Form 8-K Citizens Community Banco For: Jun 20
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WASHINGTON, DC 20549
__________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 20, 2018
CITIZENS COMMUNITY BANCORP, INC.
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of incorporation)
001-33003 | 20-5120010 | |
(Commission File Number) | (I.R.S. Employer I.D. Number) | |
2174 EastRidge Center, Eau Claire, Wisconsin | 54701 | |
(Address of Principal Executive Offices) | (Zip Code) | |
715-836-9994
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933. (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter.)
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 1.01. Entry into a Material Definitive Agreement
Stock Purchase Agreement
On June 20, 2018, Citizens Community Bancorp, Inc. (the “Company”) entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with United Bancorporation (“Parent”) and its wholly-owned subsidiary, United Bank, a Wisconsin chartered bank (“United Bank”), pursuant to which the Company will, subject to the terms and conditions set forth therein, acquire 100% of the common stock of United Bank (the “Acquisition”) for approximately $50.7 million in cash, subject to adjustment as provided in the Stock Purchase Agreement. At the closing of the Acquisition, United Bank will become a wholly-owned subsidiary of the Company. Immediately following the closing of the Acquisition, the Company intends to merge United Bank with and into Citizens Community Federal, N.A. (“CCF Bank”), a federally-chartered national bank and a wholly-owned subsidiary of the Company, with CCF Bank surviving the Acquisition.
Completion of the Acquisition is subject to certain customary mutual conditions, including: (i) receipt of all required regulatory approvals and expiration of all related statutory waiting periods (and the absence of a burdensome condition (as defined in the Stock Purchase Agreement) in connection with obtaining any such approvals); and (ii) the absence of any law or order prohibiting the consummation of the Acquisition. Each party’s obligation to complete the Acquisition is also conditioned upon certain additional customary conditions, including (i) the accuracy of the representations and warranties of the other party (subject to certain exceptions and qualifications); and (ii) material compliance by the other party with its obligations under the Stock Purchase Agreement. The Company’s obligation to complete the Acquisition is further conditioned upon the absence of a material adverse effect (as defined in the Stock Purchase Agreement) with respect to United Bank or Parent.
The Stock Purchase Agreement contains customary representations and warranties by each of the parties, and each party has agreed to customary covenants. United Bank and Parent have also agreed to customary covenants relating to the conduct of United Bank’s business during the interim period between the execution of the Stock Purchase Agreement and the completion of the Acquisition, and customary non-solicitation covenants relating to alternative acquisition proposals.
The Stock Purchase Agreement contains indemnification obligations of the Company and Parent with respect to breaches of certain of such party’s representations, warranties and covenants and certain other specified matters, which party’s indemnification obligations are also subject to various specified limitations.
The Stock Purchase Agreement provides certain customary termination rights for the Company and Bank Parent, including, among others, (i) a breach of the Stock Purchase Agreement by the other party that is not cured within 30 days’ notice of such breach and which cause the non-breaching party’s closing conditions to not be satisfied; (ii) a final, non-appealable denial of required regulatory approvals or an injunction prohibiting the transactions contemplated by the Stock Purchase Agreement; and (iii) if the Acquisition has not closed on or prior to the twelfth month anniversary of the date of signing, as may be extended by six months, if necessary, to obtain regulatory approvals.
The foregoing summary of the Stock Purchase Agreement and the transactions contemplated thereby does not purport to be complete and is subject to and qualified in its entirety by the full text of the Stock Purchase Agreement, which is filed as Exhibit 2.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Cautionary Statements Regarding Stock Purchase Agreement Representations and Warranties
The Stock Purchase Agreement has been filed as an exhibit to this Form 8-K to provide information regarding its terms. It is not intended to modify or supplement any factual disclosures about the Company, CCF Bank or United Bank in any public reports filed or to be filed with the U.S. Securities and Exchange Commission (the “SEC”) by the Company. In particular, the assertions embodied in the representations, warranties, and covenants contained in the Stock Purchase Agreement were made only for purposes of the Stock Purchase Agreement and as of specified dates, were solely for the benefit of the parties to the Stock Purchase Agreement, and are subject to limitations, modifications and qualifications agreed upon by the parties to the Stock Purchase Agreement. Moreover, certain representations and warranties in the Stock Purchase Agreement have been made for the purposes of allocating risk between the parties to the Stock Purchase Agreement instead of establishing matters of fact. Accordingly, the representations and warranties in the Stock Purchase Agreement may not constitute the actual state of facts about the Company, CCF Bank or United Bank. The representations and warranties set forth in the Stock Purchase Agreement may also be subject to a contractual standard of materiality different from that generally applicable under federal securities laws. Investors should not rely on the representations, warranties, or covenants or any descriptions thereof as characterizations of the actual state of facts or the actual condition of the Company, CCF Bank or United Bank or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may
change after the date of the Stock Purchase Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
PIPE Transaction
On June 20, 2018, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with each of a limited number of institutional and other accredited investors, including certain officers and directors of the Company (collectively the “Purchasers”), pursuant to which the Company expects to sell an aggregate of 500,000 shares of the Company’s 8.00% Series A Mandatorily Convertible Non-Cumulative Non-Voting Perpetual Preferred Stock, par value $0.01 per share, (the “Series A Preferred Stock”), in a private placement (the “Private Placement”) at $130 per share, for aggregate gross proceeds of $65 million. The Securities Purchase Agreement contains customary representations, warranties, and covenants of the Company and the Purchasers.
The Series A Preferred Stock ranks senior to the Company’s common stock, $0.01 par value, of the Company (“Common Stock”) with respect to payment of dividends and distribution of amounts upon liquidation, dissolution or winding up. Each share of Series A Preferred Stock has a “Liquidation Preference” of $130. Holders of the Series A Preferred Stock generally will have limited voting rights as provided below. The Series A Preferred Stock will not be redeemable by either the Company or by a holder.
Each share of Series A Preferred Stock is mandatorily convertible into ten shares of common stock, $0.01 par value, of the Company (“Common Stock”) following the Company’s receipt of stockholder approval of the issuance of the shares of Common Stock into which the Series A Preferred Stock is expected to be converted. The Securities Purchase Agreement requires that the Company hold a special meeting of stockholders for purposes of a stockholder vote regarding approval of issuance of the shares of Common Stock into which the Series A Preferred Stock is expected to be converted.
Each share of the Series A Preferred Stock will bear a cash dividend, when and as authorized by the Board of Directors of the Company, equal to 8% per annum. Such dividends are non-cumulative and shall be payable semiannually in arrears commencing on December 31, 2018 if the Series A Preferred Stock is not converted to Common Stock on or before that date. If the Series A Preferred Stock is converted to Common Stock on or before December 31, 2018, then no dividends will be payable on the Series A Preferred Stock.
The affirmative vote or consent of the holders of at least a majority of the outstanding shares of Series A Preferred Stock, voting together with any class or series of parity securities, shall be required to (i) authorize or issue, or increase the authorized, issued or outstanding amount of, any shares of any class or series of stock ranking senior to the Series A Preferred Stock with respect to the payment of dividends or distribution of assets on the Company’s liquidation, dissolution or winding up or (ii) adversely affect the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption of the Series A Preferred Stock.
In connection with the Private Placement, the Company entered into a Registration Rights Agreement on June 20, 2018 (the “Registration Rights Agreement”), with each of the Purchasers. Pursuant to the terms of the Registration Rights Agreement, the Company has agreed to file a resale registration statement by no later than the 30th day following the closing of the Private Placement for the purpose of registering the underlying shares of Common Stock into which the shares of Series A Preferred Stock are convertible (following stockholder approval of the conversion of the Series A Preferred Stock into shares of Common Stock). Pursuant to the Registration Rights Agreement, the Company has agreed to use its commercially reasonable efforts to have such registration statement declared effective with the SEC as soon as practical, but not later than the 120th day following the closing of the Private Placement (or, in the event the SEC reviews and has written comments to the registration statement, the 150th day following the closing of the Private Placement) or the 5th trading day after the date the Company is notified by the SEC that the SEC is prepared to declare such registration statement effective.
The foregoing descriptions of the Securities Purchase Agreement, Registrations Rights Agreement and the transactions contemplated thereby do not purport to be complete and are subject to and qualified in their entirety by the full text of the Securities Purchase Agreement and Registrations Rights Agreement, which are filed as Exhibits 1.1 and 1.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
Item 3.02. Unregistered Sales of Equity Securities.
The information contained under Item 1.01 under the section “PIPE Transaction” is hereby incorporated by reference into this Item 3.02.
The issuance and sale of the securities pursuant to the Securities Purchase Agreement was a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 4(a)(2) thereof and Rule 506(b) safe harbor of Regulation D promulgated thereunder, as a transaction by an issuer not involving a public offering, involving only a limited number of institutional and other accredited investors.
Item 3.03. Material Modification to Rights of Security Holders
The information contained under Item 1.01 under the section “PIPE Transaction” is hereby incorporated by reference into this Item 3.03.
On June 20, 2018, the Company filed, with the State Department of Assessments and Taxation of the State of Maryland (the “SDAT”), Articles Supplementary (the “Articles Supplementary”), which classified and designated 500,000 authorized but unissued shares of the Company’s preferred stock as shares of Series A Preferred Stock. The preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of the Series A Preferred Stock are set forth in the Articles Supplementary and are described under Item 1.01 under the section “PIPE Transaction”. The Articles Supplementary became effective on June 20, 2018 upon the acceptance for record by SDAT.
The foregoing description of the Articles Supplementary does not purport to be complete and is qualified in its entirety by the full text of the Articles Supplementary as filed with SDAT, which is attached as Exhibit 3.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
The information contained above in Item 1.01 under the section “PIPE Transaction” and in Item 3.03 is hereby incorporated by reference into this Item 5.03.
Item 7.01. Regulation FD Disclosure.
On June 21, 2018, the Company issued a press release announcing the Acquisition and the Private Placement. A copy of this press release is attached hereto as Exhibit 99.1.
The Company provided certain information to investors in the Private Placement as part of the private placement process. A copy of this information is attached hereto as Exhibits 99.2.
The information in this Item 7.01 and Exhibits 99.1, 99.2 and 99.3 attached hereto shall not be deemed “to be filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liability of such section, nor shall it be deemed incorporated by reference in any filing of the Company under the Securities Act or the Exchange Act, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference in such filing.
Cautionary Notice About Forward-looking Statements and Other Statements
This Current Report on Form 8-K and the attached exhibits may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking words or phrases such as “anticipate,” “believe,” “could,” “expect,” “intend,” “may,” “planned,” “potential,” “should,” “will,” “would” or the negative of those terms or other words of similar meaning. Such forward-looking statements in this release are inherently subject to many uncertainties arising in the operations and business environment of the Company and CCF Bank. These uncertainties include conditions in the financial markets and economic conditions generally; the possibility of a deterioration in the residential real estate markets; interest rate risk; lending risk; the sufficiency of loan allowances; changes in the fair value or ratings downgrades of our securities; competitive pressures among depository and other financial institutions; our ability to realize the benefits of net deferred tax assets; our ability to maintain or increase our market share; the risk that the proposed transaction may be more difficult, costly or time consuming or that the expected benefits are not realized; failure to obtain applicable regulatory approvals and meet other closing conditions to the proposed transaction on the expected terms and schedule; the risk that if the proposed transaction were not completed it could negatively impact the stock price and the future business and financial results of the Company; difficulties and delays in integrating the acquired business operations or fully realizing cost savings and other benefits; acts of
terrorism and political or military actions by the United States or other governments; legislative or regulatory changes or actions, or significant litigation, adversely affecting the Company or CCF Bank; increases in FDIC insurance premiums or special assessments by the FDIC; disintermediation risk; our inability to obtain needed liquidity; our ability to raise capital needed to fund growth or meet regulatory requirements; the possibility that our internal controls and procedures could fail or be circumvented; our ability to attract and retain key personnel; our ability to keep pace with technological change; cybersecurity risks; risks posed by acquisitions and other expansion opportunities; changes in federal or state tax laws; litigation risk; changes in accounting principles, policies or guidelines and their impact on financial performance; restrictions on our ability to pay dividends; and the potential volatility of our stock price. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Such uncertainties and other risks that may affect the Company’s performance are discussed further in Part I, Item 1A, “Risk Factors,” in the Company’s Form 10-K, for the year ended September 30, 2017 filed with the Securities and Exchange Commission (“SEC”) on December 13, 2017 and the Company’s subsequent filings with the SEC. The Company undertakes no obligation to update any forward-looking statement to reflect the impact of events, circumstances, or results that arise after the date that the statement was made.
This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful under the securities laws of any such jurisdiction.
Item 8.01. | Other Events. |
The following “Description of Capital Stock” is being filed to update the description of the Company’s Common Stock, which description is incorporated by reference in certain of the Company’s registration statements filed with the Securities and Exchange Commission.
DESCRIPTION OF CAPITAL STOCK
The following description of the Company’s capital stock is a summary of the material terms of the Company’s charter and bylaws, as amended, and the applicable provisions of Maryland law, including the Maryland General Corporation Law (the “MGCL”). Reference is made to the more detailed provisions of, and the descriptions are qualified in their entirety by reference to, (i) the Articles of Incorporation of the Company filed as Exhibit 3.1 to the Company’s Registration Statement on Form SB-2 filed on June 30, 2006, (ii) the Articles of Amendment to the Articles of Incorporation of the Company filed as Exhibit 3.1 to the Company’s Form 10-Q filed on May 15, 2012, (iii) the Articles Supplementary of the Company filed as Exhibit 3.1 to this Form 8-K, (iv) the Bylaws of the Company filed as Exhibit 3.2 to the Company’s Registration Statement on Form SB-2 filed on June 30, 2006, (v) the Amendment to the Bylaws of the Company filed as Exhibit 99.1 to the Company's Form 8-K filed on December 26, 2013, and (vi) the applicable provisions of the MGCL.
General
The Company’s authorized capital stock consists of 30,000,000 shares of common stock, par value $0.01 per share, and 1,000,000 shares of preferred stock, par value $0.01 per share. 500,000 shares of preferred stock are classified and designated as shares of 8.00% Series A Mandatorily Convertible Non-Cumulative Non-Voting Perpetual Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”). Shares of outstanding Series A Preferred Stock that are purchased or otherwise acquired by the Company (including shares of Series A Preferred Stock that are converted into shares of common stock) will automatically be reclassified as and revert to authorized but unissued shares of preferred stock without further classification as to class or series. Subject to the rights and preferences granted to holders of the Company’s preferred stock, if any, the authorized but unissued shares of the Company’s capital stock are available for future issuance without stockholder approval, unless otherwise required by applicable law or the rules of any applicable securities exchange. All of the Company’s issued and outstanding shares of capital stock are validly issued, fully paid and non-assessable.
Common Stock
Subject to the rights and preferences granted to holders of the Company’s preferred stock then outstanding, if any, and except with respect to voting rights, conversion rights and certain distributions of the Company’s capital stock, holders of the Company common stock rank equally with respect to distributions and have identical rights, preferences, privileges and restrictions, including the right to attend meetings and receive any information distributed by the Company with respect to such meetings.
Dividends
Holders of the Company common stock are entitled to receive ratably such dividends as may be declared from time to time by the Company board out of legally available funds. In no event will any stock dividends or stock splits or combinations of stock be declared or made on common stock unless the shares of common stock are treated equally and identically. The ability of the Company board to declare and pay dividends on the Company common stock is subject to the laws of the state of Maryland, applicable federal and state banking laws and regulations, and the terms of any senior securities (including preferred stock) the Company may then have outstanding. The Company’s principal source of income is dividends that are declared and paid by its wholly owned banking subsidiary, CCF Bank, on its capital stock. Therefore, the Company’s ability to pay dividends is dependent upon the receipt of dividends from CCF Bank.
Voting Rights
Each holder of common stock is entitled to one vote for each share of record held on all matters submitted to a vote of stockholders, except as otherwise required by law and subject to the rights and preferences of the holders of any outstanding shares of the Company preferred stock. Holders of the Company common stock are not entitled to cumulative voting in the election of directors. Directors are elected by a plurality of the votes cast. In addition to any other vote required by law, the affirmative vote of 80% of the voting power of all of the then-outstanding shares of capital stock of the Company entitled to vote generally in the election of directors is required to amend or repeal the provisions of the Company charter covering the capital stock, directors, bylaws, approval of certain business combinations, acquisitions of equity securities from interested persons, indemnification of directors and officers, limitations of liability or amendment of the charter or to amend or repeal any provision of the Company bylaws.
Liquidation Rights
In the event of the Company’s liquidation, dissolution or winding up, holders of the Company common stock are entitled to share ratably in all of the Company’s assets remaining after payment of liabilities, including but not limited to the liquidation preference of any then outstanding the Company preferred stock. Because the Company is a bank holding company, the Company’s rights and the rights of the Company’s creditors and stockholders to receive the assets of any subsidiary upon liquidation or recapitalization may be subject to prior claims of the Company’s subsidiary’s creditors, except to the extent that the Company may be a creditor with recognized claims against its subsidiary.
Preemptive and Other Rights
Holders of the Company common stock are not entitled to any preemptive, subscription or redemption rights except as may be established by the Company board of directors.
Preferred Stock
The Company’s charter authorizes the Company board to establish one or more series of preferred stock. Unless required by law or any stock exchange and subject to the rights and preferences of the holders of any outstanding shares of the Company preferred stock, the authorized shares of the Company preferred stock are available for issuance without further action by the stockholders. The Company board is authorized to divide the preferred stock into series and, with respect to each series, to fix and determine the designation, powers, preferences and rights of the shares of each series and any qualifications, limitations or restrictions. The number of authorized shares of preferred stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of the holders of a majority of the Company common stock, without a vote of the holders of the preferred stock, unless a vote of the holders of the preferred stock is required by law or pursuant to the terms of such preferred stock. Without stockholder approval, the Company could issue preferred stock that could impede or discourage an acquisition attempt or other transaction that some, or a majority, of the Company’s stockholders may believe is in their best interests or in which they may receive a premium for their common stock over the market price of the common stock.
Series A Preferred Stock
Authorized Shares, Par Value and Liquidation Preference. The Company has designated 500,000 shares as “8.00% Series A Mandatorily Convertible Non-Cumulative Non-Voting Perpetual Preferred Stock,” each of which has a $0.01 par value and a liquidation preference of $130 per share.
Ranking. The Series A Preferred Stock ranks senior to all of the Company’s common stock and will rank pari passu or senior to all future issuances of the Company’s preferred stock.
Dividends. If stockholder approval of the conversion of the Series A Preferred Stock is not obtained, the shares of Series A Preferred Stock will remain outstanding and, beginning December 31, 2018, and for so long as such shares remain outstanding, the Company will be required to pay dividends on the Series A Preferred Stock, on a non-cumulative basis, at an annual rate of 8% of the liquidation value of the Series A Preferred Stock, which is $130. Dividends after December 31, 2018 will be payable semi-annually in arrears on June 30 and December 31, beginning on December 31, 2018. If all dividends payable on the Series A Preferred Stock have not been declared and paid for an applicable dividend period, the Company shall not declare or pay any dividends on any stock which ranks junior to the Series A Preferred Stock, or redeem, purchase or acquire any stock which ranks pari passu or junior to the Series A Preferred Stock, subject to customary exceptions. If all dividends payable on the Series A Preferred Stock have not been paid in full, any dividend declared on stock which ranks pari passu to the Series A Preferred Stock shall be declared and paid pro rata with respect to the Series A Preferred Stock and such pari passu stock.
Participation in Dividends on Common Stock. So long as any shares of Series A Preferred Stock are outstanding, if the Company declares any dividends on common stock or make any other distribution to the holders of the common stock, the holders of the Series A Preferred Stock will be entitled to participate in such distribution on an as-converted basis.
Mandatory Conversion. The Series A Preferred Stock of each holder will convert into shares of common stock on the third business day following the approval by the holders of the common stock of the conversion of the Series A Preferred Stock into common stock as required by the applicable NASDAQ rules. Upon stockholder approval of the conversion of the Series A Preferred Stock, each share of Series A Preferred Stock will convert into ten shares of common stock.
Voting Rights. The holders of the Series A Preferred Stock will not have any voting rights other than as required by law, except that the approval of the holders of a majority of the Series A Preferred Stock, voting together with any class or series of parity securities, shall be required for certain matters, including to (i) authorize or issue, or increase the authorized, issued or outstanding amount of, any shares of any class or series of stock ranking senior to the Series A Preferred Stock with respect to the payment of dividends or distribution of assets on the Company’s liquidation, dissolution or winding up or (ii) significantly and adversely affect the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption of the Series A Preferred Stock.
Liquidation. In the event the Company voluntarily or involuntarily liquidates, dissolves or winds up, the holders of the Series A Preferred Stock shall be entitled to liquidating distributions equal to $130 per share plus any declared and unpaid dividends.
Redemption. The Series A Preferred Stock shall be perpetual unless converted in accordance with the Articles Supplementary. The Series A Preferred Stock will not be redeemable at the option of the Company or any holder of Series A Preferred Stock at any time.
Preemptive Rights. Holders of the Series A Preferred Stock have no preemptive rights.
Declassification. Shares of outstanding Series A Preferred Stock that are purchased or otherwise acquired by the Company (including shares of Series A Preferred Stock that are converted into shares of common stock) will automatically be reclassified as and revert to authorized but unissued shares of preferred stock without further classification as to class or series.
Authorized but Unissued Capital Stock
The MGCL does not generally require stockholder approval for the issuance of authorized shares. These additional shares may be used for a variety of corporate purposes, including future public offerings, to raise additional capital or to facilitate acquisitions. However, the listing requirements of the NASDAQ, which would apply so long as the Company common stock remains listed on the NASDAQ, require stockholder approval of certain issuances equal to or exceeding 20% of the then outstanding voting power or then outstanding number of shares of common stock.
One of the effects of the existence of unissued and unreserved shares of common stock or preferred stock may be to enable the Company's board to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of the Company by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of the Company’s management and possibly deprive the Company’s stockholders of opportunities they may believe are in their best interests or in which they may receive a premium for their the Company common stock over the market price of the common stock.
Anti-Takeover Effects of Provisions of Applicable Law and the Company Charter and the Company Bylaws
The business combination provisions of the MGCL, the control share acquisition provisions of the MGCL, the Subtitle 8 provisions of the MGCL and the supermajority vote requirements, voting rights of the holders of preferred stock, if any, and advance notice requirements for director nominations and stockholder proposals may have the effect of delaying, deterring or preventing a transaction or a change in the control that might involve a premium price for shares of the Company common stock or otherwise be in the best interests of the Company stockholders.
Federal Banking Law
The ability of a third party to acquire the Company’s stock is also limited under applicable U.S. banking laws, including regulatory approval requirements including any applicable approval requirements of the OCC under the National Bank Consolidation and Merger Act, as amended and any applicable approval requirements of the Federal Reserve Board under the BHCA.
Classified Board; Director Removal
The Company charter provides that the Company board of directors shall be divided into three classes of directors, with the classes as nearly equal in number as possible. As a result, approximately one-third of the Company board will be elected each year. The classification of directors has the effect of making it more difficult for stockholders to change the composition of the Company board. Further, the Company directors may only be removed for cause and with an affirmative vote of 80% of the voting power of the then outstanding shares of stock the Company entitled to vote in the election of directors, voting together as a single class.
Limits on Written Consents
The Company charter provides that any action to be taken by the stockholders that the stockholders are required or permitted to take must be effected at a duly called annual or special meeting of stockholders or by unanimous written consent of the stockholders.
Annual Meetings; Limits on Special Meetings
The Company’s 2018 annual meeting of stockholders was held on March 27, 2018. Subject to the rights of the holders of any series of preferred stock, special meetings of the stockholders may be called only by (i) the Company’s president, (ii) the Company board of directors, and (iii) the Company’s secretary upon the written request of the holders of a majority of all shares outstanding and entitled to vote on the business to be transacted at the meeting.
Listing
The Company common stock is listed on the NASDAQ Global Market under the symbol “CZWI.”
Transfer Agent and Registrar
The transfer agent and registrar for the Company common stock is Continental Stock Transfer & Trust.
Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CITIZENS COMMUNITY BANCORP, INC. | ||||
Date: June 21, 2018 | By: | /s/ James S. Broucek | ||
James S. Broucek | ||||
Chief Financial Officer | ||||
EXECUTION COPY
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
dated June 20, 2018
UNITED BANK,
UNITED BANCORPORATION,
and
CITIZENS COMMUNITY BANCORP, INC.
dated June 20, 2018
UNITED BANK,
UNITED BANCORPORATION,
and
CITIZENS COMMUNITY BANCORP, INC.
TABLE OF CONTENTS
PAGE
Article I | DEFINITIONS; INTERPRETATION | 1 | ||
1.01 | Definitions | 1 | ||
1.02 | Interpretation | 11 | ||
Article II | PURCHASE AND SALE AND PURCHASE PRICE | 13 | ||
2.01 | Purchase and Sale | 13 | ||
2.02 | Purchase Price | 13 | ||
2.03 | Payment of Terms | 13 | ||
2.04 | Equity Adjustment Amount | 13 | ||
Article III | CLOSING | 14 | ||
Article IV | CONDUCT OF BUSINESS PENDING THE CLOSING | 14 | ||
4.01 | Forbearance of the Sellers | 14 | ||
Article V | REPRESENTATIONS AND WARRANTIES | 18 | ||
5.01 | Disclosure Letters | 18 | ||
5.02 | Representations and Warranties of the Sellers | 18 | ||
5.03 | Representations and Warranties of the Purchaser | 35 | ||
Article VI | OTHER COVENANTS | 35 | ||
6.01 | Commercially Reasonable Efforts | 37 | ||
6.02 | Cooperation | 37 | ||
6.03 | Shareholder Covenants | 37 | ||
6.04 | Regulatory Applications; Third-Party Consents | 37 | ||
6.05 | Press Releases | 38 | ||
6.06 | Acquisition Proposals | 39 | ||
6.07 | Takeover Laws and Provisions | 39 | ||
6.08 | Access; Information | 39 | ||
6.09 | Designated Securities | 40 | ||
6.10 | Employee Benefits Matters | 41 | ||
6.11 | Title Surveys, Environmental Assessments, and Appraisals | 42 | ||
6.12 | Tax Matters | 43 | ||
6.13 | Further Assurances | 47 | ||
6.14 | Non-Competition and Non-Solicitation | 47 | ||
6.15 | Representatives’ Fees | 48 | ||
6.16 | Retention and Stay Bonuses; Employment Agreement | 49 | ||
6.17 | Voting and Support Agreement | 49 | ||
6.18 | MasterCard Covenant | 49 | ||
Article VII | Indemnification | 49 | ||
7.01 | Survival | 50 | ||
7.02 | Indemnification of Shareholder and Bank Directors and Officers by Purchaser | 50 | ||
7.03 | Indemnification of Purchaser by Shareholder | 51 | ||
7.04 | Procedures Relating to Indemnification | 53 | ||
i | ||
TABLE OF CONTENTS
(continued)
PAGE
7.05 | Limitations on Indemnification | 55 | ||
7.06 | Indemnity Payments | 55 | ||
7.07 | Insurance; Recoveries | 55 | ||
7.08 | Waiver | 56 | ||
Article VIII | CONDITIONS PRECEDENT TO THE CLOSING | 56 | ||
8.01 | Conditions to Each Party’s Obligation to Effect the Closing | 56 | ||
8.02 | Conditions to the Obligation of the Sellers | 57 | ||
8.03 | Conditions to the Obligation of Purchaser | 57 | ||
Article IX | TERMINATION | 57 | ||
9.01 | Termination | 58 | ||
9.02 | Effect of Termination and Abandonment | 60 | ||
Article X | MISCELLANEOUS | 60 | ||
10.01 | Expenses | 60 | ||
10.02 | Notices | 60 | ||
10.03 | Amendment | 61 | ||
10.04 | Governing Law | 61 | ||
10.05 | Waiver of Jury Trial | 61 | ||
10.06 | Entire Agreement | 61 | ||
10.07 | Binding Effect; Assignment; No Third-Party Beneficiaries | 62 | ||
10.08 | Counterparts | 62 | ||
10.09 | Specific Performance | 62 | ||
10.10 | Severability | 62 | ||
10.11 | Subsidiary and Affiliate Action | 62 | ||
10.12 | Deadlines | 63 | ||
10.13 | Scope of Agreements | 63 | ||
10.14 | Waivers and Consents | 63 | ||
10.15 | Remedies | 63 | ||
Schedule A | Designated Securities | Sch.A-1 | ||
EXHIBIT A | FORM OF ESCROW AGREEMENT | Exh. A-1 | ||
EXHIBIT B | TRI-PARTY AGREEMENT | Exh. B-1 | ||
EXHIBIT C | NON-COMPETITION AGREEMENT | Exh. C-1 | ||
EXHIBIT D | FORM OF NON-SOLICITATION AGREEMENT | Exh. D-1 | ||
EXHIBIT E | AMENDED AND RESTATED TSA | Exh. E-1 | ||
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated June 20, 2018 (this “Agreement”), is among United Bank, a Wisconsin chartered bank (the “Bank”), United Bancorporation, a South
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Dakota corporation, (“Shareholder,” and together with the Bank, “Sellers”), and Citizens Community Bancorp, Inc., a Maryland corporation (“Purchaser”).
RECITALS
A. The Bank is a state bank organized and existing under the laws of the state of Wisconsin, with authorized capital consisting of 51,025 shares of common stock, $10 par value per share, of which there are currently outstanding 69 shares (hereinafter referred to as the “Bank Common Stock”), all of which are owned by Shareholder; and
B. Shareholder desires to sell, assign and transfer to Purchaser and Purchaser desires to purchase, accept and receive from Shareholder, the Bank Common Stock on the terms and subject to the conditions hereinafter set forth.
C. Purchaser intends to merge the Bank with and into Purchaser’s wholly-owned subsidiary, Citizens Community Federal, National Association, a national bank (“CCF Bank”), with CCF Bank as the surviving entity, immediately following the closing of the transactions contemplated by this Agreement.
D. The respective boards of directors of Purchaser, the Bank, and Shareholder have each determined that the transactions contemplated hereby are consistent with, and will further, their respective business strategies and goals, and are in the best interests of their respective shareholders, and, therefore, have approved this Agreement and the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises, and of the mutual representations, warranties, covenants and agreements contained in this Agreement, the parties agree as follows:
Article I
DEFINITIONS; INTERPRETATION
DEFINITIONS; INTERPRETATION
1.01 Definitions. This Agreement uses the following definitions:
“Accounting Referee” has the meaning set forth in Section 2.04(b).
“Acquisition Proposal” means any expression of interest, proposal or offer by any person to acquire in any manner, directly or indirectly, (i) any voting power in the Bank, or (ii) any of the respective businesses, assets or deposits of the Bank, in each case, other than the transactions contemplated hereby and immaterial asset sales occurring in the ordinary course.
“Adverse Right” means, save as has been waived pursuant to this Agreement, (i) any option, warrant, right (including a conversion or preemptive right of first refusal), agreement or commitment that provides for the issue, subscription or purchase, or which is otherwise convertible or exchangeable into, or exercisable for, any share, debenture or other security interest of any kind of any of the equity or capital of the Bank, (ii) any other security, arrangement or agreement which may require the allotment, issue or transfer of any such share,
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debenture or other security interest in the Bank and (iii) any right under any shareholders agreement, voting agreement, joint venture, voting trust, proxy or other agreement or arrangement relating to the holding, voting, purchase, redemption, issue or acquisition of, or payment of dividends or distributions in respect of, any such share, debenture or other security interest in the Bank, in each case, including any such rights that are contingent, unvested or otherwise come into effect at a later date.
“Affiliate” means, with respect to a person, those other persons that, directly or indirectly, control, are controlled by or are under common control with such person. For purposes of the definition of “Affiliate” and “Subsidiary”, “control” (including, with correlative meanings, the terms “controlled by” or “under common control with”), as applied to any person, means the possession, directly or indirectly, of (i) ownership, control or power to vote twenty-five percent (25%) or more of the outstanding shares of any class of voting securities of such person; (ii) control, in any manner, over the election of a majority of the directors, trustees, general partners or managing members (or individuals exercising similar functions) of such person; or (iii) the ability to exercise a controlling influence, directly or indirectly, over the management or policies of such person, in each case of clauses (i)–(iii) as calculated or interpreted by the Board of Governors of the Federal Reserve System under 12 C.F.R. § 225.2(e).
“Agreement” has the meaning set forth in the Preamble.
“Applicable Law” means, to the extent applicable, (i) any local, state, national or foreign law, including common law, statute, directive, ordinance, rule, regulation, code, judgment, order, injunction, treaty, decree, declaration, arbitration award, agency requirement, license or permit of any Governmental Entity and (ii) any order, writ, judgment, injunction, decree, declaration, stipulation, determination, formal interpretive letter or award entered by or with, or issued by, any Governmental Entity.
“Audited Financial Statements” has the meaning set forth in Section 5.02(m)(1).
“Bank” has the meaning set forth in the Preamble.
“Bank Board” means the board of directors of the Bank.
“Bank Common Stock” means the common stock, par value ten dollars ($10) per share, of the Bank, of which 100% is owned by Shareholder.
“Bank Financial Statements” has the meaning set forth in Section 5.02(m)(1).
“Bank Insurance Policies” has the meaning set forth in Section 5.02(bb).
“Bank Intellectual Property” has the meaning set forth in Section 5.02(t)(1).
“Bank Marks” has the meaning set forth in Section 6.14(d).
“Bank Merger Act” means the Bank Merger Act, 12 U.S.C. 1828(c).
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“Bank Plan” means any benefit or compensation plan, program, policy, practice, agreement, Contract, arrangement or other obligation, whether or not in writing and whether or not funded, in each case, which is sponsored or maintained by, or required to be contributed to, or with respect to which any potential Liability is borne by either Seller, which is an “employee benefit plan” within the meaning of Section 3(3) of ERISA or provides retirement, severance, termination or change in control agreements, deferred compensation, equity-based, incentive, bonus, supplemental retirement, profit sharing, medical, welfare, fringe or other employee benefits or remuneration of any kind.
“Bank Real Property” has the meaning set forth in Section 5.02(y)(1).
“Base Equity Amount” means twenty-nine million two hundred forty-six thousand dollars ($29,246,000).
“Burdensome Condition” means any restraint or condition that would reasonably be expected to (i) impair in any material respect the economic or other benefits to Purchaser of the transactions contemplated hereby or the transactions contemplated by this Agreement, (ii) have a materially negative effect on the operation of the business currently conducted by the Bank or on any other business of Purchaser or its Affiliates or (iii) require the sale, transfer, license or other disposition of any assets or categories of assets that, individually or in the aggregate, would be material to any of Purchaser, its existing Affiliates or the Bank.
“Business Day” means any day excluding Saturday, Sunday and any day on which the Federal Reserve Bank of Minneapolis is closed.
“Cash Incentive Plan” has the meaning set forth in Section 6.10(g).
“Closing” has the meaning set forth in Article III.
“Closing Date” has the meaning set forth in Article III.
“COBRA” means the requirements of Part 6 of Subtitle B of Title I of ERISA, Section 4980B of the Code and the rules and regulations issued thereunder and any similar state law.
“Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations thereunder.
“Competing Business” has the meaning set forth in Section 6.14(a).
“Confidential Information” has the meaning set forth in Section 6.08(c).
“Confidentiality Agreement” means the confidentiality agreement, dated October 27, 2017, between Purchaser and Hovde Group, LLC.
“Constituent Documents” means the charter or articles or certificate of incorporation and by-laws of a corporation or banking organization, the certificate of partnership and partnership agreement of a general or limited partnership, the certificate of formation and limited liability
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company agreement of a limited liability company, the trust agreement of a trust and the comparable documents of other entities.
“Continuing Employee” has the meaning set forth in Section 6.10(d).
“Contract” means, with respect to any person, any agreement, contract, indenture, undertaking, debt instrument, lease, understanding, arrangement or commitment, whether a single document or multiple documents that collectively form a contractual relationship, to which such person or any of its Subsidiaries is a party or by which any of them is bound or to which any of their assets or properties is subject, whether or not in writing.
“CRA” means the Community Reinvestment Act of 1977.
“De Minimis Claim” has the meaning specified in Section 7.05(a).
“Designated Markets” means (i) with respect to a branch-based banking Competing Business, within a sixty (60)-mile radius of any of the Bank’s bank branches; and (ii) with respect to any other Competing Business, the markets in which the Bank conducts such activities as of the Closing Date.
“Designated Securities” means (i) the securities listed on Schedule A and (ii) any of the following types of securities acquired after the date hereof:
(1) Callable bonds issued by a GSE;
(2) Structured notes that include step up bonds issued by a GSE;
(3) Mutual funds;
(4) Common stock;
(5) Trust-preferred securities;
(6) Asset-backed securities;
(7) Private label collateralized mortgage obligations (also described as non GSE issued collateralized mortgage operations);
(8) Corporate bonds; and
(9) Municipal revenue bonds.
“Determination Date” has the meaning set forth in Section 2.03.
“Determination Date Balance Sheet” has the meaning set forth in Section 2.04.
“Disclosure Letter” has the meaning set forth in Section 5.01.
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“Environmental Laws” means any Applicable Law: (i) relating to the manufacture, handling, transport, use, treatment, storage, presence or disposal of Hazardous Materials or materials containing Hazardous Materials or (ii) otherwise relating to pollution or to the protection of health, safety or the environment including exposure to any Hazardous Materials.
“Equity Adjustment Amount” means the difference between the Equity Amount and the Base Equity Amount.
“Equity Amount” means the Stockholders Equity as of the Determination Date.
“ERISA” means the Employee Retirement Income Security Act of 1974.
“ERISA Affiliate” means all employers (whether or not incorporated) that would be treated together with the Bank as a “single employer” within the meaning of Section 414(b), (c), (m) or (o) of the Code.
“Escrow Agent” has the meaning set forth in Section 2.02(a).
“Escrow Agreement” has the meaning set forth in Section 2.02(a).
“Exchange Act” means the Securities Exchange Act of 1934.
“Extensions of Credit” has the meaning set forth in Section 5.02(cc)(1).
“FDI Act” means the Federal Deposit Insurance Act of 1950.
“Final Determination” has the meaning set forth in Section 6.12(h).
“GAAP” means United States generally accepted accounting principles, consistently applied.
“Governmental Entity” means any nation, state or political subdivision of any of the foregoing, or any national, state, local or foreign governmental or regulatory authority, court, commission, arbitration panel, department, division, committee, administration, board, bureau, agency, tribunal, instrumentality or other body or entity, or any supranational or quasi-governmental or similar body or entity, or any securities exchange, futures exchange, contract market other exchange or market body or entity, or any self-regulatory body or organization, in each case, whether temporary, preliminary or permanent.
“GSE” means government-sponsored enterprise.
“Hazardous Materials” means any hazardous or toxic substances, materials, wastes, pollutants, contaminants or harmful substances, including petroleum compounds, asbestos, mold and lead-containing and any other substance regulated under or which may give rise to Liability under any Environmental Law.
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“Indebtedness” means, with respect to any person, (i) all indebtedness and other obligations of such person, whether or not contingent, for borrowed money, whether or not evidenced by notes, debentures, bonds or other similar instruments and any obligations issued in substitute for or exchange of obligations for borrowed money, (ii) all obligations of such person for cash overdrafts, (iii) all obligations of such person for the deferred purchase price of property or services, (iv) all indebtedness and other obligations of such person created or arising under any conditional sale or other title retention agreement, (v) all obligations, contingent or otherwise, of such person under acceptance, letter of credit or similar facilities, (vi) all obligations of such person to purchase, redeem, retire, defease or otherwise acquire for value any share capital of such person or any warrants, rights or options to acquire such share capital, valued, in the case of redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (vii) all of such person’s obligations in respect of swap or hedge agreements, derivatives, or similar agreements, (viii) all of such person’s obligations under finance leases, (ix) all indebtedness and other obligations of others to the extent directly or indirectly guaranteed or assumed by or otherwise made with recourse to such person, (x) all indebtedness and other obligations of others to the extent secured by any asset of such person, whether or not the indebtedness or other obligation is guaranteed or assumed by that person and (xi) accrued and unpaid interest, penalties, fines and fees with respect to any of the foregoing.
“Indemnification Escrow Account” has the meaning set forth in Section 2.02(a).
“Indemnification Escrow Amount” has the meaning set forth in Section 2.02(a).
“Indemnity Threshold” has the meaning set forth in Section 7.05(a).
“Insolvency Procedure” means any procedure (i) relating to or ensuing from a person being bankrupt or Insolvent or being a debtor under any bankruptcy, insolvency or other Applicable Law respecting debtor relief, (ii) relating to or ensuing from the appointment of a receiver, conservator, administrator, liquidator, trustee or similar officer, (iii) relating to or ensuing from any voluntary or involuntary arrangement with creditors or suspension of any creditor’s rights or (iv) relating to or ensuing from the liquidation or winding-up of a person or all or a substantial part of the assets of a person.
“Insolvent” means a person (i) not being in a position to satisfy all of such person’s Indebtedness or other Liabilities (including reasonably foreseeable prospective Liabilities) as they fall due for payment, or whose Indebtedness or other Liabilities (including reasonably foreseeable prospective Liabilities) are of an amount that is greater than the value of such person’s assets, (ii) admitting to any of the foregoing in writing, (iii) voluntarily suspending payment of such person’s obligations, (iv) making any assignment for the benefit of creditors, or (v) being subject to an Insolvency Procedure or having all or substantially all of such person’s property subject to an Insolvency Procedure.
“Intellectual Property” means all (i) trademarks, service marks, brand names, d/b/a’s, Internet domain names, logos, symbols, trade dress, trade names, and other indicia of origin, all applications and registrations for the foregoing, and all goodwill associated therewith and
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symbolized thereby, including all renewals of the same; (ii) inventions and discoveries, whether patentable or not, and all patents, registrations, invention disclosures and applications therefor, including divisions, continuations, continuations-in-part and renewal applications, and including renewals, extensions, reexaminations and reissues; (iii) Trade Secrets; (iv) published and unpublished works of authorship, whether copyrightable or not (including databases and other compilations of information), copyrights therein and thereto, and registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof; and (v) all other intellectual property or proprietary rights or protections throughout the world, in each case whether currently existing or hereafter developed or acquired, arising under Applicable Law or by Contract, and whether or not perfected, registered or issued, including all applications, disclosures, registrations, issuances and extensions with respect thereto.
“Interest Rate Instruments” has the meaning set forth in Section 5.02(dd).
“IRS” means the Internal Revenue Service of the United States of America.
“IT Assets” means the information technology and computer systems, including all computers, computer software, firmware, middleware, servers, workstations, routers, hubs, switches, data communications lines, and all other information technology and telecommunication hardware and other equipment, and all associated documentation used in or necessary to the conduct of the Bank’s businesses as conducted as of the date of this Agreement.
“Knowledge” means: (i) when used with respect to the Sellers (collectively, not individually), the actual knowledge, after reasonable inquiry, of any of the following persons: the CEO (or equivalent position), CFO, or Director of HR of the Bank; and the President, CIO, CCO, and CTO of Shareholder, and (iii) when used with respect to Purchaser, the actual knowledge, after reasonable inquiry, of the following persons: the CEO and CFO of Purchaser. For purposes of this definition, any person who is an officer or employee of a company shall be deemed to have actual knowledge of facts that would be reasonably expected to come to the attention of such officer or employee in the course of customary management reporting practices consistent with such officer’s or employee’s position, and the employer of such person shall be deemed to have knowledge of all facts that its officers and employees have knowledge of.
“Liabilities” means all debts, liabilities, commitments and obligations of any kind, whether fixed, contingent or absolute, matured or unmatured, liquidated or unliquidated, accrued or not accrued, asserted or not asserted, known or unknown, determinable or indeterminable, or otherwise, whenever or however arising (including whether arising out of any Contract or tort).
“Licensed Intellectual Property” has the meaning set forth in Section 5.02(t)(1).
“Lien” means any right, interest or equity of any person (including any pre-emption right, right of first refusal, option or right to acquire) or any mortgage, deed of trust, encumbrance, claim, charge, deposit arrangement, pledge, lien, assignment, restriction, hypothecation, security or priority interest, participation interest, title retention, conditional sale, financing lease or other security, preference or priority agreement or arrangement, however arising (including any
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created by Applicable Law), or an agreement or commitment to create any of the foregoing, other than a Permitted Lien.
“Loss” means any losses, Liabilities, claims, fines, deficiencies, damages, obligations, payments (including those arising out of any settlement, judgment or compromise relating to any Proceeding), costs and expenses (including interest, fines, penalties and fees with respect thereto and attorneys’ and accountants’ fees and any other out-of-pocket expenses incurred in investigating, preparing, defending, avoiding or settling any Proceeding), diminution in value and loss of future revenue, income or profits, including any of the foregoing arising under, out of or in connection with any Proceeding or award of any arbitrator of any kind, or any Applicable Law, or Contract.
“MasterCard” has the meaning set forth in Section 7.03(a)(5).
“MasterCard Agreement” has the meaning set forth in Section 7.03(a)(5).
“Material Adverse Effect” means, as applicable, with respect to any Seller or Purchaser, any effect that:
(a) is material and adverse to the assets, Liabilities, condition (financial or otherwise), results of operations, business, or prospects of the Bank, taken as a whole, or Purchaser and its Subsidiaries, taken as a whole, respectively, excluding (with respect to each of clauses (i), (ii) or (iii), only to the extent that the effect of a change on it is not disproportionate to the effect of such change on comparable banking organizations organized and operated in the United States) the impact of (i) changes in banking and other laws of general applicability or changes in the interpretation thereof by Governmental Entities, (ii) changes in GAAP or regulatory accounting requirements applicable to banking services organizations generally, (iii) changes in prevailing interest rates or market prices or other general economic conditions generally affecting banking organizations operating in the United States or any state therein, and (iv) actions or omissions of a party to this Agreement that are expressly required by this Agreement or taken upon the written request or with the prior written consent of the other party to this Agreement, in contemplation of the transactions contemplated hereby; or
(b) would materially impair the ability of any Seller (or in any representation made by it, Purchaser), to perform its obligations under this Agreement or to consummate the transactions contemplated hereby on a timely basis.
“Material Contracts” has the meaning set forth in Section 5.02(z)(1).
“Non-Competition Period” has the meaning set forth in Section 6.14(a).
“Open Source Software” means all open source software, public source software, “copyleft” software, shareware, freeware and similar software, as such terms are understood in the software industry, in executable code and/or source code form.
“Other Incentive Plans” has the meaning set forth in Section 6.10(g).
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“Outside Date” has the meaning set forth in Section 9.01(d).
“Owned Intellectual Property” has the meaning set forth in Section 5.02(t)(1).
“PBGC” means the Pension Benefit Guaranty Corporation.
“Permitted Enforceability Exceptions” means those exceptions with respect to receivership, conservatorship and supervisory powers of bank regulatory agencies generally as well as bankruptcy, insolvency, reorganization, moratorium or other Applicable Law of general applicability relating to or affecting creditors’ rights or the limiting effect of rules of law governing specific performance, equitable relief and other equitable remedies or the waiver of rights or remedies.
“Permitted Liens” has the meaning set forth in Section 5.02(y)(1).
“Phase I Assessment” has the meaning set forth in Section 6.11(a).
“Post-Closing Tax Period” has the meaning set forth in Section 6.12(a)(1).
“Preamble” means the paragraph preceding the Recitals.
“Pre-Closing Tax Period” means all Tax periods ending on or before the Closing Date and the portion ending on the Closing Date of any Straddle Period.
“Previously Disclosed” means information fully, clearly and accurately disclosed (with sufficient details to identify the nature and scope of the matter disclosed) by the Sellers or Purchaser in the applicable paragraph of its respective Disclosure Letter and, with respect to Purchaser, information disclosed in Purchaser SEC Filings (disregarding risk factor disclosures contained under the heading “Risk Factors” or disclosure of risks set forth in any “forward-looking statements” disclaimer).
“Proceeding” means any judicial, administrative or arbitration action, suit, or other proceeding (whether governmental, public, private, civil, criminal or any other kind) or any claim, complaint, dispute or investigation of any kind.
“Profit-Sharing Bonus Plan” has the meaning set forth in Section 6.10(g).
“Purchase Price” has the meaning set forth in Section 2.01.
“Purchaser” has the meaning set forth in the Preamble.
“Purchaser Indemnified Party” has the meaning set forth in Section 7.03(a).
“Purchaser SEC Filings” means all reports, registration statements, definitive proxy statements, or other information statements or filings filed by Purchaser with the SEC under the Exchange Act.
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“Registered” means issued by, registered with, renewed by or the subject of a pending application before any Governmental Entity or Internet domain name registrar.
“Representatives” means, with respect to any person, such person’s directors, managers, officers, employees, agents, advisors and representatives (including attorneys, accountants, consultants and bankers).
“Required Third-Party Consents” has the meaning set forth in Section 5.02(f).
“Requisite Regulatory Approvals” has the meaning set forth in Section 6.04(a).
“Restricted Lending Action” has the meaning set forth in Section 4.01(i).
“Rights” means, with respect to any person, securities or obligations convertible into or exercisable or exchangeable for, or giving any other person any right to subscribe for or acquire, or any options, calls or commitments relating to, or any stock appreciation right or other instrument the value of which is determined in whole or in part by reference to the market price, book or other value of, shares of capital stock, units or other equity or voting interests of, such first person.
“SEC” means the United States Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933.
“Seller Indemnified Parties” has the meaning set forth in Section 7.02(a).
“Sellers” has the meaning set forth in the Preamble.
“Shareholder” has the meaning set forth in the Recitals.
“Stockholders’ Equity” means, as of a given date, the aggregate amount of the common stockholders’ equity of the Bank, determined in accordance with GAAP.
“Straddle Period” means all Tax periods that include (but do not end on) the Closing Date.
“Subsidiary” means, with respect to a person, any other person directly or indirectly controlled by that person.
“Takeover Laws” has the meaning set forth in Section 5.02(i).
“Tax” and “Taxes” means all federal, state, local or foreign taxes, duties, charges, fees, levies or other assessments, however denominated, including all net income, gross income, gains, gross receipts, sales, use, ad valorem, goods and services, capital, capital stock, value added, production, transfer, franchise, registration, windfall profits, license, withholding, payroll, employment, disability, employer health, excise, estimated, severance, stamp, premium, occupation, property, environmental, unemployment, social security (or similar), net worth,
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escheat, alternative or add-on minimum, estimated or other taxes, custom duties, charges, fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, fines, fees, additions to tax or additional amounts imposed by any Governmental Entity whether arising before, on or after the Closing Date and whether disputed or not and any obligation to indemnify or otherwise assume or succeed to the tax Liability of any other person.
“Tax Claim” has the meaning set forth in Section 6.12(e)(1).
“Tax Returns” means any return, amended return or other report (including elections, declarations, disclosures, schedules, statements, estimates, information returns and claims for refund) required to be filed with respect to any Tax and any amendments or attachments thereto.
“Third-Party Claim” has the meaning set forth in Section 7.04(a).
“Trade Secrets” means confidential information, trade secrets and know-how, including processes, schematics, business methods, formulae, drawings, prototypes, models, designs, customer lists and supplier lists.
“Unaudited Financial Statements” has the meaning set forth in Section 5.02(m)(1).
“Visa Agreement” has the meaning set forth in Section 6.18.
“WARN Act” has the meaning set forth in Section 5.02(w)(2).
“WBL” means the Wisconsin banking law.
1.02 Interpretation.
(a) In this Agreement, except as context may otherwise require, references:
(1) to the Preamble, Recitals, Articles, Sections, Schedules, or Exhibits refer, respectively, to the Preamble to, a Recital, Article or Section of, Schedule, or Exhibit to, this Agreement;
(2) to this Agreement are to this Agreement and the Schedules and Exhibits to it, taken as a whole;
(3) to the “transactions contemplated hereby” include the transactions provided for in this Agreement;
(4) to any agreement (including this Agreement) or Contract are to the agreement or Contract as amended, modified, supplemented, restated or replaced from time to time, to the extent permitted by the terms thereof;
(5) to any Applicable Law or other law refer to such Applicable Law or other law as amended, modified, supplemented or replaced from time to time (and, in the case
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of statutes, include any rules and regulations promulgated under the statute) and references to any section of any Applicable Law or other law include any successor to such section;
(6) to any Governmental Entity include any successor to that Governmental Entity;
(7) to the terms defined in the singular have a comparable meaning when used in the plural, and vice versa;
(8) to the terms “dollars”, “cents” and “$” mean U.S. Dollars and Cents;
(9) to any gender include the other gender;
(10) to the phrase “date hereof” or “date of this Agreement” shall be deemed to refer to the date set forth in the Preamble; and
(11) to “foreign” or “federal” shall be by reference to the United States.
(b) The words “hereby”, “herein”, “hereof”, “hereunder” and similar terms, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement.
(c) The words “include”, “includes” or “including” are to be deemed followed, in each case, by the words “without limitation”.
(d) The word “party” is to be deemed to refer to any of the Bank, Shareholder or Purchaser.
(e) The word “person” is to be interpreted broadly to include any individual, savings association, bank, trust company, corporation, limited liability company, partnership, association, joint-stock company, business trust or unincorporated organization.
(f) The phrase “in the ordinary course” as used in this Agreement, shall be deemed to mean, in each case, “in the usual and ordinary course of business consistent with past practice”.
(g) The table of contents and article and section headings in this Agreement are for reference purposes only and do not limit or otherwise affect any of the provisions of this Agreement or the meaning thereof.
(h) This Agreement is the product of negotiation by the parties, each having the assistance of counsel and other advisers. The parties intend that this Agreement not be construed more strictly with regard to one party than with regard to any other.
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(i) No provision of this Agreement is to be construed to require, directly or indirectly, any person to take any action, or omit to take any action, to the extent such action or omission would violate Applicable Law.
ARTICLE II
PURCHASE AND SALE AND PURCHASE PRICE
PURCHASE AND SALE AND PURCHASE PRICE
2.01 Purchase and Sale. At the Closing, Purchaser shall purchaser from Shareholder, and Shareholder shall sell, convey, assign, transfer and deliver to Purchaser, all of Shareholder’s right, title and interest in and to the Bank Common Stock, free and clear of all Liens.
2.02 Purchase Price. The purchase price to be paid by Purchaser to Shareholder for the Bank Common Stock (the “Purchase Price”) shall be equal to the sum of:
(a) fifty million seven hundred thousand dollars ($50,700,000), PLUS OR MINUS
(b) the Equity Adjustment Amount, PLUS
(c) interest on the Base Equity Amount at a rate of four and one half percent (4.5%) per annum from the period from the Determination Date through the Closing Date.
2.03 Payment of Terms. The Purchase Price shall be paid by Purchaser to Shareholder on the Closing Date in immediately available funds as follows:
(a) Purchaser shall deposit, or shall cause to be deposited, six million dollars ($6,000,000) (the “Indemnification Escrow Amount”) into an escrow account (the “Indemnification Escrow Account”) established pursuant to the terms of an Escrow Agreement to be entered into at Closing among Purchaser, Shareholder, and Bankers’ Bank, a Wisconsin state bank, as escrow agent (the “Escrow Agent”), substantially in the form attached hereto as Exhibit A (the “Escrow Agreement”), in order to support Shareholder’s indemnification obligations under Article VII hereof.
(b) The balance of the Purchase Price shall be paid by Purchaser to Shareholder.
2.04 Equity Adjustment Amount.
(a) At least ten (10) Business Days prior to the Closing Date, Sellers shall deliver to Purchaser an unaudited consolidated balance sheet of the Bank as of the close of business on the Business Day that is the last Business Day of the calendar month immediately preceding the calendar month in which the Closing is scheduled to occur (such date, the “Determination Date”, and the balance sheet, the “Determination Date Balance Sheet”), prepared on a basis consistent with the accounting practices and policies used in the preparation of the Bank Financial Statements, as well as Sellers’ calculation of the Equity Amount. Sellers shall afford Purchaser and its Representatives the opportunity to review all work papers and
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documentation used by Sellers in preparing the Determination Date Balance Sheet and Sellers’ calculation of the Equity Amount. For clarity, the Determination Date Balance Sheet shall reflect the Bank’s payment or accrual of (i) all fees and expenses incurred (or estimated to be incurred) in connection with the consummation of the transactions contemplated by this Agreement, (including all fees payable to the Bank’s financial advisor, legal counsel, and accountants), and (ii) all vendor or funding termination or breakage penalties, management change-in-control or retention payments, employee severance costs, and any payments or distributions under any Bank Plan due as a result of this Agreement or the transactions contemplated by this Agreement.
(b) Sellers’ calculation of the Equity Adjustment Amount shall be final and binding on the parties hereto, unless, no later than five (5) Business Days following Purchaser’s receipt of the Determination Date Balance Sheet and Sellers’ calculation of the Equity Amount, Purchaser shall notify Sellers’ in writing of its disagreement with any amount included therein or omitted therefrom (each dispute, an “Objection”), in which case, the Closing shall be delayed and, if the parties are unable to resolve the Objections within three (3) Business Days of the receipt by the Sellers of the Objection(s), such unresolved Objections shall be determined by a regionally recognized independent accounting firm selected by mutual agreement between Purchaser and Sellers (the “Accounting Referee”). The Accounting Referee shall be instructed to resolve the Objections within five (5) Business Days of engagement, to the extent reasonably practicable. The determination of the Accounting Referee shall be final and binding on the parties hereto. The fees and costs of the Accounting Referee, if one is required, shall be payable (i) fifty percent (50%) by Shareholder, on the one hand, and (ii) fifty percent (50%) by Purchaser, on the other hand.
ARTICLE III
CLOSING
CLOSING
The closing of the purchase and sale of the Bank Common Stock contemplated hereunder (the “Closing”) shall take place electronically on a date mutually agreed upon by Purchaser and Shareholder, provided: (1) such date shall not occur before September 30, 2018; (2) such date shall be no later than thirty (30) days following the date Purchaser is in receipt of all regulatory approvals required for consummation of the transactions hereunder, to the extent such date is after September 30, 2018; and (3) if such date is after the dates set forth in (1) and (2) because of a dispute regarding the Equity Amount pursuant to Section 2.03(b), then such date shall be no later than five (5) days after the Accounting Referee has made its determination regarding the Objection(s) (said day of Closing hereinbefore and hereinafter called the “Closing Date”).
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE CLOSING
CONDUCT OF BUSINESS PENDING THE CLOSING
4.01 Forbearances of the Sellers. Shareholder agrees that from the date hereof until the Closing, except as expressly contemplated by this Agreement or as Previously Disclosed, without the prior written consent of Purchaser (which consent will not be unreasonably withheld or delayed), Shareholder shall cause the Bank not to:
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(a) Ordinary Course. Conduct its business other than in the ordinary course or fail to use reasonable efforts to preserve intact its business organizations and assets and maintain its rights, franchises and authorizations and its existing relations with customers, suppliers, vendors, employees and business associates.
(b) Operations. Enter into any new line of business or change its lending, investment, underwriting, risk and asset liability management or other banking and operating policies or practices, except (i) as required by Applicable Law or policies imposed by any Governmental Entity or (ii) for immaterial adjustments to such policies or practices made in the ordinary course.
(c) Products. Materially alter any of its policies or practices with respect to the rates, fees, charges, credit or underwriting policies, levels of services or products available to customers of the Bank or, other than in response to market developments and with notice to Purchaser, offer any promotional pricing with respect to any product or service available to customers of the Bank; provided that the Bank’s response to market developments is comparable with its past practices in responding to similar market developments.
(d) Brokered Deposits; National CD Program; Federal Home Loan Bank Advances. Other than in the ordinary course, (i) book any “brokered deposits”, as such term is defined in 12 C.F.R. § 337.6, (ii) issue any new certificates of deposit in connection with its deposit program or (iii) make any additional borrowings in the form of a Federal Home Loan Bank advance, in each case of (i) – (iii), with an original maturity that is past the last day of the month that immediately precedes the Closing Date.
(e) Deposit Mix. Materially alter the mix, type or aggregate amount of deposits held by the Bank.
(f) Securities Portfolio. Other than in the ordinary course, purchase any securities other than short-term securities issued by the United States Department of the Treasury with an original maturity that is no later than the last day of the month that immediately precedes the Closing Date, provided, however that the Bank may purchase certificates of deposit that are registered with the Depository Trust Company and that have an original maturity not to exceed twelve months.
(g) Capital Expenditures. Make any capital expenditures in excess of twenty thousand dollars ($20,000) individually or one hundred fifty thousand dollars ($150,000) in the aggregate.
(h) Material Contracts. Terminate, enter into, amend, modify, extend or renew any Material Contract.
(i) Extensions of Credit and Interest Rate Instruments. Make, renew or amend any Extension of Credit in excess of seven hundred fifty thousand dollars ($750,000) or make, renew, amend any Extension of Credit to any borrower carrying, or proposed to carry, a risk rating of 6 or 7; enter into, renew or amend any Interest Rate Instrument in excess of seven
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hundred fifty thousand dollars ($750,000); or terminate any Interest Rate Instrument prior to its stated maturity (any action referred to in this Section 4.01(i), a “Restricted Lending Action”); provided, however, that the Bank may take a Restricted Lending Action, if (1) the Bank has delivered to Purchaser a notice of its intention to take such Restricted Lending Action and such additional information as Purchaser shall request in respect thereof and (2) Purchaser shall not have objected to such Restricted Lending Action within two (2) Business Days following the delivery to Purchaser of the notice of intention and information requested by Purchaser. If Purchaser objects to such Restricted Lending Action, the Bank may still take such Restricted Lending Action if Shareholder, in response to Purchaser’s notice of objection, agrees to purchase, on or prior to the Closing Date, the Extension of Credit or Interest Rate Instrument that was the subject of the Restricted Lending Action.
(j) Loan Portfolio. Amend or modify, including by entering into any forbearance agreement with respect to, any Extension of Credit, other than those described in Section 4.01(i) and other than in the ordinary course and consistent with the written loan policies of the Bank.
(k) Capital Stock. Issue, sell, split, combine, reclassify or otherwise permit to become outstanding, or dispose of, allow the creation of an Adverse Right in respect of or permit a Lien to be placed on any shares of its stock, or authorize or propose the creation of any additional shares of its stock or Rights with respect to its stock.
(l) Dividends, Distributions, Repurchases. Make, declare, pay or set aside for payment any dividend on or in respect of, or declare or make any distribution on any shares of its stock that would cause the Bank’s Equity Amount to be less then the Base Equity Amount as of the Determination Date or declare, pay or set aside for payment any dividend after the Determination Date, or directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire, any shares of its stock.
(m) Borrowings. Incur any additional Indebtedness other than as permitted by Section 4.01(d).
(n) Insurance. Fail to maintain in effect any Bank Insurance Policy, in each case on substantially the same terms as currently in effect.
(o) Branches. Close, sell, consolidate or relocate or materially alter any of its branches or offices.
(p) Reorganization. Adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization.
(q) Dispositions. Except for the sale of any stock owned by the Bank in Bankers’ Bank or the Federal Agricultural Mortgage Corporation (Farmer Mac), sell, transfer, mortgage, encumber, allow a Lien to be placed on or otherwise dispose of or discontinue any of its assets, deposits, business or properties, except (i) for sales, transfers, Liens or other dispositions or discontinuances in the ordinary course and in a transaction that individually or
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taken together with all other such transactions is not material or not reasonably likely to be material to the Bank, individually or in the aggregate, or (ii) in respect of assets received in foreclosure or otherwise in satisfaction of debts and which are sold in a commercially reasonable manner and in the ordinary course (provided that, at Purchaser’s request, the Bank shall provide a list of dispositions of any such assets specified in clause (ii) during the period specified in such request).
(r) Acquisitions. Acquire (other than by way of foreclosures or acquisitions in a fiduciary or similar capacity, through an investment advisory or trust account, or in satisfaction of debts previously contracted in good faith, in each case in the ordinary course) all or any portion of the assets, business, deposits or properties of any other person.
(s) Constituent Documents. Amend its Constituent Documents (or similar governing documents).
(t) Accounting and Audit Matters. Implement or adopt any change in (i) its accounting principles, practices or methods, other than as may be required by GAAP or applicable accounting requirements of a Governmental Entity, or (ii) the scope or schedule of its auditing activities.
(u) Tax Matters. Make, change or revoke any material Tax election, file any amended Tax Return with respect to a material amount of Taxes, enter into any material closing agreement, settle any material Tax claim or assessment, surrender any right to claim a material refund of Taxes, take any action with respect to Taxes, other than in the ordinary course, change the residence of the Bank for Tax purposes or take any action which is reasonably likely to have a materially adverse impact on the Tax position of the Bank.
(v) Intellectual Property. Grant any license with respect to, permit the lapse of, or enter into, modify or terminate, any agreement relating to any Intellectual Property.
(w) Open Source Software. (i) Use Open Source Software, (ii) incorporate Open Source Software into any product or service offered by the Bank or into any Bank Intellectual Property, or (iii) modify or distribute any product or service offered by the Bank or any Bank Intellectual Property, in each case, such that the Bank would be required to disclose, distribute or otherwise make available the source code of any software contained in the Bank Intellectual Property in order to comply with applicable Open Source Software licenses.
(x) Claims. Commence, settle or compromise any Proceeding, except for a Proceeding that is settled or compromised in the ordinary course in an amount or for consideration not in excess of ten thousand dollars ($10,000) and that would not (x) impose any restriction on the business of the Bank or (y) create a precedent for claims that is reasonably likely to be adverse to the Bank.
(y) Compensation and Benefits. Except as required by Applicable Law, the terms of any Bank Plan in effect on the date hereof, or as provided for under Section 6.10 of this Agreement, with respect to any officer, employee or director of the Bank, (i) increase the
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compensation, target bonus amounts or pension, welfare, severance or other benefits, other than ordinary course increases in base salaries not to exceed, in the aggregate, five percent (5%) of total base salaries in effect as of the date of this Agreement (and corresponding increases in target annual bonuses occurring solely as a result of such increases in base salaries), (ii) grant any equity-based award, (iii) materially increase the benefits provided under any Bank Plan, (iv) grant or provide any increase in severance or termination payments or benefits, (v) establish, adopt, enter into, amend or terminate any Bank Plan or award thereunder, except as may be required by Applicable Law, (vi) take any action to accelerate the vesting or payment, or fund or in any other way secure the payment, of compensation or benefits under any Bank Plan, (vii) enter into or forgive any loan, (viii) terminate the employment of any “key executive” (as defined in the Bank’s severance guidelines as in effect as of the date hereof), other than for cause, (ix) hire any employee who would be a “key executive” (as defined in the Bank’s severance guidelines as in effect as of the date hereof), or (x) establish, adopt or enter into any collective bargaining or other labor agreement.
(z) Adverse Actions. Notwithstanding any other provision hereof, knowingly take, or knowingly omit to take, any action that is reasonably likely to result in any of the conditions set forth in Article VIII not being satisfied in a timely manner, or any action that is reasonably likely to materially impair its ability to perform its obligations under this Agreement or to consummate the transactions contemplated hereby, except as required by Applicable Law.
(aa) Commitments. Enter into any Contract with respect to, or otherwise agree or commit to do, any of the foregoing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES
5.01 Disclosure Letters. Before entry into this Agreement, Shareholder delivered to Purchaser a letter, and Purchaser delivered to Shareholder a letter (respectively, each letter a “Disclosure Letter”), setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more covenants contained in Article III or Article VI or one or more representations or warranties contained in this Article V. The inclusion of an item in a Disclosure Letter as an exception to a representation or warranty will not by itself be deemed an admission by a party that such item is material or was required to be disclosed therein.
5.02 Representations and Warranties of the Sellers. Except as Previously Disclosed, each Seller hereby, jointly and severally, represents and warrants to Purchaser as follows:
(a) Organization, Standing and Authority.
(1) The Bank is a banking corporation duly organized, validly existing and in good standing under the WBL. The Bank is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership or leasing of its assets or property or the conduct of its business requires such qualification. The Bank has made
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available to Purchaser a complete and correct copy of the Bank’s Constituent Documents, each as amended to the date hereof, and such Constituent Documents are in full force and effect.
(2) Shareholder has full power, authority and legal capacity to enter into this Agreement, to perform its obligations hereunder and to effect the consummation of the transactions contemplated hereby to the extent applicable to it. Shareholder is the record and beneficial holder of 69 shares of Bank Common Stock, which shares constitute all of the issued and outstanding shares of Bank Common Stock, and Shareholder has full and unqualified authority to exercise the voting power with respect to such shares of Bank Common Stock.
(b) Bank Securities.
(1) The authorized capital stock of the Bank consists of 51,025 shares of Bank Common Stock, of which 69 shares are outstanding. The outstanding shares of Bank Common Stock have been duly authorized and are validly issued and outstanding, fully paid and non-assessable and are not subject to any Adverse Right (and were not issued in violation of any preemptive rights). The Bank does not have any Rights issued or outstanding, any shares of Bank Common Stock reserved for issuance or any commitment to authorize, issue or sell any Bank Common Stock or any Rights. The Bank has no commitment to redeem, repurchase or otherwise acquire, or to register with the SEC, any shares of Bank Common Stock.
(2) The sale and delivery of the shares of Bank Common Stock as contemplated by this Agreement is not subject to any Adverse Right or other restriction. Shareholder (i) is the record and beneficial owner of, and has good and valid title to, all of the shares of Bank Common Stock, free and clear of any Liens or Adverse Rights, and no authorization for any such Lien or Adverse Right has been given and (ii) controls one hundred percent (100%) of the voting power of the Bank required to vote on, or give its written consent to, the transactions contemplated hereby.
(3) There are no voting trusts, proxies, stockholder agreements or other agreements or understandings with respect to the voting of shares of Bank Common Stock.
(4) Section 5.02(b)(4) of the Sellers Disclosure Letter lists all bonds, debentures, notes or other obligations that have been issued by the Bank as of the date hereof (other than deposits and other short-term obligations issued and outstanding in the ordinary course), which list includes a description of the terms and conditions on which such bonds, debentures, notes or other obligations may be redeemed by the Bank. The Bank does not have any outstanding bonds, debentures, notes or other obligations, the holders of which have the right to vote (or which are convertible into or exercisable for securities having the right to vote) on any matter.
(c) Subsidiaries and Equity Holdings. The Bank does not have any Subsidiaries.
(d) Power. The Bank has the corporate power and authority to own and operate its assets and properties and to conduct its businesses as such businesses are now being
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conducted. The Bank has the corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.
(e) Authority. Each Seller has duly executed and delivered this Agreement and has taken all corporate action necessary for it to execute and deliver this Agreement. This Agreement and the transactions contemplated hereby have been authorized by all necessary corporate action on the part of each Seller. This Agreement is a valid and legally binding obligation of each Seller, enforceable against each Seller in accordance with its terms, except as enforcement may be limited by one or more Permitted Enforceability Exceptions. All actions taken by the Bank Board and Shareholder’s board of directors in connection with this Agreement have been approved unanimously.
(f) Consents and Approvals. Section 5.02(f) of the Sellers Disclosure Letter contains a true, correct and complete listing of all notices, applications or other filings required to be made by the Bank with, and any consents, approvals, registrations, permits, expirations of waiting periods or other authorizations required to be obtained by the Bank from, any Governmental Entity or any third party (such required third-party consents, the “Required Third-Party Consents”) in connection with the execution, delivery or performance by the Bank of this Agreement or the consummation of the transactions contemplated hereby, except for (i) filings of applications and notices with, receipt of approvals or no objections from, and the expiration of related waiting periods, required by federal and state banking authorities, including applications and notices under the Bank Merger Act and (ii) any filings specified in this Agreement.
(g) No Defaults. Subject to making the filings and receiving the consents and approvals referred to in Section 5.02(f), and the expiration of the related waiting periods, the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby do not and will not violate, conflict with, require a consent or approval under or notice with respect to, result in a breach of, constitute a default (or an event that, with notice or lapse of time or both, would constitute a default) under, result in the right of termination of, accelerate the performance required by, increase any amount payable under, change the rights or obligations under, or give rise to any Lien or penalty under, the terms, conditions or provisions of (i) the Bank’s Constituent Documents, (ii) any Contract, policy or other instrument of any Seller, or by which any Seller is bound or affected, or to which any Seller or any Seller’s businesses, operations, assets or properties is subject or receives benefits, or (iii) any Applicable Law.
(h) Insolvency. No Seller is currently subject to any Insolvency Procedure. No Seller has any Knowledge or reason to believe that it or the Bank will become subject to any Insolvency Procedure prior to the consummation of the transactions contemplated hereby.
(i) Takeover Laws and Provisions. This Agreement and the transactions contemplated hereby are exempt from any applicable “moratorium”, “control share”, “fair price”, “affiliate transaction”, “business combination” or “antitakeover” provisions of Applicable Law (collectively, the “Takeover Laws”).
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(j) Financial Advisors. No Seller nor any of the Bank’s directors, officers or employees has employed any broker or finder or incurred any Liability for any brokerage fees, commissions or finder’s fees in connection with the transactions contemplated hereby, except that, in connection with this Agreement, Shareholder has retained Hovde Group, LLC as its financial advisor.
(k) Indebtedness between Bank and Shareholder. Section 5.02(k) of the Sellers Disclosure Letter contains a true, correct and complete listing of all Indebtedness extended by the Bank to Shareholder or any Affiliate of Shareholder (excluding the Bank), or by Shareholder or Affiliate thereof (excluding the Bank) to the Bank, specifying in each case the terms and duration of such Indebtedness.
(l) Business Relationships with Affiliates. Each Contract between the Bank, on the one hand, and an Affiliate of the Bank, on the other hand, is set forth on Section 5.02(l) of the Sellers Disclosure Letter is on market terms, is in compliance with any Applicable Law regarding affiliate transactions and was entered into in the ordinary course on an arm’s-length basis.
(m) Financial Reports and Regulatory Filings.
(1) The December 31, 2015, 2016, and 2017, and April 30, 2018 Consolidated Reports of Condition and Income of the Bank, which have previously been delivered to the Purchaser are available at https://cdr.ffiec.gov/public, and are incorporated by reference herein (the “Unaudited Financial Statements”). No later than ninety (90) days following the date hereof, the Bank will provide Purchaser with audited balance sheets and statements of income and cash flows for the years ending December 31, 2016, and 2017, along with signed, unqualified opinions of WIPFLi, LLP, the Bank’s independent auditor, with respect thereto (the “Audited Financial Statements”, together with the Unaudited Financial Statements, the “Bank Financial Statements”). Each of the statements of financial position (or equivalent statements) included in the Bank Financial Statements (including any related notes and schedules) fairly presents or will fairly present in all material respects the consolidated financial position of the Bank as of the date of such statement, and each of the statements of income, comprehensive income (loss), changes in shareholders’ equity and cash flows, as applicable, included in the Bank Financial Statements (including any related notes and schedules) fairly presents or will fairly present in all material respects the consolidated results of operations, comprehensive income, changes in shareholders’ equity and changes in cash flows, as applicable, of the Bank for the periods set forth in such statement, in each case, in accordance with GAAP, during the periods involved. The Audited Financial Statements will be consistent in all material respects with the Unaudited Financial Statements for the years ending December 31, 2016 and 2017.
(2) Since December 31, 2014, the Bank has filed all reports and statements, together with any amendments required to be made with respect thereto, that it was required to file with any applicable Governmental Entities, except where the failure to so file would not be, or would not reasonably be expected to be, material to the Bank, taken as a whole. As of their respective dates (and without giving effect to any amendments or modifications filed
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after the date of this Agreement with respect to reports and documents filed before the date of this Agreement), each of such reports and statements, including the financial statements, exhibits and schedules thereto, complied with all of the Applicable Laws enforced or promulgated by the Governmental Entity with which they were filed, except where the failure to do so would not be, or would not reasonably be expected to be, material to the Bank, taken as a whole.
(n) Absence of Undisclosed Liabilities. Except (i) as fully and adequately reflected or reserved against in the Bank Financial Statements as of April 30, 2018 and (ii) for Liabilities incurred in the ordinary course subsequent to April 30, 2018 that would not be prohibited by this Agreement and are not material to the Bank, taken as a whole, the Bank has no Liabilities.
(o) Absence of Certain Changes; Conduct of Business. Since December 31, 2017, (i) other than in the ordinary course, the Bank has not incurred any material Liability, whether or not accrued, contingent or otherwise and whether or not required to be disclosed, (ii) the Bank has conducted its businesses in all material respects in the ordinary course, (iii) no Seller has taken any of the actions referenced in Section 4.01, and (iv) no event has occurred or fact or circumstance has arisen that, individually or taken together with all other events, facts and circumstances, has had or is reasonably likely to have a Material Adverse Effect with respect to the Bank, taken as a whole.
(p) Litigation. There is no dispute or Proceeding (x) pending, (y) to the Sellers’ Knowledge, threatened against or affecting any Seller, or (z) with respect to any Proceeding that is reasonably likely to be material, to the Sellers’ Knowledge, reasonably likely to be brought against or affecting any Seller, nor is there any judgment, order, decree, injunction or ruling of any Governmental Entity or arbitrator outstanding against the Bank (or to the Sellers’ Knowledge, in the process of being issued), except, in each case, as would not if adversely determined, individually or in the aggregate, be reasonably likely to (i) involve a claim for damages to the Bank in excess of ten thousand dollars ($10,000), (ii) impair the ability of the Bank to operate its business in the ordinary course, or (iii) impair or delay the ability of any Seller to consummate the transactions contemplated hereby.
(q) Compliance with Laws. The Bank:
(1) conducts its business, and in the last five (5) years, has conducted its business, in all material respects, in compliance with all Applicable Laws pertaining to it or to the employees conducting such businesses;
(2) currently has a rating of “Satisfactory” or better under the CRA to the extent it is subject to such act;
(3) has all material permits, licenses, authorizations, orders and approvals of, and has made all filings, applications and registrations with, all Governmental Entities that are required in order to permit it to own or lease its assets and properties and to conduct its business as it is now being conducted, and all such permits, licenses, authorizations,
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orders and approvals are in full force and effect and, to its Knowledge, no suspensions or cancellations are threatened;
(4) has received, since December 31, 2012, no notification from a Governmental Entity (i) asserting that it is not in compliance with any Applicable Law that such Governmental Entity enforces, (ii) threatening to suspend, cancel, revoke or condition the continuation of any permit, license, authorization, order or approval or (iii) restricting or disqualifying, or threatening to restrict or disqualify, its activities, except, in the case of each of clauses (i), (ii) and (iii), as would not, individually or in the aggregate, be material to the Bank, individually or in the aggregate; and
(5) has not, in any of the last ten (10) years, been convicted or pled guilty to any felony or misdemeanor.
(r) Regulatory Matters. The Bank is not subject to, nor has it been advised that it is reasonably likely to become subject to, any written order, decree, agreement or similar arrangement with, or a commitment letter or similar submission to, or extraordinary supervisory letter from, or adopted, in the past twenty-four (24) months, any extraordinary board resolutions at the request of, any Governmental Entity charged with the supervision or regulation of financial institutions or issuers of securities or engaged in the insurance of deposits or otherwise involved with the supervision or regulation of the Bank.
(s) Books and Records and Internal Controls.
(1) The Bank’s books and records have been fully, properly and accurately maintained in all material respects, and there are no material inaccuracies or discrepancies of any kind contained or reflected therein.
(2) The records, systems, controls, data and information of the Bank are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of the Bank or accountants (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have a material adverse effect on the system of internal accounting controls described in the following sentence. The Bank has established and maintains a system of internal accounting controls sufficient to provide reasonable assurances regarding (i) the reliability of financial reporting and the preparation of financial statements in accordance with GAAP and (ii) prevention or timely detection of unauthorized acquisition, use or disposition of assets of the Bank.
(3) Other than as listed on Section 5.02(s) of the Sellers Disclosure Letter, since December 31, 2012, the Bank has not received from its independent accountants any oral or written notification of any (i) ”significant deficiency” in the design or operation of its internal controls over financial reporting, (ii) ”material weakness” in its internal controls over financial reporting, or (iii) fraud, whether or not material, that involves management or other employees who have a significant role in its internal controls over financial reporting.
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(t) Intellectual Property.
(1) All Intellectual Property used in the operation of the business of the Bank (“Bank Intellectual Property”) is either owned by the Bank (“Owned Intellectual Property”) or is used by the Bank pursuant to a valid, written license agreement (“Licensed Intellectual Property”). All of the Bank’s rights to the Bank Intellectual Property shall survive the consummation of the transactions contemplated by this Agreement unchanged. Consummation of the transactions contemplated by this Agreement will not create any rights authorizing third parties to use any Intellectual Property owned by Purchaser or Purchaser’s Subsidiaries. The Bank or its relevant Subsidiary exclusively owns all right, title and interest in and to the Owned Intellectual Property, free and clear of all Liens. The Owned Intellectual Property is subsisting, valid and enforceable, and is not subject to any outstanding order, judgment, decree or agreement materially and adversely affecting the Bank’s use thereof or its rights thereto. The Bank has Previously Disclosed all Owned Intellectual Property that is Registered and/or material to the business of the Bank.
(2) The conduct of the businesses of the Bank does not, and in the past six (6) years has not materially, infringed, misappropriated or otherwise violated the Intellectual Property rights of any third party. To the Sellers’ Knowledge, no person is materially infringing, misappropriating or otherwise violating any Owned Intellectual Property right or, to the Sellers’ Knowledge, any rights of the Bank in any Licensed Intellectual Property.
(3) The Bank has taken commercially reasonable measures to protect the confidentiality of all Trade Secrets that are owned, used or held by the Bank, and, to the Sellers’ Knowledge, such Trade Secrets have not been used, disclosed to or discovered by any person except pursuant to valid and appropriate non-disclosure and/or license agreements which have not, to the Sellers’ Knowledge, been breached. All Intellectual Property developed under Contract to the Bank has been validly assigned to the Bank or is otherwise owned by the Bank. None of the Bank’s Affiliates or Representatives of the Bank’s Affiliates have access to or have accessed any of the Trade Secrets owned, used or held by the Bank.
(4) The IT Assets are in good working condition; have been properly maintained by technically competent personnel in accordance with standards set by the manufacturers or otherwise in accordance with standards prudent in the industry to ensure proper operation, monitoring and use; operate and perform in all material respects in accordance with their documentation and functional specifications and otherwise as required by the Bank in connection with its businesses; and have not materially malfunctioned or failed within the past three (3) years. To the Sellers’ Knowledge, the IT Assets do not contain any “time bombs”, “Trojan horses”, “back doors”, “trap doors”, “worms”, viruses, bugs, faults or other devices or effects that (i) enable or assist any person to access without authorization the IT Assets, or (ii) otherwise significantly adversely affect the functionality of the IT Assets.
(5) The Bank has established and is in compliance with a written information security program that includes administrative, technical and physical safeguards designed to safeguard the security, confidentiality, and integrity of transactions and data. To the Sellers’ Knowledge, no person has gained unauthorized access to the IT Assets. The Bank has
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implemented backup, security and disaster recovery technology and safeguards consistent with industry practices. The Bank takes reasonable measures, which are adequate to comply with all Applicable Law and its contractual and privacy commitments, to protect the confidentiality of customer financial and other data. The Bank has taken commercially reasonable measures to provide for the backup and recovery of the data and information necessary to the conduct of its business without material disruption to, or material interruption in, the conduct of its business.
(6) The Bank has Previously Disclosed each item of Open Source Software that is licensed or otherwise used by the Bank. The conduct of the business of the Bank as currently conducted does not violate any license terms applicable to any item of such Open Source Software. No software contained in the Owned Intellectual Property contains, is derived from, is distributed with or is being or was developed using Open Source Software that is licensed under any terms that impose or could impose a requirement or condition that any software contained in the Owned Intellectual Property or part thereof: (i) be disclosed or distributed in source code form; (ii) be licensed for the purpose of making modifications or derivative works; or (iii) be redistributable at no charge.
(u) Taxes.
(1) Section 5.02(u)(1) of the Sellers Disclosure Letter lists each material obligation, debt, account balance or other payable or receivable of any kind between the Bank, on the one hand, and any of its Affiliates, on the other hand.
(2) All Tax Returns that were required to be filed (taking into account any extensions of time within which to file) by or with respect to the Bank have been duly, timely and accurately filed with the appropriate Governmental Entity and all such Tax Returns are true, complete and accurate in all material respects. The Bank is not currently the beneficiary of any extension of time within which to file any Tax Return.
(3) All material Taxes that are due and payable with respect to the Bank (whether or not shown to be due on any Tax Return) have been paid in full.
(4) All deficiencies asserted or assessments made as a result of any audit or examination of the Bank or by any Governmental Entity of the Tax Returns referred to in Section 5.02(u)(2) have been paid in full or otherwise finally resolved. To Sellers’ Knowledge, no issues have been raised by any Governmental Entity, or are expected to be raised by any directors or officers of the Bank based upon personal contact with any agent of any Governmental Entity, in connection with any audit or examination of any Tax Return and no such issues are currently pending.
(5) There are no pending, or threatened in writing, audits, examinations, investigations or other Proceedings in respect of Taxes, Tax Returns or Tax matters, in each case, with respect to the Bank. No written claim has been made within the past three (3) years by any Governmental Entity in a jurisdiction where the Bank does not file Tax Returns that the Bank is or may be subject to any Tax imposed by that jurisdiction.
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(6) The Sellers have made available to Purchaser complete copies of all (i) federal and state income Tax Returns filed by the Bank for all periods beginning with the fiscal year ended December 31, 2011, and (ii) material Tax Returns filed by the Bank for all periods beginning with the fiscal year ended December 31, 2011.
(7) The U.S. federal income Tax basis of each asset of the Bank as of December 31, 2017 is no lower than the amount set forth in Section 5.02(u)(7) of the Sellers Disclosure Letter.
(8) All Taxes that the Bank is obligated to withhold from amounts paid or owing to any employee, independent contractor, creditor, stockholder, customer, client, account holder, or other third party have been withheld and paid over to the proper Governmental Entity in a timely manner, to the extent due and payable.
(9) The Bank (i) collects and maintains appropriate IRS Forms W-9 and W-8 and other required Tax forms, that are accurate and valid in all material respects with respect to each customer, client, creditor or other party in accordance with Applicable Law and (ii) has complied with all material Tax information reporting requirements.
(10) No extensions or waivers of statutes of limitation with respect to Tax matters have been requested or given by any Tax authority or by the Bank which are currently in effect.
(11) The Bank has adequately reserved or accrued in the Bank Financial Statements (rather than in any notes thereto) for all accrued and unpaid Taxes of the Bank and such reserve is adequate as adjusted for the passage of time through the Closing Date in accordance with past practice and custom of the Bank in filing their Tax Returns. Since December 31, 2017, the Bank has not incurred any liability for Taxes arising from extraordinary gains or losses, outside the ordinary course of business.
(12) No Liens for Taxes exist with respect to any of the Bank’s assets or properties, except for statutory Liens for Taxes not yet due and payable or that are being contested in good faith, nor, to the Sellers’ Knowledge, is any Governmental Entity in the process of imposing a Lien for Taxes upon such assets or properties.
(13) The Bank does not have any liability for the Taxes of any Person (other than the Bank) under Treasury Regulation Section 1.1502-6 (or any similar provision of applicable Law), and will not be required to include any material item of income in, or exclude any material item of deduction from, taxable income for any taxable period beginning after the Closing Date as a result of any (i) change in accounting method occurring in any Pre-Closing Tax Period by the Sellers, (ii) use of an improper method of accounting in a Pre-Closing Tax Period, (iii) written agreement entered into with, or letter ruling received from, a Governmental Entity by the Sellers executed prior to the Closing Date, (iv) installment sale or open transaction disposition made prior to the Closing Date by the Bank, (v) prepaid amount or advance payment received on or prior to the Closing Date by the Bank or (vi) election under Section 108 of the Code (income from discharge of indebtedness) in respect of a Pre-Closing Tax Period.
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(14) Other than as set forth in Section 5.02(u)(14) of the Sellers Disclosure Letter and as will be terminated upon the Closing, the Bank is not a party to any Tax allocation, sharing or indemnification agreement or any similar agreement.
(15) The Bank has not been a member of an affiliated group of corporations, within the meaning of Section 1504 of the Code, or a member of a consolidated, unitary or combined Tax group filing, consolidated or combined Tax Returns (other than a group the common parent of which is Shareholder).
(16) No closing agreements, private letter rulings, technical advice, memoranda or similar agreement or rulings have been entered into or issued by any Governmental Entity with respect to the Bank or any of its Subsidiaries (other than PLR-133454-08).
(17) No Tax is required to be withheld pursuant to Section 1445 of the Code as a result of the transactions contemplated hereby.
(18) The Bank has not been a party to any distribution occurring during the two (2)-year period prior to the date of this Agreement in which the parties to such distribution treated the distribution as one to which Section 355 of the Code applied.
(19) The Bank has not participated in any reportable or listed transaction within the meaning of Treasury Regulation Section 1.6011-4(b).
(v) Environmental Matters. Other than as set forth in Section 5.02(v) of the Sellers Disclosure Letter, the Bank has complied in all material respects at all times with all applicable Environmental Laws; there are no Proceedings of any kind, pending or to the Sellers’ Knowledge threatened, against the Bank in any court, agency, or other Governmental Entity or in any arbitral body, arising under or relating to any Environmental Law; there are no agreements, orders, judgments, decrees, settlements or indemnities to which the Bank is a party with any court, regulatory agency, Governmental Entity or private party, imposing Liability or obligation under or relating to any Environmental Law; the Bank has not and has no Knowledge that any Hazardous Materials have been released or otherwise present or other conditions at any property (currently or formerly owned, operated or otherwise used by, or the subject of a security interest on behalf of, the Bank); there are no past, present or reasonably anticipated future events, conditions, circumstances, practices, plans or legal requirements that could give rise to material obligations or material Liabilities of the Bank under any Environmental Law; and the Bank has delivered to Purchaser copies of all material environmental reports, studies, assessments, sampling data and memoranda in its possession relating to the Bank or any of their current or former properties or activities.
(w) Labor Matters.
(1) As of the date hereof, the Bank is not a party to any collective bargaining agreement or other agreement with a labor union or like organization, and to the Sellers’ Knowledge, there are no activities or proceedings by any individual or group of
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individuals, including representatives of any labor organizations or labor unions, to organize any employees of the Bank.
(2) There is no strike, lockout, slowdown, work stoppage, unfair labor practice or other labor dispute, or arbitration or grievance pending or, to the Sellers’ Knowledge, threatened. The Bank is in compliance in all material respects with all Applicable Laws respecting labor, employment and employment practices, terms and conditions of employment, worker classification, wages and hours, wrongful discharge, and occupational safety and health, and has not engaged in any unfair labor practices or similar prohibited practices. The Bank has not incurred any Liability or obligation under the Worker Adjustment and Retraining Notification Act and the regulations promulgated thereunder (the “WARN Act”) or any similar Applicable Law that remains unsatisfied.
(x) Employee Benefits.
(1) Section 5.02(x)(1) of the Sellers Disclosure Letter sets forth an accurate and complete list of each Bank Plan. With respect to each Bank Plan that will be retained by Purchaser, the Bank has made available to Purchaser, to the extent applicable, accurate and complete copies of (i) the Bank Plan document, including any amendments thereto, and all related trust documents, insurance Contracts or other funding vehicles, (ii) a written description of such Bank Plan if such plan is not set forth in a written document, (iii) all material correspondence to or from any Governmental Entity received in the last three (3) years with respect to any such Bank Plan, (iv) the most recent IRS determination or opinion letter, and (v) the two most recent annual reports (Form 5500 or 990 series and all schedules and financial statements attached thereto). No Bank Plan is maintained outside the jurisdiction of the United States or covers any employees or other service providers of the Bank who reside or work outside of the United States.
(2) (i) As to the Bank, each Bank Plan (including any related trusts) has been established, operated and administered in all material respects in compliance with its terms and Applicable Law, including ERISA and the Code, (ii) all contributions or other amounts payable by the Bank with respect to each Bank Plan in respect of current or prior plan years have been paid or accrued in accordance with GAAP, and (iii) there are no pending or, to the Sellers’ Knowledge, threatened claims (other than routine claims for benefits) or Proceedings by a Governmental Entity, participant, beneficiary or similar party by, on behalf of or against any Bank Plan or any trust related thereto which could reasonably be expected to result in any material Liability to the Bank.
(3) As to the Bank, each Bank Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the IRS, or is a prototype plan that is entitled to rely on a favorable opinion letter from the IRS to the prototype plan sponsor, as to the Tax qualification under Section 401(a) of the Code and, to the Sellers’ Knowledge, nothing has occurred that would adversely affect the qualification or Tax exemption of any such Bank Plan. To the Sellers’ Knowledge, no Seller has engaged in a transaction in connection with which the Bank reasonably could be subject to either a civil
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penalty assessed pursuant to Section 409 or 502(i) of ERISA or a Tax imposed pursuant to Section 4975 or 4976 of the Code.
(4) The Bank has not nor does it expect to incur any material Liability under subtitles C or D of Title IV of ERISA with respect to any ongoing, frozen or terminated “single-employer plan”, within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them or any ERISA Affiliate. With respect to any Bank Plan subject to the minimum funding requirements of Section 412 of the Code or Title IV of ERISA, which will be retained by Purchaser, (i) no such plan is, or is expected to be, in “at-risk” status (within the meaning of Section 303(i)(4)(A) of ERISA or Section 430(i)(4)(A) of the Code), (ii) as of the last day of the most recent plan year ended prior to the date hereof, the actuarially determined present value of all “benefit liabilities” within the meaning of Section 4001(a)(16) of ERISA did not exceed the then current value of assets of such Bank Plan, (iii) no unsatisfied Liability (other than for premiums to the PBGC) under Title IV of ERISA has been, or is expected to be, incurred by the Bank, (iv) the PBGC has not instituted proceedings to terminate any such Bank Plan, and (v) no “reportable event” within the meaning of Section 4043 of ERISA (excluding any such event for which the thirty (30)-day notice requirement has been waived under the regulations to Section 4043 of ERISA) has occurred, nor has any event described in Sections 4062, 4063 or 4041 of ERISA occurred.
(5) Neither the Bank nor any ERISA Affiliate has maintained, established, participated in or contributed to, or is or has been obligated to contribute to, or has otherwise incurred any obligation or Liability (including any contingent Liability) under, any “multiemployer plan” within the meaning of Section 3(37) of ERISA in the last six (6) years. With respect to any “multiemployer plan” contributed to any ERISA Affiliate, neither the Bank nor any ERISA Affiliate has incurred any withdrawal liability under Title IV of ERISA that remains unsatisfied.
(6) Except as required by Applicable Law, as to the Bank, no Bank Plan provides retiree or post-employment medical, disability, life insurance or other welfare benefits to any person, and the Bank does not have any obligation to provide such benefits. To the extent that the Bank sponsors such plans, the Bank has reserved the right to amend, terminate or modify at any time each Bank Plan that provides retiree or post-employment disability, life insurance or other welfare benefits to any person.
(7) As to the Bank, each Bank Plan that is a “nonqualified deferred compensation plan” (within the meaning of Section 409A of the Code) is in documentary compliance with, and has been operated and administered in all material respects in compliance with, Section 409A of the Code and the guidance issued by the IRS provided thereunder. No transfer of property has been deemed to have occurred under Section 409A(b)(3) of the Code, to the extent any restricted period has existed with respect to a single-employer defined benefit plan for which the Bank is either the plan sponsor or a member of a controlled group which includes the plan sponsor.
(8) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement (either alone or in
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combination with another related event) will (i) entitle any current or former officer, employee, director, or independent contractor of the Bank to severance pay or any material increase in severance pay, (ii) accelerate the time of payment or vesting, or materially increase the amount of compensation due to any such employee, director, officer or independent contractor, except as required by Applicable Laws, (iii) directly or indirectly cause the Bank to transfer or set aside any assets to fund any material benefits under any Bank Plan, (iv) otherwise give rise to any material Liability of the Bank under any Bank Plan, (v) limit or restrict the right to merge, materially amend, terminate or transfer the assets of any Bank Plan on or following the Closing, except as required by the terms of such Bank Plan or as required by Applicable Laws, or (vi) give rise to the payment of any amount under any of the Bank Plans that would be nondeductible by the Bank by reason of Section 280G of the Code. The Bank has no obligation to provide, and, as to the Bank, no Bank Plan or other agreement provides any individual with the right to, a gross-up, indemnification, reimbursement or other payment for any excise or additional Taxes, interest, fines, fees or penalties incurred pursuant to Section 409A or Section 4999 of the Code or due to the failure of any payment to be deductible under Section 280G of the Code.
(9) The Bank has not prepaid or prefunded any welfare plan described in Section 3(1) of ERISA through a trust, reserve, premium stabilization, or similar account, nor does it provide benefits through a voluntary employee beneficiary association as defined in Section 501(c)(9) of the Code.
(10) The Bank has classified all individuals (including but not limited to independent contractors and leased employees) appropriately under the Bank Plans.
(11) Section 5.02(x)(11) of the Sellers Disclosure Letter includes the Liabilities, as of the date hereof, under the Bank’s PTO Policy. The Determination Date Balance Sheet shall accrue for the Liabilities through the Determination Date under the Bank’s PTO Policy.
(y) Property.
(1) The Bank has good, and in the case of real property, insurable, title to, or, in the case of securities and investments, a “security entitlement” (as defined in the Uniform Commercial Code) in, or in the case of leased property, a valid and enforceable leasehold interest in, all property (whether real or personal, tangible or intangible, and including securities and investments) (all real property leased or owned by the Bank, including all appurtenances and improvements thereto and fixtures thereon, being referred to herein as “Bank Real Property”), and assets purported to be owned or leased by the Bank, except for the following (collectively, “Permitted Liens”): (i) immaterial defects that do not detract from the value of the property, (ii) statutory Liens for current Taxes or other governmental charges or withholding not yet due and payable or the amount or validity of which is being contested in good faith and for which appropriate reserves required pursuant to GAAP have been made, (iii) mechanics’, workmen’s, repairmen’s, warehousemen’s, carriers’ or similar Liens arising in the ordinary course, (iv) zoning, entitlement, building and other land-use regulations imposed by Governmental Entities which are not violated by the current use and operation of such property or which can be insured over, (v) covenants, conditions, restrictions, easements and other similar
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non-monetary matters of record affecting title to any property which in the aggregate do not materially impair the occupancy and use of such property and (vi) any right of way or easement related to public roads which in the aggregate do not materially impair the occupancy and use of such property.
(2) The Bank has Previously Disclosed to Purchaser a complete and accurate list of all Bank Real Property, and has made available to Purchaser complete and accurate copies of all lease documents relating to real property leased by the Bank. There are no unsatisfied capital expenditure requirements or remodeling obligations of the Bank involving any Bank Real Property, other than ordinary maintenance and repair obligations, in each case, not in excess of twenty thousand dollars ($20,000), other than as listed in Section 5.02(y)(2) of the Sellers Disclosure Letter.
(z) Material Contracts.
(1) Section 5.02(z)(1) of the Sellers Disclosure Letter contains a true, correct and complete listing of all of the following Contracts (“Material Contracts”) to which the Bank is a party, or by which the Bank may be bound, or to which the Bank or the Bank assets or properties may be subject as of the date hereof:
(i) any lease of real property or material personal property;
(ii) any partnership, limited liability company, joint venture or other similar agreement or arrangement;
(iii) any Contract relating to the acquisition or disposition of any material business or operations (whether by merger, sale of stock, sale of assets or otherwise) as to which there are any ongoing obligations or that was entered into on or after December 31, 2015;
(iv) any Contract for the purchase of services, materials, supplies, goods, equipment, IT Assets or other assets or property, or the license of any Licensed Intellectual Property, in each case, that creates future payment obligations in excess of ten thousand dollars ($10,000) (on a one-time or annualized basis) and that by its terms does not terminate or is not terminable without penalty upon notice of sixty (60) days or less;
(v) any Contract that creates future payment obligations in excess of ten thousand dollars ($10,000)(on a one-time or annualized basis) and that by its terms does not terminate or is not terminable without penalty upon notice of sixty (60) days or less, or any Contract that creates or would create a Lien;
(vi) any Contract providing for an irrevocable power of attorney on behalf of the Bank;
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(vii) any Contract, other than this Agreement, providing for exclusive dealing or limiting the freedom of the Bank to compete in any line of business or with any person;
(viii) any Contract, other than this Agreement, that requires the Bank to disclose Confidential Information or to indemnify or hold harmless any person (in each case, excluding Contracts entered into in the ordinary course with suppliers of goods or services);
(ix) any Contract, other than this Agreement, (i) with (A) any Affiliate of the Bank, (B) any current or former director, officer, employee, consultant or five percent (5%) or more stockholder of the Bank or any Affiliate, or (C) any “associate” or member of the “immediate family” (as such terms are respectively defined in Rule 12b‑2 and Rule 16a‑1 of the Exchange Act) of a person identified in clauses (A) or (B) of this subparagraph (i); or (ii) referred to in subparagraph (i) but that, although the Bank is not a party to or bound by, the Bank receives the benefit of or has obligations under;
(x) any Contract with a Governmental Entity, excluding Contracts entered into in the ordinary course involving loans or extensions of credit to municipalities;
(xi) any Contract pursuant to which the Bank has granted to any person any right in or to any Owned Intellectual Property; and
(xii) any other Contract not entered into in the ordinary course or that is material to the Bank or its financial conditions or results of operations.
(2) Each Material Contract is a valid and legally binding agreement of the Bank and, to the Sellers’ Knowledge, the counterparty or counterparties thereto, is enforceable in accordance with the terms of such Contract (except as enforcement may be limited by one or more Permitted Enforceability Exceptions) and is in full force and effect. Neither the Bank nor, to the Sellers’ Knowledge, any counterparty or counterparties, is in breach of any material provision of or in default (or, with the giving of notice or lapse of time or both, would be in default) under, and has not taken any action resulting in the termination of, acceleration of performance required by, or resulting in a right of termination or acceleration under, any Material Contract. Except as set forth in Section 5.02(z)(2) of the Sellers Disclosure Letter, each Material Contract is terminable without cause and without penalty, fee, or prepayment on no more than sixty (60)-days’ notice.
(aa) Material Interests of Certain Persons. Except for Shareholder, no officer or director of the Bank, or “associate” (as such term is defined in Rule 12b‑2 under the Exchange Act) of any such officer or director, has any material interest in any material property (whether real or personal, tangible or intangible) or Contract used in or pertaining to the business of the Bank.
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(bb) Insurance Coverage. The Bank maintains commercially reasonable insurance coverage for all normal risks incident to the business of the Bank and the properties and assets of the Bank. Such coverage is of a character and amount at least equivalent to that typically carried by persons engaged in similar businesses and subject to the same or similar perils or hazards. The Bank has Previously Disclosed a complete and correct list of each Contract representing such coverage as of the date hereof (the “Bank Insurance Policies”). All premiums due and payable with respect to the Bank Insurance Policies have been paid, and the Bank has not received any written notice from any such underwriter of non-coverage of any particular claim or of cancellation, non-renewal, material premium increase or other material change in prospective coverage with respect to any Bank Insurance Policy.
(cc) Extensions of Credit.
(1) Except where the failure to do so would not result, or would not reasonably be expected to result, in a Material Adverse Effect with respect to the Bank, each loan, revolving credit facility, letter of credit or other extension of credit or commitment to extend credit (collectively, “Extensions of Credit”) made or entered into by the Bank is evidenced by promissory notes, mortgages or other evidences of Indebtedness, which, together with all security agreements and guarantees, are valid and legally binding obligations of the Bank and, to the Sellers’ Knowledge, the counterparty or counterparties thereto, are enforceable in accordance with their terms (except as enforcement may be limited by one or more Permitted Enforceability Exceptions) and are in full force and effect. Other than Extensions of Credit that have been Previously Disclosed pursuant to the immediately succeeding sentence, neither the Bank nor, to the Sellers’ Knowledge, any counterparty or counterparties, is in breach of any provisions of or in default (or, with the giving of notice or lapse of time or both, would be in default) under, and has not taken any action resulting in the termination of, acceleration of, performance required by, or resulting in a right of termination or acceleration under, any Extension of Credit, except as would not, in the aggregate, reasonably be likely to be material to the Bank. Set forth on Section 5.02(cc)(1) of the Sellers Disclosure Letter is a complete and correct list of all Extensions of Credit that have been classified by it or any Governmental Entity as “Special Mention”, “Substandard”, “Doubtful”, or “Loss” as of the month end prior to the date hereof, and all Extensions of Credit in excess of two hundred thousand dollars ($200,000) that are more than thirty (30) days past due as of the month end prior to the date hereof.
(2) The provisions for loan losses contained in the Bank Financial Statements were, at the time established, made in accordance with past practices and experiences of the Bank and in accordance with the requirements of GAAP and are adequate thereunder. The representation made in this Section 5.02(cc)(2) is not a guarantee that the Bank will be able to collect the full amount of the loans or that the collateral securing any of the loans is adequate to protect the Bank from any deficiency in the collection of any of the loans to the extent such inability to collect or deficiency in collateral results from any fact, occurrence, or event that arose after the date of such Bank Financial Statements.
(3) The Bank has made available to Purchaser true and correct copies of the loan files requested by Purchaser for each individual loan, note, borrowing arrangement
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and other commitment for credit relationships between the Bank, on the one hand, and a single third-party obligor, on the other hand, as of the date hereof. Such files contain, in all material respects, all of the documents and instruments relating to such loan, note, borrowing, arrangement or other commitment.
(4) The Bank is not subject to any Contract pursuant to which the Bank has sold any Extensions of Credit or pools of, or participations in, Extensions of Credit containing any obligation to repurchase part or all of such Extensions of Credit or such pools or participations.
(5) The Bank has previously delivered to Purchaser a loan data tape in Excel format disclosing information regarding all loans, notes, borrowing arrangements and other commitments for credit relationships by the Bank as of the date previously delivered, which information is accurate and complete in all material respects as of the date hereof.
(dd) Interest Rate Risk Management Instruments. All interest rate swaps, caps, floors and other option agreements and other interest rate risk management arrangements (collectively, “Interest Rate Instruments”), whether entered into for the account of the Bank or for the account of a customer of the Bank, were entered into in the ordinary course and in accordance with prudent banking practice and applicable rules, regulations and policies of any Governmental Entity and with counterparties believed to be financially responsible at the time. All Interest Rate Instruments are valid and legally binding obligations of the Bank and, to the Sellers’ Knowledge, the counterparty or counterparties thereto, are enforceable in accordance with their terms (except as enforcement may be limited by one or more Permitted Enforceability Exceptions) and are in full force and effect. Neither the Bank nor, to the Sellers’ Knowledge, any counterparty or counterparties, is in breach of any provision of or in default (or, with the giving of notice or lapse of time or both, would be in default) under, and has not taken any action resulting in the termination of, acceleration of performance required by, or resulting in a right of termination or acceleration under, any Interest Rate Instrument. The Bank has Previously Disclosed a complete and correct list of all Interest Rate Instruments as of the date hereof.
(ee) Sufficiency of Assets. The Bank owns good and marketable title to, or has the valid right to use, lease or license, all of the assets and rights used in the operation of the Bank’s businesses as currently conducted. Such assets and rights constitute all of the material assets, tangible and intangible, of any nature whatsoever, used in the operation of such businesses as currently conducted.
(ff) Disclosure. No representation or warranty by any Seller herein, in the Sellers Disclosure Letter or any certificate, exhibit or document furnished or to be furnished by such Seller pursuant to this Agreement or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements contained herein or therein, in the light of the circumstances in which they were made, not misleading. No notification given by a Seller pursuant to Section 6.01(b) will contain any untrue statement or omit to state a material fact necessary to make the statements therein or herein, in the light of the circumstances in which they were made, not misleading.
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(gg) Securities Gains. The Bank has Previously Disclosed (i) all gains on sales of securities by the Bank effected during the period beginning on January 1, 2018 and ending on March 31, 2018 and (ii) all loans for which there is a specific reserve allocation as part of the Bank’s allowance for loan losses as of March 31, 2018 and the amount of each such reserve allocation.
(hh) No Trust Business. The Bank does not have any trust powers and is not a registered investment advisor. The Bank does not act as a fiduciary, including as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor.
5.03 Representations and Warranties of Purchaser. Except as Previously Disclosed, Purchaser hereby represents and warrants to the Sellers as follows:
(a) Organization, Standing and Authority. Purchaser is a national bank duly organized, validly existing and in good standing under the laws of the United States. Purchaser is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership or leasing of its assets or property or the conduct of its business requires such qualification, except for any failure to be so qualified that would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect with respect to Purchaser.
(b) Power. Purchaser has the corporate (or comparable organizational) power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.
(c) Authority. Purchaser has duly executed and delivered this Agreement and has taken all corporate (or comparable organizational) action necessary for it to execute and deliver this Agreement. This Agreement, the transactions contemplated hereby have been authorized by all necessary corporate (or comparable organizational) action on the part of Purchaser. This Agreement is a valid and legally binding obligation of Purchaser, enforceable in accordance with its terms, except as enforcement may be limited by one or more Permitted Enforceability Exceptions.
(d) Consents and Approvals. No notices, applications or other filings are required to be made by Purchaser or any of its Subsidiaries with, nor are any consents, approvals, registrations, permits, expirations of waiting periods or other authorizations required to be obtained by Purchaser or any of its Subsidiaries from, any Governmental Entity or third party in connection with the execution, delivery or performance by Purchaser of this Agreement or the consummation of the transactions contemplated hereby, except for (i) filings of applications and notices with, receipt of approvals or no objections from, and the expiration of related waiting periods, required by federal and state banking authorities, including applications and notices under the Bank Merger Act and (ii) the filings referenced in Section 6.04(a) with respect to the transactions contemplated hereby.
(e) Regulatory Approval. To Purchaser’s Knowledge, no facts or circumstances exist on the date hereof that may prevent or unreasonably delay Purchaser’s
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receipt of the Requisite Regulatory Approvals (as defined in Section 6.04) for the transactions contemplated by this Agreement.
(f) No Defaults. Subject to making the filings and receiving the consents and approvals referred to in Section 5.03(d), and the expiration of the related waiting periods, the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby do not and will not violate, conflict with, require a consent or approval under, or notice with respect to, result in a breach of, constitute a default (or an event that, with notice or lapse of time or both, would constitute a default) under, result in the right of termination of, accelerate the performance required by, increase any amount payable under, change the rights or obligations under, or give rise to any Lien or penalty under, the terms, conditions or provisions of (i) Purchaser’s Constituent Documents or those of its Subsidiaries, (ii) any Contract, indenture, lease, policy or other instrument of Purchaser or any of its Subsidiaries, or by which Purchaser or any of its Subsidiaries is bound or affected, or to which Purchaser or any of its Subsidiaries or Purchaser’s or any of its Subsidiaries’ respective businesses, operations, assets or properties is subject or receives benefits, in the case of clause (ii), which is required to be disclosed in any Purchaser SEC Filings, or (iii) any Applicable Law.
(g) Financial Advisors. None of Purchaser, its Subsidiaries or any of Purchaser’s or any of its Subsidiaries’ directors, officers or employees has employed any broker or finder or incurred any Liability for any brokerage fees, commissions or finder’s fees in connection with the transactions contemplated hereby, except that, in connection with this Agreement, Purchaser has retained FIG Partners as its financial advisor.
(h) Due Diligence. Purchaser has no actual knowledge of the existence of a breach of the Sellers’ representations and warranties set forth in Section 5.02 hereof. Nothing contained in this subsection shall be deemed a waiver by Purchaser of any representations or warranties made by Seller. For purposes of this Section 5.03(h), the actual knowledge of Purchaser shall mean the actual knowledge of Purchaser’s CEO or CFO.
(i) Disclosure. No representation or warranty by Purchaser herein, in Purchaser Disclosure Letter or any certificate, exhibit or document furnished or to be furnished by Purchaser pursuant to this Agreement or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements contained herein or therein, in the light of the circumstances in which they were made, not misleading. No notification given by Purchaser pursuant to Section 6.01(b) will contain any untrue statement or omit to state a material fact necessary to make the statements therein or herein, in the light of the circumstances in which they were made, not misleading.
ARTICLE VI
OTHER COVENANTS
OTHER COVENANTS
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6.01 Commercially Reasonable Efforts.
(a) Subject to the terms and conditions of this Agreement, each of the Sellers and Purchaser will use commercially reasonable efforts to take, or cause to be taken, in good faith, all actions, and to do, or cause to be done, all things, necessary, proper, desirable or advisable under Applicable Law, so as to permit consummation of the transactions contemplated hereby as promptly as practicable, and each will cooperate fully with, and furnish information to, the other party to that end.
(b) Each Seller will give prompt notice to Purchaser, and Purchaser will give prompt notice to Shareholder, of any fact, event or circumstance known to it that (i) is reasonably likely, individually or taken together with all other facts, events and circumstances known to it, to result in any Material Adverse Effect with respect to any Seller or (ii) would cause or constitute a breach of any of its representations, warranties, covenants or agreements contained herein that reasonably could be expected to give rise, individually or in the aggregate, to the failure of a condition in Article VIII. The delivery of any notice pursuant to this Section 6.01(b) shall not limit or otherwise affect the remedies available to the parties pursuant to this Agreement or the conditions to the parties’ obligations pursuant to Article VIII.
6.02 Cooperation. The Bank agrees to cooperate reasonably with Purchaser and to provide Purchaser (or its Representatives) with financial or other information (including audited financial information) with respect to the Bank on a timely basis as may be necessary or desirable for Purchaser to include or incorporate in any Purchaser SEC Filings or as may be needed in connection with any capital markets activities conducted by Purchaser.
6.03 Shareholder Covenants. From the date hereof through the Closing, except as expressly provided in this Agreement or as otherwise consented to in writing in advance by Purchaser, each Seller agrees not to (i) transfer any of the Bank Common Stock, (ii) exercise any of its voting rights with respect to the Bank to the extent such exercise would be contrary to the provisions of this Agreement or would cause the Sellers to violate the provisions of this Agreement, (iii) create any Lien or other Adverse Right in respect of the Bank Common Stock, (iv) take any action or fail to take any action that would cause or would be likely to cause a Material Adverse Effect with respect to the Bank or (v) take, offer, propose or authorize any of, or commit or agree to take any of, the foregoing actions or inactions.
6.04 Regulatory Applications; Third-Party Consents.
(a) Each of the Sellers and Purchaser will cooperate and use commercially reasonable efforts to prepare as promptly as practicable all documentation, to (i) make all filings and obtain all consents, approvals, permits and other authorizations of all Governmental Entities, necessary to consummate the transactions contemplated hereby (the “Requisite Regulatory Approvals”); (ii) make all filings and obtain all consents, approvals, permits and other authorizations of all Governmental Entities necessary to consummate any transactions related to the transactions contemplated hereby; and (iii) obtain all Required Third-Party Consents. Each of the Sellers and Purchaser will have the right to review in advance, and to the extent practicable each will consult with the other, in each case subject to Applicable Law relating to
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the exchange of information, with respect to all material written information submitted to any third party or any Governmental Entity in connection with the Requisite Regulatory Approvals and the Required Third-Party Consents, other than any information which is otherwise confidential. In exercising the foregoing right, each of the parties will act reasonably and as promptly as practicable. Each party agrees that it will consult with the other party with respect to obtaining all material consents, approvals, permits and other authorizations of all third parties and Governmental Entities necessary or advisable to consummate the transactions contemplated hereby, and each party will keep the other party apprised of the status of material matters relating to completion of the transactions contemplated hereby.
(b) Each party will, upon request but subject to applicable confidentiality requirements, furnish the other parties with all information concerning itself, its Affiliates, directors, officers and shareholders and such other matters as may be reasonably necessary, proper, desirable or advisable in connection with any filing, notice or application made by or on behalf of such other party or any of its Affiliates with or to any third party or Governmental Entity in connection with the transactions contemplated hereby.
(c) Notwithstanding the foregoing or anything else in this Agreement:
(1) No Seller shall amend, modify, supplement or waive the terms and conditions of any Material Contract without the prior written consent of Purchaser, nor shall any Seller, without the prior written consent of Purchaser, pay or commit to pay to any person whose consent, waiver or approval is being sought any cash or other consideration, make any accommodation or commitment to incur any Liability or other obligation to such person in connection with such consent, waiver or approval; and
(2) Nothing shall require Purchaser to, and each Seller shall not, without the prior written consent of Purchaser, agree to, take any action or commit to take any action in connection with, or agree to any condition on, or request with respect to, any Requisite Regulatory Approval or Required Third-Party Consent that would (i) have any Material Adverse Effect or (ii) constitute a Burdensome Condition.
6.05 Press Releases. Each Seller will consult with Purchaser before issuing any press release, written employee communication or other written shareholder communication with respect to this Agreement and will not issue any such communication or make any such public statement without the prior written consent of Purchaser, which will not be unreasonably withheld or delayed. Purchaser will consult with, and consider in good faith the views of, the Bank before it or its Affiliates issues any press release, written employee communication or other written stockholder communication with respect to this Agreement and will not issue any such communication or make any such public statement without prior consultation in good faith with the Bank. The Bank and Purchaser will cooperate to develop all public communications of the Bank with respect to this Agreement and the transactions contemplated hereby and will make appropriate members of management available at presentations related to the transactions contemplated hereby as reasonably requested by the other party.
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6.06 Acquisition Proposals. Each Seller agrees that it will not, and will cause its Representatives and Affiliates not to, in each case directly or indirectly, solicit or encourage, or engage in any negotiations concerning, or provide any Confidential Information in connection with, or have any discussions with any person relating to, any Acquisition Proposal, or otherwise knowingly facilitate any effort or attempt to make or implement an Acquisition Proposal. Each Seller will immediately cease and cause to be terminated any of the foregoing actions relating to an Acquisition Proposal and will use its commercially reasonable efforts to enforce any confidentiality or similar agreement relating to an Acquisition Proposal. Shareholder will within one (1) Business Day advise Purchaser following receipt of any Acquisition Proposal and the substance thereof (including the identity of the person making such Acquisition Proposal and, if applicable, copies of any related written requests, expressions of interest, proposals or offers, including proposed letters of intent, agreements or other documents), and will keep Purchaser apprised of any related developments on a current basis.
6.07 Takeover Laws and Provisions. The Bank will not take any action that would cause the transactions contemplated hereby to be subject to requirements imposed by any Takeover Law and will take all necessary steps within its control to exempt (or ensure the continued exemption of) the transactions contemplated hereby from, or if necessary challenge the validity or applicability of, any applicable Takeover Law, as now or hereafter in effect.
6.08 Access; Information.
(a) Each Seller agrees that upon reasonable notice and subject to Applicable Law relating to the exchange of information, it will afford Purchaser, and Purchaser’s Representatives, such access during normal business hours throughout the period before the Closing to the books, records (including Tax Returns and work papers of independent auditors), properties, personnel and to such other information as Purchaser may reasonably request and, during such period, it will furnish promptly to Purchaser (i) a copy of each report, schedule and other document filed by it pursuant to the requirements of Applicable Law respecting banking or securities, and (ii) all other information concerning the business, properties and personnel of it as Purchaser may reasonably request. Neither Purchaser nor any Seller will be required to afford access or disclose information that would jeopardize attorney-client privilege. To the extent possible, the parties will make appropriate substitute arrangements in circumstances where the previous sentence applies.
(b) No investigation by Purchaser of the business and affairs of any Seller, pursuant to this Section 6.08 or otherwise, will affect or be deemed to modify or waive any representation, warranty, covenant or agreement in this Agreement, or the conditions to Purchaser’s obligation to consummate the transactions contemplated hereby.
(c) Each party shall hold, and shall cause its respective Affiliates and Representatives to hold, in strict confidence, except to the extent necessary to discharge obligations pursuant to Section 6.04 or unless compelled to disclose by judicial or administrative process or, based on the advice of its counsel, by other requirements of Applicable Law or the applicable Governmental Entity, all non-public records, books, contracts, instruments, computer data and other data and information, including Trade Secrets (each, whether oral or written and
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collectively, “Confidential Information”), concerning Purchaser, in the case of the Sellers, and concerning the Sellers, in the case of Purchaser, furnished to it by or on behalf of Purchaser, in the case of the Sellers, or the Sellers, in the case of Purchaser, or, in each case, any Affiliate or Representative thereof or otherwise in connection with the transactions contemplated hereby and any related integration or transition planning, it being understood that each party and its respective Affiliates and Representatives will use reasonable best efforts to preserve the confidential treatment of such Confidential Information (except to the extent that such Confidential Information can be shown to have been (i) previously known by such party on a non-confidential basis, (ii) independently developed by a party or its Representatives without use of Confidential Information, (iii) in the public domain through no fault of such party or (iv) later lawfully acquired from other sources, which are not prohibited from disclosing such information by a known contractual, legal, agency or fiduciary obligation, by the party to which it was furnished), and shall not release or disclose such Confidential Information to any other person, except its Representatives who (A) in its judgment need to know such information for the purpose of evaluating, negotiating, or consummating the transactions contemplated hereby, (B) are informed by it of the confidential nature of such information, and (C) agree or are required by internal policies or fiduciary or other legal obligations to keep such information confidential.
(d) At any time upon Purchaser’s written request, but in any event after the Closing, each Seller shall destroy or cause to be destroyed, all Confidential Information concerning Purchaser (and, following the Closing, all Confidential Information concerning the Bank) in the possession of such Seller or any of its Affiliates and Representatives, and, if requested by Purchaser, Shareholder will deliver a certificate certifying compliance with this provision on behalf of each of the Sellers. To the extent permitted by Applicable Law, each party will notify the other party promptly upon becoming aware that any of the Confidential Information has been disclosed to or obtained by a third party (other than as permitted by this Section 6.08). If this Agreement is terminated pursuant to its terms, each party agrees to promptly destroy all Confidential Information in its and its Affiliates’ possession and, if requested by another party, will deliver a certificate of a senior officer certifying compliance with this provision.
(e) Subject to its confidentiality obligations under this Section 6.08, each party and each of its respective Representatives (i) may retain Confidential Information of the other parties to the extent consistent with its compliance or record-retention policies or procedures or any legal requirement or standard and (ii) is not obligated to destroy any Confidential Information of the other parties that may be contained in its electronic back-up systems established for archival or disaster-recovery purposes.
6.09 Designated Securities. At the request of Purchaser, prior to the Closing, the Bank shall sell, liquidate or otherwise dispose of any Designated Securities such that no Designated Securities shall be held by the Bank as of the Closing; provided, however, that the Bank shall not be obligated to take the actions required by this Section 6.09, (i) unless and until the Bank shall be satisfied that the conditions to the obligation of the parties to consummate the transactions contemplated hereby will be satisfied or waived on or before the Closing Date, and (ii) in no event until two (2) days prior to the Closing Date.
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6.10 Employee Benefits Matters.
(a) Prior to the Closing, Shareholder and/or the Bank, as appropriate, shall take (or cause to be taken) all actions reasonably determined by Purchaser to be necessary or appropriate to (i) terminate, effective immediately prior to the Closing, the Bank’s participation in and liability for benefits under such plans which will not be retained by Purchaser, (ii) amend any Bank Plans intended to be retained by Purchaser, (iii) make, or cause to be made, all contributions to Sellers’ 401(k) plan for all or any portion of the plan year in which the Bank ceases participation in such 401(k) plan, including matching contributions and any employer non-elective contribution for the Continuing Employees, waiver, or cause to be waived, any hours requirement and any requirement that a participant be employed as of the last day of the plan year shall be waived for all Continuing Employees, and ensure that all Continuing Employees shall be one hundred percent (100%) vested in Sellers’ 401(k) plan, or (iv) provide substantiation of the foregoing or that other actions have been completed that are required to maintain compliance with Applicable Law, including ERISA and the Code.
(b) The Bank agrees to provide group medical coverage to their employees until the Closing in a manner reasonably expected to avoid triggering a Tax or penalty under Section 4980H of the Code.
(c) Purchaser agrees that it will, from and after the Closing, honor all employment Contracts entered into by the Bank prior to the date hereof and described in Section 6.11(c) of the Sellers Disclosure Letter, provided, that, such Contracts are not subject to any Taxes under Sections 280G or 409A of the Code. Where applicable and except to the extent that it would result in duplication of benefits, each Continuing Employee will receive full credit for service with the Bank for purposes of determining eligibility to participate and vesting under each employee benefit plan, program, policy or arrangement to be provided by Purchaser to such Continuing Employees to the same extent such service was recognized under the applicable benefit plan immediately preceding the Closing. If, after the Closing, any Continuing Employee is terminated from employment without cause prior to the first anniversary of the Closing Date, Purchaser shall provide severance benefits consisting of 1 weeks of pay for each Year of Service with the Bank or its Subsidiaries, with a minimum of 2.0 weeks salary and a maximum of twenty (20) weeks’ salary. “Year of Service” as used herein means each full twelve-month period for which such employee was an actual employee of the Bank and shall not include any such time period where such employee was previously employed by Purchaser, or any other entity other than the Bank. Such severance shall be subject to and conditioned on such Continuing Employee’s execution, delivery and non-revocation of a release of claims in favor of Purchaser and the Affiliates of Purchaser.
(d) Nothing in this Agreement, express or implied, shall create any right of an employee of the Bank who remains in the employment of Purchaser, the Bank or any of their Subsidiaries or Affiliates following the Closing (a “Continuing Employee”) to employment or continued employment for any specified period, of any nature or kind whatsoever, with Purchaser or any of its Subsidiaries or create any third-party beneficiary rights in any current or former employee, officer, director or independent contractor of Purchaser, the Bank or their
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respective Subsidiaries in respect of employment or any other matter. Nothing in this Agreement is intended to be, or shall be construed as, an amendment to any employee benefit plan, program, arrangement, policy or agreement. Section 6.10(d) of the Sellers Disclosure Letter lists all Continuing Employees who are disabled as of Closing under the Bank Plan that provides coverage for such disability, and such Bank Plan will continue to cover all such Continuing Employees until the date the Continuing Employee is no longer disabled, or the maximum disability period under such Bank Plan ends.
(e) To the extent permitted by Applicable Law and the terms of the applicable plan or arrangement, Purchaser shall amend any defined contribution plan sponsored by Purchaser, and Shareholder shall amend any defined contribution plan sponsored by Shareholder, as necessary, so that any Continuing Employee with an outstanding participant loan under the defined contribution plan sponsored by the Bank or an ERISA Affiliate shall have the opportunity to elect an in-kind rollover of the participant loan to Purchaser’s plan, provided that such loan is determined to be in compliance with ERISA and the Code.
(f) Purchaser will be responsible for providing continuation coverage required under COBRA to all of the employees and former employees of the Bank, including any beneficiaries who are or become “M&A Qualified Beneficiaries” (as defined in Treasury Regulations §54.4980B-9) as a result of the consummation of the transaction contemplated by this Agreement.
(g) Effective on or prior to the Closing, Sellers shall take, or cause to be taken, all actions necessary to fully liquidate and distribute to participants in the Bank’s Year-End Profit-Sharing Bonus Plan (“Profit-Sharing Bonus Plan”), Deferred Cash Incentive Plan (“Cash Incentive Plan”), and any other incentive compensation or bonus plan or arrangement listed on Section 5.02(x)(1) of the Bank’s Disclosure Letter (the “Other Incentive Plans”), all benefits accrued under the Profit-Sharing Bonus Plan, the Cash Incentive Plan, and the Other Incentive Plans so that neither Purchaser nor any of its Affiliates (including, following the Closing, the Bank) shall assume any Liabilities arising under or attributable to the Profit-Sharing Bonus Plan, the Cash Incentive Plan, or the other Incentive Plans. Prior to the Closing, Shareholder will deliver Schedule 6.10(g) listing the amounts to be distributed under each such plan pursuant to this Section 6.10(g).
(h) Sellers will provide reasonable cooperation with Purchaser in making any written or oral communications to the directors, officers or employees of the Bank pertaining to compensation or benefit matters that are affected by the transactions contemplated by this Agreement.
6.11 Title Surveys, Environmental Assessments, and Appraisals.
(a) At Purchaser’s written request, the Bank shall cause a Phase I environmental assessment (“Phase I Assessment”) to be performed (at Purchaser’s expense) covering any property owned by the Bank and specified in Purchaser’s request. Any Phase I Assessment shall be prepared by an environmental engineering firm mutually acceptable to the parties and shall assess with a reasonable degree of certainty the presence or absence of any
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Hazardous Materials and the potential costs in connection with any remedial action with respect to any Hazardous Materials found on, under, at or within the applicable property. The Bank will provide Purchaser with a copy of any Phase I Assessment performed. If any Phase I Assessment finds that any actions are necessary to contain, clean up or remediate any Hazardous Materials, or to bring any property of the Bank into compliance with applicable Environmental Laws or Applicable Law respecting zoning and building, the parties shall discuss in good faith the appropriate manner of addressing such findings.
(b) At Purchaser’s written request, the Bank shall obtain title insurance commitment (at the Bank’s expense) covering any property owned by the Bank and specified in Purchaser’s request. The Bank will provide Purchaser a copy of any title insurance commitment obtained, including any report listing exceptions, and Purchaser shall have the option to purchase a title insurance policy at Purchaser’s expense. If any requested title insurance cannot be obtained, or can only be obtained with exceptions not customarily included in title insurance available in the region where the property is located, the parties shall discuss in good faith the appropriate manner of addressing such inability to obtain customary insurance.
(c) Sellers shall cooperate with Purchaser (at Purchaser’s expense) in obtaining appraisals of the Bank Real Property.
6.12 Tax Matters.
(a) Tax Returns and Amendments.
(1) Purchaser shall timely prepare and file or cause to be filed with the appropriate authorities all Tax Returns required to be filed by the Bank after the Closing Date, other than income and franchise Tax Returns described in Section 6.12(a)(2) below. All such Tax Returns that pertain to a Pre-Closing Tax Period shall be prepared on a basis consistent with the past practice of the Bank (except as otherwise required by Applicable Law) and in a manner that does not distort Taxable income as between Pre-Closing Tax Periods and Tax periods beginning after the Closing Date and the portion of any Straddle Period beginning after the Closing Date (a “Post-Closing Tax Period”) (e.g., by deferring income or accelerating deductions). Purchaser shall furnish a copy of any Tax Returns pertaining to a Pre-Closing Tax Period to Shareholder for its review and comment at least thirty (30) days prior to the due date for filing such Tax Returns, including extensions. Purchaser shall take into account any reasonable comments provided at least fifteen (15) Business Days prior to the due date for filing such Tax Returns. Except as required by Applicable Law, Purchaser shall not amend (and shall not permit any of its Affiliates (including the Bank) to amend) any income Tax Return of the Bank relating to a Pre-Closing Tax Period without the prior written consent of Shareholder (such consent not to be unreasonably withheld, conditioned or delayed).
(2) Shareholder shall cause the timely preparation and filing (or will provide to Purchaser for timely filing) with the appropriate authorities all income and franchise Tax Returns required to be filed by the Bank for Tax periods ending on or before the Closing Date. All such Tax Returns shall be prepared on a basis consistent with the past practice of the Bank (except as otherwise required by Applicable Law) and in a manner that does not distort
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Taxable income as between Pre-Closing Tax Periods and Post-Closing Tax Periods (e.g., by deferring income or accelerating deductions). Shareholder shall furnish such Tax Returns to Purchaser for its review and filing at least thirty (30) days prior to the due date, including extensions, for filing such Tax Returns. Seller shall take into account any reasonable comments provided by Purchaser at least fifteen (15) Business Days prior to the due date for filing such Tax Return. Purchaser shall timely file such Tax Returns as furnished, or otherwise approved in writing, by Seller, except as otherwise required by Applicable Law. Purchaser and Shareholder agree to cause the Bank to file all Tax Returns for any Tax period including the Closing Date on the basis that the relevant Tax period ended as of the close of business on the Closing Date, unless the relevant Governmental Entity will not accept a Tax Return filed on that basis.
(b) Proration of Taxes.
(1) With respect to a Straddle Period, the Taxes that shall be treated as attributable to a Pre-Closing Tax Period shall be determined as follows: (i) to the extent such Tax is calculated on a basis other than income, profit, receipts, or gains, such as property Tax, such Tax shall be prorated based on the number of days in such Tax period up to and including the Closing Date, except that any increase in Taxes that would not have occurred but for the transactions contemplated by this Agreement shall not be taken into account and (ii) to the extent such Tax is measured by income or receipts or otherwise not described in (i), above, such Tax shall be allocated based on a closing of the books on the Closing Date with respect to the Bank.
(2) In the case of Taxes that are payable with respect to a Straddle Period, the portion of any such Taxes that shall be treated as attributable to a Post-Closing Tax Period shall be all such Taxes other than the Taxes attributable to a Pre-Closing Tax Period pursuant to Section 6.12(b)(1) hereof.
(c) Cooperation. Each of the Sellers and Purchaser shall reasonably cooperate, and shall cause their respective Affiliates, officers, employees, agents, auditors and Representatives reasonably to cooperate, in preparing and filing all Tax Returns, including maintaining and making available to each other all records necessary in connection with Taxes and in resolving all disputes and audits with respect to all Tax periods relating to Taxes. Purchaser and the Sellers recognize that Shareholder and its Affiliates will need access, from time to time, after the Closing Date, to certain accounting and Tax records and information held by the Bank to the extent such records and information pertain to events occurring prior to the Closing Date; therefore, Purchaser agrees to (i) use best efforts to properly retain and maintain such records until such time as Shareholder agrees that such retention and maintenance is no longer necessary, and (ii) allow Shareholder and its agents and Representatives (and agents or Representatives of any of its Affiliates), at times and dates mutually acceptable to the parties, to inspect, review and make copies of such records as Shareholder may deem necessary or appropriate from time to time, such activities to be conducted during normal business hours and at Shareholder’s expense.
(d) Shareholder’s Liability for Taxes. Shareholder shall indemnify, defend and hold harmless Purchaser and its Affiliates from, against, and in respect of any Losses incurred or sustained by, or imposed upon, any such indemnified party based upon, arising out
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of, with respect to or by reason of: (i) Taxes of the Bank with respect to a Pre-Closing Tax Period; (ii) any breach of or inaccuracy in any representation, warranty or covenant contained in Section 5.02(u) and this Section 6.12 (it being understood that for purposes of this Section 6.12(d), in determining the amount of any Losses in respect of a breach of any such representation or warranty, any qualifications relating to materiality (including Material Adverse Effect) or Knowledge contained in any such representation or warranty shall be disregarded); (iii) transfer Taxes for which Shareholder is responsible pursuant to Section 6.12(f); and (iv) without duplication, Taxes directly or indirectly arising from, related to or attributable to the breach or nonperformance of any covenant or agreement of the Sellers contained in this Agreement; and (v) without limitation on clauses (i) through (iv) of this Section 6.12(d), any Taxes attributable to failure to properly withhold Tax from any payment and/or failure to pay any amount required to be withheld to a Governmental Entity, or to properly report any Tax item to a Governmental Entity, in each case, to the extent such failure (A) arises as a result of reliance by Purchaser or the Surviving Company on the Tax forms, client information and information reporting methodologies maintained by the Bank as of the Closing Date and (B) occurs prior to the first (1st) anniversary of the Closing Date.
(e) Procedures Relating to Indemnification of Tax Claims.
(1) If a claim shall be made by any Governmental Entity, which, if successful might result in an indemnity payment by Shareholder to Purchaser or any of its Affiliates under Section 6.12(d) (a “Tax Claim”), Purchaser shall promptly notify Shareholder of such Tax Claim in writing and in reasonable detail. Failure to provide such notice shall not limit the right of Purchaser and its Affiliates to be indemnified under Section 6.12(d), except to the extent Shareholder’s ability to participate as to such Tax Claim is actually and materially prejudiced thereby.
(2) With respect to any Tax Claim with respect to income or franchise Taxes relating to a Tax period ending on or before the Closing Date, Shareholder shall control all proceedings taken in connection with such Tax Claim (including selection of counsel) and, without limiting the foregoing, may in its sole discretion pursue or forego any and all administrative appeals, proceedings, hearings and conferences with any Governmental Entity with respect thereto, and shall either, in its sole discretion, pay the Tax claimed and sue for a refund on behalf of Shareholder where Applicable Law permits such refund suits, or contest the Tax Claim in any permissible manner; provided that (i) Purchaser may at its own expense participate in the Proceedings related to such Tax Claim, (ii) Shareholder shall keep Purchaser reasonably and timely informed with respect to the commencement, status and nature of such Tax Claim, (iii) Shareholder shall consider any reasonable comments proposed by Purchaser that are related to the defense of such Tax Claim and (iv) Shareholder shall not settle, compromise or dispose of such Tax Claim without the consent of Purchaser, such consent not to be unreasonably withheld, conditioned or delayed.
(3) With respect to any Tax Claim relating to a Straddle Period, Purchaser shall have the right to control all Proceedings and may make any decisions in connection with any Tax Proceeding related to such Straddle Period; provided, however, that (i)
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Shareholder may at the its own expense participate in the Proceedings related to such Tax Claim, if permitted by the Governmental Entity, (ii) Purchaser shall keep Shareholder reasonably and timely informed with respect to the commencement, status and nature of such Tax Claim, and (iii) Purchaser shall not settle, compromise or dispose of such Tax Proceeding without the prior written consent of Shareholder, such consent not to be unreasonably withheld, conditioned or delayed.
(4) With respect to any Tax Claim not described in Section 6.12(e)(2) or (3), Purchaser shall have the right to control all Proceedings and may make any decisions in connection with such Tax Claim; provided that (i) Purchaser shall not settle, compromise or dispose of a Tax Claim with respect to a Pre-Closing Tax Period for which Shareholder may be liable under this Section 6.12 without consent of Shareholder, such consent not to be unreasonably withheld, conditioned or delayed and (ii) Purchaser shall not settle, compromise or dispose of such Tax Claim in a manner that would either (x) shift income from a Post-Closing Tax Period to a Pre-Closing Tax Period or (y) shift deductions from a Pre-Closing Tax Period to a Post-Closing Tax Period, without the consent of Shareholder, such consent not to be unreasonably withheld, conditioned or delayed.
(5) Purchaser and the Bank and each of their respective Affiliates shall cooperate with Shareholder in contesting any Tax Claim, which cooperation shall include the retention and (upon any request of Shareholder) the provision to Shareholder, of records and information that are reasonably relevant to such Tax Claim, and making employees available on a mutually convenient basis to provide additional information or explanation of any material provided hereunder or to testify at proceedings relating to such Tax Claim.
(f) Transfer Taxes. All transfer, documentary, sales, use, value-added, registration and other such Taxes (including all applicable real estate transfer or gains Taxes) and related fees (including any penalties, fines, interest and additions to Tax) incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by Shareholder, and Shareholder shall file all appropriate Tax Returns as may be required with respect to such Taxes. Shareholder and Purchaser shall cooperate in timely making all Tax Returns as may be required to be filed in the preceding sentence.
(g) Survival; Interaction with ARTICLE VII. The representations and warranties in Section 5.02(u) and the indemnification obligations pursuant to this Section 6.12 shall survive the Closing until sixty (60) days following the expiration of the applicable statute of limitations (including any extensions thereof) relevant to each particular item, including any indemnification obligation arising from a breach of the representations and warranties; provided that if notice of indemnification under Section 6.12(e)(1) is provided to the indemnifying party prior to any such expiration date, any obligation to indemnify for any claim described in such notice shall continue indefinitely until such claim is finally resolved. Indemnification for Losses with respect to the matters set forth in Section 6.12(d) shall be governed solely by this Section 6.12 and the provisions of Article VII (other than Section 7.01(a)(2)) shall not be applicable to indemnification with respect to Taxes.
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(h) Amounts Payable. As more specifically described in the following sentence, Shareholder shall pay all amounts payable pursuant to this Section 6.12 promptly following receipt from Purchaser of a claim for a Loss that is the subject of indemnification hereunder. In any event, Shareholder shall pay to Purchaser, by wire transfer of immediately available funds, the amount of any Loss for which it is liable hereunder no later than ten (10) Business Days following any Final Determination of such Loss and the indemnifying party’s liability therefor. A “Final Determination” shall exist when (i) the parties to the dispute have reached an agreement in writing, (ii) a court of competent jurisdiction shall have entered a final and non-appealable order or judgment or (iii) an arbitration or like panel shall have rendered a final non-appealable determination with respect to disputes the parties have agreed to submit thereto. Except as otherwise required by Applicable Law, all payments made by Shareholder in respect of any claim pursuant to Section 6.12(d) shall be treated as adjustments to the Purchase Price for Tax purposes.
6.13 Further Assurances. The parties agree that, from time to time, whether before, on or after the Closing Date, each of them will execute and deliver such further instruments of conveyance and transfer and take such other action as may be reasonably necessary to carry out the purposes and intents of this Agreement.
6.14 Non-Competition and Non-Solicitation.
(a) During the period beginning on the Closing Date and ending on the third (3rd) anniversary of the Closing Date (the “Non-Competition Period”), Shareholder shall not, directly or indirectly, engage in the business of the Bank (any such business, a “Competing Business”) in the Designated Markets; provided, however, that the limitations of this Section 6.14(a) shall not apply to control of up to three percent (3%) of the outstanding securities of any entity (i) the securities of which are listed and traded on a nationally recognized securities exchange or market and (ii) that is engaged in the Competing Business; as long as Shareholder does not otherwise control such entity. In addition, the provisions of this Section 6.14(a) shall not apply to Shareholder’s operation of Lincoln Community Bank and United Community Bank until the closing of the sales of such banks; and (b) Shareholder shall be permitted to attempt to collect any loans that are transferred to Shareholder as excluded assets in any of the sales of its Affiliate banks. In addition to Shareholder’s covenants set forth in this Section 6.14(a), Greg LeGare shall execute a Non-Competition Agreement in the form of Exhibit C, to be effective as of the Closing Date.
(b) During the Non-Competition Period, Shareholder shall not, directly or indirectly, solicit for employment or hire any Continuing Employee; provided that this Section 6.14(b) shall not prohibit (i) solicitation by means of a general purpose advertisement not specifically targeted at the Continuing Employees or hiring any Continuing Employee as a result of such general purpose advertisement or (ii) hiring any Continuing Employee who was terminated by Purchaser or any of its Affiliates after the Closing Date.
(c) During the Non-Competition Period, Shareholder shall not, and shall cause its Affiliates (other than the Bank) and its and their respective directors and officers not to, directly or indirectly, (i) use any information regarding the Bank to solicit or engage in other
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efforts directed to or targeted at any customer or customers of the Bank with respect to providing services similar to those provided to such customers by the Bank as of the Closing Date or (ii) use such information to take any other actions that are designed to induce any customer of the Bank to transfer any portion of such customer’s relationships with Purchaser to a similar business of Shareholder or any of its Affiliates (other than the Bank). In addition to Shareholder’s covenants set forth in Sections 6.14(b) and (c), the persons listed on Schedule 6.14(c) of the Sellers Disclosure Letter, for the respective periods listed on Schedule 6.14(c) of Sellers Disclosure Letter, shall each execute Non-Solicitation Agreement in the form of Exhibit D, to be effective as of the Closing Date.
(d) Shareholder acknowledges that (a) as between Shareholder and the Bank, the Bank owns all trademarks, service marks, trade dress, trade names, and domain names consisting of or incorporating the terms set forth in Section 6.14(d) of the Sellers Disclosure Letter (collectively, the “Bank Marks”), and (b) Shareholder has no rights, or is not acquiring any rights, to use the Bank Marks after the Closing Date. Shareholder may not use any Bank Marks after the Closing Date, except that Shareholder may at all times after the Closing Date retain records and other historical or archived documents containing or referencing the Bank Marks.
(e) Shareholder understands and acknowledges that (i) it would be difficult to calculate damages to Purchaser from any breach of the obligations under this Section 6.14, (ii) injury to Purchaser from any such breach would be irreparable and impossible to measure and (iii) the remedy under Applicable Law for any breach or threatened breach of this Section 6.14 would therefore be an inadequate remedy and, accordingly, Purchaser shall, in addition to all other available remedies (including seeking such damages as it can show it has sustained by reason of such breach and/or the exercise of all other rights it has under this Agreement), be entitled to seek injunctive relief, specific performance and other equitable remedies without the necessity of showing actual damages or posting bond. Shareholder shall be responsible for breaches of this Section 6.14 by its Affiliates (other than the Bank) and its and their respective directors and officers.
(f) Shareholder understands and acknowledges that the restrictive covenants and other agreements contained in this Section 6.14 are an essential part of this Agreement. It is the intention of the parties that, if any of the restrictions or covenants contained herein are held to cover a geographic area or to be for a length of time that is not permitted by Applicable Law, or is in any way construed to be too broad or to any extent invalid, such provision shall not be construed to be null, void and of no effect, but to the extent that such provision would then be valid or enforceable under Applicable Law, such provision shall be construed and interpreted or reformed to provide for a restriction or covenant having the maximum enforceable geographic area, time period and other provisions as shall be valid and enforceable under Applicable Law.
(g) For the avoidance of doubt, none of the restrictions imposed by applicable subsections of this Section 6.14 shall apply to any person that is an Affiliate of a party to this Agreement if such person ceases to be an Affiliate of such party.
6.15 Representatives’ Fees. Prior to the Determination Date, all fees or other payments due to any Representatives of the Bank in respect of the transactions contemplated hereby shall
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be fully paid or fully accrued on the Bank’s financial accounts and the Determination Date Balance Sheet.
6.16 Retention and Stay Bonuses; Employment Agreement.
(a) Each employee of the Bank who is listed on Section 6.16 of Purchaser’s Disclosure Letter shall be eligible to receive the retention bonus set forth on Section 6.16 of Purchaser’s Disclosure Letter pursuant to a retention agreement in form and substance reasonably satisfactory to Purchaser and Shareholder. Each employee of the Bank who is listed on Section 6.16 of Purchaser’s Disclosure Letter shall be eligible to receive the stay bonus set forth on Section 6.16 of Purchaser’s Disclosure Letter pursuant to a stay bonus agreement in form and substance reasonably satisfactory to Purchaser and Shareholder.
(b) Concurrently with the execution and delivery of this Agreement, Shareholder has delivered to Purchaser an employment agreement, in form and substance reasonably satisfactory to Purchaser, duly executed by the Bank’s current president and CEO, Trevor Bohland, and Purchaser has delivered to Shareholder and Trevor Bohland, an executed counterpart to such employment agreement.
6.17 Voting and Support Agreement. Concurrently with the execution and delivery of this Agreement, Shareholder has delivered to Purchaser a voting and support agreement, in form and substance satisfactory to Purchaser, approving this Agreement and the consummation of the contemplated transaction, duly executed by the shareholder listed on Section 6.17 of the Sellers Disclosure Letter.
6.18 MasterCard Covenant. As promptly as practicable following the execution of this Agreement Seller shall initiate negotiations with MasterCard to amend the MasterCard Agreement to (i) reapportion the amount of transaction volume, revenue and any other measure under the MasterCard Agreement, including, without limitation, the Cumulative Qualified Volume Amount (as defined in the MasterCard Agreement), so that such amounts relate to the Bank only (and not any other Affiliate of Shareholder), (ii) affirm that the MasterCard Agreement can be operated by CCF Bank together with that certain Growth Agreement dated June 21, 2017 by and between Visa U.S.A. Inc. and CCF Bank (the “Visa Agreement”), and (iii) such other provisions as would mitigate the Liability of CCF Bank in operating the MasterCard Agreement following the Closing. Purchaser shall cooperate with Seller in such negotiations to obtain such amended MasterCard Agreement. Based upon the results of those negotiations and further evaluation of the costs associated therewith and the costs associated with the termination of the MasterCard Agreement, Shareholder and Purchaser will determine whether CCF Bank, following the Closing, will assume responsibility for operation under such amended MasterCard Agreement or whether the Bank, at or upon the Closing, will cease operating under the MasterCard Agreement.
ARTICLE VII
INDEMNIFICATION
INDEMNIFICATION
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7.01 Survival.
(a) The representations and warranties in this Agreement shall survive the Closing as follows:
(1) the representations and warranties in Sections 5.02(a) – 5.02(h), 5.02(j), 5.02(x)(5), and 5.03(a) –5.03(g) shall survive indefinitely;
(2) the representations and warranties in Section 5.02(u) shall survive pursuant to Section 6.12(g); and
(3) all other representations and warranties in this Agreement not specified in Sections 7.01(a)(1)–(2) shall survive until the dated that is eighteen (18) months after the Closing.
(b) The covenants and agreements of the parties contained in this Agreement shall, subject to the express terms thereof, survive the Closing indefinitely.
(c) Each of the representations and warranties in Article V is separate and, unless otherwise specifically provided, is not limited by reference to any other representation or warranty or any other provision in this Agreement.
7.02 Indemnification of Shareholder and Bank Directors and Officers by Purchaser.
(a) Without limiting any right to indemnification available to any person by Contract or Applicable Law, following the Closing, Purchaser will indemnify, defend and hold harmless Shareholder, its Affiliates, the present directors and officers (when acting in such capacity) of the Bank and their respective agents, heirs, successors and permitted assigns (each, a “Seller Indemnified Party”) against all Losses resulting from, arising out of or incurred in connection with:
(1) any failure of any representation or warranty made by Purchaser that is referred to in:
(i) Sections 7.01(a)(1); or
(ii) Section 7.01(a)(3);
in each case, to be true and correct as of the date of this Agreement or as of, and as if made on, the Closing Date; it being understood that for purposes of this Section 7.02(a)(1), in determining the amount of any Losses in respect of the failure of any such representation or warranty to be true and correct as of any particular date, any qualifications relating to materiality (including Material Adverse Effect) or Knowledge contained in any such representation or warranty shall be disregarded;
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(2) any nonfulfillment or breach of any covenant or agreement made by Purchaser in this Agreement; and
(3) any Third-Party Claim arising out of the conduct of the business by Purchaser or the Bank after the Closing except to the extent the Purchaser Indemnified Parties are entitled to indemnity with respect thereto pursuant to Section 7.03.
(b) The Seller Indemnified Parties shall not be entitled to assert any indemnification pursuant to Section 7.02(a)(1)(ii) after the date that is eighteen (18) months after the Closing Date; provided that if on or prior to such date, a notice of claim shall have been given to Purchaser pursuant to Section 7.04 hereof for such indemnification, the Seller Indemnified Parties shall continue to have the right to be indemnified pursuant to this Section 7.02 with respect to the matter or matters to which such claim relates until such claim for indemnification has been satisfied or otherwise resolved.
(c) Any indemnification of a Seller Indemnified Party pursuant to this Section 7.02 shall be effected by wire transfer or transfers of immediately available funds from Purchaser to an account or accounts designated by the applicable Seller Indemnified Party in writing to Purchaser within five (5) Business Days after the determination thereof.
(d) The provisions of this Section 7.02 shall survive the Closing and are intended to be for the benefit of, and will be enforceable by, each Seller Indemnified Party and his, her, or its heirs and Representatives.
7.03 Indemnification of Purchaser by Shareholder.
(a) Without limiting any right to indemnification available to any person by Contract or Applicable Law, following the Closing, Shareholder shall indemnify and hold harmless Purchaser and its Affiliates and its and their respective officers, directors, employees, shareholders, agents, heirs, successors and permitted assigns, each in their capacity as such (each, a “Purchaser Indemnified Party”), against all Losses resulting from, arising out of or incurred in connection with:
(1) any failure of any representation or warranty made by any Seller that is referred to in:
(i) Section 7.01(a)(1); or
(ii) Section 7.01(a)(3);
in each case, to be true and correct as of the date of this Agreement or as of, and as if made on, the Closing Date; it being understood that for purposes of this Section 7.03(a)(1), in determining the amount of any Losses in respect of the failure of any such representation or warranty to be true and correct as of any particular date, any qualifications relating to materiality (including Material
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Adverse Effect) or Knowledge contained in any such representation or warranty shall be disregarded;
(2) any nonfulfillment or breach of any covenant or agreement made by any Seller in this Agreement;
(3) any Liability of the Bank to Shareholder or to any Affiliate of Shareholder (other than the Bank) existing as of, or related to the period prior to, the Closing Date;
(4) any Liability of Shareholder or any Affiliate of Shareholder; and
(5) any Liability of the Bank, Purchaser or CCF Bank resulting from the actions taken with respect to that certain MasterCard Incentive Enrollment Agreement dated June 6, 2016 (the “MasterCard Agreement”) by and between MasterCard International Incorporated (“MasterCard”) and the Bank as set forth in Section 6.18 of this Agreement (for purposes of this Section 7.03(a)(5)(A), Liabilities shall include, without limitation, (i) if the Bank or CCF Bank cease operating under the MasterCard Agreement, any amount owing to MasterCard under the MasterCard Agreement; and (ii) if CCF Bank continues to operate under the MasterCard Agreement following the Closing, any (a) revenues, to the extent in excess of those that CCF Bank receives under the MasterCard Agreement, which CCF Bank would have received through the Visa Agreement but for CCF Bank’s continued operation of the MasterCard Agreement, and (b) increased administrative costs, including the reasonable costs of third parties (including unaffiliated network provides) hired in good faith to assist CCF Bank to operate under both the Visa Agreement and the MasterCard Agreement, related to operation of the MasterCard Agreement).
(b) Any indemnification of a Purchaser Indemnified Party pursuant to this Section 7.03 shall be effected by the parties executing joint written instructions to the Escrow Agent for the release from the Indemnification Escrow Account to Purchaser in an amount equal to the amount of the indemnification payment to an account designated by the applicable Purchaser Indemnified Party in the joint written instructions. Such joint written instructions shall be delivered to the Escrow Agent within five (5) Business Days after the determination of the indemnification amount.
(c) The Purchaser Indemnified Parties shall not be entitled to assert any indemnification pursuant to Section 7.03(a)(1)(ii) after the date that is eighteen (18) months after the Closing Date; provided that if on or prior to such date a notice of claim shall have been given to Shareholder pursuant to Section 7.04 hereof for such indemnification, the Purchaser Indemnified Parties shall continue to have the right to be indemnified pursuant to this Section 7.03 with respect to the matter or matters to which such claim relates until such claim for indemnification has been satisfied or otherwise resolved.
(d) Any dispute between Shareholder and the Purchaser Indemnified Parties regarding a claim for indemnification shall be resolved by a court of competent jurisdiction
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pursuant to Section 10.04 of this Agreement. After receipt of a Final Determination, the parties shall give joint written instructions to the Escrow Agent as set forth in Subsection (b), above.
(e) The provisions of this Section 7.03 shall survive the Closing and are intended to be for the benefit of, and will be enforceable by, each Purchaser Indemnified Party and its successors and Representatives.
7.04 Procedures Relating to Indemnification.
(a) If an indemnified party shall desire to assert any claim for indemnification provided for under this Article VII in respect of, arising out of or involving a claim or demand made by any person (other than a party hereto or Affiliate thereof) against the indemnified party (a “Third-Party Claim”), such indemnified party shall notify the indemnifying party in writing, and in reasonable detail (taking into account the information then available to such indemnified party), of the Third-Party Claim promptly after receipt by such indemnified party of written notice of the Third-Party Claim; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except to the extent the indemnifying party shall have been actually and materially prejudiced as a result of such failure. The indemnified party shall deliver to the indemnifying party, promptly after the indemnified party’s receipt thereof, copies of all notices and documents (including court papers) received by the indemnified party relating to the Third-Party Claim; provided, however, that the failure to deliver such copies shall not affect the indemnification provided hereunder except to the extent the indemnifying party shall have been actually and materially prejudiced as a result of such failure.
(b) If a Third-Party Claim is made against an indemnified party, the indemnifying party will be entitled to participate in the defense thereof (at its expense) and, if it so chooses, within ten (10) days of receiving notice of such claim acknowledges without reservation its obligation to indemnify the indemnified party therefor and furnishes acceptable evidence of the resources necessary to properly defend such matter, to assume the defense thereof (at its expense) with counsel selected by the indemnifying party and satisfactory to the indemnified party; provided, however, that the indemnifying party shall not have the right to assume the defense of any Third-Party Claim that (i) is a criminal claim or involves any allegations of criminal wrongdoing or fraud, (ii) is a claim by a Governmental Entity or involves an alleged violation of Applicable Law, (iii) seeks injunctive or other non-monetary relief, (iv) is, in the case of Purchaser, material to Purchaser or the Surviving Company, or (v) relates to the period after the Closing.
(c) Should the indemnifying party have the right to assume the defense of a Third-Party Claim and elect to so assume the defense of such Third-Party Claim, the indemnifying party will not be liable to the indemnified party for legal expenses subsequently incurred by the indemnified party in connection with the defense thereof, unless the Third-Party Claim involves potential conflicts of interest or different defenses for the indemnified party and the indemnifying party. If the indemnifying party assumes such defense, the indemnified party shall have the right to participate in defense thereof and to employ counsel, at its own expense (except as provided in the immediately preceding sentence), separate from the counsel employed by the indemnifying party, it being understood that the indemnifying party shall control such
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defense. If the indemnified party reasonably determines (i) that the indemnifying party failed or is failing to adequately prosecute or defend any Third-Party Claim for which it has assumed the defense, (ii) that the conduct of the defense of any claim subject to indemnification hereunder or any proposed settlement of any such claim by the indemnifying party might be expected to affect adversely the indemnified party’s Tax Liability or (in the event the indemnified party is a Purchaser Indemnified Party) the ability of Purchaser to conduct its business, or (iii) that the indemnified party may have available to it one or more defenses or counterclaims that are inconsistent with one or more of those that may be available to the indemnifying party in respect of such claim or any litigation thereto, then the indemnified party may revoke the ability of the indemnifying party to control the defense of such claim and may, itself, assume the defense of such Third-Party Claim, at the expense of the indemnifying party. The indemnifying party shall be liable for the fees and expenses of counsel employed by the indemnified party for any period during which the indemnifying party has not assumed the defense thereof and as otherwise contemplated by (i), (ii) and (iii) above.
(d) If the indemnifying party chooses to defend any Third-Party Claim, all the parties shall reasonably cooperate in the defense or prosecution thereof. Such cooperation shall include the retention and (upon the indemnifying party’s reasonable request) the provision to the indemnifying party of records and information that are reasonably relevant to such Third-Party Claim, and use of all reasonable efforts to make employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Whether or not the indemnifying party shall have assumed the defense of a Third-Party Claim, the indemnified party shall not admit any Liability with respect to, or settle, compromise or discharge, such Third-Party Claim without the indemnifying party’s prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed). The indemnifying party may pay, settle or compromise a Third-Party Claim without the written consent of the indemnified party, so long as such settlement (i) includes an unconditional release of the indemnified party from all Liability in respect of such Third-Party Claim, (ii) does not subject the indemnified party to any injunctive relief or other equitable remedy or any other obligation other than solely the payment of monetary damages for which the indemnified party will be indemnified hereunder, and (iii) does not include a statement or admission of fault, culpability or failure to act by or on behalf of the indemnified party.
(e) If an indemnified party shall desire to assert any claim for indemnification provided for under this Article VII other than a claim in respect of, arising out of or involving a Third-Party Claim, such indemnified party shall notify the indemnifying party in writing, and in reasonable detail (taking into account the information then available to such indemnified party), of such claim promptly after becoming aware of the existence of such claim; provided that the failure to give such notification shall not affect the indemnification provided for hereunder except to the extent the indemnifying party shall have been actually and materially prejudiced as a result of such failure. If the indemnifying party does not respond to such notice within forty-five (45) days after its receipt, it will have no further right to contest the validity or amount of such claim.
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(f) The parties agree that Shareholder shall act in all respects under this Article VII as the Seller Indemnified Party and indemnifying party on behalf of the Sellers.
7.05 Limitations on Indemnification.
(a) Shareholder shall have no Liability for any claim for indemnification pursuant to Section 7.03(a)(1) if the Loss associated with such claim is less than five thousand dollars ($5,000) (any such claim being referred to as a “De Minimis Claim”). Shareholder shall have no Liability for indemnification pursuant to Section 7.03(a)(1)(ii) with respect to Losses for which indemnification is provided thereunder unless the aggregate amount of such Losses (including all Losses associated with De Minimis Claims) exceeds two hundred fifty thousand dollars ($250,000) (the “Indemnity Threshold”), in which case Shareholder shall be liable for all Losses in excess of the Indemnity Threshold (excluding all Losses associated with De Minimis Claims); provided that in no event shall the aggregate indemnification to be paid by Shareholder (i) pursuant to Section 7.03(a)(1)(ii) exceed five million dollars ($5,000,000) or (ii) pursuant to Section 7.03(a)(1)(i) exceed twenty-five million dollars ($25,000,000).
(b) Purchaser shall have no Liability for any claim for indemnification pursuant to Section 7.02(a)(1) if the Loss is associated with any De Minimis Claim. Purchaser shall have no Liability for indemnification pursuant to Section 7.02(a)(1)(ii) with respect to Losses for which indemnification is provided thereunder unless the aggregate amount of such Losses (including all Losses associated with De Minimis Claims) exceeds the Indemnity Threshold, in which case Purchaser shall be liable for all Losses in excess of the Indemnity Threshold (excluding all Losses associated with De Minimis Claims); provided that in no event shall the aggregate indemnification to be paid by Purchaser (i) pursuant to Section 7.02(a)(1)(ii) exceed five million dollars ($5,000,000) or (ii) pursuant to Section 7.02(a)(1)(i) exceed twenty-five million dollars ($25,000,000).
(c) The limitations specified in Sections 7.05(a)–7.05(b) shall not apply in respect of fraudulent breaches of representations and warranties or willful concealment of any matter which breaches a representation or warranty.
(d) No indemnified party shall be entitled to recover from an indemnifying party more than once in respect of the same Losses.
7.06 Indemnity Payments. All payments made pursuant to this Article VII (other than interest payments) shall be treated by the parties on all Tax Returns as adjustments to the Purchase Price.
7.07 Insurance; Recoveries. The amount of any Loss subject to indemnification hereunder shall be calculated net of any insurance proceeds or other payments actually received by the indemnified party from any insurer or other third party on account of such Loss (as reduced by any related retrospective or prospective increase in premiums and taking into account all costs and expenses reasonably incurred in procuring such proceeds or payments, and any Taxes paid or payable as a result of the receipt of such proceeds or payments). The indemnified party shall be under no obligation to pursue any insurance claim with respect to a matter for
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which such party is claiming indemnity under this Agreement if the indemnified party reasonably believes the cost of pursuing such insurance claim, including any increase in premium related thereto, would be greater than the potential recovery. To the extent that the indemnified party pursues an insurance claim and the costs related thereto (as described in the parenthetical above) exceed the insurance proceeds, the excess will be treated as a Loss. If the amount of any Loss suffered by any indemnified party is reduced, at any time subsequent to any payment in respect thereof by an indemnifying party pursuant to recovery from any insurer or other third party on account of such Loss, an amount equal to the amount of such reduction (not to exceed, in any event, the amount so previously paid in respect thereof by the indemnifying party), less any costs incurred in obtaining such recovery, shall either promptly be repaid by the indemnified party to the indemnifying party or will serve as an offset of other amounts owed by the indemnifying party to the indemnified party.
7.08 Waiver. Shareholder agrees that any information supplied by the Bank or by or on behalf of any of the employees, directors, agents or officers of the Bank to Shareholder or its advisers in connection with this Agreement, the information in the Sellers Disclosure Letter or otherwise shall not constitute a warranty, representation or guarantee as to the accuracy of such information in favor of Shareholder, and Shareholder hereby undertakes to Purchaser and to the Bank that it waives any and all claims which it might otherwise have against any of them in respect of such claims.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE CLOSING
CONDITIONS PRECEDENT TO THE CLOSING
8.01 Conditions to Each Party’s Obligation to Effect the Closing. The respective obligation of each party to consummate the transactions contemplated hereby is subject to the fulfillment or written waiver by each party on or before the Closing Date of each of the following conditions:
(a) Stockholder Approvals. This Agreement shall have been duly approved by Shareholder (this Agreement being conclusive evidence of such approval) in accordance with the South Dakota Business Corporation Act.
(b) Regulatory Approvals. (i) Each of the Requisite Regulatory Approvals shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired and (ii) no Governmental Entity in connection with, or as a condition to receipt of, any such Requisite Regulatory Approval shall have imposed a Burdensome Condition.
(c) No Injunction. No Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Applicable Law (whether temporary, preliminary or permanent) which is in effect and prohibits consummation of the transactions contemplated hereby. No Applicable Law shall have been enacted, entered, promulgated or enforced by any Governmental Entity which prohibits or makes illegal the consummation of the transactions contemplated hereby.
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(d) Restrictive Covenant Agreements. Purchaser and the persons identified in Section 6.14 of Sellers Disclosure Letter shall have executed restrictive covenant agreements as more fully described in Section 6.14 hereof.
(e) Tri-Party Agreement. Effective as of (or prior to) the Closing Date, Purchaser, the purchaser of United Community Bank, and the purchaser of Lincoln Community bank shall have entered into a Nonsolicitation Agreement in the form attached hereto as Exhibit B.
8.02 Conditions to the Obligation of the Sellers. The Sellers’ obligation to consummate the transactions contemplated hereby is subject to the fulfillment or written waiver by Shareholder before the Closing of each of the following conditions:
(a) Each of the representations and warranties in Sections 5.03(a) - 5.03(c) and 5.03(g) shall be true and correct in all respects as of the Closing Date. Each of the other representations and warranties of Purchaser contained in this Agreement shall be true and correct as of the Closing Date, with the same effect as though those representations and warranties had been made on and as of the Closing Date (except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty need only be true and correct as of such date), except where the matters in respect of which such representations and warranties are not true and correct, in the aggregate, and without duplication as to materiality (including Material Adverse Effect), would not reasonably be expected to prevent, materially delay or materially impair the ability of Purchaser to perform and comply with its obligations under this Agreement.
(b) Purchaser shall have duly performed and complied in all material respects with all covenants and agreements contained in this Agreement that are required to be performed or complied with by Purchaser at or before the Closing.
(c) Purchaser shall have delivered to Shareholder a certificate, dated as of the Closing Date and signed by an authorized officer of Purchaser, certifying the fulfillment of the conditions specified in Sections 8.02(a) and (b).
(d) Termination of Participation in Employee Benefit Plans. The Bank shall terminate participation in all employee benefit plans sponsored or maintained by any entity other than the Bank including, but not limited to, Shareholder.
8.03 Conditions to the Obligation of Purchaser. Purchaser’s obligation to consummate the transactions contemplated hereby is also subject to the fulfillment, or written waiver by Purchaser before the Closing of each of the following conditions:
(a) Each of the representations and warranties in Sections 5.02(a)–5.02(g), 5.02(j) and 5.02(u) shall be true and correct in all respects as of the Closing Date. Each of the other representations and warranties of the Sellers contained in this Agreement shall be true and correct as of the Closing Date, with the same effect as though those representations and warranties had been made on and as of the Closing Date (except to the extent that any such
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representation or warranty is made as of a specified date, in which case such representation or warranty need only be true and correct as of such date), except where the matters in respect of which such representations and warranties are not true and correct, in the aggregate, and without duplication as to materiality (including Material Adverse Effect), have not had or resulted in and would not be reasonably likely to have or result in a Material Adverse Effect.
(b) The Sellers shall have duly performed and complied in all material respects with all covenants and agreements contained in this Agreement that are required to be performed or complied with by them at or before the Closing.
(c) There shall not have occurred any Material Adverse Effect with respect to any Seller.
(d) The Bank shall have obtained the consent or approval of each person that is not a Governmental Entity whose consent or approval shall be required in connection with the transactions contemplated hereby under any Material Contract.
(e) Sellers shall have delivered to Purchaser:
(1) a certificate (dated not more than 10 days prior to the Closing) as to the good standing of the Bank from the Wisconsin Department of Financial Institutions;
(2) an assignment of the Bank Common Stock, in form and substance satisfactory to Purchaser, duly executed in blank by Shareholder, as well as the certificates representing the Bank Common Stock; and
(3) a duly executed resignation from each of the officers and directors of the Bank.
(4) an amended and restated Technology Services Agreement substantially in the form attached hereto as Exhibit E.
(f) Shareholder shall have delivered to Purchaser a certificate, in its capacity as Shareholder, acting on behalf of Sellers, dated as of the Closing Date, certifying the fulfillment of the conditions specified in Sections 8.03(a) – (d).
(g) The Bank shall have delivered to Purchaser a certificate, dated as of the Closing Date and signed by an authorized officer of the Bank, certifying the fulfillment of the conditions specified in Sections 8.03(a) – (d).
ARTICLE IX
TERMINATION
TERMINATION
9.01 Termination. This Agreement may be terminated, and the transactions contemplated hereby may be abandoned, at any time before the Closing Date, by Shareholder or Purchaser:
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(a) Mutual Agreement. With the mutual agreement of the other parties.
(b) Breach. Upon thirty (30) days’ prior written notice of termination, if there has occurred and is continuing: (i) in the case of Purchaser, a breach by any Seller, and in the case of the Sellers, a breach by Purchaser, of any representation or warranty contained herein or (ii) in the case of Purchaser, a breach by any Seller, and in the case of the Sellers, a breach by Purchaser, of any covenant or agreement contained herein; provided that, in the case of each of clauses (i) and (ii), such breach has not been cured within thirty (30) days of receipt of such notice and such breach (under either clause (i) or (ii)) would entitle Purchaser, in the case of a breach by a Seller, or the Sellers, in the case of a breach by Purchaser, not to consummate the transactions contemplated hereby under Article VIII.
(c) Denial of Regulatory Approval. If the approval of any Governmental Entity required for consummation of the other transactions contemplated hereby is denied by final, non-appealable action of such Governmental Entity; provided that the right to terminate this Agreement under this Section 9.01(c) shall not be available to any party whose failure to comply with any provision of this Agreement has been the cause of, or materially contributed to, the foregoing.
(d) Delay. If the Closing has not occurred by the close of business on the twelve (12)-month anniversary of the date hereof (the “Outside Date”); provided that if the conditions set forth in Section 8.01(b) shall not have been satisfied or duly waived by Purchaser and Shareholder by the fifth (5th) Business Day prior to the Outside Date, Purchaser or Shareholder, as the case may be, may, by written notice delivered to Shareholder, extend the Outside Date from time to time to a date not later than the six (6)-month anniversary of the Outside Date; provided further that the right to terminate this Agreement under this Section 9.01(d) shall not be available to any party whose failure to comply with any provision of this Agreement has been the cause of, or materially contributed to, the failure of the Closing to occur on or before such date.
(e) Applicable Law; Governmental Restriction; Material Adverse Effect.
(1) Each of Shareholder and Purchaser will have the right to terminate this Agreement if: (i) any Applicable Law is enacted, entered, promulgated, enforced or issued by any Governmental Entity or other restraint or prohibition is in effect which prevents the consummation of the transactions contemplated hereby or (ii) there is a final and non-appealable denial by any Governmental Entity of a consent necessary to consummate the transactions contemplated hereby or Purchaser receives notification that a Governmental Entity will, as a condition to its consent to the transactions contemplated hereby, impose a Burdensome Condition.
(2) Purchaser will have the right to terminate this Agreement if any event, change, circumstance or occurrence that, individually or together with any other event, change, circumstance or occurrence, has occurred which has, or would be reasonably likely to have, a Material Adverse Effect with respect to any Seller.
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9.02 Effect of Termination and Abandonment. If this Agreement is terminated and the transactions contemplated hereby are abandoned, no party will have any Liability or further obligation under this Agreement, except that Sections 6.08(c)–(e), this Section 9.02 and Article X, as well as any relevant definitions, will survive termination of this Agreement and remain in full force and effect and except that termination will not relieve a party from Liability for any willful breach by it of this Agreement.
ARTICLE X
MISCELLANEOUS
MISCELLANEOUS
10.01 Expenses. Except as otherwise expressly set forth herein, all fees and expenses payable in connection with the consummation of the transactions contemplated by this Agreement shall be the sole Liability of the party incurring such expense. In furtherance and not in limitation of the foregoing sentence, Shareholder shall be responsible for all fees and expenses Shareholder and the Bank incur in connection with the consummation of the transactions contemplated by this Agreement including all attorney’s fees, accounting fees, financial advisor fees, and any termination or breakage fees or penalties under any Contracts to which Shareholder or its Affiliates (other than the Bank) are a party to.
10.02 Notices. All notices, requests and other communications given or made under this Agreement must be in writing and will be deemed given or made when personally delivered or delivered by nationally recognized overnight courier to the addresses set forth below or at such other place or by such other method as such party may specify by notice.
If to Shareholder, to:
United Bancorporation
12525 10th Street, Suite 1
Osseo, WI 54758
Attention: Greg LeGare
E-mail: [email protected]
United Bancorporation
12525 10th Street, Suite 1
Osseo, WI 54758
Attention: Greg LeGare
E-mail: [email protected]
with a copy to:
Ballard Spahr LLP
2000 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
Attention: Scott A. Coleman
Ballard Spahr LLP
2000 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
Attention: Scott A. Coleman
If to Purchaser, to:
Citizens Community Bancorp, Inc.
2174 Eastridge Center
Eau Claire, WI 54701
Attention: Stephen Bianchi
Citizens Community Bancorp, Inc.
2174 Eastridge Center
Eau Claire, WI 54701
Attention: Stephen Bianchi
60
with a copy to:
Briggs and Morgan, P.A.
2200 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
Attention: Joseph T. Kinning
Briggs and Morgan, P.A.
2200 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
Attention: Joseph T. Kinning
10.03 Amendment. Any provision of this Agreement may be amended or modified at any time, but only by a written agreement executed and delivered by the parties to be bound.
10.04 Governing Law. The execution, interpretation, and performance of this Agreement shall be governed by the laws of the State of Wisconsin without giving effect to any conflict-of-laws provision or rule (whether of the State of Wisconsin or any other jurisdiction) that would cause the application of the law of any other jurisdiction other than the State of Wisconsin. Each party hereto, to the extent it may lawfully do so, hereby submits to the jurisdiction of any court of the State of Wisconsin and the United States District Court for the Western District of Wisconsin as well as to the jurisdiction of all courts from which an appeal may be taken or other review sought from the aforesaid courts, for the purpose of any Proceeding arising out of such party’s Liabilities under or with respect to this Agreement or any of the agreements, instruments or documents contemplated hereby and expressly waives any and all objections it may have as to venue in any of such courts.
10.05 Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER OR WITH RESPECT TO THIS AGREEMENT COULD INVOLVE COMPLICATED OR DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) THE PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) THE PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) THE PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.05.
10.06 Entire Agreement. This Agreement, together with the Schedules hereto and the Disclosure Letters, contains the entire agreement and understanding among the parties with respect to the subject matter hereof and thereof (and supersedes any prior agreements, arrangements or understandings among any of the parties with respect to the subject matter hereof and thereof), and there are no agreements, arrangements, understandings, representations or warranties which are not set forth herein or therein.
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10.07 Binding Effect; Assignment; No Third-Party Beneficiaries. Except as otherwise expressly provided in this Agreement, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Except as otherwise expressly provided herein, this Agreement and all rights and Liabilities hereunder may not be assigned by any party hereto except by the prior written consent of (i) the Sellers, in the case of Purchaser, or (ii) Purchaser, in the case of any Seller; provided that Purchaser may assign its right to acquire any asset, its obligation to pay all or part of the consideration or any of its other Liabilities to any wholly-owned Subsidiary without the prior written consent of the other parties hereto if Purchaser agrees to guarantee the performance of any such wholly-owned Subsidiary. The parties intend that this Agreement shall not benefit or create any right or cause of action in or on behalf of any person other than the parties hereto; provided that the provisions of Article VII will inure to the benefit of the Purchaser Indemnified Parties and Seller Indemnified Parties and the provisions of Section 6.12 will inure to the benefit of the Purchaser Indemnified Parties. Any assignment in contravention of this Section 10.07 is null and void.
10.08 Counterparts. This Agreement may be executed in multiple counterparts, and may be delivered by means of facsimile or email (or any other electronic means, such as “.pdf” or “.tiff” files), each of which shall be deemed to constitute an original, but all of which together shall be deemed to constitute one and the same instrument.
10.09 Specific Performance. The parties hereto acknowledge and agree that (i) monetary damages could not adequately compensate any party hereto in the event of a breach of this Agreement by any other party which results in the failure of any of the transactions contemplated by this Agreement to be consummated by the Outside Date (including, if applicable, as extended in accordance with Section 9.01(d)); (ii) the non-breaching party/parties would suffer irreparable harm in the event of such a breach with such an effect; and (iii) the applicable non-breaching party shall have, in addition to any other rights or remedies it may have at law or in equity, specific performance and injunctive relief as a remedy for the enforcement hereof. The parties agree to not seek, and agree to waive, any requirement for the securing or posting of a bond or other security in connection with a party seeking or obtaining any relief pursuant to this Section 10.09.
10.10 Severability. Each provision of this Agreement shall be interpreted in such manner as to be effective and valid under Applicable Law, but in case any one or more provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, (i) all other provisions of this Agreement shall nevertheless remain in full force and effect for so long as the economic or legal substance of the transaction contemplated hereby is not affected in a manner materially adverse to any party and (ii) the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible, in a mutually acceptable manner, in order that the transactions contemplated hereby can be consummated as originally contemplated to the greatest extent possible.
10.11 Subsidiary and Affiliate Action. Wherever a party has an obligation under this Agreement to “cause” a Subsidiary or other Affiliate of such party or any such Subsidiary’s or
62
other Affiliate’s Representatives to take, or refrain from taking, any action, or such action that may be necessary, to accomplish the purposes of this Agreement, such obligation of such party shall be deemed to include an undertaking on the part of such party to cause such Subsidiary or other Affiliate to take such action. Wherever this Agreement provides that a Subsidiary or other Affiliate of a party has an obligation to act or refrain from taking any action, such party shall be deemed to have an obligation under this Agreement to cause such Subsidiary or other Affiliate, or any such Subsidiary’s or other Affiliate’s Representatives to take, or refrain from taking, the action, or such action as may be necessary to accomplish the purposes of this Agreement. To the extent necessary or appropriate to give meaning or effect to the provisions of this Agreement or to accomplish the purposes of this Agreement, Purchaser and Shareholders, as the case may be, shall be deemed to have an obligation under this Agreement to cause any Subsidiary thereof to take, or refrain from taking, any action, and to cause such Subsidiary’s Representatives to take, or refrain from taking, any action, otherwise contemplated herein. Any failure by an Affiliate of Purchaser or any Seller to act or refrain from taking any action contemplated by this Agreement shall be deemed to be a breach of this Agreement by Purchaser or such Seller, respectively.
10.12 Deadlines. If the last day of the time period for the giving of any notice or the taking of any action required under this Agreement falls on a day other than a Business Day, the time period for giving such notice or taking such action shall be extended through the next Business Day following that day.
10.13 Scope of Agreements. This Agreement shall not create any partnership, joint venture or other similar arrangement between any of the Sellers or any of their Affiliates, on the one hand, and Purchaser or any of its Affiliates, on the other hand.
10.14 Waivers and Consents. Any waiver, permission, consent or approval of any kind relating to any breach or default under this Agreement, or any waiver of any provision or condition of this Agreement, shall be effective only to the extent specifically set forth in writing. Notwithstanding any provision set forth herein, no party hereto shall be required to take any action or refrain from taking any action that would cause it to violate any Applicable Law.
10.15 Remedies. Except as otherwise expressly provided herein, no failure to exercise or delay in exercising any right or remedy in connection with this Agreement will effect a waiver of that right or remedy. No single or partial exercise of any right or remedy in connection with this Agreement will preclude any other or further exercise of that right or remedy or any other right or remedy. Except as otherwise expressly provided, the rights and remedies in connection with this Agreement are cumulative and not exhaustive.
[Signature Page Follows]
63
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.
CITIZENS COMMUNITY BANCORP, INC.
By: | |
Name: Stephen Bianchi | |
Title: President and CEO | |
UNITED BANK
By: | |
Name: | |
Title: | |
UNITED BANCORPORATION
By: | |
Name: Greg LeGare | |
Title: President | |
Signature Page to Stock Purchase Agreement
Schedule A
Designated Securities
Designated Securities
None.
Sch. A-1
EXHIBIT A
FORM OF ESCROW AGREEMENT
FORM OF ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this “Agreement”), dated as of , 2018, is entered into by and among Citizens Community Bancorp, Inc., a Maryland corporation (“Purchaser”), United Bancorporation, a South Dakota corporation (“Seller”), and Bankers’ Bank, a Wisconsin state bank (“Escrow Agent”).
INTRODUCTION
Purchaser, Seller, and United Bank (“Bank”) are parties to a Stock Purchase dated _______________, 2018 (the “Purchase Agreement”) by which Purchaser purchased the outstanding stock of Bank from Seller. This Agreement is entered into pursuant to the Purchase Agreement to establish an escrow for the purpose of funding any indemnification claim under the Purchase Agreement as provided in Article VII of the Purchase Agreement (“Indemnification Claim”). On the date hereof, Purchaser shall deliver to the Escrow Agent to be held hereunder [____________] Dollars ([$_________]) (the “Escrow”) to fund Indemnification Claims between the date hereof and _____________, 20__ (eighteen months) (the “Escrow Period”). The Parties desire that Escrow Agent act as escrow agent for both parties in accordance with the terms hereof, and Escrow Agent is willing to act in such capacity.
NOW, THEREFORE, in contemplation of the foregoing and in consideration of the mutual agreements, covenants, representations and warranties contained herein and for other good and valuable consideration, the receipt of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:
1. Appointment of Escrow Agent. Purchaser and Seller hereby appoint and designate Escrow Agent as escrow agent to receive, hold, invest and disburse the Escrow and any income, interest or other amounts received thereon in accordance with the terms of this Agreement. Escrow Agent hereby accepts its appointment as escrow agent and agrees to receive, hold, invest and disburse the Escrow and any income, interest or other amounts received thereon in accordance with the terms of this Agreement.
2. The Escrow.
2.1 Funding of the Escrow. Purchaser and Seller acknowledge and agree that [$__________] of the Purchase Price under the Purchase Agreement is hereby placed in escrow with the Escrow Agent.
2.2 Receipt of the Escrow Funds. Escrow Agent hereby acknowledges receipt of [$__________] to be placed in the escrow. The Escrow is not the property of Escrow Agent and is to be held in a separate, segregated account.
Exh. A-1
2.3 Investment of the Escrow. Escrow Agent shall deposit the Escrow in an interest bearing account at ___________, which shall earn interest at an annual rate equal to ___________________________________.
3. Disbursement of the Escrow Funds.
3.1 Claims. Purchaser shall be entitled to obtain from the Escrow amounts equal to any Indemnification Claim incurred by Purchaser during the Escrow Period up to the full amount of the Escrow plus any interest accrued thereon (the “Indemnification Escrow Amount”).
3.2 Procedure for Indemnification Claims. Indemnification Claims under this Agreement shall be paid pursuant to and in accordance with the terms of: (a) joint written instructions by Purchaser and Seller to Escrow Agent instructing Escrow Agent to disburse to Purchaser from Escrow the amount of such Indemnification Claims or (b) any Final Determination upon receipt of a written notice from any party, with a copy to the other party, executed by such party certifying that a Final Determination has been issued (with a copy of such Final Determination attached to such written notice) and directing the Escrow Agent to make such disbursement of all or a portion of the Escrow Property in accordance with the Final Determination. A “Final Determination” shall exist when (i) the parties to the dispute have reached an agreement in writing, (ii) a court of competent jurisdiction shall have entered a final and non-appealable order or judgment or (iii) an arbitration or like panel shall have rendered a final non-appealable determination with respect to disputes the parties have agreed to submit thereto. Escrow Agent shall disburse such funds within three (3) business days after its receipt of such joint written instructions or Final Determination.
3.3 Termination of Escrow.
(a) On the next business day following the end of the Indemnification Escrow Period (the “Indemnification Escrow Disbursement Date”), the Escrow Agent shall disburse to Seller from the Escrow an amount equal to (i) the full amount of the Escrow, including any interest earned on such amount up and to the date of the disbursement, less (ii) any amounts previously disbursed from the Escrow to Purchaser, and less (iii) any Unresolved Claim Amounts (as defined below). If, prior to the Indemnification Escrow Disbursement Date, the Escrow Agent receives written notice from Purchaser (with a copy of such notice delivered to the Seller) that there are one or more Unresolved Claims (as defined below) as of such date, the Escrow Agent shall retain the Unresolved Claim Amounts in the Escrow and distribute such Unresolved Claim Amounts only in accordance with Section 3.2. “Unresolved Claims” means any good faith claim by any Purchaser Indemnified Parties (as defined in the Purchase Agreement) for indemnification under the Purchase Agreement which is not finally determined (either by mutual agreement of Purchaser and Seller or a court of competent jurisdiction) prior to the Indemnification Escrow Disbursement Date. “Unresolved Claim Amounts” means the aggregate dollar amount of the Escrow, if any, which is the subject of one or more Unresolved Claims by any Purchaser Indemnified Party(ies) for indemnity under the Purchase Agreement.
Exh. A-2
(b) During the period during which any funds remain in Escrow, neither the Seller nor Purchaser shall have any right to receive, pledge, borrow or otherwise obtain the benefits of the money constituting the Escrow.
3.4 Reliance. Escrow Agent shall be able to rely conclusively, without inquiry or liability, on the joint instructions, agreements and decisions of Purchaser and Seller, and no party shall have any cause of action against Escrow Agent for any action taken by Escrow Agent in reliance upon the joint agreements, instructions or decisions of the authorized signers of Purchaser or Seller. Concurrent with the execution of this Escrow Agreement, the parties shall deliver to the Escrow Agent authorized signers’ forms in the form of Exhibit A-1 and Exhibit A-2 to this Escrow Agreement.
3.5 Joint Instructions. In the event that Escrow Agent receives any joint instructions or notice in writing from Purchaser and Seller, such instructions or notice may be revoked only (a) if Escrow Agent has not already acted upon such joint instructions or notice and (b) pursuant to further joint instructions or notice in writing from Purchaser and the Seller.
3.6 Purpose. None of the Escrow will be available for any purpose other than as described herein.
4. Termination of the Escrow. The Escrow provided for hereunder shall terminate upon the complete disbursement of the Escrow pursuant to Section 3.3.
5. Covenants of Escrow Agent. Escrow Agent hereby agrees and covenants to Purchaser and Seller as follows:
5.1 Escrow Agent agrees to perform all of its obligations under this Agreement and not to deliver custody or possession of any of the Escrow to anyone except pursuant to the express terms of this Agreement.
5.2 Escrow Agent agrees to send, within three (3) business days after receipt of a written notice from either Purchaser or Seller (not including joint written instructions), one copy of such written notice to the other.
6. Resignation and Removal of Escrow Agent. Escrow Agent may resign from the performance of its duties hereunder at any time by giving thirty (30) days’ prior written notice to Purchaser and Seller or may be removed, with or without cause, by mutual agreement of Purchaser and Seller at any time by the giving of thirty (30) days’ prior written notice to Escrow Agent. Such resignation or removal shall take effect upon the appointment of a successor escrow agent as provided herein. Upon any such notice of resignation or removal, Purchaser and Seller shall appoint a successor escrow agent. Upon the acceptance in writing of any appointment as Escrow Agent hereunder by a successor escrow agent, such successor escrow agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring escrow agent, and the retiring escrow agent shall be discharged from its duties and obligations under this Agreement other than to safely keep the Escrow and to deliver the same to the successor escrow agent as directed by joint instructions of Purchaser and Seller or by a court
Exh. A-3
order. Notwithstanding anything herein to the contrary, any resignation or removal of an escrow agent shall not discharge such escrow agent from any liability for actions taken as escrow agent hereunder prior to such removal or resignation. After any retiring escrow agent’s resignation or removal, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it while it was escrow agent under this Agreement.
7. Liability of Escrow Agent. Escrow Agent shall have no liability or obligation with respect to its services hereunder except for Escrow Agent’s willful misconduct or gross negligence. Escrow Agent may rely upon any instrument, not only as to its due execution, validity and effectiveness, but also as to the truth and accuracy of any information contained therein, which Escrow Agent shall in good faith believe to be genuine, to have been signed or presented by the person or parties purporting to sign the same and to conform to the provisions of this Agreement. Escrow Agent may consult legal counsel selected by it in the event of any dispute or question of the construction of this Agreement or seek the assistance of a court of competent jurisdiction, and shall incur no liability and shall be fully protected in acting in accordance with the opinion or instruction of such counsel or such court. Purchaser and Seller hereby jointly and severally agree to indemnify and hold harmless Escrow Agent against any and all losses, claims, damages, liabilities and expenses, including reasonable costs of investigation and counsel fees and disbursement, which may be imposed upon Escrow Agent or incurred by Escrow Agent in connection with its acceptance of appointment as escrow agent hereunder, or the performance of its duties hereunder, including any litigation arising from this Agreement or involving the subject matter hereof or the cash deposited hereunder; provided, however, Escrow Agent shall not be indemnified or held harmless in the event it acts with gross negligence or willful misconduct. This indemnification provided herein shall survive the termination of this Agreement and the resignation or removal of Escrow Agent.
8. Compensation of Escrow Agent. Purchaser, on one hand, and Seller, on the other, shall each pay one-half of the payments due to Escrow Agent for performing its duties hereunder in accordance with Schedule A attached hereto.
9. Miscellaneous.
9.1 Binding Effect. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective representatives and permitted successors and assigns.
9.2 Entire Agreement. This Agreement contains the entire understanding of the parties and supersedes all prior agreements and understandings between the parties with respect to its subject matter. This Agreement may be amended only by a written instrument duly executed by the parties hereto.
9.3 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
9.4 Waiver. Any party hereto may, at its option, waive in writing any or all of the conditions herein contained to which its obligations hereunder are subject. No waiver of any
Exh. A-4
provision of this Agreement, however, shall constitute a waiver of any other provision (whether similar or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.
9.5 Survival of Agreement. This Agreement shall survive the consummation of the transaction contemplated by the Purchase Agreement.
9.6 Assignment. No assignment or transfer by any party hereto of such party’s rights and obligations under this Agreement will be made except with the prior written consent of the other parties to this Agreement. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and permitted assigns. Except as set forth herein, 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.
9.7 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which together shall constitute one and the same Agreement.
9.8 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given if so given) by hand delivery (if an affidavit of delivery is obtained), telecopy (if successful delivery can be verified), electronic mail (if successful delivery can be verified) or by post mail (registered or certified mail, postage prepaid, return receipt requested) or by any national courier service. All communications hereunder shall be delivered to the respective parties at the following addresses (or at such other address for a party as shall be specified by like notice, provided that notices of a change of address shall be effective only upon receipt thereof):
(a) | If to Purchaser: Citizens Community Bancorp, Inc. 2174 Eastridge Center Eau Claire, WI 54701 Attention: Stephen Bianchi |
with a copy to: | Briggs and Morgan, P.A. 2200 IDS Center 80 South Eighth Street Minneapolis, MN 55402 Attention: Joseph T. Kinning |
(b) | If to Seller: United Bancorporation 12525 10th Street, Suite 1 Osseo, WI 54758 Attention: Greg LeGare E-mail: [email protected] |
Exh. A-5
with a copy to: | Ballard Spahr LLP 2000 IDS Center 80 South 8th Street Minneapolis, MN 55402-2205 Attention: Scott A. Coleman |
(c) | If to Escrow Agent: ___________________ ___________________ ___________________ ___________________ |
9.9 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Wisconsin without regard to principles of conflicts of laws.
9.10 Enforceability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
[Signatures on the next page.]
Exh. A-6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
PURCHASER
CITIZENS COMMUNITY BANCORP, INC.
By:_________________________________
Its:_________________________________
SELLER
UNITED BANCORPORATION
By:_________________________________
Its:_________________________________
ESCROW AGENT
BANKERS’ BANK
By:__________________________________
Its:__________________________________
[Signature Page to Escrow Agreement]
SCHEDULE A
FEES
Exh. A – Schedule A-1
EXHIBIT A-1
Certificate as to Authorized Signatures
The specimen signature shown below is the specimen signature of the individual who has been designated as an authorized representative of Purchaser and is authorized to initiate and approve transactions of all types for the escrow account or accounts established under the Escrow Agreement to which this Exhibit A-1 is attached, on behalf of Purchaser.
Name / Title / Phone Number | Specimen Signature | |
Name | Signature | |
Title | ||
Phone Number | ||
Exh. A – Exhibit A-1-1
EXHIBIT A-2
Certificate as to Authorized Signatures
The specimen signature shown below is the specimen signature of the individual who has been designated as an authorized representative of Seller and is authorized to initiate and approve transactions of all types for the escrow account or accounts established under the Escrow Agreement to which this Exhibit A-2 is attached, on behalf of Seller.
Name / Phone Number | Specimen Signature | |
Name | Signature | |
Phone Number | ||
Exh. A – Exhibit A-2-1
EXHIBIT B
TRI-PARTY AGREEMENT
TRI-PARTY AGREEMENT
THIS TRI PARTY AGREEMENT (“Tri Party Agreement”) is entered into as of the Effective Date (as defined below) by and among _________ (“United Purchaser”), a _______________________, _________ (“United Community Purchaser”), a _____________________ and _________ (“Lincoln Purchaser”), a _____________________. United Purchaser, United Community Purchaser, and Lincoln Purchaser may be referred to individually as a “Party” and together as the “Parties.”
RECITALS
A. United Bancorporation (“UB”), a South Dakota corporation, owns 100% of the issued and outstanding common stock of United Bank (“United”), United Community Bank (“United Community”), and Lincoln Community Bank (“Lincoln”) each a Wisconsin banking corporation. United, United Community and Lincoln may be referred to individually as a “Bank” and together as the “Banks.”
B. United Purchaser entered into a Stock Purchase Agreement dated _______ __, 2018 with UB and United, whereby United Purchaser will purchase from UB 100% of the issued and outstanding common stock of United (on consummation, the “United Transaction”).
C. United Community Purchaser entered into a Stock Purchase Agreement dated _______ __, 2018 with UB and United Community, whereby United Purchaser will purchase from UB 100% of the issued and outstanding common stock of United Community (on consummation, the “United Community Transaction”).
D. Lincoln Purchaser entered into a Stock Purchase Agreement dated _______ __, 2018 with UB, whereby Lincoln Purchaser will purchase from UB 100% of the issued and outstanding common stock of Lincoln (on consummation, the “Lincoln Transaction” and together with the United Transaction and the United Community Transaction, each a “Transaction” and together the “Transactions”).
E. It is a condition precedent to the consummation of each of the stock purchase agreements described in recitals B-D above that the Parties enter into this Tri Party Agreement to establish non-solicitation covenants among the Parties.
In consideration of the mutual conditions hereinafter set forth, United Purchaser, United Community Purchaser, and Lincoln Purchaser hereby agree to the following terms and conditions:
1. | Effective Date; Term. This Tri Party Agreement shall become effective on the date on which the last of the Parties hereto signs the signature page to this Tri Party Agreement (such date, the “Effective Date”). The term of this Tri Party Agreement shall begin on the Effective Date and shall terminate on the second anniversary of the Effective Date (the “Term”). |
Exh. B-1
2. | Non Solicitation. Throughout the Term of this Tri Party Agreement, the Parties shall not, and shall cause their respective directors, corporate officers, loan officers, and credit officers not to, directly or indirectly knowingly solicit for employment or hire any employee of another Party that was an employee of the Bank (“Restricted Employees”), provided that this section shall not prohibit (i) solicitation by means of a general purpose advertisement not specifically targeted at the Restricted Employees or hiring any Restricted Employee as a result of such general purpose advertisement, (ii) solicitation or hiring any Restricted Employee who was terminated by another Party or any of its affiliates after the Effective Date, or (iii) solicitation by one Party of the employee of another Party who was not an employee of the Bank acquired by that Party. |
3. | Assignment. The provisions of this Tri Party Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns. |
4. | Counterpart Signatures; Electronic Signatures. This Tri Party Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. This Tri Party Agreement, to the extent signed and delivered by electronic means, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. |
[Signature Page Follows]
Exh. B-2
IN WITNESS WHEREOF, the parties to this Tri Party Agreement have caused it to be executed by their duly authorized officers as of the Effective Date.
UNITED PURCHASER | UNITED COMMUNITY PURCHASER | |||
By: | By: | |||
Name: | Name: | |||
Title: | Title: | |||
Date Signed: | Date Signed: | |||
LINCOLN PURCHASER | ||||
By: | ||||
Name: | ||||
Title: | ||||
Date Signed: | ||||
[Signature Page to Tri Party Agreement]
EXHIBIT C
NON-COMPETITION AGREEMENT
NON-COMPETITION AGREEMENT
This NON-COMPETITION AGREEMENT (the “Agreement”) is entered into and is made effective as of _________________, 2018 (the “Effective Date”), by and between Citizens Community Bancorp, Inc., a Maryland corporation (“CCBI”), and Greg LeGare (“Executive”).
WHEREAS, Executive is an officer and director of United Bancorporation, a South Dakota corporation (“UBC”), and United Bank, a Wisconsin state bank (the “Bank”).
WHEREAS, UBC owns all of the issued and outstanding shares (the “Bank Shares”) of capital stock of the Bank.
WHEREAS, CCBI, UBC, and the Bank are parties to that certain Stock Purchase Agreement dated June __, 2018 (the “Purchase Agreement”), pursuant to which CCBI will purchase Bank Shares from UBC (the “Transaction”).
WHEREAS, the Purchase Agreement conditions the closing of the Transaction on CCBI’s and Executive’s execution and delivery of this Agreement.
WHEREAS, Executive will be receiving substantial direct and indirect consideration from the Transaction, Executive’s execution and delivery of this Agreement was a material inducement to CCBI’s execution of the Purchase Agreement and is a condition to CCBI’s obligation to close the Transaction, and Executive acknowledges and agrees that the foregoing is sufficient consideration for Executive’s obligations in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Restrictive Covenants.
(a) Need for Restrictions. Executive acknowledges and agrees that the Bank’s business, technical, and customer information is established and maintained at great expense to the Bank and is of significant value to the Bank, and that by virtue of Executive’s services to the Bank and UBC, Executive has possession of information pertaining to, and has had unique and extensive exposure to, and personal contact with, the Bank’s business, technical and customer information which would enable Executive to compete unfairly with the Bank. As a result, and in consideration of CCBI’s entry into the Purchase Agreement and closing of the Transaction, Executive acknowledges and agrees that the following restrictions are necessary to protect the Bank’s business.
(b) Confidential Information; Trade Secret. For purposes of this Agreement, “Confidential Information” means information disclosed to Executive or known by him as a result of or as disclosed in the course of Executive’s services to the Bank and UBC which is not
Exh. C-1
generally known to the public pertaining to the Bank’s business, including, but not limited to, operations, contracts, customers, customer lists, proposals, research and development, procedures and protocols, operating models, financial information, pricing, price lists, marketing methods, strategic planning information, information stored in or developed for use with the Bank’s computer systems, insurance plans, risk management information, or marketing programs, and third-party information that the Bank may learn from its customers or clients. Confidential Information shall include any such information developed or created by Executive if the information was developed or created by Executive while executing Executive’s duties for the Bank or UBC or if the information was developed or created by Executive based upon any Confidential Information that Executive learned by virtue of Executive’s services to the Bank or UBC. Confidential Information shall not include any information that Executive can demonstrate is in the public domain by means other than disclosure by Executive, but shall include non-public compilations, combinations, or analyses of otherwise public information.
(c) Non-Disclosure or Use of Confidential Information and Trade Secrets. For the five-year period following the Effective Date, Executive shall not directly or indirectly, under any circumstances, communicate or disclose to any person, firm, association, corporation, company or any other third party, or use for Executive’s own benefit or the benefit of any person or entity, any Confidential Information, and Executive will keep secret and in strict confidence and hold inviolate said Confidential Information. Executive further agrees not to disclose to others or use, at any time between the Effective Date and the date that is five years following the Effective Date, any Confidential Information that constitutes and remains a trade secret under the Wisconsin Trade Secrets Act, as amended (Section 134.90 Wis. Stats.), any Confidential Information that the Bank received from a third party and continues to hold in confidence, and any Confidential Information that he is otherwise prohibited by law from disclosing to others or using. The prohibitions of this paragraph do not apply to Confidential Information after it has become generally known and/or in the public domain through no fault of Executive. The prohibitions of this paragraph also do not prohibit use of Executive’s general skills and knowledge acquired during and prior to his services to the Bank and UBC, as long as such use does not involve the use or disclosure of Confidential Information.
(d) Defend Trade Secrets Act. Executive understands that if Executive breaches the provisions of Section 1(c) above, Executive may be liable to the Bank under the Defend Trade Secrets Act of 2016 (“DTSA”). Executive further understands that by providing Executive with the following notice, the Bank may recover from Executive its attorney fees and exemplary damages if it brings a successful claim against Executive under the DTSA: Under the federal Defend Trade Secrets Act of 2016, Executive shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (a)(i) in confidence to a federal, state, or local governmental official, either directly or indirectly, or to an attorney and (ii) solely for the purpose of reporting or investigating a suspected violation of law or (b) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Without limiting the foregoing, if Executive files a lawsuit for retaliation by the Bank for reporting a suspected violation of law, Executive may disclose the trade secret to Executive’s attorney and use the trade secret information in the court proceeding, if Executive (i)
Exh. C-2
files any document containing the trade secret under seal and (ii) does not disclose the trade secret, except pursuant to court order.
(e) Nonsolicitation of Customers. For the three-year period following the Effective Date, Executive shall not, directly or indirectly canvas, contact or solicit any “Active Customer” (as defined below) of the Bank for the purpose of selling, offering or providing products or services which are the same as or substantially similar to the products or services provided by the Bank at any time during the “Reference Period” (as defined below). “Active Customer” shall mean any person or entity which, within the 12‑month period prior to the closing of the Transaction (the “Reference Period”), received any products or services supplied by or on behalf of the Bank.
(f) Non-Solicitation of Company Personnel. For the three-year period following the Effective Date, Executive shall not, directly or indirectly, solicit, encourage or induce any employee, consultant, contractor, or other agent of the Bank to terminate a relationship (employment or otherwise), or breach any agreement with the Bank.
(g) Non-Competition. For the three-year period following the Effective Date, Executive shall not, directly or indirectly, have a financial interest in, or in a “Prohibited Capacity” (as defined below) become associated with, provide assistance or service to or engage in, that aspect of any firm, entity, business, activity or enterprise which competes with the Bank anywhere within the “Restricted Territory” (as defined below). This restriction shall not apply to any activities conducted on behalf of an entity that is not a financial institution or owned or controlled by a financial institution, except to the extent such activities are for the benefit of a competitor. A “financial interest” shall not include the ownership of less than 5% of the securities of any corporation or other entity that is listed on a national securities exchange or traded in the national over-the-counter market. “Prohibited Capacity” means a capacity (i) involving duties or responsibilities substantially similar to those of Executive’s position with UBC and the Bank, at any time during the Reference Period, (ii) involving management, sales or marketing duties or responsibilities, or (iii) reasonably likely to involve the use or disclosure of Confidential Information or trade secrets of the Bank. The “Restricted Territory” means the territory within a 60-mile radius of any Bank location at that time.
(h) Non-Disparagement. For the five-year period following the Effective Date, Executive agrees not to make any disparaging or negative remarks, either orally or in writing, regarding the Bank or CCBI or any of their respective officers, directors, employees, or agents. Executive further agrees not to make disparaging or negative remarks, either orally or in writing, regarding the Bank’s or CCBI’s business practices, services, products, programs, operations, administration, leadership, management, or community activities.
2. Enforcement.
(a) If, at the time of enforcement of the covenants contained in Section 1 (collectively, the “Restrictive Covenants”), a court shall hold that the duration, scope or area restrictions stated are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for
Exh. C-3
the stated duration, scope or area and that the court shall be allowed to revise the Restrictive Covenants to cover the maximum duration, scope and area permitted by law. Executive has had the opportunity to consult with Executive’s own legal counsel regarding the Restrictive Covenants and agrees that the Restrictive Covenants are reasonable in terms of duration, scope and area restrictions and are necessary to protect the goodwill of the Bank’s businesses and agrees not to challenge the validity or enforceability of the Restrictive Covenants.
(b) If Executive breaches, or threatens to commit a breach of any of the Restrictive Covenants, the Bank shall have the following rights and remedies, each of which rights and remedies shall be independent of the others and severally enforceable, and each of which is in addition to, and not in lieu of, any other rights and remedies available to the Bank at law or in equity:
i. The right and remedy to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Bank and that money damages would not provide an adequate remedy to the Bank; and
ii. The right and remedy to require Executive to account for and pay over to the Bank any profits, monies or other benefits derived or received by Executive as the result of any transactions constituting a breach of the Restrictive Covenants.
3. Notices. All notices, demands or other communications shall be sent to Executive, CCBI, and the Bank at the addresses indicated below to such other addresses or to the attention of such other persons as the recipient party has specified by prior written notice to the sending party, or in the case of the Executive, to the most recent address on record with the Bank.
Notice to Executive
N51404 Harriman Rd
Osseo, WI 54758
Notice to CCBI or the Bank
2174 Eastridge Center
Eau Claire WI 54701
Attn: Steve Bianchi, President and Chief Executive Officer
4. Attorneys’ Fees. In the event that either party brings any action to enforce any of the provisions of this Agreement, or to obtain money damages for the breach thereof, all expenses, including reasonable attorneys’ fees, incurred by the party prevailing on substantially all of the claims finally decided in the action, shall be paid by the other party with 120 days of the date that entry of judgment on the claims brought in the action becomes final and non –appealable.
Exh. C-4
5. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such a manner to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid or illegal provision had never been contained herein.
6. Complete Agreement. This Agreement contains the complete agreement and understanding between the parties related to the subject matter hereof, and supersedes, replaces, and preempts any prior understandings, agreements, or representations by or among the parties related to such subject matter, whether written or oral.
7. Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.
8. Choice of Law. All issues concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed in accordance with the laws of the State of Wisconsin, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Wisconsin or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Wisconsin.
9. Amendments and Waiver. The provisions of this Agreement may be amended or waived only by a written instrument, with written consent by both CCBI and Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.
[Signature Page Follows]
Exh. C-5
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first above written.
CITIZENS COMMUNITY BANCORP, INC. GREG LEGARE
By:__________________________________ ________________________________
Its:_______________________________
Exh. C-6
EXHIBIT D
FORM OF NON-SOLICITATION AGREEMENT
FORM OF NON-SOLICITATION AGREEMENT
This NON-SOLICITATION AGREEMENT (the “Agreement”) is entered into and is made effective as of the closing date of the Transaction (as hereinafter defined) (the “Effective Date”), by and among Citizens Community Bancorp, Inc., a Maryland corporation (“Buyer”), United Bancorporation, a South Dakota Corporation (“Seller”) and [Employee’s Name] (“Employee”).
WHEREAS, Employee is an employee of Seller.
WHEREAS, Seller owns all of the issued and outstanding shares of capital stock of United Bank, a Wisconsin state bank (the “Bank”).
WHEREAS, Buyer, Seller, and the Bank are parties to that certain Stock Purchase Agreement dated June __, 2018 (the “Purchase Agreement”), pursuant to which Buyer will purchase all of the issued and outstanding common stock of Bank from Seller (the “Transaction”).
WHEREAS, the Purchase Agreement conditions the closing of the Transaction on Buyer’s and Employee’s execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Restrictive Covenants.
(a) Confidential Information. For purposes of this Agreement, “Confidential Information” means information disclosed to Employee or known by Employee as a result of or as disclosed in the course of Employee’s services to Seller which is not generally known to the public pertaining to the Bank’s business, including, but not limited to, operations, contracts, customers, customer lists, proposals, research and development, procedures and protocols, operating models, financial information, pricing, price lists, marketing methods, strategic planning information, information stored in or developed for use with the Bank’s computer systems, insurance plans, risk management information, or marketing programs, and third-party information that the Bank may learn from its customers or clients. Confidential Information shall include any such information developed or created by Employee if the information was developed or created by Employee while executing Employee’s duties for Seller or if the information was developed or created by Employee based upon any Confidential Information that Employee learned by virtue of Employee’s services to the Seller. Confidential Information shall not include any information that Employee can demonstrate is in the public domain by means other than disclosure by Employee, but shall include non-public compilations, combinations, or analyses of otherwise public information.
(b) Non-Disclosure or Use of Confidential Information. From and after the Effective Date, Employee shall not directly or indirectly, under any circumstances, communicate
Exh. D-1
or disclose to any person, firm, association, corporation, company or any other third party, or use for Employee’s own benefit or the benefit of any person or entity, any Confidential Information, and Employee will keep secret and in strict confidence and hold inviolate said Confidential Information. Employee further agrees not to disclose to others or use at any time any Confidential Information that constitutes and remains a trade secret under the Wisconsin Trade Secrets Act, as amended (Section 134.90 Wis. Stats.), any Confidential Information that the Seller received from a third party and continues to hold in confidence, and any Confidential Information that Employee is otherwise prohibited by law from disclosing to others or using. The prohibitions of this paragraph shall not apply to Confidential Information after it has become generally known and/or in the public domain through no fault of Employee. The prohibitions of this paragraph also do not prohibit use of Employee’s general skills and knowledge acquired during and prior to Employee’s services to Seller, as long as such use does not involve the use or disclosure of Confidential Information.
(c) Nonsolicitation of Customers. For the [___]-year period following the Effective Date, Employee shall not, directly or indirectly canvas, contact or solicit any “Active Customer” (as defined below) of the Bank for the purpose of selling, offering or providing products or services which are the same as or substantially similar to the products or services provided by the Bank at any time during the 12-month period prior to the closing of the Transaction. “Active Customer” shall mean any person or entity which, to the actual knowledge of Employee, received any products or services supplied by or on behalf of the Bank.
(d) Non-Solicitation of Bank Personnel. For the [___]-year period following the Effective Date, Employee shall not, directly or indirectly, solicit, encourage or induce any employee, consultant, contractor, or other agent of the Bank to terminate a relationship (employment or otherwise), or breach any agreement with the Bank.
(e) Non-Disparagement. For the five-year period following the Effective Date, Employee agrees not to make any disparaging or negative remarks, either orally or in writing, regarding Bank, Buyer or any of their respective officers, directors, employees, agents, or affiliates. Employee further agrees not to make disparaging or negative remarks, either orally or in writing, regarding the Bank’s or Buyer’s business practices, services, products, programs, operations, administration, leadership, management, or community activities.
2. Enforcement.
(a) If, at the time of enforcement of the covenants contained in Section 1 (collectively, the “Restrictive Covenants”), a court shall hold that the duration or scope stated are unreasonable under circumstances then existing, the parties agree that the maximum duration or scope are reasonable under such circumstances shall be substituted for the stated duration or scope and that the court shall be allowed to revise the Restrictive Covenants to cover the maximum duration or scope permitted by law. Employee has had the opportunity to consult with Employee’s own legal counsel regarding the Restrictive Covenants and agrees that the Restrictive Covenants are reasonable in terms of duration and scope restrictions and are necessary to protect the goodwill of the Bank’s businesses and agrees not to challenge the validity or enforceability of the Restrictive Covenants.
Exh. D-2
(b) If Employee breaches, or threatens to commit a breach of any of the Restrictive Covenants, the Buyer shall have the following rights and remedies, each of which rights and remedies shall be independent of the others and severally enforceable, and each of which is in addition to, and not in lieu of, any other rights and remedies available to the Buyer at law or in equity:
i. The right and remedy to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Bank or Buyer and that money damages would not provide an adequate remedy to Buyer; and
ii. The right and remedy to require Employee to account for and pay over to the Bank any profits, monies or other benefits derived or received by Employee as the result of any transactions constituting a breach of the Restrictive Covenants.
3. Payment of Consideration. In consideration of Employee’s agreement to be bound by the Restrictive Covenants, Seller shall pay Employee One Thousand Dollars ($1,000) on the Effective Date.
4. Effectiveness. Notwithstanding anything herein to the contrary, this Agreement shall only become effective, if at all, upon consummation of the Transaction and the Purchase Agreement in accordance with its terms. In the event that the Transaction is not so consummated, no party hereto or its affiliates shall have any obligation or liability hereunder, and no claim shall be made by any party hereto or any of their respective affiliates in respect hereof.
5. Notices. All notices, demands or other communications shall be sent to Employee and Buyer at the addresses indicated below to such other addresses or to the attention of such other persons as the recipient party has specified by prior written notice to the sending party, or in the case of the Employee, to the most recent address on record with the Bank.
Notice to Employee
[Name]
____________________
____________________
____________________
Notice to Buyer
2174 Eastridge Center
Eau Claire WI 54701
Attn: Steve Bianchi, President and Chief Executive Officer
6. Attorneys’ Fees. In the event that either party brings any action to enforce any of the provisions of this Agreement, or to obtain money damages for the breach thereof, all expenses, including reasonable attorneys’ fees, incurred by the party prevailing on substantially all of the claims finally decided in the action, shall be paid by the other party with 120 days of
Exh. D-3
the date that entry of judgment on the claims brought in the action becomes final and non –appealable.
7. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such a manner to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid or illegal provision had never been contained herein.
8. Complete Agreement. This Agreement contains the complete agreement and understanding between the parties related to the subject matter hereof, and supersedes, replaces, and preempts any prior understandings, agreements, or representations by or among the parties related to such subject matter, whether written or oral.
9. Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.
10. Choice of Law. All issues concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed in accordance with the laws of the State of Wisconsin, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Wisconsin or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Wisconsin.
11. Amendments and Waiver. The provisions of this Agreement may be amended or waived only by a written instrument, with written consent by both Buyer and Employee, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.
[Signature Page Follows]
Exh. D-4
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first above written.
BUYER CITIZENS COMMUNITY BANCORP, INC. ____________________________________ By: ________________________________ Its: ________________________________ | SELLER UNITED BANCORPORATION ____________________________________ By: ________________________________ Its: ________________________________ |
EMPLOYEE _____________________________________ [Name] | |
Non-Solicitation Agreement
EXHIBIT E
AMENDED AND RESTATED TSA
AMENDED AND RESTATED TSA
Agreement I.D. # UB4
Customer # 2635
THIS AMENDED AND RESTATED TECHNOLOGY SERVICES AGREEMENT (the “Agreement”) is made effective June ___, 2018, by and between UNITED BANCORPORATION (referred to herein as “UBC”) and UNITED BANK (“Customer” and/or “Bank”).
WHEREAS, UBC and Customer are parties to that certain Technology Services Agreement dated January 1, 2016 (the “Services Agreement”).
WHEREAS, UBC and Customer desire to amend and restate the Services Agreement in its entirety following the consummation of the transactions contemplated by that certain Stock Purchase Agreement dated as of the date hereof by and among UBC, Customer, and Citizens Community Bancorp, Inc. (the “Purchase Agreement”),
NOW, THEREFORE, in consideration of the premises and mutual covenants hereinafter set forth, the parties hereto agree as follows:
1. Services. UBC shall: provide Customer at UBC’s place of business and at Customer’s place or places of business, as set forth below, all services as set forth in the attached Schedules A, B, C, D, E and F incorporated herein by reference (the “Services”) and coordinate and interact with Customer; train the Customer and its employees in the use and interpretation of all input, output and customized reports produced by UBC for Customer’s use; facilitate with Finastra the production of and furnish to Customer special reports and other additional services upon such terms, at such times and for such fees (including pass-through fees from Finastra, which fees shall be approved by Customer prior to being incurred) as shall from time to time hereafter be agreed upon by UBC and Customer; and provide at Customer’s expense, such information concerning the services rendered under this Agreement as Customer’s auditors may request upon the Customer’s authorization.
UBC shall take all steps necessary to implement and maintain during the term of this contract appropriate measures to ensure compliance with the Interagency Guidelines Establishing Standards for Safeguarding Customer Information and, in connection therewith, shall provide Customer with such information as Customer may reasonably request to monitor and ensure such compliance including, without limitation, audits and summaries of test results. The Bank shall have the right to have access from time to time to UBC premises upon reasonable notice from
Confidential 2016-2018
generic
Exh. E-1
Bank and during regular business hours to audit compliance with the Interagency Guidelines Establishing Standards for Safeguarding Customer Information.
2. Term. This Agreement shall commence upon the Closing Date (as defined in the Purchase Agreement) of the Purchase Agreement, and shall continue until Customer provides UBC with at least forty-five (45)-days’ advance written notice of termination. Customer may determine from time to time that it does not require all of the Services and, accordingly, may terminate any Service, in whole or in part, upon forty-five (45)-days’ advance written notice.
3. Fees. As consideration for provision of the Services, Customer will pay UBC the actual cost, without markup, incurred by UBC in providing the Services. Full payment of all undisputed fees shall be due within thirty (30) days after the date of the invoice provided for such Services. With each invoice, UBC shall provide Customer with the underlying support for the cost of the Services on such invoice, in form and substance reasonably satisfactory to Customer, and shall provide Customer with such additional supporting information for such invoice as Customer reasonably requests.
4. Duties and Representations of Customer.
a. Customer shall furnish data to UBC in a form acceptable to UBC at the time provided in the attached Schedules C, D and E.
b. Customer shall pay all expenses of rescheduling if it is necessary for UBC to extend the time requirements to allow for any rescheduling of Customer’s work caused by Customer’s failure to furnish its data in accordance with the attached Schedules, or on incomplete or incorrect forms.
c. Customer shall reject in writing any incorrect report within ten (10) business days after receipt of same and that failure to so reject shall constitute Customer’s acceptance of the report.
d. Customer shall pay UBC for any tax, except income, real estate or occupation tax and personal property tax, which shall at any time become payable in respect of this Agreement or for the Services provided hereunder.
e. Customer shall be responsible for and safeguard equipment and documents in transit, unless otherwise provided in the attached Schedules.
f. Customer hereby indemnifies and holds UBC harmless from liability, and shall not seek to hold UBC responsible for delay in providing or failing to provide Services if due to causes or conditions beyond UBC’s reasonable
Confidential 2016-2018
generic
Exh. E-2
control, or for any inaccuracy, inadequacy, or omission in any data, information or instructions furnished by the Customer.
g. Customer hereby indemnifies and holds UBC harmless from any and all liability, including reasonable attorneys’ fees arising from a claim asserted with respect to this Agreement or the Services provided hereunder, by any employee of Customer or any other third party, none of whom shall have any rights or claims against UBC. This indemnification shall not extend to, or indemnify UBC with respect to, any liability or claim to the extent the same is caused by the negligent, willful, or wanton act or omission of UBC.
h. Customer warrants and represents that it will be free, as of the date of the execution of this Agreement, of any contractual obligation that would prevent the Customer from entering into this Agreement, and that UBC’s offer to provide such services in no way caused or induced the Customer to breach any contractual obligation.
i. Customer shall provide oversight of system access by its own employees and notify UBC in writing, of any errors, breaches of security or unauthorized access to the system on a timely basis. UBC will also notify Customer of any security breaches or unauthorized access.
j. UBC shall permit Customer’s duly authorized representative and all applicable regulatory authorities to examine procedures, internal controls and accounting related functions as they apply to services provided by UBC to Customer under this agreement. Properly executed written authorization shall be submitted to UBC by customer. Authorization via email communication is accepted.
k. Customer shall be responsible for confirmation that adequate insurance coverage is in place to protect Customer and UBC from employee dishonesty while processing Customer’s data. Customer shall furnish proof of such coverage upon signing of this agreement.
l. [Reserved.]
m. | Customer agrees to employ or designate an Information Security Officer (ISO) charged with the responsibility of supervision of risk management and board reporting. |
5. Warranties of UBC. UBC hereby warrants and represents that it will exercise ordinary care in managing the Customer’s work and that it will hold in confidence all information relating to the assets, liabilities, business and affairs of the Customer received by UBC in rendering the Services under this Agreement,
Confidential 2016-2018
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Exh. E-3
except to the extent that disclosure is authorized by the Customer or compelled by governmental regulation or legal process.
6. Limitation of Liability. UBC’s liability hereunder for damages for any single incident, regardless of the form of action, shall not exceed the total amount paid for Services for the month in which an error occurs under attached Schedules or in the authorization for the particular service if not pursuant to a schedule. This shall be Customer’s exclusive remedy. Furthermore, UBC shall not be liable for any lost profits, consequential damages or for any claim or demand asserted against Customer by any other party. No action, regardless of form, arising out of the Services under this Agreement, may be brought by either party more than two years after the cause of action has accrued, except that an action for nonpayment must be brought within one year of the date of last payment. There are no expressed or implied warranties other than those described in this Agreement.
7. | Miscellaneous. |
a. All specifications, tapes, programs, concepts, expertise and procedures developed or utilized by UBC for Customer, except as provided by Customer, are and remain the sole property of UBC unless otherwise specifically provided herein.
b. All master files shall remain the property of Customer unless provided otherwise in the attached Schedules. Master files will be provided at UBC’s then current standard rate to the Customer in such machine-readable form as UBC produces in its ordinary course of business, if requested by the Customer in the event of termination.
c. This Agreement, together with all appendices or other attachments referenced herein, constitutes the entire agreement between the parties hereto and supersedes all proposals, oral and written, between the parties on this subject.
d. This Agreement shall be governed by the laws of the State of Wisconsin as set forth herein. Any action to enforce any provision of this Agreement may be filed in the Trempealeau County Court. Any action arising out of or related to this Agreement shall be brought in the District Court of Trempealeau County, Wisconsin, and in no other court or location.
e. Any invalidity, in whole or in part, of any provision of this Agreement shall not affect the validity of any other of its provisions.
f. Any notice or other communication hereunder shall be in writing, to the following:
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Exh. E-4
United Bancorporation
Greg LeGare
12525 10th Street, Suite 1
Osseo, WI 54758
United Bank
Trevor Bohland
P.O. Box 10
Osseo, WI 54758
g. No term or provisions hereof shall be deemed waived and no breach excused unless such waiver or consent shall be in writing and signed by the party claimed to have waived or consented.
h. | The Schedules A, B, C, D, E and F to be attached are part of this Agreement. |
8. | Responsibilities of UBC and Customer. |
a. | Asset Inventory |
1) | UBC will assist with the management of software licenses and coordinate with the bank for contract negotiations and renewals. |
2) | UBC will assist with the purchase of new computer hardware on an “as needed” basis. |
3) | UBC will assist with the proper disposal of old equipment to ensure necessary private data is properly disposed of. |
b. | Host System |
The Customer provides decisions for password administration of the host system and by special request; UBC provides the technical environment and proper system administration to test the effectiveness of password policies.
UBC will provide an environment so automated reports from the core system are viewable on their scheduled occurrence.
c. | Network Administration |
UBC provides general network administration on behalf of the Customer under the guidelines established by the Customer’s Information Security Policy. New/delete user requests, password administration, group policy, file/directory auditing, and user/group permissions are handled by
Confidential 2016-2018
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Exh. E-5
documented requests directly from appointed Customer administrators through the appropriate and secure means. Additional services that UBC provides for the Bank occur “behind the scenes,” such as server and router hardening, firewall policies, website filtering, virus management, disaster recovery, etc. The policies currently in place for these systems have been approved by UBC’s technical staff and necessary Executive members of the bank.
d. | Disaster Recovery |
In the event of a disaster, UBC will make all technical resources available to ensure the recovery of the disaster is handled in accordance with the Customer’s Business Continuity Program. UBC will provide backup systems for the most critical application located at the Datacenter at an alternate location so that the critical systems can be recovered in a timely manner. UBC will do its absolute best to recover the systems as quickly as possible.
e. | Internet Banking |
1) | UBC will assist the appointed Customer staff for each system to resolve technical issues; communicate with the systems’ vendors to resolve technical issues. |
f. | Telephone Banking |
2) | UBC will assist the appointed Customer staff for each system to resolve technical issues; communicate with the systems’ vendors to resolve technical issues. |
g. | Business Application |
1) | UBC will assist with the appointed Customer staff to resolve technical support issues with the bank’s business applications. Applications similar to email, spam filtering, anti-virus, office productivity, loan and deposit platforms, document viewers, etc… would fall into the category of business application support. |
Confidential 2016-2018
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Exh. E-6
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and each warrants and represents that the person whose signature appears below has been and is on the date of this Agreement duly authorized to execute this Agreement.
UNITED BANCORPORATION
By: _______________________________, Greg LeGare
Its: President
Date: | ___________________ |
UNITED BANK
By: _______________________________, Trevor Bohland
Its: President
Date: | ___________________ |
Confidential 2016-2018
generic
Exh. E-7
SCHEDULE A
[Intentionally Omitted]
Confidential 2016-2018
generic
Exh. E-8
SCHEDULE B
PROJECT MANAGEMENT & TECHNICAL RESOURCE FEES
The Customer will be responsible for technical resource costs for new project management and implementation.
UBC provides consultative project management assistance to the Bank as one of its primary services. As the Customer decides to implement new products, services, applications or systems, they will utilize UBC’s technical expertise to assist with the project(s). Expectations and responsibilities of UBC and the Customer are as follows:
1. | Bank will appoint and UBC will contact the bank appointment with the announcement of a new project. |
2. | UBC will work directly with the primary bank project lead on the new project. UBC will provide clear deliverables and schedule within the availability of the bank resources for project implementation. |
3. | UBC will work with the bank appointee for integrating the application or system into the Risk Assessment program. |
4. | UBC will be responsible for ensuring the new application or system follows the Customer’s compliance guidelines as it relates to Vendor Management. |
5. | UBC will work with the bank appointee for negotiating contracts of the new application or system associated with this new project with formal approval from the Customer. |
6. | UBC will be responsible for ensuring the new application or system is properly licensed. UBC’s project manager will define proper licensing as it relates to network, database or operating system structure. |
7. | UBC will work with the bank appointee on debrief of the project to track any reoccurring problems. |
Any work requested outside of this agreement will be considered as a Project and will be bill at T&M.
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Exh. E-9
SCHEDULE C
The following is to be included as part of this Agreement and supersedes any conditions and terms of the previous Agreement(s).
Datacenter Facilities Management:
UBC will manage and operate the technology services equipment which is owned by the Customer and UBC. This equipment will reside in the UBC Datacenter (“Datacenter”) and is available for inspection, audit, etc., at any time during normal working hours and by appointment after hours when the building is totally secured.
UBC will designate a specific individual to be in charge of Customer technology services equipment and service and will meet from time to time as needed with bank officials. Customer will identify one person who shall be the liaison between UBC and the Customer.
UBC will maintain and manage all equipment at the Datacenter in a prudent manner as if it were their own equipment.
Customer will pay all hardware, software, supplies and related expenses associated with said equipment. In the event the equipment, etc., reaches 80 percent of capacity or if Customer desires new or additional services, UBC will recommend best alternatives to Customer management and upon their decision, will add, develop, etc., proper solutions at Customers expense. All expenses will be at UBC standard fees.
Asset Disposal. UBC will develop and maintain an Asset Disposal Policy that is acceptable to the bank and follow procedures to manage the disposal of assets. UBC will be responsible for the disposal of bank assets based upon FFIEC guidelines to ensure the security and confidentiality of data.
Research/Retrieval Request
From time to time, the need will arise for the Customer to request copies of items that are on file at Finastra. The research/retrieval requests have been designed to meet this need. The research requests are for items that can only be located image because the originals may no longer retained by the bank or UBC.
UBC will then research with Finastra any missing information and deliver to the bank as requested.
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Exh. E-10
SCHEDULE D
UNITED BANCORPORATION
INFORMATION SECURITY PROGRAM
Related to the areas in the Information Security Program, UBC will work with key participants from Customer business units to support technology while controlling risk and complying with 501 (b) of the Gramm Leach Bliley Act. UBC will work in conjunction with the Customers Information Security Officer to assist in making necessary adjustments with the Customers Information Security Program outlined in TRAC.
The Customer Information Security Officer will be responsible for reporting all information security activities and status to the bank Board and regulatory bodies.
Standardized Information Security Program includes:
a. | Risk Assessment |
The customer will be a resource to UBC to assist in the review and update of existing risk assessments. UBC will provide clear deliverables and schedule within the availability of the bank resources for regular evaluation of Customer risk assessments from an information security standpoint only. UBC will work with the bank to perform a uniform risk assessment.
For the introduction of new systems, UBC requires participation in the selection of the technology to evaluate information security. UBC will work with the Bank appointee to formally track new technologies so that the appointee can report to Bank Executive Management for approval of any new technology.
b. | Vendor Management |
Hardware, software, and contracted services may be owned and/or licensed through the Customer or UBC. The overall vendor management is the responsibility of the Customer. UBC will work with bank resources for assistance on the management of vendors. UBC may report to the UBC Executive Management for approval of any new vendor.
c. | Incident Response |
A formal incident response plan will be maintained by the Customer with UBC providing assistance where needed.
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Exh. E-11
d. | Policies and Procedures |
UBC will provide guidance and recommendations for policies and procedures related to information security to ensure they are aligned with best practices and FFIEC requirements.
e. | Change Control |
A formal change control procedure is used by UBC for changes to the production environment. The procedure includes a testing and approval process, documentation and communication.
The Customer is responsible for adhering to the change control process by submitting change requests for testing and approval as well as final approval.
f. | Awareness Programs |
UBC will be a resource to assist as necessary to ensure Customer employees receive information security awareness training.
g. | Auditing and Monitoring |
UBC will provide guidance and recommendations in the identification and selection of external parties for auditing of the information security program and related systems.
UBC will provide management of security monitoring and testing. Regular reports will be provided to the Customer.
h. | Event Schedules |
UBC will maintain standardized event schedules related to the Information Security Program.
The Customer shall make resources available throughout the year to assist with the identified information security initiatives including Business Continuity.
Confidential 2016-2018
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Exh. E-12
SCHEDULE E
Compliance With Customer Financial Privacy And Safeguarding Requirements.
The parties agree to the following for purposes of complying with financial privacy and safeguarding requirements imposed by law with respect to Bank’s customers:
(a) To the extent applicable, each of the parties to this Agreement shall comply with the Gramm Leach Bliley Act, the Fair Credit Reporting Act (15 U.S.C. § 1681; 12 C.F.R. Part 41), OCC regulations on the privacy of consumer financial information (12 C.F.R. Part 40), the Interagency Guidelines Establishing Standards for Safeguarding Customer Information (12 C.F.R. Part 30, Appendix A), and any other applicable laws, regulations or guidelines regarding the privacy and security of customer information, to ensure that the confidentiality and security of Bank’s customers’ nonpublic personal information is preserved.
(b) In connection with Bank’s customers, UBC shall preserve the confidentiality of any nonpublic personal information provided by Bank or Bank’s customers to UBC, and shall not disclose such information to any affiliated or unaffiliated third parties, except (i) as necessary to carry out the services that UBC has agreed to provide Bank, or (ii) as otherwise required by federal or state law. Furthermore, to the extent disclosure of Bank’s customers’ nonpublic personal information is made to UBC, such information will be disclosed only to those employees, if any, of UBC whose duties reasonably require access to such information.
(c) In connection with preserving the confidentiality and security of Bank’s customers’ nonpublic personal information, UBC shall maintain physical, electronic, and procedural safeguards that comply with applicable federal and state laws and regulations to protect any such customers’ nonpublic personal information provided to UBC by Bank or Bank’s customers. UBC shall immediately disclose to Bank any and all breaches in security that may materially affect any of the customers of Bank, and in connection therewith, Bank shall be provided access to internal and external audits of UBC, if any, to the extent the same concern or provide information pertaining to such security or breaches of security. Upon termination of this Agreement, all Bank’s customers’ nonpublic personal information provided by Bank and Bank’s customers to UBC shall be promptly returned to Bank upon request, or properly destroyed, as applicable.
(d) The provisions of this Schedule E shall survive termination of this Agreement and termination of the business relationship between Bank and UBC.
Confidential 2016-2018
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Exh. E-13
SCHEDULE F
UBC Bank Services
Purpose
This document lists the various ongoing technical services that the UBC Technology Services Department will provide to the Customer.
Services
To the extent UBC staff has access to the following services following the consummation of the transactions contemplated by the Purchase Agreement, UBC technical staff will provide the following listed services to the serviced banks in order to ensure that the banks’ information security (IS) and information technology (IT) environments are maintained according to industry best practices and regulatory guidelines.
Network
• | Provide on-going patch management support |
o | Analyze patches for relevancy |
o | Test patches prior to implementation |
o | Approve patches for implementation |
• | Periodically scan bank systems (servers/workstations) for proper patching |
• | Periodically scan bank systems for unapproved software |
o | Evaluate and research software |
• | Maintain current hardware and software inventories |
• | Maintain and monitor adherence to software license agreements |
• | Monitor for hardware warranties and expirations |
• | Ensure that all servers and workstations are installed according to documented standards |
o | E.g. running services, enabled firewalls, host-based IDS, etc… |
• | Ensure that the network infrastructure and protocols are in line with documented standards |
o | E.g. DHCP vs. static addresses, Encryption key lengths, open/closed ports, etc… |
• | Manage the remote data backup service |
o | Provide daily monitoring to substantiate the integrity of the back-up process |
o | Periodically restore backup files to validate integrity of the back-up process |
• | Monitor server usage |
o | Drive space, memory and processor utilization |
o | Error logs |
o | Network traffic |
• | Proactively monitor system (server/workstation) audit logs to identify system problems |
• | Monitor battery backup (UPS) status |
• | Maintain current network (LAN and WAN) topologies. |
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Exh. E-14
• | Provide hardware (e.g. hard drive, tape, etc…) erasing and disposal services for the bank. |
• | Maintain complete and current technical documentation on all aspects of the Datacenter systems’ configurations. |
o | Provide mid-level documentation to the bank pertaining to basic IT processes. |
(For Example: Data-backup - Describe what data is backed up? What software is backed up? What is the frequency of each? What are the backup methodologies (e.g. incremental? Full?)
• | Regularly monitor the status of the anti-virus system |
o | E.g. running on all systems, updated engines, update dat files. |
o | Help the bank to determine the root cause of any quarantined viruses. |
• | Manage and monitor bank employees’ network remote access |
o | Maintain the Remote Access Policy |
o | Obtain completed and authorized Remote Access Request Forms |
o | Enable and disable remote access as directed |
o | Generate and review reports to monitor the remote access usage of VPN users. |
Management
• | Attend bank meetings (e.g. IT Committee, other) relating to IT new or prevailing IT matters. |
• | Participate in the risk assessment process relating to new products/services |
o | Provide input into the product/service risk assessment (e.g. threats, risks, controls) |
o | Participate in populating the risk assessment |
• | Perform research and provide advice on proposed new software for the institution. |
• | Maintain a help desk function |
o | Log and respond to user inquiries / issues |
o | Properly prioritize issues |
o | Respond to service requests in a timely and complete manner |
o | Provide notification of the resolved issue(s) |
o | Maintain audit trail documentation relating to each issue |
• | Provide vendor due diligence documentation to the bank annually. |
o | Disaster recovery preparedness and testing |
o | Audit report results of Datacenter operations, including any remediation efforts |
o | Information on security audits of the Datacenter |
• | Facilitate the annual updating of the bank’s IT related policies. |
• | Help the bank to populate and maintain the TRAC system information. |
o | IS/IT Policies |
o | Vendor Management |
o | IS/IT Risk Assessment |
o | Disaster Recovery |
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Exh. E-15
Core Processing
• | Download, deploy and implement upgrades, hot fixes and patches to the banks network infrastructure each time a new release is delivered. |
• | Provide and maintain the telecom pipe between the bank and core processor. |
• | Participate in the negotiation process of core processor services and pricing. |
• | Perform the ongoing due diligence of the core processor for Vendor Management purposes |
o | E.g. Review financials, SAS70s, insurance, DR info, FFIEC reports, other security information. |
o | Report the results of the annual due diligence review to the bank. |
Firewall
• | Maintain proper physical security over firewalls |
• | Provide for redundant firewalls (physical, imaged) for recovery purposes |
• | Maintain firewall configurations in line with best practices and documented standards |
• | Provide for periodic penetration testing of the firewalls |
• | Maintain firewall and IDS patches and signature files |
• | Generate and review IDS logs daily for analysis and escalation, as applicable |
• | Generate and review firewall logs regularly to identify any changes made |
• | Immediately notify the bank of any security breaches that have occurred within the Datacenter as well as remediation efforts underway. |
• | Provide web filtering services relating to bank employees’ Internet access. |
• | Provide the bank regular reports relating to employees’ web sites visited, and denied. |
Networking
• | Maintain a network monitoring system |
• | Maintain a 24x7 monitoring system of network connections. |
• | Provide for escalation procedures and resolution of network issues. |
• | Provide for network redundancy to preclude a single point of failure between the Datacenter and core processor |
Confidential 2016-2018
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Exh. E-16
EXHIBIT 3.1
ARTICLES SUPPLEMENTARY
DESIGNATING THE RIGHTS AND PREFERENCES
OF
THE 8.00% SERIES A MANDATORILY CONVERTIBLE NON-CUMULATIVE
NON-VOTING PERPETUAL PREFERRED STOCK,
PAR VALUE $0.01 PER SHARE
OF
CITIZENS COMMUNITY BANCORP, INC.
CITIZENS COMMUNITY BANCORP, INC., a Maryland corporation (hereinafter called the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Under a power contained in Article 5(C) of the charter of the Corporation (the “Charter”), the Board of Directors of the Corporation (the “Board of Directors”), by duly adopted resolutions, classified and designated 500,000 shares of the authorized but unissued preferred stock, par value $0.01 per share (the “Preferred Stock”), of the Corporation, as shares of 8.00% Series A Mandatorily Convertible Non-Cumulative Non-Voting Perpetual Preferred Stock, par value $0.01 per share, with the following preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption, which, upon any restatement of the Charter, shall become part of Article 5 of the Charter, or any exhibit thereto, with any necessary or appropriate renumbering or relettering of the sections or subsections hereof.
8.00% SERIES A MANDATORILY CONVERTIBLE NON-CUMULATIVE NON-VOTING PERPETUAL PREFERRED STOCK
Section 1.Designation of Series and Number of Shares.
(a) The shares of such series of Preferred Stock shall be designated as shares of “8.00% Series A Mandatorily Convertible Non-Cumulative Non-Voting Perpetual Preferred Stock” (the “Series A Preferred Stock”), and the authorized number of shares that shall constitute such series shall be 500,000 shares.
(b) Shares of outstanding Series A Preferred Stock that are purchased or otherwise acquired by the Corporation (including shares of Series A Preferred Stock that are converted into shares of Common Stock pursuant to Section 6 hereof) shall be automatically be reclassified as and shall revert to authorized but unissued shares of Preferred Stock without further classification as to class or series.
Section 2. Ranking. The Series A Preferred Stock will rank, with respect to the payment of dividends and distributions upon liquidation, dissolution or winding-up, (a) junior to each class or series of stock of the Corporation that the Corporation may issue in the future, the terms of which expressly provide that such class or series will rank senior to the Series A Preferred Stock as to dividend rights and rights on liquidation, dissolution and winding-up of the Corporation (collectively, the “Senior Securities”), (b) on parity with each class or series of Preferred Stock that the Corporation may issue in the future, the terms of which expressly provide that such class or series will rank on a parity with the Series A Preferred Stock as to dividend rights and rights on liquidation, dissolution and winding-up of the Corporation (collectively, the “Parity Securities”) and (c) senior to the Common Stock and each other class or series of stock of the Corporation that the Corporation may issue in the future, the terms of which do not expressly provide that it ranks on a parity with or senior to the Series A Preferred Stock as to dividend rights and rights on liquidation, dissolution and winding-up of the Corporation (the “Junior Securities”).
Section 3. Definitions. As used herein with respect to the Series A Preferred Stock:
(a) “Applicable Regulations” has the meaning set forth in Section 6(f).
(b) “Articles Supplementary” means these Articles Supplementary and, upon any restatement of the Charter, shall mean the terms of the Series A Preferred Stock as set forth in the Charter.
(c) “Board of Directors” has the meaning set forth in Article First.
(d) “Business Day” means any day other than a Saturday, Sunday or any other day on which banks in New York, New York or the State of Maryland are generally required or authorized by law to be closed.
(e) “Bylaws” means the Bylaws of the Corporation, as amended, and as further amended or restated and in effect from time to time.
(f) “Charter” has the meaning set forth in Article First.
(g) “Common Stock” means the common stock, par value $0.01 per share, of the Corporation.
(h) “Conversion” has the meaning set forth in Section 6(a).
(i) “Conversion Date” has the meaning set forth in Section 6(a).
(j) “Corporation” has the meaning set forth in the Recitals.
(k) “Dividend Payment Date” has the meaning set forth in Section 4(a).
(l) “Dividend Period” has the meaning set forth in Section 4(a).
(m) “Dividends Payable Date” has the meaning set forth in Section 4(a).
(n) “Effective Date” means the date on which any shares of Series A Preferred Stock are first issued.
(o) “Event” has the meaning set forth in Section 9(b)(ii).
(p) “Holder” means a Person in whose name shares of the Series A Preferred Stock are registered, which Person may be treated by the Corporation and any paying agent as the absolute owner of such shares of Series A Preferred Stock for the purpose of making payment, the issuance of shares of Common Stock in connection with the Conversion and for all other purposes, acting in his, her or its capacity as such.
(q) “Junior Securities” has the meaning set forth in Section 2.
(r) “Parity Securities” has the meaning set forth in Section 2.
(s) “Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust or other entity.
(t) “Preferred Dividends” means the non-cumulative cash dividends to which Holders of Series A Preferred Stock are entitled to receive pursuant to Section 4(a), and shall not include any dividends to which Holders of Series A Preferred Stock are entitled to receive pursuant to Section 4(f).
(u) “Preferred Stock” has the meaning set forth in Article First.
(v) “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
(w) “Securities Purchase Agreement” means that certain Securities Purchase Agreement, dated as of the date hereof, by and among the Company and each purchaser identified on the signature pages thereto.
(x) “Senior Securities” has the meaning set forth in Section 2.
(y) “Stockholder Approval” means the approval, by the vote required by the rules of The NASDAQ Global Market (or such other primary stock exchange upon which the Common Stock shall be listed or admitted for trading), of the issuance of shares of Common Stock in the Conversion.
(z) “Record Date” has the meaning set forth in Section 4(a).
Section 4. Dividends.
(a) If the Conversion has not occurred on or before December 31, 2018 (the “Dividends Payable Date”), Holders shall be entitled to receive, when, as and if authorized by the Board of Directors and declared by the Corporation, out of legally available funds, non-cumulative, cash Preferred Dividends on the Series A Preferred Stock at a rate equal to 8.00% per annum of the $130.00 liquidation preference per share, payable semiannually in arrears on June 30 and December 31 of each year, commencing on December 31, 2018 (each such date, subject to adjustment as provided below, a “Dividend Payment Date”). Preferred Dividends on the Series A Preferred Stock will accrue daily from the Effective Date (if the Conversion does not occur on or before the Dividends Payable Date) and will be computed on the basis of a 360-day year consisting of twelve 30-day months. Each Preferred Dividend will be payable to the Holders of record as they appear in the records of the Corporation at the close of business on the first day of the month in which the relevant Dividend Payment Date occurs or such other date, not exceeding 60 days before the applicable Dividend Payment Date, as may be fixed by the Board of Directors (each, a “Record Date”). The period from and including the Effective Date and to but excluding December 31, 2018, and each period thereafter from and including December 31 of each year to and including June 29 of each year, and from and including June 30 of each year to and including December 30 of each year, are herein each referred to as a “Dividend Period.” If a Dividend Payment Date is not a Business Day, then any Preferred Dividends declared on the Series A Preferred Stock for payment on such Dividend Payment Date may be paid on the next succeeding Business Day without interest or adjustment in the amount of the dividend per share of Series A Preferred Stock.
(b) Preferred Dividends are not cumulative. If the Corporation does not declare a Preferred Dividend on the Series A Preferred Stock or if the Corporation declares less than the full Preferred Dividend accrued in respect of any Dividend Period, the Holders will have no right to receive any Preferred Dividend or the full Preferred Dividend accrued, as the case may be, for the Dividend Period, and the Corporation will have no obligation to declare or pay a Preferred Dividend or to pay full Preferred Dividends accrued for that Dividend Period, whether or not Preferred Dividends are authorized, declared and paid for any future Dividend Period with respect to the Series A Preferred Stock or, except as set forth in Section 4(c) and Section 4(d) below, the Common Stock or any other class or series of Preferred Stock.
(c) So long as any share of Series A Preferred Stock remains outstanding, from and after the end of the first Dividend Period, no dividends or distributions (other than dividends or distributions paid in shares of, or options, warrants, or rights to subscribe for or purchase shares of, Common Stock or other Junior Securities) shall be declared or paid or set apart for payment and no other distribution shall be declared or made or set apart for payment, in each case upon the Common Stock or any other Junior Securities, nor shall any Common Stock nor any other Junior Securities be redeemed, purchased, or otherwise acquired for any consideration (or any monies be paid to or made available for a sinking fund or otherwise for the purchase or redemption of any shares of any such stock) by the Corporation (except (1) by conversion into or exchange for shares of Common Stock or other Junior Securities; (2) repurchases of unvested shares of the Corporation’s capital stock upon termination of employment or consultancy of the holder thereof, provided such repurchases are approved by the Board of Directors; or (3) in connection with the payment of exercise prices or withholding taxes relating to employee equity awards) unless, in each case, full Preferred Dividends accrued during the most recently-completed Dividend Period on all outstanding shares of Series A Preferred Stock have been declared and paid or declared and a sum sufficient for the payment thereof has been set aside for payment.
(d) So long as any share of Series A Preferred Stock remains outstanding, from and after the end of the first Dividend Period:
(i) No dividends, except as described in the next succeeding sentence, shall be declared or paid on any Parity Securities for any current dividend period unless full accrued Preferred Dividends for such current Dividend Period have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series A Preferred Stock. When full accrued Preferred Dividends for the then-current Dividend Period are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, upon the shares of Series A Preferred Stock and any other Parity Securities (which, for the avoidance of doubt, shall not include the redemption, repurchase, conversion or exchange of shares of Series A Preferred Stock or any Parity Securities), all dividends declared upon shares of Series A Preferred Stock and such other Parity Securities shall be declared pro rata so that the amounts of Preferred Dividends per share declared on the Series A Preferred Stock and the amount of dividends per share declared on such other Parity Securities shall in all cases bear to each other the same ratio that accrued and unpaid Preferred Dividends per share on outstanding shares of Series A Preferred Stock and accrued and unpaid dividends per share on such other outstanding Parity Securities (which shall not include any amount in respect of unpaid dividends accrued during any prior Dividend Period on the Series A Preferred Stock or, if such other class or series of Parity Securities does not have a cumulative dividend, any other Parity Securities) bear to each other; and
(ii) No Parity Securities shall be redeemed, purchased, or otherwise acquired for any consideration (or monies to be paid to or made available for a sinking fund or otherwise for the purchase or redemption of any shares of any such stock) by the Corporation (except (1) by conversion into or exchange for shares of Common Stock or other Junior Securities, including pursuant to Section 6 hereof; or (2) for the purchase or other acquisition of shares of Series A Preferred Stock or Parity Securities pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series A Preferred Stock and all outstanding Parity Securities) unless, in each case, full Preferred Dividends accrued during the most recently-completed Dividend Period on all outstanding shares of Series A Preferred Stock have been declared and paid or declared and a sum sufficient for the payment thereof has been set aside for payment.
(e) No Preferred Dividends on the Series A Preferred Stock shall be authorized, declared, paid or set apart for payment by the Corporation at any time such authorization, payment or setting apart for payment shall be restricted or prohibited by law, regulation or the rules of any stock exchange upon which the Corporation’s stock is then listed or admitted for trading.
(f) In addition to the non-cumulative preferential cash dividends as set forth in Section 4(a), Holders shall be entitled to share ratably, on an as-converted basis, in any dividend or other distribution on the Common Stock, whether in cash, property, securities or a combination thereof, when, as and if authorized by the Board and declared by the Corporation, out of legally available funds.
Section 5. Redemption.
(a) The Series A Preferred Stock shall not be redeemable either at the Corporation’s option or at the option of the Holders at any time.
Section 6. Mandatory Conversion.
(a) As of the close of business on the third Business Day after the Corporation’s receipt of the Stockholder Approval (the “Conversion Date”), each outstanding share of Series A Preferred Stock shall automatically, without any action by any of the Holders, be converted into ten issued and outstanding shares of Common Stock (the “Conversion”); provided, however, that the number of shares of Common Stock into which each share of Series A Preferred Stock is convertible pursuant to this Section 6 will be adjusted pro rata for any stock splits (including those effected pursuant to a distribution of Common Stock), subdivisions or combinations (in each case, a “Share Split”) with respect to the Common Stock such that the adjusted number of shares of Common Stock into which each share of Series A Preferred Stock is convertible after a Share Split shall be the number of shares of Common Stock equal to the product obtained by multiplying (i) the number of shares of Common Stock into which each share of Series A Preferred Stock is convertible immediately prior to such Share Split by (ii) a fraction, the numerator of which is the number of shares of Common Stock outstanding after giving effect to such Share Split and the denominator of which is the number of shares of Common Stock outstanding immediately prior to such Share Split.
(b) Effective immediately before the close of business on the Conversion Date, dividends shall cease to accrue on any converted shares of Series A Preferred Stock and such shares of Series A Preferred Stock shall cease to be outstanding, in each case, subject to the right of the Holders to receive any declared and unpaid dividends on such shares and any other payments to which they are otherwise entitled pursuant to these Articles Supplementary.
(c) The shares of Common Stock issuable in the Conversion shall not be deemed outstanding for any purpose, and the Holders shall have no rights with respect to such shares of Common Stock (including voting rights, rights to respond to tender offers for the Common Stock and rights to receive any dividends or other distributions on the Common Stock) by virtue of holding shares of Series A Preferred Stock, until the close of business on the Conversion Date.
(d) The Person or Persons entitled to receive shares of Common Stock in the Conversion shall be treated for all purposes as the record holder(s) of such shares of Common Stock as of the close of business on the Conversion Date. Unless a Holder of Series A Preferred Stock designates another name in which the shares of Common Stock issuable in the Conversion with respect to such shares of Series A Preferred Stock should be registered, or another manner in which such shares of Common Stock should be delivered in accordance with such reasonable procedures as the Corporation may require, the Corporation shall be entitled to register and deliver such shares of Common Stock in the name of the Holder of the shares of Series A Preferred Stock so converted as shown on the records of the Corporation. Any certificates representing shares of Series A Preferred Stock prior to the Conversion Date shall, from and after the Conversion, represent the number of shares of Common Stock into which such shares of Preferred Stock were converted.
(e) Within 2 Business Days after receipt of the Stockholder Approval, the Corporation will provide to Holders of Series A Preferred Stock a notice of occurrence of the Conversion, which notice in writing shall be delivered to the holders of record of the shares of the Series A Preferred Stock to their addresses as they appear on the stock records of the Corporation, and which notice shall state the Conversion Date and the number of shares of Common Stock into which each share of Series A Preferred Stock held by such Holder was converted. The Corporation shall, if required, furnish all appropriate endorsements and transfer documents and pay all transfer or similar taxes arising in connection with the Conversion. Notwithstanding the foregoing, if the shares of Series A Preferred Stock are held in global form, such notice shall instead comply with applicable procedures of The Depository Trust Company. No failure to give such notice or any defect thereto or in the giving thereof shall affect the validity of the Conversion.
(f) The Corporation will comply with all applicable United States federal laws and regulations, any applicable State laws and regulation, and the rules and regulations of the NASDAQ Global Market (or such other stock exchange upon which the Common Stock shall be listed or admitted for trading) (collectively, the “Applicable Regulations”) in connection with the Conversion. Notwithstanding any other provisions of these Articles Supplementary, the Conversion may not be effectuated if the Conversion would result in a violation of any of the Applicable Regulations.
Section 7. Liquidation.
(a) In the event the Corporation voluntarily or involuntarily liquidates, dissolves or winds up, the Holders at the time of such liquidation, dissolution or winding-up shall be entitled to receive liquidating distributions in the amount equal to the greater of (i) $130.00 per share of Series A Preferred Stock, without payment for any accrued dividends that have not been declared by the Corporation, out of assets legally available for distribution to the Corporation’s stockholders, and (ii) the amount the Holder would receive if the shares of Series A Preferred Stock had been converted at the time of such liquidation, dissolution or winding up (assuming the conversion of all shares of Series A Preferred Stock, without regard to any limitations on the conversion of Series A Preferred Stock), before any distribution of assets is made to the holders of the Common Stock or any other Junior Securities. After payment of the full amount of such liquidating distributions, the Holders will not be entitled to any further participation in any distribution of assets by, and shall have no right or claim to any remaining assets of, the Corporation.
(b) In the event the assets of the Corporation available for distribution to stockholders upon any liquidation, dissolution or winding-up of the affairs of the Corporation, whether voluntary or involuntary, are insufficient to pay in full the amounts payable with respect to all outstanding shares of the Series A Preferred Stock and the corresponding amounts payable on any Parity Securities, the Holders and the holders of such Parity Securities shall share ratably in any distribution of assets of the Corporation in proportion to the full respective liquidating distributions to which they would otherwise be respectively entitled.
(c) The Corporation’s consolidation or merger with or into any other entity, the consolidation or merger of any other entity with or into the Corporation, or the sale of all or substantially all of the Corporation’s property or business will not constitute its liquidation, dissolution or winding up.
(d) In determining whether a distribution (other than upon voluntary or involuntary liquidation) on the Series A Preferred Stock, by dividend, redemption or other acquisition of shares of stock of the Corporation or otherwise, is permitted under the Maryland General Corporation Law, amounts that would be needed, if the Corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of the Holders shall not be added to the Corporation’s total liabilities.
Section 8. Maturity. The Series A Preferred Stock shall be perpetual.
Section 9. Voting Rights. The Holders shall not have any voting rights except as set forth below.
(a) Except as set forth in Section 9(b), so long as any shares of Series A Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by the Charter, the vote or consent of the Holders of at least a majority of the outstanding shares of Series A Preferred Stock and any class or series of Parity Securities upon which like voting rights have been conferred and are exercisable and are then outstanding, voting together as a single class, given in person or by proxy, either by consent without a meeting or by vote at any meeting called for the purpose, shall be necessary to approve any amendment, alteration or repeal of the Charter, whether by merger, consolidation or otherwise, to (i) authorize or issue, or increase the authorized, issued or outstanding amount of, any shares of any class or series of stock ranking senior to the Series A Preferred Stock with respect to the payment of dividends or distribution of assets on the Corporation’s liquidation, dissolution or winding up or (ii) significantly and adversely affect the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption of the Series A Preferred Stock.
(b) Section 9(a) shall not apply, and the Holders of Series A Preferred Stock shall have no right to vote on or consent to any action, if, at or prior to the time when the action with respect to which the vote or consent would otherwise be required shall be effected, the Conversion has occurred. Further, the following actions shall not be deemed to significantly and adversely affect the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption of the Series A Preferred Stock, and the Holders of Series A Preferred Stock shall have no right to vote or consent to:
(i) an increase in the number of authorized or issued shares of Common Stock or Preferred Stock without further designation as to class or series, or the creation or issuance of any class or series of Junior Securities or Parity Securities;
(ii) an amendment, alteration or repeal of any provision of the Charter, whether by merger, consolidation or otherwise (an “Event”), (x) if the Series A Preferred Stock (or securities of any successor person or entity to the Corporation into which the Series A Preferred Stock has been converted) remains outstanding with the terms thereof unchanged in all material respects, or the holders of shares of Series A Preferred Stock receive securities of a successor person or entity with terms that are unchanged in all material respects from those of the Series A Preferred Stock, taking into account that, upon the occurrence of an Event, the Corporation may not be the surviving entity, or (y) if the holders of the Series A Preferred Stock shall receive in connection with such Event an amount of cash per share of Series A Preferred Stock equal to the liquidation preference (calculated in accordance with Section 7(a)) to which they would be entitled if the Corporation were to be liquidated and its assets distributed to its stockholders of the date of such Event.
(c) Except as expressly provided in this Section 9, each Holder will have one vote per share of Series A Preferred Stock he, she or it holds on any matter on which the Holders are entitled to vote, including any action by consent. The Holders shall have exclusive voting rights on any amendment that would alter only the contract rights, as expressly set forth in the Charter, of the Series A Preferred Stock. On any matter upon which Holders of Series A Preferred Stock vote together as a single class with the holders of Parity Securities upon which like voting rights have been conferred and are exercisable, the shares of Series A Preferred Stock and each class or series of Parity Securities will have a number of votes proportionate the aggregate liquidation preference of the outstanding shares of such class or series.
Section 10. No Preemptive Rights. No share of Series A Preferred Stock shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.
Section 11. Notices. Any notice required by the provisions hereof to be given to the holders of Series A Preferred Stock may be given in any manner that notice of a meeting of stockholders may be given under Maryland law, the Charter or the Bylaws.
Section 12. Other Rights. The shares of Series A Preferred Stock shall not have any preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications or terms or conditions of redemption, other than as set forth herein or in the Charter or as provided by applicable law.
SECOND: The Series A Preferred Stock has been classified and designated by the Board of Directors under the authority contained in the Charter.
THIRD: These Articles Supplementary have been approved by the Board of Directors in the manner and by the vote required by law.
FOURTH: The undersigned officer of the Corporation acknowledges these Articles Supplementary to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned officer acknowledges that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties of perjury.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be signed in its name and on its behalf by its President and attested to by its Secretary on this 20th day of June, 2018.
ATTEST: | CITIZENS COMMUNITY BANCORP, INC. |
By: /s/ James S. Broucek _______________ Name: James S. Broucek Title: Chief Financial Officer, Treasurer and Secretary | By: /s/ Stephen M. Bianchi ______________ Name: Stephen M. Bianchi Title: President and Chief Executive Officer |
- Signature Page to Series A Preferred Stock Articles Supplementary -
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EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this “Agreement”) is dated as of June 20, 2018, by and among Citizens Community Bancorp, Inc., a Maryland corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).
RECITALS
(1) The Company and each Purchaser is executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act.
(1) Each Purchaser, severally and not jointly, wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, that aggregate number of shares of the Company’s mandatorily convertible non-cumulative non-voting perpetual preferred stock, $130.00 liquidation preference per share (the “Preferred Stock”), set forth below such Purchaser’s name on the signature page of this Agreement (which aggregate amount for all purchasers shall be approximately $65 million worth 500,000 shares) and shall be collectively referred to herein as the “Preferred Shares”). When purchased, the Preferred Stock will have the terms set forth in the Articles Supplementary to the Company’s Charter for the Preferred Stock in the form attached as Exhibit A hereto (the “Articles Supplementary”) made a part of the Company’s Articles of Incorporation, as amended, by the filing of the Articles Supplementary with the Secretary of State of the State of Maryland (the “Maryland Secretary”). The Preferred Stock will be convertible into shares (the “Underlying Shares”) of the common stock, par value $ .01 per share, of the Company (the “Common Stock”), subject to and in accordance with the terms and conditions of the Articles Supplementary. The Underlying Shares, together with the Preferred Shares, are referred to collectively as the “Securities.”
(1) The Company has engaged FIG Partners, LLC and Hovde Group, LLC as its exclusive placement agents (the “Placement Agents”) for the offering of the Preferred Shares.
(1) Contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement, substantially in the form attached hereto as Exhibit B (the “Registration Rights Agreement”), pursuant to which, among other things, the Company will agree to provide certain registration rights with respect to the Securities under the Securities Act and the rules and regulations promulgated thereunder and applicable state securities laws.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Purchasers hereby agree as follows:
ARTICLE I
DEFINITIONS
DEFINITIONS
1.1. Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms shall have the meanings indicated in this Section 1.1:
“Action” means any action, suit, inquiry, notice of violation, proceeding (including any partial proceeding such as a deposition) or investigation pending or, to the Company’s Knowledge, threatened in writing against the Company, any Subsidiary or any of their respective properties or any officer, director or employee of the Company or any Subsidiary acting in his or her capacity as an officer, director or employee before or by any federal, state, county, local or foreign court, arbitrator, governmental or administrative agency, regulatory authority, stock market, stock exchange or trading facility.
“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, Controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“Agreement” shall have the meaning ascribed to such term in the Preamble.
“Articles of Incorporation” means the Articles of Incorporation of the Company and all amendments thereto, as the same may be amended from time to time.
“Articles Supplementary” has the meaning set forth in the Recitals.
“Bank” means Citizens Community Federal N.A., a wholly-owned subsidiary of the Company.
“BHC Act” has the meaning set forth in Section 3.1(b).
“Business Day” means a day, other than a Saturday or Sunday, on which banks in Maryland are open for the general transaction of business.
“Buy-In” has the meaning set forth in Section 4.1(e).
“Buy-In Price” has the meaning set forth in Section 4.1(e).
“CIBC Act” means the Change in Bank Control Act of 1978, as amended.
“Closing” means the closing of the purchase and sale of the Preferred Shares pursuant to this Agreement.
“Closing Date” means the Trading Day when all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all of the conditions set forth in Sections 2.1, 2.2, 5.1 and 5.2 hereof are satisfied, or such other date as the parties may agree.
“Common Stock” has the meaning set forth in the Recitals, and also includes any securities into which the Common Stock may hereafter be reclassified or changed.
“Company Counsel” means Briggs and Morgan, Professional Association and Venable LLP.
“Company Deliverables” has the meaning set forth in Section 2.2(a).
“Company Reports” has the meaning set forth in Section 3.1(kk).
“Company’s Knowledge” means with respect to any statement made to the knowledge of the Company, that the statement is based upon the actual knowledge of the executive officers of the Company having responsibility for the matter or matters that are the subject of the statement after reasonable investigation.
“Control” (including the terms “controlling,” “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
“Disclosure Materials” has the meaning set forth in Section 3.1(h).
“DTC” means The Depository Trust Company.
“Effective Date” means the date that the initial Registration Statement required by Section 2(a) of the Registration Rights Agreement is first declared effective by the SEC.
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“Environmental Laws” has the meaning set forth in Section 3.1(l).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations promulgated thereunder.
“FDIC” means the Federal Deposit Insurance Corporation.
“Federal Reserve” has the meaning set forth in Section 3.1(kk).
“GAAP” means U.S. generally accepted accounting principles, as applied by the Company.
“Indemnified Person” has the meaning set forth in Section 4.8(b).
“Intellectual Property” has the meaning set forth in Section 3.1(r).
“Investment Considerations Memorandum” means the memorandum attached as Appendix A to this Agreement, which memorandum includes information about the Company; a term sheet summarizing information concerning the offering; and Risk Factors concerning this offering, the Company, and the Company’s stock.
“Investor Presentation” means the presentation prepared by the Placement Agents concerning the offering and the proposed acquisition dated June 2018.
“Lien” means any lien, charge, claim, encumbrance, security interest, right of first refusal, preemptive right or other restrictions of any kind.
“Material Adverse Effect” means any of (i) a material and adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material and adverse effect on the results of operations, assets, properties, business, condition (financial or otherwise) or prospects of the Company and the Subsidiaries, taken as a whole, or (iii) any adverse impairment to the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document.
“Material Contract” means any contract of the Company that has been filed as an exhibit to the SEC Reports pursuant to Item 601 of Regulation S-K.
“Material Permits” has the meaning set forth in Section 3.1(p).
“Maryland Courts” means the state and federal courts sitting in the State of Maryland.
“Maryland Secretary” has the meaning set forth in the Recitals.
“OCC” means the Office of the Comptroller of the Currency.
“Outside Date” means the thirtieth day following the date of this Agreement; provided that if such day is not a Business Day, the first day following such day that is a Business Day.
“Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.
“Placement Agents” has the meaning set forth in the Recitals.
“Preferred Shares” has the meaning set forth in the Recitals.
“Preferred Stock” has the meaning set forth in the Recitals.
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“Principal Trading Market” means the Trading Market on which the Common Stock is primarily listed on and quoted for trading, which, as of the date of this Agreement and the Closing Date, shall be the NASDAQ Global Market.
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.
“Purchase Price” means $130.00 per Preferred Share.
“Purchaser Deliverables” has the meaning set forth in Section 2.2(b).
“Purchaser Party” has the meaning set forth in Section 4.8(a).
“Registration Rights Agreement” has the meaning set forth in the Recitals.
“Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale by the Purchasers of the Registrable Securities (as defined in the Registration Rights Agreement).
“Regulation D” has the meaning set forth in the Recitals.
“Regulatory Agreement” has the meaning set forth in Section 3.1(mm).
“Required Approvals” has the meaning set forth in Section 3.1(e).
“Rule 144” means Rule 144 promulgated by the SEC pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule.
“SEC” has the meaning set forth in the Recitals.
“SEC Reports” has the meaning set forth in Section 3.1(h).
“Secretary’s Certificate” has the meaning set forth in Section 2.2(a)(v).
“Securities” has the meaning set forth in the Recitals.
“Securities Act” means the Securities Act of 1933, as amended.
“Stockholder Approval” has the meaning set forth in Section 4.11.
“Stockholder Proposal” has the meaning set forth in Section 4.11.
“Subscription Amount” means with respect to each Purchaser, the aggregate amount to be paid for the Preferred Shares purchased hereunder as indicated on such Purchaser’s signature page to this Agreement next to the heading “Aggregate Purchase Price (Subscription Amount).”
“Subsidiary” means any entity in which the Company, directly or indirectly, owns sufficient capital stock or holds a sufficient equity or similar interest such that it is consolidated with the Company in the financial statements of the Company.
“Trading Day” means (i) a day on which the Common Stock is listed or quoted and traded on its Principal Trading Market, or (ii) if the Common Stock is not listed on a Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported in the “pink sheets” by OTC Markets Group Inc. (or any similar
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organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in (i) and (ii) hereof, then Trading Day shall mean a Business Day.
“Trading Market” means whichever of the New York Stock Exchange, the NYSE MKT, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or the applicable OTC Markets Group Inc. tier on which the Common Stock is listed or quoted for trading on the date in question.
“Transaction Documents” means this Agreement, including the Appendix and Exhibits attached hereto, the Registration Rights Agreement, the Articles Supplementary, and any other documents or agreements executed in connection with the transactions contemplated hereunder.
“Transfer Agent” means in the case of the Preferred Shares, the Company; and in the case of the Underlying Shares, Continental Stock Transfer & Trust Company, or any successor transfer agent for the Company.
“Underlying Shares” has the meaning set forth in the Recitals.
ARTICLE II
PURCHASE AND SALE
PURCHASE AND SALE
2.1. Closing.
(a) Purchase of Preferred Shares. Subject to the terms and conditions set forth in this Agreement, at the Closing the Company shall issue and sell to each Purchaser, and each Purchaser shall, severally and not jointly, purchase from the Company, the number of Preferred Shares set forth below such Purchaser’s name on the signature page of this Agreement at a per Preferred Share price equal to the Purchase Price.
(b) Closing. The Closing of the purchase and sale of the Preferred Shares shall take place at the offices of Briggs and Morgan, Professional Association, 2200 IDS Center, 80 South 8th Street, Minneapolis, MN 55402 on the Closing Date or at such other locations or remotely by facsimile transmission or other electronic means as the parties may mutually agree.
(c) Delivery of Preferred Shares; Form of Payment. Unless otherwise agreed to by the Company and a Purchaser (as to itself only), on the Closing Date, (1) the Company shall deliver to each Purchaser one or more stock certificates, registered in such Purchaser’s name, or its nominee in accordance with such Purchaser’s written delivery instructions (if physical certificates are required by the Purchaser to be held immediately prior to Closing; if not, then facsimile or “.pdf” copies of such certificates shall suffice for purposes of Closing with the original stock certificates to be delivered within two Business Days of the Closing Date), evidencing the number of Preferred Shares set forth on such Purchaser’s signature page to this Agreement and (2) upon receipt thereof, each Purchaser shall wire its Subscription Amount, in United States dollars and in immediately available funds, in accordance with the Company’s written wire transfer instructions.
2.2. Closing Deliveries.
(a) On or prior to the Closing, the Company shall issue, deliver or cause to be delivered to each Purchaser the following (the “Company Deliverables”):
(i) this Agreement, duly executed by the Company;
(ii) one or more stock certificates (if physical certificates are required by the Purchaser to be held immediately prior to Closing; if not, then facsimile or “.pdf” copies of such certificates shall suffice for purposes of Closing with the original stock certificates to be delivered within two Business Days of the Closing Date), evidencing the Preferred Shares subscribed for by Purchaser hereunder, registered in the name of such Purchaser or its nominee in accordance with such Purchaser’s written delivery instructions (the “Stock Certificates”);
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(iii) legal opinions of Company Counsel, dated as of the Closing Date and in the forms attached hereto as Exhibit D-1 and Exhibit D-2, executed by such counsel and addressed to the Purchasers;
(iv) the Registration Rights Agreement, duly executed by the Company;
(v) a certificate of the Secretary of the Company, in the form attached hereto as Exhibit E (the “Secretary’s Certificate”), dated as of the Closing Date, (a) certifying the resolutions adopted by the Board of Directors of the Company or a duly authorized committee thereof approving the transactions contemplated by this Agreement and the other Transaction Documents and the issuance of the Securities, (b) certifying the current versions of the Articles of Incorporation, as amended, and by-laws, as amended, of the Company, (c) attaching a Certificate of Status for the Company from the Maryland Department of Assessments & Taxation, dated as of a recent date, and (d) certifying as to the signatures and authority of persons signing the Transaction Documents and related documents on behalf of the Company; and
(vi) the compliance certificate referred to in Section 5.1(g).
(b) On or prior to the Closing, each Purchaser shall deliver or cause to be delivered to the Company the following (the “Purchaser Deliverables”):
(i) this Agreement, duly executed by such Purchaser;
(ii) its Subscription Amount, in U.S. dollars and in immediately available funds, in the amount indicated below such Purchaser’s name on the applicable signature page hereto under the heading “Aggregate Purchase Price (Subscription Amount)” by wire transfer in accordance with the Company’s written instructions;
(iii) the Registration Rights Agreement, duly executed by such Purchaser; and
(iv) a fully completed and duly executed Accredited Investor Questionnaire in the form attached hereto as Exhibit C.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Company. The Company hereby represents and warrants as of the date hereof and the Closing Date (except for the representations and warranties that speak as of a specific date, which shall be made as of such date), to each of the Purchasers that:
(a) Subsidiaries. The Company has no direct or indirect Subsidiaries except as set forth in Exhibit 21 to the Company’s Annual Report on Form 10-K for the year ended September 30, 2017, as filed with the SEC on December 13, 2017. The Company owns, directly or indirectly, all of the capital stock or comparable equity interests of each Subsidiary free and clear of any and all Liens (except that, as previously disclosed in the SEC Reports, the Company pledged all of the outstanding shares in its wholly owned subsidiary, Citizens Community Federal N.A., in connection with its loan agreement with First Tennessee, N.A.), and all the issued and outstanding shares of capital stock or comparable equity interest of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.
(b) Organization and Qualification. The Company and each of its “Significant Subsidiaries” (as defined in Rule 1-02 of Regulation S-X) is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own or lease and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Significant Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. The Company and each of its Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification
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necessary, except where the failure to be so qualified or in good standing, as the case may be, would not reasonably be expected to have a Material Adverse Effect. The Company is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). The Bank is the Company’s only banking subsidiary, and the Bank’s deposit accounts are insured up to applicable limits by the FDIC, and all premiums and assessments required to be paid in connection therewith have been paid when due. The Company and the Bank have each conducted their respective businesses in compliance with all applicable federal, state and foreign laws, orders, judgments, decrees, rules, regulations and applicable stock exchange requirements, including all laws and regulations restricting activities of bank holding companies and banking organizations, except for any noncompliance that, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect.
(c) Authorization; Enforcement; Validity. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder, including, without limitation, to issue the Preferred Shares in accordance with the terms hereof and, subject to Stockholder Approval, to issue the Underlying Shares in accordance with the Articles Supplementary. The Company’s execution and delivery of each of the Transaction Documents to which it is a party and the consummation by it of the transactions contemplated hereby and thereby (including, but not limited to, the sale and delivery of the Preferred Shares and the Underlying Shares) have been duly authorized by all necessary corporate action on the part of the Company, and no further corporate action is required by the Company, its board of directors or its stockholders in connection therewith other than in connection with the Required Approvals. Each of the Transaction Documents to which it is a party has been (or upon delivery will have been) duly executed by the Company and is, or when delivered in accordance with the terms hereof, will constitute the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law. Except for Material Contracts, there are no stockholder agreements, voting agreements, or other similar arrangements with respect to the Company’s capital stock to which the Company is a party or, to the Company’s Knowledge, between or among any of the Company’s stockholders.
(d) No Conflicts. The execution, delivery and performance by the Company of the Transaction Documents to which it is a party and the consummation by the Company of the transactions contemplated hereby or thereby (including, without limitation, the issuance of the Preferred Shares and the Underlying Shares) do not and will not (i) conflict with or violate any provisions of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or otherwise result in a violation of the organizational documents of the Company or any Subsidiary, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would result in a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any Material Contract, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including federal and state securities laws and regulations and the rules and regulations thereunder, assuming, without investigation, the correctness of the representations and warranties made by the Purchasers herein, of any self-regulatory organization to which the Company or its securities are subject, including all applicable Trading Markets), or by which any property or asset of the Company is bound or affected, except in the case of clauses (ii) and (iii) such as would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(e) Filings, Consents and Approvals. Neither the Company nor any of its Subsidiaries is required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents (including, without limitation, the issuance of the Preferred Shares and the Underlying Shares), other than (i) obtaining Stockholder Approval to issue the Underlying Shares in accordance with the terms of the Articles Supplementary, (ii) the filing of the Articles Supplementary with the Maryland Secretary, (iii) the filing with the SEC of one or more Registration Statements in accordance with the requirements of the Registration Rights Agreement, (iv) filings required by applicable state
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securities laws, (v) the filing of a Notice of Sale of Securities on Form D with the SEC under Regulation D of the Securities Act, (vi) the filing of any requisite notices and/or application(s) to the Principal Trading Market for the issuance and sale of the Underlying Shares and the listing of the Underlying Shares for trading or quotation, as the case may be, thereon in the time and manner required thereby, (vii) the filings required in accordance with Section 4.6 of this Agreement and (viii) those that have been made or obtained prior to the date of this Agreement (collectively, the “Required Approvals”).
(f) Issuance of the Preferred Shares. The issuance of the Preferred Shares has been duly authorized and the Preferred Shares, when issued and paid for in accordance with the terms of the Transaction Documents, will be duly and validly issued, fully paid and non-assessable and free and clear of all Liens, other than restrictions on transfer provided for in the Transaction Documents or imposed by applicable securities laws, and shall not be subject to preemptive or similar rights. The issuance of the Underlying Shares has been duly authorized and the Underlying Shares, when issued upon conversion of the Preferred Shares in accordance with the terms of the Articles Supplementary, will be duly and validly issued, fully paid and non-assessable and free and clear of all Liens, other than restrictions on transfer provided for in the Transaction Documents or imposed by applicable securities laws, and shall not be subject to preemptive or similar rights. Assuming the accuracy of the representations and warranties of the Purchasers in this Agreement, the Securities will be issued in compliance with all applicable federal and state securities laws.
(g) Capitalization. The number of shares and type of all authorized, issued and outstanding capital stock, options and other securities of the Company (whether or not presently convertible into or exercisable or exchangeable for shares of capital stock of the Company) has been set forth in the SEC Reports and has changed since the date of such SEC Reports only due to stock grants or other equity awards or stock option and warrant exercises that have not, individually or in the aggregate, had a material effect on the issued and outstanding capital stock, options and other securities. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and non-assessable, have been issued in compliance in all material respects with all applicable federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase any capital stock of the Company. Except as specified in the SEC Reports: (i) no shares of the Company’s outstanding capital stock are subject to preemptive rights or any other similar rights; (ii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company, or contracts, commitments, understandings or arrangements by which the Company is or may become bound to issue additional shares of capital stock of the Company or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company, other than those issued or granted pursuant to Material Contracts or equity or incentive plans or arrangements described in the SEC Reports; (iii) there are no material outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing indebtedness of the Company or by which the Company is bound; (iv) except for the Registration Rights Agreement and the “Existing Contracts” referenced therein, there are no agreements or arrangements under which the Company is obligated to register the sale of any of its securities under the Securities Act; (v) there are no outstanding securities or instruments of the Company that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company is or may become bound to redeem a security of the Company; (vi) the Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement; and (vii) the Company has no liabilities or obligations required to be disclosed in the SEC Reports but not so disclosed in the SEC Reports, which, individually or in the aggregate, will have or would reasonably be expected to have a Material Adverse Effect. There are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities.
(h) SEC Reports; Disclosure Materials. The Company has filed all reports, forms, statements and other documents required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months preceding the date hereof (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports” and together with this Agreement and the Appendices and Schedules hereto, the Investor Presentation, the other Transaction Documents, and any other factual information concerning by the Company furnished in connection with the offering of the Preferred Shares, the “Disclosure Materials”), on a timely basis or has received a valid extension of such time
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of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective filing dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the SEC promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
(i) Financial Statements. The financial statements (including the notes thereto) of the Company and its Subsidiaries included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with GAAP applied on a consistent basis during the periods involved and, except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, fairly present in all material respects the balance sheet of the Company and its consolidated Subsidiaries taken as a whole as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, year-end audit adjustments, which would not be material, either individually or in the aggregate.
(j) Tax Matters. The Company (i) has prepared and filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith, with respect to which adequate reserves have been set aside on the books of the Company and (iii) has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply, except, in the case of clauses (i) and (ii) above, where the failure to so pay or file any such tax, assessment, charge or return would not have or reasonably be expected to have a Material Adverse Effect. No deficiencies for any taxes have been proposed or assessed in writing against the Company or any of its Subsidiaries and there is no outstanding audit, assessment, dispute or claim concerning any tax liability of the Company or any of its Subsidiaries.
(k) Material Changes. Since the date of the latest audited financial statements included within the SEC Reports, except as disclosed in subsequent SEC Reports filed prior to the date hereof, (i) there have been no events, occurrences or developments that have had or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, (ii) the Company has not incurred any material liabilities (contingent or otherwise) other than (A) trade payables, accrued expenses and other liabilities incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the SEC, (iii) the Company has not altered materially its method of accounting or the manner in which it keeps its accounting books and records, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, (v) the Company has not issued any equity securities to any officer, director or Affiliate, except Common Stock issued pursuant to existing Company stock option or stock purchase plans or equity based plans disclosed in the SEC Reports, (vi) there has not been any material change or amendment to, or any waiver of any material right by the Company under, any Material Contract under which the Company or any of its Subsidiaries is bound or subject, and (vii) to the Company’s Knowledge, there has not been a material increase in the aggregate dollar amount of (A) the Bank’s nonperforming loans (including nonaccrual loans and loans 90 days or more past due and still accruing interest) or (B) the reserves or allowances established on the Company’s or Bank’s financial statements with respect thereto; except in the case of clauses (vii) (A) or (vii) (B) such as would not have or reasonably be expected to have a Material Adverse Effect. Except for the transactions contemplated by this Agreement, no event, liability or development has occurred or exists with respect to the Company or its Subsidiaries or their respective business, properties, operations or financial condition that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made that has not been publicly disclosed at least one Trading Day prior to the date that this representation is made. Moreover, since the date(s) the Company afforded Purchaser (1) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Preferred Shares and the merits and risks of investing in the Preferred Shares; and (2) access to information about the Company and the Subsidiaries and their respective financial condition, results of operations, business, properties, management, prospects and any potential transactions sufficient to enable it to evaluate its investment, there have been no events,
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occurrences or developments that have materially affected or would reasonably be expected to materially affect, either individually or in the aggregate, the information as presented to the Purchasers in connection with the offering of the Preferred Shares.
(l) Environmental Matters. Neither the Company nor any of its Subsidiaries (i) is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), (ii) owns or operates any real property contaminated with any substance that is in violation of any Environmental Laws, (iii) is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or (iv) is subject to any claim relating to any Environmental Laws; in each case, which violation, contamination, liability or claim has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and, to the Company’s Knowledge, there is no pending or threatened investigation that might lead to such a claim.
(m) Litigation. There is no Action which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) except as disclosed in the SEC Reports, is reasonably likely to have a Material Adverse Effect, individually or in the aggregate, if there were an unfavorable decision. Except as disclosed in the SEC Reports, neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the Company’s knowledge there is not pending or contemplated, any investigation by the SEC involving the Company or any current or former director or officer of the Company. The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any of its Subsidiaries under the Exchange Act or the Securities Act. There are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Company or any executive officers or directors of the Company in their capacities as such, which individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.
(n) Employment Matters. No labor dispute exists or, to the Company’s Knowledge, is imminent with respect to any of the employees of the Company which would have or reasonably be expected to have a Material Adverse Effect. None of the Company’s employees is a member of a union that relates to such employee’s relationship with the Company, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and each Subsidiary believes that its relationship with its employees is good. To the Company’s Knowledge, no executive officer is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of a third party, and to the Company’s Knowledge, the continued employment of each such executive officer does not subject the Company or any Subsidiary to any liability with respect to any of the foregoing matters. The Company is in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(o) Compliance. Neither the Company nor any of its Subsidiaries (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any of its Subsidiaries under), nor has the Company or any of its Subsidiaries received written notice of a claim that it is in default under or that it is in violation of, any Material Contract (whether or not such default or violation has been waived), (ii) is in violation of any order of which the Company has been made aware in writing of any court, arbitrator or governmental body having jurisdiction over the Company or its properties or assets, or (iii) is in violation of, or in receipt of written notice that it is in violation of, any statute, rule or regulation of any governmental authority applicable to the Company, or which would have the effect of revoking or limiting FDIC deposit insurance, except in each case as would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(p) Regulatory Permits. The Company and each of its Subsidiaries possess or have applied for all certificates, authorizations, consents and permits issued by the appropriate federal, state, local or foreign regulatory
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authorities necessary to conduct their respective businesses as currently conducted and as described in the SEC Reports, except where the failure to possess such permits, individually or in the aggregate, has not and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (“Material Permits”), and (i) neither the Company nor any of its Subsidiaries has received any notice in writing of proceedings relating to the revocation or material adverse modification of any such Material Permits and (ii) the Company is unaware of any facts or circumstances that would give rise to the revocation or material adverse modification of any Material Permits.
(q) Title to Assets. The Company and its Subsidiaries have good and marketable title to all real property and tangible personal property owned by them which is material to the business of the Company and its Subsidiaries, taken as a whole, in each case free and clear of all Liens except such as do not materially affect the value of such property or do not interfere with the use made and proposed to be made of such property by the Company and any of its Subsidiaries. Any real property and facilities held under lease by the Company and any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries.
(r) Patents and Trademarks. The Company and its Subsidiaries own, possess, license or have other rights to use all foreign and domestic patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, inventions, trade secrets, technology, Internet domain names, know-how and other intellectual property (collectively, the “Intellectual Property”) necessary for the conduct of their respective businesses as now conducted or as proposed to be conducted in the SEC Reports except where the failure to own, possess, license or have such rights would not have or reasonably be expected to have a Material Adverse Effect. Except where such violations or infringements would not have or reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, (i) there are no rights of third parties to any such Intellectual Property; (ii) there is no infringement by third parties of any such Intellectual Property; (iii) there is no pending or threatened action, suit, proceeding or claim by others challenging the Company’s and its Subsidiaries’ rights in or to any such Intellectual Property; (iv) there is no pending or threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property; and (v) there is no pending or threatened action, suit, proceeding or claim by others that the Company and/or any Subsidiary infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others.
(s) Insurance. The Company and each of the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as the Company believes to be prudent and customary in the businesses and locations in which the Company and the Subsidiaries are engaged. All premiums due and payable under all such policies and bonds have been timely paid, there has been no lapse in coverage during the terms of such policies and bonds, and the Company and its Subsidiaries are in material compliance with the terms of such policies and bonds. Neither the Company nor any of its Subsidiaries has received any notice of cancellation of any such insurance, nor, to the Company’s Knowledge, will it or any Subsidiary be unable to renew their respective existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not be materially higher than their existing insurance coverage.
(t) Transactions With Affiliates and Employees. Except as set forth in the SEC Reports and other than the grant of stock options or other equity awards that are not individually or in the aggregate material in amount and the transactions contemplated by each of the Transaction Documents to which any officer or director is party, none of the officers or directors of the Company and, to the Company’s Knowledge, none of the employees of the Company, is presently a party to any transaction with the Company or to a presently contemplated transaction (other than for services as employees, officers and directors) that would be required to be disclosed pursuant to Item 404 of Regulation S-K promulgated under the Securities Act or pursuant to GAAP in the audited financial statements of the Company.
(u) Internal Control Over Financial Reporting. Except as set forth in the SEC Reports, the Company maintains internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) designed to provide reasonable assurance regarding the reliability of financial reporting and the
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preparation of financial statements for external purposes in accordance with generally accepted accounting principles and such internal control over financial reporting is effective.
(v) Sarbanes-Oxley; Disclosure Controls. The Company is in compliance in all material respects with all of the provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it. Except as disclosed in the SEC Reports, the Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act), and such disclosure controls and procedures are effective.
(w) Certain Fees. No person or entity will have, as a result of the transactions contemplated by this Agreement, any valid right, interest or claim against or upon the Company or, to the Company’s knowledge, a Purchaser for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Company, other than the Placement Agents with respect to the offer and sale of the Shares (which placement agents fees are being paid by the Company).
(x) Private Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2 of this Agreement and the accuracy of the information disclosed in the Accredited Investor Questionnaires, no registration under the Securities Act is required for the offer and sale of the Preferred Shares by the Company to the Purchasers under the Transaction Documents. The issuance and sale of the Preferred Shares hereunder does not contravene the rules and regulations of the Principal Trading Market and, upon Stockholder Approval, the issuance of the Underlying Shares in accordance with the Articles Supplementary will not contravene the rules and regulations of the Principal Trading Market.
(y) Registration Rights. Other than each of the Purchasers, no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company other than those securities which are currently registered on an effective registration statement on file with the SEC.
(z) No Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, none of the Company, its Subsidiaries nor, to the Company’s Knowledge, any of its Affiliates or any Person acting on its behalf has, directly or indirectly, at any time within the past six months, made any offers or sales of any Company security or solicited any offers to buy any security under circumstances that would eliminate the availability of the exemption from registration under Regulation D under the Securities Act in connection with the offer and sale by the Company of the Preferred Shares as contemplated hereby.
(aa) Listing and Maintenance Requirements. The Company’s Common Stock is registered pursuant to Section 12(b) of the Exchange Act, and the Company has taken no action designed to terminate the registration of the Common Stock under the Exchange Act nor has the Company received any written notification that the SEC is contemplating terminating such registration. The Company has not, in the 12 months preceding the date hereof, received written notice from any Trading Market on which the Common Stock is listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance in all material respects with the listing and maintenance requirements for continued trading of the Common Stock on the Principal Trading Market.
(bb) Investment Company. Neither the Company nor any of its Subsidiaries is required to be registered as, and is not an Affiliate of, and immediately following the Closing will not be required to register as, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
(cc) Unlawful Payments. Neither the Company nor any of its Subsidiaries, nor to the Company’s Knowledge, any directors, officers, employees, agents or other Persons acting at the direction of or on behalf of the Company or any of its Subsidiaries has, in the course of its actions for, or on behalf of, the Company: (i) directly or indirectly, used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to foreign or domestic political activity; (ii) made any direct or indirect unlawful payments to any foreign or domestic governmental officials or employees or to any foreign or domestic political parties or campaigns from corporate funds; (iii) violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iv) made any other unlawful
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bribe, rebate, payoff, influence payment, kickback or other material unlawful payment to any foreign or domestic government official or employee.
(dd) Application of Takeover Protections; Rights Agreements. Except as set forth in the Company’s Articles of Incorporation, as amended, and as described in the section entitled “Description of Common Stock” in the Investment Considerations Memorandum, the Company has not adopted any stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Common Stock or a change in control of the Company. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s Articles of Incorporation or other organizational documents or the laws of the jurisdiction of its incorporation or otherwise which is or could become applicable to any Purchaser solely as a result of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of the Securities and any Purchaser’s ownership of the Securities.
(ee) Off Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company (or any Subsidiary) and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its Exchange Act filings and is not so disclosed and would have a Material Adverse Effect.
(ff) Acknowledgment Regarding Purchasers’ Purchase of Preferred Shares. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Preferred Shares.
(gg) Absence of Manipulation. The Company has not, and to the Company’s Knowledge no one acting on its behalf has, taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities.
(hh) OFAC. Neither the Company nor any Subsidiary nor, to the Company’s Knowledge, any director, officer, agent, employee, Affiliate or Person acting on behalf of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not knowingly use the proceeds of the sale of the Preferred Shares towards any sales or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other country sanctioned by OFAC or for the purpose of financing the activities of any Person currently subject to any U.S. sanctions administered by OFAC.
(ii) Money Laundering Laws. The operations of each of the Company and any Subsidiary are in compliance in all material respects with the money laundering statutes of applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any applicable governmental agency (collectively, the “Money Laundering Laws”) and to the Company’s Knowledge, no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company and/or any Subsidiary with respect to the Money Laundering Laws is pending or threatened.
(jj) No Additional Agreements. The Company does not have any agreement or understanding with any Purchaser with respect to the transactions contemplated by the Transaction Documents other than as specified in the Transaction Documents.
(kk) Reports, Registrations and Statements. Since September 30, 2014, the Company and each Subsidiary have filed all material reports, registrations and statements, together with any required amendments thereto, that it was required to file with the Board of Governors of the Federal Reserve System (the “Federal Reserve”), FDIC, OCC, and any other applicable federal or state securities or banking authorities, except where the failure to file any such report, registration or statement would not have or reasonably be expected to have a Material Adverse Effect.
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All such reports and statements filed with any such regulatory body or authority are collectively referred to herein as the “Company Reports.” All such Company Reports were filed on a timely basis or the Company or Subsidiary, as applicable, received a valid extension of such time of filing and has filed any such Company Reports prior to the expiration of any such extension. As of their respective dates, the Company Reports complied as to form in all material respects with all the rules and regulations promulgated by the Federal Reserve, the FDIC, the OCC, and any other applicable foreign, federal or state securities or banking authorities, as the case may be.
(ll) Well Capitalized. As of March 31, 2018, the Bank met or exceeded the standards necessary to be considered “well capitalized” under the Federal Deposit Insurance Company’s regulatory framework for prompt corrective action.
(mm) Agreements with Regulatory Agencies; Compliance with Certain Banking Regulations. Neither the Company nor any Subsidiary is subject to any cease-and-desist or other similar order or enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any capital directive by, or since September 30, 2015, has adopted any board resolutions at the request of, any governmental entity that currently restricts in any material respect the conduct of its business or that in any material manner relates to its capital adequacy, its liquidity and funding policies and practices, its ability to pay dividends, its credit, risk management or compliance policies, its internal controls, its management or its operations or business (each item in this sentence, a “Regulatory Agreement”), nor has the Company or any Subsidiary been advised in writing since September 30, 2015 by any governmental entity that it intends to issue, initiate, order, or request any such Regulatory Agreement.
To the Company’s Knowledge, there are no facts and circumstances, and has no reason to believe that any facts or circumstances exist, that would cause any of its Subsidiary banking institutions: (i) to be deemed not to be in satisfactory compliance with the Community Reinvestment Act of 1977, as amended (the “CRA”), and the regulations promulgated thereunder or to be assigned a CRA rating by federal or state banking regulators of lower than “satisfactory;” (ii) to be deemed to be operating in violation, in any material respect, of the Bank Secrecy Act of 1970 (or otherwise known as the “Currency and Foreign Transactions Reporting Act”), the USA Patriot Act (or otherwise known as “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001”), any order issued with respect to anti-money laundering by OFAC, or any other anti-money laundering statute, rule or regulation; or (iii) to be deemed not to be in satisfactory compliance, in any material respect, with all applicable privacy of customer information requirements contained in any applicable federal and state privacy laws and regulations as well as the provisions of all information security programs adopted by the Subsidiaries.
(nn) No General Solicitation or General Advertising. Neither the Company nor, to the Company’s Knowledge, any person acting on its behalf has engaged or will engage in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with any offer or sale of the Preferred Shares.
(oo) Risk Management Instruments. The Company and its Subsidiaries have in place risk management policies and procedures sufficient in scope and operation to protect against risks of the type and in amounts reasonably expected to be incurred by companies of similar size and in similar lines of business as the Company and its Subsidiaries. Except as has not had or would not reasonably be expected to have a Material Adverse Effect, since October 1, 2016, all material derivative instruments, including, swaps, caps, floors and option agreements, whether entered into for the Company’s own account, or for the account of one or more of the Subsidiaries of the Company, were entered into (i) only in the ordinary course of business, (ii) in accordance with prudent practices and in all material respects with all applicable laws, rules, regulations and regulatory policies and (iii) with counterparties believed to be financially responsible at the time; and each of them constitutes the valid and legally binding obligation of the Company or any of its Subsidiaries, enforceable in accordance with its terms. None of the Company, any Subsidiary of the Company or, to the knowledge of the Company, any other party thereto, is in breach of any of its material obligations under any such agreement or arrangement.
(pp) ERISA. The Company is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and
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published interpretations thereunder (herein called “ERISA”); no “reportable event” (as defined in ERISA) has occurred with respect to any “pension plan” (as defined in ERISA) for which the Company would have any liability; the Company has not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “pension plan;” or (ii) Sections 412 or 4971 of the Code; and each “Pension Plan” for which the Company would have liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification.
(qq) Shell Company Status. The Company is not, and has never been, an issuer identified in Rule 144(i)(1).
(rr) Reservation of Underlying Shares. The Company has reserved, and will continue to reserve, free of any preemptive or similar rights of stockholders of the Company, a number of unissued shares of Common Stock, sufficient to issue and deliver the Underlying Shares into which the Preferred Shares are convertible, assuming Stockholder Approval has been obtained.
(ss) No More Favorable Terms. Except for the number of Preferred Shares being purchased hereunder by each Purchaser, each Purchaser is receiving Preferred Shares on the same terms and conditions as all other Purchasers, including the Purchase Price for the Preferred Shares.
(tt) Mortgage Banking Business. Except as has not had and would not reasonably be expected to have a Material Adverse Effect:
(i) Each of the Company and the Bank has complied with, and all documentation in connection with the origination, processing, underwriting and credit approval of any mortgage loan originated, purchased or serviced by the Company or the Bank satisfied, (A) all applicable federal, state and local laws, rules and regulations with respect to the origination, insuring, purchase, sale, pooling, servicing, subservicing, or filing of claims in connection with mortgage loans, including all laws relating to real estate settlement procedures, consumer credit protection, truth in lending laws, usury limitations, fair housing, transfers of servicing, collection practices, equal credit opportunity and adjustable rate mortgages, (B) the responsibilities and obligations relating to mortgage loans set forth in any agreement between the Company or the Bank and any Agency, Loan Investor or Insurer, (C) the applicable rules, regulations, guidelines, handbooks and other requirements of any Agency, Loan Investor or Insurer and (D) the terms and provisions of any mortgage or other collateral documents and other loan documents with respect to each mortgage loan; and
(ii) No Agency, Loan Investor or Insurer has (A) claimed in writing that the Company or the Bank has violated or has not complied with the applicable underwriting standards with respect to mortgage loans sold by the Company or the Bank to a Loan Investor or Agency, or with respect to any sale of mortgage servicing rights to a Loan Investor, (B) imposed in writing restrictions on the activities (including commitment authority) of the Company or the Bank or (C) indicated in writing to the Company or the Bank that it has terminated or intends to terminate its relationship with the Company or the Bank for poor performance, poor loan quality or concern with respect to the Company’s or the Bank’s compliance with laws,
For purposes of this Section 3.1(tt): (A) “Agency” means the Federal Housing Administration, the Federal Home Loan Mortgage Corporation, the Farmers Home Administration (now known as Rural Housing and Community Development Services), the Federal National Mortgage Association, the United States Department of Veterans’ Affairs, the Rural Housing Service of the U.S. Department of Agriculture or any other federal or state agency with authority to (i) determine any investment, origination, lending or servicing requirements with regard to mortgage loans originated, purchased or serviced by the Company or any of its Subsidiaries or (ii) originate, purchase, or service mortgage loans, or otherwise promote mortgage lending, including state and local housing finance authorities; (B) “Loan Investor” means any person (including an Agency) having a beneficial interest in any mortgage loan originated, purchased or serviced by the Company or any of its Subsidiaries or a security backed by or representing an interest in any such mortgage loan; and (C) “Insurer” means a person who insures or guarantees for the benefit of the mortgagee all or any portion of the risk of loss upon borrower default on any of the mortgage loans originated, purchased or serviced by the
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Company or any of its Subsidiaries, including the Federal Housing Administration, the United States Department of Veterans’ Affairs, the Rural Housing Service of the U.S. Department of Agriculture and any private mortgage insurer, and providers of hazard, title or other insurance with respect to such mortgage loans or the related collateral.
(uu) Nonperforming Assets. To the Company’s knowledge, except as disclosed in the SEC Reports, the Company believes that the amount of reserves and allowances for loan and lease losses and other nonperforming assets established on the Company’s and Bank’s financial statements is adequate and such belief is reasonable under all the facts and circumstances known to the Company and Bank.
(vv) Change in Control. The issuance of the Securities to the Purchasers as contemplated by this Agreement will not trigger any rights under any “change of control” provision in any of the agreements to which the Company or any of its Subsidiaries is a party, including any employment, “change in control,” severance or other compensatory agreements and any benefit plan, which results in payments to the counterparty or the acceleration of vesting of benefits.
(ww) Common Control. The Company is not and, to the Company’s Knowledge after giving effect to the offering and sale of the Preferred Shares, will not be under the control (as defined in the BHC Act and the Federal Reserve’s Regulation Y (12 CFR Part 225) (“BHC Act Control”) of any company (as defined in the BHC Act and the Federal Reserve’s Regulation Y). The Company is not in BHC Act Control of any federally insured depository institution other than the Bank. The Bank is not under the BHC Act Control of any company (as defined in the BHC Act and the Federal Reserve’s Regulation Y) other than Company. Other than the Company’s ownership of the Bank, neither the Company nor the Bank controls, in the aggregate, more than five percent of the outstanding voting class, directly or indirectly, of any federally insured depository institution. The Bank is not subject to the liability of any commonly controlled depository institution pursuant to Section 5(e) of the Federal Deposit Insurance Act (12 U.S.C. § 1815(e)).
(xx) No “Bad Actor” Disqualification. The Company has exercised reasonable care, in accordance with SEC rules and guidance, and has conducted a factual inquiry including the procurement of relevant questionnaires from each Covered Person (as defined below) or other means, the nature and scope of which reflect reasonable care under the relevant facts and circumstances, to determine whether any Covered Person (as defined below) is subject to any of the “bad actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (“Disqualification Events”). To the Company’s knowledge, after conducting such sufficiently diligent factual inquiries, no Covered Person is subject to a Disqualification Event, except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3) under the Securities Act. The Company has complied, to the extent applicable, with any disclosure obligations under Rule 506(e) under the Securities Act. “Covered Persons” are those persons specified in Rule 506(d)(1) under the Securities Act, including the Company; any predecessor or affiliate of the Company; any director, executive officer, other officer participating in the offering, general partner or managing member of the Company; any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power; any promoter (as defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of the sale of the Securities; and any person that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of the Securities (a “Solicitor”), any general partner or managing member of any Solicitor, and any director, executive officer or other officer participating in the offering of any Solicitor or general partner or managing member of any Solicitor.
(yy) Disclosure. All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and the Bank, their respective businesses and the transactions contemplated hereby is true and correct in all material respects and does not 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 they were made, not misleading. The Company confirms that neither it nor any of its officers or directors nor any other Person acting on its or their behalf has provided, and it has not authorized the Placement Agents to provide, any Purchaser or its respective agents or counsel with any information that it believes constitutes or could reasonably be expected to constitute material, non-public information except insofar as the existence, provisions and terms of the Transaction Documents and the proposed transactions hereunder and the proposed acquisition of United Bank (the “Proposed Acquisition”) may constitute such information, all of which will be disclosed by the Company in the Press Release as contemplated
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by Section 4.6 hereof. The Company understands and confirms that each of the Purchasers will rely on the foregoing representations in effecting transactions in securities of the Company. No event or circumstance has occurred or information exists with respect to the Company or the Bank or its or their business, properties, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed.
3.2. Representations and Warranties of the Purchasers. Each Purchaser hereby, for itself and for no other Purchaser, represents and warrants as of the date hereof and as of the Closing Date to the Company as follows:
(a) Organization; Authority. If such Purchaser is an entity, it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the applicable Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. If such purchaser is an entity, the execution, delivery and performance by such Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate or, if such Purchaser is not a corporation, such partnership, limited liability company or other applicable like action, on the part of such Purchaser. If such Purchaser is an entity, each of this Agreement and the Registration Rights Agreement has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.
(b) No Conflicts. The execution, delivery and performance by such Purchaser of this Agreement and the Registration Rights Agreement and the consummation by such Purchaser of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of such Purchaser (if such Purchaser is an entity), (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such Purchaser is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to such Purchaser, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of such Purchaser to perform its obligations hereunder.
(c) Investment Intent. Such Purchaser understands that the Preferred Shares are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Preferred Shares as principal for its own account and not with a view to, or for distributing or reselling such Preferred Shares or any part thereof in violation of the Securities Act or any applicable state securities laws, provided, however, that by making the representations herein, such Purchaser does not agree to hold any of the Preferred Shares for any minimum period of time and reserves the right at all times to sell or otherwise dispose of all or any part of such Preferred Shares pursuant to an effective registration statement under the Securities Act or under an exemption from such registration and in compliance with applicable federal and state securities laws. Such Purchaser is acquiring the Preferred Shares hereunder in the ordinary course of its business. Such Purchaser does not presently have any agreement, plan or understanding, directly or indirectly, with any Person to distribute or effect any distribution of any of the Preferred Shares (or any securities which are derivatives thereof) to or through any person or entity.
(d) Purchaser Status. At the time such Purchaser was offered the Preferred Shares, it was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the Securities Act and, with respect to a Purchaser whose principal business address is in New York, at the date hereof it is an “institutional investor” as described in the Accredited Investor Questionnaire.
(e) Reliance. The Company and the Placement Agent will be entitled to rely upon this Agreement and is irrevocably authorized to produce this Agreement or a copy hereof to (A) any regulatory authority having jurisdiction over the Company and its affiliates and (B) any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby, in each case, to the extent required by any
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court or governmental authority to which the Company is subject, provided that the Company provides the Purchaser with prior written notice of such disclosure to the extent practicable and allowed by applicable law.
(f) General Solicitation. Such Purchaser is not purchasing the Preferred Shares as a result of any advertisement, article, notice or other communication regarding the Preferred Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general advertisement.
(g) Direct Purchase. Purchaser is purchasing the Preferred Shares directly from the Company and not from the Placement Agents. The Placement Agents did not make any representations or warranties to Purchaser, express or implied, regarding the Preferred Shares, the Company or the Company’s offering of the Preferred Shares.
(h) Experience of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Preferred Shares, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk of an investment in the Preferred Shares and, at the present time, is able to afford a complete loss of such investment. Further Purchaser understands that no representation is being made as to the future trading value or trading volume of the Preferred Shares.
(i) Access to Information. Such Purchaser acknowledges that it has had the opportunity to review the Disclosure Materials and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Preferred Shares and the merits and risks of investing in the Preferred Shares and any such questions have been answered to such Purchaser’s reasonable satisfaction; (ii) access to information about the Company and the Subsidiaries and their respective financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment; and (iv) the opportunity to ask questions of management and any such questions have been answered to such Purchaser’s reasonable satisfaction. Neither such inquiries nor any other investigation conducted by or on behalf of such Purchaser or its representatives or counsel shall modify, amend or affect such Purchaser’s right to rely on the truth, accuracy and completeness of the Disclosure Materials and the Company’s representations and warranties contained in the Transaction Documents. Such Purchaser has sought such accounting, legal and tax advice as it has considered necessary to make an informed decision with respect to its acquisition of the Preferred Shares. Purchaser acknowledges that neither the Company nor the Placement Agents has made any representation, express or implied, with respect to the accuracy, completeness or adequacy of any available information except that the Company has made the express the representations and warranties contained in Section 3.1.
(j) Brokers and Finders. Other than the Placement Agents with respect to the Company, no Person will have, as a result of the transactions contemplated by this Agreement, any valid right, interest or claim against or upon the Company or any Purchaser for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Purchaser.
(k) Independent Investment Decision. Such Purchaser has independently evaluated the merits of its decision to purchase Preferred Shares pursuant to the Transaction Documents, and such Purchaser confirms that it has not relied on the advice of the Company or the Placement Agent (or any of their respective agents, counsel or Affiliates) or any other Purchaser or Purchaser’s business and/or legal counsel in making such decision. Such Purchaser understands that nothing in this Agreement or any other materials presented by or on behalf of the Company (including, without limitation, by the Placement Agent) to the Purchaser in connection with the purchase of the Preferred Shares constitutes legal, tax or investment advice. Such Purchaser has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Preferred Shares. Such Purchaser understands that the Placement Agent has acted solely as the agent of the Company in this placement of the Preferred Shares and such Purchaser has not relied on the business or legal advice of the Placement Agent or any of its agents, counsel or Affiliates in making its investment decision hereunder, and confirms that none of such
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Persons has made any representations or warranties to such Purchaser in connection with the transactions contemplated by the Transaction Documents.
(l) Reliance on Exemptions. Such Purchaser understands that the Preferred Shares being offered and sold to it in reliance on specific exemptions from the registration requirements of U.S. federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and such Purchaser’s compliance with, the representations, warranties, agreements, acknowledgements and understandings of such Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of such Purchaser to acquire the Preferred Shares.
(m) No Governmental Review. Such Purchaser understands that no U.S. federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Preferred Shares or the fairness or suitability of the investment in the Preferred Shares nor have such authorities passed upon or endorsed the merits of the offering of the Preferred Shares.
(n) Residency. Such Purchaser’s residence (if an individual) or office in which its investment decision with respect to the Preferred Shares was made (if an entity) are located at the address immediately below such Purchaser’s name on its signature page hereto.
(o) Trading. Purchaser acknowledges that there is no trading market for the Preferred Stock, and no such market is expected to develop.
(p) OFAC and Anti-Money Laundering. The Purchaser understands, acknowledges, represents and agrees that (i) the Purchaser is not the target of any sanction, regulation, or law promulgated by the Office of Foreign Assets Control, the Financial Crimes Enforcement Network or any other U.S. governmental entity (“U.S. Sanctions Laws”); (ii) the Purchaser is not owned by, controlled by, under common control with, or acting on behalf of any person that is the target of U.S. Sanctions Laws; (iii) the Purchaser is not a “foreign shell bank” and is not acting on behalf of a “foreign shell bank” under applicable anti-money laundering laws and regulations; (iv) the Purchaser’s entry into this Agreement or consummation of the transactions contemplated hereby will not contravene U.S. Sanctions Laws or applicable anti-money laundering laws or regulations; (v) the Purchaser will promptly provide to the Company or any regulatory or law enforcement authority such information or documentation as may be required to comply with U.S. Sanctions Laws or applicable anti-money laundering laws or regulations; and (vi) the Company may provide to any regulatory or law enforcement authority information or documentation regarding, or provided by, the Purchaser for the purposes of complying with U.S. Sanctions Laws or applicable anti-money laundering laws or regulations.
(q) No Discussions. Purchaser has not discussed the offering of the Preferred Shares with any other party or potential investors (other than the Company, any other Purchaser, and Purchaser’s authorized representatives or other potential investors who are subject to a similar duty of confidentiality with the Company), except as expressly permitted under the terms of this Agreement.
(r) Knowledge as to Conditions. Purchaser does not know of any reason why any regulatory approvals and, to the extent necessary, any other approvals, authorizations, filings, registrations, and notices required or otherwise a condition to the consummation by it of the transactions contemplated by this Agreement will not be obtained.
(s) No Regulatory Consents or Approvals. No consent, approval, order or authorization of, or registration, declaration or filing with, any bank regulatory authority or other third party is required on the part of the Purchaser in connection with (i) the execution, delivery or performance by Purchaser of this Agreement and the Transaction Documents contemplated hereby or (ii) the consummation by Purchaser of the transactions contemplated hereby.
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(t) Investment Considerations Memorandum. Purchaser acknowledges that it has received, reviewed, and had adequate time to consider the information contained in, the Investment Considerations Memorandum attached hereto as Appendix A.
3.3. The Company and each of the Purchasers acknowledge and agree that no party to this Agreement has made or makes any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Article III and the Transaction Documents.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
OTHER AGREEMENTS OF THE PARTIES
4.1. Transfer Restrictions.
(a) Compliance with Laws. Notwithstanding any other provision of this Article IV, each Purchaser covenants that it understands that it may not sell or transfer the Securities except pursuant to an effective registration statement under, and in compliance with the requirements of, the Securities Act, or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, and in compliance with any applicable state, federal or foreign securities laws. In connection with any sale or transfer of the Securities other than (i) pursuant to an effective registration statement, (ii) to the Company or (iii) pursuant to Rule 144 (provided that the transferor provides the Company with reasonable assurances (in the form of a seller representation letter and, if applicable, a broker representation letter) that such securities may be sold pursuant to such rule), the Company may require the transferor thereof to provide to the Company and the Transfer Agent, at the transferor’s expense, an opinion of counsel selected by the transferor and reasonably acceptable to the Company and the Transfer Agent, the form and substance of which opinion shall be reasonably satisfactory to the Company and the Transfer Agent, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer (other than pursuant to clauses (i), (ii) or (iii) of the preceding sentence), any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under this Agreement and the Registration Rights Agreement with respect to such transferred Securities.
(b) Legends. Certificates evidencing the Securities shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form, until such time as they are not required under Section 4.1(c) or applicable law:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL, WHICH COUNSEL AND OPINION MUST BE REASONABLY SATISFACTORY TO THE COMPANY AND ITS TRANSFER AGENT, OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT (PROVIDED THAT THE TRANSFEROR PROVIDES THE COMPANY WITH REASONABLE ASSURANCES (IN THE FORM OF A SELLER REPRESENTATION LETTER AND, IF APPLICABLE, A BROKER REPRESENTATION LETTER THAT THE SECURITIES MAY BE SOLD PURSUANT TO SUCH RULE). NO REPRESENTATION IS MADE BY THE ISSUER AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT FOR RESALES OF THESE SECURITIES.
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(c) Removal of Legends. The restrictive legend set forth in Section 4.1(b) above shall be removed and the Company shall issue a certificate without such restrictive legend or any other restrictive legend to the holder of the applicable Securities upon which it is stamped or issue to such holder by electronic delivery at the applicable balance account at DTC, if (i) such Securities are registered for resale under the Securities Act, (ii) such Securities are sold or transferred pursuant to Rule 144 (if the transferor is not an Affiliate of the Company), or (iii) such Securities are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144(c)(1) (or Rule 144(i)(2), if applicable) as to such securities and without volume or manner-of-sale restrictions. Following the earlier of (i) the Effective Date or (ii) the date Rule 144 becoming available for the resale of Securities, without the requirement for the Company to be in compliance with the current public information required under 144(c)(1) (or Rule 144(i)(2), if applicable) as to the Securities and without volume or manner-of-sale restrictions, the Company shall instruct the Transfer Agent to remove the legend from the Securities and shall cause its counsel to issue any legend removal opinion required by the Transfer Agent. Any fees (with respect to the Transfer Agent, Company counsel or otherwise) associated with the issuance of such opinion or the removal of such legend shall be borne by the Company. If a legend is no longer required pursuant to the foregoing, the Company will no later than three (3) Trading Days following the delivery by a Purchaser to the Company or the Transfer Agent (with notice to the Company) of a legended certificate or instrument representing such Securities (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer) and a representation letter to the extent required by Section 4.1(a), deliver or cause to be delivered to such Purchaser a certificate or instrument (as the case may be) representing such Securities that is free from all restrictive legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4.1(c). Certificates for Securities free from all restrictive legends may be transmitted by the Transfer Agent to the Purchasers by crediting the account of the Purchaser’s prime broker with DTC as directed by such Purchaser.
(d) Acknowledgement. Each Purchaser hereunder acknowledges its primary responsibilities under the Securities Act and accordingly will not sell or otherwise transfer the Securities or any interest therein without complying with the requirements of the Securities Act. Except as otherwise provided below, while the above-referenced registration statement remains effective, each Purchaser hereunder may sell the Securities in accordance with the plan of distribution contained in the registration statement and if it does so it will comply therewith and with the related prospectus delivery requirements unless an exemption therefrom is available or unless the Securities are sold pursuant to Rule 144. Each Purchaser, severally and not jointly with the other Purchasers, agrees that if it is notified by the Company in writing at any time that the registration statement registering the resale of the Securities is not effective or that the prospectus included in such registration statement no longer complies with the requirements of Section 10 of the Securities Act, the Purchaser will refrain from selling such Securities until such time as the Purchaser is notified by the Company that such registration statement is effective or such prospectus is compliant with Section 10 of the Exchange Act, unless such Purchaser is able to, and does, sell such Securities pursuant to an available exemption from the registration requirements of Section 5 of the Securities Act.
(e) Buy-In. If the Company shall fail for any reason or for no reason to issue to a Purchaser unlegended certificates within three (3) Trading Days of receipt of all documents necessary for the removal of the legend set forth above (the “Deadline Date”), then, in addition to all other remedies available to such Purchaser, if on or after the Trading Day immediately following such three (3) Trading Day period, such Purchaser purchases (in an open market transaction or otherwise) Securities (or a broker or trading counterparty through which the Purchaser has agreed to sell shares makes such purchase) to deliver in satisfaction of a sale by the holder of Securities that such Purchaser anticipated receiving from the Company without any restrictive legend (a “Buy-In”), then the Company shall, within three (3) Trading Days after such Purchaser’s request and in such Purchaser’s sole discretion, either (i) pay cash to the Purchaser in an amount equal to such Purchaser’s total purchase price (including brokerage commissions, if any) for the Securities so purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate (and to issue such Securities) shall terminate, or (ii) promptly honor its obligation to deliver to such Purchaser a certificate or certificates representing such Securities and pay cash to the Purchaser in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of Securities, times (B) the closing bid price of such security on the Deadline Date.
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4.2. Acknowledgment of Dilution. The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of Common Stock. The Company further acknowledges that its obligations under the Transaction Documents, including without limitation its obligation to issue the Securities pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.
4.3. Furnishing of Information. In order to enable the Purchasers to sell the Securities under Rule 144 of the Securities Act, for a period of one year from the Closing, the Company shall maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. During such one year period, if the Company is not required to file reports pursuant to such laws, it will prepare and furnish to the Purchasers and make publicly available the information described in Rule 144(c)(2), if the provision of such information will allow resales of the Securities pursuant to Rule 144.
4.4. Form D and Blue Sky. The Company agrees to timely file a Form D with respect to the Preferred Shares as required under Regulation D. Purchaser agrees to timely provide Company with any and all needed information in connection with Company’s preparation and filing of a Form D. The Company, on or before the Closing Date, shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Preferred Shares for sale to the Purchasers at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from such qualification). The Company shall make all filings and reports relating to the offer and sale of the Preferred Shares required under applicable securities or “Blue Sky” laws of the states of the United States following the Closing Date.
4.5. No Integration. The Company shall not, and shall use its commercially reasonable efforts to ensure that no Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that will be integrated with the offer or sale of the Preferred Shares in a manner that would require the registration under the Securities Act of the sale of the Preferred Shares to the Purchasers.
4.6. Securities Laws Disclosure; Publicity. The Company shall, by 9:00 a.m., New York City time, on the first Business Day immediately following the date of this Agreement, (i) issue one or more press releases (collectively, the “Press Release”) reasonably acceptable to the Purchasers disclosing all material terms of the transactions contemplated hereby, the Proposed Acquisition and any other material, nonpublic information that the Company may have provided any Purchaser at any time prior to the filing of the Press Release, including in the Disclosure Materials, and (ii) file a Current Report on Form 8-K with the SEC describing the terms of the Transaction Documents (and including as exhibits to such Current Report on Form 8-K the material Transaction Documents (including, without limitation, this Agreement, the Registration Rights Agreement and the Articles Supplementary) and the Proposed Acquisition. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser or any Affiliate or investment adviser of any Purchaser, or include the name of any Purchaser or any Affiliate or investment adviser of any Purchaser in any press release or filing with the SEC (other than the Registration Statement) or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except (i) as required by federal securities law in connection with (A) any registration statement contemplated by the Registration Rights Agreement and (B) the filing of final Transaction Documents with the SEC and (ii) to the extent such disclosure is required by law, at the request of the Staff of the SEC or Trading Market regulations, in which case the Company shall provide the Purchasers with prior written notice of such disclosure permitted under this subclause (ii). From and after the issuance of the Press Release, no Purchaser shall be in possession of any material, non-public information received from the Company, the Bank or any of their respective officers, directors or employees or the Placement Agents. Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company, such Purchaser will maintain the confidentiality of the existence and terms of the transaction contemplated herein.
4.7. Non-Public Information. Except with the express written consent of such Purchaser and unless prior thereto such Purchaser shall have executed a written agreement regarding the confidentiality and use of such
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information, the Company shall not, and shall cause each Subsidiary and each of their respective officers, directors, employees and agents, not to, and each Purchaser shall not directly solicit the Company, any of its Subsidiaries or any of their respective officers, directors, employees or agents to provide any Purchaser with any material, non-public information regarding the Company or any of its Subsidiaries from and after the filing of the Press Release.
4.8. Indemnification.
(a) Indemnification of Purchasers. In addition to the indemnity provided in the Registration Rights Agreement, the Company will indemnify and hold each Purchaser and its directors, officers, stockholders, members, partners, employees, investment advisers and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, stockholders, agents, members, partners, investment advisers or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling person (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of (i) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (ii) any action instituted against a Purchaser Party in any capacity, or any of them or their respective affiliates, by any stockholder of the Company who is not an affiliate of such Purchaser Party, with respect to any of the transactions contemplated by this Agreement. The Company will not be liable to any Purchaser Party under this Agreement to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents.
(b) Conduct of Indemnification Proceedings. Promptly after receipt by any Person (the “Indemnified Person”) of notice of any demand, claim or circumstances which would or might give rise to a claim or the commencement of any action, proceeding or investigation in respect of which indemnity may be sought pursuant to Section 4.8(a), such Indemnified Person shall promptly notify the Company in writing and the Company shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Person, and shall assume the payment of all fees and expenses; provided, however, that the failure of any Indemnified Person so to notify the Company shall not relieve the Company of its obligations hereunder except to the extent that the Company is actually and materially and adversely prejudiced by such failure to notify. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless: (i) the Company and the Indemnified Person shall have mutually agreed to the retention of such counsel; (ii) the Company shall have failed promptly to assume the defense of such proceeding and to employ counsel reasonably satisfactory to such Indemnified Person in such proceeding; or (iii) in the reasonable judgment of counsel to such Indemnified Person, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Company shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, delayed or conditioned. Without the prior written consent of the Indemnified Person, which consent shall not be unreasonably withheld, delayed or conditioned, the Company shall not effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement includes an unconditional release of such Indemnified Person from all liability arising out of such proceeding.
(c) Limitation on Amount of Company’s Indemnification Liability.
(i) Tipping Basket. Except as provided otherwise in 4.8(c)(iii), the Company will not be liable for losses that otherwise are indemnifiable under Section 4.8(a) until the total of all losses under Section 4.8(a) incurred by a Purchaser Party exceeds $50,000, at which point the full amount of all such losses shall be recoverable.
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(ii) Maximum. Except as provided otherwise in Section 4.8(c)(iii), the maximum aggregate liability of the Company for all losses under Section 4.8(a) is the aggregate Subscription Amount of all Purchasers, provided however, that the maximum aggregate liability of the Company for all losses under Section 4.8(a) as to any individual Purchaser is the Aggregate Purchase Price (Subscription Amount) of such individual Purchaser as indicated on such Purchaser’s signature page to this Agreement.
(iii) Exceptions. The provisions of Section 4.8(c)(i) and (ii) do not apply to (A) claims due to the inaccuracy of any of the representations or breach of any of the warranties of the Company in Sections 3.1(a), 3.1(b), 3.1(c), 3.1(e), 3.1(f), 3.1(g) or 3.1(i) or (B) indemnification claims involving fraud or knowing and intentional misconduct on behalf of the Company.
4.9. Listing of Common Stock. The Company will use its reasonable best efforts to list the Underlying Shares for quotation on the NASDAQ Global Market and maintain the listing of the Common Stock on the NASDAQ Global Market.
4.10. Use of Proceeds. The Company intends to use the net proceeds from the sale of the Preferred Shares hereunder to finance a portion of the Proposed Acquisition and pay related expenses, to support the Company’s capital ratios in connection with the proposed acquisition, and for general corporate purposes, including organic growth and other potential acquisitions. This offering is not conditioned upon the successful completion of the proposed acquisition. If the acquisition is not completed the Company will use the net proceeds of this offering for general corporate purposes to support its growth strategy, which may include organic growth, funding additional acquisition opportunities, de novo branching into new markets or other organic expansion of the Company’s business.
4.11. Stockholders’ Meeting. The Company shall call a special meeting of its stockholders, as promptly as practicable following the Closing, to vote on a proposal (the “Stockholder Proposal”) to approve the issuance of the total number of Common Stock issuable upon conversion of all of the Preferred Shares, all in accordance with Rule 5635 of the NASDAQ Stock Market Rules (such approval of the Stockholder Proposal, “Stockholder Approval”). The Company will use its reasonable best efforts to hold the stockholders’ meeting no later than September 30, 2018. The Board of Directors of the Company shall unanimously recommend to the Company’s stockholders that such stockholders vote in favor of the Stockholder Proposal. In addition, all of the members of the Board of Directors will vote their shares in favor of the Stockholder Proposal. In connection with such meeting, the Company shall promptly prepare and file (but in no event more than fifteen (15) business days after the Closing Date) with the SEC a preliminary proxy statement, shall use its reasonable best efforts to respond to any comments of the SEC or its staff and to cause a definitive proxy statement related to such stockholders’ meeting to be mailed to the Company’s stockholders not more than seven (7) business days after clearance thereof by the SEC, and shall use its reasonable best efforts to solicit proxies for such Stockholder Approval. The Company shall notify Purchaser promptly of the receipt of any comments from the SEC or its staff with respect to the proxy statement and of any request by the SEC or its staff for amendments or supplements to such proxy statement or for additional information (but the Company shall not provide any Purchaser with any material, nonpublic information, unless requested by such Purchaser and pursuant to a written agreement regarding the confidentiality and use of such information). If at any time prior to such stockholders’ meeting there shall occur any event that is required to be set forth in an amendment or supplement to the proxy statement, the Company shall as promptly as practicable prepare and mail to its stockholders such an amendment or supplement. In the event that Stockholder Approval is not obtained at such special stockholders meeting, the Company shall include a proposal to approve (and the Board of Directors shall recommend approval of) such proposal at a meeting of its stockholders to be held no less than once in each subsequent three-month period beginning on the date of such special stockholders meeting until such approval is obtained.
4.12. Limitation on Beneficial Ownership. No Purchaser shall be entitled to purchase a number of Preferred Shares that would cause such Purchaser, together with any other person whose Company securities would be aggregated with such Purchaser’s Company securities for purposes of any banking regulation or law, to collectively be deemed to own, control or have the power to vote shares of Common Stock which would represent more than 9.9% of the number of shares of Common Stock issued and outstanding (based on the number of outstanding shares as of the Closing Date. With respect to any Purchaser whose ownership following the Closing would be more than 5% of the Company’s outstanding Common Stock on an as-converted basis, such Purchaser acknowledges that it is familiar
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with the Federal Reserve Board’s Policy Statement on equity investments in banks and bank holding companies announced September 22, 2008 (12 CFR Section 225.144) and has received or had an opportunity to review such policy statement. Such Purchaser further agrees that it will take all necessary and customary actions requested by the Federal Reserve, including consultation with the Federal Reserve if appropriate, and execution of customary passivity commitments if required by the Federal Reserve, to ensure that its ownership does not constitute a “change in control,” but only to the extent such actions are typically taken by such Purchaser under such Purchaser’s policies consistently applied, to the extent such Purchaser has such policies. Notwithstanding anything in the contrary in this Section 4.12, no Purchaser shall be required to perform any such actions if such performance would constitute or could reasonably result in any Burdensome Condition; for the avoidance of doubt, any requirement to disclose the identities or financial condition of limited partners, shareholders or non-managing members of such Purchaser or its Affiliates or its investment advisers shall be deemed a Burdensome Condition unless otherwise determined by such Investor in its sole discretion.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
CONDITIONS PRECEDENT TO CLOSING
5.1. Conditions Precedent to the Obligations of the Purchasers to Purchase Preferred Shares. The obligation of each Purchaser to acquire Preferred Shares at the Closing is subject to the fulfillment to such Purchaser’s satisfaction, on or prior to the Closing Date, of each of the following conditions, any of which may be waived by such Purchaser (as to itself only):
(a) Representations and Warranties. The representations and warranties of the Company contained herein shall be true and correct in all respects as of the date when made and as of the Closing Date, as though made on and as of such date, except for such representations and warranties that speak as of a specific date.
(b) Performance. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents.
(d) Consents. The Company shall have obtained in a timely fashion any and all consents, permits, approvals, registrations and waivers necessary for consummation of the purchase and sale of the Preferred Shares (including all Required Approvals), all of which shall be and remain so long as necessary in full force and effect.
(e) No Suspensions of Trading in Common Stock; Listing. The Common Stock (i) shall be designated for quotation or listed on the Principal Trading Market and (ii) shall not have been suspended, as of the Closing Date, by the SEC or the Principal Trading Market from trading on the Principal Trading Market nor shall suspension by the SEC or the Principal Trading Market have been threatened, as of the Closing Date, either (A) in writing by the SEC or the Principal Trading Market or (B) by falling below the minimum listing maintenance requirements of the Principal Trading Market. The Company shall have obtained approval, if necessary, of the Principal Trading Market to list the Underlying Shares.
(f) Company Deliverables. The Company shall have delivered the Company Deliverables in accordance with Section 2.2(a).
(g) Compliance Certificate. The Company shall have delivered to each Purchaser a certificate, dated as of the Closing Date and signed by its Chief Executive Officer or its Chief Financial Officer, dated as of the Closing Date, certifying to the fulfillment of the conditions specified in Sections 5.1(a) and (b) in the form attached hereto as Exhibit F.
(h) Articles Supplementary. The Company shall have filed the Articles Supplementary with the Maryland Secretary.
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(i) Gross Proceeds. The Company shall issue and sell pursuant to this Agreement 500,000 shares of Preferred Stock at a price per share equal to the Purchase Price, for total gross proceeds of $65 million.
(j) Bank Regulatory Issues. The purchase of the such Preferred Shares by such Purchaser shall not (i) cause such Purchaser or any of its Affiliates to violate any banking regulation, (ii) require such Purchaser or any of its Affiliates to file a prior notice with the Federal Reserve or its delegee under the CIBC Act or the BHC Act or obtain the prior approval of any banking regulator, (iii) require such Purchaser or any of its affiliates to become a bank holding company or otherwise serve as a source of strength for the Company or the Bank or (iv) cause such Purchaser, together with any other person whose Company securities would be aggregated with such Purchaser’s Company securities for purposes of any banking regulation or law, to collectively be deemed to own, control or have the power to vote securities which (assuming, for this purpose only, full conversion and/or exercise of such securities by the Purchaser and such other Persons) would represent more than 9.9% of any class of voting securities of the Company outstanding at such time.
(k) No Burdensome Condition. Since the date hereof, there shall not be any action taken, or any law, rule or regulation enacted, entered, enforced or deemed applicable to the Company or the Bank, such Purchaser (or its Affiliates) or the transactions contemplated by this Agreement, by any bank regulatory authority which imposes any restriction or condition on the Company or its Subsidiaries or such Purchaser or any of its Affiliates (other than such restrictions as are described in any passivity or anti-association commitments, as may be amended from time to time, entered into by such Purchaser) which such Purchaser determines, in its reasonable good faith judgment, is materially and unreasonably burdensome on the Company’s business following the Closing or on such Purchaser (or any of its Affiliates) or would reduce the economic benefits of the transactions contemplated by this Agreement to such Purchaser to such a degree that such Purchaser would not have entered into this Agreement had such condition or restriction been known to it on the date hereof (any such condition or restriction, a “Burdensome Condition”), and, for the avoidance of doubt, any requirements to disclose the identities of limited partners, shareholders or non-managing members of such Purchaser or its Affiliates or its investment advisers shall be deemed a Burdensome Condition unless otherwise determined by such Purchaser in its sole discretion.
(l) Material Adverse Effect. No Material Adverse Effect shall have occurred since the date of this Agreement.
(m) Termination. This Agreement shall not have been terminated as to such Purchaser in accordance with Section 6.16 herein.
5.2. Conditions Precedent to the Obligations of the Company to sell Preferred Shares. The Company’s obligation to sell and issue the Preferred Shares at the Closing is subject to the fulfillment to the satisfaction of the Company on or prior to the Closing Date of the following conditions, any of which may be waived by the Company:
(a) Representations and Warranties. The representations and warranties made by each Purchaser in Section 3.2 hereof shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made on and as of such date, except for representations and warranties that speak as of a specific date.
(b) Performance. Such Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by such Purchaser at or prior to the Closing Date.
(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents.
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(d) Consents. The Company shall have obtained in a timely fashion any and all consents, permits, approvals, registrations and waivers necessary for consummation of the purchase and sale of the Preferred Shares, all of which shall be and remain so long as necessary in full force and effect.
(e) Purchasers Deliverables. Such Purchaser shall have delivered its Purchaser Deliverables in accordance with Section 2.2(b).
(f) Termination. This Agreement shall not have been terminated as to such Purchaser in accordance with Section 6.16 herein.
ARTICLE VI
MISCELLANEOUS
MISCELLANEOUS
6.1. Fees and Expenses. Except as set forth elsewhere in the Transaction Documents, the parties hereto shall be responsible for the payment of all expenses incurred by them in connection with the preparation and negotiation of the Transaction Documents and the consummation of the transactions contemplated hereby. The Company shall pay all amounts owed to the Placement Agents relating to or arising out of the transactions contemplated hereby. The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the sale and issuance of the Securities to the Purchasers.
6.2. Entire Agreement. The Transaction Documents, together with the Exhibits thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, discussions and representations, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits. At or after the Closing, and without further consideration, the Company and the Purchasers will execute and deliver to the other such further documents as may be reasonably requested in order to give practical effect to the intention of the parties under the Transaction Documents.
6.3. Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile or e-mail (provided the sender receives a machine-generated confirmation of successful facsimile transmission or e-mail notification or confirmation of receipt of an e-mail transmission) at the facsimile number or e-mail address specified in this Section prior to 5:00 p.m., New York time, on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 5:00 p.m., New York time, on any Trading Day, (c) if sent by U.S. nationally recognized overnight courier service with next day delivery specified (receipt requested) the Trading Day following delivery to such courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows:
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If to the Company: | Citizens Community Bancorp, Inc. 2174 EastRidge Center Eau Claire, Wisconsin 54701 Attn: Stephen M. Bianchi Telephone: 715-839-4661 E-mail: [email protected] |
With a copy to: | Briggs and Morgan, Professional Association 2200 IDS Center, 80 South 8th Street Minneapolis, Minnesota 55402 Attn: Joseph T. Kinning, Stockholder Telephone: 612-977-8533 E-mail: [email protected] |
If to a Purchaser: | To the address set forth under such Purchaser’s name on the signature page hereof; or such other address as may be designated in writing hereafter, in the same manner, by such Person. |
or such other address as may be designated in writing hereafter, in the same manner, by such Person.
6.4. Amendments; Waivers; No Additional Consideration. No amendment or waiver of any provision of this Agreement will be effective with respect to any party unless made in writing and signed by a duly authorized representative of such party. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right. No consideration shall be offered or paid to any Purchaser to amend or consent to a waiver or modification of any provision of any Transaction Document unless the same consideration is also offered to all Purchasers who then hold Preferred Shares.
6.5. Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. This Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement or any of the Transaction Documents.
6.6. Successors and Assigns. The provisions of this Agreement shall inure to the benefit of and be binding upon the parties and their successors and permitted assigns. This Agreement, or any rights or obligations hereunder, may not be assigned by the Company without the prior written consent of the Purchasers. Any Purchaser may assign its rights hereunder in whole or in part to any Person to whom such Purchaser assigns or transfers any Securities in compliance with the Transaction Documents and applicable law, provided such transferee shall agree in writing to be bound, with respect to the transferred Securities, by the terms and conditions of this Agreement that apply to the “Purchasers.”
6.7. No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, other than Indemnified Persons.
6.8. Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Maryland, without regard to the principles of conflicts of law thereof. Each party agrees that all Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any
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other Transaction Documents (whether brought against a party hereto or its respective Affiliates, employees or agents) may be commenced on a non-exclusive basis in the Maryland Courts. Each party hereto hereby irrevocably submits to the non-exclusive jurisdiction of the Maryland Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any such Maryland Court, or that such Proceeding has been commenced in an improper or inconvenient forum. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
6.9. Survival. Subject to applicable statute of limitations, the representations, warranties, agreements and covenants contained herein shall survive the Closing and the delivery of the Preferred Shares.
6.10. Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.
6.11. Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.
6.12. Replacement of Shares. If any certificate or instrument evidencing any Preferred Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company and the Transfer Agent of such loss, theft or destruction and the execution by the holder thereof of a customary lost certificate affidavit of that fact and an agreement to indemnify and hold harmless the Company and the Transfer Agent for any losses in connection therewith or, if required by the Transfer Agent, a bond in such form and amount as is required by the Transfer Agent. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Shares. If a replacement certificate or instrument evidencing any Preferred Shares is requested due to a mutilation thereof, the Company may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.
6.13. Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agree to waive in any action for specific performance of any such obligation (other than in connection with any action for a temporary restraining order) the defense that a remedy at law would be adequate.
6.14. Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise
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restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.
6.15. Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under any Transaction Document. The decision of each Purchaser to purchase Preferred Shares pursuant to the Transaction Documents has been made by such Purchaser independently of any other Purchaser and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company or any Subsidiary which may have been made or given by any other Purchaser or by any agent or employee of any other Purchaser, and no Purchaser and any of its agents or employees shall have any liability to any other Purchaser (or any other Person) relating to or arising from any such information, materials, statement or opinions. Nothing contained herein or in any Transaction Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser acknowledges that no other Purchaser has acted as agent for such Purchaser in connection with making its investment hereunder and that no Purchaser will be acting as agent of such Purchaser in connection with monitoring its investment in the Preferred Shares or enforcing its rights under the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. It is expressly understood and agreed that each provision contained in this Agreement is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.
6.16. Termination. This Agreement may be terminated and the sale and purchase of the Preferred Shares abandoned at any time prior to the Closing by either the Company or any Purchaser (with respect to itself only) upon written notice to the other, if the Closing has not been consummated on or prior to 5:00 p.m., New York City time, on the Outside Date; provided, however, that the right to terminate this Agreement under this Section 6.16 shall not be available to any Person whose failure to comply with its obligations under this Agreement has been the cause of or resulted in the failure of the Closing to occur on or before such time. Nothing in this Section 6.16 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement or the other Transaction Documents. In the event of a termination pursuant to this Section, the Company shall promptly notify all non-terminating Purchasers. Upon a termination in accordance with this Section, the Company and the terminating Purchaser(s) shall not have any further obligation or liability (including arising from such termination) to the other, and no Purchaser will have any liability to any other Purchaser under the Transaction Documents as a result therefrom.
6.17. Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
CITIZENS COMMUNITY BANCORP, INC. | |
By: | |
Stephen M. Bianchi | |
President and Chief Executive Officer | |
NAME OF PURCHASER: | |
By:__________________________ Name:_______________________ Title:_________________________ Aggregate Purchase Price (Subscription Amount): $________ Number of Preferred Shares to be Acquired: __________ Tax ID No.: __________________ Address for Notice: ____________________________________ ____________________________________ ____________________________________ ____________________________________ Telephone: ________________ Facsimile: _________________ Email: ________________ Attention: ________________ | |
Delivery Instructions: (if different than above) | |
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APPENDICES
Appendix A - Investment Considerations Memorandum
EXHIBITS
A | − | Form of Articles Supplementary to the Company’s Charter |
B | − | Form of Registration Rights Agreement |
C | − | Accredited Investor Questionnaire |
D-1 | − | Form of Opinion of Company Counsel |
D-2 | − | Form of Opinion of Company Counsel |
E | − | Form of Secretary’s Certificate |
F | − | Form of Officer’s Certificate |
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EXHIBIT A
Form of Articles Supplementary to the Company’s Charter
EXHIBIT B
Form of Registration Rights Agreement
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EXHIBIT C
ACCREDITED INVESTOR QUESTIONNAIRE
(ALL INFORMATION WILL BE TREATED CONFIDENTIALLY)
To: Citizens Community Bancorp, Inc.
This Investor Questionnaire (“Questionnaire”) must be completed by each potential investor in connection with the offer and sale of shares of mandatorily convertible non-cumulative non-voting perpetual preferred stock, $130.00 liquidation preference per share (the “Preferred Shares”), of Citizens Community Bancorp, Inc., a Maryland corporation (the “Company”). The Preferred Shares are being offered and sold by the Company without registration under the Securities Act of 1933, as amended (the “Act”), and the securities laws of certain states, in reliance on the exemptions contained in Section 4(a)(2) of the Act and on Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws. The Company must determine that a potential investor meets certain suitability requirements before offering or selling Preferred Shares to such investor. The purpose of this Questionnaire is to assure the Company that each investor will meet the applicable suitability requirements. The information supplied by you will be used in determining whether you meet such criteria, and reliance upon the private offering exemptions from registration is based in part on the information herein supplied.
This Questionnaire does not constitute an offer to sell or a solicitation of an offer to buy any security. Your answers will be kept strictly confidential. However, by signing this Questionnaire, you will be authorizing the Company to provide a completed copy of this Questionnaire to such parties as the Company deems appropriate in order to ensure that the offer and sale of the Preferred Shares will not result in a violation of the Act or the securities laws of any state and that you otherwise satisfy the suitability standards applicable to purchasers of the Preferred Shares. All potential investors must answer all applicable questions and complete, date and sign this Questionnaire. Please print or type your responses and attach additional sheets of paper if necessary to complete your answers to any item.
PART A. BACKGROUND INFORMATION
Name of Beneficial Owner of the Preferred Shares: ______________________________________________
Business Address: ________________________________________________________________________
(Number and Street)
________________________________________________________________________________________
(City) (State) (Zip Code)
Telephone Number: (___) ______________________________________
If a corporation, partnership, limited liability company, trust or other entity:
Type of entity: ______________________________________________
Were you formed for the purpose of investing in the securities being offered?
Yes ____ No ____
Social Security or Taxpayer Identification No. _____________________
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If an individual:
Residence Address: _________________________________________________________________________
(Number and Street)
__________________________________________________________________________________________
(City) (State) (Zip Code)
Telephone Number: (___) ___________________________________
Age:__________ Citizenship: ____________ Where registered to vote: _______________
Set forth in the space provided below the state(s), if any, in the United States in which you maintained your residence during the past two years and the dates during which you resided in each state:
Are you a director or executive officer of the Company?
Yes ____ No ____
Social Security or Taxpayer Identification No. ________________________________________________________
PART B. ACCREDITED INVESTOR QUESTIONNAIRE
In order for the Company to offer and sell the Preferred Shares in conformance with state and federal securities laws, the following information must be obtained regarding your investor status. Please initial each category applicable to you as a Purchaser of Preferred Shares.
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_____ | 1. | A bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity; |
_____ | 2. | A broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; |
_____ | 3. | An insurance company as defined in Section 2(13) of the Securities Act; |
_____ | 4. | An investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; |
_____ | 5. | A Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; |
_____ | 6. | A plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; |
_____ | 7. | An employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors; |
_____ | 8. | A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940; |
_____ | 9. | An organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the Shares, with total assets in excess of $5,000,000; |
_____ | 10. | A trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Shares, whose purchase is directed by a sophisticated person who has such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of investing in the Company; |
_____ | 11. | A natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his purchase exceeds $1,000,000 (see Note 11 below); |
_____ | 12. | A natural person who had an individual income in excess of $200,000 in each of the two most recent years, or joint income with that person’s spouse in excess of $300,000, in each of those years, and has a reasonable expectation of reaching the same income level in the current year; |
_____ | 13. | An executive officer or director of the Company; and |
_____ | 14. | An entity in which all of the equity owners qualify under any of the above subparagraphs. If the undersigned belongs to this investor category only, list the equity owners of the undersigned, and the investor category which each such equity owner satisfies. |
Note 11. | For purposes of calculating net worth under paragraph (11): |
(A) | The person’s primary residence shall not be included as an asset; |
(B) | Indebtedness that is secured by the person’s primary residence, up to the estimated fair market value of the primary residence at the time of the sale of securities, shall not be included as a liability (except that if the amount of such indebtedness outstanding at the time of sale of securities exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability); and |
(C) | Indebtedness that is secured by the person’s primary residence in excess of the estimated fair market value of the primary residence at the time of the sale of securities shall be included as a liability. |
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A. FOR EXECUTION BY AN INDIVIDUAL:
Date: | By: ____________________________________ Print Name: |
B. FOR EXECUTION BY AN ENTITY:
Entity Name: _____________________________ | |
Date: | By: ____________________________________ Print Name: Title: |
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C. | ADDITIONAL SIGNATURES (if required by partnership, corporation or trust document): |
Entity Name: ___________________________ | |
Date: | By: ___________________________________ Print Name: Title: |
Entity Name: ____________________________ | |
Date: | By: ____________________________________ Print Name: Title: |
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EXHIBIT D-1
Form of Opinion of Briggs and Morgan, P.A.
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1. |
EXHIBIT D-2
Form of Opinion of Venable LLP
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EXHIBIT E
Form of Secretary’s Certificate
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EXHIBIT F
Form of Officer’s Certificate
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EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this “Agreement”) is made and entered into as of June 20, 2018, by and among Citizens Community Bancorp, Inc., a Maryland corporation (the “Company”), and the several purchasers signatory hereto (each a “Purchaser” and collectively, the “Purchasers”).
This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date hereof between the Company and each Purchaser (the “Purchase Agreement”).
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and each of the Purchasers agree as follows:
1.Definitions. Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:
“Advice” shall have the meaning set forth in Section 6(d).
“Affiliate” means, with respect to any person, any other person which directly or indirectly controls, is controlled by, or is under common control with, such person.
“Agreement” shall have the meaning set forth in the Preamble.
“Business Day” means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business.
“Closing Date” has the meaning set forth in the Purchase Agreement.
“Common Stock” means the common stock of the Company, par value $ .01 per share, and any securities into which such shares of common stock may hereinafter be reclassified.
“Company” shall have the meaning set forth in the Preamble.
“Contractual Securities” means collectively, (i) securities of the Company which are subject to an Existing Contract and (ii) Registrable Securities.
“Contractual Securityholder” means all Persons that hold Contractual Securities.
“Effective Date” means the date that the Registration Statement filed pursuant to Section 2(a) is first declared effective by the SEC.
“Effectiveness Deadline” means, with respect to the Initial Registration Statement or the New Registration Statement, the earlier of (i) the 120th calendar day following the Closing Date (or the 150th calendar day following the Closing Date in the event that such registration statement is subject to review by the SEC) and (ii) the 5th Trading Day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Registration Statement will not be “reviewed” or will not be subject to further
review and that the SEC is prepared to declare such Registration Statement effective; provided, that if the Effectiveness Deadline falls on a Saturday, Sunday or other day that the SEC is closed for business, the Effectiveness Deadline shall be extended to the next Business Day on which the SEC is open for business.
“Effectiveness Period” shall have the meaning set forth in Section 2(b).
“Event” shall have the meaning set forth in Section 2(c).
“Event Date” shall have the meaning set forth in Section 2(c).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Existing Contract” means any contract to which the Company is a party and in effect as of the date hereof, under which the Company may be required to register securities on the Registration Statement.
“Filing Deadline” means, with respect to the Initial Registration Statement required to be filed pursuant to Section 2(a), the 30th calendar day following the Closing Date, provided, however, that if the Filing Deadline falls on a Saturday, Sunday or other day that the SEC is closed for business, the Filing Deadline shall be extended to the next business day on which the SEC is open for business.
“Holder” or “Holders” means the holder or holders, as the case may be, from time to time of Registrable Securities.
“Indemnified Party” shall have the meaning set forth in Section 5(c).
“Indemnifying Party” shall have the meaning set forth in Section 5(c).
“Initial Registration Statement” has the meaning set forth in Section 2(a).
“Liquidated Damages” shall have the meaning set forth in Section 2(c).
“Losses” shall have the meaning set forth in Section 5(a).
“New Registration Statement” shall have the meaning set forth in Section 2(a).
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.
“Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and
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supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.
“Purchase Agreement” shall have the meaning set forth in the Recitals.
“Purchaser” or “Purchasers” shall have the meaning set forth in the Preamble.
“Registrable Securities” means all of the Underlying Shares (as defined in Recital B of the Purchase Agreement) and any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the Preferred Shares and the Underlying Shares, provided, that the Holder has completed and delivered to the Company a Selling Stockholder Questionnaire; and provided, further, that the Underlying Shares shall cease to be Registrable Securities upon the earliest to occur of the following: (A) a sale pursuant to a Registration Statement or Rule 144 under the Securities Act (in which case, only such security sold shall cease to be a Registrable Security); or (B) becoming eligible for sale without the requirement for the Company to be in compliance with the current public information required under Rule 144(c)(1) (or Rule 144(i)(2), if applicable) and without volume or manner of sale restrictions by Holders who are not Affiliates of the Company.
“Registration Statements” means any one or more registration statements of the Company filed under the Securities Act that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement (including without limitation the Initial Registration Statement, the New Registration Statement and any Remainder Registration Statements), amendments and supplements to such Registration Statements, including post-effective amendments, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such Registration Statements.
“Remainder Registration Statement” shall have the meaning set forth in Section 2(a).
“Rule 144” means Rule 144 promulgated by the SEC pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule.
“Rule 415” means Rule 415 promulgated by the SEC pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule.
“Rule 424” means Rule 424 promulgated by the SEC pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule.
“SEC” means the Securities and Exchange Commission.
“SEC Guidance” means (i) any publicly-available written or oral guidance, comments, requirements or requests of the SEC staff and (ii) the Securities Act.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Selling Stockholder Questionnaire” means a questionnaire in the form attached as Annex B hereto, or such other form of questionnaire as may reasonably be adopted by the Company from time to time.
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“Trading Day” means (i) a day on which the Common Stock is listed or quoted and traded on its Principal Trading Market, or (ii) if the Common Stock is not listed on a Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported in the “pink sheets” by OTC Markets Group Inc. (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in (i) and (ii) hereof, then Trading Day shall mean a Business Day.
“Trading Market” means whichever of the New York Stock Exchange, the NYSE MKT, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or the applicable OTC Markets Group Inc. tier on which the Common Stock is listed or quoted for trading on the date in question.
2. Registration.
(a) On or prior to the Filing Deadline, the Company shall prepare and file with the SEC a Registration Statement covering the resale of all of the Registrable Securities not already covered by an existing and effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 or, if Rule 415 is not available for offers and sales of the Registrable Securities, by such other means of distribution of Registrable Securities as the Company may reasonably determine (the “Initial Registration Statement”). The Initial Registration Statement shall be on Form S-3 (except if the Company is then ineligible to register for resale of the Registrable Securities on Form S-3, in which case such registration shall be on such other form available to the Company to register for resale of the Registrable Securities as a secondary offering) subject to the provisions of Section 2(f) and shall contain (except if otherwise required pursuant to written comments received from the SEC upon a review of such Registration Statement) the “Plan of Distribution” section substantially in the form attached hereto as Annex A. Notwithstanding the registration obligations set forth in this Section 2, in the event the SEC informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly (i) inform each of the Holders thereof and use its commercially reasonable efforts to file amendments to the Initial Registration Statement as required by the SEC and/or (ii) withdraw the Initial Registration Statement and file a new registration statement (a “New Registration Statement”), in either case covering the maximum number of Registrable Securities permitted to be registered by the SEC, on Form S-3 or such other form available to the Company to register for resale the Registrable Securities as a secondary offering; provided, however, that prior to filing such amendment or New Registration Statement, the Company shall be obligated to use its commercially reasonable efforts to advocate with the SEC for the registration of all of the Registrable Securities in accordance with the SEC Guidance, including without limitation, Compliance and Disclosure Interpretation 612.09. Notwithstanding any other provision of this Agreement and subject to the payment of Liquidated Damages in Section 2(c), if any SEC Guidance sets forth a limitation of the number of Registrable Securities or other shares of Common Stock permitted to be registered on a particular Registration Statement as a secondary offering (and notwithstanding that the Company used diligent efforts to advocate with the SEC for the registration of all or a greater number of Registrable Securities), the number of Registrable Securities or other shares of Common Stock to be registered on such Registration Statement will be reduced on a pro rata basis. In the event the Company amends the Initial Registration Statement or files a New Registration Statement, as the case may be, under clauses (i) or (ii) above, the Company will use its commercially reasonable efforts to file with the SEC, as promptly as allowed by the SEC or SEC Guidance provided to the Company or to registrants of securities in general, one or more registration statements on Form S-3 or such other form available to the Company to register for resale those Registrable Securities that were not registered for resale on the Initial Registration Statement, as amended, or the New Registration Statement
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(the “Remainder Registration Statements”). No Holder shall be named as an “underwriter” in any Registration Statement without such Holder’s prior written consent.
(b) The Company shall use its commercially reasonable efforts to cause each Registration Statement to be declared effective by the SEC as soon as practicable and, with respect to the Initial Registration Statement or the New Registration Statement, as applicable, no later than the Effectiveness Deadline, and shall use its commercially reasonable efforts to keep each Registration Statement continuously effective under the Securities Act until the earlier of (i) such time as all of the Registrable Securities covered by such Registration Statement have been publicly sold by the Holders or (ii) the date that all Registrable Securities covered by such Registration Statement may be sold by non-affiliates without volume or manner of sale restrictions under Rule 144, without the requirement for the Company to be in compliance with the current public information requirements under Rule 144(c)(1) (or Rule 144(i)(2), if applicable), as determined by counsel to the Company pursuant to a written opinion letter to such effect, addressed and reasonably acceptable to the Company’s transfer agent and the affected Holders (the “Effectiveness Period”). The Company shall request effectiveness of a Registration Statement as of 5:00 p.m. New York City time on a Trading Day. The Company shall promptly notify the Holders via facsimile or electronic mail of a “pdf” format data file of the effectiveness of a Registration Statement within one (1) Business Day of the Effective Date. The Company shall, by 9:30 a.m. New York City time on the first Trading Day after the Effective Date, file a final Prospectus with the SEC, as required by Rule 424(b).
(c) If: (i) the Initial Registration Statement is not filed with the SEC on or prior to the Filing Deadline; (ii) the Initial Registration Statement or the New Registration Statement, as applicable, is not declared effective by the SEC (or otherwise does not become effective) for any reason on or prior to the Effectiveness Deadline; (iii) after its Effective Date, (A) such Registration Statement ceases for any reason (including without limitation by reason of a stop order, or the Company’s failure to update the Registration Statement), to remain continuously effective as to all Registrable Securities for which it is required to be effective or (B) the Holders are not permitted to utilize the Prospectus therein to resell such Registrable Securities, in the case of (A) and (B) (other than during an Allowable Grace Period (as defined in Section 2(e) of this Agreement)); (iv) a Grace Period (as defined in Section 2(e) of this Agreement) exceeds the length of an Allowable Grace Period; or (v) after the date six months following the Closing Date, and only in the event a Registration Statement is not effective or available to sell all Registrable Securities, the Company fails to file with the SEC any required reports under Section 13 or 15(d) of the 1934 Act such that it is not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable), as a result of which the Holders who are not affiliates are unable to sell Registrable Securities without restriction under Rule 144 (or any successor thereto) (any such failure or breach in clauses (i) through (v) above being referred to as an “Event,” and, for purposes of clauses (i), (ii), (iii) or (v), the date on which such Event occurs, or for purposes of clause (iv) the date on which such Allowable Grace Period is exceeded, being referred to as an “Event Date”), then in addition to any other rights the Holders may have hereunder or under applicable law, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, the Company shall pay to each Holder an amount in cash, as liquidated damages and not as a penalty (“Liquidated Damages”), equal to 0.5% of the aggregate purchase price paid by such Holder pursuant to the Purchase Agreement for any Registrable Securities held by such Holder on the Event Date. The parties agree that notwithstanding anything to the contrary herein or in the Purchase Agreement, no Liquidated Damages shall be payable (i) if as of the relevant Event Date, the Registrable Securities may be sold by non-affiliates without volume or manner of sale restrictions under Rule 144 and the Company is in compliance with the current public information requirements under Rule 144(c)(1) (or Rule 144(i)(2), if applicable), as determined by counsel to the Company pursuant to a written opinion letter to such effect, addressed and reasonably acceptable to the Company’s transfer agent and (ii) with respect to any period after the expiration of the Effectiveness Period (it being understood that this
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sentence shall not relieve the Company of any Liquidated Damages accruing prior to the Effectiveness Period). If the Company fails to pay any Liquidated Damages pursuant to this Section 2(c) in full within five (5) Business Days after the date payable, the Company will pay interest thereon at a rate of 1.0% per month (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily from the date such Liquidated Damages are due until such amounts, plus all such interest thereon, are paid in full. The Liquidated Damages pursuant to the terms hereof shall apply on a daily pro-rata basis for any portion of a month prior to the cure of an Event, except in the case of the first Event Date. The Effectiveness Deadline for a Registration Statement shall be extended without default or Liquidated Damages hereunder in the event that the Company’s failure to obtain the effectiveness of the Registration Statement on a timely basis results from the failure of a Purchaser to timely provide the Company with information requested by the Company and necessary to complete the Registration Statement in accordance with the requirements of the Securities Act (in which case the Effectiveness Deadline would be extended with respect to Registrable Securities held by such Purchaser).
(d) Each Holder agrees to furnish to the Company a completed Selling Stockholder Questionnaire not more than ten (10) Trading Days following the date of this Agreement. At least five (5) Trading Days prior to the first anticipated filing date of a Registration Statement for any registration under this Agreement, the Company will notify each Holder of the information the Company requires from that Holder other than the information contained in the Selling Stockholder Questionnaire, if any, which shall be completed and delivered to the Company promptly upon request and, in any event, within two (2) Trading Days prior to the applicable anticipated filing date. Each Holder further agrees that it shall not be entitled to be named as a selling securityholder in the Registration Statement or use the Prospectus for offers and resales of Registrable Securities at any time, unless such Holder has returned to the Company a completed and signed Selling Stockholder Questionnaire and a response to any requests for further information as described in the previous sentence. If a Holder of Registrable Securities returns a Selling Stockholder Questionnaire or a request for further information, in either case, after its respective deadline, the Company shall use its commercially reasonable efforts at the expense of the Holder who failed to return the Selling Stockholder Questionnaire or to respond for further information to take such actions as are required to name such Holder as a selling security holder in the Registration Statement or any pre-effective or post-effective amendment thereto and to include (to the extent not theretofore included) in the Registration Statement the Registrable Securities identified in such late Selling Stockholder Questionnaire or request for further information. Each Holder acknowledges and agrees that the information in the Selling Stockholder Questionnaire or request for further information as described in this Section 2(d) will be used by the Company in the preparation of the Registration Statement and hereby consents to the inclusion of such information in the Registration Statement.
(e) Notwithstanding anything to the contrary herein, at any time after the Registration Statement has been declared effective by the SEC, the Company may delay the disclosure of material non-public information concerning the Company if the disclosure of such information at the time is not, in the good faith judgment of the Company, in the best interests of the Company (a “Grace Period”); provided, however, the Company shall promptly (i) notify the Holders in writing of the existence of material non-public information giving rise to a Grace Period (provided that the Company shall not disclose the content of such material non-public information to the Holders) or the need to file a post-effective amendment, as applicable, and the date on which such Grace Period will begin, (ii) use reasonable best efforts to terminate a Grace Period as promptly as practicable and (iii) notify the Holders in writing of the date on which the Grace Period ends; provided, further, that no single Grace Period shall exceed thirty (30) consecutive days, and during any three hundred sixty-five (365) day period, the aggregate of all Grace Periods shall not exceed an aggregate of sixty (60) days (each Grace Period complying with this provision being an “Allowable Grace Period”). For purposes of determining the length of a Grace Period, the Grace Period shall be deemed to
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begin on and include the date the Holders receive the notice referred to in clause (i) above and shall end on and include the later of the date the Holders receive the notice referred to in clause (iii) above and the date referred to in such notice; provided, however, that no Grace Period shall be longer than an Allowable Grace Period. Notwithstanding anything to the contrary, the Company shall cause the Transfer Agent to deliver unlegended Common Stock to a transferee of a Holder in accordance with the terms of the Purchase Agreement in connection with any sale of Registrable Securities with respect to which a Holder has entered into a contract for sale prior to the Holder’s receipt of the notice of a Grace Period and for which the Holder has not yet settled.
(f) In the event that Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) use commercially reasonable efforts to register the resale of the Registrable Securities on another appropriate form and (ii) undertake to use commercially reasonable efforts to register the Registrable Securities on Form S-3 promptly after such form is available, provided that the Company shall use commercially reasonable efforts to maintain the effectiveness of the Registration Statement then in effect until such time as a Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the SEC.
3. Registration Procedures
In connection with the Company’s registration obligations hereunder:
(a) the Company shall not less than three (3) Trading Days prior to the filing of a Registration Statement and not less than one (1) Trading Day prior to the filing of any related Prospectus or any amendment or supplement thereto (except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and any similar or successor reports), the Company shall, furnish to the Holder copies of such Registration Statement, Prospectus or amendment or supplement thereto, as proposed to be filed, which documents will be subject to the review of such Holder (it being acknowledged and agreed that if a Holder does not object to or comment on the aforementioned documents within such three (3) Trading Day or one (1) Trading Day period, as the case may be, then the Holder shall be deemed to have consented to and approved the use of such documents). The Company shall not file any Registration Statement or amendment or supplement thereto in a form to which a Holder reasonably objects in good faith, provided that, the Company is notified of such objection in writing within the three (3) Trading Day or one (1) Trading Day period described above, as applicable.
(b) (i) the Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements, to each Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement continuously effective as to the applicable Registrable Securities for its Effectiveness Period (except during an Allowable Grace Period); (ii) the Company shall cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424 (except during an Allowable Grace Period); (iii) the Company shall respond as promptly as reasonably practicable to any comments received from the SEC with respect to each Registration Statement or any amendment thereto and, as promptly as reasonably possible, provide the Holders true and complete copies of all correspondence from and to the SEC relating to such Registration Statement that pertains to the Holders as “Selling Stockholders” but not any comments that would result in the disclosure to the Holders of material and non-public information concerning the Company; and (iv) the Company shall comply with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement until such time as all of such Registrable Securities shall have been disposed of (subject to the terms of this Agreement) in accordance with the intended methods of
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disposition by the Holders thereof as set forth in such Registration Statement as so amended or in such Prospectus as so supplemented; provided, however, that each Purchaser shall be responsible for the delivery of the Prospectus to the Persons to whom such Purchaser sells any of the Registrable Securities (including in accordance with Rule 172 under the Securities Act), and each Purchaser agrees to dispose of Registrable Securities in compliance with the plan of distribution described in the Registration Statement and otherwise in compliance with applicable federal and state securities laws. In the case of amendments and supplements to a Registration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section 3(b)) by reason of the Company filing a report on Form 10-K, Form 10-Q or Form 8-K or any analogous report under the Exchange Act, the Company shall have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendments or supplements with the SEC on the same day on which the Exchange Act report which created the requirement for the Company to amend or supplement such Registration Statement was filed.
(c) the Company shall notify the Holders (which notice shall, pursuant to clauses (iii) through (v) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably practicable (and, in the case of (i)(A) below, not less than two Trading Days prior to such filing, in the case of (iii) and (iv) below, not more than one Trading Day after such issuance or receipt, and in the case of (v) below, not more than one Trading Day after the occurrence or existence of such development) and (if requested by any such Person) confirm such notice in writing no later than one Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post‑effective amendment to a Registration Statement is proposed to be filed; (B) when the SEC notifies the Company whether there will be a “review” of such Registration Statement and whenever the SEC comments in writing on any Registration Statement (in which case the Company shall provide to each of the Holders true and complete copies of all comments that pertain to the Holders as a “Selling Stockholder” or to the “Plan of Distribution” and all written responses thereto, but not information that the Company believes would constitute material and non-public information); and (C) with respect to each Registration Statement or any post‑effective amendment, when the same has become effective; (ii) of any request by the SEC or any other Federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information that pertains to the Holders as “Selling Stockholders” or the “Plan of Distribution”; (iii) of the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in such Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to such Registration Statement, Prospectus or other documents so that, in the case of such Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus, form of prospectus or supplement thereto, in light of the circumstances under which they were made), not misleading.
(d) the Company shall use commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, as soon as practicable.
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(e) the Company shall, if requested by a Holder, furnish to such Holder, without charge, at least one conformed copy of each Registration Statement and each amendment thereto and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the SEC; provided, that the Company shall have no obligation to provide any document pursuant to this clause that is available on the SEC’s EDGAR system.
(f) the Company shall, prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement; provided, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.
(g) the Company shall, cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to the Registration Statement, which certificates shall be free, to the extent permitted by the Purchase Agreement and under law, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holders may reasonably request. Certificates for Registrable Securities free from all restrictive legends may be transmitted by the transfer agent to a Holder by crediting the account of such Holder’s prime broker with DTC as directed by such Holder.
(h) the Company shall following the occurrence of any event contemplated by Section 3(c)(iii)-(v), as promptly as reasonably practicable (taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event), prepare and file a supplement or amendment, including a post‑effective amendment, to the affected Registration Statements or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, no Registration Statement nor any Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus, form of prospectus or supplement thereto, in light of the circumstances under which they were made), not misleading.
(i) the Company may require each selling Holder to furnish to the Company a certified statement as to (i) the number of shares of Common Stock beneficially owned by such Holder and any Affiliate thereof, (ii) any Financial Industry Regulatory Authority (“FINRA”) affiliations, (iii) any natural persons who have the power to vote or dispose of the Common Stock and (iv) any other information as may be requested by the SEC, FINRA or any state securities commission. During any periods that the Company is unable to meet its obligations hereunder with respect to the registration of Registrable Securities because any Holder fails to furnish such information within three Trading Days of the Company’s request, any Liquidated Damages that are accruing at such time as to such Holder only shall be tolled and any Event that may otherwise occur solely because of such delay shall be suspended as to such Holder only, until such information is delivered to the Company.
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(j) the Company shall cooperate with any registered broker through which a Holder proposes to resell its Registrable Securities in effecting a filing with FINRA pursuant to NASD Rule 2710 as requested by any such Holder and the Company shall pay the filing fee required for the first such filing within two (2) Business Days of the request therefore.
(k) the Company shall use its commercially reasonable efforts to maintain eligibility for use of Form S-3 (or any successor form thereto) for the registration of the resale of Registrable Securities.
(l) if requested by a Holder, the Company shall (i) promptly incorporate in a Prospectus supplement or post-effective amendment to the Registration Statement such information as the Company reasonably agrees should be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as reasonably practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment.
(m) the Company shall otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the SEC under the Securities Act and the Exchange Act, including Rule 172, notify the Holders promptly if the Company no longer satisfies the conditions of Rule 172 and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder; and make available to its security holders, as soon as reasonably practicable, but not later than the Availability Date (as defined below), an earnings statement covering a period of at least twelve (12) months, beginning after the effective date of each Registration Statement, which earning statement shall satisfy the provisions of Section 11(a) of the Securities Act, including Rule 158 promulgated thereunder (for the purpose of this Section 3, “Availability Date” means the 45th day following the end of the fourth fiscal quarter that includes the effective date of such Registration Statement, except that, if such fourth fiscal quarter is the last quarter of the Company’s fiscal year, “Availability Date” means the 90th day after the end of such fourth fiscal quarter).
4. Registration Expenses. All fees and expenses incident to the Company’s performance of or compliance with its obligations under this Agreement (excluding any underwriting discounts and selling commissions and all legal fees and expenses of legal counsel for any Holder) shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading, (B) with respect to compliance with applicable state securities or Blue Sky laws (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities and determination of the eligibility of the Registrable Securities for investment under the laws of such jurisdictions as requested by the Holders) and (C) if not previously paid by the Company in connection with an Issuer Filing, with respect to any filing that may be required to be made by any broker through which a Holder intends to make sales of Registrable Securities with FINRA pursuant to FINRA Rule 5110, so long as the broker is receiving no more than a customary brokerage commission in connection with such sale), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses if the printing of prospectuses is reasonably requested by the Holders of a majority of the Registrable Securities included in the Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the
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consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any underwriting, broker or similar fees or commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.
5. Indemnification.
(a) Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify, defend and hold harmless each Holder, the officers, directors, agents, partners, members, managers, stockholders, Affiliates, investment advisers and employees of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, partners, members, managers, stockholders, agents, investment advisers and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable costs of preparation and investigation and reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, that arise out of or are based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that (A) such untrue statements, alleged untrue statements, omissions or alleged omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and approved by such Holder expressly for use in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto (it being understood that each Holder has approved Annex A hereto for this purpose), or (B) in the case of an occurrence of an event of the type specified in Section 3(c)(iii)-(v), related to the use by a Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated and defined in Section 6(d) below, but only if and to the extent that following the receipt of the Advice the misstatement or omission giving rise to such Loss would have been corrected. The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of an Indemnified Party (as defined in Section 5(c)) and shall survive the transfer of the Registrable Securities by the Holders.
(b) Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, arising out of or are based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus, or any form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading (i) to the
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extent, but only to the extent, that such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein or (ii) to the extent, but only to the extent, that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and approved by such Holder expressly for use in a Registration Statement (it being understood that the Holder has approved Annex A hereto for this purpose), such Prospectus or such form of Prospectus or in any amendment or supplement thereto or (iii) in the case of an occurrence of an event of the type specified in Section 3(c)(iii)-(v), to the extent, but only to the extent, related to the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(d), but only if and to the extent that following the receipt of the Advice the misstatement or omission giving rise to such Loss would have been corrected. In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all reasonable fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have materially and adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest exists if the same counsel were to represent such Indemnified Party and the Indemnifying Party; provided, that the Indemnifying Party shall not be liable for the fees and expenses of more than one separate firm of attorneys at any time for all Indemnified Parties. The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld, delayed or conditioned. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.
Subject to the terms of this Agreement, all fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section 5(c)) shall be paid to the Indemnified Party, as incurred, within twenty Trading Days of written notice thereof to the Indemnifying Party; provided, that the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is finally judicially determined to not be entitled to indemnification hereunder. The failure to deliver written notice to the Indemnifying Party
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within a reasonable time of the commencement of any such action shall not relieve such Indemnifying Party of any liability to the Indemnified Party under this Section 5, except to the extent that the Indemnifying Party is materially and adversely prejudiced in its ability to defend such action.
(d) Contribution. If a claim for indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section 5(d) was available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 5 are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties and are not in diminution or limitation of the indemnification provisions under the Purchase Agreement.
6. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by a Holder of any of their obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate.
(b) No Piggyback on Registrations; Prohibition on Filing Other Registration Statements. Neither the Company nor any of its security holders (other than the Contractual Securityholders)
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may include securities of the Company in a Registration Statement hereunder other than the Contractual Securities and the Company shall not prior to the Effective Date enter into any agreement providing any such right to any of its security holders. The Company shall not, from the date hereof until the date that is 60 days after the Effective Date of the Initial Registration Statement, prepare and file with the SEC a registration statement relating to an offering for its own account under the Securities Act of any of its equity securities, other than (i) a registration statement on Form S-8, (ii) in connection with an acquisition, on Form S-4 or (iii) a registration statement to register for resale securities issued by the Company pursuant to acquisitions or strategic transactions, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.
(c) Compliance. Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it (unless an exemption therefrom is available) in connection with sales of Registrable Securities pursuant to the Registration Statement and shall sell the Registrable Securities only in accordance with a method of distribution described in the Registration Statement.
(d) Discontinued Disposition. By its acquisition of Registrable Securities, each Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c)(iii)-(v), such Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed. The Company may provide appropriate stop orders to enforce the provisions of this paragraph.
(e) No Inconsistent Agreements. Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date hereof, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.
(f) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, or waived unless the same shall be in writing and signed by the Company and Holders holding at least two-thirds (2/3) of the then outstanding Registrable Securities, provided that any party may give a waiver as to itself. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. Notwithstanding the foregoing, if any such amendment, modification or waiver would adversely affect in any material respect any Holder or group of Holders who have comparable rights under this Agreement disproportionately to the other Holders having such comparable rights, such amendment, modification, or waiver shall also require the written consent of the Holder(s) so adversely affected.
(g) Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement; provided that the Company may deliver to each Holder the documents required to be delivered to such Holder under Section 3(a) of this Agreement by e-mail to the e-mail address(es) provided by such Holder to the Company solely for such specific purpose.
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(h) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. The Company may not assign its rights (except by merger or in connection with another entity acquiring all or substantially all of the Company’s assets) or obligations hereunder without the prior written consent of all the Holders of the then outstanding Registrable Securities. Each Holder may assign its respective rights hereunder in the manner and to the Persons as permitted under the Purchase Agreement.
(i) Execution and Counterparts. This Agreement may be executed in two or more counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature were the original thereof.
(j) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be determined in accordance with the provisions of the Purchase Agreement.
(k) Cumulative Remedies. Except as provided in Section 2(c) with respect to Liquidated Damages, the remedies provided herein are cumulative and not exclusive of any other remedies provided by law.
(l) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their good faith reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for convenience only and shall not limit or otherwise affect the meaning hereof.
(n) Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under this Agreement are several and not joint with the obligations of any other Purchaser hereunder, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser hereunder. The decision of each Purchaser to purchase the Preferred Shares pursuant to the Transaction Documents has been made independently of any other Purchaser. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement. Each Purchaser
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acknowledges that no other Purchaser has acted as agent for such Purchaser in connection with making its investment hereunder and that no Purchaser will be acting as agent of such Purchaser in connection with monitoring its investment in the Preferred Shares or enforcing its rights under the Transaction Documents. Each Purchaser shall be entitled to protect and enforce its rights, including, without limitation, the rights arising out of this Agreement, and it shall not be necessary for any other Purchaser to be joined as an additional party in any Proceeding for such purpose. The Company acknowledges that each of the Purchasers has been provided with the same Registration Rights Agreement for the purpose of closing a transaction with multiple Purchasers and not because it was required or requested to do so by any Purchaser. It is expressly understood and agreed that each provision contained in this Agreement is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.
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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.
CITIZENS COMMUNITY BANCORP, INC.
By:__________________________________
Name: Stephen M. Bianchi
Title: President and Chief Executive Officer
Title: President and Chief Executive Officer
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGES OF HOLDERS TO FOLLOW]
SIGNATURE PAGES OF HOLDERS TO FOLLOW]
4132.015/1317376.1 17
BOS 48606606v2
IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.
NAME OF INVESTING ENTITY
_____________________________________________
AUTHORIZED SIGNATORY
By: _______________________________________
Name:
Title:
ADDRESS FOR NOTICE
c/o: __________________________________________
Street: ________________________________________
City/State/Zip: _________________________________
Attention: _____________________________________
Tel: _______________________________________
Fax: _______________________________________
Email: _______________________________________
4132.015/1317376.1 18
BOS 48606606v2
Annex A
PLAN OF DISTRIBUTION
We are registering the Securities issued to the selling stockholder to permit the resale of these Securities by the holders of the Securities from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the selling stockholders of the Securities. We will bear all fees and expenses incident to our obligation to register the Securities.
The selling stockholders may sell all or a portion of the Securities beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the Securities are sold through underwriters or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agent’s commissions. The Securities may be sold on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale, in the over-the-counter market or in transactions otherwise than on these exchanges or systems or in the over-the-counter market and in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions. The selling stockholders may use any one or more of the following methods when selling Securities:
• | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
• | block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
• | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
• | an exchange distribution in accordance with the rules of the applicable exchange; |
• | privately negotiated transactions; |
• | settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part; |
• | broker-dealers may agree with the selling stockholders to sell a specified number of such securities at a stipulated price per share; |
• | through the writing or settlement of options or other hedging transactions, whether such options are listed on an options exchange or otherwise; |
• | a combination of any such methods of sale; and |
• | any other method permitted pursuant to applicable law. |
The selling stockholders also may resell all or a portion of the Securities in open market transactions in reliance upon Rule 144 under the Securities Act, as permitted by that rule, or Section 4(a)(1) under the Securities Act, if available, rather than under this prospectus, provided that they meet the criteria and conform to the requirements of those provisions.
Broker-dealers engaged by the selling stockholders may arrange for other broker-dealers to participate in sales. If the selling stockholders effect such transactions by selling Securities to or through underwriters,
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broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders or commissions from purchasers of the Securities for whom they may act as agent or to whom they may sell as principal. Such commissions will be in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction will not be in excess of a customary brokerage commission in compliance with NASD Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with NASD IM-2440.
In connection with sales of the Securities or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the Securities in the course of hedging in positions they assume. The selling stockholders may also sell Securities short and if such short sale shall take place after the date that the Registration Statement of which this prospectus is a part is declared effective by the SEC, the selling stockholders may deliver Securities covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge Securities to broker-dealers that in turn may sell such shares, to the extent permitted by applicable law. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). Notwithstanding the foregoing, the selling stockholders have been advised that they may not use shares registered on this registration statement to cover short sales of our Securities made prior to the date the registration statement, of which this prospectus forms a part, has been declared effective by the SEC.
The selling stockholders may, from time to time, pledge or grant a security interest in some or all of the Securities owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the Securities from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as amended, amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate the Securities in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
The selling stockholders and any broker-dealer or agents participating in the distribution of the Securities may be deemed to be “underwriters” within the meaning of Section 2(11) of the Securities Act in connection with such sales. In such event, any commissions paid, or any discounts or concessions allowed to, any such broker-dealer or agent and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Selling Stockholders who are “underwriters” within the meaning of Section 2(11) of the Securities Act will be subject to the applicable prospectus delivery requirements of the Securities Act and may be subject to certain statutory liabilities of, including but not limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Securities Exchange Act of 1934, as amended, or the Exchange Act.
Each selling stockholder has informed the Company that it is not a registered broker-dealer and does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the Securities. Upon the Company being notified in writing by a selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of Securities through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing (i) the name of each such selling stockholder and of the participating broker-dealer(s), (ii) the number of shares involved, (iii) the price at which such the Securities were sold, (iv) the commissions paid or discounts or concessions
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allowed to such broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus, and (vi) other facts material to the transaction. In no event shall any broker-dealer receive fees, commissions and markups, which, in the aggregate, would exceed eight percent (8%).
Under the securities laws of some states, the Securities may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the Common Stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.
There can be no assurance that any selling stockholder will sell any or all of the Securities registered pursuant to the registration statement of which this prospectus forms a part.
Each selling stockholder and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the Securities by the selling stockholder and any other participating person. To the extent applicable, Regulation M may also restrict the ability of any person engaged in the distribution of the Securities to engage in market-making activities with respect to the Securities. All of the foregoing may affect the marketability of the Securities and the ability of any person or entity to engage in market-making activities with respect to the Securities.
We will pay all expenses of the registration of the Securities pursuant to the registration rights agreement, including, without limitation, SEC filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, that each selling stockholder will pay all underwriting discounts and selling commissions, if any and any related legal expenses incurred by it. We will indemnify the selling stockholders against certain liabilities, including some liabilities under the Securities Act, in accordance with the registration rights agreement, or the selling stockholders will be entitled to contribution. We may be indemnified by the selling stockholders against civil liabilities, including liabilities under the Securities Act, that may arise from any written information furnished to us by the selling stockholders specifically for use in this prospectus, in accordance with the related registration rights agreements, or we may be entitled to contribution.
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Annex B
CITIZENS COMMUNITY BANCORP, INC.
SELLING STOCKHOLDER NOTICE AND QUESTIONNAIRE
The undersigned holder of securities of Citizens Community Bancorp, Inc., a Maryland corporation (the “Company”), issued pursuant to a certain Securities Purchase Agreement by and among the Company and the Purchasers named therein, dated as of June __, 2018, understands that the Company intends to file with the Securities and Exchange Commission a registration statement on Form S-3 (the “Resale Registration Statement”) for the registration and the resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities in accordance with the terms of a certain Registration Rights Agreement by and among the Company and the Purchasers named therein, dated as of June __, 2018 (the “Agreement”). All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Agreement.
In order to sell or otherwise dispose of any Registrable Securities pursuant to the Resale Registration Statement, a holder of Registrable Securities generally will be required to be named as a selling stockholder in the related prospectus or a supplement thereto (as so supplemented, the “Prospectus”), deliver the Prospectus to purchasers of Registrable Securities (including pursuant to Rule 172 under the Securities Act) and be bound by the provisions of the Agreement (including certain indemnification provisions, as described below). Holders must complete and deliver this Notice and Questionnaire in order to be named as selling stockholders in the Prospectus. Holders of Registrable Securities who do not complete, execute and return this Notice and Questionnaire within ten (10) Trading Days following the date of the Agreement (1) will not be named as selling stockholders in the Resale Registration Statement or the Prospectus and (2) may not use the Prospectus for resales of Registrable Securities.
Certain legal consequences arise from being named as a selling stockholder in the Resale Registration Statement and the Prospectus. Holders of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not named as a selling stockholder in the Resale Registration Statement and the Prospectus.
NOTICE
The undersigned holder (the “Selling Stockholder”) of Registrable Securities hereby gives notice to the Company of its intention to sell or otherwise dispose of Registrable Securities owned by it and listed below in Item (3), unless otherwise specified in Item (3), pursuant to the Resale Registration Statement. The undersigned, by signing and returning this Notice and Questionnaire, understands and agrees that it will be bound by the terms and conditions of this Notice and Questionnaire and the Agreement.
The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate and complete:
QUESTIONNAIRE
1. | Name. |
(a) Full Legal Name of Selling Stockholder:
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(b) Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities Listed in Item 3 below are held:
(c) Full Legal Name of Natural Control Person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the securities covered by the questionnaire):
2. Address for Notices to Selling Stockholder:
Telephone: |
Fax: |
Contact Person: |
E-mail address of Contact Person: |
3. Beneficial Ownership of Registrable Securities Issuable Pursuant to the Purchase Agreement:
(a) Type and Number of Registrable Securities beneficially owned and issued pursuant to the Agreement:
(b) Number of Securities to be registered pursuant to this Notice for resale:
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4. Broker-Dealer Status:
(a) Are you a broker-dealer?
Yes ¨ No ¨
(b) If “yes” to Section 4(a), did you receive your Registrable Securities as compensation for investment banking services to the Company?
Yes ¨ No ¨
Note: | If no, the SEC’s staff has indicated that you should be identified as an underwriter in the Registration Statement. |
(c) Are you an affiliate of a broker-dealer?
Yes ¨ No ¨
Note: If yes, provide a narrative explanation below:
(c) If you are an affiliate of a broker-dealer, do you certify that you bought the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities?
Yes ¨ No ¨
Note: If no, the SEC’s staff has indicated that you should be identified as an underwriter in the Registration Statement.
5. Beneficial Ownership of Other Securities of the Company Owned by the Selling Stockholder.
Except as set forth below in this Item 5, the undersigned is not the beneficial or registered owner of any securities of the Company other than the Registrable Securities listed above in Item 3.
Type and amount of other securities beneficially owned:
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6. Relationships with the Company:
Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.
State any exceptions here:
7. Plan of Distribution:
The undersigned has reviewed the form of Plan of Distribution attached as Annex A to the Registration Rights Agreement, and hereby confirms that, except as set forth below, the information contained therein regarding the undersigned and its plan of distribution is correct and complete.
State any exceptions here:
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By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items (1) through (7) above and the inclusion of such information in the Resale Registration Statement and the Prospectus. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of any such Registration Statement and the Prospectus. The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof.
By signing below, the undersigned acknowledges that it understands its obligation to comply, and agrees that it will comply, with the provisions of the Exchange Act and the rules and regulations thereunder, particularly Regulation M in connection with any offering of Registrable Securities pursuant to the Resale Registration Statement. The undersigned also acknowledges that it understands that the answers to this Questionnaire are furnished for use in connection with Registration Statements filed pursuant to the Registration Rights Agreement and any amendments or supplements thereto filed with the SEC pursuant to the Securities Act.
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I confirm that, to the best of my knowledge and belief, the foregoing statements (including without limitation the answers to this Questionnaire) are correct.
IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Questionnaire to be executed and delivered either in person or by its duly authorized agent.
Dated:__________________________ Beneficial Owner: ____________________________________
By: __________________________________________
Name:
Title:
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EXHIBIT 99.1
Citizens Community Bancorp, Inc. to Acquire United Bank from United Bancorporation,
and Entered into Securities Purchase Agreements for a Private Placement of Preferred Stock
Eau Claire, WI and Osseo, WI -- June 21, 2018 - Citizens Community Bancorp, Inc. (NASDAQ: CZWI) (“Citizens”), the parent company of Citizens Community Federal, N.A. (“CCFBank”), and United Bancorporation (“United”), the parent company of United Bank, today jointly announced the execution of an agreement and plan of acquisition (the “Agreement”) whereby Citizens will acquire United Bank from United Bancorporation in a cash transaction valued at approximately $50.7 million. Located in northwest Wisconsin, United Bank is a full-service community bank with branches in Osseo, Strum, Eleva, Ettrick, Eau Claire and Mondovi. As of March 31, 2018, United Bank had $281 million in total assets. The combined franchise is expected to strengthen the presence and capacity of Citizens in the Chippewa Valley, providing stable, low cost funding to support loan growth, while creating operating efficiencies.
The board of directors of both companies approved the transaction, which is subject to customary conditions, including the approvals of bank regulatory agencies.
Key Acquisition and Financial Impact Highlights:
• | CCFBank will rank as the largest community bank by total assets headquartered in the Chippewa Valley Region / Greater Eau Claire market. |
• | The merger provides CCFBank with a stable low-cost deposit base to support organic growth opportunities throughout Wisconsin and Minnesota. The merger also provides more originated commercial loans and lessens the combined composition of legacy indirect paper loans. |
• | As of March 31, 2018, Citizens had $940 million in assets, while United Bank had $281 million in assets, $214 million in loans, $240 million in deposits and $30 million in shareholders’ equity. The combined company is expected to have about $1.2 billion in assets through 28 locations. |
• | This cash transaction is valued at approximately $50.7 million. |
• | The acquisition leverages existing local infrastructure for greater efficiencies. |
• | The transaction is expected to be immediately accretive to earnings and results in a tangible book value dilution earn back of approximately 4.4 years. |
• | Estimated cost savings are projected to be greater than 40% of United Bank's operating expenses. |
“We are excited about this opportunity to combine two independent community banking franchises into one of the largest banks in northwest Wisconsin,” stated Stephen Bianchi, President and CEO of Citizens. “The pooling of our personnel, resources and knowledge will allow us to make “More Possible” through enhanced capabilities, operational efficiencies, and community outreach. It will also provide us with deeper product offerings and increased lending capacity to better serve our clients and our communities. We believe this acquisition will enhance shareholder value as we increase our franchise beyond the $1 billion threshhold in assets and continue to grow core earnings on a per share basis. We expect the merger to close in the fourth quarter of calendar 2018 and the consolidated operation to be accretive to earnings immediately.”
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“Our team looks forward to growing and thriving with the Citizens team,” said Trevor Bohland, United Bank's President and Chief Executive Officer, who will join CCFBank's Senior Management team post-acquisition. “Given the challenges and opportunities of community banking today, the combined bank will be better positioned to meet the needs of our communities versus operating as two independent organizations. We share a common set of values and a vision that will provide significant benefits to our customers and shareholders.”
“United Bank brings $281 million in assets, $240 million in deposits and $214 million in loans to the Citizens franchise,” said Bianchi. “The transaction is a transformative event for us in the Chippewa Valley, as it improves both the balance and mix of our deposit base and loan portfolio, improves our margins and earnings outlook and expands our franchise in our largest key market.”
FIG Partners, LLC acted as financial advisor to Citizens in the transaction and delivered a fairness opinion to the Board of Directors of Citizens, and Briggs & Morgan, P.A. served as outside legal counsel to Citizens. Hovde Group, LLC acted as financial advisor to the Board of United, and Ballard Spahr LLP, served as legal counsel to United.
Private Placement of Series A Preferred Stock
On June 20, 2018, Citizens also entered into a securities purchase agreement and a registration rights agreement with each of a limited number of institutional and other accredited investors, including certain officers and directors of Citizens (collectively the “Purchasers”), pursuant to which the Company expects to sell an aggregate of 500,000 shares of the Company’s Series A Mandatorily Convertible Non-Cumulative Non-Voting Perpetual Preferred Stock, par value $0.01 per share, (the “Series A Preferred Stock”), in a private placement (the “Private Placement”) at $130 per share, for aggregate gross proceeds of $65 million. FIG Partners, LLC served as Senior Placement agent for the Private Placement and Hovde Group, LLC served as Co-Placement Agent.
Each share of Series A Preferred Stock will be mandatorily convertible into ten shares of common stock following receipt of stockholder approval of the issuance of the shares of common stock into which the Series A Preferred Stock is expected to be converted. Citizens will be required to hold a special meeting of stockholders for purposes of a stockholder vote regarding approval of issuance of the shares of common stock into which the Series A Preferred Stock is expected to be converted.
Citizens intends to use the net proceeds from the Private Placement to finance a portion of the acquisition of United Bank and pay related expenses, to support its capital ratios in connection with the acquisition, and for general corporate purposes, including organic growth, funding acquisition opportunities, de novo branching into new markets or other organic expansion of our business.
About Citizens Community Bancorp, Inc. and Citizens Community Federal N.A.
Citizens Community Bancorp, Inc. (NASDAQ: “CZWI”) is the holding company of Citizens Community Federal N.A., a national bank based in Altoona, Wisconsin, serving customers in Wisconsin, Minnesota and Michigan through 22 branch locations. Its primary markets include the Chippewa Valley Region in Wisconsin, the Twin Cities and Mankato, MN, and various rural communities around these areas. The company offers traditional community banking services to businesses, Ag operators and consumers, including one-to-four family mortgages. The company’s recently completed merger with Wells Federal Bank of Wells, MN expanded its market share in Mankato and southern Minnesota and added seven branch locations along with expanded services through Wells Insurance Agency.
About United Bancorporation and United Bank
United Bancorporation is a bank holding company organized in 1993 and incorporated in the State of South Dakota. The Company owns 100% of the stock of United Bank. United Bank is a state chartered commercial bank headquartered in Osseo, Wisconsin, with six full service offices. United Bank was founded in 1934 and is a community oriented, full-service retail bank.
No Offer or Solicitation
This communication is for informational purposes only and is neither an offer to purchase, nor a solicitation of an offer to sell, any securities in any jurisdiction pursuant to the proposed transaction or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of any applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
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Additional Information About The Proposed Transaction and Where To Find It
Investors are urged to read the Agreement for a more complete understanding of the terms of the transactions discussed herein.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this release are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking words or phrases such as “anticipate,” “believe,” “could,” “expect,” “intend,” “may,” “planned,” “potential,” “should,” “will,” “would” or the negative of those terms or other words of similar meaning. Such forward-looking statements in this release are inherently subject to many uncertainties arising in the operations and business environment of the Company and Citizens Community Federal N.A. (“CCFBank”). These uncertainties include conditions in the financial markets and economic conditions generally; the possibility of a deterioration in the residential real estate markets; interest rate risk; lending risk; the sufficiency of loan allowances; changes in the fair value or ratings downgrades of our securities; competitive pressures among depository and other financial institutions; our ability to realize the benefits of net deferred tax assets; our ability to maintain or increase our market share; the risk that the proposed transaction may be more difficult, costly or time consuming or that the expected benefits are not realized; failure to obtain applicable regulatory approvals and meet other closing conditions to the proposed transaction on the expected terms and schedule; the risk that if the proposed transaction were not completed it could negatively impact the stock price and the future business and financial results of the Company; difficulties and delays in integrating the acquired business operations or fully realizing cost savings and other benefits; acts of terrorism and political or military actions by the United States or other governments; legislative or regulatory changes or actions, or significant litigation, adversely affecting the Company or CCFBank; increases in FDIC insurance premiums or special assessments by the FDIC; disintermediation risk; our inability to obtain needed liquidity; our ability to raise capital needed to fund growth or meet regulatory requirements; the possibility that our internal controls and procedures could fail or be circumvented; our ability to attract and retain key personnel; our ability to keep pace with technological change; cybersecurity risks; risks posed by acquisitions and other expansion opportunities; changes in federal or state tax laws; litigation risk; changes in accounting principles, policies or guidelines and their impact on financial performance; restrictions on our ability to pay dividends; and the potential volatility of our stock price. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Such uncertainties and other risks that may affect the Company’s performance are discussed further in Part I, Item 1A, “Risk Factors,” in the Company’s Form 10-K, for the year ended September 30, 2017 filed with the Securities and Exchange Commission ("SEC") on December 13, 2017 and the Company's subsequent filings with the SEC. The Company undertakes no obligation to make any revisions to the forward-looking statements contained in this news release or to update them to reflect events or circumstances occurring after the date of this release.
Contact: Stephen M. Bianchi or James S. Broucek
715-836-9994
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Filed Pursuant to Rule 433 ExRegistration Statement No. __________ Issuer Free Writing Prospectus Dated October __, 2015 Relating to Preliminary Prospectus SupplemeEXHIBITnt Dated Oc99.2tober __, 2015 $65,000,000 Private Placement June 2018 Strictly Confidential 1
Caution Regarding Forward Looking Statements This presentation contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements include, but are not limited to, descriptions of the financial condition, results of operations, asset and credit quality trends, profitability, projected earnings, future plans, strategies and expectations of Citizens Community Bancorp, Inc. (“CZWI” or the “Company”). The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of complying with those safe harbor provisions. Forward-looking statements, which are based on certain assumptions of the Company, are generally identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “seek,” “target,” “potential,” “focus,” “may,” “could,” “should” or similar expressions. These forward-looking statements express management’s current expectations or forecasts of future events, and by their nature, are subject to risks and uncertainties. Therefore, there are a number of factors that might cause actual results to differ materially from those in such statements. These uncertainties include conditions in the financial markets and economic conditions generally; the possibility of a deterioration in the residential real estate markets; interest rate risk; lending risk; the sufficiency of loan allowances; changes in the fair value or ratings downgrades of our securities; competitive pressures among depository and other financial institutions; our ability to realize the benefits of net deferred tax assets; our ability to maintain or increase our market share; acts of terrorism and political or military actions by the United States or other governments; legislative or regulatory changes or actions, or significant litigation, adversely affecting the CCFBank; increases in FDIC insurance premiums or special assessments by the FDIC; disintermediation risk; our inability to obtain needed liquidity; our ability to raise capital needed to fund growth or meet regulatory requirements; the possibility that our internal controls and procedures could fail or be circumvented; our ability to attract and retain key personnel; our ability to keep pace with technological change; cybersecurity risks; risks posed by acquisitions and other expansion opportunities; changes in accounting principles, policies or guidelines and their impact on financial performance; restrictions on our ability to pay dividends; the potential volatility of our stock price; and such other matters as discussed in this presentation or identified in the Company’s periodic filings with the Securities and Exchange Commission, particularly those matters described under the heading “Risk Factors” in its Annual Report on Form 10-K for the year ended September 30, 2017 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2018. Additional information concerning specific risk factors pertaining to this capital raise and the proposed acquisition of United Bank will be contained in an appendix to the Securities Purchase Agreement to be used in the private placement. You are cautioned not to place undue reliance on forward-looking statements, which reflect the Company’s outlook only and speak only as of the date of this presentation or the dates indicated in the statements. The Company assumes no obligation to update or supplement forward-looking statements. For further information on these and other factors that could impact the Company and the statements contained herein, reference should be made to the Company’s filings with the Securities and Exchange Commission. This presentation is a summary only. The Company is not making any implied or express representation or warranty as to the accuracy or completeness of the information contained herein. This presentation is neither an offer to sell nor a solicitation of an offer to purchase any securities of the Company. 2
Unaudited Pro Forma Financial Information This presentation contains certain unaudited pro forma information regarding the financial condition and results of operations of the company after giving effect to the private placement, acquisition and other pro forma adjustments. The unaudited pro forma information assumes that the acquisition is accounted for under the acquisition method of accounting, and that the assets and liabilities of United Bank will be recorded by CZWI at their respective fair values as of the date the acquisition is completed. The unaudited pro forma balance sheet gives effect to the transaction as if the acquisition had occurred on March 31, 2018. The unaudited pro forma information has been derived from and should be read in conjunction with the consolidated financial statements and related notes of CZWI, which are included in its Annual Report on Form 10-K for the year ended September 30, 2017 and subsequent Quarterly Reports on Form 10-Q. The unaudited pro forma information is presented for illustrative purposes only and does not indicate the financial results of the combined company had the private placement occurred and the companies actually been combined at the beginning of each period presented, nor the impact of possible business model changes. This unaudited pro forma information reflects adjustments to illustrate the effect of the private placement and acquisition had they been completed on the date(s) indicated, which are based upon preliminary estimates, to record United Bank’s identifiable assets acquired and liabilities assumed at fair value and the resulting goodwill recognized. The unaudited pro forma information also does not consider any potential effects of changes in market conditions on revenues, potential revenue enhancements, or asset dispositions, among other factors. The purchase price allocation reflected in this information is preliminary, and the final allocation of the purchase price will be based upon the actual purchase price and the fair value of United Bank’s assets and liabilities as of the date of the completion of the acquisition. In addition, following the completion of the acquisition, there may be further refinements of the purchase price allocation as additional information becomes available. Accordingly, the final purchase accounting adjustments may differ materially from the pro forma adjustments reflected in this presentation. 3
Additional Disclosures & Abbreviations DOCUMENTS INCORPORATED BY REFERENCE This presentation should be read in conjunction with any documents that are filed by the Company with the Securities and Exchange Commission (SEC), including, without limitation, its Annual Report on Form 10-K for the year ended September 30, 2017, its subsequent Quarterly Reports on Form 10-Q for the fiscal quarters ended December 31, 2017 and March 31, 2018; its Current Reports on Form 8-K, and other documents that have been filed with the SEC. The filings listed above and any additional documents that the Company may file with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act on or after the date hereof are incorporated by reference herein. PRIVATE PLACEMENT SUBJECT TO DEFINITIVE SECURITIES PURCHASE AGREEMENT The private placement will be subject to the terms and conditions of a definitive securities purchase agreement and related documents, which will describe certain risks and uncertainties with respect to the private placement and other transactions described herein. This presentation (the “Transaction Documents”) should be read in conjunction with those risk factors, the risk factors described under “Risk Factors” to the Company’s Annual Report on Form 10-K for the year ended September 30, 2017, and any updates to those risk factors or new risk factors contained in the Company’s subsequent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the SEC, all of which are incorporated by reference herein. This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful under the securities laws of any such jurisdiction. The offer and sale will be made only pursuant to the Transaction Documents. NON-GAAP FINANCIAL MEASURES These slides may contain non-GAAP financial measures. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of the registrant’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows (or equivalent statements) of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. In this regard, GAAP refers to generally accepted accounting principles in the United States. Non-GAAP financial measures referred to herein include core earnings, core EPS, tangible common equity and tangible book value per share. Reconciliations of all non-GAAP financial measures used herein to the comparable GAAP financial measures in the appendix at the end of this presentation. ABBREVIATIONS Abbreviations used throughout this investor presentation are defined in the appendix at the end of the presentation. 4
Offering Summary Issuer: Citizens Community Bancorp, Inc. Ticker: NASDAQ: CZWI Offering Type: Private placement Security Type: Mandatorily convertible preferred stock Offering Amount: $65,000,000 Expected Closing Date: June 2018 Convertible into common stock; mandatory conversion immediately following shareholder approval; shareholders meeting scheduled as soon as practical Conversion: following the offering; further details TBD and to appear in term sheet and relevant proposed transaction documents Use of Proceeds: Support the acquisition of United Bank and for general corporate purposes Senior Placement Agent: FIG Partners, LLC Co-Placement Agent: Hovde Group, LLC Investment in these securities involves certain risks. For further information please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K for the year ended September 30, 2017 and Quarterly Report on Form 10-Q Risk Factors: for the quarter ended March 31, 2018 each as filed with the SEC, and to the appendix to the Securities Purchase Agreement to be used in the private placement. 5
Offering Rationale ❑ Offering an attractive valuation and entry point for a pro forma $1.2 billion asset institution ❑ Proposed acquisition of United Bank is consistent with CZWI’s turnaround and expansion strategy and is expected to substantially increase the Company’s presence in it’s primary market of Eau Claire, WI ❑ Post transaction, CZWI would rank as the largest community bank by total assets headquartered in the Chippewa Valley Region / Greater Eau Claire market ❑ Management has a proven track record and history of successful acquisitions ❑ Strengthens capital ratios ❑ Offering is an opportunity to broaden the Company’s investor base and sponsorship, and combined with CZWI passing the $1.0 billion total assets threshold at the close of the proposed acquisition, expectation is for both a greater market capitalization and potential for improved trading liquidity post-offering ❑ Allows CZWI to build capital on a pro forma basis going forward, positioning the Company to take advantage of future potential M&A opportunities, a key part of CZWI’s strategy 6
Company Overview: Citizens Community Bancorp, Inc.(1) ❑ Operates 21 branches primarily located in southeastern Minnesota and northwestern Wisconsin(2) CZWI Locations ❑ Balance Sheet (2018 FQ2): ▪ Assets – $940.4 million ▪ Gross Loans – $725.1 million ▪ Deposits – $748.6 million ▪ Tangible Common Equity - $57.9 million(3) ❑ Profitability (3/31/18 FYTD)(4): ▪ Net Income of $2.7 million ▪ ROAA – 0.57%(5) ▪ ROATCE – 9.6%(3)(5) ▪ Efficiency Ratio – 77.0% ❑ Asset Quality: ▪ 1.49% NPAs/ Assets(6) (1) Financial information excludes proposed acquisition of United Bank (2) The Company has one additional branch located in Rochester Hills, MI, a suburb of Detroit (3) Non-GAAP financial measure: see appendix for reconciliations (4) Fiscal year end is September 30th (5) Annualized (6) Nonperforming assets include nonaccrual loans, accruing loans past due 90 days or more, other real estate owned and other collateral owned Source: SEC filings; Company documents 7
Experienced Leadership Team Stephen M. “Steve” Bianchi – President & Chief Executive Officer Board of Directors Mr. Bianchi has served as President and Chief Executive Officer of Name Bio the Company and President and a director of Citizens Community Federal N.A., the Company's wholly owned subsidiary (the "Bank"), since June 2016. Mr. Bianchi has also served as a member of the Richard W. McHugh President & Majority Owner of Choice Products USA, CZWI Board since May 2017. Mr. Bianchi served as President and Chairman LLC Chief Executive Officer of HF Financial Corp. and Home Federal Bank, both based in Sioux Falls, South Dakota from October 2011 through Stephen M. "Steve" May 2016. Mr. Bianchi was a member of the board of directors of Bianchi President & CEO of Citizens Community Bancorp, Inc. Home Federal Bank. Mr. Bianchi also served in several senior Director and Citizens Community Federal management positions at Wells Fargo Bank and Associated Bank prior to his employment with HF Financial Corp. and Home Federal Bank. Mr. Bianchi holds an MBA from Providence College and a B.S. Kristina M. Bourget Vice President and General Counsel at Wisconsin in Finance from Providence College and has over 30 years of Director Independent Network banking experience. Francis E. Felber Director Founder of Ag Risk Managers Insurance Agency LLC James S. Broucek – Executive Vice President, Chief Financial Officer, Principal Accounting Officer & Treasurer, and Secretary Mr. Broucek served as a Senior Manager of Wipfli LLP from James R. Lang December 2013 through October 2017. Before joining Wipfli, Mr. Director President & Owner of Advantech Manufacturing, Inc. Broucek held several positions with TCF Financial Corporation and its subsidiaries from 1995 to 2013, with his last position being Treasurer of TCF Financial. Prior to joining TCF Financial, Mr. Broucek served as James D. "Jim" Moll Former President & CEO of Wells Financial Corp., Director Licensed CPA the Controller of Great Lakes Bancorp. He currently serves as a member of the Strategic Issues Council of the Financial Manager Society, Inc. and as a member of the Finance Committee of Timothy L. Olson Vice President of Project Development for Royal Youthprise. Director Construction, Licensed CPA Michael L. "Mike" Swenson Former President and CEO of Northern States Power Director Company Wisconsin Source: Company documents and S&P Global Market Intelligence 8
Recent Franchise Expansion ❑ CZWI has been focused on transforming the Company away from a consumer based bank into a commercial focused operation, creating a strengthened franchise value through this process ❑ The proposed acquisition of United Bank is consistent with this strategy, particularly given United’s commercial driven business and close proximity to CZWI’s corporate headquarters 2016 Acquisition of 2 Central Bank branches in northwestern WI: $27.1 million deposits 2016 Acquisition of Community Bank of Northern Wisconsin (Rice Lake, WI): $167 million in assets 2017 Acquisition of Wells Financial Corp. (Wells, MN): $256 million in assets 2018 Proposed acquisition of United Bank (Osseo, WI): $281 million in assets Source: SEC filings; Company documents 9
Financial Performance Since 2014(1) CAGR Balance Sheet ($ in millions) 2014 2015 2016 2017 2018(2) Since 2014 Total Assets $570 $580 $696 $941 $940 15.4% Total Loans $470 $451 $574 $733 $721 13.0% Deposits $450 $456 $558 $743 $749 15.7% Loans/Deposits 104% 99% 103% 99% 96% Net Income $2.5 $2.8 $2.6 $2.5 $2.7 24.6%(3) ROAA 0.45% 0.49% 0.40% 0.34% 0.57%(4) ROATCE(5) 4.5% 4.7% 4.3% 4.2% 9.6%(4) Net Interest Margin 3.61% 3.36% 3.27% 3.31% 3.42%(4) Diluted Earnings Per Share $0.48 $0.54 $0.49 $0.46 $0.45 19.7%(6) (1) Fiscal year ended September 30 (2) At or for the 6 months ended March 31, 2018 (3) CAGR based on YTD annualized net income of $5.4 million (4) Annualized (5) Non-GAAP financial measure: see appendix for reconciliations (6) CAGR based on YTD annualized EPS of $0.90 Source: SEC filings; Company documents 10
CZWI Focus Items ENHANCING THE QUANTITY AND QUALITY OF EARNINGS We are enhancing shareholder value by improving the loan and deposit mix, deepening customer relationships and strengthening other sources of revenue. EXPERTISE IN COMMERCIAL & AG BANKING We take pride in serving small and mid-sized business and Ag operators in our communities with the best professionals, products and process. EXPERIENCED & PROVEN STRATEGIC LEADERSHIP TEAM Our team has over 174 years of banking experience to draw upon with national, regional and community banks. ENTERPRISE PRODUCTIVITY & RISK MANAGEMENT We are leveraging technology to improve productivity and support future growth, while proactively managing operating and credit risk. Source: Company documents 11
Key Market Differentiators • Serving small to mid-sized • Experienced, energetic entrepreneurs leadership team • Responsive professionals • Accountability for doing the • Products to compete vs. big right thing and getting banks, superior to smaller results community banks • Entrepreneurial spirit, winning attitude BUSINESS CULTURE MODEL STRATEGIC GROWTH CREDIT • Loan and deposit growth • Prudent risk taking through prudent M&A • Process driven, transparent • Robust commercial loan • Nimble, centralized approval and deposit growth process • Quality and quantity of • Proactive risk management earnings improving Source: Company documents 12
Execution of Current Business Strategy Total Loans Loans / Deposits $1,000 120% 110% $800 $733 $721 104% 103% 99% 99% $574 100% 96% $600 $470 $451 90% $400 80% $200 70% $0 60% 2014 2015 2016 2017 2018YTD 2014 2015 2016 2017 2018YTD NPAs / Assets(1) Diluted Earnings Per Share 3.0% $1.00 2.5% $0.80 2.0% $0.60 $0.54 1.49% 1.49% $0.48 $0.49 1.5% $0.46 $0.45 $0.40 1.0% 0.62% 0.46% $0.20 0.5% 0.37% 0.0% $0.00 2014 2015 2016 2017 2018YTD 2014 2015 2016 2017 2018YTD (1) Nonperforming assets include nonaccrual loans, accruing loans past due 90 days or more, other real estate owned and other collateral owned Note: Fiscal year end of 9/30, 2018YTD at or for the 6 months ended 3/31/2018 Source: SEC filings; Company documents 13
Execution of Current Business Strategy Net Income ($000) Efficiency Ratio $4,000 90.0% 83.6% 84.7% $3,500 80.0% 77.4% 77.0% $2,806 $3,000 $2,681 74.1% $2,510 $2,573 $2,499 $2,500 70.0% $2,000 $1,500 60.0% $1,000 50.0% $500 $0 40.0% 2014 2015 2016 2017 2018YTD 2014 2015 2016 2017 2018YTD (1) ROAA ROATCE 1.00% 10.0% 9.6% 0.80% 8.0% 0.57% 0.60% 0.49% 6.0% 0.45% 4.7% 0.40% 4.5% 4.3% 4.2% 0.40% 0.34% 4.0% 0.20% 2.0% 0.00% 0.0% (2) (2) 2014 2015 2016 2017 2018YTD 2014 2015 2016 2017 2018YTD (1) Non-GAAP financial measure: see appendix for reconciliations (2) Annualized Note: Fiscal year end of 9/30, 2018YTD at or for the 6 months ended 3/31/2018 Source: SEC filings; Company documents 14
Net Income and Diluted EPS ▪ Positive earnings trends ▪ First half of FY 2018 shows impact of Wells acquisition First Half First Half (In $000’s) Net Income ($000) Diluted EPS $5,000 $1.00 $4,260 $0.79 $4,000 $3,563 $3,322 $0.75 $0.67 $3,143 $0.62 $2,806 $0.54 $3,000 $2,573 $2,499 $2,681 $0.52 $0.49 $0.46 $0.50 $0.45 $2,000 $0.25 $1,000 $0 $- 2015 2016 2017 2018YTD 2015 2016 2017 2018YTD Net Income Core Income EPS Core EPS Core Income and Core EPS are non-GAAP financial measures, which management believes may be helpful in understanding the Company's results of operations or financial position and comparing results over different periods. Reconciliation of Core Income and Core EPS to the comparable GAAP financial measure can be found in the appendix of this presentation. These measures should not be viewed as a substitute for operating results determined in accordance with GAAP. Note: Fiscal year end of 9/30, 2018YTD at or for the 6 months ended 3/31/2018 Source: SEC filings; Company documents 15
Loan Portfolio ▪ CZWI has transformed its loan 100% portfolio through organic growth and acquisitions 80% 1-4 Family ▪ Cons & Other Change has occurred from a C&D - 1-4 Family 60% primarily consumer focused C&D - Commercial Ag. Real Estate portfolio to a diversified mix Ag. consisting of commercial real 40% HELOC Owner-Occ. CRE estate, agricultural and commercial Non-Owner Occ. CRE C&I 20% business loans Multifamily ▪ Credit quality remains a focus in 0% conjunction with loan growth 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FQ2 ($000s) 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FQ2 1-4 Family 255,269 236,125 197,218 208,034 241,781 225,980 Cons & Other 176,521 202,974 196,541 196,275 143,287 121,748 C&D - 1-4 Family $0 $1,041 $0 $3,924 $6,265 $3,647 C&D - Commercial $1,080 $1,093 $6,099 $14,809 $17,196 $13,641 Ag. Real Estate 0 1,534 2,073 27,997 68,003 64,092 Ag. 0 1,723 3,718 14,466 23,874 23,580 HELOC 1,127 1,691 2,433 9,775 53,510 49,182 MRQ Owner-Occ. CRE 214 2,458 7,176 23,311 56,122 65,643 Yield Non-Owner Occ. CRE 3,368 3,148 10,158 30,813 52,902 67,167 4.77% C&I 154 4,353 10,975 26,062 45,970 49,578 Multifamily 3,329 14,790 14,869 19,135 26,228 38,389 Total Gross Loans $441,062 $470,930 $451,260 $574,601 $735,138 $722,647 Source: SEC filings; S&P Global Market Intelligence, bank level regulatory data (call report) 16
Commercial Loan Detail ▪ Commercial loan portfolio well diversified C&I & Own. Occ. CRE C&D CRE $115.2 million C&I 4.2% ▪ 15.4% $119.2 Total portfolio of $322.1 million at 3/31/2018 million ▪ Non-Owner Occ. Strong growth in all commercial loan categories CRE 20.9% ▪ Average note size is under $225 thousand Owner-Occ. CRE 20.4% Multifamily 11.9% $140 Ag. $119.2 7.3% $120 $115.2 Ag. Real Estate 19.9% $102.1 Ag $100 $96.3 $91.9 $87.7 $87.7 million AG $80 $64.8 C&I & Own. ($M) 2018 FQ2 $60 Occ. CRE $49.4 C&D $13.6 CRE $42.5 $40 Non-Owner Occ. CRE 67.2 $31.1 Multifamily 38.4 $18.9 $18.2 $20 Ag. Real Estate 64.1 $6.8 $5.8 $3.3 Ag. 23.6 $0 2014 FY 2015 FY 2016 FY 2017 FY 2018 FQ2 Owner-Occ. CRE 65.6 C&I 49.6 Total $29.0 $55.1 $156.6 $290.3 $322.1 Total Gross Commercial Loans $322.1 Source: Company documents, S&P Global Market Intelligence, bank level regulatory data (call report) 17
Deposit Composition 100% ▪ Since 2016 FQ2, demand deposit growth has Demand 80% significantly outpaced the NOW & Other growth of the rest of the Trans. portfolio 60% MMDA & Sav ▪ CZWI remains focused on a 40% lower cost deposit base CDs < 100k 20% CDs > 100k 0% 2016 FQ2 2016 FQ3 2016 FQ4 2017 FQ1 2017 FQ2 2017 FQ3 2017 FQ4 2018 FQ1 2018 FQ2 Deposit Composition - Quarter Lookback ($000) 2016 FQ2 2016 FQ3 2016 FQ4 2017 FQ1 2017 FQ2 2017 FQ3 2017 FQ4 2018 FQ1 2018 FQ2 Demand $59,059 $90,576 $97,822 $101,704 $104,346 $103,112 $227,688 $232,668 $234,731 NOW & Other Trans. 99 94 100 112 157 721 1,457 848 1,248 MRQ MMDA & Sav 166,438 192,210 189,390 177,759 175,942 181,002 228,511 224,780 215,666 Cost of Deposits CDs < 100k 124,019 155,940 137,256 128,716 132,806 127,673 177,659 172,403 187,230 0.67% CDs > 100k 125,235 147,385 136,692 130,188 122,669 110,933 113,116 116,149 113,912 Total Deposits $474,850 $586,205 $561,260 $538,479 $535,920 $523,441 $748,431 $746,848 $752,787 Source: SEC filings; S&P Global Market Intelligence, bank level regulatory data (call report) 18
Market Demographics ❑ CZWI operates in diverse markets within the northwestern region of Wisconsin, metro Twin Cities and the Mankato, Minnesota MSA Eau Claire: ▪ Features a broad-based, diverse economy, which is driven by commercial, retail and medical industries Mankato: ▪ The Mankato market also possesses a broad-based, diverse economy Eau Claire Area Employers Mankato Area Employers Source: S&P Global Market Intelligence, eauclairedevelopment.com, greatermankato.com, Google Images 19
Net Interest Margin Analysis 2017 FY YTD March 31, 2018 Average Income/ Average Average Income/ Average ($ Dollars in Thousands) Balance Expense Rates Balance Expense Rates Interest earning assets: Cash and Equivalents 19,368 139 0.72% $ 27,659 $ 130 0.94% Loans $ 568,670 $ 25,826 4.54% 729,185 17,260 4.75% Interest Bearing Deposits 1,922 29 1.51% 7,546 63 1.67% Securities 87,449 1,974 2.26% 108,135 1,133 2.30% Other 5,136 205 3.99% 7,602 178 4.70% Total Interest Earning Assets 682,545 28,173 4.13% 880,127 18,764 4.30% Liabilities: Deposits 510,932 4,299 0.84% 665,606 2,452 0.74% FHLB Advances & Other Borrowings 82,781 1,311 1.58% 116,185 1,429 2.47% Total Interest Bearing Liabilities 593,713 5,610 0.94% 781,791 3,881 1.00% Net Interest Income 22,563 14,883 Net Interest Margin 3.31% 3.42% (1) (1) Fully taxable equivalent. The average yield on tax exempt securities is computed on a tax equivalent basis using a tax rate of 24.5%; annualized Source: SEC filings; Company documents 20
Capital Raising Thought Process • Following its recent acquisition of Wells Financial in mid 2017, CZWI began evaluating the timing of a smaller capital raise intended to (i) strengthen TCE / TA and consolidated regulatory capital ratios and (ii) “right size“ the Company’s capital ratios Strengthen Capital when compared with Midwest peers Levels • During the course of evaluating the capital raise, CZWI was presented with the opportunity to minimize the dilutive effects of a “standalone” offering by combining an M&A opportunity with a potential capital raise • United Bank Proposed M&A ‒ Osseo, WI ‒ $281 million in assets Transaction ‒ $50.7 million transaction value ‒ 100% Cash • $65,000,000 • Support the acquisition of United Bank and for general corporate purposes, including Proposed Offering organic growth and other potential acquisitions • All terms of the private placement and risk factors pertaining to the private placement will be contained in the Securities Purchase Agreement and other Transaction Documents to be used in the private placement. 21
Proposed Acquisition – United Bank Transaction Terms Financial Highlights – United Bank For the Twelve Months Ended Quarters Ended ($000) 12/31/15 12/31/16 12/31/17 03/31/18 Transaction Value: $50.7 million Balance Sheet Total Assets $248,130 $264,747 $269,890 $280,833 Price / TBV: 171.2% Total Loans $191,451 $202,070 $207,286 $213,747 Total Deposits $213,429 $227,622 $229,040 $239,734 Loans/Deposits 89.70% 88.77% 90.50% 89.16% Price/ LTM EPS: 15.1x Capital Common Equity $23,938 $25,427 $29,246 $29,612 Consideration: 100% Cash TCE/ TA 9.65% 9.60% 10.84% 10.54% Risked Based Capital 12.40% 12.91% 14.13% 14.10% Cost Saves: 40.6% Tier 1 Capital 11.29% 11.90% 13.21% 13.19% Leverage Ratio 9.98% 9.96% 11.16% 11.14% Transaction $2.2 million (pre-tax) Profitability Measures Expenses: Net Interest Margin 3.57% 3.49% 3.69% 3.71% (2) (2) CDI Created $2.2 million Non Interest Income/Avg. Assets 1.42% 1.32% 1.29% 1.21% Non Interest Expense/Avg. Assets 3.32% 3.11% 2.90% 2.94% (2) 4th Quarter of Calendar Efficiency Ratio 68.81% 65.93% 60.51% 62.39% Expected Closing: (2) 2018(1) ROAA 0.93% 1.02% 1.20% 1.32% ROAE 9.59% 10.00% 11.52% 12.04% (2) TBV Earnback 4.4 years(3) Net Income $2,190 $2,507 $3,111 $886 Period: Asset Quality NPAs/Assets 1.21% 0.84% 0.80% 0.64% IRR: 38.5% NPAs (excl TDRs)/Assets 0.60% 0.33% 0.42% 0.29% NCOs/Avg Loans 0.00% 0.09% 0.05% 0.00% Reserves/Loans 1.22% 1.07% 0.99% 0.97% Reserves/NPAs 77.85% 97.61% 95.42% 114.80% (1) Subject to shareholder and regulatory approvals and customary closing conditions (2) Annualized (3) Based on offering price of $13.00 Source: FIG Partners, S&P Global Market Intelligence 22
Transaction Rationale ▪ Attractive in-market/contiguous market transaction, as United Bank has one Eau Claire branch plus five other “close proximity” locations ▪ Assuming consummation of the proposed acquisition, Company would rank Strategic #2 in deposit market share in Eau Claire County(1) Rationale ▪ Combination consistent with CZWI’s “community banking” growth strategy ▪ Leverages existing local infrastructure for maximum efficiencies ▪ Excellent credit quality due to strong underwriting standards ▪ Low cost deposit base ▪ Comprehensive due diligence process completed ▪ Reviewed specific loans that would be risk rated higher under CZWI criteria Risk ▪ Loan review by CCF credit diligence team Mitigation ▪ Gross estimated credit mark to loans of $2.3 million (1.1%) ▪ Third party review on interest rate mark on loans and deposits (1) Deposit information as of June 30, 2017 23
Strengthened Market Presence ❑ Eau Claire, WI With the proposed acquisition of United Bank, 2017 2017 Number of Total Deposits In Total Market CZWI would become the #2 ranked bank in Eau Rank Institution (ST) Branches Market ($000) Share (%) Claire County by deposit market share 1 Charter Bankshares Inc. (WI) 1 508,031 23.58 Pro Forma Entity 4 290,953 13.51 2 Bank of Montreal 3 264,554 12.28 ❑ 3 U.S. Bancorp (MN) 6 249,130 11.56 Proposed acquisition of United is consistent 4 Associated Banc-Corp (WI) 6 218,551 10.14 with CZWI’s strategy of increasing core deposits 5 Wells Fargo & Co. (CA) 3 214,096 9.94 6 Citizens Community Bncp (WI) 3 208,065 9.66 and continued diversification of loan portfolio 7 Augusta Financial Corp. (WI) 3 114,536 5.32 8 Hayward Bancshares Inc. (WI) 1 108,733 5.05 9 United Bank (WI) 1 82,888 3.85 ❑ Increased Eau Claire/Chippewa Valley presence 10 Merchants Financial Group Inc (MN) 1 44,256 2.05 11 NW Bancshares Inc. (WI) 1 33,930 1.57 should enable CZWI to pursue additional 12 Security Financial Svcs Corp. (WI) 1 33,019 1.53 13 Bremer Financial Corp. (MN) 1 31,981 1.48 growth opportunities 14 PFSB Bancorp. Inc. (WI) 1 24,286 1.13 15 Old National Bancorp (IN) 1 9,176 0.43 16 Clayton Bankshares Inc. (WI) 1 8,739 0.41 17 Time FSB (WI) 1 395 0.02 Total For Institutions In Market 36 2,154,366 Trempealeau, WI Buffalo, WI 2017 2017 2017 Number of Total Deposits In Total Market 2017 Number of Total Deposits In Total Market Rank Institution (ST) Branches Market ($000) Share (%) Rank Institution (ST) Branches Market ($000) Share (%) 1 B & E Investments Inc. (WI) 4 145,986 24.98 1 Gebsco Inc. (WI) 4 123,874 41.68 2 United Bank (WI) 4 118,590 20.29 2 Waumandee Bancshares Ltd. (WI) 3 78,767 26.50 3 Dairyland Bank Holding Corp. (WI) 2 74,812 25.17 3 Lake Shore III Corp. (WI) 1 85,256 14.59 4 Gale Bank Holding Co. (WI) 2 59,839 10.24 4 United Bank (WI) 1 19,743 6.64 5 PFSB Bancorp. Inc. (WI) 2 44,353 7.59 Total For Institutions In Market 10 297,196 6 Northern Financial Corp. (WI) 1 37,976 6.50 7 Waumandee Bancshares Ltd. (WI) 2 36,752 6.29 8 Firsnabanco Inc. (WI) 2 35,188 6.02 9 Gebsco Inc. (WI) 1 20,442 3.50 Total For Institutions In Market 19 584,382 Source: S&P Global Market Intelligence 24
United Bank Financial Highlights United would provide CZWI with stable, low cost deposits and… Loans / Deposits % Noninterest-Bearing Deposits Cost of Interest-Bearing Deposits 100.0 % 35.0% 94.8% 0.90% 90.5% 29.4% 89.0% 89.7% 88.8% 89.2% 28.9% 28.3% 0.78% 90.0 % 87.9% 30.0% 27.4% 0.80% 0.70% 25.0% 80.0 % 20.2% 20.5% 0.60% 0.55% 20.0% 18.4% 0.50% 0.52% 0.50% 0.42% 0.44% 0.39% 70.0 % 15.0% 0.40% 10.0% 0.30% 60.0 % 0.20% 5.0% 0.10% 50.0 % 0.0% 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018 0.00% YTD YTD 2012 2013 2014 2015 2016 2017 2018 …the ability to generate significant operating efficiencies YTD Efficiency Ratio Noninterest Exp. / Avg. Assets Avg. Deposits per Branch ($M) ROAA 80.0 % 77.3% 4.00% $50.0 1.50% 3.74% 3.69% 3.64% 1.32% 70.9% $45.0 68.8% 1.20% 70.0 % 67.1% $40.0 65.9% 3.50% 3.32% $40.0 $37.9 $38.2 1.02% 1.02% 62.4% $35.6 60.5% 3.11% 1.00% 0.92% 0.93% 2.94% $35.0 $32.9 2.90% $31.3 60.0 % 3.00% $30.2 0.77% $30.0 $25.0 0.50% 50.0 % 2.50% $20.0 $15.0 40.0 % 2.00% 0.00% 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018 $10.0 YTD YTD 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018 YTD YTD Source: S&P Global Market Intelligence 25
Pro Forma Earnings Capacity: United Bank Pro forma net income of $6.1 million Excludes revenue synergies opportunities Excludes benefits of private placement which increases CZWI’s TCE and loans to one borrower level Last Twelve Months ($000)(1) $7,000 $6,000 $6,052 $5,000 $4,959 $4,000 $3,000 $3,110 $2,000 $1,000 $0 -$1,000 $(2,017) -$2,000 -$3,000 Pre-Tax Income 40.6% Expense Saves(2) Less: Taxes (25% Rate)(3) Pro Forma Net Income(4) (1) Data for the twelve months ended 3/31/18 (2) Based on United Bank reported LTM noninterest expense of $7,662 and CZWI management’s expectation of $3.1 million of LTM cost saves (3) Based on expected new tax rate of target (4) Does not include any financial information from CZWI nor any additional proposed impact other than what is illustrated above Source: Company documents, S&P Global Market Intelligence, bank level regulatory data (call report) 26
Pro Forma Loans(1) CZWI United Pro Forma(2) C&D Ag. Real C&D 2.4% Estate Consumer & 3.9% 5.4% Other C&D 3.4% Ag. 8.9% Consumer & Consumer & Ag. Real Estate Other 4.4% Other 8.1% 13.8% 16.8% 1-4 Fam 1-4 Fam C&I 13.7% 1-4 Fam Ag. Real 31.3% 10.0% 27.3% Estate HELOC Ag. 8.9% 3.2% Multifam 3.5% Ag. 3.6% C&I 3.3% 7.6% C&I Non-OwnOcc 6.9% CRE HELOC HELOC 15.2% 6.0% OwnOcc CRE Multifam 6.8% 32.2% 4.9% OwnOcc CRE Multifam 14.4% 5.3% Non-OwnOcc OwnOcc CRE Non-OwnOcc CRE 9.1% CRE 9.3% 10.7% $723 $934 Gross Loans: Gross Loans: $214 million Gross Loans: million million C&D C&D C&D 19% 59% 30% Concentration: Concentration: Concentration: CRE CRE Concentration: 134% 186% CRE Concentration: 150% Concentration: NPAs / Assets:(3) 1.49% NPAs / Assets:(1) 0.29% NPAs / Assets:(1) 0.99% (1) As of March 31, 2018 (2) Includes purchase accounting adjustments and $65.0 million capital offering (3) Nonperforming assets include nonaccrual loans, accruing loans past due 90 days or more, other real estate owned and other collateral owned Source: SEC filings; S&P Global Market Intelligence, bank level regulatory data (call report) 27
Pro Forma Deposits(1) CZWI United Pro Forma NOW Accts CDs > $100k 0.2% 4.5% CDs < $100k NOW Accts 6.2% 2.1% Non Int. Non Int. CDs > $100k CDs > $100k Bearing Bearing 15.2% 12.6% 10.6% Non Int. 14.6% Bearing 27.4% CDs < $100k 20.4% CDs < $100k 25.0% MMDA & Sav NOW Accts MMDA & Sav 49.1% 8.0% 53.9% MMDA & Sav 50.2% Deposits: $749 million Deposits: $240 million Deposits: $988 million MRQ Cost of MRQ Cost of MRQ Cost of 0.67% 0.38% 0.60% Deposits: Deposits: Deposits: Loans / Loans / Loans / 96% 89% 94% Deposits: Deposits: Deposits: Non CDs / Non CDs / Non CDs / 60% 89% 67% Deposits: Deposits: Deposits: (1) As of March 31, 2018 Note: Does not include any purchase accounting adjustments Source: S&P Global Market Intelligence, bank level regulatory data (call report) 28
Pro Forma Map CZWI Locations United Locations Note: CZWI Rochester Hills, MI branch not shown Source: S&P Global Market Intelligence 29
Pro Forma Balance Sheet Dollars in thousands, except per share data Pro Forma Balance Sheet: Fair Value M&A Total CZWI (1) United Bank Capital Raise(2) Pro Forma Adjustments Adjustments Adjustments 3/31/18 3/31/18 Cash and equivalents $ 66,871 $ 25,062 $ - $ (52,939) f $ (52,939) $ 30,064 j $ 69,058 Securities 131,034 30,820 - - - - 161,854 Total loans held for investment 721,128 213,640 (2,257) a - (2,257) - 932,511 Loan loss reserve (5,887) (2,063) 2,063 b - 2,063 - (5,887) Loans held for sale 1,520 106 - - - - 1,626 Goodwill 10,444 - - 18,873 g 18,873 - 29,317 Core deposit and other intangibles 5,126 - - 2,289 h 2,289 - 7,415 OREO 7,080 101 - - - - 7,181 Net deferred tax asset - - (166) c (124) i (290) - (290) Other assets 30,071 13,167 818 d - 818 - 44,056 Total Assets $ 967,387 $ 280,833 $ 458 $ (31,902) $ (31,444) $ 30,064 $ 1,246,840 Total deposits $ 748,615 $ 239,734 $ (40) e $ - $ (40) $ - $ 988,309 Short and long term borrowings 110,479 10,297 - - - - 120,776 Trust preferred securities - - - - - - - Other liabilities 3,780 1,190 - - - - 4,970 Total Liabilities $ 862,874 $ 251,221 $ (40) $ - $ (40) - 1,114,055 Preferred equity - - - - - - - Common equity 104,513 29,612 498 (31,902) (31,404) $ 30,064 - 132,785 Total Equity $ 104,513 $ 29,612 $ 498 $ (31,902) $ (31,404) $ 30,064 $ 132,785 Total Liabilities and Equity $ 967,387 $ 280,833 $ 458 $ (31,902) $ (31,444) $ 30,064 $ 1,246,840 Balance Sheet: Shares Issued TCE 88,943 29,612 96,053 Shares Outstanding 8,440,943 1,000,000 2,461,538 10,902,481 TBVPS $10.54 $29.61 $8.81 Regulatory Capital Ratios: TCE/ TA 9.3% 10.5% 7.9% Leverage Ratio 9.6% 11.1% 8.2% CET1 Ratio 12.8% 13.2% 10.1% Tier 1 RBC Ratio 12.8% 13.2% 10.1% Total RBC Ratio 15.7% 14.1% 12.3% (1) CZWI standalone includes $33.0 million private placement of common stock to “right size” capital ratios (2) $32.0 million private placement of common stock to support acquisition Note: See footnotes on page 32 for additional detail 30
Pro Forma Impact ❑ $65,000,000 common stock raise ❑ The proposed acquisition would be $1.87 dilutive to tangible book value at close, earned back over approximately 4.4 years(1) ❑ Pro forma capital ratios: Proposed Acquisition & $65.0 Million CZWI (Actual) Offering 3/31/2018 3/31/2018 TCE / TA:(2) 6.3% 7.9% Leverage Ratio: 6.5% 8.2% CET1 Ratio: 8.7% 10.1% Tier RBC Ratio: 8.7% 10.1% Total RBC Ratio: 11.7% 12.3% (1) TBV dilution and payback assume $33.0 million private placement of common stock “right size” CZWI capital on a standalone basis; $32.0 million attributed to the acquisition of United Bank; and based on offering price of $13.00 (2) Non-GAAP financial measure: see appendix for reconciliations 31
Pro Forma Balance Sheet Footnotes Footnotes a. Loan fair value adjustment b. Elimination of loan loss reserve c. Net DTL related to fair value purchase marks d. Fixed asset fair value adjustment e. Deposit fair value adjustment f. $50.7 million cash consideration plus $2.2 million of transaction related expenses g. Goodwill created h. Core deposit intangible created i. Net DTL created from $448 thousand DTA from transaction expenses plus $572 thousand DTL from CDI created j. Net proceeds from $32.0 million private placement of common stock (1) CZWI standalone includes $33.0 million private placement of common stock to “right size” capital ratios 32
Franchise Transformation Since 9/30/2016 CZWI 9/30/2016 CZWI pro forma United 3/31/2018 ❑ Improved loan Consumer & composition Other 13.8% ▪ Commercial, CRE, HELOC Commercial, CRE, and & Ag. Related 6.0% Consumer & Other Ag. Related loans grow 27.9% Loans from 28% of total loans 34.2% at 9/30/2016 to 53% on Commercial, CRE, a pro forma basis with & Ag. Related 1-4 Fam the acquisition of United 53.0% 27.3% Bank 1-4 Fam MRQ Yield: 36.2% MRQ Yield: 4.65% HELOC 4.77% 1.7% NOW Accts ❑ Non Int. NOW Accts Improved core 0.0% Non Int. Bearing 2.1% deposit composition 8.7% Bearing CDs 15.0% 32.9% ▪ Transaction oriented/ non- CD accounts grow from Deposits 51% of total deposits at z 9/30/2016 to 67% on a pro CDs 48.8% MMDA & Sav forma basis with the 42.4% acquisition of United Bank MMDA & Sav 50.0% MRQ Cost: MRQ Cost: 0.84% 0.60% Source: SEC filings; S&P Global Market Intelligence, bank level regulatory data (call report) 33
Disciplined Acquisition Strategy ❑ Strategic consolidation of community banks Areas of Potential Acquisition Opportunities ▪ Provides scale and operating efficiencies CZWI Locations ▪ Adds experienced and knowledgeable banking talent United Locations ▪ Opportunity to continue commercial loan growth Potential Markets ▪ Opportunity to drive down cost of funds ▪ Adds portfolios of seasoned loans Duluth ❑ Maintain disciplined approach ▪ Low loan to deposit ratio Superior ▪ Low-cost deposit funding Rice Lake ▪ Eau Claire Attractive market share Minneapolis ▪ Wausau Compelling noninterest income St. Paul ❑ Enhance the performance of acquired banks ▪ Developed core competency evaluating, structuring, Mankato acquiring and integrating target banks ❑ Target markets – Select Midwest Markets Mason City ▪ Wisconsin – Northwestern/Western/North Central ▪ Minnesota – Areas in or in close proximity to micropolitan or metropolitan markets La Crosse ▪ Iowa – Northern Iowa only Winona ❑ Size Criteria Rochester ▪ Banks with assets between $100 million and $1.0 billion Total Banks Median Asset Size ❑ There are 162 banks within our target markets that meet Banks $100M-$250M 100 $165,176 our size criteria Banks $250M-$500M 51 $357,863 Banks $500M-$1.0B 11 $681,762 Source: FIG Partners, S&P Global Market Intelligence 34
Investment Highlights ❑ Offering an attractive valuation and entry point for a pro forma $1.2 billion asset institution ❑ CZWI’s proposed acquisition of United would be transformative for the Company and would establish CZWI as #2 in deposit market share in Eau Claire County ❑ CZWI is expected to cross the $1.0 Billion in assets threshold which should lead to greater market capitalization and potential for improved trading liquidity post offering ❑ Post acquisition, CZWI would have approximately $1.2 billion in assets and rank as the largest community bank headquartered in the Chippewa Valley Region / Greater Eau Claire market ❑ CZWI has positioned itself to effectively compete and profitably offer community banking products and services in the Micropolitan, Metropolitan and Rural Demographic markets in which the Bank operates ❑ Proposed acquisition would provide CZWI with a stable low cost deposit base for organic growth opportunities in the Bank’s key markets ❑ Experienced and successful leadership team ❑ Offering is an opportunity to broaden the Company’s investor base and sponsorship ❑ Significant number of potential future M&A opportunities ❑ Continued pursuit of low cost deposits through organic growth and M&A activity ❑ Strong credit quality ❑ Proactive risk management 35
Asset Liability Management Appendix 36
Experienced Leadership Team 174 Years of Banking Experience… President / CEO EVP / CFO SVP Chief Credit Officer SVP Corporate Development 31 / 2 32 / < 1 year 23 / 23 24 / 3 SVP Chief Technology Officer SVP West Region President SVP East Region President VP Human Resources Community Banking Community Banking 35 / 9 13 / < 1 year 15 / 8 1 / 1 ...46 Years at CZWI 37
Agricultural Loan Detail Agricultural Loan Concentration ($000)(1) ▪ Ag accounts for 12% of the total loan portfolio $87,672 12% ▪ Current Lending policy limits agricultural loan advances to the Agricultural lesser of 65% of appraised value, or Other a maximum debt of $4,500 per acre $634,975 88% Ag Loans by Product Type Ag Loans by Industry(2) 2% 4% 2% 2% Ag not primary Income 0% (3) 13% 14% CAFO 23% Crop Operating Line Real Estate Dairy 28% 2% Term Debt General Agriculture Operating Line secured by RE Livestock 71% Support Activities for Crop 39% Timber (1) Based on Call Report codes (2) Based on NAICS code on Tax Return (3) Concentrated Animal Feeding Operation Source: Company Documents 38
Market Demographics CZWI Market Demographics 2018 Market Data Proj. 2023 Median Households with Number of Population Population HHI Income > 100K Businesses (Actual) Growth (%) (Actual) (Actual) (Actual) Counties Washington, MN 256,433 4.2% 93,755 45,104 7,437 Eau Claire, WI 103,866 2.7% 57,170 9,426 4,282 Blue Earth, MN 67,147 3.4% 56,011 6,346 3,238 Rice, MN 65,992 2.4% 64,059 6,382 2,438 Chippewa, WI 63,868 1.5% 58,719 5,526 2,763 Goodhue, MN 46,855 1.9% 62,631 5,308 2,200 Barron, WI 45,307 0.0% 50,189 3,200 2,468 Steele, MN 36,954 1.9% 62,817 3,585 1,700 Nicollet, MN 33,813 2.7% 63,610 3,314 1,157 Freeborn, MN 30,230 -0.6% 52,758 2,481 1,447 Martin, MN 19,561 -2.0% 56,417 1,748 1,289 Washburn, WI 15,630 0.0% 47,799 1,182 1,036 Rusk, WI 14,007 -1.7% 44,632 810 741 Faribault, MN 13,778 -1.5% 52,037 1,155 1,046 Watonwan, MN 10,844 -0.5% 52,531 696 573 MSA Minneapolis-St. Paul-Bloomington, MN-WI 3,598,391 4.2% 76,791 525,127 126,402 Eau Claire, WI 167,734 2.2% 57,762 14,952 7,045 Mankato-North Mankato, MN 100,960 3.2% 58,756 9,660 4,395 Faribault-Northfield, MN 65,992 2.4% 64,059 6,382 2,438 Red Wing, MN 46,855 1.9% 62,631 5,308 2,200 Owatonna, MN 36,954 1.9% 62,817 3,585 1,700 Albert Lea, MN 30,230 -0.6% 52,758 2,481 1,447 Fairmont, MN 19,561 -2.0% 56,417 1,748 NA State Wisconsin 5,797,217 1.3% 60,240 591,880 238,531 Minnesota 5,571,848 3.3% 68,744 705,052 225,063 Source: S&P Global Market Intelligence, eauclairedevelopment.com, greatermankato.com, Google Images 39
Asset Liability Management ($000) CZWI United Bank Pro Forma % Change of Net % Change of Net % Change of Net Change in Interest Rates Interest Income Interest Income Interest Income Up 300 bps (7.1) 5.4 (4.2) Up 200 bps (3.6) 3.6 (1.9) Up 100 bps (0.1) 1.8 0.3 0 bps Down 100 bps 0.6 -4.0 (0.4) Source: Company documents as of 3/31/2018 40
Reconciliation of Non-GAAP Financial Measures FY2015 FY2016 FY2017 FY2018 YTD Core Income (Dollars in Thousands, except share data) GAAP pre-tax earnings $4,420 $3,859 $3,822 $4,051 Merger related costs (1) - 701 1,860 104 Branch closure costs (2) 614 839 951 8 Settlement proceeds (3) - - (283) - FHLB borrowings prepayment fee (4) - - 104 - Core earnings before income taxes (5) 5,034 5,399 6,454 4,163 Provision for income tax on core earnings (6) 1,712 1,836 2,194 1,020 Core earnings after income taxes (5) $3,322 $3,563 $4,260 $3,143 Core EPS FY2015 FY2016 FY2017 FY2018 YTD GAAP diluted earnings per share, net of tax $0.54 $0.49 $0.46 $0.45 Merger related costs, net of tax - 0.09 0.23 0.02 Branch related costs, net of tax 0.08 0.09 0.12 - Settlement proceeds - - (0.03) - FHLB borrowings prepayment fee - - 0.01 - Tax Cuts and Jobs Act of 2017 tax provision (7) - - - 0.05 Core diluted earnings per share, net of tax $0.62 $0.67 $0.79 $0.52 Average diluted shares outstanding 5,239,943 5,257,304 5,378,548 5,926,912 41
Reconciliation of Non-GAAP Financial Measures (1) Costs incurred are included as data processing, advertising, marketing and public relations, professional fees and other noninterest expense in the consolidated statement of operations. (2) Branch closure costs include severance pay recorded in compensation and benefits, accelerated depreciation expense and lease termination fees included in occupancy and other costs included in other non-interest expense in the consolidated statement of operations. In addition, other non-interest expense includes costs related to the reduction in valuation of the Ridgeland branch office in the fourth quarter of fiscal 2017. (3) Settlement proceeds includes litigation income from a JP Morgan Residential Mortgage Backed Security (RMBS) claim. This JP Morgan RMBS was previously owned by the Bank and sold in 2011. (4) The prepayment fee to restructure our FHLB borrowings is included in other non-interest expense in the consolidated statement of operations. (5) Core earnings is a non-GAAP measure that management believes enhances investors' ability to better understand the underlying business performance and trends related to core business activities. (6) Provision for income tax on core earnings is calculated at 24.5% for all quarters in fiscal 2018 and at 34% for all quarters in the prior fiscal years, which represents our federal statutory tax rate for each respective period presented. (7) As a result of the Tax Cuts and Jobs Act of 2017, we recorded a one-time net tax provision of $275 in the first quarter of 2018, which is included in provision for income taxes expense in the consolidated statement of operations. 42
Reconciliation of Non-GAAP Financial Measures Tangible common equity and March 31, 2018 Tangible common equity/ tangible March 31, 2018 tangible book value per share at assets at end of period end of period ($000 except ($000 except share data and share data and per share data) per share data) Total stockholders’ equity $73,509 Total Assets $940,383 Less: Goodwill (10,444) Less: Goodwill (10,444) Less: Intangible Assets (5,126) Less: Intangible Assets (5,126) Tangible common equity (non-GAAP) $57,939 Tangible assets (non-GAAP) $924,813 Ending common shares outstanding 5,902,481 Tangible common equity (non-GAAP) $57,939 Tangible common equity/ tangible assets Tangible book value per share (non-GAAP) $9.82 (non-GAAP) 6.3% 43
Reconciliation of Non-GAAP Financial Measures ROATCE (Return on Average Tangible Common Equity) (1) (2) (2) (2) (2) Tangible common equity and ROATCE ($000) March 31, 2018 September 30, 2017 September 30, 2016 September 30, 2015 September 30, 2014 Total stockholder's equity $ 73,509 $ 73,483 $ 64,544 $ 61,454 $ 58,019 Less: Goodwill (10,444) (10,444) (4,663) 0 0 Less: Intangible assets (5,126) (5,449) (872) (104) (161) Tangible common equity (non-GAAP) $ 57,939 $ 57,590 $ 59,009 $ 61,350 $ 57,858 Net income (GAAP) $ 2,681 $ 2,499 $ 2,573 $ 2,806 $ 2,510 ROATCE 9.6%(3) 4.2% 4.3% 4.7% 4.5% Average tangible common equity $56,206 $58,891 $60,180 $59,604 $55,913 (1) At or for the 6 months ended March 31 (2) At or for the 12 months ended September 30 (3) Annualized 44
Abbreviations Abbreviation Definition Abbreviation Definition Ag. Agriculture (1) LTM (2) Last Twelve(2) Months (2) (2) BPS Basis Points M&A Mergers & Acquisitions C&D Construction & Development MMDA & Sav. Money Market Deposit Account & Savings C&I Commercial & Industrial MSA Metropolitan Statistical Area CAGR Compound Annual Growth Rate NCOs Net Charge-Offs CDI Core Deposit Intangible Non-Owner Occ. CRE Non-Owner Occupied Commercial Real Estate CDs Certificates of Deposit NOW & Other Trans. Negotiable Order of Withdrawal & Other Transaction CET1 Common Equity Tier 1 NPAs Nonperforming Assets Cons. & Other Consumer & Other Owner-Occ. CRE Owner-Occupied Commercial Real Estate CRE Commercial Real Estate RBC Risk-Based Capital DTA Deferred Tax Asset ROAA Return on Average Assets DTL Deferred Tax Liability ROAE Return on Average Equity EPS Earnings Per Share ROATCE Return on Average Tangible Common Equity FHLB Federal Home Loan Bank SEC Securities and Exchange Commission FQ Fiscal Quarter TBV Tangible Book Value FY Fiscal Year TBVPS Tangible Book Value Per Share GAAP Generally Accepted Accounting Principles TCE Tangible Common Equity HELOC Home Equity Line of Credit TCE/ TA Tangible Common Equity/ Tangible Assets HHI Household Income TDRs Troubled Debt Restructurings IRR Internal Rate of Return YTD Year to Date 45
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