EXHIBIT 2.1 AGREEMENT AND PLAN OF MERGER

EXHIBIT 2.1

AGREEMENT AND PLAN OF MERGER

dated as of January 8, 2004

between

INDEPENDENT BANK CORP.

INDB SUB, INC.

and

FALMOUTH BANCORP, INC.

 

 

TABLE OF CONTENTS

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      AGREEMENT AND PLAN OF MERGER, dated as of January 8, 2004 (this “Agreement”), by and among Independent Bank Corp. (“Parent”), INDB Sub, Inc. (“Merger Sub”) and Falmouth Bancorp, Inc. (the “Company”).

RECITALS

      WHEREAS, the Company is a Delaware corporation, having its principal place of business in Falmouth, Massachusetts.

      WHEREAS, Parent is a Massachusetts corporation, having its principal place of business in Rockland, Massachusetts.

      WHEREAS, Merger Sub, a wholly-owned subsidiary of Parent, is a Massachusetts corporation, having its principal place of business in Rockland, Massachusetts.

      WHEREAS, the Boards of Directors of Parent and the Company have each determined that it is advisable and in the best interests of their respective companies and their stockholders for Merger Sub to merge with and into the Company and to cause the surviving corporation to merge with and into Parent, subject to the terms and conditions set forth herein.

      WHEREAS, as a condition and inducement to Parent to enter into this Agreement, each Shareholder (as defined herein) is entering into an agreement, simultaneously with the execution of this Agreement, in the form of Annex A hereto (collectively, the “Voting Agreements”) pursuant to which each Shareholder has agreed, among other things, to vote the Shareholder’s shares of Company Common Stock in favor of this Agreement.

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

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

ARTICLE I

DEFINITIONS; DISCLOSURE

      1.01      Certain Definitions. The following terms are used in this Agreement with the meanings set forth below:

	“Acquisition Proposal” shall mean (x) a bona fide proposal by any person (other than Parent or any subsidiary of Parent) to the Company or its stockholders to engage in a Change in Control Transaction, (y) a public statement by any person (other than Parent or any subsidiary of Parent) to the Company or its stockholders of such person’s intention to make a proposal to engage in a Change in Control Transaction or (z) the filing by any person (other than Parent or any subsidiary of Parent) of an application or notice with any Governmental Authority to engage in a Change in Control Transaction.
	“Affiliate Agreement” has the meaning set forth in Section 7.07.
	“Agreement” means this Agreement, as amended or modified from time to time in accordance with Section 10.02.
	“Aggregate Cash Consideration” shall be the product of (i) the number of shares of Company Common Stock outstanding immediately prior to the Effective Time multiplied by 0.50 and (ii) the Per Share Cash Consideration.
	“Articles of Merger” has the meaning set forth in Section 2.02(a).

 

	“Average Closing Price” of the Parent Common Stock shall be determined by obtaining the closing prices per share of Parent Common Stock on NASDAQ (as reported by the Wall Street Journal or, if not reported thereby, another authoritative source), for the 14 consecutive NASDAQ trading days ending on and including the Determination Date, discarding the two highest and the two lowest closing prices, and averaging the remaining closing prices.
	“Bank Merger” has the meaning set forth in Section 7.13.
	“Bank Merger Agreement” has the meaning set forth in Section 7.13.
	“Bank Regulator” shall mean and include, any pertinent federal or state Governmental Authority charged with the supervision of banks or bank or financial holding companies or engaged in the insurance of bank deposits, including without limitation, the Federal Reserve Board, the FDIC, the Share Insurance Fund of Massachusetts, the Massachusetts Bank Commissioner and the Massachusetts Board of Bank Incorporation.
	“Benefit Plans” has the meaning set forth in Section 4.01(b)(5).
	“BHCA” means the Bank Holding Company Act of 1956, as amended.
	“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 Commonwealth of Massachusetts are authorized or obligated to close.
	“Cash Election Shares” has the meaning set forth in Section 3.03(b)(ii).
	“Certificate” means any certificate which immediately prior to the Effective Time represented shares of Company Common Stock.
	“Change in Control Transaction” shall mean (A) a merger, reorganization, tender or exchange offer, recapitalization, reorganization, liquidation, share exchange, consolidation or similar transaction involving the Company or any Company Subsidiary, (B) the disposition, by sale, lease, exchange or otherwise, of assets of the Company or any Company Subsidiary representing in either case 15% or more of the consolidated assets of the Company and the Company Subsidiaries, or (C) the issuance, sale or other disposition of (including by way of merger, consolidation, share exchange or any similar transaction) securities representing 15% or more of the voting power of the Company or any Company Subsidiary.
	“Closing” and “Closing Date” have the meanings set forth in Section 2.02(b).
	“COBRA” means Consolidated Omnibus Budget Reconciliation Act of 1985.
	“Code” means the Internal Revenue Code of 1986, as amended.
	“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 7.07.
	“Company Charter” means the Certificate of Incorporation of the Company.
	“Company Bank” means Falmouth Co-operative Bank, a Massachusetts cooperative bank in stock form, with its principal administrative office at 20 Davis Straits, Falmouth, Massachusetts, and any successor thereto.
	“Company Board” means the Board of Directors of the Company.
	“Company Board Recommendation” has the meaning set forth in Section 7.02.
	“Company Bylaws” means the Bylaws of the Company.

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	“Company Common Stock” means the common stock, $0.01 par value per share, of the Company.
	“Company ESOP” has the meaning set forth in Section 7.12(f).
	“Company Loan Property” has the meaning set forth in Section 5.17(b).
	“Company Meeting” has the meaning set forth in Section 7.02.
	“Company Options” means the options to acquire Company Common Stock issued under the Company Stock Option Plan.
	“Company Preferred Stock” means the serial preferred stock, par value $0.01 per share, of the Company.
	“Company RRP” has the meaning set forth in Section 7.12(g).
	“Company Regulatory Authorities” has the meaning set forth in Section 5.11(a).
	“Company Reports” has the meaning set forth in Section 5.07(b).
	“Company Special Payment” has the meaning set forth in Section 9.03.
	“Company Stock” means, collectively, the Company Common Stock and the Company Preferred Stock.
	“Company Stock Option Plan” means the 1997 Stock Option Plan for Outside Directors, Officers and Employees of Target Bancorp, Inc. and includes 23,778 options granted that were not approved by Company shareholders.
	“Defined Benefit Plan” has the meaning set forth in Section 5.15(d).
	“Deposit Incentive Plan” has the meaning set forth in Section 7.22.
	“Determination Date” means the date on which the last required approval of a Governmental Authority is obtained with respect to the Transactions, without regard to any requisite waiting period.
	“Derivatives Contract” has the meaning set forth in Section 5.19.
	“DGCL” shall mean the Delaware General Corporation Law, Title 8, Section 101 et seq., as amended.
	“Disclosure Schedule” has the meaning set forth in Section 1.03.
	“Effective Date” has the meaning set forth in Section 2.02(a).
	“Effective Time” has the meaning set forth in Section 2.02(a).
	“Election Deadline” has the meaning set forth in Section 3.03(e).
	“Election Form” has the meaning set forth in Section 3.03(a)(ii).
	“Employees” has the meaning set forth in Section 5.15(a).
	“Environmental Laws” has the meaning set forth in Section 5.17.
	“Equal Credit Opportunity Act” means the Equal Credit Opportunity Act, as amended.
	“Equity Interests” means, with respect to any Person, warrants, options, rights, subscriptions, calls, commitments, convertible securities and other arrangements or commitments of any character which call for the Person to issue, deliver or dispose, or cause to be issued, delivered or disposed, any of its or its Subsidiaries’ capital stock or other ownership or equity interests of such Person or its Subsidiaries.
	“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

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	“ERISA Affiliate” has the meaning set forth in Section 5.15(e).
	“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 3.03(a).
	“Expenses” has the meaning set forth in Section 9.02(b)
	“Expiration Date” has the meaning set forth in Section 9.01(b).
	“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.
	“Fill Option” has the meaning set forth in Section 9.01(h).
	“Final Index Price” means the sum of the Final Prices for each company comprising the Index Group multiplied by the appropriate weight.
	“Final Price,” with respect to any company belonging to the Index Group, means the arithmetic mean of the daily closing sales prices of a share of common stock of such company, as reported on the consolidated transaction reporting system for the market or exchange on which such common stock is principally traded, for the same 14 trading days used in calculating the Average Closing Price.
	“GAAP” means United States generally accepted accounting principles.
	“Governmental Authority” means any United States or foreign, federal, state or local governmental commission, board, body, bureau, or other regulatory authority, agency, including courts and other judicial bodies, or any self-regulatory body or authority, including any instrumentality or entity designated to act for or on behalf of the foregoing.
	“Hazardous Substance” has the meaning set forth in Section 5.17.
	“Indemnified Party,” “Indemnified Parties” and “Indemnifying Party” have the meanings set forth in Section 7.11(a).
	“Index Group” shall have the meaning specified on Annex C attached hereto.
	“Index Ratio” has the meaning set forth in Section 9.01(h).
	“Initial Index Price” means the sum of each per share closing price of the common stock of each company comprising the Index Group multiplied by the applicable weighting, as such prices are reported on the consolidated transactions reporting system for the market or exchange on which such common stock is principally traded, on the trading day immediately preceding the public announcement of the Agreement.
	“Insurance Amount” has the meaning set forth in Section 7.11(c).
	“Insurance Policies” has the meaning set forth in Section 5.29.
	“Joint Venture” means any corporation, limited liability company, limited liability partnership, partnership, joint venture, trust, association or other entity which is not a Subsidiary of the Company, as the case may be, and in which (a) the Company, directly or indirectly, owns or controls any shares of any class of the outstanding voting securities or other Equity Interests, including without limitation, an equity investment, as such term as of the date hereof is defined in the FDIC’s rules and regulations regarding activities and investments of insured state banks at 12 C.F.R. Section 362.2(g), or (b) the Company or any of its Subsidiaries is a general partner.

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	“knowledge” means, with respect to any Person, the actual knowledge of such Person, after reasonable due inquiry.
	“Liens” means any charge, mortgage, pledge, security interest, restriction, option, right of first refusal, claim, lien or encumbrance.
	“Loans” has the meaning set forth in Section 5.21(a).
	“Loan Loss Reserves” shall mean the reserves established by the Company in accordance with its customary practices with respect to Loans as of the Closing Date.
	“Massachusetts Bank Commissioner” means the Commissioner of Banks of The Commonwealth of Massachusetts.
	“Massachusetts Board” means the Massachusetts Board of Bank Incorporation.
	“Material Adverse Effect” means, with respect to any Person, any change or effect that (i) is or would be reasonably likely to be material and adverse to the financial position, results of operations or business of such Person and its Subsidiaries taken as a whole or (ii) would materially impair the ability of any Person 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 and similar laws, rules or regulations of general applicability or interpretations thereof by Governmental Authorities, (b) changes in GAAP or regulatory accounting requirements applicable to financial institutions and their holding companies generally and (c) changes in economic conditions affecting financial institutions generally, including but not limited to, changes in general levels of interest rates generally.
	“Material Contract” has the meaning set forth in Sections 5.13.
	“MBCL” means the Massachusetts Business Corporations Law, MGL Chapter 156B, Sections 1 et seq., 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 factional share interest, and/or the amount of cash into which shares of Company Common Stock shall be converted pursuant to the provisions of Article III.
	“Merger Sub” has the meaning set forth in the preamble to this Agreement.
	“Merger Sub Articles” means the Articles of Organization of Merger Sub.
	“Merger Sub Board” means the Board of Directors of the Merger Sub.
	“Merger Sub Common Stock” has the meaning set forth in Section 3.01(c).
	“MHPF” means the Massachusetts Housing Partnership Fund.
	“Mixed Election” has the meaning set forth in Section 3.03(b)(iii).
	“Multiemployer Plan” shall mean any multiemployer plan as defined in Section 4001(a)(3) of ERISA as to which contributions have been made within the preceding five years or are required to be made by the Company, its Subsidiaries or any ERISA Affiliate or with respect to which the Company, its Subsidiaries or any ERISA Affiliate may have any liability.
	“NASDAQ” means The Nasdaq Stock Market, Inc.’s National Market.
	“National Labor Relations Act” means the National Labor Relations Act, as amended.
	“No-Election Shares” has the meaning set forth in Section 3.03(b)(iv).
	“OREO” means other real estate owned.

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	“Parent” has the meaning set forth in the preamble to this Agreement.
	“Parent Articles” means the Articles of Organization of Parent, as amended.
	“Parent Bank” means Rockland Trust Company, a Massachusetts trust company, with its principal administrative office at 288 Union Street, Rockland, Massachusetts, and any successor thereto.
	“Parent Benefits Plans” has the meaning set forth in Section 7.12(a).
	“Parent Board” means the Board of Directors of Parent.
	“Parent Bylaws” means the Bylaws of Parent.
	“Parent Common Stock” means the common stock, $0.01 par value per share, of Parent.
	“Parent Level Mergers” means the Merger and the Parent Merger.
	“Parent Merger” has the meaning set forth in Section 2.03.
	“Parent Merger Agreement” has the meaning set forth in Section 2.03.
	“Parent Preferred Stock” means the preferred stock, $0.01 par value per share, of Parent.
	“Parent Ratio” has the meaning set forth in Section 9.01(h).
	“Parent Regulatory Authority” has the meaning set forth in Section 6.11(a).
	“Payment Event” has the meaning set forth in Section 9.03(a).
	“PBGC” means the Pension Benefit Guaranty Corporation.
	“Pension Plan” has the meaning set forth in Section 5.15(b).
	“Per Share Cash Consideration” has the meaning set forth in Section 3.01(d)(ii).
	“Per Share Merger Consideration” means the Per Share Stock Consideration PLUS cash in lieu of any fractional share interest and/or the Per Share Cash Consideration and/or the Alternative Per Share Cash Amount.
	“Per Share Stock Consideration” has the meaning set forth in Section 3.01(d)(i).
	“Person” means any individual, bank, corporation, partnership, association, joint-stock company, business trust, limited liability company or unincorporated organization.
	“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 (except as otherwise specifically provided in this Agreement).
	“Proxy Statement” has the meaning set forth in Section 7.03(a).
	“Reallocated Cash Shares” has the meaning set forth in Section 3.03(g)(i)(3).
	“Reallocated Stock Shares” has the meaning set forth in Section 3.03(g)(ii)(2).
	“Registration Statement” has the meaning set forth in Section 7.03(a).
	“Representatives” has the meaning set forth in Section 7.08.
	“SEC” means the Securities and Exchange Commission.
	“SEC Documents” has the meaning set forth in Sections 5.07(a) and 6.07(a) in the case of the Company and Parent, respectively.
	“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

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	“Shareholders” means the Persons listed on Annex B to this Agreement.
	“Signing Closing Price” shall be equal to $29.00.
	“Special Payment Termination Date” has the meaning set forth in Section 9.03(c).
	“Stock Election Shares” has the meaning set forth in Section 3.03(b)(i).
	“Stock Option Exchange Ratio” shall mean the Per Share Stock Consideration.
	“Subsidiary” has the meaning ascribed to that term in Rule 1-02 of Regulation S-X of the SEC.
	“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, report, claim for refund, information return or other document (including any schedules or attachments thereto) filed or required to be filed in connection with the determination, assessment or collection of any Tax or the administration of any laws, regulations or administrative requirements relating to any Tax.
	“Tender Offer” means a tender offer or exchange offer to purchase any shares of Company Common Stock such that, upon consummation of such offer, the person making such tender offer or exchange offer would own or control 15% or more of the then outstanding shares of Company Common Stock.
	“Time Extension Event” has the meaning set forth in Section 9.03(b).
	“Transactions” means the Merger and the Bank Merger.
	“Transaction Documents” means this Agreement, the Bank Merger Agreement and the Voting Agreements.
	“Transition Committee” has the meaning set forth in Section 7.24.
	“USA PATRIOT Act” has the meaning set forth in Section 5.27.
	“Voting Agreements” has the meaning set forth in the recitals to this Agreement.
	“Welfare Plan” has the meaning set forth in Section 5.15(g).

      1.02      Other Definitional Matters. Unless the context otherwise requires, a term defined anywhere in this Agreement has the same meaning throughout; all references to “the Agreement” or “this Agreement” are to this Agreement as modified, supplemented or amended from time to time; and terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa.

      1.03      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 Article V or Article VI or to one or more of its covenants contained in Article IV. The mere inclusion of a fact, circumstance or event in a Disclosure Schedule shall not be deemed an admission by a party that such item represents a material exception or that such item is reasonably likely to result in a Material Adverse Effect. Any matter disclosed pursuant to one section of a party’s Disclosure Schedule shall be deemed disclosed for all purposes of such party’s Disclosure Schedule, but only to the extent that it is reasonably apparent from a reading of the disclosure that it also qualifies or applies to other sections of the Agreement and the corresponding Schedule.

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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 Merger Sub shall merge with and into the Company in accordance with the applicable provisions of the MBCL (the “Merger”), the separate corporate existence of Merger Sub shall cease and the Company shall survive and continue to exist as a corporation incorporated under the MBCL (the Company, as the surviving corporation in the Merger, sometimes being referred to herein as the “Surviving Corporation”).

      (b)  Name and Purpose. The name of the Surviving Corporation shall be “INDB Sub, Inc.” The purpose of the Surviving Corporation shall to be to engage in activities permitted to bank holding companies under the Bank Holding Company Act of 1956, as amended, and Massachusetts law.

      (c)  Articles of Organization and Bylaws. The articles of organization and bylaws of the Surviving Corporation immediately after the Merger shall be the Merger Sub Articles and the Merger Sub Bylaws as in effect immediately prior to the Merger.

      (d)  Directors and Officers of the Surviving Corporation. The directors and officers of the Surviving Corporation immediately after the Merger shall be the directors and officers of the Merger Sub immediately prior to the Merger, until such time as their successors shall be duly elected and qualified.

      (e)  Directors and Officers of the Parent Bank. The directors and officers of Parent Bank immediately after the Bank Merger shall be the directors and officers of Parent Bank immediately prior to the Bank Merger, until such time as their successors shall be duly elected and qualified.

      (f)  Authorized Capital Stock. The authorized capital stock of the Surviving Corporation upon consummation of the Merger shall be as set forth in the Merger Sub Articles immediately prior to the Merger. The total authorized capital stock of the Surviving Corporation shall be one thousand (1,000) shares of common stock, $0.01 par value.

      (g)  Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in this Agreement and in the applicable provisions of the MBCL. 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 and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation.

      (h)  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 and Merger Sub 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 Merger Sub, 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 VIII (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 Commonwealth of Massachusetts

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pursuant to the MBCL on (i) a date selected by Parent after such satisfaction or waiver which is no later than five Business Days after such satisfaction or waiver, or (ii) such other date to which the parties may agree in writing. The Merger provided for herein shall become effective upon such filing or on such date as may be specified therein. The date of such filing 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. The filing of the Articles of Merger shall be made on the Closing Date.

      (b) A closing (the “Closing”) shall take place on the date on which the Articles of Merger are to be filed at 10:00 a.m., Eastern Time, at the principal offices of Choate, Hall & Stewart, Boston, Massachusetts, 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 VIII hereof.

      2.03      Parent Merger. Parent and the Surviving Corporation shall take all action necessary and appropriate, including entering into an appropriate merger agreement (the “Parent Merger Agreement”), to cause the Surviving Corporation to merge with and into Parent (the “Parent Merger”) in accordance with applicable laws and regulations and the terms of the Parent Merger Agreement and as soon as practicable after consummation of the Merger. After the Parent Merger the separate corporate existence of the Surviving Corporation shall cease and Parent shall survive and continue to exist as a corporation incorporated under the MBCL.

ARTICLE III

CONSIDERATION; 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 Equity Interests of Company or Merger Sub:

	(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) Each share of Company Common Stock held of record immediately prior to the Effective Time by the Company, Merger Sub, Parent or any Subsidiary of the Company or of Parent (other than shares held in trust pursuant to any Company Benefit Plan) shall be canceled and retired at the Effective Time and no consideration shall be issued in exchange therefor.
	(c) Each share of common stock of Merger Sub (the “Merger Sub Common Stock”) issued and outstanding immediately prior to the Effective Time shall be canceled and retired at the Effective Time and automatically converted into one validly issued, fully paid and nonassessable share of common stock, $0.01 par value, of the Surviving Corporation. Each certificate evidencing ownership of a number of shares of Merger Sub Common Stock shall be deemed to evidence ownership of the same number of shares of common stock, $0.01 par value, of the Surviving Corporation.
	(d) Subject to Sections 3.03, 3.06, 3.08 and 9.01 each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than shares to be canceled in accordance with Section 3.01(b)) shall be converted into, and shall be canceled in exchange for, the right to receive:

 

	(i) 1.28 shares of Parent Common Stock (the “Per Share Stock Consideration”), or
	(ii) a cash amount equal to $38.00 per share of Company Common Stock (the “Per Share Cash Consideration”).

      3.02      Reserved.

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      3.03      Election Procedures.

      (a) Parent shall designate an exchange agent to act as agent (the “Exchange Agent”) for purposes of conducting the election procedure and the exchange procedure described in Sections 3.03 and 3.04. Provided that the Company has delivered, or caused to be delivered, to the Exchange Agent all information which is necessary for the Exchange Agent to perform its obligations as specified herein, the Exchange Agent shall, no later than the twenty-fifth (25th) Business Day prior to the anticipated Effective Date, mail or make available to each holder of record of a Certificate or Certificates:

	(i) a notice and letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates theretofore representing shares of Company Common Stock shall pass, only upon proper delivery of the Certificates to the Exchange Agent) advising such holder of the anticipated effectiveness of the Merger and the procedure for surrendering to the Exchange Agent such Certificate or Certificates in exchange for the consideration set forth in Section 3.01(d) hereof deliverable in respect thereof pursuant to this Agreement and
	(ii) an election form in such form as Parent and the Company shall mutually agree (the “Election Form”).

      (b) Each Election Form shall permit the holder (or in the case of nominee record holders, the beneficial owner through proper instructions and documentation):

	(i) to elect to receive Parent Common Stock with respect to all of such holder’s Company Common Stock as hereinabove provided (the “Stock Election Shares”),
	(ii) to elect to receive cash with respect to all of such holder’s Company Common Stock as hereinabove provided (the “Cash Election Shares”),
	(iii) to elect to receive Parent Common Stock with respect to part of such holder’s Company Common Stock and to receive cash with respect to the remaining part of such holder’s Company Common Stock as hereinabove provided (a “Mixed Election”), or
	(iv) to indicate that such holder makes no such election with respect to such holder’s shares of Company Common Stock (the “No-Election Shares”).

      (c) With respect to each holder of Company Common Stock who makes a Mixed Election, the shares of Company Common Stock such holder elects to be converted into the right to receive Parent Common Stock shall be treated as Stock Election Shares and the shares such holder elects to be converted into the right to receive cash shall be treated as Cash Election Shares for purposes of the provisions contained in Sections 3.03(b), 3.03(g) and 3.03(h). Nominee record holders who hold Company Common Stock on behalf of multiple beneficial owners shall indicate how many of the shares held by them are Stock Election Shares, Cash Election Shares and No-Election Shares.

      (d) If a shareholder either (i) does not submit a properly completed Election Form prior to the Election Deadline or (ii) revokes an Election Form prior to the Election Deadline and does not resubmit a properly completed Election Form prior to the Election Deadline, the shares of Company Common Stock held by such shareholder shall be treated as No-Election Shares.

      (e) The term “Election Deadline” shall mean 5:00 p.m., Eastern Time, on the 20th Business Day following but not including the date of mailing of the Election Form or such other date as Parent and the Company shall mutually agree upon.

      (f) Any election to receive Parent Common Stock or cash shall have been properly made only if the Exchange Agent shall have actually received a properly completed Election Form by the Election Deadline. An Election Form will be properly completed only if accompanied by Certificates representing all shares of Company Common Stock covered thereby, subject to the provisions of Section 3.04(c). Any Election Form may be revoked or changed by the Person submitting such Election Form to the Exchange Agent by written notice to the Exchange Agent only if such written notice is actually received by the Exchange Agent at or prior to the Election Deadline. The Certificate or Certificates representing Company

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Common Stock relating to any revoked Election Form shall be promptly returned without charge to the Person submitting the Election Form to the Exchange Agent. The Exchange Agent shall have reasonable discretion to determine when any election, modification or revocation is received, whether any such election, modification or revocation has been properly made and to disregard immaterial defects in any Election Form, and any good faith decisions of the Exchange Agent regarding such matters shall be binding and conclusive. Neither Parent nor the Exchange Agent shall be under any obligation to notify any Person of any defect in an Election Form.

      (g) Within five (5) Business Days after the Election Deadline, the Exchange Agent shall effect the allocation among holders of Company Common Stock of rights to receive Parent Common Stock or cash in the Merger in accordance with the Election Forms as follows:

	(i) if the number of Cash Election Shares times the Per Share Cash Consideration is less than the Aggregate Cash Consideration, then:

 

	(1) all Cash Election Shares shall be converted into the right to receive cash,
	(2) No-Election Shares shall then be deemed to be Cash Election Shares to the extent necessary to have the total number of Cash Election Shares times the Per Share Cash Consideration equal the Aggregate Cash Consideration. If less than all of the No-Election Shares need to be treated as Cash Election Shares, then the Exchange Agent shall select which No-Election Shares shall be treated as Cash Election Shares in such manner as the Exchange Agent shall determine in accordance with Section 3.03(h), and all remaining No-Election Shares shall thereafter be treated as Stock Election Shares,
	(3) if all of the No-Election Shares are treated as Cash Election Shares under the preceding subsection, and the total number of Cash Election Shares (including such No-Election Shares treated as such) times the Per Share Cash Consideration remains less than the Aggregate Cash Consideration, then the Exchange Agent shall convert on a pro rata basis as described below a sufficient number of Stock Election Shares into Cash Election Shares (“Reallocated Cash Shares”) such that the sum of the number of Cash Election Shares plus the number of Reallocated Cash Shares times the Per Share Cash Consideration equals the Aggregate Cash Consideration, and all Reallocated Cash Shares will be converted into the right to receive the Per Share Cash Consideration, and
	(4) the Stock Election Shares which are not Reallocated Cash Shares shall be converted into the right to receive the Per Share Stock Consideration.

 

	(ii) If the number of Cash Election Shares times the Per Share Cash Consideration is greater than the Aggregate Cash Consideration, then:

 

	(1) all Stock Election Shares and all No-Election Shares shall be converted into the right to receive Parent Common Stock,
	(2) the Exchange Agent shall convert on a pro rata basis as described below a sufficient number of Cash Election Shares (“Reallocated Stock Shares”) such that the number of remaining Cash Election Shares times the Per Share Cash Consideration equals the Aggregate Cash Consideration, and all Reallocated Stock Shares shall be converted into the right to receive the Per Share Stock Consideration, and
	(3) the Cash Election Shares which are not Reallocated Stock Shares shall be converted into the right to receive the Per Share Cash Consideration.

 

	(iii) If the number of Cash Election Shares times the Per Share Cash Consideration is equal to the Aggregate Cash Consideration, then Sections 3.03(g)(i) and 3.03(g)(ii) above shall not apply and all No-Election Shares and all Stock Election Shares will be converted into the right to receive the Per Share Stock Consideration.

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      (h) For purposes of the calculations in Section 3.03(g), Company Common Stock held by Parent or any of its Subsidiaries other than in a fiduciary capacity shall be deemed Cash Election Shares without regard to whether an Election Form has been submitted with respect to such shares; provided, however, that such shares shall in no event be classified as Reallocated Stock Shares. In the event that the Exchange Agent is required pursuant to Section 3.03(g)(i)(3) to convert some Stock Election Shares into Reallocated Cash Shares, each holder of Stock Election Shares shall be allocated a pro rata portion of the total Reallocated Cash Shares. In the event the Exchange Agent is required, pursuant to Section 3.03(g)(ii)(2), to convert some Cash Election Shares into Reallocated Stock Shares, each holder of Cash Election Shares shall be allocated a pro rata portion of the total Reallocated Stock Shares, subject to the provisions of Section 3.03(i) below. In the event the Exchange Agent is required pursuant to Section 3.03(g)(i)(2) to convert some No-Election Shares into Cash Election Shares, such conversion shall be allocated on a pro rata basis among No-Election Shares.

      (i) It is intended that the Merger and Parent Level Mergers shall together constitute a reorganization within the meaning of Section 368(a) of the Code, and that this Agreement shall constitute a “plan of reorganization” as that term is used in Sections 354 and 361 of the Code. From and after the date of this Agreement and until the Closing, each party hereto shall use its reasonable best efforts to cause the Merger to qualify as a reorganization under Section 368(a) of the Code. If the tax opinions referred to in Section 8.02(e) and 8.03(e) cannot be rendered (as reasonably determined by Choate, Hall & Stewart and Thacher Proffitt & Wood LLP, respectively) as a result of the Merger potentially failing to qualify as a reorganization under Section 368(a) of the Code, then Parent may, in its sole discretion increase the number of shares of Company Common Stock entitled to receive the Per Share Stock Consideration by the minimum amount necessary to enable such tax opinions to be rendered.

      3.04      Exchange Procedures.

      (a) Prior to the Effective Time, for the benefit of the holders of Certificates, Parent shall deliver to the Exchange Agent certificates evidencing the number of shares of Parent Common Stock issuable and the Aggregate Cash Consideration payable pursuant to this Article III in exchange for Certificates representing outstanding shares of Company Common Stock. 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) After completion of the allocation referred to in Section 3.03(g), 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 the amount of cash 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, if such holder’s shares of Company Common Stock have been converted into Parent Common Stock, 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 or the right to receive the amount of cash into which such Company Common Stock shall have been converted. 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 hereinabove provided. No dividends which have been declared will be remitted to any Person entitled to receive shares of Parent Common Stock under this Agreement until such Person surrenders the Certificate

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or Certificates representing Company Common Stock, at which time such dividends shall be remitted to such Person, without interest.

      (c) Parent shall mail appropriate transmittal materials in a form satisfactory to Parent (including a letter of transmittal specifying that delivery shall be effected and risk of loss and title to such certificate shall pass only upon delivery of such certificate to the Exchange Agent) as soon as practicable after the Effective Time to each holder of record of Company Common Stock as of the Effective Time who did not previously submit a properly completed Election Form. Parent shall not be obligated to deliver cash and/or 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 until such holder surrenders the Certificate or Certificates representing the shares of Company Common Stock for exchange as provided in this Section 3.04, or, in default thereof, an appropriate affidavit of loss and indemnity agreement and/or a bond as may be required by Parent or the Exchange Agent. 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 3.04(a) that remains unclaimed by the stockholders of the Company for one year after the Effective Time (as well as any proceeds from any investment thereof) shall be delivered by the Exchange Agent to Parent. Any stockholders of the Company who have not theretofore complied with Section 3.04(c) 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. If outstanding Certificates for shares of Company Common Stock are not surrendered or the payment for them is not claimed prior to the date on which such shares of Parent Common Stock or cash would otherwise escheat to or become the property of any governmental unit or agency, the unclaimed items shall, to the extent permitted by abandoned property and any other applicable law, become the property of Parent (and to the extent not in its possession shall be delivered to it), free and clear of all claims or interest of any Person previously entitled to such property. 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 7.07.

      3.05      Rights as Shareholders; Stock Transfers. At the Effective Time, holders of Company Stock shall cease to be, and shall have no rights as, stockholders 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.

      3.06      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

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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 Per Share Cash Consideration. No such holder shall be entitled to dividends, voting rights or any other rights in respect of any fractional share.

      3.07      Reserved.

      3.08      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 Per Share Stock Consideration shall be adjusted accordingly. The provisions of this Agreement assume that there will be no more than 916,727 shares of Company Common Stock outstanding and 107,038 shares of Company Common Stock issuable upon the exercise of options at the Effective Time. If there is any change in these numbers as of the Effective Time, the Merger Consideration will be appropriately adjusted.

      3.09      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 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 in respect of which such deduction and withholding was made by Parent.

      3.10      Company Options. Prior to and effective as of the Effective Time, the Company shall take all such action as is necessary to terminate, subject to compliance with this Section 3.10, the Company Stock Option Plan, and shall provide written notice to each holder of a then outstanding stock option to purchase shares of Company Common Stock (whether or not such stock option is then vested or exercisable), that such stock option shall be, as of the date of such notice, exercisable in full and that such stock option shall terminate at the Effective Time and that, if such stock option is not exercised or otherwise terminated before the Effective Time, such holder shall be entitled to receive in cancellation of such option a cash payment from the Company at or prior to the Closing in an amount equal to the excess of the Per Share Cash Consideration over the per share exercise price of such stock option, subject to any required withholding of taxes. Subject to the foregoing, the Company Stock Option Plan and all options issued thereunder shall terminate at the Effective Time. The Company hereby represents and warrants that the maximum number of shares of the Company Common Stock subject to issuance pursuant to the exercise of stock options issued and outstanding under the Company Stock Option Plan is not and shall not be at or prior to the Effective Time more than 107,038.

ARTICLE IV

ACTIONS PENDING ACQUISITION

      4.01      Agreements of the Company. The Company covenants and agrees that, except as expressly contemplated by this Agreement, between the date of this Agreement and the Effective Time, unless Parent shall otherwise agree in writing:

(a) (i) the business of the Company, the Company Bank and the Company’s Subsidiaries shall be conducted only in, and the Company, the Company Bank and the Company’s Subsidiaries shall not take any action except in, the usual, regular and ordinary course of business and in a manner consistent with prudent banking practice and generally to conduct their business in substantially the same way as heretofore conducted, and without limiting the foregoing, to continue to operate in the same geographic markets serving the same market segments and maintain its current loan, deposit, banking products and service programs on substantially the same terms and conditions; (ii) the Company shall use its reasonable best efforts to preserve the business organization of the Company,

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the Company Bank and the Company’s Subsidiaries, to keep available the present services of the officers, employees and consultants of the Company, the Company Bank and the Company’s Subsidiaries and to preserve the current relationships and goodwill of the Company, the Company Bank and the Company’s Subsidiaries with customers, suppliers and other Persons with which the Company, the Company Bank or any of the Company’s Subsidiaries have business relationships; and (iii) the Company shall take no action which would materially adversely affect or materially delay the ability of the Company to obtain any necessary approvals of any Governmental Authority required for the transactions contemplated hereby or to perform its covenants and agreements under this Agreement or the Bank Merger Agreement; and

      (b) the Company shall not, nor shall the Company permit the Company Bank or any of the Company’s Subsidiaries, directly or indirectly to do, or publicly announce an intention to do, any of the following without the prior written consent of Parent through its duly authorized representative:

	(1)  Capital Stock. Other than pursuant to the Equity Interests set forth on Schedule 4.01(b)(1) of the Company Disclosure Schedule and outstanding on the date hereof, (i) issue, sell or otherwise permit to become outstanding, or authorize the creation of, any additional shares of stock or any Equity Interests or (ii) permit any additional shares of stock to become subject to grants of employee or director stock options or other Equity Interests.
	(2)  Dividends, etc. (i) 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 regular, quarterly cash dividend at a rate not in excess of $0.13 per share on the Company Common Stock, declared and paid in accordance with past practice (including with respect to the timing of such declaration and payment), provided that in no event shall the Company declare, set aside or pay dividends on the Company Common Stock if such action would result in the holders of Company Common Stock receiving more than four cash dividend payments in any fiscal year, or more that one cash dividend payment for any fiscal quarter, when considered in conjunction with dividends to be paid by the Parent following the Closing, or (ii) directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire, or issue any other securities in respect of, in lieu of, or in substitution for, any shares of its capital stock or any securities or obligations convertible into or exchangeable for any shares of its capital stock (other than pursuant to the Equity Interests set forth on Schedule 5.02 of the Company Disclosure Schedule and outstanding on the date hereof).
	(3)  Contracts. Except in the ordinary course of business consistent with past practice, as required by law, as contemplated by this Agreement or as otherwise permitted under this Section 4.01, enter into or terminate any Material Contract (as defined in Section 5.13) or amend or modify any of its existing Material Contracts.
	(4)  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(b)(4) of the Company Disclosure Schedule, and (ii) Persons hired 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 whose base salary, including any guaranteed bonus or any similar bonus, considered on an annual shall not exceed $75,000.
	(5)  Benefit Plans. Enter into, establish, adopt, renew or amend (except (i) as may be required by applicable law, (ii) to satisfy contractual obligations existing as of the date hereof and set forth on Schedule 4.01(b)(5) of the Company Disclosure Schedule or (iii) as otherwise contemplated by this Agreement) 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 director, officer or employee of the Company or its Subsidiaries (“Benefit Plans”) ( provided, however , that the restrictions contained in this

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	Section 4.01(b)(5) concerning renewals shall apply only to those Benefit Plans with a term greater than one (1) year or for which a fully earned premium has been or will be or is required to be paid at the commencement of the coverage period or such renewal coverage period) or take any action to accelerate the vesting or exercisability of stock options, restricted stock or other compensation or benefits payable thereunder except pursuant to this Agreement.
	(6)  Dispositions. Sell, transfer, mortgage, encumber or otherwise dispose of or discontinue any of its assets, deposits, business or properties, or cancel or release any indebtedness of a Person or any claims held by any Person, except in the ordinary course of business consistent with past practice.
	(7)  Compensation; Employment Agreements. Except as contemplated by this Agreement or by Schedule 4.01(b)(7) of the Company Disclosure Schedule, 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) for normal individual increases in compensation to employees in the ordinary course of business consistent with past practice, provided that such increases shall not result in an annual adjustment in total compensation of more than 3% for any individual or 3% in the aggregate for all employees of the Company, (ii) for other changes that are required by applicable law, or (iii) grants of awards to newly-hired employees consistent with past practice.
	(8)  Environmental. Take title to, commence operations on, or participate in management of environmental matters at any commercial real estate without first conducting an ASTM Phase I environmental site assessment of the property unless such environmental site assessment does not identify the presence of recognized environmental conditions (including without limitation the presence of Hazardous Substances) that would be material if the Company were deemed an owner or operator of the property.
	(9)  Insurance. Except as set forth on Schedule 4.01(b)(9), of the Company Disclosure Schedule, renew, amend or permit to expire, lapse or terminate or knowingly take any action reasonably likely to result in the creation, renewal, amendment, expiration, lapse or termination of any insurance policies referred to in Section 5.29 hereof.
	(10)  Reserved.
	(11)  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) all or any portion of the assets, business, deposits or properties of any other entity, including by merging or consolidating with, or by purchasing an equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, Joint Venture, other business organization or any division thereof or any material amount of assets.
	(12)  Investments. Make any material investment either by purchase of stock or securities, contributions to capital, property transfers, or purchase of any property or assets of any other Person other than a wholly owned Subsidiary of the Company, or commitment to make such an investment other than non-callable U.S. Government and U.S. Government agency securities with final maturities not greater than five years or mortgage-backed or mortgage related securities guaranteed by U.S. Government agencies meeting the following criteria: (i) initial average lives not greater than five years; (ii) purchase premiums not greater than 1.5%; and (iii) collateralized by mortgages with weighted average maturities not greater than 180 months and which would not be considered “high risk” securities under applicable regulatory pronouncements.
	(13)  Capital Expenditures. Make any capital expenditures other than capital expenditures in the ordinary course of business consistent with past practice in amounts not exceeding $25,000 individually or $100,000 in the aggregate.

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	(14)  Governing Documents. Amend the Company Charter or Company Bylaws or the articles of organization or bylaws (or equivalent documents) of any Subsidiary of the Company, other than as may be required by applicable laws and regulations.
	(15)  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.
	(16)  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 $25,000 individually or $150,000 in the aggregate and/or would impose any material restriction on the business of the Company.
	(17)  Derivatives Contracts. Enter into any Derivatives Contract, except in the ordinary course of business consistent with past practice.
	(18)  Indebtedness. Incur any indebtedness for borrowed money (other than deposits, federal funds purchased, cash management accounts, borrowings from the Federal Home Loan Bank of Boston and securities sold under agreements to repurchase, in each case in the ordinary course of business consistent with past practice), including issuing any debt securities, or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other Person, or renewals thereof, in excess of $200,000 individually or $1,000,000 in the aggregate.
	(19)  Taxes. Other than with the cooperation of and in consultation with Parent, 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, agree to any material adjustment of any Tax attribute, file any claim for a material refund of Taxes, or consent to any extension or waiver of the limitation period applicable to any material Tax claim or assessment; provided, that, for purposes of this subparagraph (19), “material” shall mean affecting or relating to $50,000 of taxable income.
	(20)  Lending. Other than in the ordinary course of business and consistent with existing lending policies and practices, make any commercial, commercial real estate, or commercial and industrial loan.
	(21)  Charitable Contributions. Other than as consistent with past practice and as disclosed in Schedule 4.01(b)(21) of the Company Disclosure Schedule, make any cash contributions to charitable organizations.
	(22)  Investment Securities Portfolio. Restructure or materially change its investment securities portfolio or its gap position, through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported.
	(23)  Real Estate. Make any new or additional equity investment in real estate or commitment to make any such an investment or in any real estate development project, other than (i) in connection with foreclosures, settlements in lieu of foreclosure or troubled loan or debt restructurings in the ordinary course of business consistent with past practice, or (ii) as required by agreements or instruments in effect as of the date hereof.
	(24)  Loan And Investment Policies. Change in any material respect its loan or investment policies and procedures, except as required by regulatory authorities.
	(25)  Leases. Enter into or renew, amend or terminate, or give notice of a proposed renewal, amendment or termination of or make any commitment with respect to (i) any lease, license, contract, agreement or commitment for office space, operations space or branch space, regardless of where located or to be located, to which the Company or any of its Subsidiaries is,

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	or may be, a party or by which the Company or any of its Subsidiaries or their respective properties is bound, or (ii) regardless of whether in the ordinary course or consistent with past practices, any such lease, license, contract, agreement or commitment involving an aggregate payment by or to the Company or any of its Subsidiaries of more than $10,000 or having a term of one year or more from the date of execution.
	(26)  Defaults. 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 or material license to which any of them is a party or by which any of them or their respective properties is bound.
	(27)  Adverse Actions. (A) 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 (B) 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 VIII 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.
	(28)  Commitments. Enter into any contract with respect to, or otherwise agree or commit to do, any of the foregoing.

      4.02      Agreements of Parent and Merger Sub. From the date hereof until the Effective Time, each of Parent and Merger Sub will operate in the ordinary course of business consistent with past practice. In addition, 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 (1) 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, (2) 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 VIII 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, (3) amend the Parent Articles or Parent Bylaws in a manner that would materially and adversely affect the benefits of the Merger to the stockholders of the Company, or (4) enter into any contract with respect to, or otherwise agree or commit to do, any of the foregoing.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

      Except as Previously Disclosed, the Company hereby represents and warrants to Parent and Merger Sub:

      5.01      Organization, Standing and Authority. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company is duly qualified to do business and is in corporate 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, except when the failure to be so licensed or in good standing would not result in a Material Adverse Effect. The Company has in effect all federal, state, local and foreign governmental authorizations necessary for it to own, operate or lease its properties and assets and to carry on its business as now conducted. The Company is a bank holding company registered with the Federal Reserve Board under the BHCA. The Company Charter and Company ByLaws, copies of which have previously been made available to Parent, are true, complete and correct copies of such documents in effect as of the date of this Agreement. The Company is not in violation of any provision of its Company Charter or Company ByLaws. The minute books of the Company contain in all material respects true and accurate records of all meetings held and corporate

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actions taken since January 1, 2001 of the Company’s stockholders and the Company Board (including committees of the Company Board) other than minutes which have not been prepared as of the date hereof.

      5.02      Company Capital Stock. The authorized capital stock of the Company consists solely of 2,500,000 shares of Company Common Stock, of which 916,727 shares are outstanding as of the date hereof, and 500,000 shares of Company Preferred Stock, of which no shares are outstanding. As of the date hereof, 538,023 shares of Company Common Stock were held in treasury by the Company. No shares of Company Common Stock are held by Company’s Subsidiaries. The outstanding shares of Company Common Stock have been duly authorized and validly issued and are fully paid and non-assessable, and free of preemptive rights, with no personal liability attaching to the ownership thereof, and none of the outstanding shares of Company Common Stock have been issued in violation of the preemptive rights of any Person. Schedule 5.02 of the Company Disclosure Schedule sets forth for each Company 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 two sentences, there are no shares of Company Stock reserved for issuance, the Company does not have any Equity Interests issued or outstanding with respect to Company Stock, and the Company does not have any commitment to authorize, issue or sell any Company Stock or Equity Interests. There are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of capital stock of, or other Equity Interests in, the Company or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any Subsidiary of the Company. There are no shares of the Company Common Stock outstanding which are subject to vesting over time or upon the satisfaction of any condition precedent, or which are otherwise subject to any right or obligation of repurchase or redemption on the part of the Company.

      5.03      Subsidiaries.

      (a) (1) The Company has Previously Disclosed on Schedule 5.03(a) of the Company Disclosure Schedule a list of all of its Subsidiaries together with the jurisdiction of organization of each such Subsidiary and the percentage and type of equity security owned or controlled by the Company, (2) the Company owns, directly or indirectly, all the issued and outstanding equity securities of each of its Subsidiaries, all of which are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof, (3) 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 Equity Interest or otherwise, (4) 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), (5) there are no contracts, commitments, understandings, or arrangements relating to the Company’s rights to vote or to dispose of such securities, (6) 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 and (7) there are no outstanding contractual obligations of any Subsidiary of the Company to repurchase, redeem or otherwise acquire any shares of capital stock of, or other equity interests in, the Company or any such Subsidiary or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any such Subsidiary of the Company.

      (b) Except for securities and other interests set forth in Schedule 5.03(b) of the Company Disclosure Schedule, 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.

      (c) 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

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good standing in the jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified, except when the failure to be so licensed or in good standing would not result in a Material Adverse Effect.

      (d) The deposit accounts of the Company Bank are insured by the Bank Insurance Fund of the FDIC and the Share Insurance Fund of the Massachusetts Central Co-operative Bank 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. Company Bank is not obligated to make any payments for premiums and assessments and it has filed all reports required by the FDIC. As of the date hereof, no proceedings for the revocation or termination of such deposit insurance are pending or, to the knowledge of the Company, threatened.

      (e) The Articles of Organization and ByLaws or equivalent organizational documents of each of the Company’s Subsidiaries, copies of which have previously been made available to Parent, are true, correct and complete copies of such documents in effect as of the date of this Agreement. Neither the Company nor any of its Subsidiaries is in violation of any provision of its Articles of Organization, ByLaws or equivalent organizational documents. The minute books of each of Company’s Subsidiaries contain in all material respects true and accurate records of all meetings held and corporate actions taken since January 1, 2001 of its stockholders and board of directors (including committees of its board of directors) other than minutes which have not been prepared as of the date hereof.

      5.04      Corporate Power. Each of the Company and its Subsidiaries has the requisite corporate power and authority to carry on its business as it is now being conducted and to own, lease or operate all its properties and assets; and the Company has the requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby, subject to receipt of all necessary approvals of Governmental Authorities and the approval of this Agreement by the holders of a majority of the outstanding shares of Company Common Stock.

      5.05      Corporate Authority. Subject to the approval of this Agreement by the holders of a majority of the outstanding shares of Company Common Stock, this Agreement and the transactions contemplated hereby have been authorized by all necessary corporate action of the Company and the Company Board on or prior to the date hereof. The execution and delivery of this Agreement, and the consummation of the transactions contemplated hereby, and have been duly and validly approved by the vote of, the Company Board. The Company Board (i) has directed that this Agreement and the transactions contemplated hereby, including the Merger, be submitted to the stockholders of the Company for approval at a meeting of such stockholders and (ii) has recommended that the stockholders of the Company approve this Agreement and the transactions contemplated hereby. The Company has duly executed and delivered this Agreement and, assuming due authorization, execution and delivery by Parent and Merger Sub, 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).

      5.06      Regulatory Approvals; No Defaults.

      (a) 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 and the other transactions contemplated hereby and thereby, except for (A) filings of applications or notices with, and approvals or waivers by, the Federal Reserve Board, the FDIC, the Massachusetts Bank Commissioner, the Massachusetts Co-operative Central Bank, the Massachusetts Board and the MHPF, as required, (B) filings with the SEC and state securities authorities in connection with the issuance of Parent Common Stock in the Merger and the solicitation of proxies from the Company’s shareholders for approval of the Merger, (C) the filing of Articles of Merger with the Secretary of State of the Commonwealth of Massachusetts pursuant to the MBCL, (D) the approval of

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this Agreement by the holders of a majority 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 8.01(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 8.01(b) or that the requisite approval of the Company’s stockholders will not be obtained.

      (b) Subject to receipt of the approvals referred to in Section 5.06(a), 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 and the other transactions contemplated hereby and thereby do not and will not (A) constitute a breach or violation of, or a default under (or, with notice or lapse of time, or both, would constitute a default under), or give rise to any Lien, any acceleration of remedies or performance or any right of termination under, any law, rule or regulation or any judgment, decree, order, governmental permit or license, or agreement, indenture, note, bond, mortgage, deed of trust, lease 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 or assets is subject, affected or bound (whether as issuer, guarantor, obligor or otherwise), (B) constitute a breach or violation of, or a default under, the articles of organization 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, note, bond, mortgage, deed of trust, lease or instrument.

      5.07      Reports.

      (a)  SEC Reports. The Company’s Annual Reports on Form 10-KSB for the fiscal years ended September 30, 2003, September 30, 2002 and September 30, 2001 and all other reports (including reports on Form 10-QSB and Form 8-K), registration statements, definitive proxy statements or information statements filed or to be filed by it subsequent to September 30, 2000 with the SEC (collectively, the Company’s “SEC Documents”), as of the date filed or to be filed and as amended prior to the date hereof, (A) complied or will comply in all material respects as to form with the applicable requirements under the Securities Act or the Exchange Act, as the case may be, and (B) did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that information as of a later date shall be deemed to modify information as of an earlier date; and (C) each of the balance sheets contained in or incorporated by reference into any such SEC Document (including the related notes and schedules thereto) fairly presents, or will fairly present, the consolidated financial position of the Company and its Subsidiaries as of its date, and (D) each of the consolidated statements of income and changes in shareholders’ equity and cash flows or equivalent statements in such SEC Documents (including any related notes and schedules thereto) fairly presents, or will fairly present, the consolidated results of operations, changes in shareholders’ equity and changes in cash flows, as the case may be, of the Company and its Subsidiaries for the periods to which they relate, in each case in accordance with GAAP consistently applied during the periods involved (subject, in the case of unaudited interim statements, to normal year-end adjustments). Each of the consolidated financial statements of the Company and its Subsidiaries, including, in each case, the notes thereto, contained in the SEC Documents comply, and the financial statements to be filed with the SEC by the Company after the date hereof will comply, with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto. The books and records of the Company and its Subsidiaries have been, and are being, maintained in accordance with GAAP and applicable legal and regulatory requirements. None of the Company’s Subsidiaries is required to file any form, report or other document with the SEC.

      (b)  Company Reports. Since October 1, 2001, the Company and its Subsidiaries have timely filed, and subsequent to the date hereof will timely file, all reports, registrations and statements, together with any amendments required to be made with respect thereto, that were and are required to be filed with

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(i) the Federal Reserve Board; (ii) the FDIC and (iii) any applicable state securities or banking authorities (except, in the case of state securities authorities, no such representation is made as to filings which are not material) (all such reports, registrations and statements, together with any amendments thereto and the SEC Documents, are collectively referred to herein as the “Company Reports”) and have paid all fees and assessments due and payable in connection with any of the foregoing. As of the date filed or to be filed and as amended prior to the date hereof, the Company Reports complied and, with respect to filings made after the date of this Agreement, will at the date of filing comply, in all material respects with all of the statutes, rules and regulations enforced or promulgated by the regulatory authority with which they were filed. The Company has made available to Parent true and complete copies of all amendments and modifications that have not been filed by the Company with the SEC to all agreements, documents and other instruments that previously had been filed by the Company with the SEC and are currently in effect. Except for normal periodic examinations conducted by a Bank Regulator in the regular course of the business of the Company and its Subsidiaries, since October 1, 2001, no Bank Regulator 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. Except as set forth on Schedule 5.07(b) of the Company Disclosure Schedule, the Company and its Subsidiaries have resolved all material violations, criticisms or exceptions by any Bank Regulator with respect to any such normal periodic examination.

      (c) The Company has established and maintains disclosure controls and procedures as required by Rule 1315 under the Exchange Act. As of the end of the period covered by each applicable SEC Document, the Company has conducted an evaluation under the supervision and with the participation of its management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures, and has concluded that its disclosure controls and procedures are effective to ensure that information required to be disclosed in the SEC Document is made known to them by others within the Company on a timely basis, and in accordance with the requirements of, the SEC’s rules, regulations and forms. There are no significant deficiencies in the design or operation of the Company’s internal controls, there are no material weaknesses in the Company’s internal controls and there has been no fraud, whether or not material, that involved senior management of the Company or any of its Subsidiaries who have a significant role in the Company’s internal controls.

      5.08      Absence of Undisclosed Liabilities. Except for those liabilities that are appropriately reflected or reserved against in the balance sheets of the Company’s SEC Documents and for liabilities incurred in the ordinary course of business consistent with past practice or in connection with this Agreement or the transactions contemplated hereby, since September 30, 2003, neither the Company nor any of its Subsidiaries has incurred any obligation or liability (contingent or otherwise) that, either alone or when combined with all similar liabilities, has had, or could reasonably be expected to have, a Material Adverse Effect on the Company.

      5.09      Absence of Certain Changes or Events. Since September 30, 2003, except as set forth in Schedule 5.09 of the Company Disclosure Schedule or reflected in the Company’s SEC Documents, there has not been (a) either individually or in the aggregate, any Material Adverse Effect and, to the knowledge of the Company, no fact or condition exists which is reasonably likely to cause such a Material Adverse Effect in the future, (b) any material damage, destruction or loss with respect to any property or asset of the Company or any of its Subsidiaries, (c) any change by the Company or any of its Subsidiaries in its accounting methods, principles or practices, other than changes required by applicable law or GAAP or regulatory accounting as concurred in by the Company’s independent accountants, (d) any revaluation by the Company or any of its Subsidiaries of any asset, including, without limitation, writing off of notes or accounts receivable, other than in the ordinary course of business consistent with past practice, (e) any entry by the Company or any of its Subsidiaries into any contract or commitment (other than with respect to Loans, as hereinafter defined) of more than $30,000 or with a term of more than one (1) year that is not terminable without penalty, (f) any declaration, setting aside or payment of any dividend or distribution in respect of any capital stock of the Company or any of its Subsidiaries except in the ordinary course of business in an amount consistent with past practice or any redemption, purchase or other

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acquisition of any of its securities, (g) any increase in or establishment of any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, stock option (including, without limitation, the granting of stock options, stock appreciation rights, performance awards, or restricted stock awards), stock purchase or other employee benefit plan, or any other increase in the compensation payable or to become payable to any directors, officers or employees of the Company or any of its Subsidiaries, or any grant of severance or termination pay, or any contract or arrangement entered into to make or grant any severance or termination pay, any payment of any bonus, or the taking of any other material action not in the ordinary course of business with respect to the compensation or employment of directors, officers or employees of the Company or any of its Subsidiaries, (h) any strike, work stoppage, slowdown or other labor disturbance, (i) any material election made by the Company or any of its Subsidiaries for federal or state income tax purposes, (j) any change in the credit policies or procedures of the Company or any of its Subsidiaries, the effect of which was or is to make any such policy or procedure materially less restrictive in any material respect, (k) any material liability or obligation of any nature (whether accrued, absolute, contingent or otherwise and whether due or to become due), including without limiting the generality of the foregoing, liabilities as guarantor under any guarantees or liabilities for taxes, other than in the ordinary course of business consistent with past practice, (l) any forgiveness or cancellation of any indebtedness or contractual obligation other than in the ordinary course of business consistent with past practice, (m) except with respect to funds borrowed by the Company or any of its Subsidiaries from the Federal Home Loan Bank, any mortgage, pledge, lien or lease of any assets, tangible or intangible, of the Company or any of its Subsidiaries with a value in excess of $25,000 in the aggregate (n) any acquisition or disposition of any assets or properties having a value in excess of $50,000, or any contract for any such acquisition or disposition entered into other than loans and investment securities or (o) any lease of real or personal property entered into, other than in connection with foreclosed property or in the ordinary course of business consistent with past practice.

      5.10      Litigation. Except as set forth on Schedule 5.10 of the Company Disclosure Schedule, there is no claim, suit, action, proceeding or investigation of any nature pending or, to the knowledge of the Company, threatened, against the Company or any Subsidiary of the Company or challenging the validity or propriety of the transactions contemplated by this Agreement, nor is there any judgment, decree, injunction, rule, award or order of any legal or administrative body or arbitrator outstanding against the Company or any Subsidiary of the Company having, or which insofar as reasonably can be foreseen, in the future could have, any such effect or restricting, or which could restrict, its ability to conduct business in any material respect in any area. The Company is not aware of any facts which could reasonably give rise to any such claim, suit, action, investigation or other proceeding.

      5.11      Regulatory Matters.

      (a) Neither the Company nor any of its Subsidiaries nor any of 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, order to cease and desist with, 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”), or is subject to any order or directive specifically naming or referring to the Company or any of its Subsidiaries by, has been required to adopt any board resolution by, any Company Regulatory Authority which is currently in effect and restricts materially the conduct of its business, or in any manner relates to its capital adequacy, loan loss allowances or reserves, credit policies, management or overall safety and soundness or such entity’s ability to perform its obligations hereunder, and neither the Company nor any of its Subsidiaries has received written notification from any such Company Regulatory Authority that any such Person may be requested to enter into, or otherwise be subject to, any such commitment letter, written agreement, memorandum of understanding, cease and desist order or any other similar order or directive. Except as set forth in Schedule 5.11(a) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party to any agreement or arrangement entered into in connection with the consummation of a federally assisted acquisition of a depository institution pursuant to which the

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Company or any of its Subsidiaries is entitled to receive financial assistance or indemnification from any Governmental Authority. The Company and its Subsidiaries have paid all assessments made or imposed by any Company Regulatory Authority.

      (b) Neither the Company nor any its Subsidiaries has been advised by, or has any knowledge of facts which would reasonably be expected to 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.

      5.12      Compliance With Laws. Each of the Company and its Subsidiaries:

	(a) is in material 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 and all other applicable fair lending laws and other laws relating to discriminatory business practices;
	(b) has all permits, licenses, franchises, 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
	(c) other than as Previously Disclosed on Schedule 5.12(c) of the Company Disclosure Schedule, has received, since September 30, 2000, no notification or communication from any Governmental Authority (A) asserting that the Company or any of its Subsidiaries is not in material 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).

      5.13      Material Contracts; Defaults. Except for documents listed as exhibits to the Company’s Annual Report on Form 10-KSB for the year ended September 30, 2003 or as set forth in Schedule 5.13 of the Company Disclosure Schedule, 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) that is a “Material Contract” within the meaning of Item 601(b)(10) of the SEC’s Regulation S-B (whether or not filed as an exhibit to an SEC document);
	(ii) that materially restricts the conduct of business by the Company or by any of its Subsidiaries;
	(iii) that is material to the financial condition, results of operations or business of the Company, except those entered into in the ordinary course of business;
	(iv) relating to the employment, including without limitation, employment as a consultant, of any person, or the election or retention in office, or severance of any present or former director or officer of the Company or any of its Subsidiaries;
	(v) which, upon the consummation of the transactions contemplated by this Agreement or the Bank Merger Agreement, will result in any payment (whether of severance pay or otherwise) becoming due from the Company or any of its Subsidiaries to any officer or employee thereof;
	(vi) which is a consulting or other agreement (including agreements entered into in the ordinary course and data processing, software programming and licensing contracts) not terminable on sixty (60) days or less notice involving the payment of more than $50,000 per annum;

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	(vii) except for the Company Stock Option Plan or as Previously Disclosed on Schedule 5.13 of the Company Disclosure Schedule, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the Bank Merger Agreement, or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement or the Bank Merger Agreement;
	(viii) providing for the indemnification by the Company or a subsidiary of the Company of any person, other than customary agreements relating to the indemnity of directors, officers and employees of the Company or its Subsidiaries; or
	(ix) providing for any material future payments that are conditioned, in whole or in part, on a change of control of the Company or any of its Subsidiaries;

Neither the Company nor any of its Subsidiaries is in material 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.

      5.14      No Brokers. Excluding the arrangement with and fee paid or payable to Trident Securities set forth in Schedule 5.14 of the Company Disclosure Schedule neither the Company nor any of its officers, directors, employees,