EXHIBIT 10.27
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF THE 11/th/ DAY OF OCTOBER, 2001
BY AND BETWEEN
GENERAL BANK
AND
LIBERTY BANK AND TRUST COMPANY
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
RECITALS: ..................................................... 1
A. General Bank ....................................... 1
B. Liberty Bank ....................................... 1
C. Cash Acquisition ................................... 1
D. GB INTERIM BANK .................................... 1
E. Required Approvals ................................. 1
F. Federal Tax Treatment .............................. 1
G. Board Approvals .................................... 2
ARTICLE I THE MERGERS AND RELATED TRANSACTIONS .............. 2
1.1 Structure and Effect of the Interim Merger ......... 2
1.2 Structure and Effect of the Bank Merger ............ 2
1.3 Closing ............................................ 2
1.4 Effective Times .................................... 3
1.5 Effect of Interim Merger on Capital Stock .......... 3
(a) Common Stock of GB Interim Bank ................ 3
(b) Liberty Bank Common Stock ...................... 3
(c) Dissenting Shares .............................. 3
(d) Cancellation of Certain Shares ................. 3
(e) Stock Transfer Books ........................... 3
1.6 Dissenters Rights Demands .......................... 4
1.7 Adjusted Cash Consideration ........................ 4
1.8 Exchange Procedures ................................ 4
ARTICLE II REPRESENTATION AND WARRANTIES OF LIBERTY BANK ..... 6
2.1 Representations and Warranties ..................... 6
(a) Recitals True .................................. 6
(b) Capital Stock .................................. 6
(c) Subsidiaries ................................... 6
(d) Authority ...................................... 6
(e) Shareholder Approvals .......................... 6
(f) No Violations .................................. 7
i
TABLE OF CONTENTS
(continued)
Page
(g) Reports .............................................. 7
(h) Taxes ................................................ 8
(i) Absence of Claims .................................... 9
(j) Absence of Regulatory Actions ........................ 9
(k) Agreements ........................................... 9
(l) Labor Matters ........................................ 10
(m) Employee Benefit Agreements .......................... 10
(n) Title to Assets ...................................... 12
(o) Knowledge as to Conditions ........................... 12
(p) Compliance with Laws ................................. 12
(q) Finder's or Advisor Fees ............................. 12
(r) Environmental Matters ................................ 13
(s) Allowances ........................................... 13
(t) Material Interests of Certain Persons ................ 14
(u) Insurance ............................................ 14
(v) Investment Securities ................................ 14
(w) Derivative Transactions .............................. 14
(x) Intellectual Property ................................ 15
(y) Books and Records .................................... 15
(z) Trust Business ....................................... 15
ARTICLE III REPRESENTATIONS AND WARRANTIES OF GENERAL BANK .......... 15
3.1 Representations and warranties of General Bank .............. 15
(a) Recitals True ........................................ 15
(b) Authority ............................................ 15
(c) Approvals ............................................ 15
(d) No Violations ........................................ 16
(e) Consideration ........................................ 16
(f) Knowledge as to Conditions ........................... 16
(g) GB Interim Bank ...................................... 16
(h) Statements True and Correct .......................... 16
ii
TABLE OF CONTENTS
(continued)
Page
ARTICLE IV CONDUCT PENDING THE MERGER ........................... 16
4.1 Conduct of Liberty Bank's Business Prior to the
Effective Time of the Interim Merger ..................... 16
4.2 Covenants of Liberty Bank ................................ 17
4.3 Notification by Liberty Bank of Certain Matters .......... 18
ARTICLE V COVENANTS ............................................ 19
5.1 Acquisition Proposals .................................... 19
5.2 Employees ................................................ 19
5.3 Access and Information ................................... 20
5.4 Certain Filings, Consents and Arrangements ............... 20
5.5 Additional Agreements .................................... 21
5.6 Publicity ................................................ 21
5.7 Shareholder Meetings or Consent .......................... 21
5.8 Proxy Statement .......................................... 21
5.9 Notification of Certain Matters .......................... 22
5.10 Indemnification .......................................... 22
5.11 Notices; Reports ......................................... 23
5.12 Liberty Bank Board of Directors Meeting Attendance;
General Bank Representatives ............................. 24
ARTICLE VI CONDITIONS TO CONSUMMATION ........................... 24
6.1 Conditions to All Parties' Obligations ................... 24
6.2 Conditions to Obligations of General Bank ................ 25
6.3 Conditions to Obligations of Liberty Bank ................ 25
ARTICLE VII TERMINATION .......................................... 26
7.1 Termination .............................................. 26
7.2 Effect of Termination; Fees .............................. 27
ARTICLE VIII OTHER MATTERS ........................................ 28
8.1 Certain Definitions; Interpretation ...................... 28
8.2 Survival ................................................. 29
8.3 Waiver ................................................... 29
8.4 Counterparts ............................................. 29
iii
TABLE OF CONTENTS
(continued)
Page
8.5 Governing Law ................................................ 29
8.6 Expenses ..................................................... 29
8.7 Notices ...................................................... 29
8.8 Entire Agreement; Etc ........................................ 30
8.9 Assignment ................................................... 31
iv
THIS AGREEMENT AND PLAN OF REORGANIZATION, dated as of the 11/th/ day
of October, 2001 (the "Agreement"), among General Bank, a California banking
corporation ("General Bank") and Liberty Bank and Trust Company, a Massachusetts
banking company ("Liberty Bank"), is entered into with reference to the
following:
RECITALS:
A. GENERAL BANK. General Bank is a duly organized, validly existing
banking corporation in good standing under the laws of the State of California,
and a wholly-owned subsidiary of GBC Bancorp, Inc. ("GBC"), a duly organized,
validly existing California corporation in good standing under the laws of the
State of California and a regulated bank holding company under the Bank Holding
Company Act of 1956, as amended (12 U.S.C. Section 1841 et seq.).
B. LIBERTY BANK. Liberty Bank is a duly organized, validly existing
trust company in good standing under the laws of the Commonwealth of
Massachusetts, the deposits of which are insured by the Bank Insurance Fund of
the Federal Deposit Insurance Corporation (the "FDIC"). The authorized capital
stock of Liberty Bank consists only of 146,382 shares of common stock, par
value $4.00 per share (the "Liberty Bank Common Stock"), all of which shares
are issued and outstanding as of the date hereof.
C. CASH ACQUISITION. General Bank and Liberty Bank, and their
representatives, have engaged in negotiations leading to the execution of this
Agreement providing for Liberty Bank to be acquired by General Bank by merger in
return for the payment of the aggregate cash amount of $11,445,000 (the "Cash
Consideration"), subject to certain adjustments as provided herein.
D. GB INTERIM BANK. General Bank will organize a California
state-chartered interim banking corporation ("GB Interim Bank") as a
wholly-owned, non-operating subsidiary for the sole purpose of facilitating the
acquisition by General Bank of Liberty Bank through the merger (the "Interim
Merger") of GB Interim Bank with and into Liberty Bank, with Liberty Bank being
the surviving institution, to be followed immediately thereafter by the merger
(the "Bank Merger") of Liberty Bank with and into General Bank, with General
Bank being the surviving entity.
E. REQUIRED APPROVALS. The Interim Merger and the Bank Merger
(together, the "Mergers") require certain shareholder and regulatory approvals
and may be effected only after all necessary approvals for both Mergers have
been obtained.
F. FEDERAL TAX TREATMENT. For federal income tax purposes, it is
intended that the Interim Merger will qualify as a "qualified stock purchase"
under Section 338(d) of the Internal Revenue Code of 1986, as amended (the
"Code") and that the Bank Merger will qualify as a tax free subsidiary
liquidation under Section 332 of the Code, as set forth in Revenue Ruling 90-95,
1990-2 C.B.67. General Bank hereby confirms and agrees, that it shall not, with
respect to the Interim Merger, make an election under Section 338 of the Code
(or any corresponding provision of state or local law) to have Liberty Bank
treated as if it had sold all its assets for federal (and/or state or local)
income tax purposes.
1
G . BOARD APPROVALS. The boards of directors ("Boards of Directors" or
individually, a "Board") of General Bank and Liberty Bank have determined that
it is in the best interests of their respective companies and shareholders to
consummate the transactions provided for in this Agreement, have duly approved
this Agreement and have duly authorized its execution, delivery and
performance.
NOW, THEREFORE, in consideration of their mutual promises and
obligations hereunder, the parties hereto adopt and make this Agreement and
prescribe the terms and conditions hereof and the manner and basis of carrying
it into effect, which shall be as follows:
ARTICLE I THE MERGERS AND RELATED TRANSACTIONS
1.1 Structure and Effect of the Interim Merger.
------------------------------------------
(a) At the Effective Time of the Interim Merger, GB Interim
Bank will merge with and into Liberty Bank, with Liberty Bank being the
surviving institution, pursuant to an Agreement of Merger ("Interim Merger
Agreement") to be entered into by and between GB Interim Bank and Liberty Bank
substantially in the form of Exhibit A hereto.
(b) At the Effective Time of the Interim Merger, (i) the
separate existence of GB Interim Bank shall cease and (ii) the Articles of
Organization and the Bylaws of Liberty Bank as in effect immediately prior to
the Effective Time of the Interim Merger shall be the Articles of Organization
and Bylaws of Liberty Bank as the surviving institution.
(c) At and after the Effective Time of the Interim Merger,
the Interim Merger will have the effects set forth in the applicable provisions
of the Massachusetts General Laws ("MGL"), including MGL Chapters 167C, Section
7, and Section 4901 of the California Financial Code ("CFC").
1.2 Structure and Effect of the Bank Merger.
---------------------------------------
(a) At the Effective Time of the Bank Merger, Liberty Bank
will merge with and into General Bank, with General Bank being the surviving
corporation, pursuant to a Bank Merger Agreement ("Bank Merger Agreement") to
be entered into between General Bank and Liberty Bank substantially in the form
of Exhibit B hereto.
(b) At the Effective Time of the Bank Merger, (i) the
separate corporate existence of Liberty Bank shall cease, and (ii) the Articles
of Incorporation and Bylaws of General Bank as in effect immediately prior to
the Effective Time of the Bank Merger shall be the Articles of Incorporation
and Bylaws of the surviving corporation.
(c) At and after the Effective Time of the Bank Merger, the
Bank Merger will have the effects set forth in CFC Sections 4880 et seq., and
in the applicable provisions of the MGL, including MGL Chapter 167, Section
39B.
1.3 Closing. The closing of the Mergers (the "Closing") will take
-------
place as of the close of business on the first Friday that is a Business Day (as
defined below) after satisfaction or waiver of each of the conditions set forth
in Article VI or at such other time thereafter as shall be
2
determined in good faith by General Bank and Liberty Bank in order to ensure an
orderly transition process and to satisfy the requirements of Sections 6.2(c)
and 6.2(d).
1.4 Effective Times. The Interim Merger shall become effective as set
---------------
forth in the MGL. The Bank Merger shall become effective as set forth in the CFC
and the MGL. The term "Effective Time of the Interim Merger" shall be the date
and time of the filing of Articles of Merger with the Massachusetts Secretary of
State in accordance with the applicable provisions of the MGL. The term
"Effective Time of the Bank Merger" shall be the date and time of the filing of
the Bank Merger Agreement certified by the California Secretary of State with
the Commissioner of Financial Institutions ("Commissioner") as set forth in CFC
Section 4887(b), which filing shall have been preceded by the filing of the
aforementioned Articles of Merger with respect to the Interim Merger pursuant to
the applicable MGL provisions as stated above.
1.5 Effect of Interim Merger on Capital Stock. Subject to the other
-----------------------------------------
provisions of this Agreement, at the Effective Time of the Interim Merger, by
virtue of the Interim Merger and without any action on the part of the holders
of shares of stock of Liberty Bank and GB Interim Bank:
(a) Common Stock of GB Interim Bank. Each share of the common
-------------------------------
stock, no par value per share, of GB Interim Bank issued and outstanding
immediately prior to the Effective Time of the Interim Merger shall be converted
into one share of Liberty Bank Common Stock.
(b) Liberty Bank Common Stock. Subject to Sections 1.5(d) and
-------------------------
(e), each share of Liberty Bank Common Stock issued and outstanding immediately
prior to the Effective Time of the Interim Merger, other than any Dissenting
Liberty Bank Stock (as defined below), shall be converted into the right to
receive at the Effective Time of the Interim Merger the cash amount equal to the
Adjusted Cash Consideration (as defined below) divided by the total number of
shares of Liberty Bank Common Stock which is issued and outstanding as of the
Effective Time of the Interim Merger (the "Per Share Cash Consideration").
(c) Dissenting Shares. Each share of Liberty Bank Common Stock
-----------------
that is held immediately prior to the Effective Time of the Interim Merger by a
Liberty Bank shareholder who has properly exercised and continues then to retain
his or its rights of dissent and appraisal pursuant to MGL Chapter 156B,
Sections 85-86 ("Dissenting Liberty Bank Stock"), shall not be converted into or
represent a right to receive the Per Share Cash Consideration hereunder unless
and until such shares have failed to perfect or have lost their status as
dissenting shares under the MGL Chapter 156B, Sections 85-98.
(d) Cancellation of Certain Shares. Any shares of Liberty Bank
------------------------------
Common Stock which may be held by General Bank or its affiliates, other than
those held in a fiduciary capacity, shall be canceled and retired at the
Effective Time of the Interim Merger and no consideration shall be issued in
exchange therefor.
(e) Stock Transfer Books. The stock transfer books of Liberty
--------------------
Bank shall be closed as to holders of Liberty Bank Common Stock immediately
prior to the Effective Time of the Interim Merger and no transfer or conversion
of Liberty Bank Common Stock by any such holder shall thereafter be made or
recognized. If, after the Effective Time of the Interim Merger,
3
certificates are properly presented in accordance with this Agreement to the
Exchange Agent (as defined in Section 1.8), such certificates shall be canceled
and exchanged for a check representing the amount of cash into which the Liberty
Bank Common Stock represented thereby was converted in the Interim Merger.
1.6 Dissenters Rights Demands.
-------------------------
(a) Liberty Bank shall give General Bank prompt notice upon
receipt by Liberty Bank of any written demands for appraisal rights, withdrawal
of such demands, and any other documents received or instruments served
pursuant to Chapter 156B, Sections 85-98 of the MGL relating to Dissenting
Liberty Bank Stock and shall give General Bank the opportunity to direct all
negotiations and proceedings with respect to such demands. Liberty Bank shall
not voluntarily make any payment with respect to any demands for appraisal
rights and shall not, except with the prior written consent of General Bank,
settle or offer to settle such demands. Each holder of Dissenting Liberty Bank
Stock who becomes entitled, pursuant to the provisions of MGL Chapter 156B,
Sections 85-98, to payment for his or her shares of Dissenting Liberty Bank
Stock shall receive payment therefor from General Bank and such shares of
Dissenting Liberty Bank Stock shall be canceled.
1.7 Adjusted Cash Consideration. The Cash Consideration shall be
---------------------------
adjusted by adding any increase, or subtracting any decrease, between the
Closing Book Value (as defined in and determined pursuant to Section 6.2) and
the Liberty Bank stockholders' equity as of December 31, 2000 (the "Net Book
Value Adjustment"), and the resultant amount shall be the "Adjusted Cash
Consideration."
1.8 Exchange Procedures.
-------------------
(a) At and after the Effective Time of the Interim Merger,
each certificate representing Liberty Bank Common Stock outstanding, other than
Dissenting Liberty Bank Stock ("Liberty Bank Certificates"), shall represent
the right to receive the Per Share Cash Consideration owed in respect of such
Liberty Bank Common Stock, without interest.
(b) As of the Effective Time of the Interim Merger, General
Bank shall deposit in escrow with American Stock Transfer & Trust Company or
another entity acceptable to General Bank and Liberty Bank (the "Exchange
Agent"), pursuant to a customary exchange agent agreement ("Exchange Agent
Agreement") in form satisfactory to General Bank, Liberty Bank and the Exchange
Agent, the total amount of Adjusted Cash Consideration owed to and to be held
for the benefit of the holders of Liberty Bank Common Stock other than
Dissenting Liberty Bank Stock for exchange in accordance with this Section 1.8.
General Bank shall pay all fees and expenses for the services provided by the
Exchange Agent.
(c) Promptly after the Effective Time of the Interim Merger,
the Exchange Agent shall mail to each holder of record of Liberty Bank
Certificates the following: (i) a letter of transmittal specifying that delivery
shall be effected, and risk of loss and title to the Liberty Bank Certificates
shall pass, only upon delivery of the Liberty Bank Certificates to the Exchange
Agent, which shall be in a form and contain any other provisions as General Bank
may determine; and (ii) instructions for use in effecting the surrender of
Liberty Bank Certificates in exchange for the Per Share Cash Consideration. Upon
the proper surrender of Liberty Bank
4
Certificates to the Exchange Agent, together with a properly completed and duly
executed letter of transmittal, the holder of such Liberty Bank Certificates
shall be entitled to receive in exchange therefor a check representing the total
Per Share Cash Consideration represented by the Liberty Bank Certificates
whereupon the Liberty Bank Certificates so surrendered shall forthwith be
canceled. No interest will be paid or accrued on the Per Share Cash
Consideration payable to holders of Liberty Bank Certificates. In the event of a
transfer of ownership of any Liberty Bank Certificates, which transfer is not
registered in the transfer records of Liberty Bank, a check for the total amount
of Per Share Cash Consideration may be issued to the transferee if the Liberty
Bank Certificates are presented to the Exchange Agent, accompanied by documents
sufficient, in the discretion of General Bank, (i) to evidence and effect such
transfer and (ii) to evidence that all applicable stock transfer taxes have been
paid.
(d) From and after the Effective Time of the Interim Merger,
there shall be no transfers on the stock transfer records of Liberty Bank of any
shares of Liberty Bank Common Stock that were outstanding immediately prior to
the Effective Time of the Interim Merger. If, after the Effective Time of the
Interim Merger, Liberty Bank Certificates are presented to General Bank, they
shall be canceled and exchanged for the amount of Per Share Cash Consideration
represented by the Liberty Bank Certificates pursuant to and in accordance with
the procedures set forth in this Section 1.8.
(e) Any portion of the Per Share Cash Consideration that
remains unclaimed as of twelve (12) months after the Effective Time of the
Interim Merger shall be remitted by the Exchange Agent to General Bank. Any
holders of Liberty Bank Certificates who have not theretofore complied with this
Section 1.8 shall thereafter look only to General Bank for payment of the Per
Share Cash Consideration in respect of Liberty Bank Certificates without any
interest thereon. If outstanding Liberty Bank Certificates are not surrendered
or the payment for them is not claimed prior to the date on which such payments
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 General Bank (and to the
extent not in its possession shall be paid over to it), free and clear of all
claims or interest of any person previously entitled to such claims. General
Bank shall then promptly remit to the former shareholders of Liberty Bank, on a
per share basis, fifty percent (50%) of the amount of any such unclaimed items
that have become the property of General Bank, to the extent that General Bank
can locate such shareholders through reasonable diligence. Notwithstanding the
foregoing, neither General Bank, the Exchange Agent nor any other person shall
be liable to any former holder of Liberty Bank Common Stock for any amount
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(f) In the event any Liberty Bank Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Liberty Bank Certificate to be lost, stolen or destroyed
and, if required by General Bank, the posting by such person of a bond in such
amount as General Bank may direct as indemnity against any claim that may be
made against it with respect to such Liberty Bank Certificate, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Liberty Bank
Certificate the total Per Share Cash Consideration represented by the Liberty
Bank Certificates.
5
ARTICLE II REPRESENTATIONS AND
WARRANTIES OF LIBERTY BANK
2.1 Representations and Warranties. Liberty Bank represents and
------------------------------
warrants to General Bank that with respect to itself and any subsidiaries,
except as specifically set forth in the disclosure schedule of Liberty Bank
delivered to General Bank and dated as of the date of this Agreement (the
"Liberty Bank Disclosure Schedule"):
(a) Recitals True. The facts set forth in the Recitals of this
-------------
Agreement with respect to Liberty Bank are true and correct.
(b) Capital Stock. All outstanding shares of Liberty Bank Common
-------------
Stock are duly authorized, validly issued and outstanding, fully paid and
non-assessable, and subject to no preemptive rights. Liberty Bank has no shares
of its capital stock reserved for issuance, any outstanding options, call or
commitment relating to shares of its capital stock or any outstanding
securities, obligations or agreements exercisable for, convertible into or
exchangeable for, or giving any person any right (including, without limitation,
preemptive rights) to subscribe for or acquire from it, any shares of its
capital stock.
(c) Subsidiaries. Liberty Bank neither owns, directly or
------------
indirectly, any subsidiaries nor the equity securities of any entity nor any
other equity interest in any entity including, without limitation, partnership
interests, except for LBT Securities Corporation, a wholly owned Massachusetts
corporation through which Liberty Bank holds a portion of its securities
portfolio. All representations and covenants made in this Agreement by Liberty
Bank shall be deemed to be similarly and separately made, as applicable, with
respect to any subsidiary of Liberty Bank.
(d) Authority. Liberty Bank has full power and authority, and is
---------
duly qualified in all jurisdictions where such qualification is required (except
for such qualifications the absence of which, individually or in the aggregate,
would not have a Material Adverse Effect on Liberty Bank), to carry on its
business as it is now being conducted and to own or lease all its properties and
assets, and it has all federal, state, local and foreign governmental
authorizations necessary for it to own or lease its properties and assets and to
carry on its business as it is now being conducted.
(e) Shareholder Approvals. (i) Subject to the formal receipt of
---------------------
approval hereof by the shareholders of Liberty Bank, this Agreement has been
authorized by all necessary corporate action of Liberty Bank. Subject to receipt
of the required approvals, consents or waivers of governmental authorities
referred to in Section 6.1(b), this Agreement is a valid and binding agreement
of Liberty Bank enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights, and general equity
principles.
(i) The affirmative vote or consent of at least two-thirds
of the outstanding shares of Liberty Bank Common Stock, unless otherwise
provided in Liberty Bank's Articles of Organization or Bylaws, is the only
shareholder vote or consent required for approval of this Agreement and
consummation of the Merger and the other transactions contemplated hereby.
6
(ii) The Liberty Bank Disclosure Schedule lists all directors of
Liberty Bank and all shareholders of more than 5% of the Liberty Bank Common
Stock and identifies all Liberty Bank loans to and deposits from such persons
and, to the knowledge of Liberty Bank, of affiliates or companies controlled by
such persons.
(f) No Violations. The execution, delivery and performance of this
-------------
Agreement by Liberty Bank does not, and the consummation of the transactions
contemplated hereby by Liberty Bank will not, constitute (i) to Liberty Bank's
knowledge, a breach or violation of, or a default under, any law, rule or
regulation, or any judgment, decree, order, governmental permit or license of
Liberty Bank, or to which Liberty Bank (or any of its respective properties) is
subject, which breach, violation or default would have a Material Adverse Effect
(defined in Section 8.l), (ii) a breach or violation of, or a default under,
the Articles of Organization or Bylaws of Liberty Bank, or (iii) a breach or
violation of, or a default under (or an event which with due notice or lapse of
time or both would constitute a breach or violation of, or a default under), or
result in the termination of, accelerate the performance required by or result
in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the properties or assets of Liberty Bank under any of
the terms, conditions or provisions of any note, bond, indenture, deed of trust,
loan agreement or other agreement, instrument or obligation to which Liberty
Bank is a party, or to which any of its properties or assets may be bound or
affected; and the consummation of the transactions contemplated hereby will not
require any approval, consent or waiver under any such law, rule, regulation,
judgment, decree, order, governmental permit or license or the approval, consent
or waiver of any other party to any such agreement, indenture or instrument,
other than the required approvals, consents and waivers of the Regulatory
Agencies (defined below) referred to in Section 6.1 (b).
(g) Reports. (i) The books and records of Liberty Bank have been, and
-------
are being, maintained in all material respects in accordance with applicable
legal and accounting requirements. The balance sheet of Liberty Bank as of
December 31, 2000, and the related statements of income, cash flow and changes
in financial position of Liberty Bank for the year then ended, audited by
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Company, P.C., all subsequently issued balance sheet and
income statements and the call reports of Liberty Bank filed with the Federal
Deposit Insurance Corporation ("FDIC") as of March 31, 2001 and June 30, 2001,
and for the three and six month periods then ended, copies of all of which have
been delivered to General Bank (collectively, "Liberty Bank's Reports"), fairly
present, subject in the case of the unaudited balance sheets and call reports to
recurring year-end audit adjustments normal in nature and amount, the financial
position of Liberty Bank as of such dates and the results of the operations of
Liberty Bank for the periods then ended, all in accordance with generally
accepted accounting principles ("GAAP") consistently applied, or in the case of
call reports, as permitted by the call report forms. Liberty Bank's Reports
dated after June 30, 2001, including the call reports to be filed by Liberty
Bank with the FDIC after the date hereof and all balance sheet and income
statements prepared after the date hereof, including the Closing Financial
Statements (as defined below), will also fairly present the financial position
of Liberty Bank as of such dates and the results of the operations of Liberty
Bank for the periods then ended, and will comply with applicable accounting
requirements and with the published rules and regulations of the FDIC with
respect thereto; and each of such statements will be, prepared in accordance
with GAAP consistently applied during the periods involved, except as indicated
in the notes thereto or as permitted by the call report forms.
7
(ii) Liberty Bank has timely filed all reports, registrations
and statements, together with any amendments required to be made with respect
thereto, that were required to be filed since December 31, 200O with the FDIC
and the Massachusetts Commissioner of Banks (together with any other 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 referred to in this Agreement as "Regulatory Agencies"),
and has paid all fees and assessments due and payable in connection therewith.
As of their respective dates, such reports, registrations and statements
complied in all material respects with all the laws, rules and regulations of
the appropriate Regulatory Agencies with which they were filed.
(h) Taxes. (i)For the purposes of this Agreement, (A) the term "Tax"
-----
or "Taxes" shall mean any tax or governmental charge, withholding obligation,
assessment, impost or levy (including, without limitation, any income, gross
receipts, deposit, license, payroll, employee withholding, foreign or domestic
withholding, backup withholding, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under the Code), capital stock,
franchise, disability, real or personal property, sales, use, transfer,
registration, ad valorem, alternative or add-on minimum, estimated or other
taxes of any kind, any customs duty, unemployment insurance, social security (or
similar tax) and workers' compensation), together with any related liabilities,
penalties, fines, additions to tax or interest (including any penalties, fines
or similar amounts related to any information return or reporting obligations,
notwithstanding that no Tax is payable if such obligations are properly
discharged) whether disputed or not, imposed by the United States or any state,
territory or other possession, county, provincial, local or foreign government
or subdivision or agency thereof, and (B) the term "Return" shall mean all
reports, returns, estimates, declarations, claims for refund, information
returns and statements of any nature with respect to Taxes, including all
schedules and attachments thereto, and including any amendment thereof.
(ii) All Returns required to be filed by or on behalf of Liberty
Bank have been timely filed (taking into account all extensions), and Liberty
Bank is not currently the beneficiary of any extension of time within which to
file any Return (other than automatic extensions), and no application for any
such extension is currently pending. All such tiled Returns are complete and
accurate in all material respects in accordance with the governing
jurisdictions' tax laws. None of the Returns have been examined by the Internal
Revenue Service (the "IRS") or the appropriate state, local or foreign taxing
authority. There are no unresolved questions, claims or disputes asserted by any
relevant taxing authority concerning the liability for Taxes of Liberty Bank.
All Taxes of Liberty Bank with respect to the periods up to the date of this
Agreement have been paid in full or adequate provision has been made for any
such Taxes on its balance sheet (in accordance with GAAP), and Liberty Bank is
not delinquent (taking into account all extensions) in the payment of any such
Taxes.
(iii) Liberty Bank has not waived any statute of limitations with
respect to Taxes or agreed to any extension of time with respect to an
assessment or deficiency for Taxes. Liberty Bank has not filed a consent under
Section 341(f) of the Code concerning collapsible corporations or is subject to
any closing agreement, irrevocable election or similar agreement or decision
that would restrict any of Liberty Bank, General Bank, GB Interim Bank or GBC
from claiming an otherwise permissible treatment for any item of income,
deduction, credit or allowance for a taxable period ending after the Effective
Date. Liberty Bank has not
8
been a "United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(l)(A)(ii) of the Code. Liberty Bank is not a party to any Tax sharing
agreement or similar contract or arrangement. Liberty Bank has not been a member
of any affiliated group within the meaning of Section 1504(a) of the Code or any
similar group defined under a similar provision of state, local or foreign law
and has no liability for the Taxes of any person under Section 1.1502-6 of the
Treasury Regulations issued pursuant to the Code (or any similar provision of
state, local or foreign law), as a transferee or successor, by contract or
otherwise, and no material demand or claim has been made against Liberty Bank
with respect to any Taxes arising out of membership or participation in any
consolidated, affiliated, combined or unitary group of which Liberty Bank was at
any time a member. There are no liens or other encumbrances of record or
otherwise known to Liberty Bank for any Taxes upon any property of Liberty Bank
other than liens for assessed taxes not yet due and payable.
(iv) Liberty Bank has paid or will pay in a timely manner (taking
into account all extensions) and as required by law, all Taxes due and payable
by it or which it is obligated to withhold from amounts owing to any employee or
third party. All Taxes which will be due and payable (taking into account all
extensions), whether now or hereafter, for any period ending on, prior to or
including the Effective Time shall have been paid by or on behalf of Liberty
Bank or shall be reflected on the books of Liberty Bank as an accrued Tax
liability (in accordance with GAAP).
(i) Absence of Claims. No litigation, investigation, proceeding or
-----------------
controversy before any court or governmental agency is pending, and there is no
pending claim, action or proceeding, against Liberty Bank, and, to Liberty
Bank's knowledge, no such litigation, proceeding, controversy, claim or action
has been threatened or is contemplated.
(j) Absence of Regulatory Actions. Liberty Bank is not a party to any
-----------------------------
current cease and desist order, written agreement or memorandum of understanding
with any Regulatory Agency, and has no notice or knowledge of the intention of
any Regulatory Agency to request or impose any of the foregoing.
(k) Agreements. Except for agreements made in the ordinary course of
----------
business, Liberty Bank is not bound by any material oral or written contract to
be performed after the date hereof, including any (A) consulting agreement not
terminable on 30 days or less notice, (B) agreement with any executive officer
or other key employee of Liberty Bank the benefits of which are contingent, or
the terms of which are materially altered, upon the occurrence of a transaction
involving Liberty Bank of the nature contemplated by this Agreement, (C)
agreement with respect to any employee of Liberty Bank providing any term of
employment or compensation guarantee, (D) agreement or plan, including any stock
option plan, stock appreciation rights plan, restricted stock plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement, (E) agreement containing covenants that limit the ability of
Liberty Bank to compete in any line of business or with any person, or that
involve any restriction on the geographic area in which, or method by which,
Liberty Bank may carry on its business (other than as may be required by law or
any Regulatory Agencies), or exclusive dealing contracts that limit the ability
9
of Liberty Bank to contract with certain persons or to directly engage in
certain activities, or (F) other than the Agreement for Information Technology
Services dated December 19, 2000, between Liberty Bank and Aurum Technology,
Inc. (as disclosed on the Liberty Bank Disclosure Schedule), any agreement that
requires further payments over the remaining term of the contract in excess of
$100,000, unless the contract is terminable without penalty or fee upon 30 days
or less notice.
(i) Liberty Bank is not in default under or in violation of any
provision of any note, bond, indenture, mortgage, deed of trust, loan agreement
or other agreement to which it is a party or by which it is bound or to which
any of its respective properties or assets is subject.
(l) Labor Matters. Liberty Bank is not a party to, nor is bound by,
-------------
any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor is Liberty Bank the
subject of any proceeding asserting that Liberty Bank has committed an unfair
labor practice or seeking to compel Liberty Bank to bargain with any labor
organization as to wages and conditions of employment, nor is there any strike,
other labor dispute or organizational effort involving Liberty Bank pending or
to its knowledge threatened.
(m) Employee Benefit Agreements. The Liberty Bank Disclosure Schedule
---------------------------
contains a complete and accurate list of all existing bonus, deferred
compensation, pension retirement, profit-sharing, thrift, savings, employee
stock ownership, stock bonus, stock purchase, restricted stock, stock option,
severance and welfare benefit plans, employment or severance agreements and all
similar arrangements that are maintained or contributed to by Liberty Bank or to
which Liberty Bank is obligated to contribute for the benefit of any employee or
former employee or director or former director of Liberty Bank (collectively,
the "Plans"). All "employee benefit plans", as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") maintained
by Liberty Bank or to which Liberty Bank is obligated to contribute that cover
any of the current or former employees of Liberty Bank (hereinafter referred to
collectively as the "Employee Plan"), comply in all material respects with all
applicable requirements of ERISA, the Code and other applicable laws; no
Employee Plan is a "multiemployer plan", as defined in Section 3(37) of ERISA;
Liberty Bank has not engaged in any "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Code) with respect to any Employee
Plan for which no exemptions were available; no liability to the Pension Benefit
Guaranty Corporation other than the payment of premiums pursuant to Sections
4006 and 4007 of ERISA has been or is expected by it or them to be incurred with
respect to any Employee Plan which is subject to Title IV of ERISA ("Pension
Plan"), or with respect to any "single-employer plan" (as defined in Section 400
1(a)(15) of ERISA) currently or formerly maintained by Liberty Bank or any
entity which is considered one employer with it under Section 4001 of ERISA or
Section 414 of the Code (an "ERISA Affiliate"); no Pension Plan had an
"accumulated funding deficiency" (as defined in Section 302 of ERISA (whether or
not waived)) as of the last day of the end of the most recent plan year ending
prior to the date hereof; all payments and contributions required to be made to
each of the Plans under the terms of the Plan, ERISA, the Code or any other
applicable laws have been timely made; the financial statements of Liberty Bank
properly reflect all amounts required to be accrued as liabilities to date under
each of the Plans; the actuarial present value of the "benefit liabilities" (as
defined in Section 4001(a)(16) of ERISA) of each Pension Plan, calculated using
10
the actuarial assumptions and methods used in the most recent actuarial
valuation for such Pension Plan as of the date hereof both with respect to
projected benefits on an ongoing basis and on a plan termination basis, does not
exceed the lesser of the fair market value of the assets of such Pension Plan on
the date hereof or the actuarial value of the assets of such Pension Plan as of
the end of the most recent plan year with respect to the respective Pension Plan
ending prior to the date hereof, calculated on the basis of the actuarial
assumptions and methods used in the most recent actuarial valuation for such
Pension Plan as of the date hereof; Liberty Bank has no liability under any
insurance policy relating to any Plan, or ancillary agreement with respect to
such insurance policy, in the nature of a retroactive rate adjustment, loss
sharing arrangement or other actual or contingent liability; no notice of a
"reportable event" (as defined in Section 4043 of ERISA) for which the 30-day
reporting requirement has not been waived has been required to be filed for any
Pension Plan within the three-year period ending on the date hereof; Liberty
Bank has not provided, nor is required to provide, security to any Pension Plan
or to any single-employer plan of an ERISA Affiliate pursuant to Section 401
(a)(29) of the Code; and neither Liberty Bank nor any ERISA Affiliate of it has
contributed to any "multiemployer plan," as defined in Section 3(37) of ERISA,
on or after September 26, 1980.
Each Employee Plan which is an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) and which is intended to be qualified under
Section 401(a) of the Code (a "Qualified Plan") has received a favorable
determination letter from the IRS, and Liberty Bank is not aware of any
circumstances that could reasonably result in revocation of any such favorable
determination letter or disqualification of a Qualified Plan; each Qualified
Plan which is an "employee stock ownership plan" (as defined in Section
4975(e)(7) of the Code) has satisfied all of the applicable requirements of
Sections 409 and 4975(e)(7) of the Code and the regulations thereunder; Liberty
Bank and its ERISA Affiliates have performed all of their obligations under each
of the Plans in all material aspects; there is no pending or, to Liberty Bank's
knowledge, threatened litigation, administrative action, proceeding or
investigation relating to any Employee Plan other-than routine claims for
benefits; there has been no announcement or legally binding commitment by
Liberty Bank to create any additional Employee Plan, or to amend any Employee
Plan, except for amendments required by applicable law that do not materially
increase the cost of such Employee Plan; all amendments required to have been
made effective on or before the date of this Agreement to bring each Employee
Plan into conformity with all of the applicable provisions of ERISA, the Code
and all other applicable laws have been made; and Liberty Bank does not have any
obligations for retiree health and life benefits under any Employee Plan other
than continuation coverage pursuant to Sections 601 et seq. of ERISA.
Neither Liberty Bank nor any of its ERISA Affiliates has used the
services of (i) workers who have been provided by a third party contract labor
supplier, temporary employees, or individual independent contractors, in each
case for more than six months or who may otherwise be eligible to participate in
the Employee Plans or to an extent that would reasonably be expected to result
in the disqualification of any of the Employee Plans or the imposition of
penalties or excise taxes with respect to the IRS, the Department of Labor, the
Pension Benefit Guaranty Corporation or any other Governmental Entity; or (ii)
leased employees, as that term is defined in Section 414(n) of the Code who are
eligible to participate in the Employee Plans without allowing such workers or
leased employees to participate in such Employee Plans.
11
The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will not result in any payment or series of
payments by Liberty Bank to any person that constitutes an "excess parachute
payment" (as defined in Section 280G of the Code) under any Plan, increase any
benefits payable under any Plan, or accelerate the time of payment or vesting of
any such benefit. With respect to each Employee Plan, Liberty Bank has made
available to General Bank a true and correct copy of (i) the three most recent
annual reports on the applicable form of the Form 5500 series filed with the IRS
if the Employee Plan is required to file such report, (ii) such Employee Plan,
including amendments thereto, (iii) each trust agreement and insurance contract
relating to such Plan, including amendments thereto, if applicable, (iv) the
most recent summary plan description for such Employee Plan, including
amendments thereto, if the Employee Plan is subject to Title I of ERISA, (v) the
most recent actuarial report or valuation if such Employee Plan is a Pension
Plan, (vi) the most recent determination letter issued by the IRS if such
Employee Plan is a Qualified Plan for which such letters are issued, (vii) all
documents relating to employee loans from each Employee Plan that are
outstanding on the date hereof or at any time within the current plan year or
the most recently ended plan year, and (viii) all material employee elections,
plan administrator actions, investment reports, administrative reports, trustee
reports, and similar plan administration materials for the current plan year and
the three most recently ended plan years.
(n) Title to Assets. Liberty Bank has good and marketable title
---------------
to its properties and assets, free and clear of any liens, claims or
encumbrances other than property as to which it is lessee, and other than for
liens for taxes not yet due and payable and such imperfections of title and
encumbrances, if any, which are not material in character, amount or extent, and
which do not materially detract from the value, or materially interfere with the
present use of the property subject thereto or affected thereby. As to leased
property, Liberty Bank has a valid and enforceable lease for such property
enforceable against the landlord in accordance with its terms.
(o) Knowledge as to Conditions. Neither Liberty Bank nor its
--------------------------
directors and officers has knowledge of any reason particular to Liberty Bank
why the approvals, consents and waivers of the Regulatory Agencies referred to
in Section 6.1(b) should not be obtained without the imposition of any
condition of the type referred to in the proviso thereto.
(p) Compliance with Laws. Liberty Bank has all permits, licenses,
--------------------
certificates of authority, orders and approvals of, and has made all filings,
applications and registrations with, federal, state, local and foreign
governmental or regulatory bodies (including without limitation the Regulatory
Agencies) that are required in order to permit Liberty Bank to carry on its
business as it is presently conducted or the absence of which would,
individually or in the aggregate, have a Material Adverse Effect; all such
permits, licenses, certificates of authority, orders, and approvals are in full
force and effect, and, to the knowledge of Liberty Bank, no suspension or
cancellation of any of them is threatened.
(q) Finder's or Advisor Fees. Neither Liberty Bank, nor any of
------------------------
its officers, directors, employees or agents, has employed any broker or finder,
or incurred any liability for any financial advisory fees, brokerage fees,
commissions or finder's fees.
12
(r) Environmental Matters.
---------------------
(i) To the knowledge of Liberty Bank, all of the properties and
operations of Liberty Bank are in compliance in all material respects with all
Environmental Laws (as defined below) applicable to its properties and
operations and Liberty Bank has no knowledge of any circumstances that with the
passage of time or the giving of notice would be reasonably likely to result in
noncompliance.
(ii) To the knowledge of Liberty Bank, there is no proceeding pending
or threatened before any court, governmental agency or board or other forum in
which Liberty Bank has been, or with respect to threatened proceedings,
reasonably would be expected to be, named as a defendant or potentially
responsible party (A) for alleged noncompliance (including by any predecessor)
with any applicable Environmental Law, or (B) relating to the release or
threatened release into the environment of any Hazardous Material (as defined
below), whether or not occurring at or on a site owned, leased or operated by
Liberty Bank.
(iii) To the knowledge of Liberty Bank, there is no reasonable basis
for any proceeding of a type described in Section 2.1 (r)(ii).
(iv) To the knowledge of Liberty Bank, during the period of Liberty
Bank's ownership or operation of any of its current properties, there have been
no releases or threatened releases of any unlawful level of any Hazardous
Material in, on, from, under or affecting any such property.
(v) To the knowledge of Liberty Bank, prior to the period of Liberty
Bank's ownership or operation of any of its current properties, there were no
releases or threatened releases of any unlawful level of any Hazardous Material
in, on, under or affecting any such property.
(vi) The following definitions apply for purposes of this Section 2.1
(r): "property" means any real estate property owned, leased or operated by
Liberty Bank. "Environmental Law" means any law, regulation, order, decree,
opinion, common law doctrine, requirement, or agency policy relating to
Hazardous Material or the protection of the environment, or human health and
safety; and "Hazardous Material" means any material, waste or mixture containing
any substance that is listed, classified or regulated under any Environmental
Law, including petroleum products and regulated levels of asbestos and
polychlorinated biphenyls.
(vii) During the period of Liberty Bank's holding of a security or
other interest in property, Liberty Bank is aware that certain of such
properties may be or may have been subject to releases of Hazardous Material;
however, to the knowledge of Liberty Bank none of such releases have had a
Material Adverse Effect on such properties or Liberty Bank.
(s) Allowances. The allowance for loan losses ("ALL") shown on Liberty
----------
Bank's latest audited balance sheet was, and the allowance for possible
loan losses shown on each of the unaudited balance sheets in Liberty Bank's
Reports for periods ending after the date of the latest audited balance sheet
were and Liberty Bank's ALL is, in the opinion of Liberty Bank's management,
adequate as of the dates thereof and hereof, under GAAP as applicable to banks.
Liberty Bank has disclosed to General Bank in writing prior to the date hereof
the
13
amounts of all loans, leases, advances, credit enhancements, other extensions of
credit, commitments and interest-bearing assets of Liberty Bank that have been
classified by Liberty Bank or otherwise as "Other Loans Specially Mentioned",
"Special Mention", "Substandard", "Doubtful", "Loss", "Classified",
"Criticized", "Credit Risk Assets", "Concerned Loans" or words of similar import
(the "Classified Loans"), and Liberty Bank shall promptly after the end of any
month after the date hereof, inform General Bank of any such classification or
any change thereof arrived at any time after the date hereof. There are no such
loans, leases, advances, credit enhancements, other extensions of credit,
commitments or interest-bearing assets which have been so classified by any of
the Regulatory Agencies that have not also been classified in a comparable or
lower category by Liberty Bank. Any Other Real Estate Owned ("OREO") included in
any non-performing assets of Liberty Bank is carried net of reserves at the
lower of cost or market value based on current independent appraisals.
(t) Material Interests of Certain Persons. No officer or director of
-------------------------------------
Liberty Bank, or any "associate" (as such term is defined in Rule 12b-2 under
the Securities Exchange Act) of any such officer or director, has any material
interest in any material contract or property (real or personal), tangible or
intangible, used in or pertaining to the business of Liberty Bank.
(u) Insurance. Liberty Bank is currently insured and, since December 3 1,
---------
2000, has been insured for amounts deemed appropriate for its business and
operations against such risks as companies engaged in a similar business would,
in accordance with good business practice, customarily be insured. Each of the
insurance policies and bonds maintained by Liberty Bank is in full force and
effect, Liberty Bank is not in default thereunder in a manner for which the
policy is likely to be cancelled and all material claims thereunder have been
filed in due and timely fashion. In the best judgment of management of Liberty
Bank, such insurance coverage is adequate.
(v) Investment Securities. Except for pledges to secure public and trust
---------------------
deposits, and reverse repurchase agreements entered into in arm's-length
transactions pursuant to normal commercial terms and conditions and other
pledges required by law, none of the investments reflected in Liberty Bank's
latest audited balance sheet and none of the material investments made by
Liberty Bank since the date of such balance sheet is subject to any restriction
(contractual, statutory or otherwise) that would materially impair the ability
of the entity holding such investment freely to dispose of such investment at
any time.
(w) Derivative Transactions. Since December 3 1,2000, Liberty Bank has not
-----------------------
engaged in transactions in or involving forwards, futures, options on futures,
swaps or other derivative instruments except (i) as agent on the order and for
the account of others or (ii) as principal for purposes of hedging interest rate
risk on U.S. dollar-denominated securities and other financial instruments. To
Liberty Bank's knowledge, none of the counter-parties to any contract or
agreement with respect to any such instrument is in material default with
respect to such contract or agreement and no such contract or agreement, were it
to be a loan or other extension of credit by Liberty Bank, would be classified
as "Other Loans Specially Mentioned", "Special Mention", "Substandard",
"Doubtful", "Loss", "Classified", "Criticized", "Credit Risk Assets", "
Concerned Loans" or words of similar import. The financial position of Liberty
Bank on a consolidated basis under or with respect to each such instrument has
been reflected in the books and records of Liberty Bank in accordance with GAAP
consistently applied, and no open
14
exposure of Liberty Bank with respect to any such instrument (or with respect to
multiple instruments with respect to any single counter-party) exceeds $25,000.
(x) Intellectual Property. Liberty Bank owns or possesses valid and binding
---------------------
licenses and other rights to use (without payment) all material trade secrets,
trade names, trademarks, service marks, inventions and processes used in its
businesses; and Liberty Bank has not received any notice of conflict with
respect thereto that asserts the right of others. Liberty Bank has in all
material respects performed all the obligations required to be performed by it
and is not in default in any material respect under any contract, agreement,
arrangement or commitment relating to any of the foregoing.
(Y) Books and Records. The books and records of Liberty Bank have been, and
-----------------
are being, maintained in accordance with applicable legal and accounting
requirements (including GAAP, consistently applied) and reflect in all material
respects the substance of events and transactions that should be included
therein.
(z) Trust Business. Although Liberty Bank was granted a trust license at
--------------
the time the bank was formed, Liberty Bank neither acts as trustee, agent,
fiscal agent, escrow agent, custodian or in another similar capacity for any
other person, nor otherwise performs any fiduciary or trust functions.
ARTICLE III REPRESENTATIONS AND
WARRANTIES OF GENERAL BANK
3.1 Representations and Warranties of General Bank. General Bank represents
----------------------------------------------
and warrants to Liberty Bank that, except as specifically set forth in the
disclosure schedule delivered to Liberty Bank and dated as of the date of this
Agreement (the "General Bank Disclosure Schedule"):
(a) Recitals True. The information set forth in the recitals of this
-------------
Agreement with respect to General Bank, GBC, and GB Interim Bank are true.
(b) Authority. General Bank has the power and authority, and is duly
---------
qualified in all jurisdictions where such qualification is required (except for
such qualifications the absence of which, individually or in the aggregate,
would not have a Material Adverse Effect on General Bank), to carry on its
business as it is now being conducted and to own all of its material properties
and assets. General Bank has all federal, state, local and foreign governmental
authorizations necessary for it to own or lease its properties and assets and to
carry on its business as it is now being conducted, except for such powers and
authorizations the absence of which, either individually or in the aggregate,
would not have a Material Adverse Effect on General Bank.
(c) Approvals. The execution by General Bank of this Agreement and Bank
---------
Merger Agreement have been authorized by all necessary corporate actions,
including, but not limited to, a vote by its boards of directors and its sole
shareholder, GBC. No vote, consent or approval of the shareholders of GBC is
required to authorize this Agreement, the Interim Merger Agreement, the Bank
Merger Agreement or the consummation of the Mergers. Subject to receipt of the
required approvals, consents or waivers of the Regulatory Agencies referred to
in Section 6.1 (b), this Agreement is a valid and binding agreement enforceable
against General
15
Bank in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditor's rights, and general equity principles.
(d) No Violations. The execution, delivery and performance of this
-------------
Agreement by General Bank does not, and the execution, delivery and performance
of the Bank Merger Agreement and consummation of the Mergers will not,
constitute (i) a breach or violation of, or a default under, any applicable law,
rule or regulation or any material judgment, decree, order, governmental permit
or license, or material indenture, agreement or instrument of General Bank to
which it is subject, which breach, violation or default would have a Material
Adverse Effect on General Bank or would materially hinder or delay the Mergers
or (ii) a breach or violation of, or a default under, the Articles of
Incorporation or Bylaws of General Bank; and the consummation of the Mergers
will not require any approval, consent or waiver under any such law, rule,
regulation, judgment, decree, order, governmental permit or license or the
approval, consent or waiver of any other party to any such agreement, indenture
or instrument, other than the required approvals, consents and waivers of the
Regulatory Agencies referred to in Section 6.1(b).
(e) Consideration. General Bank has sufficient liquid funds and
-------------
readily marketable securities to consummate the transactions contemplated in the
Agreement.
(f) Knowledge as to Conditions. Neither General Bank nor its
--------------------------
directors and officers has knowledge of any reason why the approvals, consents
and waivers of the Regulatory Agencies referred to in Section 6.1(b) should not
be obtained without the imposition of any condition of the type referred to in
the proviso thereto.
(g) GB Interim Bank. General Bank shall cause GB Interim Bank to be
---------------
duly organized and validly existing and authorized by all necessary corporate
action and bank regulatory approvals to execute and consummate the Interim
Merger Agreement. The Interim Merger Agreement will be, upon execution by GB
Interim Bank, and Liberty Bank, a valid and binding agreement, enforceable
against GB Interim Bank in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, moratorium and similar laws of general
applicability relating to or affecting creditors' rights, and general equity
principles.
(h) Statements True and Correct. None of the information supplied or
---------------------------
to be supplied by GBC or General Bank for inclusion in or incorporation by
reference in any proxy statement or information statement or any other such
document to be mailed by Liberty Bank to Liberty Bank shareholders or to be
filed by Liberty Bank with any Regulatory Agencies in connection with the
transactions contemplated hereby will, at the time of such mailing or filing,
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which such statements are made, not misleading.
ARTICLE IV CONDUCT PENDING THE MERGER
4.1 Conduct of Liberty Bank's Business Prior to the Effective Time of the
---------------------------------------------------------------------
Interim Merger. Except as expressly provided in this Agreement or unless written
--------------
consent is obtained from the General Bank, during the period from the date of
this Agreement to the Effective Time
16
of the Interim Merger, Liberty Bank shall (i) conduct its business in the usual,
regular and ordinary course consistent with past practice, (ii) use its
commercially reasonable efforts to maintain and preserve intact its business
organization, employees, valued customers and advantageous business
relationships, and retain the services of its officers and key employees, (iii)
use commercially reasonable efforts to maintain insurance coverage of customary
risks and in amounts in respect of its business and properties in accordance
with present practice, (iv) perform in all material respects all of its
obligations under all material contracts, leases and other commitments to which
it is a party or by which it or any of its properties or assets may be bound,
except such obligations as it may in good faith reasonably dispute, (v) comply
with and perform all material obligations and duties imposed upon it by
applicable federal, state and local laws, rules, regulations and ordinances,
(including filing reports with any Regulatory Agencies as provided in Section
2.1(g) or any returns or other statements in respect of any Tax) and (vi) take
no action which would reasonably be expected to adversely affect or delay the
ability of Liberty Bank, General Bank or GBC to obtain any necessary approvals,
consents or waivers of any Regulatory Agencies required for the transactions
contemplated hereby, or to perform its covenants and agreements on a timely
basis under this Agreement.
4.2 Covenants of Liberty Bank. Except as otherwise provided herein or
-------------------------
elsewhere in this Agreement, during the period from the date of this Agreement
to the Effective Time of the Interim Merger, Liberty Bank shall not without the
prior written consent of General Bank, which consent shall not be unreasonably
withheld:
(a) other than in the ordinary course of business consistent with
past practice, implement any new deposit products or deposit promotion program,
incur any indebtedness for borrowed money, assume, guarantee, endorse, or
otherwise as an accommodation become responsible for, the obligations of any
person;
(b) adjust, split, combine or reclassify any capital stock; make,
declare or pay any dividend or make any other distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible into or exchangeable for any
shares of its capital stock, or grant any stock appreciation rights or grant any
person any right to acquire any shares of its capital stock; or issue any
additional shares of its capital stock or any securities or obligations
convertible into or exchangeable for shares of its capital stock;
(c) other than in the ordinary course of business consistent with
past practice and pursuant to policies in effect on the date hereof, sell,
transfer, mortgage, encumber or otherwise dispose of any of its material
properties or assets to any person, or cancel, release or assign any
indebtedness of any such person or any claims held by any such person, except
pursuant to contracts or agreements in force at the date of this Agreement;
(d) other than in the ordinary course of business consistent with
past practice, enter into or terminate any lease, contract or agreement, or make
any change in any of its leases, contracts or agreements in excess of $50,000;
(e) except to the extent required by law, existing change in
control contracts or other employment agreements, or any payments made in
connection with any profit sharing or similar plan, increase in any manner the
compensation or fringe benefits of any of its employees
17
or pay or accrue any additional severance benefits (except with respect to the
total amount of the two severance agreements described in the Liberty Bank
Disclosure Schedule), or pay any retention bonuses or any pension or retirement
allowance not required by any existing plan or agreement to any such employees,
or become a party to, amend (except as may be required under applicable law) or
commit itself to any pension, retirement, profit-sharing or welfare benefit plan
or agreement or employment agreement with or for the benefit of any employee, or
voluntarily accelerate the vesting of any compensation or benefit, other than
general increases in compensation in the ordinary course of business consistent
with past practice;
(f) settle any claim, action or proceeding involving any liability of
Liberty Bank if any such settlement, individually or in the aggregate with other
such settlements, either (i) would have a Material Adverse Effect on Liberty
Bank, (ii) result in material restrictions upon the operations of Liberty Bank,
or (iii) would be reasonably likely to impact materially the terms of this
Agreement or the transactions contemplated hereby;
(g) amend Liberty Bank's Articles of Organization or its Bylaws;
(h) except in the ordinary course of business, waive or release any
material right or collateral, or cancel or compromise any extension of credit or
other debt or claim;
(i) change any of its accounting policies, including without
limitation, diverting in any manner from GAAP;
(j) make or change any Tax election, file any amended Return or
permit any insurance policy naming it as a beneficiary or loss-payable payee to
be canceled or terminated, except in the ordinary course of business consistent
with past practice;
(k) make any changes to the stated ALL policy, or the application of
such policy to the ALL; or
(1) agree to, or make any commitment to, take any of the actions
prohibited by this Section 4.2.
For purposes of this Section 4.2, General Bank shall be deemed to have
given consent to any action which is contrary to any specified covenant set
forth in this Section if, within five (5) business days after receipt by General
Bank of written notice from Liberty Bank of Liberty Bank's intention to act
contrary to any of the specified covenants set forth in this Section, General
Bank shall not have delivered to Liberty Bank written objection to any such
action.
4.3 Notification bv Libertv Bank of Certain Matters. During the period
-----------------------------------------------
from the date of this Agreement to the Effective Time of the Interim Merger
Liberty Bank shall provide General Bank at least three (3) Business Days notice
of: (a) any loan, lease, advance, credit enhancement renewal or other extension
of credit, or any commitment made with respect to the foregoing, in excess of
$600,000 that Liberty Bank proposes to make; and (b) any investment either by
purchase of stock or securities, contributions to capital, property transfers,
or purchase of any property or assets of any person that Liberty Bank proposes
to make (other than existing portfolio investments of Liberty Bank), which is
made other than in the ordinary course of Liberty Bank's business consistent
with past practices and policies. Following Liberty Bank's receipt of a request
by General Bank within such three (3) Business Day period, Liberty Bank
18
shall first consult with and consider General Bank's views, should General Bank
express opposition to the proposed action. General Bank shall be deemed not to
have objected to Liberty Bank making any such loan or investment if General Bank
does not notify Liberty Bank to the contrary within such three (3) Business Day
period.
ARTICLE V COVENANTS
5.1 Acquisition Proposals. Liberty Bank agrees that neither it, its Board
---------------------
of Directors, nor any of its respective officers and employees shall, and
Liberty Bank shall direct and use its best efforts to cause its individual
members of the Board of Directors, employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by Liberty Bank) not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to shareholders of Liberty Bank) with
respect to a merger, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the assets or any equity
securities of, Liberty Bank (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal"). Liberty Bank will immediately cease
and cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing.
Liberty Bank will take the necessary steps to inform the appropriate individuals
or entities referred to in the first sentence hereof of the obligations
undertaken in this Section 5.1. Liberty Bank will notify General Bank and GBC
promptly if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with Liberty Bank or, to its knowledge, any
of the individuals or entities referred to in the first sentence of this Section
5.1, and Liberty Bank shall not enter into any negotiations or discussions nor
provide any non-public information or materials to any such individuals or
entities unless Liberty Bank shall have received an unsolicited written offer
(other than from General Bank or GBC) to effect an Acquisition Proposal and the
Board of Directors of Liberty Bank is advised in a written opinion by legal
counsel (a copy of which shall be provided promptly to General Bank and GBC)
that, in the exercise of the directors' fiduciary obligations, such information
should be provided to or such discussions or negotiations should be undertaken
with the person or entity submitting such unsolicited written offer.
5.2 Employees.
---------
(a) General Bank shall have the right but not the obligation to offer
employment immediately following the Effective Time of the Interim Merger to any
and all persons who are expected to be officers and employees of Liberty Bank
immediately before the Effective Time of the Interim Merger.
(b) Only those severance or retention bonus obligations of Liberty
Bank in connection with the severance agreements listed on the Liberty Bank
Disclosure Schedule shall be accrued prior to the Closing.
(c) General Bank agrees that as of and following the Effective Time of
the Interim Merger and the consummation of the Bank Merger, the employees of
Liberty Bank as of the Effective Time of the Interim Merger who are offered and
who accept employment with General Bank (the "Former Liberty Bank Employees")
shall be eligible to participate in General
19
Bank's employee benefit plans in which the similarly situated employees of
General Bank participate, to the same extent as similarly situated employees of
the General Bank. All of Liberty Bank's employee benefit plans shall be
terminated, either by General Bank at or after the Effective Time of the Bank
Merger or, at the direction of General Bank, by Liberty Bank immediately prior
to the Effective Time of the Interim Merger. To the extent permitted by
applicable laws, General Bank shall provide that distributions from Liberty
Bank's profit sharing plan to persons who are employed by General Bank
immediately after the Effective Time of the Interim Merger may be rolled into an
appropriate existing General Bank Plan (as defined below) that accepts such
rollover contributions.
(d) With respect to each employee benefit plan, program, policy or
arrangement maintained by General Bank for the benefit of current employees of
General Bank (each such plan, program, policy or arrangement, a "General Bank
Plan"), General Bank agrees that for purposes of determining eligibility to
participate and vesting (but not for benefit accrual purposes other than
severance and vacation entitlement), service with Liberty Bank (or predecessor
employers to the extent Liberty Bank provides past service credit) shall be
treated as service with General Bank; provided, however, that such services
-------- -------
shall not be recognized to the extent that such recognition would result in a
duplication of benefits. General Bank shall cause such General Bank Plan to
waive (i) any pre-existing condition restriction which was waived under the
terms of any analogous plan of Liberty Bank immediately prior to the Effective
Time of the Interim Merger or (ii) any waiting period limitation or evidence of
insurability requirement which would otherwise be applicable to a Former Liberty
Bank Employee on or after the Effective Time of the Interim Merger to the extent
such Former Liberty Bank Employee had satisfied any similar limitation or
requirement under an analogous plan of Liberty Bank prior to the Effective Time
of the Interim Merger. Each Former Liberty Bank Employee shall be given credit
for amounts paid under any analogous plan for purposes of applying deductibles,
co-payments and out-of-pocket maximums as though such amounts had been paid in
accordance with the terms and conditions of the General Bank Plan.
5.3 Access and Information. Upon reasonable notice and subject to Liberty
----------------------
Bank's prior consent, which consent shall not be unreasonably withheld, Liberty
Bank shall afford to General Bank and its authorized representatives (including,
without limitation, directors, officers and employees of General Bank or GBC and
its affiliates, and counsel, accountants and other professionals retained) such
reasonable access during normal business hours throughout the period prior to
the Effective Time of the Interim Merger, to the books, records (including,
without limitation, shareholder lists, Tax Returns and work papers of
independent auditors), properties and personnel of Liberty Bank, and to such
other information as General Bank may reasonably request; provided, however,
-------- -------
that no investigation pursuant to this Section 5.3 shall affect or be deemed to
modify any representation or warranty made herein. General Bank will not, and
will cause its representatives not to, use any information obtained pursuant to
this Section 5.3 for any purpose unrelated to this Agreement or the consummation
of the transactions contemplated by this Agreement.
5.4 Certain Filings, Consents and Arrangements. General Bank and Liberty
------------------------------------------
Bank shall (a) promptly make or cause any filings, notices and applications
required to be made in order to obtain all approvals, consents and waivers of
any Regulatory Agencies necessary or appropriate for the consummation of the
transactions contemplated hereby, and (b) cooperate with one another (i) in
promptly determining the filings that are required to be made or the
20
approvals, consents or waivers that are required to be obtained under any
relevant federal, state or foreign law or regulation, and (ii) in promptly
making any such filings, furnishing information required in connection therewith
and seeking to timely obtain any such approvals, consents or waivers. The
parties shall deliver to one another copies of the publicly available portions
of all such filings, notices and applications made by them or it, as the case
may be, promptly after such filings are made.
5.5 Additional Agreements. Subject to the terms and conditions herein
----------------------
provided, each of the parties hereto agrees to use all commercially reasonable
efforts to take promptly, or cause to be taken promptly, all actions and to do
promptly, or cause to be done promptly, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement as promptly as practicable,
including to use commercially reasonable efforts to obtain all necessary actions
or non-actions, extensions, waivers, consents and approvals from all applicable
governmental entities, to effect all necessary registrations, applications and
filings (including, without limitation, any filings under any applicable state
securities laws), and to obtain any required contractual consents and regulatory
approvals, including any actions which may be required to effect the Mergers.
5.6 Publicity. The initial press release announcing this Agreement shall
---------
be a joint press release on or as of the date hereof, and thereafter Liberty
Bank and General Bank shall consult with each other in issuing any press
releases or otherwise making public statements with respect to the other or the
transactions contemplated hereby, and in making any filings with any
governmental authority or with any national securities organization with respect
thereto, provided that each party may make such press releases as it deems
required under applicable law upon the advice of counsel, but only after
affording the other party a reasonable opportunity to review and comment.
5.7 Shareholder Meetings or Consent. Liberty Bank shall take all action
-------------------------------
necessary, in accordance with the MGL and its Articles of Organization and
Bylaws, to convene as promptly as practicable a meeting of the holders of
Liberty Bank Common Stock for the purpose of considering this Agreement, the
Interim Merger and the other actions contemplated by this Agreement. Except in
reliance on the advice of legal counsel set forth in a written opinion as
provided in Section 5.1, Liberty Bank's Board of Directors shall unanimously
recommend that the Liberty Bank shareholders vote in favor of and approve this
Agreement, shall cause Liberty Bank to use its reasonable efforts to solicit
from Liberty Bank shareholders proxies or consents to vote their shares in favor
of the Agreement and shall take all other action in their judgment reasonably
necessary or appropriate to obtain the approval of Liberty Bank shareholders
required to effect the Agreement and the Interim Merger.
5.8 Proxy Statement. As soon as practicable after the date hereof, Liberty
---------------
Bank shall prepare a proxy statement in accordance with applicable law to take
shareholder action on the Agreement, including without limitation the Mergers
(the "Proxy Statement"), and shall promptly after the receipt of any required
regulatory review, mail the Proxy Statement to all holders of record (as of the
applicable record date) of shares of Liberty Bank Common Stock entitled to vote.
Liberty Bank represents and covenants that the Proxy Statement and any amendment
or supplement thereto, at the date of mailing to shareholders of Liberty Bank
and the date of the meeting of Liberty Bank's shareholders to be held in
connection with the Agreement and the Interim Merger will not contain any untrue
statement of a material fact or omit to state
21
any material fact required to be stated or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that Liberty Bank makes no representations or
-------- -------
covenants with respect to information provided to Liberty Bank in writing by
General Bank or GBC specifically for inclusion in the Proxy Statement, and
General Bank hereby represents that any such information so provided by General
Bank or GBC will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The parties shall cooperate with each other in the preparation
of the Proxy Statement and Liberty Bank shall provide General Bank an
opportunity to review and comment upon a final draft of the Proxy Statement
prior to its mailing to Liberty Bank's shareholders.
5.9 Notification of Certain Matters.
-------------------------------
(a) Liberty Bank shall give prompt notice to General Bank of any
notice of, or other communication relating to, a default or event that, with
notice or lapse of time or both, would become a default, received by Liberty
Bank subsequent to the date of this Agreement and prior to the Effective Time of
the Interim Merger, under any contract material to the financial condition,
properties, businesses or results of operations of Liberty Bank, to which
Liberty Bank is a party or is subject.
(b) Liberty Bank shall give prompt notice to General Bank of any
change, or any series of changes, in the financial condition, properties,
business or results of operations of Liberty Bank which would have a Material
Adverse Effect or the occurrence of any event which, so far as reasonably can be
foreseen at the time of its occurrence, is reasonably likely to result in any
such change.
(c) Each party shall give prompt notice to the other party or parties
of any notice or other communication from any third party challenging the
legality of this Agreement or any of the transactions contemplated hereby or
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement.
5.10 Indemnification. General Bank agrees that all rights to
---------------
indemnification or exculpation now existing in favor of the directors, officers
and employees of Liberty Bank as provided in its Articles of Organization,
Bylaws, indemnification agreements or otherwise in effect as of the date hereof
with respect to matters occurring prior to the Effective Time of the Interim
Merger, shall survive the Mergers and shall continue in full force and effect.
General Bank further agrees in the event of any threatened or actual claim,
action, suit, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action, suit,
proceeding or investigation initiated by a party other than General Bank or GBC
in which any person who is now, or has been at any time prior to the date of
this Agreement, or who becomes prior to the Effective Time of the Interim
Merger, a director or officer of Liberty Bank (the "Indemnified Parties") is, or
is threatened to be, made a party based in whole or in part on, or arising in
whole or in part out of, or pertinent to (i) the fact that he or she is or was a
director or officer of Liberty Bank or any of its predecessors or affiliates or
(ii) this Agreement or any of the transactions contemplated hereby, whether in
any case asserted or arising before or after the Effective Time of the Interim
Merger, the parties agree to cooperate and use their reasonable best efforts to
defend against and respond thereto. It is understood and
22
agreed that General Bank shall indemnify and hold harmless, as and to the extent
permitted by law, each such Indemnified Party against any losses, claims,
damages, liabilities, costs, expenses (including reasonable attorney's fees and
expenses in advance of the final disposition of any claim, suit, proceeding or
investigation to each Indemnified Party to the fullest extent permitted by law
upon receipt of any undertaking required by applicable law and including
reasonable attorney's fees and expenses incurred in connection with prevailing
in a suit by an Indemnified Party to enforce its rights under this Section 5.1
l), judgments, fines and amounts paid in settlement in connection with any such
threatened or actual claim, action, suit, proceeding or investigation
("Claims"); in the event of any such threatened or actual claim, action, suit,
proceeding or investigation (whether asserted or arising before or after the
Effective Time of the Interim Merger), the Indemnified Parties may retain
counsel reasonably satisfactory to General Bank; provided, however, that (1)
-------- -------
General Bank shall have the right to assume the defense thereof and upon such
assumption General Bank shall not be liable to any Indemnified Party for any
legal expenses of other counsel or any other expenses subsequently incurred by
any Indemnified Party in connection with the defense thereof, except that if
General Bank elects not to assume such defense, or counsel for the Indemnified
Parties reasonably advises that there are issues which raise conflicts of
interest between General Bank and the Indemnified Parties, the Indemnified
Parties may retain counsel reasonably satisfactory to them after consultation
with General Bank, and General Bank shall pay the reasonable fees and expenses
of such counsel for the Indemnified Parties, (2) General Bank shall in all cases
be obligated pursuant to this paragraph to pay for only one firm of counsel for
all Indemnified Parties, (3) General Bank shall not be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld), and (4) General Bank shall have no obligation hereunder
to any Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law. General Bank's
indemnification obligations under this Section 5.11 shall extend only to Claims
threatened in writing or existing prior to the third anniversary of the
Effective Date and of which the Indemnified Party gives notice to General Bank
prior to or on such date, or within ten (10) days after such date.
5.11 Notices: Reports.
----------------
(a) Liberty Bank will promptly notify General Bank of any event of
which Liberty Bank obtains knowledge that has had or may have a Material Adverse
Effect on Liberty Bank, or in the event Liberty Bank determines that it is
unable to fulfill any of the conditions to the performance of General Bank's
obligations hereunder, and Liberty Bank will furnish General Bank (i) as soon as
available, and in any event within ten (10) days after it is prepared, any
report by Liberty Bank for submission to the Board of Directors of Liberty Bank
or committees thereof, (ii) as soon as available, all proxy statements,
financial statements, and all reports to be filed by Liberty Bank with any of
the Regulatory Agencies after the date hereof, and (iii) such other existing
reports as General Bank may reasonably request relating to Liberty Bank.
(b) General Bank will promptly notify Liberty Bank of any event of
which General Bank obtains knowledge that has had or may have a Material Adverse
Effect on General Bank, or in the event General Bank determines that it is
unable to fulfill any of the conditions to the performance of Liberty Bank's
obligations hereunder, and General Bank shall thereafter furnish Liberty Bank
with such information as Liberty Bank may reasonably request. General
23
Bank shall furnish Liberty Bank such reports filed by General Bank and GBC with
any of the Regulatory Agencies as Liberty Bank may reasonably request which are
relevant to the transactions contemplated by this Agreement and the disclosure
of which by General Bank to Liberty Bank is not otherwise prohibited by law or
regulation.
5.12 Libertv Bank Board of Directors Meeting Attendance; General Bank
-----------------------------------------------------------------
Representatives. Subject to the prior consent of Liberty Bank, a representative
---------------
of General Bank designated by General Bank and approved in advance by Liberty
Bank, may attend meetings of the Liberty Bank Board of Directors, or any
committee thereof, and the Liberty Bank Loan Committee, provided that such
representative may be excluded by the Liberty Bank Board of Directors from any
discussion it deems appropriate with respect to the transactions contemplated by
this Agreement or other discussions of any material matters as to which it is
deemed important for preservation of the attorney client privilege. Liberty Bank
shall give General Bank at least forty-eight (48) hours notice of any Liberty
Bank Board of Directors, Loan Committee and any other committee meetings.
ARTICLE VI CONDITIONS TO CONSUMMATION
6.1 Conditions to All Parties' Obligations. The respective obligations of
--------------------------------------
parties to effect the Mergers shall be subject to the satisfaction or waiver
prior to the Effective Time of the Interim Merger of the following conditions:
(a) The Agreement and the transactions contemplated hereby shall have
been approved by the requisite vote of the shareholders of Liberty Bank.
(b) General Bank, GBC and Liberty Bank shall have procured the
required Regulatory Agencies' approvals, consents or waivers with respect to the
Agreement and the transactions contemplated hereby (including the organization
of GB Interim Bank), and all applicable statutory waiting periods shall have
expired; and the parties shall have procured any other regulatory approvals,
consents or waivers of governmental authorities or other persons that are
necessary or appropriate to the consummation of the transactions contemplated by
the Agreement; provided, however, that no approval, consent or waiver referred
-------- -------
to in this Section 6.1 (b) shall be deemed to have been received if it shall
include any condition or requirement that, individually or in the aggregate, (i)
would result in a Material Adverse Effect on Liberty Bank or General Bank (after
giving effect to the Interim Merger or the Bank Merger and the other
transactions contemplated by this Agreement), or (ii) would so materially reduce
the economic or business benefits of the acquisition contemplated by the
Agreement to General Bank or GBC that had such condition been known to General
Bank or GBC, General Bank and GBC in their respective good faith reasonable
judgments would not have entered into this Agreement.
(c) No party hereto shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Interim Merger or the Bank Merger or any other
transaction contemplated by this Agreement, and no litigation or proceeding
shall be pending against any party or any of their respective subsidiaries
brought by any governmental agency seeking to prevent consummation of the
transactions contemplated hereby.
24
(d) No statute, rule, regulation, order, injunction or decree shall
have been enacted, entered or promulgated by any governmental authority which
prohibits, restricts or makes illegal the consummation of the Interim Merger or
the Bank Merger, or any other transaction contemplated by this Agreement.
(e) The Exchange Agent Agreement shall have been executed by all
appropriate parties and the Adjusted Cash Consideration shall have been
delivered to the Exchange Agent.
6.2 Conditions to Obligations of General Bank. The obligations of General
-----------------------------------------
Bank to effect the Mergers shall be subject to the satisfaction or waiver prior
to the Effective Time of the Interim Merger of the following additional
conditions:
(a) Each of the representations and warranties of Liberty Bank
contained in this Agreement shall, in all material respects, be true on the
Effective Date as if made on such date (or on the date when made in the case of
any representation or warranty which specifically relates to an earlier date);
Liberty Bank shall have performed, in all material respects, each of its
covenants and agreements contained in this Agreement; and General Bank shall
have received a certificate signed by the Chief Executive Officer of Liberty
Bank dated as of the Effective Time of the Interim Merger, to the foregoing
effect.
(b) Since June 30, 2001, there shall have been no Material Adverse
Effect on Liberty Bank.
(c) At least five (5) Business Days prior to the Effective Time of
the Interim Merger, Liberty Bank shall provide General Bank with Liberty Bank's
Closing Financial Statements. The "Closing Financial Statements" shall be
defined as the balance sheet and income statement as of the last day of that
month which most immediately precedes the Closing Date by at least five (5)
days. The Closing Financial Statements shall have been prepared in all material
respects in accordance with GAAP and other applicable legal and accounting
requirements, reflecting all period-end accruals and other adjustments usual and
customary.
(d) Liberty Bank's Closing Book Value shall not be less than
$5,578,779. The "Closing Book Value" shall be defined as the stockholders'
equity as shown in the Closing Financial Statements plus a per diem amount based
on the average daily earnings for the third quarter of 2001, which amount is
$2,015, further reduced by the amount of any accrual or payment of, or in
connection with, the two severance agreements listed on the Liberty Bank
Disclosure Schedule which shall have been accrued during the month of the
Closing.
6.3 Conditions to Obligations of Liberty Bank. The obligation of Liberty
-----------------------------------------
Bank to effect the Interim Merger shall be subject to the satisfaction or waiver
prior to the Effective Time of the Interim Merger of the following additional
conditions:
Each of the representations and warranties of General Bank contained in
this Agreement shall, in all material respects, be true on the Effective Time of
the Interim Merger as if made on such date (or on the date when made in the case
of any representation or warranty which specifically relates to an earlier
date); General Bank shall have performed, in all material respects, each of its
covenants and agreements contained in this Agreement; and Liberty Bank
25
shall have received a certificate signed by the Chief Executive Officer of
General Bank, dated as of the Effective Time of the Interim Merger, to the
foregoing effect.
ARTICLE VII TERMINATION
7.1 Termination. This Agreement may be terminated, and the Merger
-----------
abandoned, prior to the Effective Time of the Interim Merger, either before or
after its approval by the parties' shareholders:
(a) by the mutual consent of the parties, if the Board of Directors
of each so determines by vote of a majority of the members of its entire Board;
(b) by either party, if its Board of Directors so determines by vote
of a majority of the members of its entire Board, in the event of a material
breach by the other party hereto of any representation, warranty, covenant or
agreement contained herein such that the conditions in Section 6.2(a) or 6.3, as
applicable, would not be satisfied; provided, however, that if such breach is
-------- -------
cured within 30 days after written notice is given to the party committing such
breach by the other party, then this Agreement may not be terminated pursuant to
this Section 7.(b);
(c) by either party by written notice to the other party if (i) any
approval, consent or waiver of a governmental authority required to permit
consummation of the transactions contemplated hereby shall have been
conclusively denied; (ii) action shall have occurred which prevents the
satisfaction of the condition in Section 6.1 (d); (iii) any governmental
authority of competent jurisdiction shall have issued a final, unappealable
order enjoining or otherwise prohibiting consummation of the transactions
contemplated by this Agreement;
(d) by either party, if its Board of Directors so determines by vote
of a majority of the members of its entire Board, in the event that the Merger
is not consummated by March 31, 2002, unless the failure to so consummate by
such time is due to (i) the breach of any representation, warranty or covenant
contained in this Agreement by the party seeking to terminate in which case
subsection 7.1 (b) shall control, or (ii) subsection (e) immediately below;
(e) by either party as provided in this subsection (e), if it is
commercially unreasonable for such party to consummate the Mergers due to the
occurrence and effect of a Force Majeure. As used in this Agreement, the term
"Force Majeure" means acts of war, acts of public enemies, terrorists, mobs or
rioters, or acts of God that prevents either party from continuing its banking
operations substantially as now conducted and precludes the party from
completing the Mergers or operating after the Mergers as contemplated by this
Agreement take place; provided, however, that the occurrence and effect of a
-------- -------
Force Majeure for purposes of this subsection shall be determined by the good
faith and commercially reasonable judgment of the party seeking termination. The
party seeking termination due to a Force Majeure shall immediately provide
written notice to the other party. Upon receipt of such notice, the earliest
Closing date shall be delayed for a period of 60 days from the date of receipt
of the notice (even if such 60-day period shall continue past March 31, 2002).
If, in the good faith and commercially reasonable judgment of either party, the
Force Majeure effect continues to make it commercially unreasonable to
consummate the Mergers at the end of such 60 day period, then
26
either party may terminate this Agreement. If the parties agree that despite the
effect of the Force Majeure it is commercially reasonable to consummate the
Mergers, the Closing shall occur within 60 days of such agreement of the
parties;
(f) by either party without any cause, if its Board of Directors so
determines by a vote of a majority of the members of its entire Board; or
(g) by either party if the other party fails to close the
transaction without any cause provided for herein; or
(h) by General Bank if the conditions set forth in Section 6.2(b),
(c) or (d) have not been satisfied, or by either party if the conditions set
forth in Section 6.1(b), (c) or (d) have not been satisfied, in which event no
termination fee shall be payable by either party.
7.2 Effect of Termination: Fees. As mutual inducements by Liberty Bank
---------------------------
and General Bank to one another to enter into this Agreement:
(a) In the event: (i) this Agreement is unilaterally terminated by
Liberty Bank as set forth in Section 7.1(f); (ii) a majority of the
Liberty Bank Board of Directors does not recommend or the Liberty Bank
shareholders do not approve, this Agreement and the Merger; (iii) Liberty
Bank breaches Section 5.1 or takes action in reliance on a written legal
opinion as provided in Section 5.1; or (iv) General Bank terminates this
Agreement as set forth in Section 7.1(b) or 7.1(g), then Liberty Bank
shall wire General Bank within three (3) Business Days of demand the sum of
$500,000, whereupon Liberty Bank shall have no further liability or
obligation to General Bank;
(b) In the event this Agreement is unilaterally terminated by
Liberty Bank as set forth in Section 7.1(e), then Liberty Bank shall wire
General Bank within three (3) Business Days of demand the sum of $250,000,
whereupon Liberty Bank shall have no further liability or obligation to
General Bank;
(c) In the event this Agreement is unilaterally terminated by
General Bank as set forth in Section 7.1(f), or in the event Liberty Bank
terminates this Agreement as set forth in Section 7.1(b) or 7.1(g), then
General Bank shall wire Liberty Bank within three (3) Business Days of
demand the sum of $500,000, whereupon General Bank shall have no further
liability or obligation to Liberty Bank; and
(d) In the event this Agreement is unilaterally terminated by
General Bank as set forth in Section 7.1(e), then General Bank shall wire
Liberty Bank within three (3) Business Days of demand the sum of $250,000,
whereupon General Bank shall have no further liability or obligation to
Liberty Bank.
The parties hereto hereby agree that the amounts set forth in Sections
7.2(a)-(d) represent the respective party's:
(i) direct costs and expenses incurred in negotiating and
undertaking to carry out the transactions contemplated hereby,
27
(ii) indirect costs and expenses incurred in connection with the
transactions contemplated hereby, including but not limited to, each
respective party's management time devoted to negotiating and preparing for
the transactions contemplated hereby, and
(iii) loss as a result of the transactions contemplated by this
Agreement not being consummated.
In the event of termination of this Agreement pursuant to Section 7.1 and
as set forth above, the provisions of Section 8.6 and the last sentence of
Section 5.3 of this Agreement shall remain in full force and effect and survive
any termination of this Agreement.
ARTICLE VIII OTHER MATTERS
8.1 Certain Definitions: Interpretation. As used in this Agreement, the
-----------------------------------
following terms shall have the meanings indicated:
(a) "Business Day" shall mean any day other than a Saturday, Sunday,
national holiday or any other day on which California or Massachusetts banks are
permitted or required to close.
(b) "knowledge" shall mean facts and other information which as of
the date of this Agreement any director, the president, any executive vice
president, the chief financial officer, the chief operating officer or the chief
credit officer, or any senior vice president (and any officer superior to any of
the foregoing) of a party knows as a result of the performance of his or her
duties, or that any director or officer of a bank or bank holding company
reasonably should know in the normal course of his or her duties.
(c) "material" means material to General Bank or Liberty Bank (as
the case may be) and their respective subsidiaries, if any, taken as a whole.
(d) "Material Adverse Effect", with respect to a person, means any
condition, event, change, development, occurrence or any combination of the
foregoing which, individually or in the aggregate, has, or is reasonably likely
to have or result in a material adverse effect upon (1) the financial condition,
properties, business, results of operations or prospects of such person and its
subsidiaries, taken as a whole, without regard to costs and expenses incurred by
Liberty Bank in connection with this Agreement and the consummation of the
transactions contemplated hereby, or (2) the ability of such person to perform
its obligations under, and to consummate the transactions contemplated by, this
Agreement, provided, however, that in determining whether a Material Adverse
-------- -------
Effect has occurred, there shall be excluded from such determination any effect
on the referenced party the cause of which is (i) any change in the banking or
similar laws, rules or regulations of general applicability or interpretations
thereof by courts or governmental authorities, (ii) any change in GAAP
applicable to banks generally, (iii) changes in the general level of interest
rates for Liberty Bank's products in Liberty Bank's market, (iv) any action or
omission of General Bank or Liberty Bank taken with the prior written consent of
General Bank or Liberty Bank, as applicable or permitted by this Agreement, and
(v) any outbreak of hostilities, national or international calamity or crisis,
or any banking moratorium or other general directive issued by state or federal
banking authorities that affects the operations of banks or trust companies in
the United States generally, but provided further, that the exclusions
--------------------
28
in this subsection (v) shall have no effect on, and are mutually exclusive from,
the terms and conditions set forth in Sections 6.2(d).
(e) "person" includes an individual, corporation, partnership,
association, trust, limited liability company or unincorporated organization.
(f) "subsidiary", with respect to a person, means any other person
controlled by such person.
When a reference is made in this Agreement to Sections, an Exhibit or an
Addendum, such reference shall be to a Section of, or an Exhibit or Addendum to,
this Agreement unless otherwise indicated. The headings contained in this
Agreement are for ease of reference only and shall not affect the meaning or
interpretation of this Agreement. Whenever the words "include", " includes", or
"including" are used in this Agreement, they shall be deemed followed by the
words "without limitation". Any singular term in this Agreement shall be deemed
to include the plural, and any plural term shall be deemed to include the
singular.
8.2 Survival. Only those agreements and covenants of the parties that are
--------
by their terms applicable in whole or in part after the Effective Time of the
Interim Merger shall survive the Effective Time of the Interim Merger. All other
representations, warranties, agreements and covenants shall be deemed to be
conditions of the Agreement and shall not survive the Effective Time of the
Interim Merger.
8.3 Waiver. Prior to the Effective Time of the Interim Merger, any
------
provision of this Agreement may be: (i) waived by the party benefited by the
provision; or (ii) amended or modified at any time (including a change to the
structure of the transaction) by an agreement in writing between the parties
hereto approved by their respective Boards of Directors, except that, after the
vote by the shareholders of Liberty Bank, no amendment may be made that would
contravene California law.
8.4 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed to constitute an original, but all of which together shall
constitute one and the same instrument.
8.5 Governing Law. To the fullest extent permissible under governing law,
-------------
including the laws of the Commonwealth of Massachusetts, this Agreement shall be
governed by, and interpreted in accordance with the laws of the State of
California.
8.6 Expenses. Each party hereto will bear all expenses incurred by it in
--------
connection with this Agreement and the transactions contemplated hereby,
provided, however, that General Bank shall pay any and all expenses of the
-----------------
Exchange Agent, as set forth in Section 1.8(b) hereof.
8.7 Notices. All notices, requests, acknowledgements and other
-------
communications hereunder to a party shall be in writing and shall be deemed to
have been duly given when delivered by hand, telecopy, telegram or telex
(confirmed in writing) to such party at its address set forth below or such
other address as such party may specify by notice to the other party hereto.
29
If to Liberty Bank, to:
Hwachii Lien
Chairman and Treasurer
Liberty Bank and Trust Company
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, P.C.
Posternak, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to General Bank, to:
Li-▇▇▇ ▇▇
Chairman of the Board
General Bank
GB Financial Center
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇. ▇. ▇▇▇▇▇▇▇▇, Esq.
Manatt, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
8.8 Entire Agreement; Etc. This Agreement (including the Liberty Bank
---------------------
Disclosure Schedule, the General Bank Disclosure Schedule, and the Exhibits to
this Agreement), together with the Exchange Agent Agreement, and the Interim
Merger Agreement and the Bank Merger Agreement provided for herein, when
executed, shall represent the entire understanding of the parties hereto with
reference to the transactions contemplated hereby and supersedes any and all
30
other oral or written agreements heretofore made. All terms and provisions of
the Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Except as provided
in Sections 1.8 and 5.11, nothing in this Agreement is intended to confer upon
any other person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
8.9 Assignment. This Agreement may not be assigned by any party hereto
----------
without the written consent of the other parties and any purported assignment
shall be void.
[the remainder of this page intentionally left blank; signature page to follow]
31
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
GENERAL BANK
By /s/ Li-▇▇▇ ▇▇
------------------------------
Name: Li-▇▇▇ ▇▇
Title: Chairman of the Board
LIBERTY BANK AND TRUST COMPANY
By /s/ Hwachii Lien
------------------------------
Name: Hwachii Lien
Title: Chairman of the Board
32