BRANCH PURCHASE AGREEMENT

Exhibit 10.27

BRANCH PURCHASE AGREEMENT

By and Among

FIRST COMMUNITY BANK,

FIRST STATE BANCORPORATION

and

GREAT WESTERN BANK

Dated as of March 10, 2009

 

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TABLE OF CONTENTS

 

 

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This filing excludes schedules and exhibits, other than schedule 1.6(b)(i), Deposit Premium Calculation. The registrant agrees to furnish the excluded schedules and exhibits supplementally to the Securities and Exchange Commission upon request.

 

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INDEX OF DEFINED TERMS

 

 

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BRANCH PURCHASE AGREEMENT

THIS BRANCH PURCHASE AGREEMENT (this “ Agreement ”), is made this 10th day of March, 2009, by and among GREAT WESTERN BANK, a bank chartered under the laws of the State of South Dakota (“ Purchaser ”), on the one hand, and FIRST COMMUNITY BANK, a bank chartered under the laws of the State of New Mexico (“ Seller ”), and FIRST STATE BANCORPORATION, a New Mexico corporation (“ Parent ”), on the other hand.

W I T N E S S E T H :

WHEREAS, Seller desires to sell, and Purchaser desires to acquire and operate, the branch offices described on Annex A attached hereto (the “ Branch Offices ”), and in this regard, Seller desires to sell and Purchaser desires to acquire certain assets relating thereto, including certain real and personal property used in the operation of the Branch Offices and certain loans and deposits, all as set forth more fully in this Agreement, upon the terms and conditions set forth herein;

WHEREAS, Seller desires to assign to Purchaser and Purchaser desires to assume and discharge from Seller certain liabilities relating to the Branch Offices, including certain obligations and liabilities relating to the deposits of the Branch Offices, and certain other obligations of Seller, all as set forth more fully in this Agreement, upon the terms and conditions set forth herein; and

WHEREAS, Parent owns all of the issued and outstanding capital stock of Seller and in order to induce Purchaser to execute and deliver this Agreement and to consummate the transactions contemplated hereby, Parent agreed to execute, deliver and perform its obligations under this Agreement.

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and promises herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each of the parties hereto, the parties, intending to be legally bound hereby, agree as follows:

ARTICLE I

TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES

Section 1.1 Purchase and Sale of Assets .

(a) Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Seller shall sell, convey, assign, transfer and deliver to Purchaser, and Purchaser shall purchase and accept from Seller, all of Seller’s right, title and interest in and to the following assets relating to the Branch Offices (collectively, the “ Assets ”) free and clear of all Encumbrances other than Permitted Encumbrances:

(i) Cash on Hand . All petty cash, vault cash, teller cash and automated teller machine (“ ATM ”) cash and any other cash at the Branch Offices or at the Owned ATMs (the “ Cash “) as of the close of business on the Closing Date.

 

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(ii) Loans . All loans and loan participations, or other extensions of credit, including overdrafts (whether specifically extended or courtesy) relating to any Deposits, interests in loan participations and assignments, customer liabilities on bankers acceptances, as well as legally binding commitments and obligations to extend credit (including any unfunded or partially funded revolving loans, lines of credit and overdraft lines of credit) (A) listed on Section 1.1(a)(ii) of Seller Disclosure Letter to the extent originated and serviced by the Branch Offices (exclusive of any reserves for loan losses) and all obligations of Seller to make additional extensions of credit in connection with such loans and loan participations, as such loans and loan participations may be increased, decreased, amended, renewed or extended in the ordinary course of business consistent with past practice and in compliance with Section 4.1(b), or (B) entered into in the ordinary course of business consistent with past practice and in compliance with Section 4.1(b) by Seller to the extent originated and serviced by the Branch Offices between the date indicated on Section 1.1(a)(ii) of the Seller Disclosure Letter and the close of business on the Closing Date and all obligations of Seller to make additional extensions of credit in connection with such loans and loan participations, as such loans and loan participations may be increased, decreased, amended, renewed or extended in the ordinary course of business consistent with past practice and in compliance with Section 4.1(b), in the case of each of clauses (A) and (B) immediately above together with any and all related promissory notes, liens, mortgages, deeds of trust, instruments, documentation, collateral, security, guarantees, documents, security and pledge agreements, insurance policies, financing statements, participation agreements, intercreditor agreements and other rights and interests, including all balances relating to such loans for which an escrow or other similar account is maintained under the terms of such loans, and in the case of each of clauses (A) and (B) immediately above only if, as of the close of business on the Closing Date, such loan, loan participation or extension of credit (w) has not been fully repaid, satisfied and discharged, (x) has not been charged off and is not classified as non-performing (which, for the avoidance of doubt, includes loans in non-accrual status, loans for which the collateral securing such loan has been repossessed or as to which collection efforts have been instituted or claim and delivery of foreclosure proceedings have been filed or are in the process of being filed, and loans in respect of which the obligor has filed a petition for relief under the United States Bankruptcy Code or otherwise has indicated a refusal to pay the loan as it becomes due), (y) is not a construction loan or for the acquisition or development of real property (in each case, including any refinancing thereof) and (z) unless expressly agreed to in writing by Purchaser prior to the Closing, is not an Excluded Loan (collectively, the “ Loans ”). Each Loan shall include the interest, fees, premiums, costs and other charges that have accrued on or been charged to the Loans but not received by Seller from the applicable borrower, or

 

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any guarantor, surety or other obligor therefor, or otherwise collected by offset, recourse to collateral or otherwise, all as set forth in Seller’s general ledger as of the close of business on the Closing Date (the “ Loan Interest ”). For purpose of this Agreement, An “ Excluded Loan ” means,(1) in respect of loans falling within clause (A) immediately above, any loan which, as of the close of business on the Closing Date: (I) is sixty (60) calendar days delinquent as to principal or interest, (II) has an internal credit risk rating or classification of 6 – Special Mention, 7 – Substandard, 8 – Doubtful or 9 – Loss (as such terms are used in Seller’s credit risk rating and classification policies as of December 31, 2008) and which has deteriorated one (1) or more levels from the internal credit risk rating or classification specified in Section 1.1(a)(ii) of Seller Disclosure Letter or (III) is the subject of any pending litigation, mediation or arbitration; or (2) in respect of loans falling within clause (B) immediately above, any loan which, as of the close of business on the Closing Date; (I) is (60) sixty calendar days delinquent as to principal or interest; (II) has an internal credit risk rating or classification of 6 – Special Mention, 7 – Substandard, 8 – Doubtful or 9 – Loss (as such terms are used in Seller’s credit risk rating and classification policies as of December 31, 2008); (III) is a student loan; (IV) whose obligor lives or the associated collateral is located in a place outside the United States of America or within the states of Arizona, California, Florida, Nevada or Utah; (V) is the subject of any pending litigation, mediation or arbitration; or (VI) whose obligor has a primary banking relationship with a branch of Seller other than one of the Branch Offices; it being agreed that references to loans in this definition of Excluded Loans shall also include loan participations and any other extensions of credit.

(iii) Real Property . (A) All real property relating to the Branch Offices, including the buildings, improvements and structures thereon and the appurtenances belonging thereto (each, an “Owned Real Property” and, collectively, the “ Owned Real Properties ”) and (B) all leasehold interests in real property relating to the Branch Offices (each a “Leased Real Property” and, collectively, the “ Leased Real Properties ”), in the case of each of the Owned Real Properties and the Leased Real Properties, as described in Section 1.1(a)(iii) of the Seller Disclosure Letter, and all of Seller’s rights with respect to the occupancy of any and all of the Leased Real Properties (“ Leases ”).

(iv) Personal Property . (A) The ATM machines listed on Section 1.1(a)(iv)(A) of the Seller Disclosure Letter (the “ Owned ATMs ”) and (B) (1) the personal property (including any furniture, fixtures, equipment, software and inventory) located at the Branch Offices on the Closing Date, and listed in Section 1.1(a)(iv)(B) of the Seller Disclosure Letter, (collectively the “ Owned Personal Property ”), (2) the other personal property (including any furniture, fixtures, equipment, software and inventory) located at the Branch Offices on the Closing Date which is leased or licensed by Seller and identified in Section 2.14 of the Seller Disclosure Letter as such (collectively the “ Leased Personal Property ”), and (3) any personal property (including any furniture, fixtures, equipment, software and inventory) located at the Branch Offices acquired by Seller after the date hereof in compliance with Section 4.1. Any personal property to be conveyed to Purchaser by Seller pursuant to this Section 1.1(a)(iv) is hereinafter referred to as the “ Personal Property .”

 

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(v) Records . All Records. As used in this Agreement, “ Records ” means all records, documents, data and files (in every format) in Seller’s possession, or in the possession of any of its agents or service providers, at Closing to the extent related to or utilized by Seller or such agents or service providers to administer, reflect, monitor, evidence or record information respecting the business or conduct of any of the Branch Offices and all such records and documents, data and files (in every format) respecting (A) the Assets (including, with respect to the Loans, all documents executed or delivered in connection with such loan or loan participation, any and all collateral held as security therefor or in which a security interest, lien or mortgage has been granted and any and all guarantees, insurance and credit enhancements and rights of interest relating thereto), (B) the Deposits and Other Liabilities and (C) the Employees (except confidential employee records which Seller is legally not permitted to transfer to Purchaser and for which consents to release such records to Purchaser shall not have been obtained from the relevant employee after commercially reasonable efforts by Seller to obtain such consent), including all such records maintained on electronic or magnetic media in an electronic data base system of Seller or any of its agents or service providers, or to comply with any applicable federal or state law or governmental regulation to which the Deposits are subject, including but not limited to Federal Reserve Board Regulation E (12 C.F.R. §205), Federal Reserve Board Regulation CC (12 C.F.R. §229) and the escheat and unclaimed property laws of the State of Colorado; provided, however, that for the purposes of this Section 1.1(a)(v), Records shall not include any federal, state, local or foreign income Tax records (including Tax Returns and supporting work papers) covering any period or transaction of Seller or any of the Assets, Branch Offices and Assumed Liabilities.

(vi) Contracts; Permits . The contracts set forth in Section 1.1(a)(vi)(A) of the Seller Disclosure Letter, together with any additional contracts entered into by Seller in accordance with Section 4.1(b)(vi) (the “ Contracts ”) and all the Permits relating to the Owned Real Property or the Leased Real Property (the “ Assigned Permits ”).

(vii) Leasehold Improvements . All leasehold improvements (to the extent not otherwise included as Personal Property) located at the Branch Offices on the Closing Date (the “ Leasehold Improvements ”).

(viii) Safe Deposit Box Business . All assets and property, of any kind, character or description related to the safe deposit box business located at the Branch Offices as of the close of business on the Closing Date (the “ Safe Deposit Box Business ”).

 

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(ix) Heritage Bank . All rights, logos, service marks, trademarks, slogans, similar materials, and assorted goodwill relating to Heritage Bank, Seller’s predecessor, and any derivatives thereof.

(x) Other Rights . Any and all claims and rights to seek recovery on any claims against third parties that may have arisen with respect to the Assets and the Assumed Liabilities prior to the Closing.

(b) For avoidance of doubt, subject to Section 4.2, Seller shall have the right to retain a copy of all Records and Contracts to the extent reasonably necessary in connection with accounting, tax, litigation or regulatory compliance purposes and Seller shall use such Records and Contracts only for such purposes.

Section 1.2 Excluded Assets and Liabilities .

(a) It is understood and agreed that Purchaser is not acquiring from Seller, and Seller shall retain ownership of all right, title and interest in and to, (i) all Loans set forth in Section 1.2(a)(i) of the Seller Disclosure Letter and (ii) any property or asset which is not being transferred pursuant to Section 1.1, including (A) the existing name of Seller or any combination or derivation thereof, (B) the software set forth in Section 1.2(a)(ii)(B) of the Seller Disclosure Letter, (C) any logos, service marks, trademarks, advertising material, slogans or similar items used on or prior to the Closing Date by Seller or Parent in connection with its business, (D) any refunds, credits or other assets or rights (including interest thereon or claims therefor) with respect to any Taxes paid by Seller, or for which Seller or any of its Affiliates are responsible under this Agreement, relating to the Assets or the Assumed Liabilities, (E) loan, loan participations or other extensions of credit that have been classified as non-performing as of the Closing Date and any amounts recovered thereon, (F) amounts recovered on any loans, loan participations or other extensions of credit that have been charged off prior to the Closing Date, (G) the mortgage loan origination business of Seller and any assets related primarily thereto, (H) any real property owned, leased or licensed by Seller other than the Owned Real Properties or the Leased Real Properties (including any real property identified as other real estate owned (OREO) on Section 1.2(a)(ii) of the Seller Disclosure Letter), (I) any Excluded Loans, (J) any insurance policies of Seller relating to any of the Branch Offices, Assets or Employees or (K) any assets arising out of or relating to employee benefits or employee benefit or compensation plans, programs, agreements or arrangements maintained or contributed to (or formerly maintained or contributed to) by Seller, any of its Affiliates or any trade or business (whether or not incorporated) which, together with Seller or any of its Affiliates, would be treated as a single employer under Section 414 of the Internal Revenue Code of 1986, as amended (the “ Code ”), or Section 4001 of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”) (an “ ERISA Affiliate ”), except as expressly set forth in Section 5.1 (collectively, the “ Excluded Assets ”).

(b) It is understood and agreed that, except as expressly set forth in this Agreement, Purchaser shall not assume or be liable for, and the Assumed Liabilities shall not include, any of the debts, obligations or liabilities of Seller of any kind or nature whatsoever (whether or not accrued or fixed, absolute or contingent, known or unknown), and Seller shall remain and be solely and exclusively liable with regard to such debts, liabilities and obligations,

 

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including liabilities and obligations accrued or arising prior to the close of business on the Closing Date relating to the assets, liabilities, leases and contracts, employees and their employment, and the operation of the Branch Offices (collectively, the “ Excluded Liabilities ”). Seller acknowledges that any liability under the WARN Act relating to any non-Transferred Employee is an Excluded Liability.

Section 1.3 Assignment and Assumption of Deposits . Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Seller shall assign to Purchaser, and Purchaser shall accept and assume from Seller, and shall be solely and exclusively liable for, all obligations of Seller arising or accrued after the close of business on the Closing Date with respect to (a) Branch Deposits listed on Section 1.3(a)(i) of the Seller Disclosure Letter and (b) Branch Deposits in accounts opened on behalf of a customer by a Branch Office in the ordinary course of business consistent with past practice between the date listed on Section 1.3(a)(i) of the Seller Disclosure Letter and the close of business on the Closing Date, in each case as such Branch Deposits may be increased or decreased in the ordinary course of business, and in each case provided such Branch Deposits are domiciled at the Branch Offices as of the close of business on the Closing Date (collectively, the “ Deposits ”). As used in this Agreement, the term “ Branch Deposits ” shall mean, as of any given time, all deposits (as defined in Section 3(l) of the Federal Deposit Insurance Act (“ FDIA ”), as amended, 12 U.S.C. Section 1813(l)) domiciled at any Branch Office, including the aggregate balances of all savings accounts (including certificates of deposit), including accounts accessible by negotiable orders of withdrawal or other demand instruments, all deposit accounts maintained by a customer for the stated purpose of the accumulation of funds to be drawn upon at retirement (“ Retirement Accounts ”), all deposit accounts domiciled at each Branch Office through which Seller accepts payments or deposits for credit or deposit to another account domiciled at such Branch Office, all deposit accounts domiciled at the Branch Offices subject to arrangements between the owner of the account and a third party which directly makes Automated Clearing House (“ ACH ”) debits and credits, including social security payments, Federal recurring payments, and other payments debited and/or credited on a regularly scheduled basis to or from such accounts (such payments being hereinafter referred to as the “ Automated Items ” and such accounts being hereinafter referred to as the “ Automated Accounts ”), and all other accounts and deposits domiciled at the Branch Offices, together with interest, if any, that are accrued but unposted to Seller’s general ledger as of such time. Notwithstanding the foregoing, Branch Deposits shall not include any Certificate of Deposit Account Registry Service accounts or any Excluded Deposit. For purpose of this Agreement, an “ Excluded Deposit ” means any (i) deposit account that cannot be assumed by Purchaser because of legal impediments, (ii) deposit account of any customer with a primary relationship with a branch of Seller other than one of the Branch Offices (each such customer is identified on Section 1.3(a)(ii) of the Seller Disclosure Letter), (iii) brokered deposit account and (iv) deposit account that is involved in any pending or threatened litigation, mediation or arbitration as of the Closing Date.

Section 1.4 Assignment and Assumption of Other Liabilities . Upon the terms and subject to the conditions set forth in this Agreement, on the Closing Date, Seller shall assign to Purchaser, and Purchaser shall accept and assume from Seller and shall be solely and exclusively liable for, the liabilities of Seller with respect to the following, but only to the extent that such liabilities and obligations arise or accrue after the close of business on the Closing Date (collectively, the “ Other Liabilities ,” and, together with the Deposits, the “ Assumed Liabilities ”):

(a) the Assets;

 

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(b) the Leases and Contracts;

(c) the Transferred Employees and their employment, including all compensation, benefits, severance, workers compensation and welfare benefit claims and employment-related liabilities; and

(d) the operation of the Branch Offices;

but, in each case, excluding the Excluded Liabilities, including all liabilities for which Seller is responsible pursuant to Section 5.1 or Section 6.1 and all liabilities arising out of, or relating to, employee benefits or employee benefit or compensation plans, programs, agreements or arrangements maintained or contributed to (or formerly maintained or contributed to) by Seller, any of its Affiliates or any ERISA Affiliate, including (i) all liabilities arising under the “employee benefit plans” (within the meaning of Section 3(3) of ERISA) maintained or contributed (or required to be maintained or contributed to) by Seller or any of its Affiliates or any ERISA Affiliate and any other employee benefit plan, program or arrangement or employment agreement in which Employees participate (including without limitation any pension, retirement, profit-sharing, thrift, savings, bonus plan, incentive, stock option or other equity or equity-based compensation, or deferred compensation arrangement, stock purchase, severance pay, retention, change of control, unemployment benefits, sick leave, vacation, salary continuation for disability, hospitalization, health or medical insurance, life insurance, fringe benefit, compensation, flexible spending account or scholarship program, and any employment or severance contract or similar practice, policy or arrangement whether in writing or oral) (each, an “ Employee Benefit Plan ”), (ii) all liabilities arising under Title IV of ERISA, (iii) all liabilities with respect to compensation, bonuses and commissions owed to any current or former Employee that are payable with respect to services performed by such individuals prior to their termination of employment or service with Seller or any of its Affiliates and (iv) all liabilities arising out of or relating to any claims by any current or former Employees with respect to any personal injuries, including workers’ compensation or disability, allegedly arising during their employment or engagement by Seller or any of its Affiliates, regardless of when any such claim is made or asserted.

Section 1.5 Adjustment for Income, Expenses and Fees .

(a) All items of income, operating expenses and fees relating to the Assets and Assumed Liabilities, whether or not accrued or prepaid prior to the Closing Date (including wages, salaries, rents, safe deposit fees, utility payments, all Taxes that are imposed on a periodic basis with respect to the Assets or the Assumed Liabilities (including personal property taxes and non-delinquent real property taxes), any fees paid or payable to Seller with respect to the Loans or the IRA accounts, and any Federal Deposit Insurance Corporation (“ FDIC ”) and Depositors Insurance Fund fees or premiums), shall be pro-rated between the parties as of the Closing Date, with Seller responsible for (or entitled to receive, as the case may

 

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be) all such items which are allocable to the period on or prior to the Closing Date and Purchaser responsible for (or entitled to receive, as the case may be) all such items which are allocable to the period subsequent to the Closing Date; provided, however, that each of Seller and Purchaser shall be responsible for one-half (50%) of the aggregate amount levied on Seller and Purchaser pursuant to the emergency special assessment on the Deposits imposed by the FDIC on June 30, 2009, under the interim rule adopted by the FDIC on February 27, 2009, as such special assessment may be modified or amended prior to the Closing Date, which amount shall be included in the Pro-Rata adjustment. The aggregate net amount of such proration shall result in an adjustment (the “ Pro-Rata Adjustment ”) in the calculation of the Estimated Transfer Amount and the Final Transfer Amount as provided for in Section 1.6 and Section 1.8, respectively.

(b) The Pro-Rata Adjustment shall include the dollar amount of all security deposits which Seller has paid to lessors or landlords under the Tenant Leases as an amount that Seller is entitled to receive (without proration), as indicated in each Assignment and Assumption of Tenant Leases.

(c) To the extent that any of the items of income, fees or expenses described in this Section 1.5 are not discovered prior to the preparation of the Post-Closing Schedule, the parties shall cooperate so that Purchaser or Seller, as the case may be, pays any such fee or expense or receives any such income depending upon whether such fee, expense or income relates to the period after, on or before the Closing Date.

(d) All prorations made pursuant to this Section 1.5 shall be based upon the ratio of the number of days prior to and including the Closing Date related to such item compared to the total number of days related to such item.

(e) “ IRA ” shall mean an account created by a trust for the benefit of an individual or his or her beneficiary, and that complies with the provisions of Section 408 or 408A of the Code.

Section 1.6 Estimated Transfer Amount .

(a) Three (3) Business Days prior to the Closing, Seller shall deliver to Purchaser a certificate executed on behalf of Seller by the President or any Vice President of Seller, dated the date of its delivery, (x) stating that there has been conducted under the supervision of such officer a review of all relevant information and data then available, (y) attaching a schedule setting forth Seller’s best estimate of the following, in each case as of the close of business on the date that is seven (7) calendar days prior to the Closing (the “ Estimation Date ”): (i) the aggregate amount of the Branch Deposits, including (to the extent not reflected in such aggregate amount) any accrued and unpaid interest with respect to such Branch Deposits (the “ Estimated Deposits ”); (ii) the aggregate gross book value of the Loans, including (to the extent not reflected in such gross book value) all Loan Interest as of the Estimation Date, minus an aggregate discount equal to 2.0% of the aggregate gross book value of the Loans (which discount, for the avoidance of doubt, takes into account any loan loss reserves attributable to the Loans) (such book value, as so adjusted, the “ Estimated Loan Payment ”); (iii) the aggregate amount of the Cash (the “ Estimated Cash ”); and (iv) the Pro-Rata Adjustment (the “ Estimated

 

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Pro-Rata Adjustment ”), in the case of clauses (i) through (iv), determined in accordance with Seller GAAP and (z) stating that the attached schedule has been prepared in good faith and in compliance with this Section 1.6. Each such estimate shall be subject to the prior written approval of Purchaser, which approval shall not be unreasonably withheld or delayed.

(b) In connection with the sale by Seller to Purchaser of the Assets and the assumption by Purchaser of the Deposits and Other Liabilities as provided for herein, at the Closing, (x) if the Estimated Transfer Amount is positive, Seller shall transfer to Purchaser in immediately available funds, by wire transfer to an account designated in writing by Purchaser to Seller at least two (2) Business Days prior to the Closing Date (“ Purchaser’s Account ”), an amount equal to the absolute value of the Estimated Transfer Amount and (y) if the Estimated Transfer Amount is negative, Purchaser shall transfer to Seller in immediately available funds, by wire transfer to an account designated in writing by Seller to Purchaser at least two (2) Business Days prior to the Closing Date (“ Seller’s Account ”), an amount equal to the absolute value of the Estimated Transfer Amount. For purposes of this Agreement:

(i) “ Estimated Target Amount ” means an amount equal to the sum of (i) the amount determined in accordance with Schedule 1.6(b)(i) (the “ Deposit Premium ”), (ii) the Estimated Loan Payment, (iii) the Estimated Cash and (iv) the estimated aggregate book value (net of accumulated depreciation) as of the Closing Date of the Personal Property, the Leasehold Improvements and the Owned Real Properties as set forth on the Book Value Schedule delivered pursuant to Section 4.16 plus the Estimated Pro-Rata Adjustment (if such amount is owing to Seller) or minus the Estimated Pro-Rata Adjustment (if such amount is owing to Purchaser).

(ii) “ Estimated Transfer Amount ” means the Estimated Deposits minus the Estimated Target Amount.

Section 1.7 Post-Closing Schedule .

(a) Within forty-five (45) Business Days after the Closing Date, Purchaser shall deliver to Seller a schedule (the “ Post-Closing Schedule ”) setting forth the actual amount of (i) the aggregate amount of the Deposits, including (to the extent not reflected in such aggregate amount) any accrued and unpaid interest with respect to such Deposits, (ii) the aggregate gross book value of the Loans, including (to the extent not reflected in such book value) all Loan Interest, minus an aggregate discount equal to 2.0% of the aggregate gross book value of the Loans (which discount, for the avoidance of doubt, takes into account any loan loss reserves attributable to the Loans), (iii) the aggregate amount of the Cash, (iv) the aggregate book value (net of accumulated depreciation) as of the Closing Date of the Personal Property, the Leasehold Improvements and the Owned Real Properties and (v) the Pro-Rata Adjustment, in each case as of the close of business on the Closing Date. Seller shall cooperate with Purchaser in the preparation of the Post-Closing Schedule. Purchaser shall provide Seller and its independent accountants with reasonable access to the books, records, facilities and personnel of the Branch Offices in a manner which does not unduly disrupt or interfere with the operation of the Branch Offices so that Seller and its independent accountants may review the Post-Closing Schedule. In each case, such book value shall be determined in accordance with Seller GAAP.

 

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(b) Within thirty (30) calendar days after delivery of the Post-Closing Schedule to Seller (the “ Review Period ”), Seller may dispute all or any portion of the Post-Closing Schedule by giving written notice (a “ Notice of Disagreement ”) to Seller setting forth in reasonable detail the basis for such dispute (hereinafter called a “ Disagreement ”). The failure by Seller to deliver a Notice of Disagreement during the Review Period shall constitute an irrevocable acceptance by Seller of the Post-Closing Schedule in the form delivered by Purchaser. If Seller delivers a Notice of Disagreement during the Review Period, the parties shall promptly commence good faith negotiations with a view to resolving such Disagreement. If Purchaser shall not dispute all or any portion of the Notice of Disagreement by giving written notice to Seller setting forth in reasonable detail the basis for such dispute within ten (10) Business Days following the delivery of the Notice of Disagreement, Purchaser shall be deemed to have irrevocably accepted the Post-Closing Schedule as modified by the Notice of Disagreement.

(c) If Purchaser disputes all or any portion of the Notice of Disagreement within the period specified in the last sentence of Section 1.7(b), and the parties are not able to resolve any Disagreement within fifteen (15) calendar days after the delivery by Purchaser of its dispute of the Notice of Disagreement, such unresolved Disagreement(s) shall be referred to a nationally recognized accounting firm that is independent in respect of Purchaser and Seller for determination of the disputed amounts in accordance with this Agreement. If Purchaser and Seller do not agree on the selection of a nationally recognized accounting firm within fifteen (15) calendar days, then the American Arbitration Association shall select such accounting firm. The determination of such firm shall be final and binding upon the parties and the amount so determined shall be used to complete the final Post-Closing Schedule. Such firm shall render its determination as soon as practicable after referral of the Disagreement. The fees and expenses of such firm shall be paid one-half (50%) by Purchaser and one-half (50%) by Seller. The parties shall cooperate with each other and such firm with respect to the resolution of any Disagreement, such cooperation to include reasonable access to such party’s books, records, facilities, personnel and independent accountants.

(d) As used in this Agreement, the term “ Business Day ” shall mean any day (other than a Saturday or Sunday) on which banking institutions shall generally be open for the transaction of business in the State of Colorado.

Section 1.8 Final Settlement . On the Business Day immediately following the day on which the Post-Closing Schedule shall have been finally determined pursuant to the terms of Section 1.7 (the “ Final Settlement Date ”), each of the Estimated Deposits, the Estimated Target Amount and the Estimated Transfer Amount, shall be recalculated as of the close of business on Closing Date using the amounts reflected in the final Post-Closing Schedule. As so recalculated, such amounts are referred to herein as the “ Final Deposits ”, the “ Final Target Amount ” and the “ Final Transfer Amount ”, respectively. If the Final Transfer Amount is greater than the Estimated Transfer Amount, then Seller shall pay the difference to Purchaser. If the Final Transfer Amount is less than the Estimated Transfer Amount, then, Purchaser shall pay the difference to Seller. In each case such payment shall be made within three (3) Business Days after the Final Settlement Date by wire transfer in immediately available funds to Seller’s Account or Purchaser’s Account, as applicable. Any payment pursuant to this Section 1.8 (such payment the “Final Transfer Payment” ) shall include interest on such amount for the number of days from and including the Closing Date to but excluding the Final Settlement Date (the

 

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“ Interest Period ”) calculated at the Federal Funds Rate. “ Federal Funds Rate ” means, for the period involved, the average of the interest rates for each day of the period set forth in H.15(519) opposite the caption “ Federal Funds (Effective) ,” where H.15(519) means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System.

Section 1.9 Allocation of Purchase Price . Purchaser shall deliver to Seller, within thirty (30) calendar days after the Final Settlement Date, a schedule allocating the consideration paid by Purchaser among the Assets, including any intangible assets (the “ Proposed Final Allocation ”) prepared in a manner consistent with the Post-Closing Schedule and Section 1060 of the Code and the Treasury Regulations promulgated thereunder. The methodology for such allocation shall be set forth on Schedule 1.9. Seller shall have thirty (30) calendar days from receipt of the Proposed Final Allocation to object in writing to such Proposed Final Allocation. If Seller does not object within such period the Proposed Final Allocation shall become final (the “ Final Allocation ”). If Seller provides written notice to Purchaser prior to the end of such period that objects to the Proposed Final Allocation, Purchaser and Seller shall negotiate in good faith to agree on the Final Allocation. If Purchaser and Seller do not agree on the Final Allocation within forty-five (45) calendar days of Seller having provided written notice to Purchaser, then any dispute with respect to the Final Allocation shall be resolved by a nationally recognized accounting firm to be selected in accordance with Section 1.7(c). Any determination of such firm shall be made as soon as practicable and will be final and binding upon the parties. The parties shall sign the Final Allocation once it has been finalized. Seller and Purchaser agree to (i) be bound, and cause any of their Affiliates to be bound, by the Final Allocation, (ii) prepare and file their Tax Returns on a basis consistent with the Final Allocation unless required to do otherwise under Applicable Law and (iii) take no position, and cause any of their Affiliates to take no position, inconsistent with the Final Allocation on any applicable Tax Return or in any administrative or judicial examination or other proceeding with respect to Taxes, unless required to do otherwise under Applicable Law. In the event that the Final Allocation or the Estimated Allocation is disputed by any Governmental Entity, the party receiving notice of the dispute shall promptly notify the other party concerning resolution of the dispute. Each of Seller, on the one hand, and Purchaser, on the other hand, agrees to cooperate with the other in preparing Internal Revenue Service (“ IRS ”) Form(s) 8594 (including any such form(s) required to be filed as a result of any adjustment to the consideration paid hereunder), and to furnish the other with a copy of such form(s) prepared in a draft form no later than sixty (60) calendar days before the due date for the filing of such form(s) (including any extensions).

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SELLER

Except as set forth in the disclosure letter delivered to Purchaser by Seller at or prior to the execution hereof (the “ Seller Disclosure Letter ”) (each section of which qualifies the correspondingly numbered representation, warranty or covenant to the extent specified therein and such other representations, warranties or covenants to the extent a matter in such section is disclosed in such a way as to make its relevance to such other representation, warranty or covenant reasonably apparent), Seller hereby represents and warrants to Purchaser as follows:

Section 2.1 Corporate Organization and Powers .

(a) Seller is a bank, duly organized, validly existing and in good standing under the laws of the State of New Mexico and Parent is a corporation, duly organized, validly existing and in good standing under the laws of the State of New Mexico.

 

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(b) (i) Seller has the full power and authority to own, lease, license or operate the Assets and to carry on the business of the Branch Offices as presently conducted and is duly qualified and in good standing to do business in Colorado and in each other jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate with all other such failures, have a Material Adverse Effect and (ii) Parent has the full power and authority to own, lease, license or operate its assets and to carry on the business of its business as presently conducted and is duly qualified and in good standing to do business in New Mexico and in each other jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate with all other such failures, have a Material Adverse Effect. Seller’s deposits are, subject to applicable monetary limits established by Applicable Law, insured by the FDIC in accordance with the FDIA, and Seller has paid all premiums and assessments and has duly, timely and accurately filed all reports required to be filed by it with the FDIC or any other applicable bank regulatory authority.

(c) “ Material Adverse Effect ” shall mean any circumstance, change in or effect that has or would reasonably be expected to have a material adverse effect on the Assets and the Assumed Liabilities taken as a whole or on the business of the Branch Offices taken as a whole as conducted by Seller immediately prior to the date of this Agreement (the “ Branch Business ”); provided, however, that “Material Adverse Effect” shall not include any adverse change, event, development, or effect arising from or relating to (i) any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates, (ii) national or international political or social conditions, including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon the United States, or any of its territories, possessions, or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States, (iii) changes in Applicable Law, GAAP or regulatory accounting principles, or authoritative interpretations thereof after the date of this Agreement that affect in general the financial services industry, (iv) compliance with the terms of, or the taking of any action contemplated by, this Agreement or any of the other agreements contemplated hereby, (v) the markets or industry in which the Branch Offices operate generally or (vi) the public announcement of this Agreement or the other agreements contemplated hereby or of the consummation of the transactions contemplated hereby or thereby, except in the case of clause (i), (ii), (iii) or (v) immediately above to the extent that any such change, event, development or effect has a materially disproportionate impact on the Assets and the Assumed Liabilities, taken as a whole, or the Branch Business.

 

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Section 2.2 Corporate Authority; No Violation .

(a) Each of Seller and Parent has the corporate power and authority to execute and deliver this Agreement and any documents, agreements or instruments to be executed by Seller or Parent, as the case may be, pursuant to this Agreement, and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and any documents, agreements or instruments to be executed by Seller or Parent, as the case may be, pursuant to this Agreement, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action on the part of Seller and Parent, and no further corporate authorization on the part of Seller or Parent is necessary to approve this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by Seller and Parent and (assuming the due authorization, execution and delivery of this Agreement by Purchaser) constitutes a legal, valid and binding obligation of Seller and Parent, enforceable against Seller and Parent in accordance with its terms, and the other documents, agreements and instruments to be delivered by Seller or Parent, as the case may be, to Purchaser pursuant to this Agreement will, when executed and delivered, be duly executed and delivered by Seller or Parent, as the case may be, and will constitute legal, valid and binding obligations of Seller or Parent, as the case may be, enforceable against Seller or Parent, as the case may be, in accordance with their terms, in all cases except as enforcement may be limited by receivership, conservatorship and supervisory powers of bank regulatory agencies generally, general principles of equity, whether applied in a court of law or a court of equity, and by bankruptcy, insolvency and similar laws affecting creditors’ rights and remedies generally.

(b) Neither the execution and delivery by Seller or Parent of this Agreement or any document, agreement or instrument to be executed by Seller or Parent, as the case may be, pursuant to this Agreement, nor the consummation by Seller or Parent of the transactions contemplated hereby or thereby, nor compliance by Seller or Parent with any of the terms or provisions hereof or thereof, will (i) violate any provision of the Restated Articles of Incorporation of Seller, as amended, or Bylaws of Seller or violate any provision of the Restated Articles of Incorporation of Parent, as amended, or amended Bylaws of Parent, or (ii) (x) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to Seller or Parent or any of their respective properties or assets (including the Assets) or (y) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any lien, pledge, security interest, charge or other Encumbrance upon any of the Assets under any of the terms, conditions or provisions of any Permit to which Seller or Parent is a party, or by which Seller, Parent or any of the Assets may be bound or affected or any note, bond, mortgage, indenture, deed of trust, license, lease, agreement, or other instrument or obligation to which Seller or Parent is a party, or by which Seller, Parent or any of the Assets may be bound or affected.

Section 2.3 Consents and Approvals . Except as set forth in Section 2.3 of the Seller Disclosure Letter, no consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity or any other third party is required by or with respect to Seller or Parent in connection with the execution and delivery of this Agreement by

 

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Seller or Parent, or any document, agreement or instrument to be executed by Seller or Parent, as the case may be, pursuant to this Agreement or the consummation by Seller and Parent of the transactions contemplated hereby or thereby (including the transfer of the Assets to Purchaser).

Section 2.4 Compliance With Law .

(a) Except for any Environmental Laws and Applicable Laws relating to Taxes or Loans, which are addressed exclusively in Section 2.8, Section 2.11 and Section 2.12, respectively, with respect to the Assets and the business of Seller related to the Branch Offices, Seller is in compliance in all material respects with the provisions of all applicable statutes, regulations, ordinances, orders, Permits and judgments of all Governmental Entities, including without limitation, zoning rules and regulations, and employment relations matters (collectively, “ Applicable Laws ”). Seller is and has been in compliance with the requirements of the Workers Adjustment and Retraining Notification Act and with any and all comparable state, local and other legal requirements (including without limitation legal requirements under state law regarding mass layoffs) (collectively, the “ WARN Act ”), and has no liabilities or unfulfilled notice obligations pursuant to the WARN Act. Seller has not taken any action that would cause Seller or, after the Closing, Purchaser (without giving effect to any actions taken by Purchaser following the Closing) to have any liability thereunder. Except for regularly scheduled examinations, audits and full and limited scope reviews conducted by the Federal Reserve, the FDIC and any other governmental authority under any Applicable Law relating to banks and their holding companies, Seller has not received written notice, nor to Seller’s knowledge oral notice, of any investigation or review by any federal, state or local court, administrative agency or commission, other governmental authority or instrumentality or arbitrator (each, a “ Governmental Entity ”). Seller has all licenses, franchises, permits, certificates of public convenience, orders and other authorizations (“ Permits ”) of all federal, state and local governments and Governmental Entities necessary for the lawful conduct of the business being conducted at each of the Branch Offices and all such Permits are valid, subsisting and in full force and effect, are in good standing and are not subject to any suspension, modification or revocation or proceedings related thereto.

(b) Complete and correct copies of all of the Assigned Permits have heretofore been delivered to Purchaser by Seller, and (i) Seller has fulfilled and performed its obligations under each of the Assigned Permits, and no event has occurred or condition or state of facts exists which constitutes or, after notice or lapse of time or both, would constitute a breach or default under any such Permit or which permits or, after notice or lapse of time or both, would permit revocation or termination of any such Permit, or which might adversely affect the rights of Seller under any such Permit; (ii) no notice of cancellation, of default or of any dispute concerning any Assigned Permit, or of any event, condition or state of facts described in the preceding clause, has been received by, or is known to, Seller; and (iii) each of the Assigned Permits may be assigned and transferred to Purchaser in accordance with this Agreement and, to Seller’s knowledge, will continue in full force and effect thereafter, in each case without (x) the occurrence of any breach, default or forfeiture of rights by Seller or, following the Closing, Purchaser thereunder, or (y) the consent, approval, or act of, or the making of any filing with, any Governmental Entity.

 

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(c) The Branch Offices have been operated, in all material respects in compliance with Sellers’ policies and procedures.

Section 2.5 Title to Assets .

(a) Seller has, and will deliver to Purchaser at the Closing, good, valid and, in the case of the Owned Real Property, marketable, title to all of the Assets, except that in the case of Leased Real Property set forth in Section 1.1(a)(iii) of the Seller Disclosure Letter and Leased Personal Property set forth in Section 1.1(a)(iv)(B) of the Seller Disclosure Letter, Seller has and will deliver to Purchaser at the Closing, a valid leasehold interest in such leased Assets, in each case free and clear of all mortgages, covenants, claims, charges, liens, encumbrances, easements, limitations, restrictions, rights of way, pledges, deeds of trust, leases or other encumbrances of any kind (“ Encumbrances ”) except for the following (“ Permitted Encumbrances ”):

(i) Encumbrances securing the Leased Personal Property listed on Section 2.5(a)(i) of the Seller Disclosure Letter;

(ii) inchoate Encumbrances imposed by law, such as carriers’, warehousemen’s, materialmen’s and mechanics’ Liens and other similar Encumbrances arising in the ordinary course of business consistent with past practice which are not due and payable and not involving more than $5,000 in the aggregate;

(iii) Encumbrances for Taxes or assessments, special or otherwise, which are not due and payable;

(iv) zoning, entitlement or other land use regulations that do not adversely impact the intended use of the Properties for the business purposes to be conducted by Purchaser thereon after the Closing Date, assuming Purchaser will conduct its business in substantially the same way as Seller conducted the Branch Business immediately prior to the Closing;

(v) easements, quasi-easements, licenses, covenants, rights-of-way, rights of re-entry or other restrictions, including any other agreements, conditions or restrictions that would be shown by a current title report or other similar report or listing, which do not underlie any buildings or improvements on the Properties and which do not adversely impact the intended use of the Properties for the business purposes to be conducted by Purchaser thereon after the Closing Date, assuming Purchaser will conduct its business in substantially the same way as Seller conducted the Branch Business immediately prior to the Closing;

(vi) subject to Section 4.26, any conditions that may be shown by a current Survey or physical inspection of the Properties, which do not adversely impact the intended use of the Properties for the business purposes to be conducted by Purchaser thereon after the Closing Date, assuming Purchaser will conduct its business in substantially the same way as Seller conducted the Branch Business immediately prior to the Closing; and

 

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(vii) with respect to any Leased Real Property set forth in Section 1.1(a)(iii) of the Seller Disclosure Letter and Leased Personal Property set forth in Section 1.1(a)(iv)(B)of the Seller Disclosure Letter, any Encumbrances set forth in the applicable lease.

(b) Upon delivery to Purchaser on the Closing Date of the instruments of transfer contemplated by Section 9.3, Seller will thereby transfer to Purchaser good, valid and, with respect to the Owned Real Properties, marketable title to the Assets, subject to no Encumbrances, except for Permitted Encumbrances.

Section 2.6 Contracts and Leases .

(a) Seller is not a party to or bound by any agreements or arrangements for the purchase or sale of any of the Assets, or for the grant of any preferential right to purchase any of the Assets.

(b) Each of the Contracts set forth in Section 1.1(a)(vi)(A) of the Seller Disclosure Letter constitutes and, on the Closing Date, each of the Contracts included in the Assets will constitute, the legal, valid and binding obligation of Seller, and, to the knowledge of Seller, each of the other parties thereto, and each of the Contracts set forth in Section 1.1(a)(vi)(A) of the Seller Disclosure Letter is, and, on the Closing Date, each of the Contracts included in the Assets will be, in full force and effect (except to the extent that any Contract expires in accordance with its terms). Neither Seller nor, to Seller’s knowledge, any other party thereto is in breach or default under any Contract, nor, to the knowledge of Seller, does there exist any condition which with the passage of time or the giving of notice or both would result in a breach or default thereunder. Seller has made available to Purchaser true and complete copies of each Contract set forth on Section 1.1(a)(vi)(A) of the Seller Disclosure Letter and will make available to Purchaser a true and complete copy of each other Contract entered into after the date hereof at the time it is entered into. Except as set forth in Section 1.1(a)(vi)(A) of the Seller Disclosure Letter, none of the Contracts (x) has payments of more than $50,000 in any year, (y) would not be cancelable on ninety (90) calendar days or less notice without cost or penalty or (z) contains any confidentiality, noncompetition, non-solicitation or restriction on the conduct of business of the Branch Offices or, following the Closing, Purchaser or any of its Affiliates.

(c) Seller has made available to Purchaser true and complete copies of the Leases set forth on Section 2.6(c) of the Seller Disclosure Letter as of the date hereof under which Seller is the tenant or lessee or holds or operates, any real property owned by any third Person (“ Tenant Leases ”) and/or under which Seller is the landlord or lessor (“ Landlord Leases ”). The Leases are legally valid and binding obligations of Seller and, to the knowledge of Seller, each of the other parties thereto and are in full force and effect (except to the extent that any Lease expires in accordance with its terms). Neither Seller nor, to Seller’s knowledge, any other party thereto is in breach or default under any Lease, nor, to the knowledge of Seller, does there exist any condition which with the passage of time or the giving of notice or both

 

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would result in a breach or default thereunder. All sums due and owing through the Closing Date by Seller pursuant to the Leases have been or, prior to the Closing Date, will be paid. Seller has not subleased any of its interests in any Leased Real Property. Section 2.6(c) of the Seller Disclosure Letter sets forth a list and brief description of each Lease or similar agreement (showing the parties thereto, the gross annual rent, expiration date, renewal and purchase options (if any), the location and common address). Seller has made available to Purchaser, true, complete and accurate copies of all Leases, including all amendments and modifications thereto and any and all material written notices or other agreements relating to any of such Lease. As to any Tenant Leases, Seller is the sole owner of the leasehold interest in such real property. For purpose of this Agreement, “ Person ” means any individual, partnership, joint venture, corporation, trust, limited liability company, unincorporated organization, government or other entity.

(d) None of the Leases contains any option, right of first refusal, right of first offer, put option, equity participation right or any other contractual right to offer, purchase, acquire, sell, assign or dispose of any portion of the Leased Real Properties. Except for Seller, no third party has any right to use, lease, possess and/or occupy any portion of the Leased Real Properties under a Tenant Lease, and there are no oral or written agreements between Seller and any other third party providing such third party the right to use, occupy or posses all or any portion of the Leased Real Properties.

(e) None of the rights of Seller under any of the Leases will be subject to termination or modification as the result of the consummation of the transactions contemplated by this Agreement. Section 2.6(c) of the Seller Disclosure Letter sets forth: (i) with respect to each Tenant Lease, each of the security deposits funded by Seller and the true and correct amount of each such security deposit; and except as set forth in Section 2.6(c) of the Seller Disclosure Letter, Seller has not tendered a security deposit to any lessor or landlord in connection with any of the Tenant Leases and (ii) with respect to each Landlord Lease, each of the security deposits funded by the lessee or tenant thereunder and the true and correct amount of each such security deposit. Except as set forth in Section 2.6(c) of the Seller Disclosure Letter, Seller has not accepted a security deposit from any lessee or tenant in connection with any of the Landlord Leases. Seller is not (x) as of the date hereof, renegotiating any of the Contracts and Leases or (y) currently paying liquidated damages in lieu of performance under any of the Contracts and Leases.

(f) Seller has delivered to Purchaser true and complete copies of all safe deposit box lease forms used in connection with the Safe Deposit Box Business. All agreements relating to the Safe Deposit Box Business are in such forms.

Section 2.7 Litigation . Except as set forth in Section 2.7 of the Seller Disclosure Letter, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, pending, or, to Seller’s knowledge, threatened, (a) relating to the Assets, the Assumed Liabilities or the Branch Business or (b) against Seller or Parent which questions the legality or propriety of the transactions contemplated by this Agreement or that would prevent or materially impair the ability of Seller or Parent to perform its obligations under this Agreement in all material respects, nor, to the knowledge of Seller, is there any reasonable basis for any of the same. There are no lawsuits, suits or proceedings pending in which Seller is the plaintiff or claimant and which relate to the Assets, the Assumed Liabilities or the Branch Business.

 

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Section 2.8 Environmental . With respect to the Owned Real Properties and the Leased Real Properties (collectively, the “ Properties ”):

(i) The Properties are, and have been, in material compliance with all Environmental Laws and there are no underground or above ground storage tanks, septic systems or asbestos-containing materials on, in or under any Property.

(ii) (A) There has not been any storage, disposal, arrangement for disposal, presence or release of Hazardous Materials from, in, upon or below any such Properties by Seller or, to the knowledge of Seller, by any other Person that would reasonably be expected to result in liability under Environmental Laws, and (B) neither Seller nor, to the knowledge of Seller, any other Person has engaged in any activity that involves or involved the generation, use, manufacture, treatment, transportation, storage in tanks or otherwise, or disposal of Hazardous Material on or from any Property.

(iii) Seller has not received any written communication from any Person that alleges environmentally unsafe working conditions or potential environmental exposure at, a violation of Environmental Laws concerning, or that Seller may be responsible for any Loss under Environmental Laws with respect to, any of the Properties or the Assets.

(iv) Seller has not received any claim, action, demand, or investigation from any Person alleging or describing potential Loss under Environmental Laws based on or resulting from (A) the presence, release or threatened release of any Hazardous Material from, in, upon or below any of the Properties or (B) the violation or alleged violation of any Environmental Laws concerning any of the Assets or Properties and, to the knowledge or Seller, there are no facts or circumstances relating to the Assets or present at such Properties that could reasonably result in any such claim, action, demand or investigation.

(v) Seller has duly followed its internal procedures regarding the avoidance of environmental risk in connection with its loan origination business and Seller has no Losses relating to or arising from the environmental condition of any collateral that constitutes an Asset.

(b) For purposes of this Agreement:

(i) “ Environmental Laws ” means all Applicable Laws relating to pollution or protection of the environment, or prevention of exposure to or the discharge of Hazardous Materials into, the environment.

(ii) “ Hazardous Material ” means any pollutant, contaminant, hazardous substance, hazardous material or hazardous waste, or any

 

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oil, petroleum, petroleum product, asbestos, asbestos containing material, in each case as defined under or for which liability or standards of care are imposed by Environmental Laws.

Section 2.9 Finders or Brokers . Except for Keefe, Bruyette & Woods, Inc. (the fees and expenses of which shall be borne solely by Seller), Seller has not agreed to pay any fee or commission to any agent, broker, finder or other Person for or on account of services rendered as a broker or finder in connection with this Agreement or the transactions covered and contemplated hereby.

Section 2.10 Financial Information .

(a) The books of account of Seller relating to the Branch Offices (including the December 31, 2008 Trial Balance set forth in Section 2.10(a) of the Seller Disclosure Letter (the “ 2008 Trial Balance ”)) fairly and accurately reflect in all material respects the respective assets and liabilities of the Branch Offices (including the Branch Deposits) in accordance with generally accepted accounting principles in the United States (“ GAAP ”), or regulatory accounting principles, whichever is applicable and, in any case, as consistently applied to Seller as a whole throughout the periods involved. The books of account of Seller relating to the Branch Offices (including the 2008 Trial Balance) fairly present the financial position of the Branch Offices as of the date thereof, and the results of operations for the Branch Offices for the periods referred to therein. Seller does not have any liabilities (absolute or contingent) which are material to the Branch Offices, the Assets or the Assumed Liabilities that are not reflected or provided for in the books of account of Seller relating to the Branch Offices (including the 2008 Trial Balance). GAAP or regulatory accounting principles, whichever is applicable, as applied in the preparation of the books of account of Seller relating to the Branch Offices as of the date hereof are collectively referred to as the “ Seller GAAP ”.

(b) The books of account of the Branch Offices have been, and are being, maintained by Seller in all material respects in accordance with applicable legal and accounting requirements and reflect only actual transactions.

(c) Set forth in Section 2.10(c) of the Seller Disclosure Letter, in each case as of the close of business on December 31, 2008, is a true and complete balance sheet of the Assets and the Assumed Liabilities, including (i) the aggregate amount of the Branch Deposits, (ii) the aggregate net book value of Loans, including (to the extent not reflected in such book value) all Loan Interest, (iii) the aggregate amount of the Cash, (iv) the aggregate book value (net of accumulated depreciation) of the Personal Property and (v) the aggregate book value (net of accumulated depreciation) of the Leasehold Improvements and the aggregate book value (net of accumulated depreciation) of the Owned Real Properties, in each case, the components of which are determined in accordance with Seller GAAP.

Section 2.11 Taxes .

(a) (i) Seller has filed all Tax Returns required to be filed with respect to the Branch Offices, the Assets and the Assumed Liabilities with the appropriate federal, state or local Governmental Entity and each such Tax Return is true, complete and correct in all

 

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material respects with respect to the periods covered by such Tax Return, (ii) all Taxes shown to be due on such Tax Returns have been paid, (iii) no notice of deficiency or assessment of Taxes has been received from any Governmental Entity with respect to the Branch Offices, the Assets or the Assumed Liabilities, (iv) there are no ongoing audits or examinations of any of the Tax Returns relating to or attributable to the Branch Offices, the Assets, or the Assumed Liabilities, nor has Seller received any written notification of any assessments pending, proposed or threatened with respect thereto, (v) no consents or waivers to extend the statutory period of limitations applicable to the assessment of any Taxes with respect to Seller, the Branch Offices, the Assets, or the Assumed Liabilities has been granted, (vi) all monies required to be withheld by Seller with respect to Taxes (including from employees for income, social security and other payroll Taxes) have been collected or withheld, and either paid to the respective Governmental Entity, set aside in accounts for such purpose, or accrued, reserved against and entered upon the books of the Branch Offices, (vii) with respect to the Deposits, Seller has complied fully with Section 4.5, and (viii) all of the real estate taxes that are currently due and payable for each parcel of the Owned Real Properties have been paid in full (other than de minimis amounts) and no real estate taxes are delinquent, and Section 2.11 of the Seller Disclosure Letter contains a copy of the real estate Tax receipts and current bills for the Owned Real Properties for the twelve (12) months preceding the date of this agreement.

(b) Seller is not a foreign person within the meaning of Section 1445 of the Code and the Treasury regulations promulgated thereunder.

Section 2.12 Loans .

(a) Section 1.1(a)(ii) of the Seller Disclosure Letter sets forth, or incorporates therein by reference, a complete and accurate list of all Loans as of December 31, 2008, including, with respect to each Loan the following: name of borrower, location of borrower and collateral, account number, principal amount outstanding, current interest rate paid, fixed or floating, aggregate amount due and payable, term and maturity, Loan grade/classification under Seller’s lending guidelines, FDIC description and Seller description of loan category, loan to value, and credit risk rating. Each such Loan has been originated by or on behalf of the Branch Offices, except where the Loan was purchased from another Person, and is serviced by the Branch Offices.

(b) As to each Loan:

(i) Each Loan was made by Seller (or, in the case of a Loan purchased by Seller, to Seller’s knowledge by the Person making such Loan): (A) in the ordinary course of business at the time such Loan was made; and (B) in accordance, in all material respects, with then existing Applicable Laws.

(ii) Each Loan has been originated, serviced and administered in all material respects in accordance with (A) Seller’s standard loan underwriting, credit servicing and operating policies and procedures as in effect from time to time (other than non-material exceptions to such policies and procedures approved by Seller in the ordinary course of business consistent with past practice); (B) all Applicable Laws; and (C) the respective loan documents governing each Loan.

 

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(iii) None of the rights or remedies under the documentation relating to the Loans has been materially amended, modified, waived, subordinated or otherwise altered by Seller, except as evidenced by a written instrument which is a part of the file with respect to the Loans made available to Purchaser and was entered into by Seller in good faith and in the ordinary course of business.

(iv) Each Loan constitutes a legal, valid and binding obligation of the respective borrower(s) or obligor(s), enforceable against such borrower(s) and obligor(s) in accordance with its terms, except as enforcement may be limited by general principles of equity, whether applied in a court of law or a court of equity, and by bankruptcy, insolvency and similar laws affecting creditors’ rights and remedies generally.

(v) Each secured Loan is secured by a valid, enforceable and perfected lien on the secured property described in the applicable security agreement, mortgage, pledge, collateral assignment or other security agreement.

(vi) Immediately following the sale of each Loan, Purchaser will own such Loan free and clear of any Encumbrance arising by, through or under Seller.

(vii) The Records, with respect to each Loan, contain all of the material documents and instruments evidencing the Loans.

(viii) All payments made up to the Closing Date on the Loans have been properly credited to the respective Loan.

(c) As to each Loan that is secured by a guaranty of the United States Small Business Administration, whether in whole or in part (an “ SBA Loan ”), such guaranty is in full force and effect, and is freely transferable as an incident to the sale of each SBA Loan, and Purchaser shall be entitled to the benefits of such guaranty in accordance with its terms.

Section 2.13 Real Property .

(a) With respect to the Owned Real Properties, Seller has good, insurable and marketable fee simple title to all of the Owned Real Prop