Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):
If applicable, place an X in the box to
designate the appropriate rule provision relied upon in conducting this transaction:
Security Ownership of Certain Beneficial Owners of First
Choice Bank and First Choice Bank Directors and Executive Officers
The following table sets forth the number
of shares of First Choice Bank common stock beneficially owned by any person (including any group) who is known to First Choice
Bank to be the beneficial owner of more than five percent of First Choice Bank’s class of common stock, each director of
First Choice Bank, and all directors and officers of First Choice Bank as a group, as of
[__________, 2016]
. The table,
together with the notes below the table, include First Choice Bank’s present commitments to such persons with respect to
the issuance of shares of First Choice Bank common stock, namely through exercise of warrants and options, or conversion of preferred
stock. Except for Mr. Tuchman, no person is known by First Choice Bank to own more than ten percent of First Choice Bank’s
outstanding common stock.
Name
|
|
Amount
and Nature of
Beneficial Ownership
(1)
|
|
|
Percent
of
Class
(2)
|
|
Steven J. Doerler
(3)
|
|
|
63,339
|
|
|
|
2.0
|
%
|
Nancy E. Dudas
(4)
|
|
|
60,386
|
|
|
|
1.9
|
%
|
Paul E. Fitzgerald
(5)
|
|
|
26,050
|
|
|
|
*
|
|
James J. Kreig
|
|
|
100
|
|
|
|
*
|
|
Geoffrey R. Morsell
(6)
|
|
|
45,050
|
|
|
|
1.4
|
%
|
Munish Sood
(7)
|
|
|
179,868
|
|
|
|
5.5
|
%
|
Martin Tuchman
(8)
|
|
|
805,920
|
|
|
|
24.9
|
%
|
Richard L. Weise
(9)
|
|
|
65,736
|
|
|
|
2.0
|
%
|
Robert L. Workman
(10)
|
|
|
94,604
|
|
|
|
2.9
|
%
|
Total owned by directors and executive officers as a group (12 persons)
(11)
|
|
|
1,474,217
|
|
|
|
41.1
|
%
|
|
(1)
|
Any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship, or otherwise has or shares: voting power, which includes the power to vote, or to direct
the voting of, our common stock; and/or, investment power, which includes the power to dispose, or to direct the disposition of,
our common stock, is determined to be a beneficial owner of the common stock. Unless otherwise indicated, the beneficial owner
has sole voting and investment power. Shares beneficially owned include warrants and options to purchase shares which are currently
exercisable or which will be exercisable within 60 days of August [__], 2016.
|
|
(2)
|
Based on 3,207,493 shares issued and outstanding as of
August [__], 2016. Percentage calculations presume that the identified individual or group exercises all of his, her or their
respective warrants and options and that no other holders of warrants or options exercise their warrants or options.
|
|
(3)
|
Includes 20,150 shares of common stock issuable upon exercise
of options, 2,667 shares of common stock issuable upon exercise of warrants, 1,000 shares issuable upon conversion of Series A
Preferred Stock, and 6,504 shares issuable upon conversion of Series C Preferred Stock. Excludes 1,071 shares of common stock
issuable upon conversion of Series D Preferred Stock, which are not convertible prior to June 2017.
|
|
(4)
|
Includes 18,600 shares of common stock issuable upon exercise
of options, 2,667 shares of common stock issuable upon exercise of warrants, 5,000 shares issuable upon conversion of Series A
Preferred Stock, and 1,734 shares issuable upon conversion of Series C Preferred Stock. Excludes 3,751 shares of common stock
issuable upon conversion of Series D Preferred Stock, which are not convertible prior to June 2017.
|
|
(5)
|
Includes 25,000 shares of common stock issuable upon exercise
of options.
|
|
(6)
|
Includes 22,100 shares of common stock issuable upon exercise
of options, 2,667 shares of common stock issuable upon exercise of warrants, and 100 shares issuable upon conversion of Series
A Preferred Stock. Excludes 571 shares of common stock issuable upon conversion of Series D Preferred Stock, which are not convertible
prior to June 2017, and 314 shares of common stock issuable upon conversion of Series E Preferred Stock, which are not convertible
prior to July 2019.
|
|
(7)
|
Includes 19,650 shares of common stock issuable upon exercise
of options, 2,667 shares of common stock issuable upon exercise of warrants, 4,700 shares issuable upon conversion of Series A
Preferred Stock, 5,000 shares issuable upon conversion of Series B Preferred Stock and 3,469 shares issuable upon conversion of
|
Series C Preferred Stock. Excludes 1,785 shares
of common stock issuable upon conversion of Series D Preferred Stock, which are not convertible prior to June 2017, and 1,257 shares
of common stock issuable upon conversion of Series E Preferred Stock, which are not convertible prior to July 2019. Includes shares
with respect to which Mr. Sood serves as custodian for his minor children.
|
(8)
|
Includes 21,650 shares of common stock issuable upon exercise
of options and 7,484 shares of common stock issuable upon exercise of warrants. Excludes 2,391,958 shares of common stock otherwise
issuable upon exercise of warrants and conversion of Series A, B and C Preferred Stock but for the limitations on exercise and
conversion set forth in the terms of such warrants and preferred stock to comply with New Jersey banking regulations, 561,357
shares of common stock issuable upon conversion of Series D Preferred Stock, which are not convertible prior to June 2017, and
745,534 shares of common stock issuable upon conversion of Series E Preferred Stock, which are not convertible prior to July 2019.
|
|
(9)
|
Includes 17,150 shares of common stock issuable upon exercise
of options, 2,667 shares of common stock issuable upon exercise of warrants, 3,600 shares issuable upon conversion of Series A
Preferred Stock, 1,000 shares issuable upon conversion of Series B Preferred Stock and 1,734 shares issuable upon conversion of
Series C Preferred Stock. Excludes 1,142 shares of common stock issuable upon conversion of Series D Preferred Stock, which are
not convertible prior to June 2017, and 628 shares of common stock issuable upon conversion of Series E Preferred Stock, which
are not convertible prior to July 2019.
|
|
(10)
|
Includes 17,950 shares of common stock issuable upon exercise
of options, 20,000 shares issuable upon conversion of Series A Preferred Stock, 5,000 shares issuable upon conversion of Series
B Preferred Stock and 6,504 shares issuable upon conversion of Series C Preferred Stock. Excludes 1,785 shares of common stock
issuable upon conversion of Series D Preferred Stock, which are not convertible prior to June 2017, and 7,861 shares of common
stock issuable upon conversion of Series E Preferred Stock, which are not convertible prior to July 2019.
|
|
(11)
|
Includes 207,250 shares of common stock issuable upon exercise
of options, 38,134 shares of common stock issuable upon exercise of warrants, and 135,654 shares of common stock issuable upon
conversion of Series A, B and C Preferred Stock. Excludes 2,304,334 shares of common stock otherwise issuable upon conversion
of Series A, B and C Preferred Stock but for the application of New Jersey banking regulations limiting the current conversion
of such stock, excludes 571,282 shares of common stock issuable upon conversion of Series D Preferred Stock, which are not convertible
prior to June 2017, and 755,594 shares of common stock issuable upon conversion of Series E Preferred Stock, which are not convertible
prior to July 2019.
|
DISSENTERS’
RIGHTS
Under
the New Jersey Banking Act, shareholders of First Choice Bank who are entitled to vote on the proposal to approve the Merger Agreement
have the right to dissent from the Merger and to receive payment in cash for the fair value of their shares of First Choice Bank
common stock instead of the merger consideration. First Choice Bank shareholders electing to do so must comply with the statutory
provisions relating to dissenters’ rights in order to perfect their dissenters’ rights. A copy of the applicable statutory
provisions are attached as
Annex C
of this document.
Ensuring
perfection of dissenters’ rights can be complicated. The procedural rules are specific and must be followed precisely. A
First Choice Bank shareholder’s failure to comply with these procedural rules may result in his or her becoming ineligible
to pursue dissenters’ rights.
The
following is intended as a brief summary of the material provisions of the New Jersey Banking Act procedures that a First Choice
Bank shareholder must follow in order to dissent from the Merger and obtain payment of the fair value of his or her shares of
First Choice Bank common stock instead of the merger consideration. This summary, however, is not a complete statement of all
applicable requirements and is qualified in its entirety by reference to the statutory provisions relating to dissenters’
rights, the full text of which appears in
Annex C
of this proxy statement/prospectus.
First Choice Bank is notifying each of the holders of record of its common stock as of [__________, 2016] that dissenters’
rights are
available and intends that this proxy statement/prospectus
constitutes this notice.
If
you are a First Choice Bank shareholder and you wish to exercise your dissenters’ rights, you must satisfy the following:
You
must serve a written notice of dissent:
You must serve a written notice of dissent from the merger
agreement at the principal office of First Choice Bank no later than the third day prior to the First Choice Bank special meeting
of shareholders. Delivery of the notice of dissent may be made by registered mail or in person by you or your agent.
You
must not vote for approval of the merger agreement:
You must not vote for approval of the merger
agreement. If you vote, by proxy or in person, in favor of the merger agreement, this will terminate your dissenters’ rights.
You
must make a written demand for dissenters’ rights:
You must deliver a written demand for
dissenters’ rights to the principal office of First Choice Bank within 30 days after the filing of the merger agreement with
the New Jersey Commissioner of Banking and Insurance following the First Choice Bank special meeting of shareholders where the
merger agreement was approved by shareholders. This written demand for dissenters’ rights must be separate from your proxy
card. A vote against the merger agreement alone will not constitute a demand for dissenters’ rights. Delivery of the demand
for payment may be made by registered mail or in person by you or your agent.
If you are a First Choice Bank shareholder
who elects to exercise dissenters’ rights, you may mail or deliver a written demand to: First Choice Bank, 669 Whitehead
Road, Lawrenceville, New Jersey 08648, Attention: Paul E. Fitzgerald, President and Chief Executive Officer.
The
written demand for dissenters’ rights should state that the shareholder is demanding payment of the value of the shareholder’s
shares and may specify the shareholder’s name, mailing address and the number of shares of common stock owned. Berkshire
Hills Bancorp may within ten days of receipt of the demand for dissenters’ rights offer to pay the shareholder an amount
for his shares that in the opinion of Berkshire Hills Bancorp does not exceed the amount which would be paid if First Choice Bank
liquidated as of the filing of the merger agreement with the New Jersey Commissioner of Banking and Insurance following the special
meeting of shareholders.
If
a shareholder fails to accept the offer from Berkshire Hills Bancorp or if no offer is made, the shareholder must within three
weeks after the receipt of the offer from Berkshire Hills Bancorp or within three weeks after the demand was made if no offer was
made by Berkshire Hills Bancorp, initiate an action in New Jersey Superior Court. Berkshire Hills Bancorp has no obligation to
file this action, and if you do not file this action within the above time frame, you will lose your dissenters’ rights.
The
court will appoint a board of three appraisers to determine the value of the shares of all shareholders who are party to the action.
In determining such fair value, the appraisers may take into account all relevant factors, including hearing evidence from the
parties and upon such determination will file a report in the Superior Court where the determination of any two of the appraisers
will control. Either party may appeal the ruling to the Superior Court within ten days of the filing of the appraisers’ report
and the Superior Court will issue a final ruling. Berkshire Hills Bancorp will then pay the dissenting shareholders of First Choice
Bank the judicially determined value of First Choice Bank shares plus a judicially determined interest rate. Berkshire Hills Bancorp
will be responsible for paying the fees of the appraisers.
Shareholders
considering seeking dissenters’ rights for their shares should note that the fair value of their shares determined under
the New Jersey Banking Act could be more, the same, or less than the consideration they would receive pursuant to the merger agreement
if they did not seek appraisal of their shares.
IF YOU FAIL TO STRICTLY COMPLY WITH THE
PROCEDURES DESCRIBED ABOVE YOU WILL LOSE YOUR DISSENTERS’ RIGHTS. CONSEQUENTLY, IF YOU WISH TO EXERCISE YOUR DISSENTERS’
RIGHTS, WE STRONGLY URGE YOU TO CONSULT A LEGAL ADVISOR BEFORE ATTEMPTING TO DO SO.
PROPOSAL
I — THE PROPOSED MERGER
The following summary of the Merger Agreement
is qualified by reference to the complete text of the Merger Agreement. A copy of the Merger Agreement is attached as Annex A to
this proxy statement/prospectus and is incorporated by reference into this proxy statement/prospectus. You should read the Merger
Agreement completely and carefully as it, rather than this description, is the legal document that governs the Merger.
General
The Merger Agreement provides for the merger
of First Choice Bank with and into Berkshire Bank, with Berkshire Bank as the surviving entity. First Choice Bank will cease to
exist upon closing of the Merger. First Choice Loan Services, Inc. will become a wholly-owned subsidiary of Berkshire Bank.
Background of the Merger
On November 18, 2015, the board of directors
of First Choice Bank held one of its regular monthly meetings. As part of the board’s regular efforts to deliver value to
shareholders, discussion at the meeting included consideration of the strategic alternatives available to the bank. At the meeting,
the board considered, among other alternatives, a potential sale of its subsidiary, First Choice Loan Services, and/or a potential
sale of the bank itself. Given certain challenges facing the bank, including increasing regulatory compliance costs, and the prospects
of operating the bank without First Choice Loan Services, the board determined it would consider a potential sale of the bank.
A committee of the board was established to take the lead in evaluating strategic alternatives, on behalf of the board as they
were presented. Chairman, Martin Tuchman, Vice Chair Munish Sood and Robert Workman were appointed as the members of the committee.
Houlihan Lokey Capital Inc. had been invited to the meeting to discuss its qualifications to provide financial advisory and investment
banking services in connection with a potential sale or other transaction. After the meeting, a proposal was received from Houlihan
Lokey and thereafter other investment bankers were interviewed by representatives of the First Choice board. On January 16, 2016,
First Choice Bank signed an engagement letter with Houlihan Lokey.
In early 2016, Houlihan Lokey worked with
the management of First Choice Bank to prepare a Confidential Information Memorandum to be used in the process of a potential transaction.
Houlihan Lokey presented to First Choice Bank a list of potential acquirers to be contacted. This list contained institutions that
might be interested in acquiring First Choice Bank in its entirety, as well as institutions that might have an interest in acquiring
the bank or First Choice Loan Services only. In late March, the Confidential Information Memorandum was nearly complete and the
First Choice board committee authorized Houlihan Lokey to start contacting institutions that might have an interest in acquiring
First Choice Bank in its entirety.
On March 24, 2016 Houlihan Lokey contacted
Berkshire Hills Bancorp and had a discussion which resulted in Berkshire Hills Bancorp having an initial interest in First Choice
Bank. Berkshire Hills Bancorp informed Houlihan Lokey that it would not participate in an auction process and would only proceed
with a potential transaction if First Choice Bank agreed to negotiate with Berkshire Hills Bancorp on an exclusive basis.
On March 29, 2016 a confidentiality agreement
with Berkshire Hills Bancorp was signed and on April 4, 2016, an initial meeting between First Choice Bank’s representatives
and Berkshire Hills Bancorp’s representatives took place in New Jersey.
On April 12, 2016, before Houlihan Lokey
had commenced a comprehensive solicitation effort, and before receiving any competing offers, it received a non-binding,
indicative proposal from Berkshire Hills Bancorp. Houlihan Lokey presented the proposal initially to the First Choice board committee
for consideration and then to the First Choice Bank board of directors on April 14, 2016, along with a proposed 30-day Exclusivity
Agreement. Berkshire Hills Bancorp’s initial proposal, based on preliminary information and subject to due diligence, proposed
a valuation of First Choice Bank at 1.3 to 1.4 times its tangible book value. Based on a representative price of $27.00 per share
of Berkshire Hills Bancorp common stock, the initial proposal suggested an exchange ratio of between 0.65 and 0.70 shares of Berkshire
Hills Bancorp common stock for each share of First Choice Bank common stock.
At the meeting, Houlihan Lokey reported
on the general banking environment and historical acquisitions of similar banks and financial institutions; its analysis of First
Choice Bank and First Choice Loan Services, including their strengths and business challenges, the potential for selling First
Choice Loan Services and continuing to operate First Choice Bank as an independent institution, and provided a detailed analysis
of the indicative proposal from Berkshire Hills Bancorp. Houlihan Lokey opined that while solicitation efforts had been limited
to date, Berkshire Hills Bancorp was ideally suited to acquire both First Choice Bank and First Choice Loan Services in a combined
transaction. Berkshire Hills Bancorp was unwilling to proceed with further diligence absent an agreement regarding exclusivity.
After hearing the report from and engaging in a discussion with Houlihan Lokey, and further discussing the proposal among
the directors, based on the report of its financial advisor, the financial strength and market capitalization of Berkshire
Hills Bancorp, the board’s perception of Berkshire Hills Bancorp’s ability to acquire and integrate First Choice Loan
Services, the fact that its common stock was listed on a national exchange, NYSE, its history of paying dividends to its stockholders
and the prospect of consummating the transaction prior to the end of 2016, the First Choice Bank board determined to grant
Berkshire Hills Bancorp the requested 30-day exclusivity. The Exclusivity Agreement was signed on April, 15, 2016.
From April 15, 2016 through June 24, 2016,
Berkshire Hills Bancorp conducted an extensive due diligence investigation of First Choice Bank and First Choice Loan Services,
including substantial financial analysis, management meetings and document review.
During this time, because negotiations had
proceeded constructively towards a potential transaction, First Choice Bank determined that it was appropriate to extend the exclusivity
period on three occasions, first on May 13, 2016, extending until May 27, 2016, second on May 27, 2016 extending until June 1,
2016, and finally on June 2, 2016, extending until June 24, 2016.
On May 31, 2016, Berkshire Hills Bancorp
provided the First Choice board committee with a revised indication of interest with respect to the proposed merger, which reflected
the results of Berkshire Hills Bancorp’s due diligence investigation s available at that time . The revised indication
proposed an exchange ratio of 0.5864 shares of Berkshire Hills Bancorp common stock for each share of First Choice Bank common
stock, based on a valuation of $16.25 per share of First Choice Bank common stock and $27.71 per share of Berkshire Hills Bancorp
common stock, its closing price on the New York Stock Exchange on May 31, 2016. First Choice Bank’s outstanding warrants
and options would receive a cash payment at the closing of the Merger. The revised proposal was subject to certain contingencies,
including those based on First Choice Bank obtaining a minimum tangible book value per share on June 30, 2016, resolution of certain
matters relating to loans guaranteed by the U.S. Small Business Administration, and key executives of First Choice Loan Services
agreeing to continue employment following the merger.
From May 31, 2016 to June 6, 2016, representatives
from Houlihan Lokey and First Choice Bank’s Chairman, Martin Tuchman, negotiated with Berkshire Hills Bancorp on the terms
of the revised indication. On June 2, 2016, First Choice Bank received a second revised indication from Berkshire Hills Bancorp.
The second revised indication included a $15.75 per share valuation of the First Choice Bank common stock , or an exchange ratio
of 0.5684. Berkshire Hills Bancorp cited the results of its additional due diligence investigations, in particular with respect
to First Choice Bank’s loan portfolio and allowance for loan losses, as the primary reason for the decrease in valuation
and exchange ratio .
On June 6, 2016, after additional negotiations
by representatives of First Choice Bank and Houlihan Lokey with Berkshire Hills Bancorp , a further revised indication was
presented orally to Houlihan Lokey, who relayed it to the board of directors of First Choice Bank. The June 6 oral indication
included an increase in the exchange ratio , from 0.5684 to 0.5773, as more particularly described below under “The
Merger Agreement—Consideration to be Received in the Merger”. In addition, in response to a concern of First Choice
with respect to the fixed nature of the exchange ratio, First Choice would be permitted to distribute , as a special
dividend, 35% of any core earnings between July 1, 2016 and closing in excess of a $14.22 tangible book value per share, assuming
First Choice wa s able to achieve a tangible book value of not less than $14.22 per share at closing and ha d positive
core net income at closing. Houlihan Lokey provided the Board with some additional feedback received from Berkshire Hills Bancorp
with respect to its due diligence investigations, including Berkshire Hills Bancorp’s analysis of the risks associated with
the acquisition analysis of the market and other factors for consideration. The First Choice board of directors then unanimously
authorized the committee to move forward with the negotiation of a definitive merger agreement consistent with the final offer
and term sheet, for presentation to the board for final approval. The Board also agreed to extend the exclusivity period to permit
a merger agreement to be negotiated and executed and authorized the President to obtain proposals from independent investment
banking firms to provide a fairness opinion prior to entering into a final merger agreement.
On June 10, 2016, First Choice Bank engaged
Ambassador to provide a fairness opinion in connection with the proposed merger.
On June 10, 2016, Berkshire Hills Bancorp
delivered a draft merger agreement to Houlihan Lokey, which was distributed to First Choice Bank and its counsel, Pepper Hamilton
LLP. Between June 10 and June 24, 2016, the parties, with the assistance of their respective counsel, negotiated the final form
of merger agreement.
Between June 10, 2016 and June 17, 2016
extensive conference calls took place between Pepper Hamilton and the Committee members and representatives of management, to
discuss issues presented by the draft merger agreement. Discussion included the fixed nature of the exchange ratio, the ability
to extract additional value for the stockholders of First Choice Bank through the proposed special dividend, the defined terms,
calculation and conditions for payment of the proposed special dividend, treatment of certain matters relating to loans guaranteed
by the U.S. Small Business Administration, the procedures to exchange preferred stock for merger consideration, and the proposed
representations and warranties, the proposed pre-closing operating covenants (particularly with respect to payment of regular
dividends, investment of the securities portfolio, extending credit and maintaining the allowance for loan losses), employee matters,
conditions to closing (including the percentage of dissenting shares) and each party’s right to terminate the merger agreement,
including the circumstances under which First Choice Bank would be responsible for a termination fee, and the termination provisions
relating to a decrease in the market price of Berkshire Hills Bancorp’s stock.
Between June 13, 2016 and June 23, 2016
representatives of Houlihan Lokey, attorneys from Pepper Hamilton and employees of First Choice Bank conducted due diligence investigations
of the business and operations of Berkshire Hills Bancorp, which included a two (2) day onsite visit to Berkshire Hills Bancorp’s
main office on June 15, 2016 and June 16, 2016.
On June 17, 2016, First Choice’s
legal counsel forwarded to Berkshire Hills Bancorp’s legal counsel, Luse Gorman, PC, a revision of the June 10, 2016 draft
merger agreement, reflecting the comments of the First Choice negotiation working group and the discussions with Pepper Hamilton
described above . On June 21, 2016, Berkshire Hills Bancorp returned to First Choice Bank a revised draft merger agreement,
and between June 21 and June 24, the parties negotiated the remaining open issues , with focus on the special dividend, its
calculations and conditions to payment, the treatment of certain matters relating to loans guaranteed by the U.S. Small Business
Administration,
the closing condition relating to dissenting shares, the
pre-closing investment of the securities portfolio and the termination fee payable by First Choice Bank in certain circumstances .
On June 15, 2016, the boards of directors
of Berkshire Hills Bancorp and Berkshire Bank held a special meeting to consider the proposed merger. The boards reviewed and discussed
the material terms of the merger agreement, as well as certain other agreements (including a voting agreement to be signed by the
directors and certain officers of First Choice Bank and an agreement to be signed by Mr. Tuchman, First Choice Bank’s largest
shareholder, that would govern certain of his activities as a stockholder of Berkshire Hills Bancorp after the closing), with senior
management, Luse Gorman, PC, counsel to Berkshire Hills Bancorp, and Sandler O’Neill & Partners, L.P. (“Sandler
O’Neill”), Berkshire Hills Bancorp’s financial advisor. Luse Gorman made a detailed presentation describing the
key terms of the merger and the merger agreement. Sandler O’Neill presented a detailed financial analysis relating to the
proposed transaction and answered follow-up questions from the boards. Following the boards’ discussion, the boards of directors
of Berkshire Hills Bancorp and Berkshire Bank each unanimously authorized management to continue to finalize the Merger Agreement.
At the regularly scheduled meeting of Berkshire
Hills Bancorp and Berkshire Bank on June 23, 2016, the boards of directors were updated on and considered further the proposed
merger. The boards reviewed and discussed the updated merger agreement, and related agreements with senior management, Luse Gorman
and Sandler O’Neill. Sandler O’Neill updated its financial analysis relating to the proposed transaction, presented
the fairness opinion with respect to the merger consideration, and answered follow-up questions from the boards. Following the
boards’ discussion, the boards of directors of Berkshire Hills Bancorp and Berkshire Bank each unanimously approved the Merger
Agreement and the proposed Merger and authorized management to execute the Merger Agreement following the negotiation of the remaining
non-material issues.
On June 24, 2016, the board of directors
of First Choice Bank held a special meeting to consider the proposed merger. The board reviewed and discussed the material terms
of the merger agreement as well as certain other agreements including a voting agreement to be signed by the directors and certain
officers of First Choice Bank, and an agreement to be signed by Mr. Tuchman as the largest stockholder of First Choice Bank which
would restrict his activities as a stockholder of Berkshire Hills Bancorp after the closing. A representative from Pepper Hamilton
LLP, as counsel to First Choice Bank, made a detailed presentation describing the key terms of the merger and the merger agreement.
Representatives of Houlihan Lokey were present at the meeting and to provide additional information and guidance on the terms
of the merger agreement. Representatives of Ambassador were also present at the meeting to present the Ambassador fairness opinion
with respect to the exchange ratio to the Board and answer questions. Based on the exchange ratio of 0.5773 and the closing
price per share of Berkshire Hills Bancorp common stock on June 24, 2016 (the date preceding the public announcement of the proposed
transaction), the merger consideration exchanged per share of First Choice Bank common stock would have a value of $14.73. The
market value of the merger consideration will continue to fluctuate with the market price of Berkshire Hills Bancorp common stock.
After discussion, the First Choice Bank
board of directors unanimously approved the Merger Agreement and the proposed Merger, authorized the submission of the Merger Agreement
and proposed Merger to the stockholders for their consideration and approval, and unanimously recommended that First Choice Bank
shareholders vote “
FOR
” the proposal to approve the Merger Agreement. In addition, each of the directors and
certain members of senior management of First Choice Bank signed voting agreements agreeing to vote their shares of First Choice
Bank common stock for the approval of the proposed merger with Berkshire Bank.
The Merger Agreement was subsequently executed
and delivered by the parties and First Choice Bank and Berkshire Hills Bancorp issued a joint press release on June 27, 2016 announcing
the transaction.
First Choice Bank’s
Reasons for the Merger and Recommendation of the First Choice Bank Board
The board of directors of First Choice Bank
believes that the Merger Agreement and the Merger are fair to and in the best interests of the bank, and that the consideration
to be paid in the Merger is fair to and in the best interests of the stockholders of First Choice Bank. Accordingly, First Choice
board has approved the Merger Agreement and unanimously recommends that First Choice Bank stockholders vote “
FOR
”
the adoption of the Merger Agreement.
In approving the Merger Agreement, First
Choice’s board of directors consulted with legal counsel as to its legal duties and the terms of the Merger Agreement and
with its financial advisors with respect to the financial aspects of the transaction and specific transaction terms. In arriving
at its determination, First Choice’s board of directors also considered a number of factors, including the following:
|
·
|
the form and value of the consideration to be received by First Choice’s stockholders pursuant to the Merger Agreement;
|
|
·
|
its belief that the Merger was more favorable to First Choice’s stockholders than the other alternatives reasonably available
to First Choice and its stockholders, including the form and amount of the merger consideration and the alternative of remaining
as a stand-alone, independent bank;
|
|
·
|
First Choice’s board of directors’ familiarity with and review of information concerning First Choice’s business,
results of operations, financial condition, competitive position and future prospects;
|
|
·
|
the current and prospective environment in which First Choice and First Choice Loan Services operates, including national,
regional and local economic conditions, the competitive environment for banks and other financial institutions generally, the increased
regulatory burdens on financial institutions generally and the trend toward consolidation in the banking industry and in the financial
services industry;
|
|
·
|
the financial presentation and advice of the First Choice’s financial advisor Houlihan Lokey;
|
|
·
|
the opinion of Ambassador that, as of the date of its opinion, that the exchange ratio provided for in the Merger is fair to
the holders of First Choice common stock from a financial point of view;
|
|
·
|
the limited liquidity of First Choice’s common stock and preferred stock, and the greater liquidity of the Berkshire
Hills Bancorp common stock and its listing for trading on the New York Stock Exchange;
|
|
·
|
the ability of First Choice’s stockholders to participate in the combined business of Berkshire Hills Bancorp following
the Merger;
|
|
·
|
the financial strength of Berkshire Hills Bancorp and its history of paying dividends to its stockholders;
|
|
·
|
the ability of Berkshire Hills Bancorp to execute a merger transaction from a financial and regulatory perspective and its
recent history of being able to successfully integrate its merger partners;
|
|
·
|
the terms and conditions of the Merger Agreement, including the conditions to closing of the merger and the likelihood of their
being satisfied, including the absence of any financing or Berkshire stockholder approval conditions to Berkshire’s obligation
to complete the merger;
|
|
·
|
the potential for First Choice Bank to pay a special dividend to the holders of its common stock prior to the effectiveness
of the Merger;
|
|
·
|
the synergies of Berkshire Bank’s residential mortgage origination business and First Choice Loan Services mortgage origination
business and the ability of Berkshire Hills Bancorp to allocate the financial resources necessary to grow the combined businesses;
|
|
·
|
the financial risks to the business of First Choice Loan Services and resulting risk to First Choice Bank, if there is a material
increase in mortgage interest rates;
|
|
·
|
the dependence of the First Choice Loan Services business on certain key members of management, and the risk that First Choice
Loan Services would be unable to retain their services absent a transaction such as the Merger;
|
|
·
|
the financial attributes of the First Choice Bank common and preferred stock, dividend yields, liquidity, and corporate fundamentals;
|
|
·
|
the favorable tax treatment of the Berkshire Hills Bancorp proposal, which contemplated a tax-free exchange of First Choice
shares for Berkshire Hills Bancorp shares;
|
|
·
|
the fact that Berkshire Bank does not currently operate in First Choice’s market area and the potential benefit that
would have to many of First Choice Bank’s current employees;
|
|
·
|
the favorable results of the financial, business and legal due diligence investigations undertaken by First Choice Bank and
its advisors;
|
|
·
|
First Choice Bank’s current condition and historical operating results and the potential effects of a merger with Berkshire
Hills Bancorp;
|
|
·
|
adverse conditions in markets and prices for stock of financial institutions generally;
|
|
·
|
adverse and increased regulatory compliance obligations, regulatory scrutiny and the resulting increased financial burden to
banks, especially smaller local and regional banks, which limits growth opportunities; and
|
|
·
|
the potential effects of the merger on First Choice’s depositors and customers and the communities served by First Choice,
which was deemed to be favorable given that they would be served by a geographically diversified organization with greater resources
than First Choice has.
|
In the course of its deliberations, the
First Choice board also considered a variety of countervailing factors and risks with respect to entering into the Merger Agreement,
including:
|
·
|
the risk that the transactions contemplated by the Merger Agreement might not be consummated due to failure to satisfy the
closing conditions set forth therein, some of which are outside of First Choice’s control (including, without limitation,
the receipt of regulatory approvals), and the potential adverse effect resulting therefrom due to the public announcement of the
Merger Agreement;
|
|
·
|
the possibility that another party might have been willing to provide merger consideration higher than that provided in the
Merger Agreement;
|
|
·
|
The restrictions that the Merger Agreement imposes on soliciting competing proposals, and the fact that Firestone might be
obligated to pay a termination fee of $4.1 million to Berkshire under specified circumstances;
|
|
·
|
The restrictions the Merger Agreement places on the conduct of First Choice’s business prior to the consummation of the
transactions contemplated by the Merger Agreement, which generally require First Choice to use commercially reasonable efforts
to conduct its business in the ordinary course of business (subject to certain limitations), which may delay or prevent First Choice
from undertaking business opportunities that may arise pending completion of the Merger;
|
|
·
|
That First Choice will no longer exist as a stand-alone, independent bank, and as such, its shareholders will no longer benefit
as directly from the future financial performance or appreciation in the value of First Choice distinct from the combined entity;
and
|
|
·
|
The interests of First Choice’s executive officers and directors in the transactions contemplated by the Merger Agreement,
as described under the heading “
Proposal I—The Proposed Merger—Interests of Certain Persons in the Merger
that are Different from Yours.
”
|
The above discussion of the information
and factors considered by First Choice Bank’s board of directors is not intended to be exhaustive, but includes the material
factors considered by the board of directors in arriving at its determination to approve, and to recommend that the First Choice
Bank common stockholders vote to approve and adopt, the Merger Agreement. The First Choice board of directors did not assign any
relative or specific weights to the above factors, and individual directors may have given differing weights to different factors.
The First Choice board of directors unanimously recommends that First Choice Bank stockholders vote “
FOR
” the
adoption of the Merger Agreement.
Berkshire Hills Bancorp’s and
Berkshire Bank’s Reasons for the Merger
Berkshire Hills Bancorp’s and Berkshire
Bank’s boards of directors reviewed and discussed the transaction with their management and unanimously determined that the
Merger is advisable and is fair to, and in the best interests of, Berkshire Hills Bancorp and Berkshire Bank. In reaching its determination,
the Berkshire Hills Bancorp and Berkshire Bank boards of directors considered a number of factors, including, among others, the
following:
|
·
|
the Merger will expand Berkshire Bank’s residential mortgage business and broaden its consolidated asset and revenue mix;
|
|
·
|
the Merger will diversify the geographic and sector mix of Berkshire Bank’s loan portfolio;
|
|
·
|
the First Choice Bank Merger is expected to improve Berkshire Bank’s earnings, capital and liquidity ratios .
With the benefit of cost savings from merger efficiencies, Berkshire Hills Bancorp’s return on assets and return on equity
are targeted to improve when the acquisition is fully integrated. The Berkshire Hills Bancorp common stock issued as merger
consideration is expected to increase the ratios of equity to assets and tangible equity to assets. Berkshire Bank’s
ratio of loans/deposits (a key measure of liquidity) is expected to benefit as a result of the more favorable ratio at First
Choice Bank ;
|
|
·
|
the Merger will provide Berkshire Bank entry into the Princeton, New Jersey and Greater Philadelphia banking markets and
complement Berkshire Bank’s existing lending team at 44 Business Capital in the Philadelphia market; and
|
|
·
|
following consummation of the Merger, First Choice Loan Services will operate as a subsidiary of Berkshire Bank with no change expected to First Choice Loan Services’ operations or systems, which will ensure continuity of operations.
|
The Berkshire Hills Bancorp and Berkshire
Bank boards of directors also considered the potential risks related to the merger but concluded that the anticipated benefits
of the merger were likely to substantially outweigh these risks. These potential risks included:
|
·
|
First Choice Bank’s ratio of non-accrual loans to total loans;
|
|
·
|
the possibility of certain potential deposit run-off, primarily related to non-relationship accounts;
|
|
·
|
the possibility of encountering difficulties in achieving anticipated cost synergies and savings in the amounts estimated
or in the time frame contemplated;
|
|
·
|
the possibility of encountering difficulties in successfully integrating First Choice Bank’s business,
|
|
|
operations and workforce with those of Berkshire Bank;
|
|
·
|
the transaction-related restructuring charges and other merger-related costs, including the payments and other benefits
to be received by First Choice Bank management in connection with the merger pursuant to existing First Choice Bank plans
and compensation arrangements and the merger agreement;
|
|
·
|
diversion of management attention and resources from the operation of Berkshire Hills Bancorp’s business towards
the completion of the merger; and
|
|
·
|
the regulatory and other approvals required in connection with the merger and the risk that such regulatory approvals
will not be received in a timely manner and may impose unacceptable conditions.
|
This discussion of the factors considered
by Berkshire Hills Bancorp’s and Berkshire Bank’s boards of directors is not exhaustive. Berkshire Hills Bancorp’s
and Berkshire Bank’s boards of directors considered these factors as a whole, and considered them to be favorable to, and
supportive of, its determination. Berkshire Hills Bancorp’s and Berkshire Bank’s boards of directors did not consider
it practical, nor did it attempt, to quantify, rank or otherwise assign relative weights to the specific factors that it considered
in reaching its decision. In considering the factors described above, individual members of Berkshire Hills Bancorp’s and
Berkshire Bank’s boards of directors may have given different weights to different factors.
Opinion of First
Choice Bank’s Financial Advisor, Ambassador Financial Group, Inc.
First Choice Bank retained Ambassador to
provide a fairness opinion to the First Choice Bank board of directors in connection with the possible business combination of
First Choice Bank with Berkshire Bank and payment of stock consideration by Berkshire Hills Bancorp. Ambassador is a nationally
recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its
investment banking business, Ambassador is regularly engaged in the valuation of financial institutions and their securities in
connection with mergers and acquisitions and other corporate transactions.
On June 24, 2016, Ambassador delivered to
the First Choice Bank board its oral opinion, which was subsequently confirmed in writing, to the effect that, as of such date,
that the exchange ratio provided for in the Merger was fair to the holders of First Choice Bank common stock from a financial point
of view. Ambassador’s opinion was approved by Ambassador’s Fairness Opinion Committee. Ambassador has consented to
the inclusion of its opinion in this proxy statement/prospectus.
The full text of Ambassador’s written
opinion to First Choice Bank, which sets forth, among other things, the assumptions made, procedures followed, factors considered
and limitations on the review undertaken, is attached as
Annex B
to this proxy statement/prospectus and is incorporated
by reference in its entirety into this proxy statement/prospectus. Holders of First Choice Bank common stock are encouraged to
read the opinion carefully in its entirety. The following summary of Ambassador’s opinion is qualified in its entirety by
reference to the full text of such opinion.
Ambassador delivered its opinion to the
First Choice Bank board of directors for the benefit of the First Choice Bank board (in its capacity as such) in connection with
its evaluation of a merger with Berkshire Bank and payment of stock consideration by Berkshire Hills Bancorp. Ambassador’s
opinion is not intended and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act
with respect to the merger or any matter relating thereto. Ambassador’s opinion does not address the relative merits of the
merger as compared to any other transaction or business strategy in which First Choice Bank might engage or the merits of the underlying
decision by First Choice Bank to engage in the merger.
No limitations were imposed by First Choice
Bank on the scope of Ambassador’s investigation or on the procedures followed by Ambassador in rendering its opinion.
In rendering the opinion, Ambassador:
|
·
|
Reviewed a draft of the merger agreement dated June 23, 2016;
|
|
·
|
Reviewed First Choice Bank’s audited consolidated financial statements as of December 31, 2015 and 2014 and related audited
consolidated balance sheets, consolidated statements of income, consolidated statements of comprehensive income, consolidated statements
of changes in shareholders’ equity and consolidated statements of cash flows for the years ending December 31, 2015 and 2014;
|
|
·
|
Reviewed Berkshire Hills Bancorp’s Form 10-Q for the quarterly period ended March 31, 2016 and Form 10-K for the fiscal
year ended December 31, 2015, including the financial statements contained therein;
|
|
·
|
Reviewed First Choice Bank’s and Berkshire Bank’s respective quarterly call reports for June 30, 2015, September
30, 2015, December 31, 2015, and March 31, 2016;
|
|
·
|
Reviewed other publicly available information regarding First Choice Bank and Berkshire Hills Bancorp, including certain publicly
available research analysts estimates for Berkshire Hills Bancorp;
|
|
·
|
Reviewed certain non-public information provided to Ambassador by or on behalf of First Choice Bank and Berkshire Hills Bancorp
regarding First Choice Bank (including financial projections and forecasts for First Choice Bank provided to Ambassador by the
management of First Choice Bank) and projected cost savings anticipated by the management of Berkshire Hills Bancorp to be realized
from the merger;
|
|
·
|
Reviewed recently reported stock prices and trading activity of Berkshire Hills Bancorp’s common stock;
|
|
·
|
Discussed the past and current operations, financial condition and future prospects of each company with senior executives
of First Choice Bank and Berkshire Hills Bancorp;
|
|
·
|
Reviewed and analyzed certain publicly available financial and stock market data of banking companies that Ambassador selected
as relevant to Ambassador’s analysis of Berkshire Hills Bancorp;
|
|
·
|
Reviewed and analyzed certain publicly available financial data of transactions that Ambassador selected as relevant to Ambassador’s
analysis of First Choice Bank;
|
|
·
|
Considered Berkshire Hills Bancorp’s financial and capital position and certain potential pro forma financial effects
of the merger on Berkshire Hills Bancorp;
|
|
·
|
Conducted other analyses and reviewed other information Ambassador considered necessary or appropriate; and
|
|
·
|
Incorporated Ambassador’s assessment of the overall economic environment and market conditions, as well as Ambassador’s
experience in mergers and acquisitions, bank stock valuations and other transactions.
|
In rendering Ambassador’s opinion,
Ambassador also relied upon and assumed, without independent verification, the accuracy, reasonableness and completeness of the
information provided to Ambassador by or on behalf of First Choice Bank and Berkshire Hills Bancorp and publicly available information
used in Ambassador’s analyses. Ambassador did not assume any responsibility for the accuracy, reasonableness and completeness
of any of the foregoing materials provided to Ambassador and publicly available information or for the independent verification
thereof. With respect to the financial projections and forecasts for First Choice Bank reviewed by Ambassador and
other non-public information related to projected cost savings
referred to above, Ambassador assumed, with First Choice Bank’s consent, that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the managements of First Choice Bank and Berkshire Hills Bancorp,
as the case may be, as to the future financial performance of First Choice Bank and such cost savings and that the financial results
reflected in such projections and forecasts as well as such cost savings would be realized in the amounts and at the times projected.
With respect to the publicly available research analyst estimates for Berkshire Hills Bancorp referred to above, Ambassador assumed,
with First Choice Bank’s consent, that such estimates represent reasonable estimates and judgments as to the future financial
performance of Berkshire Hills Bancorp. Ambassador assumed no responsibility for and expressed no view as to any of the foregoing
financial projections and forecasts, other non-public information and publicly available research analyst estimates reviewed by
Ambassador or the assumptions on which they were based.
Ambassador is not an expert in the evaluation
of deposit accounts or loan, mortgage or similar portfolios or allowances for losses with respect thereto and Ambassador was not
requested to, and Ambassador did not, conduct a review of individual credit files or loan, mortgage or similar portfolios. Ambassador
assumed no responsibility for and expressed no view as to the adequacy or sufficiency of allowances for losses or other matters
with respect thereto and Ambassador assumed that each of First Choice Bank and Berkshire Hills Bancorp had, and the pro forma combined
company would have, appropriate reserves to cover any such losses. Ambassador did not conduct any independent valuation or appraisal
of any of the assets or liabilities (contingent or otherwise) of First Choice Bank or Berkshire Hills Bancorp, and Ambassador was
not furnished with any such valuation or appraisal.
Ambassador’s opinion was based on
conditions as they existed and the information Ambassador received, as of the date of Ambassador’s opinion. Ambassador does
not have any obligation to update, revise or reaffirm its opinion. Ambassador expressed no opinion as to the actual value of Berkshire
Hills Bancorp’s common stock when issued in the merger or the prices at which Berkshire Hills Bancorp’s common stock
might trade at any time.
In rendering its opinion, Ambassador assumed,
with First Choice Bank’s consent, that the merger and other transactions (including, without limitation, the payment of a
special dividend to holders of First Choice Bank common stock equal to 35% of First Choice Bank’s core net income in excess
of $14.22 tangible book value per share from July 1, 2016 until the month end immediately preceding the closing of the merger,
subject to certain conditions and limitations) would be consummated on the terms described in the merger agreement, without any
waiver or modification of any material terms or conditions. Ambassador also assumed, with First Choice Bank’s consent, that,
in the course of obtaining the necessary governmental, regulatory and other third party approvals, consents and releases for the
merger, including with respect to any divestiture or other requirements, no delay, limitation, restriction or condition would be
imposed that would have an adverse effect on First Choice Bank, Berkshire Hills Bancorp or the merger (including the contemplated
benefits thereof). Ambassador also assumed, with First Choice Bank’s consent, that the final merger agreement would not differ
from the draft reviewed by Ambassador in any respect material to its analyses or opinion. Ambassador further assumed, with First
Choice Bank’s consent, that the merger would qualify for U.S. federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
Ambassador expressed no view or opinion
as to any terms or other aspects (other than the exchange ratio to the extent expressly specified in Ambassador’s opinion)
of the merger or any related transaction, including the treatment of First Choice Bank preferred stock or the fairness to, or any
other consideration of, the holders of any class of securities, creditors or other constituencies of First Choice Bank (other than
holders of First Choice Bank common stock to the extent expressly specified in Ambassador’s opinion) or any other party to
the merger. Ambassador expressed no opinion with respect to the fairness of the amount or nature of any compensation to any of
the officers, directors, or employees of any party to the merger, or any class of such persons, relative to the exchange ratio
or otherwise.
In performing its analyses, Ambassador made
numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other
matters, which are beyond the control of Ambassador, First Choice Bank and Berkshire Hills Bancorp. Any estimates contained in
the analyses performed by Ambassador are not necessarily indicative of actual values or future results, which may be significantly
more or less favorable than suggested by these analyses. Additionally, estimates of the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which such businesses or securities might actually be sold.
Accordingly, these analyses and estimates are inherently subject
to substantial uncertainty. In addition, Ambassador’s opinion was among several factors taken into consideration by the First
Choice Bank board in making its determination to approve the merger agreement and the merger. Consequently, the analyses described
below should not be viewed as determinative of the decision of the First Choice Bank board with respect to the fairness of the
exchange ratio. The type and amount of consideration payable in the merger were determined through negotiation between First Choice
Bank and Berkshire Hills Bancorp and the decision to enter into the merger agreement was solely that of the First Choice Bank board.
Selected
Implied Transaction Ratios for the Merger
Based on First Choice Bank’s financial
information as of March 31, 2016, for the three months ended March 31, 2016 annualized or for the twelve months ended March 31,
2016, Ambassador calculated the following transaction ratios (assuming the First Choice Bank preferred stock is fully converted)
using Berkshire Hills Bancorp’s closing common stock price of $26.91 per share as of June 23, 2016:
|
|
June 23, 2016
|
|
Aggregate total deal consideration/last three months earnings annualized
|
|
|
32.4
|
X
|
Aggregate total deal consideration/last twelve months (“LTM”) earnings
|
|
|
57.8
|
X
|
Price/tangible book per share
|
|
|
115
|
%
|
Aggregate total deal consideration/tangible book value
|
|
|
116
|
%
|
The following is a summary of the material
financial analysis presented by Ambassador to the First Choice Bank board in connection with rendering its opinion. This summary
is not a complete description of the analyses and procedures performed by Ambassador in the course of arriving at its opinion.
The financial analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete
description of the financial analyses. The preparation of a fairness opinion is a complex analytic process involving various determinations
as to appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances.
Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion,
Ambassador did not attribute any particular weight to any analysis or factor that it considered, but rather made qualitative judgments
as to the significance and relevance of each analysis and factor. Accordingly, Ambassador believes that its analyses and the summary
of its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on the information
presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial
analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of
the process underlying its analyses and opinion. No company, transaction or business used in Ambassador’s analyses for comparative
purposes is identical to First Choice Bank, Berkshire Hills Bancorp or the proposed merger and an evaluation of the results of
those analyses is not entirely mathematical.
Comparable
Transactions Analysis for First Choice Bank
Ambassador performed a comparable transaction
analysis by reviewing the following information for purposes of comparison with selected implied transaction ratios for the merger:
|
·
|
Publicly available acquisition metrics of 429 selected transactions in the United States that were announced from January 1,
2013 through June 23, 2016 with announced deal values in excess of $10 million, excluding mergers of equals (“Nationwide
Transactions”).
|
|
·
|
Publicly available acquisition metrics of 24 selected transactions in which the selling bank was based in Eastern Pennsylvania
or New Jersey that were announced from January 1, 2014 through June 23, 2016 with announced deal values between $25 million and
$250 million, excluding mergers of equals and transactions with no price information (“Eastern Pennsylvania and New Jersey
Transactions”).
|
|
·
|
Publicly available acquisition metrics of Investors Bancorp, Inc.’s announced acquisition of the Bank of Princeton, which
is located in New Jersey.
|
The results of the analysis are set for
in the following tables:
Nationwide Transactions
(1)
|
|
|
|
|
|
|
|
Price/
|
|
|
|
|
|
|
Price/
|
|
|
Tangible
|
|
|
|
Number
|
|
|
LTM
|
|
|
Common
|
|
Year
|
|
of Deals
|
|
|
Earnings
|
|
|
Book (%)
|
|
|
|
|
|
|
|
|
|
|
|
Highest 3
rd
by Announced Price-to-Tangible Book
|
2016
(2)
|
|
|
20
|
|
|
|
18.0
|
X
|
|
|
168
|
%
|
2015
|
|
|
47
|
|
|
|
23.7
|
|
|
|
181
|
|
2014
|
|
|
45
|
|
|
|
18.6
|
|
|
|
194
|
|
2013
|
|
|
33
|
|
|
|
17.2
|
|
|
|
167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Middle 3
rd
by Announced Price-to-Tangible Book
|
2016
|
|
|
19
|
|
|
|
19.7
|
X
|
|
|
132
|
%
|
2015
|
|
|
46
|
|
|
|
22.8
|
|
|
|
143
|
|
2014
|
|
|
44
|
|
|
|
24.1
|
|
|
|
144
|
|
2013
|
|
|
33
|
|
|
|
19.7
|
|
|
|
130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lowest 3
rd
by Announced Price-to-Tangible Book
|
2016
|
|
|
19
|
|
|
|
20.6
|
X
|
|
|
111
|
%
|
2015
|
|
|
46
|
|
|
|
23.4
|
|
|
|
118
|
|
2014
|
|
|
44
|
|
|
|
24.2
|
|
|
|
110
|
|
2013
|
|
|
33
|
|
|
|
20.0
|
|
|
|
98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Berkshire Hills Bancorp/First Choice Bank Merger
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
June 23, 2016
|
|
|
—
|
|
|
|
32.4
|
|
|
|
116
|
|
Source: SNL Financial, Charlottesville, Virginia.
|
(1)
|
Median pricing data of the selected transactions in the
sub-group indicated are shown. Based on information as of respective announcement of the selected transactions.
|
|
(2)
|
Through June 23, 2016.
|
|
(3)
|
First Choice bank net income and earnings are based on
first quarter 2016 annualized (not LTM) and assumes preferred stock is fully converted into common stock.
|
Eastern Pennsylvania and New Jersey Transactions
(1)
)
|
|
|
|
|
Price/
|
|
Acquirer/Seller
|
|
Deal
Value
(in
millions)
|
|
|
LTM
Earnings
|
|
|
Common
Tangible
Book
|
|
|
Assets
|
|
|
Deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High ROE (over 5%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Univest Corporation of Pennsylvania/ Valley Green Bank
|
|
$
|
78
|
|
|
|
15.3
|
X
|
|
|
234
|
%
|
|
|
21.0
|
%
|
|
|
23.2
|
%
|
Investors Bancorp, Inc./ Bank of Princeton
|
|
|
155
|
|
|
|
13.8
|
|
|
|
151
|
|
|
|
15.0
|
|
|
|
18.9
|
|
Center Bancorp, Inc./ ConnectOne Bancorp, Inc.
|
|
|
240
|
|
|
|
23.3
|
|
|
|
179
|
|
|
|
19.3
|
|
|
|
24.8
|
|
Penns Woods Bancorp, Inc./ Luzerne National Bank Corporation
|
|
|
46
|
|
|
|
20.3
|
|
|
|
165
|
|
|
|
15.0
|
|
|
|
17.2
|
|
Lakeland Bancorp, Inc./ Somerset Hills Bancorp
|
|
|
66
|
|
|
|
19.5
|
|
|
|
152
|
|
|
|
17.8
|
|
|
|
20.5
|
|
Wilshire Bancorp, Inc./ BankAsiana
|
|
|
31
|
|
|
|
14.2
|
|
|
|
137
|
|
|
|
15.1
|
|
|
|
18.8
|
|
Peoples Financial Services Corp./ Penseco Financial Services Corp.
|
|
|
156
|
|
|
|
15.0
|
|
|
|
147
|
|
|
|
16.8
|
|
|
|
21.0
|
|
Lakeland Bancorp, Inc./ Pascack Bancorp, Inc.
|
|
|
42
|
|
|
|
17.3
|
|
|
|
130
|
|
|
|
11.9
|
|
|
|
14.4
|
|
DNB Financial Corporation/ East River Bank
|
|
|
49
|
|
|
|
22.1
|
|
|
|
155
|
|
|
|
15.8
|
|
|
|
21.0
|
|
National Penn Bancshares, Inc./ TF Financial Corporation
|
|
|
142
|
|
|
|
21.0
|
|
|
|
148
|
|
|
|
16.7
|
|
|
|
20.5
|
|
OceanFirst Financial Corp./ Cape Bancorp, Inc.
|
|
|
206
|
|
|
|
18.2
|
|
|
|
139
|
|
|
|
13.2
|
|
|
|
16.0
|
|
Provident Financial Services, Inc./ Team Capital Bank
|
|
|
124
|
|
|
|
19.2
|
|
|
|
191
|
|
|
|
13.1
|
|
|
|
16.7
|
|
Beneficial Bancorp, Inc./ Conestoga Bank
|
|
|
100
|
|
|
|
24.5
|
|
|
|
160
|
|
|
|
13.9
|
|
|
|
18.7
|
|
Lakeland Bancorp, Inc./ Harmony Bank
|
|
|
32
|
|
|
|
20.8
|
|
|
|
125
|
|
|
|
10.7
|
|
|
|
12.3
|
|
Univest Corporation of Pennsylvania/ Fox Chase Bancorp, Inc.
|
|
|
244
|
|
|
|
24.8
|
|
|
|
134
|
|
|
|
22.2
|
|
|
|
34.0
|
|
Northfield Bancorp, Inc./ Hopewell Valley Community Bank
|
|
|
55
|
|
|
|
22.8
|
|
|
|
148
|
|
|
|
13.4
|
|
|
|
12.4
|
|
WSFS Financial Corporation/ Penn Liberty Financial Corp.
|
|
|
102
|
|
|
|
31.8
|
|
|
|
199
|
|
|
|
18.7
|
|
|
|
18.2
|
|
Median
|
|
|
|
|
|
|
20.3
|
X
|
|
|
151
|
%
|
|
|
15.1
|
%
|
|
|
18.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Low ROE (Below 5%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Haven Bancorp, MHC/ Hilltop Community Bancorp, Inc.
|
|
$
|
27
|
|
|
|
29.8
|
X
|
|
|
130
|
%
|
|
|
16.1
|
%
|
|
|
19.0
|
%
|
Bryn Mawr Bank Corporation/ Continental Bank Holdings, Inc.
|
|
|
109
|
|
|
|
42.3
|
|
|
|
175
|
|
|
|
16.6
|
|
|
|
23.6
|
|
WSFS Financial Corporation/ Alliance Bancorp, Inc. of Pennsylvania
|
|
|
93
|
|
|
|
36.6
|
|
|
|
136
|
|
|
|
22.2
|
|
|
|
27.1
|
|
Tompkins Financial Corporation/ VIST Financial Corp.
|
|
|
84
|
|
|
|
18.4
|
|
|
|
116
|
|
|
|
5.7
|
|
|
|
6.9
|
|
ESSA Bancorp, Inc./ Eagle National Bancorp, Inc.
|
|
|
25
|
|
|
|
NM
|
|
|
|
112
|
|
|
|
14.4
|
|
|
|
17.0
|
|
Prudential Bancorp, Inc./ Polonia Bancorp, Inc.
|
|
|
38
|
|
|
|
NM
|
|
|
|
101
|
|
|
|
13.0
|
|
|
|
20.2
|
|
Cape Bancorp, Inc./ Colonial Financial Services, Inc.
|
|
|
56
|
|
|
|
NM
|
|
|
|
88
|
|
|
|
10.1
|
|
|
|
11.7
|
|
Median
|
|
|
|
|
|
|
33.2
|
X
|
|
|
116
|
%
|
|
|
14.4
|
%
|
|
|
19.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Berkshire Hills Bancorp/First Choice Bank
(2)
Merger 6/23/16
|
|
|
(118
|
)
|
|
|
32.4
|
|
|
|
116
|
|
|
|
10.5
|
|
|
|
13.0
|
|
Source: SNL Financial, Charlottesville,
Virginia.
|
(1)
|
Based on information as of respective announcement of the
selected transactions. “NM” indicates that statistic was considered not meaningful and excluded from median calculation.
|
|
(2)
|
First Choice Bank net income and earnings are based on
first quarter 2016 annualized (not LTM) and assumes preferred stock is fully converted into common stock.
|
Side-by-Side Comparison of First Choice
Bank and Bank of Princeton
(1)
|
|
First
Choice
Bank
|
|
|
Bank
of
Princeton
|
|
|
|
|
|
|
|
|
Established Date
|
|
March 2007
|
|
|
April 2007
|
|
Assets (in millions)
|
|
$
|
1,125
|
|
|
$
|
1,035
|
|
Equity (in millions)
|
|
|
101
|
|
|
|
95
|
|
|
|
|
|
|
|
|
|
|
Deal Pricing
|
|
|
|
|
|
|
|
|
Price/ MRQ Annualized Earnings June 23, 2016
|
|
|
32.4
|
X
|
|
|
13.7
|
X
|
Price/LTM Earnings June 23, 2016
|
|
|
57.8
|
X
|
|
|
13.8
|
X
|
Price/Tangible Equity as of June 23, 2016
(2)
|
|
|
116
|
%
|
|
|
151
|
%
|
|
|
|
|
|
|
|
|
|
Financial Ratios
|
|
|
|
|
|
|
|
|
Loans/assets
|
|
|
48.00
|
%
|
|
|
81.00
|
%
|
Yield on loans
|
|
|
4.50
|
|
|
|
5.21
|
|
Yield on earning assets
|
|
|
3.30
|
|
|
|
4.61
|
|
Cost of funds
|
|
|
0.85
|
|
|
|
0.77
|
|
Reserves/loans
|
|
|
2.43
|
|
|
|
1.34
|
|
NPA’s+90 days PD/Assets
|
|
|
3.59
|
|
|
|
1.17
|
|
Net interest margin
|
|
|
2.51
|
|
|
|
3.90
|
|
Efficiency ratio
|
|
|
91.00
|
|
|
|
55.00
|
|
Return on equity LTM
|
|
|
1.99
|
|
|
|
12.80
|
|
Return on equity MRQ
|
|
|
3.57
|
|
|
|
11.89
|
|
|
|
|
|
|
|
|
|
|
Income and Expense to average assets
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
2.43
|
%
|
|
|
3.77
|
%
|
Noninterest income
|
|
|
5.82
|
|
|
|
0.17
|
|
Noninterest expense
|
|
|
7.61
|
|
|
|
2.23
|
|
Net operating income
|
|
|
0.64
|
|
|
|
1.71
|
|
Provision expense
|
|
|
0.41
|
|
|
|
0.21
|
|
Net income
|
|
|
0.18
|
|
|
|
1.13
|
|
|
|
|
|
|
|
|
|
|
Deposit Mix (% of deposits)
|
|
|
|
|
|
|
|
|
Noninterest bearing
|
|
|
6.00
|
%
|
|
|
19.00
|
%
|
NOW
|
|
|
5.00
|
|
|
|
16.00
|
|
MMDA/savings
|
|
|
53.00
|
|
|
|
32.00
|
|
Retail CD’s
|
|
|
30.00
|
|
|
|
25.00
|
|
Jumbo CD’s
|
|
|
6.00
|
|
|
|
8.00
|
|
Total
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
Loan Mix (% of loans)
|
|
|
|
|
|
|
|
|
Construction
|
|
|
2.00
|
%
|
|
|
18.00
|
%
|
Multi-family
|
|
|
3.00
|
|
|
|
4.00
|
|
CRE—owner
|
|
|
14.00
|
|
|
|
26.00
|
|
CRE—investor
|
|
|
33.00
|
|
|
|
32.00
|
|
C&I
|
|
|
6.00
|
|
|
|
6.00
|
|
Residential mortgage
|
|
|
34.00
|
|
|
|
10.00
|
|
Home equity
|
|
|
7.00
|
|
|
|
4.00
|
|
Consumer
|
|
|
1.00
|
|
|
|
—
|
|
Total
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
Source: SNL Financial, Charlottesville, Virginia.
|
(1)
|
As of March 31, 2016 or the twelve months ended March 31,
2016, except where noted.
|
|
(2)
|
Assumes preferred stock is converted and price to tangible
book as of March 31, 2106.
|
Discounted
Dividend Analysis of First Choice Bank with Cost Savings
Ambassador performed a discounted dividend analysis
including cost savings to estimate a range for the implied equity value of First Choice Bank common stock. In this analysis, Ambassador
assumed discount rates of 10%, 12% and 14% and calculated terminal values of 10X, 12X and 14X estimated earnings at the end of
seven years. Ambassador used financial projections and forecasts for First Choice Bank provided to Ambassador by the management
of First Choice Bank, as reflected in the following table, and projected cost savings anticipated by the management of Berkshire
Hills Bancorp to be realized from the merger of $14.9 million in year 1 and $15.1 million in year 2.
|
|
Assets
(1)
In millions
|
|
|
Equity
In millions
|
|
|
Net Income
In
thousands
|
|
|
Equity/
Assets
|
|
|
ROA
|
|
|
ROE
|
|
|
Preferred
Dividend
|
|
|
Common
Dividend
(2)
|
|
2016 - Budget
|
|
$
|
1,142
|
|
|
$
|
105.8
|
|
|
$
|
4,166
|
|
|
|
9.26
|
%
|
|
|
0.36
|
%
|
|
|
3.94
|
%
|
|
$
|
1,548
|
|
|
$
|
513
|
|
2017 - Budget
|
|
|
1,198
|
|
|
|
110.2
|
|
|
|
6,853
|
|
|
|
9.20
|
|
|
|
0.57
|
|
|
|
6.22
|
|
|
|
1,548
|
|
|
|
539
|
|
2018 - Estimated
|
|
|
1,258
|
|
|
|
115.5
|
|
|
|
7,422
|
|
|
|
9.18
|
|
|
|
0.59
|
|
|
|
6.43
|
|
|
|
1,548
|
|
|
|
566
|
|
2019 - Estimated
|
|
|
1,321
|
|
|
|
121.4
|
|
|
|
8,057
|
|
|
|
9.19
|
|
|
|
0.61
|
|
|
|
6.64
|
|
|
|
1,548
|
|
|
|
594
|
|
2020 - Estimated
|
|
|
1,387
|
|
|
|
128.0
|
|
|
|
8,737
|
|
|
|
9.23
|
|
|
|
0.63
|
|
|
|
6.83
|
|
|
|
1,548
|
|
|
|
624
|
|
|
(1)
|
Asset growth rate of 5% per year in 2018 through 2020.
|
|
(2)
|
Dividend growth rate of 5% per year starting in 2017.
|
This analysis indicated an implied present value
reference range of First Choice Bank common stock of $13.10 per share to $21.35 per share, which are 97% and 161%, respectively,
of First Choice Bank’s fully-converted tangible book value as of March 31, 2016.
Comparable
Institutions Analysis for Berkshire Hills Bancorp
Ambassador performed a comparable institutions
analysis by comparing the financial condition and performance and stock performance of Berkshire Hills Bancorp with those of the
following fourteen selected publicly traded institutions headquartered in Connecticut, Maine, Massachusetts, New Hampshire, New
Jersey, New York, Pennsylvania, Rhode Island or Vermont that had assets between $5 billion and $10 billion, nonperforming assets
to assets ratios less than 2% and returns on equity greater than 5%, excluding mutual institutions and merger or acquisition targets:
|
|
Assets
(1)
|
|
|
|
|
|
|
|
Institution
|
|
In Millions
|
|
|
City, State
|
|
Ticker
|
|
Exchange
|
Boston Private Financial Holdings, Inc.
|
|
$
|
7,414
|
|
|
Boston, MA
|
|
BPFH
|
|
NASDAQ
|
Brookline Bancorp, Inc.
|
|
|
6,181
|
|
|
Boston, MA
|
|
BRKL
|
|
NASDAQ
|
Community Bank System, Inc.
|
|
|
8,616
|
|
|
De Witt, NY
|
|
CBU
|
|
NYSE
|
Customers Bancorp, Inc.
|
|
|
9,039
|
|
|
Wyomissing, PA
|
|
CUBI
|
|
NYSE
|
Dime Community Bancshares, Inc.
|
|
|
5,517
|
|
|
Brooklyn, NY
|
|
DCOM
|
|
NASDAQ
|
First Commonwealth Financial Corporation
|
|
|
6,699
|
|
|
Indiana, PA
|
|
FCF
|
|
NYSE
|
Flushing Financial Corporation
|
|
|
5,813
|
|
|
Uniondale, NY
|
|
FFIC
|
|
NASDAQ
|
Independent Bank Corp.
|
|
|
7,189
|
|
|
Rockland, MA
|
|
INDB
|
|
NASDAQ
|
NBT Bancorp Inc.
|
|
|
8,473
|
|
|
Norwich, NY
|
|
NBTB
|
|
NASDAQ
|
Northwest Bancshares, Inc.
|
|
|
8,916
|
|
|
Warren, PA
|
|
NWBI
|
|
NASDAQ
|
Provident Financial Services, Inc.
|
|
|
9,026
|
|
|
Iselin, NJ
|
|
PFS
|
|
NYSE
|
S&T Bancorp, Inc.
|
|
|
6,479
|
|
|
Indiana, PA
|
|
STBA
|
|
NASDAQ
|
Tompkins Financial Corporation
|
|
|
5,765
|
|
|
Ithaca, NY
|
|
TMP
|
|
NYSE MKT
|
United Financial Bancorp, Inc.
|
|
|
6,319
|
|
|
Glastonbury, CT
|
|
UBNK
|
|
NASDAQ
|
|
|
|
|
|
|
|
|
|
|
|
Berkshire Hills Bancorp, Inc.
|
|
|
7,832
|
|
|
Pittsfield, MA
|
|
BHLB
|
|
NYSE
|
Ambassador compared the financial condition
and performance of Berkshire Hills Bancorp and the selected institutions in several financial categories as of March 31, 2016,
or for the twelve months ended March 31, 2016, as indicated in the following table:
Financial Condition and Performance of Berkshire
Hills Bancorp and Comparable Institutions
(1)
|
|
|
|
|
|
|
|
Tangible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible
Equity/
|
|
|
Common
Equity/
|
|
|
|
|
|
Return
on
|
|
|
Return
on
|
|
|
|
Assets
|
|
|
Tangible
|
|
|
Tangible
|
|
|
NPAs/
|
|
|
Average
|
|
|
Average
|
|
|
|
In Millions
|
|
|
Assets
|
|
|
Assets
|
|
|
Assets
(2)
|
|
|
Assets
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum
|
|
$
|
9,039
|
|
|
|
10.41
|
%
|
|
|
10.41
|
%
|
|
|
1.26
|
%
|
|
|
1.72
|
%
|
|
|
17.04
|
%
|
75
th
Percentile
|
|
|
8,580
|
|
|
|
8.85
|
|
|
|
8.82
|
|
|
|
0.95
|
|
|
|
1.07
|
|
|
|
9.93
|
|
Median
|
|
|
6,944
|
|
|
|
8.28
|
|
|
|
8.28
|
|
|
|
0.76
|
|
|
|
0.95
|
|
|
|
8.86
|
|
25
th
Percentile
|
|
|
6,216
|
|
|
|
8.04
|
|
|
|
7.78
|
|
|
|
0.46
|
|
|
|
0.83
|
|
|
|
7.87
|
|
Minimum
|
|
|
5,517
|
|
|
|
6.59
|
|
|
|
5.71
|
|
|
|
0.29
|
|
|
|
0.73
|
|
|
|
5.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Berkshire Hills Bancorp
|
|
$
|
7,808
|
|
|
|
7.66
|
%
|
|
|
7.66
|
%
|
|
|
0.53
|
%
|
|
|
0.75
|
%
|
|
|
6.66
|
%
|
Adjusted
(3)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
0.85
|
|
|
|
7.53
|
|
Source: SNL Financial, Charlottesville, Virginia.
Ambassador then compared the stock performance of Berkshire Hills
Bancorp and the selected institutions in several categories, as indicated in the following table:
Stock Performance
of Berkshire Hills Bancorp and Comparable Institutions
(4)
|
|
Stock
Price/
|
|
|
|
|
|
Shares
|
|
|
|
LTM
|
|
|
Est. 2016
|
|
|
Tangible
|
|
|
|
|
|
Dividend
|
|
|
Traded
|
|
|
|
Earnings
|
|
|
Earnings
(5)
|
|
|
Book
|
|
|
Assets
|
|
|
Yield
|
|
|
Daily
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum
|
|
|
23.1
|
X
|
|
|
17.7
|
X
|
|
|
260
|
%
|
|
|
21.6
|
%
|
|
|
4.06
|
%
|
|
|
593,460
|
|
75th Percentile
|
|
|
17.3
|
|
|
|
16.0
|
|
|
|
207
|
|
|
|
16.4
|
|
|
|
3.26
|
|
|
|
262,231
|
|
Median
|
|
|
16.3
|
|
|
|
14.5
|
|
|
|
167
|
|
|
|
14.0
|
|
|
|
3.06
|
|
|
|
164,601
|
|
25th Percentile
|
|
|
13.1
|
|
|
|
13.4
|
|
|
|
140
|
|
|
|
12.2
|
|
|
|
2.92
|
|
|
|
106,065
|
|
Minimum
|
|
|
7.9
|
|
|
|
10.3
|
|
|
|
127
|
|
|
|
7.9
|
|
|
|
0.00
|
|
|
|
36,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Berkshire Hills Bancorp
|
|
|
14.3
|
X
|
|
|
11.5
|
X
|
|
|
146
|
%
|
|
|
10.7
|
%
|
|
|
2.97
|
%
|
|
|
106,928
|
|
Adjusted
(2)
|
|
|
12.5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Source: SNL Financial, Charlottesville, Virginia.
|
(1)
|
Financial data is as of March 31, 2016, or the twelve months ended March 31, 2016.
|
|
(2)
|
Includes loans 90 days past due and still accruing interest, and troubled debt restructurings
|
|
(3)
|
Adjusted to exclude non-recurring expenses and net securities gains assuming a 34% tax rate
|
|
(4)
|
Based on historical financial data as of March 31, 2016, or for the twelve months ended March 31, 2016, publicly available
research analysts estimates and stock market data as of June 23, 2016
|
|
(5)
|
2016 mean estimates from SNL Financial
|
|
(6)
|
Trailing twelve months ended June 23, 2016
|
Contribution Analysis
Ambassador analyzed the relative contribution
of Berkshire Hills Bancorp and First Choice Bank to various pro forma balance sheet items and net income of the combined entity.
This analysis excludes the impact of purchase accounting marks and one-time merger costs. The results of Ambassador’s analysis
are set forth in the following table:
Berkshire Hills Bancorp and First Choice
Bank Contribution Analysis
(1)
|
|
Percentage
Contribution
|
|
|
|
Berkshire
Hills
Bancorp
|
|
|
First
Choice
Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma Ownership
|
|
|
87.8
|
%
|
|
|
12.2
|
%
|
|
|
|
|
|
|
|
|
|
Balance Sheet
|
|
|
|
|
|
|
|
|
Assets
|
|
|
87.4
|
%
|
|
|
12.6
|
%
|
Gross loans – held for investment
|
|
|
92.7
|
|
|
|
7.3
|
|
Deposits
|
|
|
86.0
|
|
|
|
14.0
|
|
Tangible common equity
|
|
|
90.0
|
|
|
|
10.0
|
|
|
|
|
|
|
|
|
|
|
Income statement
|
|
|
|
|
|
|
|
|
Net income
|
|
|
96.9
|
%
|
|
|
3.1
|
%
|
— with pre-tax cost savings
(2)
|
|
|
85.5
|
|
|
|
14.5
|
|
|
(1)
|
Absent accounting marks. Balance sheet data is based on March 31, 2016. Income statement data is
based on the twelve months ended March 31, 2016.
|
|
(2)
|
Cost savings were estimated by BHLB and assumes a 40% tax rate.
|
Financial
Impact Analysis on Berkshire Hills Bancorp
Ambassador also conducted a financial impact
analysis that included the impact of the transaction on Berkshire Hills Bancorp’s tangible book value per share at March
31, 2016 and on Berkshire Hills Bancorp’s earnings per share for the twelve months ended March 31, 2016. Ambassador used
historical financial data as of March 31, 2016, or for the twelve months ended March 31, 2016, and included projected cost savings
anticipated by the management of Berkshire Hills Bancorp to be realized from the merger. The analysis indicated that the merger
could be dilutive to tangible book per share as of March 31, 2016 and could be accretive to earnings per share for the twelve months
ended March 31, 2016, absent one-time merger costs. All of the results of Ambassador’s financial impact analysis may vary
materially from the actual results achieved by Berkshire Hills Bancorp.
Other
disclosures
Ambassador, as part of its financial advisory
business, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions
and valuations for corporate and other purposes. First Choice Bank selected Ambassador to provide a fairness opinion based on Ambassador’s
experience, including in connection with mergers and acquisitions of commercial banks and bank holding companies.
Pursuant to an engagement letter, First Choice
Bank has agreed to pay Ambassador a fairness opinion fee totaling $110,000. First Choice Bank paid Ambassador a $25,000 engagement
fee and $65,000 for presentation of its fairness opinion. First Choice Bank will pay an additional fee of $20,000 at closing. An
additional fee will be charged if First Choice Bank requests an updated fairness opinion. First Choice Bank has also agreed to
reimburse
Ambassador’s out-of-pocket expenses incurred in connection
with its engagement and to indemnify Ambassador against certain liabilities arising out of the performance of its obligations under
the engagement letter.
Other than this engagement over the two years
preceding the date of Ambassador’s opinion, Ambassador has not provided investment banking or other consulting services to
First Choice Bank for which Ambassador received compensation from First Choice Bank. Over the two years preceding the date of Ambassador’s
opinion, Ambassador has not provided investment banking or other consulting services to Berkshire Hills Bancorp for which Ambassador
received compensation from Berkshire Hills Bancorp. In the future, Ambassador may pursue the opportunities to provide investment
banking and other consulting services to First Choice Bank and Berkshire Hills Bancorp, but none have been discussed or contemplated.
Ambassador is an approved broker-dealer for
First Choice Bank and periodically purchases and sells securities to First Choice Bank.
Ambassador’s fairness committee approved
the issuance of its opinion letter dated June 23, 2016.
Opinion of Berkshire
Hills Bancorp’s Financial Advisor, Sandler O’Neill & Partners, L.P.
By letter dated June 10, 2016, Berkshire
Hills Bancorp retained Sandler O’Neill, to act as financial advisor to Berkshire Hills Bancorp’s board of directors
in connection with Berkshire Hills Bancorp’s consideration of a possible business combination involving Berkshire Hills
Bancorp and First Choice Bank. Sandler O’Neill is a nationally recognized investment banking firm whose principal business
specialty is financial institutions. In the ordinary course of its investment banking business, Sandler O’Neill is regularly
engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other
corporate transactions.
Sandler O’Neill acted as financial
advisor in connection with the proposed merger and participated in certain of the negotiations leading to the execution of the
merger agreement. At the June 23, 2016 meeting at which Berkshire Hills Bancorp’s board of directors considered and discussed
the terms of the merger agreement and the merger, Sandler O’Neill delivered to Berkshire Hills Bancorp’s board of
directors its oral opinion, which was subsequently confirmed in writing, that, as of such date, the Exchange Ratio was fair to
Berkshire Hills Bancorp from a financial point of view
. The full text of Sandler O’Neill’s opinion is an exhibit
to the registration statement of which this proxy statement/prospectus forms a part. The opinion outlines the procedures followed,
assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill in rendering
its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the full text of the
opinion.
Sandler O’Neill’s opinion
speaks only as of the date of the opinion. The opinion was directed to Berkshire Hills Bancorp’s board of directors in connection
with its consideration of the agreement and the merger and is directed only to the fairness, from a financial point of view, of
the Exchange Ratio to Berkshire Hills Bancorp. Sandler O’Neill’s opinion does not constitute a recommendation to any
holder of Berkshire Hills Bancorp’s common stock as to how such shareholder should vote at any meeting of shareholders called
to consider and vote upon the merger or any other matter. The opinion does not address the underlying business decision of Berkshire
Hills Bancorp to engage in the merger, the form or structure of the merger or any other transactions contemplated in the merger
agreement, the relative merits of the merger as compared to any other alternative transactions or business strategies that might
exist for Berkshire Hills Bancorp, or the effect of any other transaction in which Berkshire Hills Bancorp might engage.
Sandler
O’Neill did not express any opinion as to the fairness of the amount or nature of the compensation to be received in the
merger by any Berkshire Hills Bancorp or First Choice Bank officer, director or employee, or class of such persons, if any, relative
to the amount of compensation to be received by any other shareholder. Sandler O’Neill’s opinion was approved by Sandler
O’Neill’s fairness opinion committee.
In connection with rendering its opinion, Sandler O’Neill
reviewed and considered, among other things:
|
·
|
a draft of
the merger agreement, dated June 24, 2016;
|
|
·
|
certain publicly
available financial statements and other historical financial information of Berkshire
Hills Bancorp and the Bank that Sandler O’Neill deemed relevant;
|
|
·
|
certain publicly
available financial statements and other historical financial information of First Choice
Bank that Sandler O’Neill deemed relevant;
|
|
·
|
publicly available
median analyst earnings per share estimates for Berkshire Hills Bancorp for the years
ending December 31, 2016 through December 31, 2018 and an estimated long-term earnings
per share growth rate for the years thereafter, as provided by and discussed with the
senior management of Berkshire Hills Bancorp;
|
|
·
|
financial projections
for First Choice Bank for the years ending December 31, 2016 through December 31, 2020,
as provided by and discussed with the senior management of Berkshire Hills Bancorp;
|
|
·
|
the pro forma
financial impact of the merger on Berkshire Hills Bancorp based on certain assumptions
relating to transaction expenses, purchase accounting adjustments, a core deposit intangible
asset, cost savings and expected deposit run-off, as provided by and discussed with the
senior management of Berkshire Hills Bancorp;
|
|
·
|
the publicly
reported historical price and trading activity for Berkshire Hills Bancorp common stock,
including a comparison of certain stock trading information for Berkshire Hills Bancorp
common stock and certain stock indices as well as similar publicly available information
for certain other companies, the securities of which are publicly traded;
|
|
·
|
a comparison
of certain financial information for Berkshire Hills Bancorp and First Choice Bank with
similar bank and thrift institutions for which information is publicly available;
|
|
·
|
the financial
terms of certain recent business combinations in the bank and thrift industry (on a regional
and nationwide basis), to the extent publicly available;
|
|
·
|
the current
market environment generally and the banking environment in particular; and
|
|
·
|
such other
information, financial studies, analyses and investigations and financial, economic and
market criteria as Sandler O’Neill considered relevant.
|
Sandler O’Neill also discussed with
certain members of senior management of Berkshire Hills Bancorp the business, financial condition, results of operations and prospects
of Berkshire Hills Bancorp and held similar discussions with certain members of the senior management of First Choice Bank regarding
the business, financial condition, results of operations and prospects of First Choice Bank.
In performing its review, Sandler O’Neill
relied upon the accuracy and completeness of all of the financial and other information that was available to and reviewed by
it from public sources, that was provided to it by Berkshire Hills Bancorp or its representatives or that was otherwise reviewed
by it, and Sandler O’Neill assumed such accuracy and completeness for purposes of rendering its opinion without any independent
verification or investigation. Sandler O’Neill further relied on the assurances of the senior management of Berkshire Hills
Bancorp that they were not aware of any facts or circumstances that would have made any of such information inaccurate or misleading.
Sandler O’Neill was not asked to and did not undertake an independent verification of any such information and did not assume
any responsibility or liability for the accuracy or completeness thereof. Sandler O’Neill did not make an independent evaluation
or perform an appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of
Berkshire Hills Bancorp or First Choice Bank, or any of their respective subsidiaries, nor was Sandler O’Neill furnished
with any such evaluations or appraisals. Sandler O’Neill did not render an opinion or evaluation on the collectability of
any assets or the future performance of any loans of Berkshire Hills Bancorp or First Choice Bank. Sandler O’Neill did not
make an independent evaluation of the adequacy of the allowance for loan losses of Berkshire Hills Bancorp or First Choice Bank,
or the combined entity after the merger, and did not review any individual credit files relating to Berkshire Hills Bancorp or
First Choice
Bank. Sandler O’Neill assumed, with Berkshire Hills Bancorp’s
consent, that the respective allowances for loan losses for both Berkshire Hills Bancorp and First Choice Bank were adequate to
cover such losses and would be adequate on a pro forma basis for the combined entity.
In preparing its analyses, Sandler O’Neill
used publicly available median analyst earnings per share estimates for Berkshire Hills Bancorp for the years ending December
31, 2016 through December 31, 2018 and an estimated long-term earnings per share growth rate for the years thereafter, as provided
by and discussed with the senior management of Berkshire Hills Bancorp, and financial projections for First Choice Bank for the
years ending December 31, 2016 through December 31, 2020, as provided by and discussed with the senior management of Berkshire
Hills Bancorp. Sandler O’Neill also received and used in its pro forma analyses certain assumptions relating to transaction
expenses, purchase accounting adjustments, a core deposit intangible asset, cost savings and expected deposit run-off, as provided
by and discussed with the senior management of Berkshire Hills Bancorp. With respect to the foregoing information, the senior
management of Berkshire Hills Bancorp confirmed to Sandler O’Neill that such information reflected (or, in the case of the
publicly available median analyst earnings per share estimates referred to above, were consistent with) the best currently available
projections, estimates and judgments of management of the future financial performance of Berkshire Hills Bancorp and First Choice
Bank, respectively, and Sandler O’Neill assumed that such performance would be achieved. Sandler O’Neill expressed
no opinion as to such information, or the assumptions on which such information was based. Sandler O’Neill also assumed
that there was no material change in Berkshire Hills Bancorp’s or First Choice Bank’s assets, financial condition,
results of operations, business or prospects since the date of the most recent financial statements made available to Sandler
O’Neill. Sandler O’Neill assumed in all respects material to its analysis that Berkshire Hills Bancorp and First Choice
Bank would remain as going concerns for all periods relevant to its analyses.
Sandler O’Neill also assumed, with
Berkshire Hills Bancorp’s consent, that in all respects material to its analysis, that (i) each of the parties to the merger
agreement would comply in all material respects with all material terms and conditions of the merger agreement and all related
agreements, that all of the representations and warranties contained in such agreements were true and correct in all material
respects, that each of the parties to such agreements would perform in all material respects all of the covenants and other obligations
required to be performed by such party under such agreements and that the conditions precedent in such agreements were not and
would not be waived, (ii) in the course of obtaining the necessary regulatory or third party approvals, consents and releases
with respect to the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect
on Berkshire Hills Bancorp, First Choice Bank or the merger or any related transaction, (iii) the merger and any related transaction
would be consummated in accordance with the terms of the merger agreement without any waiver, modification or amendment of any
material term, condition or agreement thereof and in compliance with all applicable laws and other requirements, (iv) the merger
would be consummated without First Choice Bank’s rights under Section 10.1.9 of the merger agreement having been triggered,
and (v) the merger would qualify as a tax-free reorganization for federal income tax purposes. Sandler O’Neill expressed
no opinion as to any of the legal, accounting or tax matters relating to the merger or any other transaction contemplated in connection
therewith.
Sandler O’Neill’s opinion was
necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it
as of, the date of its opinion. Events occurring after the date thereof could materially affect Sandler O’Neill’s
opinion. Sandler O’Neill has not undertaken to update, revise, reaffirm or withdraw its opinion or otherwise comment upon
events occurring after the date thereof. Sandler O’Neill expressed no opinion as to the trading values of Berkshire Hills
Bancorp common stock or First Choice Bank common stock at any time or what the value of Berkshire Hills Bancorp common stock would
be once it is actually received by the holders of First Choice Bank common stock.
In rendering its opinion, Sandler O’Neill
performed a variety of financial analyses. The summary below is not a complete description of the analyses underlying Sandler
O’Neill’s opinion or the presentation made by Sandler O’Neill to Berkshire Hills Bancorp’s board of directors,
but is a summary of all material analyses performed and presented by Sandler O’Neill. The summary includes information presented
in tabular format.
In order to fully understand the financial analyses, these tables must be read together with the accompanying
text. The tables alone do not constitute a complete description of the financial analyses.
The preparation of a fairness opinion
is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and
the application of those methods to the particular circumstances. The process, therefore, is not
necessarily susceptible to a partial analysis or summary description.
Sandler O’Neill believes that its analyses must be considered as a whole and that selecting portions of the factors and
analyses to be considered without considering all factors and analyses, or attempting to ascribe relative weights to some or all
such factors and analyses, could create an incomplete view of the evaluation process underlying its opinion. Also, no company
included in Sandler O’Neill’s comparative analyses described below is identical to Berkshire Hills Bancorp or First
Choice Bank and no transaction is identical to the merger. Accordingly, an analysis of comparable companies or transactions involves
complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other
factors that could affect the public trading values or merger transaction values, as the case may be, of Berkshire Hills Bancorp
and First Choice Bank and the companies to which they are being compared. In arriving at its opinion, Sandler O’Neill did
not attribute any particular weight to any analysis or factor that it considered. Rather, Sandler O’Neill made qualitative
judgments as to the significance and relevance of each analysis and factor. Sandler O’Neill did not form an opinion as to
whether any individual analysis or factor (positive or negative) considered in isolation supported or failed to support its opinion,
rather, Sandler O’Neill made its determination as to the fairness of the Exchange Ratio on the basis of its experience and
professional judgment after considering the results of all its analyses taken as a whole.
In performing its analyses, Sandler O’Neill
also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters,
many of which cannot be predicted and are beyond the control of Berkshire Hills Bancorp, First Choice Bank and Sandler O’Neill.
The analyses performed by Sandler O’Neill are not necessarily indicative of actual values or future results, both of which
may be significantly more or less favorable than suggested by such analyses. Sandler O’Neill prepared its analyses solely
for purposes of rendering its opinion and provided such analyses to Berkshire Hills Bancorp’s board of directors at its
June 23, 2016, meeting, which was subsequently confirmed in writing on June 24, 2016. Estimates on the values of companies do
not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold. Such
estimates are inherently subject to uncertainty and actual values may be materially different. Accordingly, Sandler O’Neill’s
analyses do not necessarily reflect the value of Berkshire Hills Bancorp’s common stock or the prices at which Berkshire
Hills Bancorp’s common stock or First Choice Bank’s common stock may be sold at any time. The analyses of Sandler
O’Neill and its opinion were among a number of factors taken into consideration by Berkshire Hills Bancorp’s board
of directors in making its determination to approve the merger agreement and the analyses described below should not be viewed
as determinative of the decision of Berkshire Hills Bancorp’s board of directors or management with respect to the fairness
of the merger. See “[Berkshire Hills Bancorp’s Reasons for the Merger; Recommendation of the Berkshire Hills Bancorp
Board of Directors]” for additional information on the factors Berkshire Hills Bancorp’s board of directors considered
in reaching its decision to approve the merger agreement.
Summary of Proposed Merger Consideration
and Implied Transaction Metrics.
Sandler O’Neill reviewed the financial terms of the proposed merger. Pursuant to
the terms of the merger agreement, each share of First Choice Bank common stock issued and outstanding immediately prior to the
Effective Time, except for certain shares of First Choice Bank common stock as specified in the merger agreement, will be converted
into the right to receive, without interest, 0.5773 shares of Berkshire Hills Bancorp common stock. Using Berkshire Hills Bancorp’s
June 24, 2016 closing stock price of $25.51, and based upon 7,475,657 shares of First Choice Bank common stock outstanding, which
includes 3,204,826 common shares outstanding and 4,270,831 common shares outstanding associated with the conversion of 51,000
shares of Series A-E convertible preferred stock, options to purchase 371,900 First Choice Bank shares with a weighted average
exercise price of $12.70 per share and warrants to purchase 64,799 First Choice Bank shares with a weighted average exercise price
of $10.00 per share, Sandler O’Neill calculated an implied transaction price per share of $14.73 and calculated an aggregate
implied transaction value of approximately $111.7 million. Based upon financial information for First Choice Bank as or for the
twelve months ended December 31, 2015 and three months ended March 31, 2016, Sandler O’Neill calculated the following implied
transaction metrics:
Transaction Price / March 31, 2016 Book Value Per Share
(1)
:
|
|
|
108
|
%
|
Transaction Price / March 31, 2016 Tangible Book Value Per Share
(1)
:
|
|
|
109
|
%
|
Transaction Price / 2015 Net Income:
|
|
|
47.0
|
x
|
Transaction Price / 2016E Core Net Income
(2)
:
|
|
|
17.7
|
x
|
Tangible Book Premium/Core Deposits
(3)
:
|
|
|
1.3
|
%
|
|
(1)
|
Book Value and Tangible Book Value based on First Choice
Bank common shares outstanding of 7,475,657, which consists of 3,204,826 common shares
outstanding and 4,270,831 common shares outstanding associated with the conversion of
51,000 shares of Series A-E convertible preferred stock.
|
|
(2)
|
Estimated First Choice Bank earnings per share provided
by and discussed with Berkshire Hills Bancorp senior management and assumes the conversion
of First Choice Bank’s 51,000 shares of Series A-E preferred stock into 4,270,831
shares of First Choice Bank common stock. Estimated core net income excludes estimated
gains recognized on the sale of securities during the three months ended June 30, 2016.
|
|
(3)
|
Core deposits are defined as total First Choice Bank deposits
as of March 31, 2016 less jumbo deposits or time deposits over $100,000 and estimated
deposit run-off.
|
Stock Trading History.
Sandler O’Neill reviewed
the historical publicly reported trading prices of Berkshire Hills Bancorp’s common stock for the three-year period ended
June 24, 2016. Sandler O’Neill then compared the relationship between the movements in the price of Berkshire Hills Bancorp’s
common stock to movements in its peer group (as described on page [ ]) as well as certain stock indices.
Berkshire Hills Bancorp’s Three-Year
Stock Performance
|
|
|
Beginning
Value
June 24, 2013
|
|
|
Ending
Value
June 24, 2016
|
|
Berkshire Hills Bancorp
|
|
|
100
|
%
|
|
|
95.3
|
%
|
Berkshire Hills Bancorp Peer Group
|
|
|
100
|
%
|
|
|
132.0
|
%
|
NASDAQ Bank Index
|
|
|
100
|
%
|
|
|
124.8
|
%
|
S&P 500 Index
|
|
|
100
|
%
|
|
|
129.5
|
%
|
Comparable Company Analyses.
Sandler
O’Neill used publicly available information to compare selected financial information for Berkshire Hills Bancorp with a
group of financial institutions selected by Sandler O’Neill. The Berkshire Hills Bancorp peer group consisted of banks and
thrifts whose securities are publicly traded on a United States exchange, are headquartered in the Mid-Atlantic or New England
regions and with total assets for the most recent period reported between $6.5 billion and $10.0 billion, excluding targets of
announced merger transactions and entities with large trust operations (the “Berkshire Hills Bancorp Peer Group”).
The Berkshire Hills Bancorp Peer Group consisted of the following companies:
Community
Bank System, Inc.
|
|
NBT
Bancorp Inc.
|
Customers Bancorp, Inc.
|
|
Northwest Bancshares, Inc.
|
First Commonwealth Financial Corporation
|
|
Provident Financial Services, Inc.
|
Independent Bank Corp.
|
|
|
The analysis compared publicly available financial information
for Berkshire Hills Bancorp with the corresponding data for the Berkshire Hills Bancorp Peer Group as of or for the twelve months
ended March 31, 2016 (unless otherwise noted), with pricing data as of June 24, 2016. The table below sets forth the data for
Berkshire Hills Bancorp and the high, low, mean and median data for the Berkshire Hills Bancorp Peer Group.
Berkshire Hills Bancorp Comparable
Company Analysis (Berkshire Hills Bancorp Peer Group)
|
|
|
Berkshire
Hills
Bancorp
|
|
|
Berkshire
Hills
Bancorp
Peer
Group
High
|
|
|
Berkshire
Hills
Bancorp
Peer
Group
Low
|
|
|
Berkshire
Hills
Bancorp
Peer
Group
Mean
|
|
|
Berkshire
Hills
Bancorp
Peer
Group
Median
|
|
Total Assets (in millions)
|
|
$
|
7,808
|
|
|
$
|
9,039
|
|
|
$
|
6,699
|
|
|
$
|
8,280
|
|
|
$
|
8,616
|
|
Loans/Deposits
|
|
|
102.50
|
%
|
|
|
111.60
|
%
|
|
|
67.70
|
%
|
|
|
95.30
|
%
|
|
|
93.20
|
%
|
Nonperforming Assets
(1)
/Total Assets
|
|
|
0.48
|
%
|
|
|
1.25
|
%
|
|
|
0.33
|
%
|
|
|
0.78
|
%
|
|
|
0.81
|
%
|
Net Charge-offs/Average Loans
|
|
|
0.23
|
%
|
|
|
0.33
|
%
|
|
|
(0.03
|
)%
|
|
|
0.10
|
%
|
|
|
0.10
|
%
|
Tangible Common Equity/Tangible Assets
|
|
|
7.66
|
%
|
|
|
10.41
|
%
|
|
|
5.71
|
%
|
|
|
8.34
|
%
|
|
|
8.69
|
%
|
Tier 1 Leverage Ratio
|
|
|
7.75
|
%
|
|
|
11.99
|
%
|
|
|
7.15
|
%
|
|
|
9.54
|
%
|
|
|
9.53
|
%
|
Total Risk-Based Capital Ratio
|
|
|
11.82
|
%
|
|
|
18.33
|
%
|
|
|
10.29
|
%
|
|
|
13.66
|
%
|
|
|
12.49
|
%
|
Total Commercial Real Estate Loans/Total Risk-Based Capital Ratio
|
|
|
218.50
|
%
|
|
|
585.60
|
%
|
|
|
60.00
|
%
|
|
|
259.80
|
%
|
|
|
213.40
|
%
|
LTM Return on Average Assets
|
|
|
0.75
|
%
|
|
|
1.15
|
%
|
|
|
0.73
|
%
|
|
|
0.91
|
%
|
|
|
0.95
|
%
|
LTM Return on Average Tangible Common Equity
|
|
|
11.20
|
%
|
|
|
14.80
|
%
|
|
|
7.10
|
%
|
|
|
11.60
|
%
|
|
|
11.70
|
%
|
LTM Net Interest Margin
|
|
|
3.35
|
%
|
|
|
3.70
|
%
|
|
|
2.82
|
%
|
|
|
3.33
|
%
|
|
|
3.40
|
%
|
LTM Efficiency Ratio
|
|
|
63.20
|
%
|
|
|
65.80
|
%
|
|
|
50.40
|
%
|
|
|
59.70
|
%
|
|
|
61.60
|
%
|
Price/Tangible Book Value
|
|
|
138.00
|
%
|
|
|
232.00
|
%
|
|
|
130.00
|
%
|
|
|
174.00
|
%
|
|
|
161.00
|
%
|
Price/LTM Earnings per share
|
|
|
13.6
|
x
|
|
|
22.2
|
x
|
|
|
12.1
|
x
|
|
|
16.4
|
x
|
|
|
16.0
|
x
|
Price/2016 Estimated Earnings Per Share
|
|
|
11.4
|
x
|
|
|
17.5
|
x
|
|
|
10.2
|
x
|
|
|
14.7
|
x
|
|
|
15.1
|
x
|
Price/2017 Estimated Earnings Per Share
|
|
|
11.1
|
x
|
|
|
16.7
|
x
|
|
|
9.2
|
x
|
|
|
13.5
|
x
|
|
|
14.2
|
x
|
Current Dividend Yield
|
|
|
3.10
|
%
|
|
|
4.20
|
%
|
|
|
0.00
|
%
|
|
|
2.90
|
%
|
|
|
3.20
|
%
|
Market Value (in millions)
|
|
$
|
795
|
|
|
$
|
1,753
|
|
|
$
|
670
|
|
|
$
|
1,182
|
|
|
$
|
1,194
|
|
|
(1)
|
Nonperforming assets defined as nonaccrual loans and leases,
renegotiated loans and leases, and real estate owned.
|
Sandler O’Neill used publicly available
information to perform a similar analysis for First Choice Bank and two groups of financial institutions as selected by Sandler
O’Neill. The first peer group consisted of banks and thrifts whose securities are publicly traded on a United States exchange,
are headquartered in the Mid-Atlantic region, with total assets between $750 million and $2.0 billion and nonperforming assets/total
assets greater than 2.0% as of the most recent period reported, excluding targets of announced merger transactions (the “First
Choice Bank Regional Peer Group”). The second peer group consisted of banks and thrifts whose securities are publicly traded
on a United States exchange, with total assets between $800 million and $3.0 billion and LTM mortgage banking income greater than
15.0% of total LTM operating revenue as of the most recent period reported, excluding targets of announced merger transactions
(the “First Choice Bank Nationwide Peer Group”).
The First Choice Bank Regional Peer Group
consisted of the following companies:
BCB Bancorp, Inc.
|
Orange County Bancorp, Inc.
|
Carver Bancorp, Inc.
|
Parke Bancorp, Inc.
|
Community Financial Corporation
|
Severn Bancorp, Inc.
|
First United Corporation
|
Shore Bancshares, Inc.
|
Franklin Financial Services Corporation
|
|
The First Choice Bank Nationwide Peer Group
consisted of the following companies:
Alerus Financial Corporation
|
Howard Bancorp, Inc.
|
BNCCORP, Inc.
|
Midland States Bancorp, Inc.
|
Carolina Financial Corporation
|
MVB Financial Corp.
|
Commerce Union Bancshares, Inc.
|
Northrim BanCorp, Inc.
|
First Internet Bancorp
|
Waterstone Financial, Inc.
|
Hampton Roads Bankshares, Inc.
|
|
The analysis compared
publicly available financial information for First Choice Bank with the corresponding data for each of the peer groups as of or
for the twelve months ended March 31, 2016 (unless otherwise noted), with pricing data as of June 24, 2016.
The table below sets
forth the data for First Choice Bank and the high, low, mean and median data for the First Choice Bank Regional Peer Group.
First
Choice Bank Comparable Company Analysis (First Choice Bank Regional Peer Group)
|
|
|
First
Choice
Bank
(1)
|
|
|
First
Choice
Bank
Regional
Peer
Group
High
|
|
|
First
Choice
Bank
Regional
Peer
Group
Low
|
|
|
First
Choice
Bank
Regional
Peer
Group
Mean
|
|
|
First
Choice
Bank
Regional
Peer
Group
Median
|
|
Total Assets (in millions)
|
|
$
|
1,125
|
|
|
$
|
1,706
|
|
|
$
|
754
|
|
|
$
|
1,075
|
|
|
$
|
1,070
|
|
Loans/Deposits
|
|
|
60.10
|
%
|
|
|
114.60
|
%
|
|
|
69.40
|
%
|
|
|
95.60
|
%
|
|
|
99.30
|
%
|
Nonperforming Assets
(2)
/Total Assets
(3)
|
|
|
3.52
|
%
|
|
|
6.30
|
%
|
|
|
2.17
|
%
|
|
|
3.19
|
%
|
|
|
2.70
|
%
|
Net Charge-offs/Average Loans
|
|
|
0.65
|
%
|
|
|
0.46
|
%
|
|
|
0.01
|
%
|
|
|
0.13
|
%
|
|
|
0.09
|
%
|
Tangible Common Equity/Tangible Assets
|
|
|
9.02
|
%
|
|
|
12.25
|
%
|
|
|
1.32
|
%
|
|
|
8.17
|
%
|
|
|
8.58
|
%
|
Tier 1 Leverage Ratio
(3)(4)
|
|
|
9.08
|
%
|
|
|
14.15
|
%
|
|
|
8.26
|
%
|
|
|
10.85
|
%
|
|
|
10.63
|
%
|
Total Risk-Based Capital Ratio
(3)(4)
|
|
|
18.10
|
%
|
|
|
19.42
|
%
|
|
|
11.88
|
%
|
|
|
15.84
|
%
|
|
|
16.51
|
%
|
Total Commercial Real Estate Loans/Total Risk-Based Capital Ratio
(3)(5)
|
|
|
191.60
|
%
|
|
|
470.60
|
%
|
|
|
176.10
|
%
|
|
|
270.30
|
%
|
|
|
210.80
|
%
|
LTM Return on Average Assets
|
|
|
0.18
|
%
|
|
|
1.41
|
%
|
|
|
(0.14
|
)%
|
|
|
0.61
|
%
|
|
|
0.59
|
%
|
LTM Return on Average Equity
|
|
|
4.20
|
%
|
|
|
11.50
|
%
|
|
|
(1.10
|
)%
|
|
|
6.30
|
%
|
|
|
6.20
|
%
|
LTM Net Interest Margin
(3)
|
|
|
2.59
|
%
|
|
|
4.13
|
%
|
|
|
3.02
|
%
|
|
|
3.41
|
%
|
|
|
3.46
|
%
|
LTM Efficiency Ratio
|
|
|
91.40
|
%
|
|
|
98.40
|
%
|
|
|
37.30
|
%
|
|
|
73.80
|
%
|
|
|
76.70
|
%
|
Price/Tangible Book Value
|
|
|
—
|
|
|
|
141.00
|
%
|
|
|
74.00
|
%
|
|
|
102.00
|
%
|
|
|
99.00
|
%
|
Price/LTM Earnings per share
|
|
|
—
|
|
|
|
38.0
|
x
|
|
|
7.1
|
x
|
|
|
17.8
|
x
|
|
|
16.3
|
x
|
Price/2016 Estimated Earnings Per Share
|
|
|
—
|
|
|
|
15.1
|
x
|
|
|
15.1
|
x
|
|
|
15.1
|
x
|
|
|
15.1
|
x
|
Price/2017 Estimated Earnings Per Share
|
|
|
—
|
|
|
|
14.5
|
x
|
|
|
12.8
|
x
|
|
|
13.7
|
x
|
|
|
13.7
|
x
|
Current Dividend Yield
|
|
|
—
|
|
|
|
5.40
|
%
|
|
|
0.00
|
%
|
|
|
2.00
|
%
|
|
|
1.80
|
%
|
Market Value (in millions)
|
|
|
—
|
|
|
$
|
138
|
|
|
$
|
14
|
|
|
$
|
87
|
|
|
$
|
91
|
|
|
(1)
|
Tangible Common Equity/Tangible Assets for First Choice Bank
represents Tangible Equity/Tangible Assets as of March 31, 2016.
|
|
(2)
|
Nonperforming assets defined as nonaccrual loans and leases,
renegotiated loans and leases, and real estate owned.
|
|
(3)
|
Nonperforming Assets/Total Assets, Tier 1 Leverage Ratio, Total
Risk-Based Capital Ratio and Total Commercial Real Estate Loans/Total Risk-Based Capital
Ratio for Orange County Bancorp, Inc. reflects Bank level regulatory financial data.
|
|
(4)
|
Tier 1 Leverage Ratio and Total Risk-Based Capital Ratio for
Carver Bancorp, Inc. reflects Bank level regulatory financial data as of December 31,
2015.
|
|
(5)
|
Total Commercial Real Estate Loans/Total Risk-Based Capital
Ratio for Parke Bancorp, Inc. reflects Bank level regulatory financial data.
|
Note: Financial data for Orange County Bancorp, Inc.
is as of or for the period ended December 31, 2015.
The table below sets forth the data for
First Choice Bank and the high, low, mean and median data for the First Choice Bank Nationwide Peer Group.
First Choice Bank Comparable Company
Analysis (First Choice Bank Nationwide Peer Group)
|
|
|
First
Choice
Bank
(1)
|
|
|
First Choice
Bank
Nationwide
Peer Group
High
|
|
|
First Choice
Bank
Nationwide
Peer Group
Low
|
|
|
First Choice
Bank
Nationwide
Peer Group
Mean
|
|
|
First Choice
Bank
Nationwide
Peer Group
Median
|
|
Total Assets (in millions)
|
|
$
|
1,125
|
|
|
$
|
2,898
|
|
|
$
|
869
|
|
|
$
|
1,584
|
|
|
$
|
1,500
|
|
Loans/Deposits
|
|
|
60.10
|
%
|
|
|
121.10
|
%
|
|
|
53.30
|
%
|
|
|
87.40
|
%
|
|
|
85.50
|
%
|
Nonperforming Assets
(2)
/Total Assets
|
|
|
3.52
|
%
|
|
|
3.51
|
%
|
|
|
0.28
|
%
|
|
|
1.18
|
%
|
|
|
0.98
|
%
|
Net Charge-offs/Average Loans
|
|
|
0.65
|
%
|
|
|
0.50
|
%
|
|
|
(0.06
|
)%
|
|
|
0.15
|
%
|
|
|
0.08
|
%
|
Tangible Common Equity/Tangible Assets
|
|
|
9.02
|
%
|
|
|
22.62
|
%
|
|
|
5.15
|
%
|
|
|
9.78
|
%
|
|
|
7.94
|
%
|
Tier 1 Leverage Ratio
|
|
|
9.08
|
%
|
|
|
22.61
|
%
|
|
|
6.41
|
%
|
|
|
10.64
|
%
|
|
|
9.87
|
%
|
Total Risk-Based Capital Ratio
|
|
|
18.10
|
%
|
|
|
34.02
|
%
|
|
|
11.38
|
%
|
|
|
15.77
|
%
|
|
|
13.97
|
%
|
Total Commercial Real Estate Loans/Total Risk-Based Capital Ratio
(3)
|
|
|
191.60
|
%
|
|
|
423.40
|
%
|
|
|
110.90
|
%
|
|
|
247.90
|
%
|
|
|
228.00
|
%
|
LTM Return on Average Assets
|
|
|
0.18
|
%
|
|
|
4.71
|
%
|
|
|
0.17
|
%
|
|
|
1.18
|
%
|
|
|
0.94
|
%
|
LTM Return on Average Equity
|
|
|
1.99
|
%
|
|
|
39.62
|
%
|
|
|
1.72
|
%
|
|
|
10.93
|
%
|
|
|
8.99
|
%
|
LTM Net Interest Margin
(4)
|
|
|
2.59
|
%
|
|
|
4.38
|
%
|
|
|
2.45
|
%
|
|
|
3.52
|
%
|
|
|
3.55
|
%
|
LTM Efficiency Ratio
|
|
|
91.40
|
%
|
|
|
90.40
|
%
|
|
|
61.10
|
%
|
|
|
75.50
|
%
|
|
|
77.10
|
%
|
LTM Mortgage Income
(5)
/LTM Operating Revenue
|
|
|
67.80
|
%
|
|
|
69.00
|
%
|
|
|
16.20
|
%
|
|
|
29.40
|
%
|
|
|
23.60
|
%
|
Price/Tangible Book Value
|
|
|
—
|
|
|
|
231.00
|
%
|
|
|
72.00
|
%
|
|
|
126.00
|
%
|
|
|
116.00
|
%
|
Price/LTM Earnings per share
|
|
|
—
|
|
|
|
24.8
|
x
|
|
|
3.1
|
x
|
|
|
13.1
|
x
|
|
|
12.0
|
x
|
Price/2016 Estimated Earnings Per Share
|
|
|
—
|
|
|
|
21.3
|
x
|
|
|
9.6
|
x
|
|
|
13.9
|
x
|
|
|
12.0
|
x
|
Price/2017 Estimated Earnings Per Share
|
|
|
—
|
|
|
|
19.1
|
x
|
|
|
8.0
|
x
|
|
|
12.2
|
x
|
|
|
11.3
|
x
|
Current Dividend Yield
|
|
|
—
|
|
|
|
3.00
|
%
|
|
|
0.00
|
%
|
|
|
1.00
|
%
|
|
|
0.70
|
%
|
Market Value (in millions)
|
|
|
—
|
|
|
$
|
441
|
|
|
$
|
53
|
|
|
$
|
199
|
|
|
$
|
173
|
|
|
(1)
|
Tangible Common Equity/Tangible Assets for First Choice Bank
represents Tangible Equity/Tangible Assets as of March 31, 2016.
|
|
(2)
|
Nonperforming assets defined as nonaccrual loans and leases,
renegotiated loans and leases, and real estate owned.
|
|
(3)
|
Total Commercial Real Estate Loans/Total Risk-Based Capital
Ratio for Howard Bancorp, Inc. reflects Bank level regulatory financial data.
|
|
(4)
|
LTM Net Interest Margin for Midland States Bancorp, Inc. for
the period ended December 31, 2015.
|
|
(5)
|
Mortgage Banking Income defined as all revenues associated
with mortgage banking activities, including origination revenues, gain on sale, and net
servicing income related to 1-4 family residential first mortgage loans.
|
Analysis of Selected Merger Transactions
.
Sandler O’Neill reviewed two groups of recent merger and acquisition transactions. The first group consisted of six
transactions announced between January 1, 2010 and June 24, 2016 with disclosed deal values at announcement involving bank and
thrift targets headquartered in the Mid-Atlantic region with assets between $1.0 billion and $5.0 billion and nonperforming assets/total
assets of greater than 2.0%, excluding Section 363 bankruptcy transactions (the “Regional Precedent Transactions”).
The second group consisted of nine transactions announced between January 1, 2013 and June 24, 2016 with disclosed deal values
at announcement involving bank and thrift targets with assets between $800 million and $2.0 billion and LTM mortgage banking income
greater than 15.0% of total LTM operating revenue, excluding Section 363 bankruptcy transactions (the “Nationwide Precedent
Transactions”).
The Regional Precedent Transactions group
was composed of the following transactions:
Acquiror
|
|
Target
|
Bank of the Ozarks, Inc.
|
|
Intervest Bancshares Corporation
|
Berkshire Hills Bancorp Bancorp, Inc.
|
|
Beacon Federal Bancorp, Inc.
|
Tompkins Financial Corporation
|
|
VIST Financial Corp.
|
F.N.B. Corporation
|
|
Parkvale Financial Corporation
|
Valley National Bancorp
|
|
State Bancorp, Inc.
|
Susquehanna Bancshares, Inc.
|
|
Abington Bancorp, Inc.
|
The Nationwide Precedent Transactions group
was composed of the following transactions:
Acquiror
|
|
Target
|
Mechanics Bank
|
|
California Republic Bancorp
|
TowneBank
|
|
Monarch Financial Holdings, Inc.
|
First Busey Corporation
|
|
Pulaski Financial Corp.
|
Green Bancorp, Inc.
|
|
Patriot Bancshares, Inc.
|
Renasant Corporation
|
|
Heritage Financial Group, Inc.
|
Eagle Bancorp, Inc.
|
|
Virginia Heritage Bank
|
Chemical Financial Corporation
|
|
Northwestern Bancorp
|
Old National Bancorp
|
|
United Bancorp, Inc.
|
Hanmi Financial Corporation
|
|
Central Bancorp, Inc.
|
Using the latest publicly available financial
information prior to the announcement of the relevant transaction, Sandler O’Neill reviewed the following multiples: transaction
price to last-twelve-months earnings per share, transaction price to estimated forward earnings per share, transaction price to
tangible book value per share, tangible book premium to core deposits and one-day market premium. Sandler O’Neill compared
the indicated transaction metrics for the merger to the high, low, mean and median metrics of both the Regional Precedent Transactions
group and the Nationwide Precedent Transactions group.
|
|
Berkshire
Hills
Bancorp /
First
Choice
Bank
|
|
|
Regional
Precedent
Transactions
Group
High
|
|
|
Regional
Precedent
Transactions
Group
Low
|
|
|
Regional
Precedent
Transactions
Group
Mean
|
|
|
Regional
Precedent
Transactions
Group
Median
|
|
Transaction Price/LTM Earnings Per Share
|
|
|
54.8
|
x
|
|
|
33.4
|
x
|
|
|
13.7
|
x
|
|
|
24.5
|
x
|
|
|
23.7
|
x
|
Transaction Price/Estimated Forward Earnings Per Share
|
|
|
17.7
|
x
(1)
|
|
|
31.1
|
x
|
|
|
12.8
|
x
|
|
|
22.6
|
x
|
|
|
23.2
|
x
|
Transaction Price/Tangible Book Value Per Share:
|
|
|
109.0
|
%
|
|
|
198.0
|
%
|
|
|
111.0
|
%
|
|
|
141.0
|
%
|
|
|
120.0
|
%
|
Core Deposit Premium
(2)
:
|
|
|
1.3
|
%
(3)
|
|
|
9.7
|
%
|
|
|
1.3
|
%
|
|
|
5.3
|
%
|
|
|
4.4
|
%
|
1-Day Market Premium:
|
|
|
—
|
|
|
|
109.0
|
%
|
|
|
13.8
|
%
|
|
|
56.2
|
%
|
|
|
48.9
|
%
|
|
(1)
|
2016 estimated First Choice Bank EPS provided by and discussed
with Berkshire Hills Bancorp senior management and assumes the conversion of First Choice
Bank’s 51,000 shares of Series A-E preferred stock into 4,270,831 shares of First
Choice Bank common stock. 2016 estimated First Choice Bank EPS reflects estimated core
net income, which excludes estimated gains recognized on the sale of securities during
the three months ended June 30, 2016.
|
|
(2)
|
Core deposits are defined as total deposits less all jumbo
deposits or time deposits over $100,000.
|
|
(3)
|
Core deposits for First Choice Bank are defined as total deposits
as of March 31, 2016 less all jumbo deposits or time deposits over $100,000 and estimated
deposit run-off.
|
|
|
Berkshire
Hills
Bancorp /
First
Choice
Bank
|
|
|
Nationwide
Precedent
Transactions
Group
High
|
|
|
Nationwide
Precedent
Transactions
Group
Low
|
|
|
Nationwide
Precedent
Transactions
Group
Mean
|
|
|
Nationwide
Precedent
Transactions
Group
Median
|
|
Transaction Price/LTM Earnings Per Share
|
|
|
54.8
|
x
|
|
|
25.8
|
x
|
|
|
14.9
|
x
|
|
|
20.3
|
x
|
|
|
18.1
|
x
|
Transaction Price/Estimated Forward Earnings Per Share
|
|
|
17.7
|
x
(1)
|
|
|
24.0
|
x
|
|
|
16.3
|
x
|
|
|
19.5
|
x
|
|
|
18.8
|
x
|
Transaction Price/Tangible Book Value Per Share:
|
|
|
109.0
|
%
|
|
|
208.0
|
%
|
|
|
62.0
|
%
|
|
|
172.0
|
%
|
|
|
179.0
|
%
|
Core Deposit Premium
(2)
:
|
|
|
1.3
|
%
(3)
|
|
|
21.0
|
%
|
|
|
7.4
|
%
|
|
|
12.3
|
%
|
|
|
11.9
|
%
|
1-Day Market Premium:
|
|
|
—
|
|
|
|
125.6
|
%
|
|
|
4.1
|
%
|
|
|
52.7
|
%
|
|
|
50.1
|
%
|
|
(1)
|
2016 estimated First Choice Bank EPS provided by and discussed
with Berkshire Hills Bancorp senior management and assumes the conversion of First Choice
Bank’s 51,000 shares of Series A-E preferred stock into 4,270,831 shares of First
Choice Bank common stock. 2016 estimated First Choice Bank EPS reflects estimated core
net income, which excludes estimated gains recognized on the sale of securities during
the three months ended June 30, 2016.
|
|
(2)
|
Core deposits are defined as total deposits less all jumbo
deposits or time deposits over $100,000.
|
|
(3)
|
Core deposits for First Choice Bank are defined as total deposits
as of March 31, 2016 less all jumbo deposits or time deposits over $100,000 and estimated
deposit run-off.
|
Note: For targets that were publicly traded
at announcement of the transaction, mortgage income defined as the sum of net servicing fees (income from servicing real estate
mortgages, credit cards, and other financial assets held by others, net of related servicing assets’ amortization expense) and
net gain on sale of loans and leases; for targets that were private at announcement of the transaction, mortgage income defined
as all revenues associated with mortgage banking activities, including origination revenues, gain on sale, and net servicing income
related to 1-4 family residential first mortgage loans.
Net Present Value Analyses.
Sandler O’Neill performed an analysis that estimated the net present value per share of Berkshire Hills Bancorp common stock
assuming Berkshire Hills Bancorp performed in accordance with publicly available median analyst earnings per share estimates for
Berkshire Hills Bancorp for the years ending December 31, 2016 through December 31, 2018 as well as an estimated long-term earnings
per share growth rate for the years thereafter, as provided by and discussed with the senior management of Berkshire Hills Bancorp.
To approximate the terminal value of a share of Berkshire Hills Bancorp common stock at December 31, 2020, Sandler O’Neill
applied price to 2020 earnings multiples ranging from 13.0x to 18.0x and multiples of December 31, 2020 tangible book value ranging
from 135% to 210%. The terminal values were then discounted to present values using different discount rates ranging from 8.0%
to 14.0%, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers
of Berkshire Hills Bancorp’s common stock. As illustrated in the following tables, the analysis indicates an imputed range
of values per share of Berkshire Hills Bancorp common stock of $20.15 to $34.70 when applying multiples of earnings and $20.80
to $39.89 when applying multiples of tangible book value.
Earnings Per Share Multiples
Discount
Rate
|
|
|
13.0x
|
|
|
14.0x
|
|
|
15.0x
|
|
|
16.0x
|
|
|
17.0x
|
|
|
18.0x
|
|
|
8.0
|
%
|
|
$
|
25.99
|
|
|
$
|
27.73
|
|
|
$
|
29.48
|
|
|
$
|
31.22
|
|
|
$
|
32.96
|
|
|
$
|
34.70
|
|
|
9.0
|
%
|
|
$
|
24.89
|
|
|
$
|
26.55
|
|
|
$
|
28.21
|
|
|
$
|
29.87
|
|
|
$
|
31.54
|
|
|
$
|
33.20
|
|
|
10.0
|
%
|
|
$
|
23.84
|
|
|
$
|
25.42
|
|
|
$
|
27.01
|
|
|
$
|
28.60
|
|
|
$
|
30.19
|
|
|
$
|
31.78
|
|
|
11.0
|
%
|
|
$
|
22.84
|
|
|
$
|
24.36
|
|
|
$
|
25.88
|
|
|
$
|
27.39
|
|
|
$
|
28.91
|
|
|
$
|
30.43
|
|
|
12.0
|
%
|
|
$
|
21.90
|
|
|
$
|
23.35
|
|
|
$
|
24.80
|
|
|
$
|
26.25
|
|
|
$
|
27.70
|
|
|
$
|
29.15
|
|
|
13.0
|
%
|
|
$
|
21.00
|
|
|
$
|
22.39
|
|
|
$
|
23.78
|
|
|
$
|
25.17
|
|
|
$
|
26.55
|
|
|
$
|
27.94
|
|
|
14.0
|
%
|
|
$
|
20.15
|
|
|
$
|
21.48
|
|
|
$
|
22.81
|
|
|
$
|
24.14
|
|
|
$
|
25.46
|
|
|
$
|
26.79
|
|
Tangible Book Value Multiples
Discount
Rate
|
|
|
135%
|
|
|
150%
|
|
|
165%
|
|
|
180%
|
|
|
195%
|
|
|
210%
|
|
|
8.0
|
%
|
|
$
|
26.84
|
|
|
$
|
29.45
|
|
|
$
|
32.06
|
|
|
$
|
34.67
|
|
|
$
|
37.28
|
|
|
$
|
39.89
|
|
|
9.0
|
%
|
|
$
|
25.70
|
|
|
$
|
28.19
|
|
|
$
|
30.68
|
|
|
$
|
33.17
|
|
|
$
|
35.66
|
|
|
$
|
38.15
|
|
|
10.0
|
%
|
|
$
|
24.61
|
|
|
$
|
26.99
|
|
|
$
|
29.37
|
|
|
$
|
31.75
|
|
|
$
|
34.13
|
|
|
$
|
36.51
|
|
|
11.0
|
%
|
|
$
|
23.58
|
|
|
$
|
25.86
|
|
|
$
|
28.13
|
|
|
$
|
30.40
|
|
|
$
|
32.68
|
|
|
$
|
34.95
|
|
|
12.0
|
%
|
|
$
|
22.60
|
|
|
$
|
24.78
|
|
|
$
|
26.95
|
|
|
$
|
29.13
|
|
|
$
|
31.30
|
|
|
$
|
33.48
|
|
|
13.0
|
%
|
|
$
|
21.68
|
|
|
$
|
23.76
|
|
|
$
|
25.84
|
|
|
$
|
27.92
|
|
|
$
|
30.00
|
|
|
$
|
32.08
|
|
|
14.0
|
%
|
|
$
|
20.80
|
|
|
$
|
22.79
|
|
|
$
|
24.78
|
|
|
$
|
26.77
|
|
|
$
|
28.76
|
|
|
$
|
30.75
|
|
Sandler O’Neill also considered and
discussed with the Berkshire Hills Bancorp board of directors how this analysis would be affected by changes in the underlying
assumptions, including variations with respect to net
income. To illustrate this impact, Sandler O’Neill performed
a similar analysis assuming Berkshire Hills Bancorp’s net income varied from 25% above estimates to 25% below estimates.
This analysis resulted in the following range of per share values for Berkshire Hills Bancorp common stock, applying the price
to 2020 earnings multiples range of 13.0x to 18.0x referred to above and a discount rate of 8.71%.
Earnings Per Share Multiples
Annual
Budget
Variance
|
|
|
13.0x
|
|
|
14.0x
|
|
|
15.0x
|
|
|
16.0x
|
|
|
17.0x
|
|
|
18.0x
|
|
|
(25.0
|
)%
|
|
$
|
19.72
|
|
|
$
|
20.98
|
|
|
$
|
22.25
|
|
|
$
|
23.51
|
|
|
$
|
24.78
|
|
|
$
|
26.04
|
|
|
(20.0
|
)%
|
|
$
|
20.82
|
|
|
$
|
22.16
|
|
|
$
|
23.51
|
|
|
$
|
24.86
|
|
|
$
|
26.21
|
|
|
$
|
27.56
|
|
|
(15.0
|
)%
|
|
$
|
21.91
|
|
|
$
|
23.34
|
|
|
$
|
24.78
|
|
|
$
|
26.21
|
|
|
$
|
27.64
|
|
|
$
|
29.07
|
|
|
(10.0
|
)%
|
|
$
|
23.01
|
|
|
$
|
24.52
|
|
|
$
|
26.04
|
|
|
$
|
27.56
|
|
|
$
|
29.07
|
|
|
$
|
30.59
|
|
|
(5.0
|
)%
|
|
$
|
24.10
|
|
|
$
|
25.70
|
|
|
$
|
27.30
|
|
|
$
|
28.90
|
|
|
$
|
30.50
|
|
|
$
|
32.10
|
|
|
0.0
|
%
|
|
$
|
25.20
|
|
|
$
|
26.88
|
|
|
$
|
28.57
|
|
|
$
|
30.25
|
|
|
$
|
31.94
|
|
|
$
|
33.62
|
|
|
5.0
|
%
|
|
$
|
26.29
|
|
|
$
|
28.06
|
|
|
$
|
29.83
|
|
|
$
|
31.60
|
|
|
$
|
33.37
|
|
|
$
|
35.14
|
|
|
10.0
|
%
|
|
$
|
27.39
|
|
|
$
|
29.24
|
|
|
$
|
31.09
|
|
|
$
|
32.95
|
|
|
$
|
34.80
|
|
|
$
|
36.65
|
|
|
15.0
|
%
|
|
$
|
28.48
|
|
|
$
|
30.42
|
|
|
$
|
32.36
|
|
|
$
|
34.29
|
|
|
$
|
36.23
|
|
|
$
|
38.17
|
|
|
20.0
|
%
|
|
$
|
29.58
|
|
|
$
|
31.60
|
|
|
$
|
33.62
|
|
|
$
|
35.64
|
|
|
$
|
37.66
|
|
|
$
|
39.68
|
|
|
25.0
|
%
|
|
$
|
30.67
|
|
|
$
|
32.78
|
|
|
$
|
34.88
|
|
|
$
|
36.99
|
|
|
$
|
39.10
|
|
|
$
|
41.20
|
|
Sandler O’Neill also performed an analysis that estimated
the net present value per share of First Choice Bank common stock assuming that First Choice Bank performed in accordance earning
projections provided by and discussed with Berkshire Hills Bancorp senior management. To approximate the terminal value of First
Choice Bank common stock at December 31, 2020, Sandler O’Neill applied price to 2020 earnings multiples ranging from 13.0x
to 18.0x and multiples of December 31, 2020 tangible book value ranging from 80% to 130%. The terminal values were then discounted
to present values using different discount rates ranging from 11.0% to 17.0%, which were chosen to reflect different assumptions
regarding required rates of return of holders or prospective buyers of First Choice Bank’s common stock. As illustrated
in the following tables, the analysis indicates an imputed range of values per share of First Choice Bank common stock of $4.45
to $7.92 when applying earnings multiples and $6.55 to $13.67 when applying multiples of tangible book value.
Earnings Per Share Multiples
Discount
Rate
|
|
|
13.0x
|
|
|
14.0x
|
|
|
15.0x
|
|
|
16.0x
|
|
|
17.0x
|
|
|
18.0x
|
|
|
11.0
|
%
|
|
$
|
5.72
|
|
|
$
|
6.16
|
|
|
$
|
6.60
|
|
|
$
|
7.04
|
|
|
$
|
7.48
|
|
|
$
|
7.92
|
|
|
12.0
|
%
|
|
$
|
5.48
|
|
|
$
|
5.90
|
|
|
$
|
6.32
|
|
|
$
|
6.74
|
|
|
$
|
7.17
|
|
|
$
|
7.59
|
|
|
13.0
|
%
|
|
$
|
5.25
|
|
|
$
|
5.66
|
|
|
$
|
6.06
|
|
|
$
|
6.47
|
|
|
$
|
6.87
|
|
|
$
|
7.27
|
|
|
14.0
|
%
|
|
$
|
5.04
|
|
|
$
|
5.43
|
|
|
$
|
5.81
|
|
|
$
|
6.20
|
|
|
$
|
6.59
|
|
|
$
|
6.98
|
|
|
15.0
|
%
|
|
$
|
4.83
|
|
|
$
|
5.21
|
|
|
$
|
5.58
|
|
|
$
|
5.95
|
|
|
$
|
6.32
|
|
|
$
|
6.69
|
|
|
16.0
|
%
|
|
$
|
4.64
|
|
|
$
|
5.00
|
|
|
$
|
5.35
|
|
|
$
|
5.71
|
|
|
$
|
6.07
|
|
|
$
|
6.42
|
|
|
17.0
|
%
|
|
$
|
4.45
|
|
|
$
|
4.80
|
|
|
$
|
5.14
|
|
|
$
|
5.48
|
|
|
$
|
5.82
|
|
|
$
|
6.17
|
|
Tangible Book Value Multiples
Discount
Rate
|
|
|
80%
|
|
|
90%
|
|
|
100%
|
|
|
110%
|
|
|
120%
|
|
|
130%
|
|
|
11.0
|
%
|
|
$
|
8.41
|
|
|
$
|
9.46
|
|
|
$
|
10.51
|
|
|
$
|
11.56
|
|
|
$
|
12.61
|
|
|
$
|
13.67
|
|
|
12.0
|
%
|
|
$
|
8.06
|
|
|
$
|
9.07
|
|
|
$
|
10.07
|
|
|
$
|
11.08
|
|
|
$
|
12.09
|
|
|
$
|
13.10
|
|
|
13.0
|
%
|
|
$
|
7.73
|
|
|
$
|
8.69
|
|
|
$
|
9.66
|
|
|
$
|
10.62
|
|
|
$
|
11.59
|
|
|
$
|
12.55
|
|
|
14.0
|
%
|
|
$
|
7.41
|
|
|
$
|
8.34
|
|
|
$
|
9.26
|
|
|
$
|
10.19
|
|
|
$
|
11.11
|
|
|
$
|
12.04
|
|
|
15.0
|
%
|
|
$
|
7.11
|
|
|
$
|
8.00
|
|
|
$
|
8.89
|
|
|
$
|
9.77
|
|
|
$
|
10.66
|
|
|
$
|
11.55
|
|
|
16.0
|
%
|
|
$
|
6.82
|
|
|
$
|
7.67
|
|
|
$
|
8.53
|
|
|
$
|
9.38
|
|
|
$
|
10.23
|
|
|
$
|
11.09
|
|
|
17.0
|
%
|
|
$
|
6.55
|
|
|
$
|
7.37
|
|
|
$
|
8.19
|
|
|
$
|
9.01
|
|
|
$
|
9.82
|
|
|
$
|
10.64
|
|
Sandler O’Neill also considered and
discussed with the Berkshire Hills Bancorp board of directors how this analysis would be affected by changes in the underlying
assumptions, including variations with respect to net income. To illustrate this impact, Sandler O’Neill performed a similar
analysis assuming First Choice Bank’s net income varied from 25% above projections to 25% below projections. This analysis
resulted in the following range of per share values for First Choice Bank common stock, applying the price to 2020 earnings multiples
range of 13.0x to 18.0x referred to above and a discount rate of 13.99%.
Earnings Per Share Multiples
Annual
Estimate
Variance
|
|
|
13.0x
|
|
|
14.0x
|
|
|
15.0x
|
|
|
16.0x
|
|
|
17.0x
|
|
|
18.0x
|
|
|
(25.0
|
)%
|
|
$
|
3.78
|
|
|
$
|
4.07
|
|
|
$
|
4.36
|
|
|
$
|
4.65
|
|
|
$
|
4.94
|
|
|
$
|
5.23
|
|
|
(20.0
|
)%
|
|
$
|
4.03
|
|
|
$
|
4.34
|
|
|
$
|
4.65
|
|
|
$
|
4.96
|
|
|
$
|
5.27
|
|
|
$
|
5.58
|
|
|
(15.0
|
)%
|
|
$
|
4.28
|
|
|
$
|
4.61
|
|
|
$
|
4.94
|
|
|
$
|
5.27
|
|
|
$
|
5.60
|
|
|
$
|
5.93
|
|
|
(10.0
|
)%
|
|
$
|
4.54
|
|
|
$
|
4.88
|
|
|
$
|
5.23
|
|
|
$
|
5.58
|
|
|
$
|
5.93
|
|
|
$
|
6.28
|
|
|
(5.0
|
)%
|
|
$
|
4.79
|
|
|
$
|
5.16
|
|
|
$
|
5.52
|
|
|
$
|
5.89
|
|
|
$
|
6.26
|
|
|
$
|
6.63
|
|
|
0.0
|
%
|
|
$
|
5.04
|
|
|
$
|
5.43
|
|
|
$
|
5.82
|
|
|
$
|
6.20
|
|
|
$
|
6.59
|
|
|
$
|
6.98
|
|
|
5.0
|
%
|
|
$
|
5.29
|
|
|
$
|
5.70
|
|
|
$
|
6.11
|
|
|
$
|
6.51
|
|
|
$
|
6.92
|
|
|
$
|
7.33
|
|
|
10.0
|
%
|
|
$
|
5.54
|
|
|
$
|
5.97
|
|
|
$
|
6.40
|
|
|
$
|
6.82
|
|
|
$
|
7.25
|
|
|
$
|
7.68
|
|
|
15.0
|
%
|
|
$
|
5.80
|
|
|
$
|
6.24
|
|
|
$
|
6.69
|
|
|
$
|
7.13
|
|
|
$
|
7.58
|
|
|
$
|
8.03
|
|
|
20.0
|
%
|
|
$
|
6.05
|
|
|
$
|
6.51
|
|
|
$
|
6.98
|
|
|
$
|
7.44
|
|
|
$
|
7.91
|
|
|
$
|
8.37
|
|
|
25.0
|
%
|
|
$
|
6.30
|
|
|
$
|
6.78
|
|
|
$
|
7.27
|
|
|
$
|
7.75
|
|
|
$
|
8.24
|
|
|
$
|
8.72
|
|
Sandler O’Neill also performed an
analysis that estimated the net present value per share of First Choice Bank common stock assuming that First Choice Bank performed
in accordance earning projections provided by and confirmed with Berkshire Hills Bancorp senior management, inclusive of estimated
cost savings associated with the transaction of $14.9 million for the year ending December 31, 2017, $15.2 million for the year
ending December 31, 2018, $15.4 million for the year ending December 31, 2019, and $15.5 million for the year ending December
31, 2020, as provided by and discussed with Berkshire Hills Bancorp senior management. To approximate the terminal value of First
Choice Bank common stock at December 31, 2020, Sandler O’Neill applied price to 2020 earnings multiples ranging from 13.0x
to 18.0x and multiples of December 31, 2020 tangible book value ranging from 80% to 130%. The terminal values were then discounted
to present values using different discount rates ranging from 11.0% to 17.0%, which were chosen to reflect different assumptions
regarding required rates of return of holders or prospective buyers of First Choice Bank’s common stock. As illustrated
in the following tables, the analysis indicates an imputed range of values per share of First Choice Bank common stock of $12.07
to $21.46 when applying earnings multiples and $8.41 to $17.54 when applying multiples of tangible book value.
Earnings Per Share Multiples
Discount
Rate
|
|
|
13.0x
|
|
|
14.0x
|
|
|
15.0x
|
|
|
16.0x
|
|
|
17.0x
|
|
|
18.0x
|
|
|
11.0
|
%
|
|
$
|
15.50
|
|
|
$
|
16.69
|
|
|
$
|
17.88
|
|
|
$
|
19.08
|
|
|
$
|
20.27
|
|
|
$
|
21.46
|
|
|
12.0
|
%
|
|
$
|
14.85
|
|
|
$
|
16.00
|
|
|
$
|
17.14
|
|
|
$
|
18.28
|
|
|
$
|
19.42
|
|
|
$
|
20.57
|
|
|
13.0
|
%
|
|
$
|
14.24
|
|
|
$
|
15.33
|
|
|
$
|
16.43
|
|
|
$
|
17.52
|
|
|
$
|
18.62
|
|
|
$
|
19.72
|
|
|
14.0
|
%
|
|
$
|
13.66
|
|
|
$
|
14.71
|
|
|
$
|
15.76
|
|
|
$
|
16.81
|
|
|
$
|
17.86
|
|
|
$
|
18.91
|
|
|
15.0
|
%
|
|
$
|
13.10
|
|
|
$
|
14.11
|
|
|
$
|
15.12
|
|
|
$
|
16.12
|
|
|
$
|
17.13
|
|
|
$
|
18.14
|
|
|
16.0
|
%
|
|
$
|
12.57
|
|
|
$
|
13.54
|
|
|
$
|
14.51
|
|
|
$
|
15.47
|
|
|
$
|
16.44
|
|
|
$
|
17.41
|
|
|
17.0
|
%
|
|
$
|
12.07
|
|
|
$
|
13.00
|
|
|
$
|
13.93
|
|
|
$
|
14.86
|
|
|
$
|
15.78
|
|
|
$
|
16.71
|
|
Tangible Book Value Multiples
Discount
Rate
|
|
|
80%
|
|
|
90%
|
|
|
100%
|
|
|
110%
|
|
|
120%
|
|
|
130%
|
|
|
11.0
|
%
|
|
$
|
10.80
|
|
|
$
|
12.14
|
|
|
$
|
13.49
|
|
|
$
|
14.84
|
|
|
$
|
16.19
|
|
|
$
|
17.54
|
|
|
12.0
|
%
|
|
$
|
10.35
|
|
|
$
|
11.64
|
|
|
$
|
12.93
|
|
|
$
|
14.22
|
|
|
$
|
15.52
|
|
|
$
|
16.81
|
|
|
13.0
|
%
|
|
$
|
9.92
|
|
|
$
|
11.16
|
|
|
$
|
12.40
|
|
|
$
|
13.64
|
|
|
$
|
14.88
|
|
|
$
|
16.12
|
|
|
14.0
|
%
|
|
$
|
9.51
|
|
|
$
|
10.70
|
|
|
$
|
11.89
|
|
|
$
|
13.08
|
|
|
$
|
14.27
|
|
|
$
|
15.46
|
|
|
15.0
|
%
|
|
$
|
9.12
|
|
|
$
|
10.27
|
|
|
$
|
11.41
|
|
|
$
|
12.55
|
|
|
$
|
13.69
|
|
|
$
|
14.83
|
|
|
16.0
|
%
|
|
$
|
8.76
|
|
|
$
|
9.85
|
|
|
$
|
10.95
|
|
|
$
|
12.04
|
|
|
$
|
13.14
|
|
|
$
|
14.23
|
|
|
17.0
|
%
|
|
$
|
8.41
|
|
|
$
|
9.46
|
|
|
$
|
10.51
|
|
|
$
|
11.56
|
|
|
$
|
12.61
|
|
|
$
|
13.66
|
|
Sandler O’Neill also considered and
discussed with the Berkshire Hills Bancorp board of directors how this analysis would be affected by changes in the underlying
assumptions, including variations with respect to net income. To illustrate this impact, Sandler O’Neill performed a similar
analysis assuming First Choice Bank’s net income varied from 25% above estimates to 25% below estimates. This analysis resulted
in the following range of per share values for First Choice Bank common stock, applying the price to 2020 earnings multiples range
of 13.0x to 18.0x referred to above and a discount rate of 13.99%.
Earnings Per Share Multiples
Annual
Estimate
Variance
|
|
|
13.0x
|
|
|
14.0x
|
|
|
15.0x
|
|
|
16.0x
|
|
|
17.0x
|
|
|
18.0x
|
|
|
(25.0
|
)%
|
|
$
|
12.40
|
|
|
$
|
13.35
|
|
|
$
|
14.31
|
|
|
$
|
15.26
|
|
|
$
|
16.22
|
|
|
$
|
17.17
|
|
|
(20.0
|
)%
|
|
$
|
12.65
|
|
|
$
|
13.63
|
|
|
$
|
14.60
|
|
|
$
|
15.57
|
|
|
$
|
16.55
|
|
|
$
|
17.52
|
|
|
(15.0
|
)%
|
|
$
|
12.90
|
|
|
$
|
13.90
|
|
|
$
|
14.89
|
|
|
$
|
15.88
|
|
|
$
|
16.88
|
|
|
$
|
17.87
|
|
|
(10.0
|
)%
|
|
$
|
13.16
|
|
|
$
|
14.17
|
|
|
$
|
15.18
|
|
|
$
|
16.19
|
|
|
$
|
17.21
|
|
|
$
|
18.22
|
|
|
(5.0
|
)%
|
|
$
|
13.41
|
|
|
$
|
14.44
|
|
|
$
|
15.47
|
|
|
$
|
16.50
|
|
|
$
|
17.53
|
|
|
$
|
18.57
|
|
|
0.0
|
%
|
|
$
|
13.66
|
|
|
$
|
14.71
|
|
|
$
|
15.76
|
|
|
$
|
16.81
|
|
|
$
|
17.86
|
|
|
$
|
18.92
|
|
|
5.0
|
%
|
|
$
|
13.91
|
|
|
$
|
14.98
|
|
|
$
|
16.05
|
|
|
$
|
17.12
|
|
|
$
|
18.19
|
|
|
$
|
19.26
|
|
|
10.0
|
%
|
|
$
|
14.16
|
|
|
$
|
15.25
|
|
|
$
|
16.34
|
|
|
$
|
17.43
|
|
|
$
|
18.52
|
|
|
$
|
19.61
|
|
|
15.0
|
%
|
|
$
|
14.42
|
|
|
$
|
15.53
|
|
|
$
|
16.63
|
|
|
$
|
17.74
|
|
|
$
|
18.85
|
|
|
$
|
19.96
|
|
|
20.0
|
%
|
|
$
|
14.67
|
|
|
$
|
15.80
|
|
|
$
|
16.93
|
|
|
$
|
18.05
|
|
|
$
|
19.18
|
|
|
$
|
20.31
|
|
|
25.0
|
%
|
|
$
|
14.92
|
|
|
$
|
16.07
|
|
|
$
|
17.22
|
|
|
$
|
18.36
|
|
|
$
|
19.51
|
|
|
$
|
20.66
|
|
In connection with its analyses, Sandler
O’Neill considered and discussed with the Berkshire Hills Bancorp board of directors how the present value analyses would
be affected by changes in the underlying assumptions. Sandler O’Neill noted that the net present value analysis is a widely
used valuation methodology, but the results of
such methodology are highly dependent upon the numerous assumptions
that must be made, and the results thereof are not necessarily indicative of actual values or future results.
Pro Forma Merger Analysis.
Sandler O’Neill analyzed certain potential pro forma effects of the merger based on the following assumptions: (i) the merger
closes in the fourth calendar quarter of 2016; (ii) pursuant to the merger agreement, each share of First Choice Bank common stock
issued and outstanding immediately prior to the Effective Time will be converted into the right to receive, without interest,
0.5773 shares of Berkshire Hills Bancorp common stock; (iii) all outstanding First Choice Bank options and warrants are cashed
out by Berkshire Hills Bancorp at closing; and (iv) Berkshire Hills Bancorp’s closing stock price of $25.51 on June 24,
2016. Sandler O’Neill also incorporated the following assumptions, each of which were provided by and discussed with Berkshire
Hills Bancorp’s senior management: (a) financial projections for First Choice Bank for the years ending December 31, 2016
through December 31, 2020; (b) estimated earnings per share projections for Berkshire Hills Bancorp, based on publicly available
analyst consensus median earnings per share estimates for the years ending December 31, 2016 through December 31, 2018 with an
estimated long-term earnings per share growth rate for the years thereafter; (c) a per share dividend payment at closing by First
Choice Bank to holders of First Choice Bank common stock; (d) purchase accounting adjustments, including a gross credit mark on
loans, a negative interest rate mark on gross loans, a negative mark on owned real estate, a fixed asset write-down, a positive
interest rate mark on time deposits and a positive interest rate mark on borrowings; (e) the reversal of First Choice Bank’s
existing allowance for loan and lease losses; (f) an estimated deposit run-off on First Choice Bank’s deposits; (g) estimated
cost savings; (h) pre-tax one-time transaction costs and expenses; and (i) a mortgage bonus payment to First Choice Bank at close
and over the subsequent three years. In addition, Sandler O’Neill assumed a core deposit premium on First Choice Bank’s
core deposits with straight line depreciation over 5 years and a pre-tax opportunity cost of cash of approximately 2.0%. The analysis
indicated that the merger could be accretive to Berkshire Hills Bancorp’s estimated earnings per share in 2017 (excluding
transaction expenses in 2017) and dilutive to estimated tangible book value per share at close.
In connection with this analyses, Sandler
O’Neill considered and discussed with the Berkshire Hills Bancorp board of directors how the analysis would be affected
by changes in the underlying assumptions, including the impact of final purchase accounting adjustments determined at the closing
of the transaction, and noted that the actual results achieved by the combined company may vary from projected results and the
variations may be material.
Sandler O’Neill’s Relationship.
Sandler O’Neill is acting as financial advisor to Berkshire Hills Bancorp’s board of directors in connection
with the merger and will receive a transaction fee in an amount equal to approximately $838,000, 10% of such fee was paid to Sandler
O’Neill upon Berkshire Hills Bancorp’s entry into the merger agreement and the remainder will become payable at the
time of closing of the merger. In addition, Sandler O’Neill received a fee in an amount equal to $200,000 upon rendering
its fairness opinion to the Berkshire Hills Bancorp board of directors in connection with the merger, which fairness opinion fee
will be credited in full towards the portion of the transaction fee which will become payable to Sandler O’Neill on the
day of closing of the merger. Berkshire Hills Bancorp has also agreed to reimburse Sandler O’Neill, upon request made from
time to time, for its reasonable out-of-pocket expenses incurred in connection with its engagement, including the reasonable fees
and disbursements of its legal counsel. Berkshire Hills Bancorp has also agreed to indemnify Sandler O’Neill and its affiliates
and their respective partners, directors, officers, employees, agents and controlling persons harmless from and against any and
all losses, claims, damages and labilities, joint or several, to which it may become subject under applicable federal or state
law.
In the two years preceding the date of Sandler
O’Neill’s opinion, Sandler O’Neill provided certain other investment banking services to Berkshire Hills Bancorp
and received fees for such services. Specifically, Sandler O’Neill advised Berkshire Hills Bancorp in its acquisition of
Hampden Bancorp, Inc., for which it received fees totaling approximately $900,000. In addition, in the ordinary course of Sandler
O’Neill’s business as a broker-dealer, Sandler O’Neill may purchase securities from and sell securities to Berkshire
Hills Bancorp, First Choice Bank and their respective affiliates. Sandler O’Neill may also actively trade the equity and
debt securities of Berkshire Hills Bancorp, First Choice Bank or their respective affiliates for its own account and for the accounts
of its customers.
Consideration to be
Received in the Merger
Each share of First Choice
Bank common stock issued and outstanding immediately prior to the effective time of the Merger (other than dissenting shares, if
applicable) will be converted into the right to receive 0.5773
shares of
Berkshire Hills
Bancorp common stock as described herein. In addition, each outstanding share of First Choice Bank preferred stock will be converted
into the right to receive such number of Berkshire Hills Bancorp common stock equal to the number of shares of First Choice Bank
common stock issuable upon the conversion of the First Choice Bank preferred stock multiplied by 0.5773. Based on 3,207,493 shares
of First Choice Bank common stock issued and outstanding as of August [__], plus 4,270,829 shares of First Choice Bank common stock
issuable upon the conversion of the issued and outstanding shares of First Choice Bank Series A through Series E preferred stock,
and the 0.5773 exchange ratio, approximately 4,317,235 shares of Berkshire Hills Bancorp common stock will be issued to First Choice
Bank shareholders.
Based on Berkshire Hills Bancorp’s
closing price of $25.51 on June 24, 2016 (the date preceding the public announcement of the proposed transaction), each share of
First Choice Bank common stock exchanged for 0.5773 shares of Berkshire Hills Bancorp common stock, would have a value of $14.73.
Based on Berkshire Hills Bancorp’s closing price of $____ on
[______, 2016]
, each share of First Choice Bank common
stock exchanged for 0.5773 shares of Berkshire Hills Bancorp common stock would have a value of $____. Berkshire Hills Bancorp
common stock is listed on the New York Stock Exchange under the symbol “BHLB.” First Choice Bank stock is not traded
on any established public trading market.
Berkshire Hills Bancorp will
pay to each holder of First Choice Bank common stock otherwise entitled to receive a fractional share of Berkshire Hills Bancorp
common stock, an amount in cash, rounded to the nearest cent and without interest, equal to the value of such fractional share
determined in accordance with the paragraph above.
First Choice Bank Common
Stock Special Dividend
Pursuant to the terms of the Merger Agreement,
First Choice Bank may pay a special dividend to the holders of its common stock if:
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its tangible book value per share as of the last day of the calendar month prior to the closing date of the Merger is greater
than $14.22 per share, and
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First Choice Bank has a positive core net income.
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If both criteria are met, then First Choice
Bank may pay a per share dividend to the holders of its common stock immediately prior to the effective time of the Merger in an
aggregate amount not to exceed 35% of Core Net Income per share in excess of the $14.22 tangible book value per share, provided
First Choice Bank maintains a tangible book value per common share of at least $14.22 following the payment of the special dividend.
Core Net Income is defined in the Merger Agreement
as the consolidated net income of First Choice Bank and its subsidiaries for the period beginning July 1, 2016 and ending on the
last day of the calendar month immediately preceding the closing date of the Merger, plus certain payments, if any, made by First
Choice Bank to the U.S. to the U.S. Small Business Administration, and minus any non-core net income, including any gains on the
sale of assets, reversals of provisions for loan and lease losses, other nonrecurring items or income that is not consistent with
past practice.
Treatment of First Choice
Bank Stock Options and Warrants
Under the terms of the merger agreement, outstanding
options and warrants to purchase First Choice Bank common stock, whether or not vested; will be terminated with a payment to the
holder of the option or warrant, as applicable, of an amount of cash equal to:
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the excess, if any, of $16.00 over the applicable per share price of the option or warrant, as applicable,
multiplied by
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the number of shares of First Choice Bank common stock that the holder could have purchased with the option or warrant, as
applicable, if the holder had exercised the option or warrant, as applicable, immediately prior to the date of the Merger.
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Surrender of Stock Certificates
Promptly
following the completion of the Merger, Berkshire Hills Bancorp will cause to be delivered to First Choice Bank shareholders a
letter of transmittal, together with instructions for the surrender of their First Choice Bank stock certificates in exchange for
the merger consideration. Until a First Choice Bank shareholder surrenders his, her or its First Choice Bank stock certificates
in exchange for the merger consideration, First Choice Bank shareholders will not be paid dividends or other distributions declared
after the Merger with respect to any Berkshire Hills
Bancorp
common
stock for which their First Choice Bank shares may be exchanged. When First Choice Bank shareholders surrender their First Choice
Bank stock certificates, Berkshire Hills Bancorp will pay any unpaid dividends or other distributions, without interest. After
the completion of the Merger, there will be no further transfers of First Choice Bank stock. First Choice Bank stock certificates
surrendered after the completion of the Merger will be canceled and exchanged for the merger consideration.
If their First Choice Bank stock certificates
have been lost, stolen or destroyed, First Choice Bank shareholders will have to prove their ownership of these certificates and
that they were lost, stolen or destroyed before they receive any consideration for their shares. The letter of transmittal will
include instructions on how to provide evidence of ownership.
Accounting Treatment
of the Merger
In accordance with current accounting guidance,
the Merger will be accounted for pursuant to accounting standards for business combinations. The result of this is that the recorded
assets and liabilities of Berkshire Hills Bancorp will be carried forward at their recorded amounts, the historical operating results
will be unchanged for the prior periods being reported on and that the assets and liabilities of First Choice Bank will be adjusted
to fair value at the date of the Merger. In addition, all identified intangibles will be recorded at fair value and included as
part of the net assets acquired. To the extent that the purchase price, consisting of cash plus the number of shares of Berkshire
Hills Bancorp common stock to be issued to former First Choice Bank shareholders and option and warrant holders at fair value,
exceeds the fair value of the net assets including identifiable intangibles of First Choice Bank at the Merger date, that amount
will be reported as goodwill. In accordance with current accounting guidance, goodwill will not be amortized but will be evaluated
for impairment annually. Identified intangibles will be amortized over their estimated lives. Further, operating results of First
Choice Bank will be included in the operating results of Berkshire Hills Bancorp beginning from the date of completion of the Merger.
Material United States
Federal Income Tax Consequences of the Merger
General
.
The following discussion sets forth the material U.S. federal income tax consequences of the Merger to U.S. holders (as defined
below) of First Choice Bank preferred stock and common stock, generally referred to as “First Choice Bank stock,” who
exchange First Choice Bank stock for Berkshire Hills Bancorp common stock in the Merger. The discussion also sets forth the material
U.S. federal income tax consequences to U.S. holders of the pre-merger special dividend (as defined below), if made. This discussion
does not address any tax consequences arising under the laws of any state, locality or foreign jurisdiction, or under any U.S.
federal tax laws (such as the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation
Act of 2010) other than federal income tax law. This discussion is based upon the Internal Revenue Code of 1986, as amended (referred
to as the “Code”), the regulations of the U.S. Department of the Treasury and court and administrative rulings and
decisions in effect on the date of this document. These laws may change, possibly retroactively, and any change could affect the
continuing validity of this discussion.
For
purposes of this discussion, you are a “U.S. holder” if you beneficially own First Choice Bank stock and you are:
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a citizen or resident of the United States for U.S. federal income tax purposes;
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a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the
laws of the United States or any of its political subdivisions;
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a trust that (1) is subject to the primary supervision of a court within the United States and the control over substantial
decisions of which is vested in one or more U.S. persons or (2) has a valid election in effect under applicable U.S. Treasury regulations
to be treated as a U.S. person; or
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an estate that is subject to U.S. federal income tax on its income regardless of its source.
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This discussion assumes that you hold your shares
of First Choice Bank stock as a capital asset within the meaning of Section 1221 of the Code. Further, this discussion does not
address all aspects of U.S. federal income taxation that may be relevant to you in light of your particular circumstances or that
may be applicable to you if you are subject to special treatment under the U.S. federal income tax laws, including if you are:
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a financial institution;
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a tax-exempt organization;
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an S corporation or other pass-through entity;
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a regulated investment company or real estate investment trust;
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a controlled foreign corporation or passive foreign investment company;
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a dealer or broker in securities or foreign currencies;
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a trader in securities who elects the mark-to-market method of accounting for your securities;
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a First Choice Bank shareholder whose shares are qualified small business stock for purposes of Section 1202 of the Code or
who may otherwise be subject to the alternative minimum tax provisions of the Code;
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a First Choice Bank shareholder who received First Choice Bank stock through the exercise of employee stock options or otherwise
as compensation, through the exercise of warrants or conversion of First Choice Bank preferred stock, or through a tax-qualified
retirement plan;
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an expatriate or person who has a functional currency other than the U.S. dollar; or
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a First Choice Bank shareholder who holds First Choice Bank stock as part of a hedge, straddle or a constructive sale or conversion
transaction.
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In
addition, this discussion does not address the tax consequences of the Merger to holders of First Choice Bank stock other than
U.S. holders, holders of First Choice Bank options or warrants, or holders of First Choice Bank stock who exercise appraisal and/or
dissenters rights. This discussion does not address the tax consequences to a holder of First Choice Bank stock of the receipt
of regular monthly dividends paid consistently in accordance with past practice.
If
a partnership (including an entity treated as a partnership for U.S. federal income tax purposes) holds First Choice Bank stock,
the tax treatment of a partner in the partnership will generally depend on the status of such partner and the activities of the
partnership.
This
discussion is not intended to be tax advice to any particular holder of First Choice Bank stock. Tax matters regarding the Merger
are complicated, and the tax consequences of the Merger to you will depend on your particular situation. First Choice Bank shareholders
are urged to consult their tax advisors as to the U.S. federal income tax consequences of the Merger, as well as the effects of
state, local, federal non-income and non-U.S. tax laws.
It
is a condition to the closing of the Merger that Berkshire Hills Bancorp receive the opinion of its legal counsel, Luse Gorman,
PC, and First Choice Bank receive the opinion of its legal counsel, Pepper Hamilton LLP, each dated as of the effective time of
the Merger, substantially to the effect that, on the basis of facts, representations
and
assumptions set forth or referred to in that opinion (including factual representations contained in certificates of officers of
Berkshire Hills Bancorp and First Choice Bank), the Merger will be treated for U.S. federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code. The tax opinions are not binding on the Internal Revenue Service, or “IRS,”
or any court. Berkshire Hills Bancorp and First Choice Bank have not sought and will not seek any ruling from the IRS regarding
any matters relating to the Merger and, as a result, there can be no assurance that the IRS will not assert, or that a court would
not sustain, a position contrary to any of the conclusions set forth below. In addition, if any of the representations or assumptions
upon which the opinions are based are inconsistent with the actual facts, the U.S. federal income tax consequences of the Merger
could be adversely affected.
Based
on the opinions that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code, the material
U.S. federal income tax consequences of the Merger are as follows:
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No gain or loss generally will be recognized by a U.S. holder of First Choice Bank stock upon the receipt of shares of Berkshire
Hills Bancorp common stock in exchange therefor pursuant to the Merger (except in respect of cash received in lieu of fractional
shares, as discussed below);
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The aggregate adjusted tax basis of the shares of Berkshire Hills Bancorp common stock received by the U.S. holder in the Merger
will be the same as the aggregate adjusted tax basis of shares of First Choice Bank stock surrendered in exchange therefor, reduced
by the tax basis allocable to any fractional share of Berkshire Hills Bancorp common stock for which cash is received;
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The holding period of Berkshire Hills Bancorp common stock received by a U.S. holder will include the holding period of the
First Choice Bank stock exchanged therefor; and
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Although no fractional shares of Berkshire Hills Bancorp common stock will be issued in the Merger, a U.S. holder who receives
cash in lieu of such a fractional share of Berkshire Hills Bancorp common stock will generally be treated as having received the
fractional share pursuant to the Merger and then having sold that fractional share of Berkshire Hills Bancorp common stock for
cash. As a result, a U.S. holder will generally recognize gain or loss equal to the difference between the amount of cash received
and the portion of the holder’s aggregate adjusted tax basis of the shares of First Choice Bank stock surrendered that is
allocable to its fractional share. Any capital gain or loss will be long-term capital gain or loss if the holding period for the
fractional share (including the holding period of the shares of First Choice Bank stock surrendered therefor) is more than one
year. Long-term capital gains of individuals generally are eligible for reduced rates of taxation. The deductibility of capital
losses is subject to limitations.
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For purposes of the
above discussion of the bases and holding periods for shares of First Choice Bank stock and Berkshire Hills Bancorp common stock,
First Choice Bank shareholders who acquired different blocks of First Choice Bank stock at different times or at different prices
must calculate their basis and holding periods separately for each identifiable block of such stock exchanged or received in the
Merger.
Pre-Merger Special
Dividend
. Under the terms of the merger agreement, First Choice Bank may, if certain circumstances are met, pay a per share
distribution to the holders of First Choice Bank common stock immediately prior to the effective time of the Merger (the “pre-merger
special dividend”). The pre-merger special dividend is intended to be treated as a distribution by First Choice Bank within
the meaning of Section 301 of the Code and not as consideration paid for First Choice Bank stock in the Merger. It is possible
that the IRS would disagree with the characterization of the pre-merger special dividend as a distribution by First Choice Bank
within the meaning of Section 301 of the Code and instead seek to characterize the pre-merger special dividend as merger consideration
paid by Berkshire Hills Bancorp in exchange for a portion of a holder’s First Choice Bank common stock. If this characterization
were to be sustained, the tax consequences of the cash received pursuant to the pre-merger special dividend would be different
than described herein.
Assuming the pre-merger
special dividend is characterized as a distribution by First Choice Bank under Section 301 of the Code, the pre-merger special
dividend will be treated as a dividend for U.S. federal income tax purposes to the extent paid out of current or accumulated earnings
and profits of First Choice Bank. Generally, individual U.S. holders who meet applicable holding period requirements under the
Code for “qualified dividends”
(generally more than 60 days during the
121-day period surrounding the ex-dividend date) will be taxed on the pre-merger special dividend at a maximum U.S. federal income
tax rate of 20%. To the extent that the amount of any dividend exceeds First Choice Bank’s current and accumulated earnings
and profits, the excess will first be treated as a tax-free return of capital, causing a reduction in the U.S. holder’s adjusted
tax basis in the First Choice Bank common stock. If such basis is reduced to zero, any remaining portion of the pre-merger special
dividend will be taxed as capital gain, which would be long-term capital gain if the U.S. holder has held the First Choice Bank
common stock for more than one year at the time the pre-merger special dividend is received.
To the extent an individual
U.S. holder of First Choice Bank common stock includes in income the pre-merger special dividend as a qualified dividend and such
dividend constitutes an “extraordinary dividend” (generally, where the amount of the dividend exceeds 10% of the holder’s
tax basis in its stock), any loss on the sale or exchange of such stock, to the extent of such dividend, will be treated as long-term
capital loss. U.S. holders of First Choice common stock should consult their tax advisors regarding the possible applicability
of the extraordinary dividend provisions of the Code with respect to the pre-merger special dividend and the potential effect of
such provisions on any losses realized with respect to Berkshire Hills Bancorp common stock received in the merger.
In addition, U.S. holders
that are corporations should consult their tax advisors regarding the possible availability of a dividends received deduction and
the potential applicability of the extraordinary dividend provisions of the Code with respect to the pre-merger special dividend.
U.S. holders should
consult their tax advisors regarding any alternative characterization of the pre-merger special dividend, including as consideration
received in exchange for their shares of First Choice Bank common stock.
Backup Withholding
.
Payments of cash (including cash in lieu of a fractional share and the pre-merger special dividend, if any) to a U.S. holder of
First Choice Bank stock may, under certain circumstances, be subject to information reporting and backup withholding (currently
at a rate of 28%) unless such holder provides proof of an applicable exemption or, in the case of backup withholding, furnishes
its taxpayer identification number and otherwise complies with the backup withholding rules. Any amounts withheld from payments
to a U.S. holder of First Choice Bank stock under the backup withholding rules are not an additional tax and generally will be
allowed as a refund or credit against such holder’s federal income tax liability provided that the holder timely furnishes
the required information to the IRS.
Reporting Requirements
.
U.S. holders of First Choice Bank stock who receive Berkshire Hills Bancorp common stock pursuant to the Merger will be required
to retain records pertaining to the Merger, and any such holder who, immediately before the Merger, holds at least 1% (by vote
or value) of the outstanding First Choice Bank stock, or securities of First Choice Bank with a basis for federal income tax purposes
of at least $1 million, will be required to file with its U.S. federal income tax return for the year in which the Merger takes
place a statement setting forth certain facts relating to the Merger.
The preceding discussion
is a summary of the material U.S. federal income tax consequences of the Merger to a U.S. holder of First Choice Bank stock does
not address all potential tax consequences that apply or that may vary with, or are contingent on, individual circumstances, and
should not be construed as tax advice. Moreover, the discussion does not address any U.S. federal non-income tax or any foreign,
state or local tax consequences of the Merger. Tax matters are very complicated and, accordingly, we strongly urge you to consult
with a tax advisor to determine the particular federal, state, local and foreign income and other tax consequences to you of the
Merger
.
Resale
of Berkshire Hills
Bancorp
Common Stock
Shares
of Berkshire Hills Bancorp common stock received by First Choice Bank shareholders in the Merger will be registered under the Securities
Act of 1933 and will be freely transferable.
This
proxy statement/prospectus does not cover resales of Berkshire Hills Bancorp’s common stock received by any person who may
be deemed to be an affiliate of First Choice Bank or Berkshire Hills Bancorp.
Interests of Certain
Persons in the Merger that are Different from Yours
In considering the recommendation of the First
Choice Bank board of directors that you vote to approve the Merger Agreement, you should be aware that some of First Choice Bank’s
officers and directors have employment and other compensation agreements or economic interests that are different from, or in addition
to, those of First Choice Bank shareholders generally. The First Choice Bank board of directors was aware of and considered these
interests, among other matters, in evaluating and negotiating the Merger Agreement, and in recommending to the shareholders that
the Merger Agreement be approved.
Employment Agreements with First Choice
Bank.
First Choice Bank previously entered into employment agreements with each of Howard N. Hall (on November 9, 2014),
Joanne O’Donnell (on January 5, 2015), and Lisa M. Tuccillo (on March 1, 2013). Under the employment agreements, if an executive’s
employment is terminated by First Choice Bank, or any successor, subsequent to the Merger and during the term of his or her employment
agreement for any reason other than cause or the executive’s death, or if the executive resigns for good reason, then the
executive will receive a severance amount equal to one and one-half times his or her base salary (one times base salary for Ms.
O’Donnell). If payable, the cash severance payable to Mr. Hall, Ms. O’Donnell and Ms. Tuccillo is estimated to be $370,500,
$211,000 and $270,000, respectively, less tax withholding. Additionally, Mr. Hall and Ms. O’Donnell would be entitled to
continued health insurance, at no cost to the executive, for eighteen months (twelve months for Ms. O’Donnell). The employment
agreements provide that the cash severance payments, will be paid over a period of eighteen months in the case of Mr. Hall, a period
of twelve months in the case of Ms. O’Donnell, and in a single lump sum cash payment in the case of Ms. Tuccillo.
Cash Payment for Outstanding Options and
Warrants.
Under the terms of the merger agreement, outstanding options and warrants to purchase First Choice
Bank common stock, whether or not vested; will be terminated with a payment to the holder of the option or warrant, as applicable,
of an amount of cash equal to (i) the excess, if any, of $16.00 over the applicable per share price of the option or warrant, as
applicable, (ii) multiplied by the number of shares of First Choice Bank common stock that the holder could have purchased with
the option or warrant, as applicable, if the holder had exercised the option or warrant, as applicable, immediately prior to the
date of the Merger. Paul E. Fitzgerald, Howard N. Hall, Joanne O’Donnell and Lisa M. Tuccillo who hold 25,000; 10,000; 7,500
and 27,500 stock options, respectively, will receive cash payments of $2,500; $1,000, $750 and $124,025, respectively, upon termination
of the options. Non-employee directors Steven Doerler, Nancy Dudas, Geoffrey Morsell, Munish Sood, Martin Tuchman, Richard Weise,
and Robert Workman will each receive $98,500, $89,200, $103,015, $95,500, $107,500, $80,500, and $85,300, respectively, in cash
upon the termination of the stock options held by each of them. Additionally, non-employee directors Steven Doerler, Nancy Dudas,
Geoffrey Morsell, Munish Sood, Martin Tuchman, and Richard Weise will each receive a cash payment in exchange for the termination
of the warrants held by each of them in the same manner as all other holders of warrants.
Severance Pay
.
Under the terms
of the Merger Agreement, each person who is an employee of First Choice Bank or a subsidiary of First Choice Bank and who is terminated
for a reason other than cause within twelve months subsequent to the date of the Merger or resigns for good reason within twelve
months subsequent to the date of the Merger or is not offered employment as of the date of the Merger, excluding those employees
who are entitled to benefits under employment or change of control arrangements, shall be entitled to severance benefits. The amount
of the severance benefits shall be determined under the applicable employer’s severance plan, First Choice Bank or a subsidiary
of First Choice Bank, or Berkshire Bank’s severance plan if such payments would be more favorable to such person.
Indemnification.
Pursuant to the
Merger Agreement, Berkshire Hills Bancorp has agreed that it will from and after the effective time of the Merger, to the fullest
extent permitted under applicable law, indemnify, defend and hold harmless each present and former officer, employee or director
of First Choice Bank or any subsidiary of First Choice Bank against all losses, claims, damages, costs, expenses, liabilities or
judgments or amounts that are paid in settlement of or in connection with any action or investigation arising in whole or in part,
out of the fact that such person is or was an officer, employee or director of First Choice Bank or any subsidiary of First Choice
Bank. Any such claim must pertain to a matter arising, existing or occurring before the effective time of the Merger, regardless
of whether such claim is asserted or claimed before or after the effective time of the Merger.
Directors’ and Officers’ Insurance
.
Berkshire Hills Bancorp has further agreed to obtain and fully pay the premiums for the extension of First Choice Bank’s
existing directors’ and officers’ insurance policies, in each case for a claims reporting or discovery period of at
least six years from and after the effective time of the Merger. Berkshire Hills Bancorp is not required to spend more than 200%
of the annual premiums currently paid by First Choice Bank.
Three-Year Retention Agreements
.
Seven executive officers of First Choice Loan Services entered into three-year retention agreements with Berkshire Hills Bancorp
and Berkshire Bank, which will become effective immediately prior to the Merger. Each of these executive officers of First Choice
Loan Services must remain employed by First Choice Loan Services in the same capacities as they were on June 24, 2016 through the
Merger.
Agreement with Chairman
. Concurrent
with the execution of the Merger Agreement, Martin Tuchman, First Choice Bank’s Chairman, entered into an agreement with
Berkshire Hills Bancorp, which, among other things, would provide Berkshire Hills Bancorp a right of first refusal after the Merger
on certain sales of Berkshire Hills Bancorp common stock by Mr. Tuchman and otherwise restricts Mr. Tuchman’s ability to
sell shares of Berkshire Hills Bancorp common stock, influence corporate transactions and management of Berkshire Hills Bancorp,
and initiate and support actions or shareholder proposals not recommended by Berkshire Hills Bancorp’s board of directors.
Additionally, during the 36-month term of this agreement, Mr. Tuchman must vote all Berkshire Hills Bancorp common stock beneficially
owned by him in a manner consistent with the recommendations of the board of directors of Berkshire Hills.
Employee Matters
Each person who is an employee of First Choice
Bank as of the closing of the Merger will become an employee of Berkshire Bank and will be eligible to participate in group health,
medical, dental, life, disability, and other welfare plans available to similarly situated employees of Berkshire Bank on the same
basis that it provides such coverage to Berkshire Bank employees. With respect to any welfare plan or program of First Choice Bank
that in the determination of Berkshire Hills Bancorp provides benefits of the same type as a plan maintained by Berkshire Hills
Bancorp, Berkshire Hills Bancorp may continue the First Choice Bank plan until such employees become eligible for the Berkshire
Hills Bancorp plan so that there is no gap in coverage. Berkshire Hills Bancorp will give credit to continuing First Choice Bank
employees for purposes of Berkshire Bank’s vacation and other paid leave programs for their accrued and unpaid vacation and/or
leave balance with First Choice Bank. Employees of First Choice Bank will be eligible to participate in the Berkshire Bank 401(k)
Plan as of the day following the closing date of the Merger.
Operations of Berkshire
Bank after the Merger
After the Merger of First Choice Bank into Berkshire
Bank, Berkshire Bank will continue to operate as a wholly-owned subsidiary of Berkshire Hills. Certain subsidiaries of First Choice
Bank, including First Choice Loan Services, will become a wholly-owned subsidiary of Berkshire Bank. The senior executive officers
of First Choice Loan Services have entered into agreements with Berkshire Hills Bancorp and Berkshire Bank to remain as officers
of First Choice Loan Services following the Merger. These agreements, among other things, provide for the payment of an aggregate
of $1.5 million in sign-on bonuses to the executive officers, payable in installments at the effective time and on the first two
anniversaries of the effective time, provided the executive officers remain employed on the payment dates. The current Chief Operating
Officer of Berkshire Bank will be appointed President of First Choice Loan Services upon completion of the Merger.
Agreement with First Choice Bank Chairman
Concurrent with the execution of the Merger
Agreement, Martin Tuchman, First Choice Bank’s Chairman, entered into an agreement with Berkshire Hills. Such agreement provides
that for a term of up to 36 months from the date of the closing of the Merger, Mr. Tuchman generally may not: (i) with certain
exceptions, transfer Berkshire Hills Bancorp common stock beneficially owned unless such transfers are within certain timing and
volume limits and if outside those timing or volume limitations, Berkshire Hills Bancorp is provided the right of first refusal
on any sale, (ii) influence corporate transactions or management of Berkshire Hills Bancorp, or (iii) otherwise initiate
or support actions or shareholder proposals unless such actions
or proposals are approved or recommended by Berkshire Hills Bancorp’s board of directors. Additionally, during the term of
this agreement, Mr. Tuchman must vote all Berkshire Hills Bancorp common stock beneficially owned in a manner consistent with the
recommendations of the board of directors of Berkshire Hills Bancorp.
Time of Completion
Unless the parties agree otherwise and unless
the Merger Agreement has otherwise been terminated, the closing of the Merger will take place on a date that is no later than the
fifth business day following the date on which all of the conditions to the Merger contained in the Merger Agreement are satisfied
or waived. See “
—Conditions to Completing the Merger.
” On the closing date of the Merger, Berkshire Bank
will file articles of merger with the Massachusetts Department of Banking, the Massachusetts Secretary of the Commonwealth and
the New Jersey Commissioner of Banking and Insurance merging First Choice Bank into Berkshire Bank. The Merger will become effective
at the time stated in the articles of merger.
Berkshire Hills Bancorp, Berkshire Bank and
First Choice Bank are working to complete the Merger quickly. It is currently expected that the Merger will be completed in the
fourth quarter of 2016. However, because completion of the Merger is subject to various conditions, the parties cannot be certain
of the actual timing.
Conditions to Completing
the Merger
The parties’ obligations to consummate
the Merger are conditioned on the following:
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The parties’ representations and warranties contained in the Merger Agreement must be true and
correct as of June 24, 2016, and upon the effective time of the Merger (except to the extent made with reference to an earlier
date, in which case only as of such earlier date), except where the failure of any such representation or warranty to be true and
correct (without giving effect to any “materiality,” “material,” “in all material respects”
or “material adverse effect” qualifier or exception, or similar terms or phrases set forth therein) as of the effective
time of the Merger (or express earlier date) would not have a material adverse effect (except for certain representations and warranties
made in the Merger Agreement regarding the organization, capitalization and corporate authority of the parties, which must be true
and correct in all material respects);
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Each party having performed in all material respects all obligations and complied in all material
respects with all agreements or covenants required by the Merger Agreement to be performed or complied with by them at or prior
to the effective time of the Merger;
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The parties obtaining any and all permits, authorizations, consents, waivers, clearances or approvals required for the consummation
of the Merger and the acquisition of First Choice Loan Services, the failure of which to obtain would have a material adverse effect
on the parties;
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No changes, other than changes contemplated by the Merger Agreement, in the business, operations,
condition (financial or otherwise), assets or liabilities of a party to the Merger Agreement and its subsidiaries (regardless of
whether or not such events or changes are inconsistent with the representations and warranties given in the Merger Agreement) that
individually or in the aggregate has had or reasonably would be expected to have a material adverse effect on such party;
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The Merger Agreement and each transaction contemplated thereby must be approved and adopted by the
requisite votes of the First Choice Bank shareholders;
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All required regulatory approvals having been received and all waiting periods thereto shall have
expired, and such regulatory approvals shall not have included any condition or requirement that would result in a material adverse
effect or a burdensome condition on either of the parties or their subsidiaries;
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None of the parties to the Merger Agreement being subject to any order, decree or injunction, and
no statute rule or regulation having been enacted, entered, promulgated, interpreted, applied or enforced, that enjoins or prohibits
the consummation of the transactions contemplated by the Merger Agreement;
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The registration statement filed by Berkshire Hills Bancorp with the SEC having been declared effective
under the Securities Act and no stop order suspending the effectiveness of the Merger Registration Statement having been issued,
and no proceedings for that purpose having been initiated or threatened by the SEC, and, if the offer and sale of Berkshire Hills
Bancorp common stock in the Merger is subject to state securities laws if any state, no stop order of any state securities commissioner;
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Immediately prior to the effective time of the Merger, specified executive officers of First Choice
Loan Services must have remained employed by First Choice Loan Services in the same capacities as they were on June 24, 2016, and
such officers must have been abiding by, in all material respects, the terms and conditions of the executive agreements that they
previously entered into with Berkshire Hills Bancorp and Berkshire Bank
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Berkshire Hills Bancorp having filed a notification form with the NYSE to list the additional shares
of Berkshire Hills Bancorp common stock to be issued in the Merger;
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Each party receiving a tax opinion to the effect that the Merger will be treated for federal income
tax purposes as a reorganization under Section 368(a) of the Internal Revenue Code;
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No more than 10% of the outstanding shares of First Choice Bank common stock shall have served a written
notice of dissent from the Merger Agreement to First Choice Bank under the New Jersey Banking Act; and
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Berkshire Hills Bancorp, in its sole discretion, has determined that the liabilities and obligations
imposed on First Choice Bank by the United States Small Business Administration for certain identified loans has been sufficiently
determined or formalized.
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Conduct of Business
Before the Merger
The Merger Agreement contains various restrictions
on the operations of First Choice Bank and Berkshire Hills Bancorp before the effective time of the Merger. In general, the Merger
Agreement obligates First Choice Bank and Berkshire Hills Bancorp to conduct their businesses in the usual, regular and ordinary
course of business and to use reasonable efforts to preserve intact their business organizations and assets and maintain their
rights and franchises.
In addition, First Choice Bank has agreed that,
until completion of the Merger and unless permitted by Berkshire Hills Bancorp, it will not:
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take any action that would, or is reasonably likely to, prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code;
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change or waive any provision of First Choice Bank’s or First Choice Loan Services’ certificate
of incorporation or bylaws, except as required by law;
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change the number of authorized or issued shares of its capital stock, issue any shares of First Choice
Bank common stock, or issue or grant any right or agreement of any character relating to its authorized or issued capital stock
or any securities convertible into shares of such stock, make any grant or award under the First Choice Bank 2008 Stock Option
Plan or 2010 Equity Incentive Plan, or split, combine or reclassify any shares of capital stock, or declare, set aside or pay any
dividend or other distribution in respect of capital stock, or redeem or otherwise acquire any shares of capital stock, except
that
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(i) First Choice Bank may issue shares of First Choice Bank common stock upon the valid exercise of presently outstanding
First Choice Bank stock options issued under the First Choice Bank Equity Incentive Plan and First Choice Bank warrants provided
that First Choice Bank shall prohibit the exercise of any First Choice Bank stock option or First Choice Bank warrant beginning
on and after the fifth trading day immediately preceding the closing date of the Merger, (ii) First Choice Bank may issue
shares of First Choice Bank common stock upon the valid exercise of the conversion rights of the First Choice Bank preferred stock,
(iii) shall continue to declare and pay regular monthly cash dividends on First Choice Bank preferred stock, with the total
quarterly amount of dividends to First Choice Bank preferred shareholders not to exceed $386,875 and with payment and record dates
consistent with past practice, (iv) immediately prior to the closing, First Choice Bank may pay a per share dividend to the holders
of First Choice Bank common stock in an aggregate amount not to exceed 35% of core net income in excess of a $14.22 tangible book
value per share, provided that the final tangible book value per share exceeds $14.22 per share and First Choice Bank has a positive
core net income, and (v) any First Choice Bank subsidiary may pay dividends to its parent company (as permitted under applicable
law or regulations).
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enter into, amend in any material respect or terminate any material contract or agreement (including
without limitation any outstanding mortgage servicing agreement or settlement agreement with respect to litigation) in excess of
$100,000, except in the ordinary course of business or as contemplated by the Merger Agreement;
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make application for the opening or closing of any, or open or close any, branch or automated banking
facility;
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grant or agree to pay any bonus (discretionary or otherwise), severance or termination to, or enter
into, renew or amend any employment agreement, severance agreement and/or supplemental executive agreement with, or increase in
any manner the compensation or fringe benefits of, any of its directors, officers, employees or consultants, except (i) as
may be required pursuant to current commitments, (ii) for salary adjustments in the ordinary course of business consistent
with past practice provided that any increases to such amounts shall not exceed four percent (4%)
in the aggregate or (iii) as
otherwise contemplated by the Merger Agreement. Neither First Choice Bank nor any First Choice Bank subsidiary shall hire or promote
any employee to a rank having a title of vice president or other more senior rank or hire any new employee at an annual rate of
compensation in excess of $75,000 (excluding commissions);
provided
,
however
, that that neither First Choice Bank
nor any First Choice Bank subsidiary shall hire any new employee without first seeking to fill any position internally. Neither
First Choice Bank nor or any First Choice Bank subsidiary shall pay expenses of any employee or director for attending conventions
held after June 24, 2016;
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except as agreed to by the parties, enter into or, except as may be required by law or any such plan
or agreement or by the terms of the Merger Agreement and the transactions contemplated therein, modify any pension, retirement,
stock option, stock purchase, stock appreciation right, stock grant, savings, profit sharing, deferred compensation, supplemental
retirement, consulting, bonus, group insurance or other employee benefit, incentive or welfare contract, plan or arrangement, or
any trust agreement related thereto, in respect of any of its directors, officers or employees, or make any contributions to any
defined contribution or defined benefit plan not in the ordinary course of business consistent with past practice and provided
further that First Choice Bank and First Choice Loan Services may not make any discretionary contributions to the First Choice
Bank 401(k) Plan;
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merge or consolidate First Choice Bank or any First Choice Bank subsidiary with any other person;
sell or lease all or any substantial portion of the assets or business of First Choice Bank or First Choice Loan Services; make
any acquisition of all or any substantial portion of the business or assets of any other person other than in connection with foreclosures,
settlements in lieu of foreclosure, troubled loan or debt restructuring, or the collection of any loan or credit arrangement between
First Choice Bank or First Choice Loan Services and any other person; enter into a purchase and assumption transaction with respect
to deposits and liabilities; incur deposit liabilities, other than liabilities
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incurred in the ordinary
course of business consistent with past practice; permit the revocation or surrender by First Choice Bank of its certificate of
authority to maintain, or file an application for the relocation of, any existing branch office, or file an application for a certificate
of authority to establish a new branch office; permit the revocation or surrender by First Choice Loan Services of its certificate
of authority to maintain, or file an application for the relocation of, any existing loan production office, or file an application
for a certificate of authority to establish a new loan production office;
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except as agreed to by the parties, sell or otherwise dispose of any asset of First Choice Bank or
any First Choice Bank subsidiary, including loans and securities, other than in the ordinary course of business consistent with
past practice; except for transactions with the FHLB, subject any asset of First Choice Bank or of any First Choice Bank subsidiary
to a lien, pledge, security interest or other encumbrance (other than in connection with deposits, repurchase agreements, bankers
acceptances, pledges in connection with acceptance of governmental deposits, and transactions in “federal funds” and
the satisfaction of legal requirements in the exercise of trust powers) other than in the ordinary course of business consistent
with past practice; incur any indebtedness for borrowed money (or guarantee any indebtedness for borrowed money), except in the
ordinary course of business consistent with past practice;
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change its ordinary and customary methods, practices or principles of accounting, including but not
limited to, make any reduction in its allowance for loan losses, make any negative provisions for loan losses, recognize unrealized
gain or loss on securities, and deferral of any obligation due in the ordinary course of business, except as may be required from
time to time by any bank regulator responsible for regulating First Choice Bank or any First Choice Bank subsidiary;
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waive, release, grant or transfer any rights of value or modify or change any existing agreement or
indebtedness to which First Choice Bank or any First Choice Bank subsidiary is a party;
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purchase any securities except securities (i) rated “A” or higher by either Standard
& Poor’s Ratings Services or Moody’s Investors Service, (ii) having a face amount in the aggregate of not
more than $3,000,000, in the case of U. S. Treasury and other U. S. Government agencies bonds, including mortgage-backed securities,
and $1,000,000 in the case of all other bonds, (iii) which will, when combined with all other securities of First Choice Bank,
result in a weighted average duration of not more than four (4) years and (iv) otherwise in the ordinary course of business
consistent with past practice;
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except as specifically provided below, and except for commitments issued prior to June 24, 2016, which
have not yet expired and which have been disclosed to Berkshire Bank, and the renewal of existing lines of credit, make any new
loan or other credit facility commitment (including without limitation, lines of credit and letters of credit) (i) in an amount
in excess of $5.0 million for commercial loans, $750,000 for residential loans and $200,000 for home equity loans or lines of credit,
(ii) that involves an exception to policy or (iii) other than as qualified in subsection (i) for a one- to four-family residential
real estate loan that is not eligible for sale in the secondary market to Fannie Mae or Freddie Mac or other investor to which
First Choice Loan Services sells such loans in the ordinary course of business consistent with past practice; provided that Berkshire
Hills Bancorp shall have been deemed to have consented to any loan in excess of such amount or otherwise not permitted by this
section if Berkshire Hills Bancorp does not object to any such proposed loan within three business days of receipt by Berkshire
Hills Bancorp of a request by First Choice Bank to exceed such limit along with all financial or other data that Berkshire Hills
Bancorp may reasonably request in order to evaluate such loan;
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enter into, renew, extend or modify any other transaction (other than a deposit transaction) with
any affiliate of First Choice Bank;
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enter into any futures contracts, options, interest rate caps, interest rate floors, interest rate
exchange agreements or other agreements or take any other action for purposes of hedging the exposure of its interest-earning assets
and interest-bearing liabilities to changes in market rates of interest, other than with respect to the asset pipeline in the ordinary
course of business consistent with past practices;
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First Choice Bank and each First Choice Bank subsidiary shall manage the asset pipeline in the ordinary
course of business consistent with past practice and shall consult with the Bank with respect to all hedging transactions pertaining
to the asset pipeline;
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except for the execution of the Merger Agreement, and actions taken or which will be taken in accordance
with the Merger Agreement and performance thereunder, take any action that would give rise to a right of payment to any individual
under any employment agreement;
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make any change in policies in existence on June 24, 2016, with regard to: the extension of credit,
or the establishment of reserves with respect to the possible loss thereon or the charge off of losses incurred thereon; investments;
asset/liability management; or other banking policies except as may be required by changes in applicable law or regulations, GAAP
or regulatory accounting principles or by a Bank Regulator;
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except for the execution of the Merger Agreement, and the transactions contemplated by the Merger
Agreement and any terminations of employment, take any action that would give rise to an acceleration of the right to payment to
any individual under any First Choice Bank and First Choice Loan Services benefit plan;
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make any capital expenditures in excess of $25,000
individually or $100,000 in the aggregate,
other than for previously binding commitments;
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except as previously disclosed, purchase or otherwise acquire, or sell or otherwise dispose of, any
assets or incur any liabilities other than in the ordinary course of business consistent with past practices and policies;
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except for existing commitments to sell any participation interest in any loan, sell any participation
interest in any loan (other than sales of loans secured by one- to four-family real estate that are consistent with past practice)
unless Berkshire Hills Bancorp has been given the first opportunity and a reasonable time to purchase any loan participation being
sold, or purchase any participation interest in any loan other than purchases of participation interests from Berkshire Hills Bancorp;
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undertake or enter into any lease, contract or other commitment for its account, other than in the
ordinary course of providing credit to customers as part of its banking business, involving a payment by First Choice Bank or any
First Choice Bank subsidiary of more than $25,000 annually, or containing any financial commitment extending beyond twelve (12) months
from June 24, 2016;
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pay, discharge, settle or compromise any claim, action, litigation, arbitration or proceeding, other
than any such payment, discharge, settlement or compromise in the ordinary course of business consistent with past practice that
involves solely money damages in the amount not in excess of $25,000
individually or $50,000 in the aggregate, and that
does not create negative precedent for other pending or potential claims, actions, litigation, arbitration or proceedings;
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foreclose upon or take a deed or title to any commercial real estate without having a Phase I environmental
assessment of the property conducted as of a reasonably current date and, in the event such Phase I environmental assessment of
the property indicates the presence of materials of environmental concern, providing notice to Berkshire Hills Bancorp thereof
prior to final sale;
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purchase or sell any mortgage loan servicing rights other than in the ordinary course of business
consistent with past practice;
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issue any broadly distributed communication to employees relating to post-closing employment, benefit
or compensation information without the prior consent of Berkshire Hills Bancorp (which shall not be unreasonably withheld, conditioned
or delayed) or issue any broadly distributed communication of a general nature to customers without the prior approval of Berkshire
Hills Bancorp (which shall not be unreasonably withheld, conditioned or delayed), except as required by law or for communications
in the ordinary course of business consistent with past practice that do not relate to the Merger or other transactions contemplated
hereby;
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make, change or rescind any material election concerning taxes or tax returns, file any amended tax
return, enter into any closing agreement with respect to taxes, settle or compromise any material tax claim or assessment or surrender
any right to claim a refund of taxes or obtain any tax ruling;
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enter into any modification of a residential mortgage loan available for sale that, as of June 24,
2016, has been closed and funded, but has not been purchased by a secondary market investor; or
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enter into any contract with respect to, or otherwise agree or commit to do, any of the foregoing.
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In addition to these covenants,
the Merger Agreement contains various other customary covenants, including, among other things, access to information, each party’s
efforts to cause its representations and warranties to be true and correct on the closing date of the Merger and each party’s
agreement to take no action that would cause the Merger to fail to qualify as a tax-free reorganization.
Representations and
Warranties Made
by the Parties
in the Merger Agreement
Each of the parties have made certain customary
representations and warranties to each other in the Merger Agreement relating to their businesses. For information on these representations
and warranties, please refer to the Merger Agreement attached as
Annex A
. The representations and warranties must be true
and correct through the effective time of the Merger, except where the failure of any such representation or warranty to be true
and correct as of the effective time of the Merger would not have a material adverse effect (except for certain representations
and warranties made in the Merger Agreement regarding the organization, capitalization and corporate authority of the parties,
which must be true and correct in all material respects). See
“—Conditions to Completing the Merger.”
The representations and warranties contained
in the Merger Agreement were made only for purposes of such agreement and are made as of specific dates, were solely for the benefit
of the parties to such agreement, and may be subject to limitations agreed to by the contracting parties, including qualifications
by disclosures between the parties. These representations and warranties may have been made for the purpose of allocating risk
between the parties to the agreement instead of establishing these matters as facts, and may be subject to standards of knowledge
and materiality applicable to the contracting parties that differ from those applicable to investors as statements of factual information.
Each of the parties has made representations
and warranties to the other regarding, among other things:
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corporate matters, including due organization and qualification;
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authority relative to execution and delivery of the Merger Agreement and the absence of conflicts with, violations of, or a
default under organizational documents or other obligations as a result of the Merger;
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governmental filings and consents necessary to complete the Merger;
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compliance with applicable laws;
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employee and labor matters, and benefit plans;
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truthfulness of information provided for governmental filings;
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the approval of the Merger Agreement and related transactions by each party’s boards of directors;
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risk management instruments;
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related party transactions;
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real and personal property, and insurance matters;
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the absence of any event or action that would constitute a material adverse effect since December 31, 2015;
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broker or financial advisor fees;
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each party’s duties regarding its operations as a fiduciary; and
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In addition, First Choice Bank has made other
representations and warranties about itself to Berkshire Hills Bancorp as to:
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environmental liabilities;
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no obligation to register securities under the Securities Act;
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matters related to bank owned life insurance; and
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First Choice Bank’s stock transfer records.
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In addition, Berkshire Hills Bancorp has made
other representations and warranties about its respective entities to First Choice Bank as to:
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previous documents filed with the SEC;
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sufficient funds to cover the cash consideration at closing; and
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Berkshire Hills Bancorp common stock to be issued at closing will be duly authorized, validly issued, fully paid and non-assessable
and subject to no preemptive rights.
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The representations and warranties of each of
Berkshire Hills Bancorp and First Choice Bank will expire upon the effective time of the Merger.
Regulatory Approvals
Required for the Merger
General
.
First Choice Bank
and
Berkshire Hills Bancorp have agreed to use all reasonable efforts to obtain all permits, consents, approvals and authorizations
of all third parties and governmental entities that are necessary or advisable to consummate the Merger, which will include the
approvals of the Federal Deposit Insurance Corporation, New Jersey Commissioner of Banking and Insurance and the Massachusetts
Commissioner of Banks. Berkshire Hills Bancorp has filed the application or notice materials necessary to obtain these regulatory
approvals. The Merger cannot be completed without such approvals. Berkshire Hills Bancorp and First Choice Bank cannot assure you
that all of the required regulatory approvals will be obtained, when they will be received or whether there will be conditions
in the approvals or any litigation challenging the approvals. Berkshire Hills Bancorp and First Choice Bank also cannot assure
you that the United States Department of Justice or any state attorney general will not attempt to challenge the Merger on antitrust
grounds, or what the outcome will be if such a challenge is made.
Berkshire Hills Bancorp and First Choice Bank
are not aware of any material governmental approvals or actions that are required prior to the Merger other than those described
herein. Berkshire Hills Bancorp and First Choice Bank presently contemplate that each will seek any additional governmental approvals
or actions that may be required in addition to those requests for approvals currently pending; however, Berkshire Hills Bancorp
and First Choice Bank cannot assure you that any such additional approvals or actions will be obtained.
Federal Deposit Insurance Corporation
.
The Merger is subject to approval by the Federal Deposit Insurance Corporation pursuant to the Federal Bank Merger Act. The Federal
Deposit Insurance Corporation may not approve any transaction that would result in a monopoly or otherwise substantially lessen
competition or restrain trade, unless it finds that the anti-competitive effects of the transaction are clearly outweighed by the
public interest. In addition, the Federal Deposit Insurance Corporation considers the financial and managerial resources and future
prospects of the institutions involved and the convenience and needs of the communities to be served. Under the Community Reinvestment
Act, the Federal Deposit Insurance Corporation must take into account the record of performance of each company in meeting the
credit needs of its entire communities, including low and moderate income neighborhoods, served by each company. Berkshire Bank
and First Choice Bank each has a satisfactory CRA rating. The Federal Deposit Insurance Corporation also must consider the effectiveness
of each institution involved in the proposed transaction in combating money-laundering activities, as well as any risk to the financial
stability of the banking or financial systems of the United States.
Federal law requires publication of notice of,
and the opportunity for public comment on, the applications submitted by Berkshire Hills Bancorp and Berkshire Bank for approval
of the Merger and authorizes the Federal Deposit Insurance Corporation to hold a public hearing in connection with the application
if it determines that such a hearing would be appropriate. Any such hearing or comments provided by third parties could prolong
the period during which the application is subject to review. In addition, under federal law, a period of 30 days must expire following
approval by the Federal Deposit Insurance Corporation, within which period the Department of Justice may file objections to the
Merger under the federal antitrust laws. This waiting period may be reduced to 15 days if the Department of Justice has not provided
any adverse comments relating to the competitive factors of the transaction. If the Department of Justice were to commence an antitrust
action, that action would stay the effectiveness of the Federal Deposit Insurance Corporation’s approval of the Merger unless
a court specifically orders otherwise. In reviewing the Merger, the Department of Justice could analyze the Merger’s effect
on competition differently than the Federal Deposit Insurance Corporation, and thus it is possible that the Department of Justice
could reach a different conclusion than the Federal Deposit Insurance Corporation regarding the Merger’s competitive effects.
New Jersey Commissioner of Banking and
Insurance
.
The Merger is subject to the approval of the New Jersey Commissioner of Banking and Insurance under the
New Jersey Banking Act. In determining whether to approve the application, the New Jersey Commissioner of Banking and Insurance
will consider, among other factors, whether the Merger will be in the public interest and conforms to the New Jersey Banking Act.
Massachusetts Commissioner of Banks
.
The Merger is also subject to the approval of the Massachusetts Commissioner of Banks pursuant to Massachusetts law. In determining
whether to approve the application, the Commissioner of Banks will consider, among other factors, whether competition among banking
institutions will be unreasonably affected, whether public convenience and advantage will be promoted and whether the Merger will
result in “net new benefits” within the resulting institution’s Community Reinvestment Act assessment area.
No Solicitation
Until the Merger is completed or the Merger
Agreement is terminated, First Choice Bank has agreed that it, its subsidiaries, its officers, directors, employees, representatives,
agents and affiliates will not:
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directly or indirectly initiate, solicit, induce or knowingly encourage any inquiries or the making of any proposal that constitutes,
or may reasonably be expected to lead to, any acquisition of First Choice Bank, whether by merger, acquisition of 25% or more of
First Choice Bank’s capital stock or 25% or more of the assets of First Choice Bank or otherwise;
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enter into or maintain or continue discussions or negotiations regarding any such acquisition proposal; or
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obtain any such acquisition proposal or agree to or endorse any such acquisition proposal.
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First Choice Bank may, however, furnish information
regarding First Choice Bank to, or enter into discussions or negotiations with, any person or entity in response to an unsolicited
acquisition proposal by such person or entity if and only to the extent that:
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such acquisition proposal did not result from a breach of the “No Solicitation” section of the Merger Agreement;
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First Choice Bank’s board of directors determines in good faith, after consultation with its financial and legal advisors,
that such unsolicited proposal, if consummated, is reasonably likely to result in a transaction more favorable to First Choice
Bank’s shareholders from a financial point of view than the merger with Berkshire Hills Bancorp and is reasonably likely
to be completed in accordance with its terms;
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First Choice Bank receives for the person presenting the unsolicited acquisition proposal an executed confidentiality agreement
in form and substance identical in all material respects to the confidentiality agreement between Berkshire Hills Bancorp and First
Choice Bank; and
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the First Choice Bank special meeting of shareholders has not yet occurred.
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Nothing
contained in the Merger Agreement prohibits First Choice Bank or its representatives from (a) informing any person of the existence
of the provisions of the “No Solicitation” section of the Merger Agreement, (b) contacting any person solely to clarify
the terms and conditions of an acquisition proposal or (c) otherwise disclosing any information to the First Choice Bank shareholders
that the First Choice Bank board of directors determines in good faith (after consultation with its legal counsel) it must disclose
in order not to breach its fiduciary duties to such shareholders.
First Choice Bank must promptly, but in no event
later than one calendar day, notify Berkshire Hills Bancorp of any inquires, proposals or offers received by, any information requested
from, or any discussions or negotiations sought to be initiated or continued with it or any of its representative regarding an
acquisition proposal, indicating in connection with such notice the material terms of, and the name of the person making, any such
inquires, proposals or offers.
Terminating the Merger
Agreement
The Merger Agreement may be terminated prior
to the closing, before or after approval by First Choice Bank’s shareholders, as follows:
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by mutual written agreement of Berkshire Hills Bancorp and First Choice Bank;
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by either Berkshire Hills Bancorp or First Choice Bank if the closing of the Merger has not occurred on or before June 30,
2017, and such failure to close is not due to the terminating party’s material breach of any representation, warranty, covenant
or other agreement contained in the Merger Agreement;
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by Berkshire Hills Bancorp or First Choice Bank if the shareholders of First Choice Bank have voted at the special shareholders’
meeting and do not approve the Merger Agreement;
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by a non-breaching party if the other party breaches any covenants, agreements, representations or warranties contained in
the Merger Agreement and such breach, together with all other such breaches, would entitle the terminating party not to consummate
the transactions contemplated by the Merger Agreement, and if such breach has not been cured within thirty days after written notice
from the terminating party;
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by either party if any required regulatory approvals for consummation of the Merger are not obtained or any court or other
governmental authority issues a final order or other action prohibiting the Merger;
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by Berkshire Hills Bancorp if (a) First Choice Bank receives a “superior proposal,” as defined in the Merger Agreement,
and the First Choice Bank board of directors enters into an acquisition agreement with respect to the superior proposal, withdraws
its recommendation of the Merger Agreement, fails to make such recommendation or modifies or qualifies its recommendation in a
manner adverse to Berkshire Hills Bancorp, (b) either (i) the First Choice Bank board or directors submits the Merger Agreement
to its shareholders without a recommendation for approval or (ii) the First Choice Bank board of directors withdraws, qualifies
or adversely modifies its recommendation of the Merger Agreement to the First Choice Bank shareholders (or publicly proposes or
resolves to do so), and (c) the First Choice Bank shareholders do not approve the Merger Agreement; or
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by First Choice Bank in order to accept a superior proposal, as defined in the Merger Agreement, which has been received and
considered by First Choice Bank in compliance with the applicable terms of the Merger Agreement, provided that First Choice Bank
has notified Berkshire Hills Bancorp in accordance with the Merger Agreement of such superior proposal and has given Berkshire
Hills Bancorp the opportunity during a period of three business days following delivery of the notice to negotiate amendments to
the Merger Agreement which would permit First Choice Bank to proceed with the proposed merger with Berkshire Hills.
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If the Merger Agreement is terminated, under
either of the latter two scenarios described above, First Choice Bank shall pay to Berkshire Hills Bancorp a fee of $4.1 million.
The fee would also be payable to Berkshire Hills Bancorp if First Choice Bank enters into a merger agreement with a third party
within one year of (a) the termination of the Merger Agreement by Berkshire Hills Bancorp due to a breach by First Choice Bank
after the occurrence of a bona fide acquisition proposal has been publicly announced or otherwise made known to the senior management
or board of directors of First Choice Bank, or (b) the termination of the Merger Agreement by any party due to the failure of the
shareholders of First Choice Bank to approve the Merger Agreement at the special meeting after the occurrence of an acquisition
proposal has been publicly announced or otherwise made known to the shareholders of First Choice Bank.
Additionally, First Choice Bank may terminate
the Merger Agreement at any time during the five business-day period commencing on the first date on which all regulatory approvals
(and waivers, if applicable) necessary for consummation of the Merger have been received (disregarding any waiting period) (the
“Determination Date”), if both of the following conditions are satisfied:
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the number attained by dividing the average of the daily closing sales prices of one share of Berkshire Hills Bancorp common
stock for the ten consecutive trading days immediately preceding the Determination Date (the “Average Closing Price”)
is less than $21.52 (the “Berkshire Hills Ratio”); and
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the number obtained by dividing the Berkshire Hills Ratio by $26.91 is less than the number obtained by dividing the sum of
the daily average closing prices of the KBW Regional Bank Index for the ten consecutive trading days immediately preceding the
Determination Date (the “Final Index Price”) by the average of the daily closing price of the KBW Regional Bank Index
for the ten consecutive trading days immediately preceding the Determination Date (the “Index Price”) minus 0.20 (the
“Index Ratio”).
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If First Choice Bank elects to exercise its
termination right as described above, it must give prompt written notice to Berkshire Hills. During the five business-day period
commencing with its receipt of such notice, Berkshire Hills Bancorp shall have the option to increase the consideration to be received
by the holders of First Choice Bank common stock by increasing the exchange ratio from 0.5773 to a number obtained by dividing
$15.54 by the greater of (i) $21.53 or (ii) the product obtained by multiplying the Index Ratio by $26.91. If within
such five business-day period, Berkshire Hills Bancorp delivers written notice to First Choice Bank that it intends to proceed
with the Merger by paying such additional consideration as contemplated by the preceding sentence, then no termination shall have
occurred, and the Merger Agreement shall remain in full force and effect in accordance with its terms.
Because the formula is dependent on the future
price of Berkshire Hills Bancorp’s common stock and that of the KBW Regional Bank Index, it is not possible to determine
what the adjusted exchange ratio would be at this time, but, in general, the ratio would be increased and, consequently, more shares
of Berkshire Hills Bancorp common stock issued, to take into account the extent of the decline in the value of Berkshire Hills
Bancorp’s common stock as compared to the changes in the value of the common stock of the KBW Regional Bank Index.
Changing the Terms of
the Merger Agreement
The parties may amend the Merger Agreement at
any time before or after approval of the Merger Agreement by First Choice Bank shareholders. However, after such shareholder approval,
no amendment may be made without the approval of First Choice Bank’s shareholders if it reduces the amount or value, or changes
the form of, the merger consideration to be delivered to First Choice Bank shareholders pursuant to the Merger Agreement.
The parties may waive any of their conditions
to closing, unless they may not be waived under law.
Expenses
Except as specifically provided in the Merger
Agreement, each of Berkshire Hills Bancorp and First Choice Bank will pay its own costs and expenses incurred in connection with
the Merger.
THE MERGER
2.1
Merger.
Subject to the terms and conditions of this
Agreement, at the Effective Time: (a) FCB shall merge with and into the Bank, with the Bank as the resulting or surviving bank
(the “
Surviving Bank
”) and (b) the separate existence of FCB shall cease and all of the rights, privileges,
powers, franchises, properties, assets, liabilities and obligations of FCB shall be vested in and assumed by the Bank. As part
of the Merger, each outstanding share of FCB Stock will be converted into the right to receive the Merger Consideration pursuant
to the terms of Article III.
2.2
Closing;
Effective Time.
The closing (“
Closing
”) shall
occur no later than the close of business on the fifth Business Day following the satisfaction or (to the extent permitted by applicable
law) waiver of the conditions set forth in Article IX (other than those conditions that by their terms are to be satisfied at the
Closing, but subject to the satisfaction or (to the extent permitted by applicable law) waiver of those conditions), or such other
date that may be agreed to in writing by the parties. The Merger shall be effected by the filing of articles of merger with the
MDOB and the requisite certifications filed with the NJDOBI on the day of the Closing (the “
Closing Date
”),
in accordance with Massachusetts and New Jersey law. The
“
Effective Time
” means the date and time upon
which the articles of merger are filed with the MDOB and the requisite certification are filed with the NJDOBI or as otherwise
stated in the articles of merger and requisite certifications as filed with the NJDOBI, respectively, in accordance with Massachusetts
and New Jersey law. A pre-closing of the transactions contemplated hereby (the “
Pre-Closing
”) shall take place
at the offices of Luse Gorman, PC at 10:00 a.m. on the day prior to the Closing Date.
2.3
Charter
and Bylaws; Board of Directors and Management.
The articles of organization and bylaws of the
Bank as in effect immediately prior to the Effective Time shall be the articles of organization and bylaws of the Surviving Bank,
until thereafter amended as provided therein and by applicable law. The board of directors and management of the Bank as in effect
immediately prior to the Effective Time shall be the board of directors and management of the Surviving Bank.
2.4
Effects
of the Merger.
At and after the Effective Time, the Merger
shall have the effects as set forth under Massachusetts and New Jersey law.
2.5
Tax
Consequences.
It is intended that the Merger shall constitute
a reorganization within the meaning of Section 368(a) of the Code, and that this Agreement shall constitute a “plan of reorganization”
as that term is used in Sections 354 and 361 of the Code.
2.6
Possible
Alternative Structures.
Notwithstanding anything to the contrary contained
in this Agreement and subject to the satisfaction of the conditions set forth in Article IX, prior to the Effective Time BHLB
may revise the structure for effecting the Merger described in Section 2.1 including, without limitation, by substituting
a wholly owned subsidiary for the Bank, provided that (i) any such subsidiary shall become a party to, and shall agree to
be bound by, the terms of this Agreement; (ii) there are no adverse tax consequences to BHLB, the Bank, or FCB or to the BHLB
or FCB shareholders, and nothing would prevent the rendering of the opinion contemplated in Section 9.1.6, as a result of the modification;
(iii) the consideration to be paid to the holders of FCB Common Stock under this Agreement is not thereby changed in kind,
value or reduced in amount; and (iv) such modification will not delay materially the Closing or jeopardize or delay materially
the receipt of any Regulatory Approvals or other consents and approvals
relating to the consummation of the Merger or
otherwise cause any condition to Closing set forth in Article IX not to be capable of being fulfilled. The parties hereto
agree to appropriately amend this Agreement and any related documents in order to reflect any such revised structure.
2.7
Additional
Actions.
If, at any time after the Effective Time, BHLB
shall consider or be advised that any further deeds, documents, assignments or assurances in law or any other acts are necessary
or desirable to (i) vest, perfect or confirm, of record or otherwise, in the Bank its right, title or interest in, to or under
any of the rights, properties or assets of FCB or any FCB Subsidiary, or (ii) otherwise carry out the purposes of this Agreement,
FCB and its officers and directors shall be deemed to have granted to BHLB and the Bank an irrevocable power of attorney to execute
and deliver, in such official corporate capacities, all such deeds, assignments or assurances in law or any other acts as are necessary
or desirable to (a) vest, perfect or confirm, of record or otherwise, in the Bank its right, title or interest in, to or under
any of the rights, properties or assets of FCB and any FCB Subsidiary or (b) otherwise carry out the purposes of this Agreement,
and the officers and directors of the Bank are authorized in the name of FCB or otherwise to take any and all such action.
ARTICLE
III
CONVERSION OF SHARES
3.1
Conversion
of FCB Stock; Merger Consideration.
At the Effective Time, by virtue of the Merger
and without any action on the part of BHLB, the Bank, FCB or the holders of any of the shares of FCB Stock, the Merger shall be
effected in accordance with the following terms:
3.1.1 Each
share of capital stock of the Bank that is issued and outstanding immediately prior to the Effective Time shall remain issued and
outstanding following the Effective Time and shall be unchanged by the Merger.
3.1.2 All
shares of FCB Stock held in the treasury of FCB and each share of FCB Stock owned by BHLB or the Bank at the Effective Time (other
than shares held in a fiduciary capacity or in connection with debts previously contracted) (“
Treasury Stock
”)
shall, at the Effective Time, cease to exist, and such shares, including any Certificates therefor, shall be canceled as promptly
as practicable thereafter, and no payment or distribution shall be made in consideration therefor.
3.1.3 Subject
to a potential adjustment as provided in Sections 3.1.9 and 10.1.9, each outstanding share of FCB Common Stock (other than Treasury
Stock and Dissenting Shares) shall be converted into the right to receive 0.5773 (the “
Exchange Ratio
”) shares
of BHLB Common Stock.
3.1.4 Subject
to a potential adjustment as provided in Sections 3.1.9 and 10.1.9, each outstanding share of FCB Preferred Stock (other than Treasury
Stock and Dissenting Shares) shall be converted into the right to receive such number of shares of BHLB Common Stock as is equal
to the product of the Common Stock Equivalent of such share of FCB Preferred Stock, multiplied by the Exchange Ratio.
3.1.5 Each
outstanding share of FCB Common Stock, the holder of which has perfected his right to dissent under applicable law and has not
effectively withdrawn or lost such right as of the Effective Time (the “
Dissenting Shares
”), shall not be converted
into or represent a right to receive the Merger Consideration hereunder, and the holder thereof shall be entitled only to such
rights as are granted by applicable law. FCB shall give BHLB immediate notice upon receipt by FCB of any such demands for payment
of the fair value of such shares of FCB Common Stock and of withdrawals of such notice and any other related communications (any
shareholder duly making such demand being hereinafter called a “
Dissenting Shareholder
”), and BHLB shall have
the right to participate in all discussions, negotiations and proceedings with respect to any such demands. FCB shall not, except
with the prior written consent of BHLB, voluntarily make any payment with respect to, or settle or offer to settle, any such demand
for payment, or waive any failure to timely deliver a written demand for appraisal or the taking of any
other action by such Dissenting Shareholder as
may be necessary to perfect appraisal rights under applicable law. Any payments made in respect of Dissenting Shares shall be made
by the Surviving Company.
3.1.6 If
any Dissenting Shareholder withdraws or loses (through failure to perfect or otherwise) his right to such payment at or prior to
the Effective Time, such holder’s shares of FCB Stock shall be converted into a right to receive the Merger Consideration
in accordance with the applicable provisions of this Agreement. If such holder withdraws or loses (through failure to perfect or
otherwise) his right to such payment after the Effective Time, each share of FCB Stock of such holder shall be entitled to receive
the Merger Consideration.
3.1.7 Upon
the Effective Time, outstanding shares of FCB Stock shall no longer be outstanding and shall automatically be canceled and shall
cease to exist, and shall thereafter by operation of this Section 3.1 represent only the right to receive the Merger Consideration
and any dividends or distributions with respect thereto or any dividends or distributions with a record date prior to the Effective
Time that were declared or made by FCB on such shares of FCB Stock in accordance with the terms of this Agreement on or prior to
the Effective Time and which remain unpaid at the Effective Time.
3.1.8 Notwithstanding
anything to the contrary contained herein, no certificates or scrip representing fractional shares of BHLB Common Stock shall be
issued upon the surrender for exchange of Certificates, no dividend or distribution with respect to BHLB Common Stock shall be
payable on or with respect to any fractional share interests, and such fractional share interests shall not entitle the owner thereof
to vote or to any other rights of a shareholder of BHLB. In lieu of the issuance of any such fractional share, BHLB shall pay to
each former holder of FCB Stock who otherwise would be entitled to receive a fractional share of BHLB Common Stock, an amount in
cash, rounded to the nearest cent and without interest, equal to the product of (i) the fraction of a share to which such
holder would otherwise have been entitled and (ii) the average of the daily closing sales prices of a share of BHLB Common
Stock as reported on the NYSE for the five (5) consecutive trading days immediately preceding the Closing Date. For purposes of
determining any fractional share interest, all shares of FCB Stock owned by a FCB shareholder shall be combined so as to calculate
the maximum number of whole shares of BHLB Common Stock issuable to such FCB shareholder.
3.1.9 If
BHLB changes (or the BHLB Board sets a related record date that will occur before the Effective Time for a change in) the number
or kind of shares of BHLB Common Stock outstanding by way of a stock split, stock dividend, recapitalization, reclassification,
reorganization or similar transaction, then the Exchange Ratio (and any other dependent items) will be adjusted proportionately
to account for such change. If FCB changes (or the FCB Board sets a related record date that will occur before the Effective Time
for a change in) the number or kind of shares of FCB Common Stock (or Rights thereto) outstanding by way of a stock split, stock
dividend, recapitalization, reclassification, reorganization or similar transaction, then the Exchange Ratio (and any other dependent
items) will be adjusted proportionately to account for such change.
3.2
Procedures
for Exchange of FCB Common Stock.
3.2.1
BHLB
to Make Merger Consideration Available
. At or prior to the Effective Time, BHLB shall deposit, or shall cause to be deposited,
with the Exchange Agent for the benefit of the holders of FCB Common Stock, for exchange in accordance with this Section 3.2,
an aggregate amount of cash sufficient to pay the aggregate amount of cash payable in lieu of the issuance of fractional shares
pursuant to this Article III and shall instruct the Exchange Agent to issue such cash and shares of BHLB Common Stock for
exchange in accordance with this Section 3.2 (such cash and shares of BHLB Common Stock, together with any dividends or distributions
with respect thereto (without any interest thereon) being hereinafter referred to as the “
Exchange Fund
”).
3.2.2
Exchange
of Certificates
. BHLB shall take all steps necessary to cause the Exchange Agent, not later than five (5) Business Days
after the Effective Time, to mail to each holder of a Certificate or Certificates a form letter of transmittal for return to the
Exchange Agent and instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration
and cash in lieu of fractional shares into which the FCB Common Stock represented by such Certificates shall have been converted
as a result of the Merger, if any. The letter of transmittal shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent. Upon proper surrender of a
Certificate for exchange and cancellation to the Exchange Agent, together with a properly completed letter of
transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger Consideration and the Certificate so surrendered shall
be cancelled. No interest will be paid or accrued on any cash payable in lieu of fractional shares or any unpaid dividends and
distributions, if any, payable to holders of Certificates.
3.2.3
Rights
of Certificate Holders after the Effective Time
. The holder of a Certificate that prior to the Merger represented issued and
outstanding FCB Common Stock shall have no rights, after the Effective Time, with respect to such FCB Common Stock except to surrender
the Certificate in exchange for the Merger Consideration as provided in this Agreement. No dividends or other distributions declared
after the Effective Time with respect to BHLB Common Stock shall be paid to the holder of any unsurrendered Certificate until the
holder thereof shall surrender such Certificate in accordance with this Section 3.2. After the surrender of a Certificate
in accordance with this Section 3.2, the record holder thereof shall be entitled to receive any such dividends or other distributions,
without any interest thereon, which theretofore had become payable with respect to shares of BHLB Common Stock represented by such
Certificate.
3.2.4
Surrender
by Persons Other than Record Holders
. If the Person surrendering a Certificate and signing the accompanying letter of transmittal
is not the record holder thereof, then it shall be a condition of the payment of the Merger Consideration that: (i) such Certificate
is properly endorsed to such Person or is accompanied by appropriate stock powers, in either case signed exactly as the name of
the record holder appears on such Certificate, and is otherwise in proper form for transfer, or is accompanied by appropriate evidence
of the authority of the Person surrendering such Certificate and signing the letter of transmittal to do so on behalf of the record
holder; and (ii) the Person requesting such exchange shall pay to the Exchange Agent in advance any transfer or other similar
taxes required by reason of the payment to a Person other than the registered holder of the Certificate surrendered, or required
for any other reason, or shall establish to the satisfaction of the Exchange Agent that such tax has been paid or is not payable.
3.2.5
Closing
of Transfer Books
. From and after the Closing Date, there shall be no transfers on the stock transfer books of FCB of the FCB
Common Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates representing
such shares are presented for transfer to the Exchange Agent, they shall be exchanged for the Merger Consideration and canceled
as provided in this Section 3.2.
3.2.6
Return
of Exchange Fund
. At any time following the nine (9) month period after the Effective Time, BHLB shall be entitled to
require the Exchange Agent to deliver to it any portion of the Exchange Fund which had been made available to the Exchange Agent
and not disbursed to holders of Certificates (including, without limitation, all interest and other income received by the Exchange
Agent in respect of all funds made available to it), and thereafter such holders shall be entitled to look to BHLB (subject to
abandoned property, escheat and other similar laws) with respect to any Merger Consideration that may be payable upon due surrender
of the Certificates held by them. Notwithstanding the foregoing, neither BHLB nor the Exchange Agent shall be liable to any holder
of a Certificate for any Merger Consideration delivered in respect of such Certificate to a public official pursuant to any abandoned
property, escheat or other similar law.
3.2.7
Lost,
Stolen or Destroyed Certificates
. In the event any Certificate shall have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and the posting by such Person
of a bond in such amount as the Exchange Agent may reasonably direct as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration deliverable in respect thereof.
3.2.8
Withholding
.
BHLB or the Exchange Agent will be entitled to deduct and withhold from the Merger Consideration such amounts as BHLB (or any Affiliate
thereof) or the Exchange Agent are required to deduct and withhold with respect to the making of such payment under the Code, or
any applicable provision of U.S. federal, state, local or non-U.S. tax law. To the extent that such amounts are properly withheld
and paid over to the appropriate Governmental Entity by BHLB or the Exchange Agent, such amounts will be treated for all purposes
of this Agreement as having been paid to the holder of the FCB Common Stock in respect of whom such deduction and withholding were
made by BHLB or the Exchange Agent.
3.3
Treatment
of FCB Stock Options and Warrants.
3.3.1
FCB
Disclosure Schedule 4.3.1
sets forth all of the outstanding FCB stock options (each, a “
FCB Stock Option
”)
and outstanding FCB warrants (each, a “
FCB Warrant
”) as of the date hereof. Each FCB Stock Option and FCB Warrant,
in each case whether vested or unvested, which is outstanding immediately prior to the Effective Time and which has not been exercised
or canceled prior thereto shall, at the Effective Time, fully vest (to the extent not vested) and be canceled and, on the Closing
Date, BHLB shall pay to the holder thereof cash in an amount equal to the product of (i) the number of shares of FCB Common Stock
provided for in each such FCB Stock Option or FCB Warrant, and (ii) the excess, if any, of (x) $27.71 multiplied by the Exchange
Ratio (the “
Exchange Price
”) over (y) the Exercise Price (the “
Cash Payment
”). Any FCB Stock
Option or FCB Warrant for which the Exercise Price exceeds the Exchange Price shall be cancelled as of the Effective Time without
payment. For purposes of this Section 3.3.1, “
Exercise Price
” shall mean the exercise price per share of FCB
Common Stock provided for in such FCB Stock Option or FCB Warrant. The Cash Payment shall be paid in cash within five (5) calendar
days after the Closing Date, and shall be made without interest and net of all applicable withholding taxes. Prior to the Closing
Date, FCB shall use its reasonable best efforts to obtain written acknowledgement and consent of each holder of a then-outstanding
FCB Stock Option or FCB Warrant to the termination of the FCB Stock Option or FCB Warrant and the payment of the Cash Payment in
accordance with the terms of this Section 3.3.1. FCB shall prohibit the exercise of any FCB Stock Option or FCB Warrant beginning
on and after the fifth trading day immediately preceding the Closing Date, and FCB shall terminate the FCB Equity Incentive Plan
subject to the occurrence of the Effective Time and prior to the Closing Date.
3.3.2 At
the Effective Time, the FCB Equity Incentive Plan and all related grant agreements thereunder shall terminate and the provisions
in any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock
of FCB shall be of no further force and effect.
3.4
Reservation
of Shares.
BHLB shall reserve for issuance a sufficient
number of shares of the BHLB Common Stock for the purpose of issuing shares of BHLB Common Stock to the FCB shareholders in accordance
with this Article III.
ARTICLE
IV
REPRESENTATIONS AND WARRANTIES OF FCB
FCB represents and warrants to BHLB that the
statements contained in this Article IV are correct as of the date of this Agreement and will be correct as of the Closing
Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article IV),
subject to the standard set forth in Section 4.1 and except as set forth in the FCB Disclosure Schedule delivered by FCB to
BHLB on the date hereof, and except as to any representation or warranty which specifically relates to an earlier date, which only
need be correct as of such earlier date,
provided
,
however
, that disclosure in any section of such FCB Disclosure
Schedule shall apply only to the indicated Section of this Agreement except to the extent that it is reasonably apparent that such
disclosure is relevant to another section of this Agreement. References to the Knowledge of FCB shall include the Knowledge of
FCB and FCB Subsidiaries.
4.1
Standard.
Except as set forth in the following sentence,
no representation or warranty of FCB contained in this Article IV shall be deemed untrue or incorrect, and FCB shall not be
deemed to have breached a representation or warranty, as a consequence of the existence of any fact, circumstance or event unless
such fact, circumstance or event, individually or taken together with all other facts, circumstances or events inconsistent with
any paragraph of this Article IV, has had or reasonably would be expected to have a Material Adverse Effect, disregarding
for these purposes (x) any qualification or exception for, or reference to, materiality in any such representation or warranty
and (y) any use of the terms “material,” “materially,” “in all material respects,” “Material
Adverse Effect” or similar terms or phrases in any such representation or warranty. The foregoing standard shall not apply
to representations and warranties contained in Sections 4.2 (other than Sections 4.2.3, 4.2.4 and 4.2.5 and the last sentence
of Sections 4.2.1 and 4.2.2), Section 4.3 and 4.4 (other than Section 4.4.2(iii)) which shall be true and correct in all material
respects.
4.2
Organization.
4.2.1 FCB
is a New Jersey chartered commercial bank duly organized, validly existing and in good standing under the laws of the State of
New Jersey. The deposits in FCB are insured by the FDIC to the fullest extent permitted by law, and all premiums and assessments
required to be paid in connection therewith have been paid by FCB. FCB is a member in good standing of the FHLB and owns the requisite
amount of stock of the FHLB, which amount, as of May 31, 2016, is set forth on
FCB Disclosure Schedule 4.2.1
.
4.2.2 FCLS
is a corporation duly organized, validly existing and in good standing under the laws of the State of New Jersey, and is a wholly-owned
subsidiary of FCB. FCLS has full corporate power and authority to carry on its business as now conducted. FCLS is duly licensed
and/or qualified to do business in the states of the United States and foreign jurisdictions where its ownership or leasing of
property or the conduct of its business requires such license and/or qualification.
4.2.3
FCB
Disclosure Schedule 4.2.3
sets forth each FCB Subsidiary and its jurisdiction of incorporation or organization. Each FCB
Subsidiary is a corporation, limited liability company or other legal entity as set forth on
FCB Disclosure Schedule 4.2.3
,
duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization. Each
FCB Subsidiary is duly licensed and/or qualified to do business in the states of the United States and foreign jurisdictions where
its ownership or leasing of property or conduct of its business requires such license and/or qualification.
4.2.4 The
respective minute books of FCB, FCLS and each other FCB Subsidiary accurately record all corporate actions of their respective
shareholders and boards of directors (including committees).
4.2.5 Prior
to the date of this Agreement, FCB has made available to BHLB true and correct copies of the certificate of incorporation and bylaws
or other governing documents of FCB, FCLS and each other FCB Subsidiary.
4.3
Capitalization.
4.3.1 The
authorized capital stock of FCB consists of (i) 25,000,000 shares of FCB Common Stock, $5.00 par value (“
FCB Common
Stock
”), and (ii) 5,000,000 shares of preferred stock, of which (A) 10,000 shares have been designated “Series
A Convertible Preferred Stock,” $2.00 par value per share (“
Series A Preferred Stock
”), (B) 20,000 shares
have been designated “Series B Convertible Preferred Stock,” $2.00 par value (“
Series B Preferred Stock
”),
(C) 6,000 shares have been designated “Series C Convertible Preferred Stock,” $2.00 par value (“
Series C Preferred
Stock
”), (D) 10,000 shares have been designated “Series D Convertible Preferred Stock,” $2.00 par value (“
Series
D Preferred Stock
”), (E) 12,500 shares have been designated “Series E Convertible Preferred Stock,” $2.00
par value (“
Series E Preferred Stock
”) (collectively, subparts (ii)(A) through (E) of Section 4.3.1 are referred
to herein as “
FCB Preferred Stock
” and collectively with FCB Common Stock, “
FCB Stock
”),
and (F) 4,941,500 remain undesignated. As of May 31, 2016, there were (i) 3,204,826 shares of FCB Common Stock validly issued and
outstanding, fully paid and non-assessable and free of preemptive rights, and (ii) 7,500 shares of Series A Preferred Stock, 15,000
shares of Series B Preferred Stock, 6,000 shares of Series C Preferred Stock, 10,000 shares of Series D Preferred Stock, and 12,500
shares of Series E Preferred Stock validly issued and outstanding, fully paid and non-assessable and free of preemptive rights,
and (iii) no shares of FCB Common Stock held by FCB as Treasury Stock. The FCB Subsidiaries do not own, of record or beneficially,
any shares of FCB Stock, other than shares held as treasury stock. Neither FCB nor any FCB Subsidiary has or is bound by any Rights
or other arrangements of any character relating to the purchase, sale or issuance or voting of, or right to receive dividends or
other distributions on, any capital stock of FCB, or any other security of FCB or a FCB Subsidiary or any securities representing
the right to vote, purchase or otherwise receive any capital stock of FCB or a FCB Subsidiary or any other security of FCB or any
FCB Subsidiary, other than shares of FCB Common Stock underlying the FCB Stock Options, the FCB Warrants and the FCB Preferred
Stock. FCB has granted outstanding options to acquire 371,900 shares of FCB Common Stock at a weighted average exercise price of
$12.695 per share.
FCB Disclosure Schedule 4.3.1
sets forth: the name of each holder of an outstanding FCB Stock Option,
identifying the number of shares each such individual may acquire pursuant to the exercise of such options, the plan under which
such options were granted, the grant, vesting and expiration dates, and the exercise price relating to the options held, and whether
the FCB Stock Option is an incentive stock option or a nonqualified stock option. FCB has issued
outstanding FCB Warrants to acquire 64,799 shares
of FCB Common Stock at a weighted average exercise price of $10.00 per share.
FCB Disclosure Schedule 4.3.1
sets forth the
name of each holder of an outstanding FCB Warrant, identifying the number of shares each such individual may acquire pursuant to
the exercise of such warrants, the grant, vesting and expiration dates, and the exercise price relating to the warrants held. FCB
has issued FCB Preferred Stock to certain individuals.
FCB Disclosure Schedule 4.3.1
sets forth the name of each holder
of FCB Preferred Stock, identifying the number of shares to each individual, the series of preferred stock under which the issuance
was made, the conversion rate to FCB Common Stock, and the annual dividend yield for each series. All shares of FCB Common Stock
issuable pursuant to the FCB Equity Incentive Plan and the FCB Warrants will be duly authorized, validly issued, fully paid and
non-assessable when issued upon the terms and conditions specified in the instruments pursuant to which they are issuable.
4.3.2 FCB
owns all of the capital stock or other equity securities of each FCB Subsidiary, free and clear of all liens, security interests,
pledges, charges, encumbrances, agreements and restrictions of any nature, except for Permitted Liens and as set forth in the certificate
of incorporation and bylaws or other governing documents and applicable securities laws. Except for the FCB Subsidiaries and as
set forth in
FCB Disclosure Schedule 4.3.2
, FCB, as of the date of this Agreement, does not possess, directly or indirectly,
any equity interest in any corporate or other legal entity, except for equity interests held in the investment portfolios of FCB
or any FCB Subsidiary (which as to any one issuer, do not exceed five percent (5%) of such issuer’s outstanding equity securities)
and equity interests held in connection with the lending activities of FCB, including stock in the FHLB.
4.3.3 Except
as set forth on
FCB Disclosure Schedule 4.3.3
, to the Knowledge of FCB, as of the date hereof no Person is the beneficial
owner (as defined in Section 13(d) of the Exchange Act) of five percent (5%) or more of the outstanding shares of FCB Common Stock.
4.3.4 No
bonds, debentures, notes or other indebtedness having the right to vote on any matters on which FCB’s shareholders may vote
have been issued by FCB and are outstanding.
4.4
Authority;
No Violation.
4.4.1 FCB
has full corporate power and authority to execute and deliver this Agreement and, subject to the receipt of the Regulatory Approvals
and the approval of this Agreement by FCB’s shareholders (the “
FCB Shareholder Approval
”), to perform
its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement
by FCB and the completion by FCB of the transactions contemplated hereby, up to and including the Merger, have been duly and validly
approved by the Board of Directors of FCB. This Agreement has been duly and validly executed and delivered by FCB, and subject
to FCB Shareholder Approval and the receipt of the Regulatory Approvals and due and valid execution and delivery of this Agreement
by BHLB and the Bank, constitutes the valid and binding obligation of FCB, enforceable against FCB in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, and subject, as to enforceability,
to general principles of equity.
4.4.2 (a) Subject
to compliance by BHLB with the terms and conditions of this Agreement, the execution and delivery of this Agreement by FCB, subject
to receipt of Regulatory Approvals and FCB’s and BHLB’s compliance with any conditions contained therein, and subject
to the receipt of the FCB Shareholder Approval, the consummation of the transactions contemplated hereby, and (b) compliance
by FCB with the terms and provisions hereof will not (i) conflict with or result in a breach of any provision of the certificate
of incorporation and bylaws or other governing documents of FCB, FCLS or any other FCB Subsidiary; (ii) violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to FCB, FCLS or any FCB Subsidiary or
any of their respective properties or assets; or (iii) violate, conflict with, result in a breach of any provisions of, constitute
a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination
or amendment of, accelerate the performance required by, or result in a right of termination or acceleration or the creation of
any lien, security interest, charge or other encumbrance upon any of the properties or assets of FCB, FCLS or any FCB Subsidiary
under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement
or other investment or obligation to which FCB, FCLS, or any FCB Subsidiary is a party, or by which they or any of their respective
properties or assets may be bound or affected.
4.5
Consents.
Except for (a) the receipt of the Regulatory
Approvals and compliance with any conditions contained therein, (b) compliance with applicable requirements of the Securities
Act, the Exchange Act and state securities or “blue sky” laws, (c) the filing of the Articles of Merger with the
MDOB and the requisite certifications with the NJDOBI, and (d) the FCB Shareholder Approval, no consents, waivers or approvals
of, or filings or registrations with, any Governmental Entity or Bank Regulator are necessary, and, to the Knowledge of FCB, no
consents, waivers or approvals of, or filings or registrations with, any other third parties are necessary, in connection with
the execution and delivery of this Agreement by FCB, the completion by FCB of the Merger and the performance by FCB of its obligations
hereunder. To the Knowledge of FCB, no fact or circumstance exists, including any possible other transaction pending or under consideration
by FCB or any of its Subsidiaries, that (a) would reasonably be expected to prevent or delay in any material respect, (i) any filings
with or approvals or waivers required from the FRB, the FDIC, the NJDOBI or the MDOB or (ii) any required Regulatory Approvals,
(b) would cause a Bank Regulator or Governmental Entity acting pursuant to the Bank Merger Act, the BHCA, the New Jersey Banking
Law or the Massachusetts General Laws or any other applicable law or regulation to seek to prohibit or materially delay consummation
of the transactions contemplated hereby or impose a Burdensome Condition or (c) any Bank Regulator or Governmental Entity having
jurisdiction over the affairs of FCB or FCLS, the consent or approval of which is not required or approval of which is not required
pursuant to the rules of which a filing is not required, will object to the completion of the transactions contemplated by this
Agreement.
4.6
Financial
Statements.
4.6.1 The
FCB Regulatory Reports have been prepared in all material respects in accordance with applicable regulatory accounting principles
and practices throughout the periods covered by such reports, and fairly present in all material respects the consolidated financial
position, results of operations and changes in shareholders’ equity of FCB as of and for the periods ended on the dates thereof,
in accordance with applicable regulatory accounting principles applied on a consistent basis.
4.6.2 FCB
has previously made available to BHLB the FCB Financial Statements. The FCB Financial Statements have been prepared in accordance
with GAAP in all material respects, and (including the related notes where applicable) fairly present in each case in all material
respects (subject in the case of the unaudited interim statements to normal year-end adjustments) the consolidated financial position,
results of operations and cash flows of FCB and the FCB Subsidiaries on a consolidated basis as of and for the respective periods
ending on the dates thereof, in accordance with GAAP during the periods involved, except as indicated in the notes thereto.
4.6.3 At
the date of the most recent consolidated statement of financial condition included in the FCB Financial Statements or in the FCB
Regulatory Reports, FCB did not have any liabilities, obligations or loss contingencies of any nature (whether absolute, accrued,
contingent or otherwise) of a type required to be reflected in such FCB Financial Statements or in the FCB Regulatory Reports or
in the footnotes thereto which are not reflected or reserved against therein or disclosed in a footnote thereto, in each case to
the extent required in accordance with GAAP, except for liabilities, obligations and loss contingencies which are not material
individually or in the aggregate or which are incurred in the ordinary course of business, consistent with past practice, and subject,
in the case of any unaudited statements, to normal, recurring audit adjustments and the absence of footnotes.
4.7
Taxes.
Except as provided in this Agreement, neither
FCB nor any of the FCB Subsidiaries has taken or agreed to take any action, has failed to take any action or knows any fact, agreement,
plan or other circumstance that could reasonably be expected to prevent the Merger from qualifying as a “reorganization”
within the meaning of Section 368(a) of the Code. FCB and the FCB Subsidiaries that are corporations for federal income Tax purposes
are members of the same affiliated group within the meaning of Code Section 1504(a). FCB, on behalf of itself and the FCB
Subsidiaries, has timely (taking into account extensions) filed or caused to be filed all Tax Returns (including, but not limited
to, those filed on a consolidated, combined or unitary basis) required to have been filed by FCB and the FCB Subsidiaries prior
to the date hereof, or requests for extensions to file such returns and reports have been timely filed. All such Tax Returns are
true, correct, and complete in all material respects. FCB and the FCB
Subsidiaries have timely paid or, prior to the
Effective Time will pay, all Taxes, whether or not shown on such returns or reports, due or claimed to be due to any Governmental
Entity prior to the Effective Time other than Taxes which are being contested in good faith. FCB and the FCB Subsidiaries have
declared on their Tax Returns all positions taken therein that could give rise to a substantial underpayment of United States federal
income Tax within the meaning of Section 6662 of the Code (or any corresponding provision of state or local laws). The accrued
but unpaid Taxes of FCB and the FCB Subsidiaries did not, as of the most recent FCB Financial Statements, exceed the reserve for
Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income)
set forth on the face of the most recent FCB balance sheet (rather than in any notes thereto). FCB and the FCB Subsidiaries are
subject to Tax audits in the ordinary course of business. FCB management does not believe that an adverse resolution to any of
such audits of which it has Knowledge would be reasonably likely to have a Material Adverse Effect on FCB. FCB and the FCB Subsidiaries
have not been notified in writing by any jurisdiction that the jurisdiction believes that FCB or any of the FCB Subsidiaries were
required to file any Tax Return in such jurisdiction that was not filed. Neither FCB nor any of the FCB Subsidiaries (A) has been
a member of a group with which they have filed or been included in a combined, consolidated or unitary income Tax Return other
than a group the common parent of which was FCB or (B) has any liability for the Taxes of any Person (other than FCB or any of
the FCB Subsidiaries) under Treas. Reg. § 1.1502-6 (or any similar provision of state, local, or non-U.S. law), as a
transferee or successor, by contract, or otherwise. As of the date hereof, all deficiencies proposed in writing as a result of
any audits have been paid or settled. There are no written claims or assessments pending against FCB or any FCB Subsidiary for
any alleged deficiency in any Tax, and neither FCB nor any FCB Subsidiary has been notified in writing of any proposed Tax claims
or assessments against FCB or any FCB Subsidiary. FCB and the FCB Subsidiaries each have duly and timely withheld, collected and
paid over to the appropriate taxing authority all amounts required to be so withheld and paid under all applicable laws, and have
duly and timely filed all Tax Returns with respect to such withheld Taxes, within the time prescribed under any applicable law.
FCB and the FCB Subsidiaries have delivered to BHLB true and complete copies of all income Tax Returns of FCB and the FCB Subsidiaries
for taxable periods ending on or after December 31, 2013. Neither FCB nor any of the FCB Subsidiaries is or has been a party to
any “reportable transaction,” as defined in Code § 6707A(c)(1) and Treas. Reg. § 1.6011-4(b). Neither
FCB nor any of the FCB Subsidiaries has distributed stock of another Person, or has had its stock distributed by another Person,
in a transaction that was purported or intended to be governed in whole or in part by Code § 355 or Code § 361.
Neither FCB nor any of the FCB Subsidiaries has been a United States real property holding corporation within the meaning of Code
§ 897(c)(2) during the applicable period specified in Code § 897(c)(1)(A)(ii).
4.8
No
Material Adverse Effect.
Neither FCB nor any FCB Subsidiary has suffered
any Material Adverse Effect since December 31, 2015 and, to FCB’s Knowledge, no event has occurred or circumstance arisen
since that date which, in the aggregate, has had or reasonably would be expected to have a Material Adverse Effect on FCB.
4.9
Material
Contracts; Leases; Defaults.
4.9.1 Except
as set forth in
FCB Disclosure Schedule 4.9.1
, neither FCB nor any FCB Subsidiary is a party to or subject to: (i) any
employment, consulting or severance contract or arrangement with any past or present officer, director, employee or consultant
of FCB or any FCB Subsidiary, except for “at will” arrangements; (ii) any plan, arrangement or contract providing
for bonuses, pensions, options, deferred compensation, retirement payments, profit sharing or similar arrangements for or with
any past or present officers, directors, employees or consultants of FCB or any FCB Subsidiary; (iii) any collective bargaining
agreement with any labor union relating to employees of FCB or any FCB Subsidiary; (iv) any agreement which by its terms limits
or affects the payment of dividends by FCB or any FCB Subsidiary; (v) any instrument evidencing or related to indebtedness
for borrowed money in excess of $50,000, whether directly or indirectly, by way of purchase money obligation, conditional sale,
lease purchase, guaranty or otherwise, in respect of which FCB or any FCB Subsidiary is an obligor to any Person, which instrument
evidences or relates to indebtedness other than deposits, FHLB advances with a term to maturity not in excess of one (1) year,
repurchase agreements, bankers’ acceptances, and transactions in “federal funds” or which contains financial
covenants or other non-customary restrictions (other than those relating to the payment of principal and interest when due) which
would be applicable on or after the Closing Date to FCB or any FCB Subsidiary; (vi) any other agreement, written or oral,
which is not terminable without cause on sixty (60) days’ notice or less without penalty or payment, or that obligates
FCB or any FCB Subsidiary for the
payment of more than $30,000 annually or for the
payment of more than $50,000
over its remaining term; or (vii) any agreement (other than this Agreement), contract,
arrangement, commitment or understanding (whether written or oral) that materially restricts or limits the conduct of business
by FCB or any FCB Subsidiary.
4.9.2 Each
real estate lease that will require the consent of the lessor or its agent as a result of the Merger by virtue of the terms of
any such lease, is listed in
FCB Disclosure Schedule 4.9.2
identifying the section of the lease that contains such
prohibition or restriction. Subject to any consents that may be required as a result of the transactions contemplated by this Agreement,
to its Knowledge neither FCB nor any FCB Subsidiary is in material default under any material contract, agreement, commitment,
arrangement, lease, insurance policy or other instrument to which it is a party, by which its assets, business, or operations may
be bound or affected, or under which it or its assets, business, or operations receive benefits, and there has not occurred any
event that, with the lapse of time or the giving of notice or both, would constitute such a default and all such material contracts,
agreements, commitments, arrangements, leases, insurance policies and other instruments are listed on
FCB Disclosure Schedule
4.9.2
.
4.9.3 True
and correct copies of agreements, contracts, arrangements and instruments referred to in Section 4.9.1 and 4.9.2 have been
made available to BHLB on or before the date hereof, are listed on
FCB Disclosure Schedules 4.9.1 and 4.9.2
and are in full
force and effect without modification on the date hereof. Except as set forth in
FCB Disclosure Schedule 4.9.3
, no
such agreement, plan, contract, or arrangement (i) provides for acceleration of the vesting of benefits or payments due thereunder
upon the occurrence of a change in ownership or control of FCB or any FCB Subsidiary or upon the occurrence of a subsequent event;
(ii) requires FCB or any FCB Subsidiary to provide a benefit in the form of FCB Common Stock or determined by reference to
the value of FCB Common Stock or (iii) contains provisions which permit an employee, director or independent contractor to
terminate such agreement or arrangement without cause and continue to accrue future benefits thereunder.
4.10
Ownership
of Property; Insurance Coverage.
4.10.1 Except
as set forth on
FCB Disclosure Schedule 4.10.1
, FCB and each FCB Subsidiary has good and, as to real property, insurable
title to all assets and properties owned by FCB or such FCB Subsidiary, as applicable, in the conduct of its businesses, whether
such assets and properties are real or personal, tangible or intangible, including assets and property reflected in the most recent
consolidated statement of financial condition contained in the FCB Financial Statements or acquired subsequent thereto (except
to the extent that such assets and properties have been disposed of in the ordinary course of business, since the date of such
consolidated statement of financial condition), subject to no encumbrances, liens, mortgages, security interests or pledges, except
Permitted Liens. FCB and the FCB Subsidiaries, as lessee, have the right under valid and existing leases of real and personal properties
used by FCB and the FCB Subsidiaries in the conduct of their businesses to occupy or use all such properties as presently occupied
and used by each of them. Such existing leases and commitments to lease constitute or will constitute operating leases for both
tax and financial accounting purposes and the lease expense and minimum rental commitments with respect to such leases and lease
commitments are as disclosed in all material respects in the notes to the FCB Financial Statements.
4.10.2 With
respect to all material agreements pursuant to which FCB or any FCB Subsidiary has purchased securities subject to an agreement
to resell, if any, FCB or such FCB Subsidiary, as the case may be, has a lien or security interest (which to FCB’s Knowledge
is a valid, perfected first lien) in the securities or other collateral securing the repurchase agreement, and the value of such
collateral equals or exceeds the amount of the debt secured thereby.
4.10.3 FCB
and each FCB Subsidiary currently maintain insurance considered by each of them to be reasonable for their respective operations.
Neither FCB nor any FCB Subsidiary, has received notice from any insurance carrier on or before the date hereof that (i) such
insurance will be canceled or that coverage thereunder will be reduced or eliminated, or (ii) premium costs with respect to
such policies of insurance will be substantially increased. Except as listed on
FCB Disclosure Schedule 4.10.3
, there
are presently no claims pending under such policies of insurance and no notices of claim have been given by FCB or any FCB Subsidiary
under such policies. All such insurance is valid and enforceable and in full force and effect (other than insurance that expires
in accordance with its terms), and within the last three (3) years FCB and each FCB Subsidiary has received each type of insurance
coverage for which it has applied and, except as listed on FCB Disclosure Schedule 4.10.3, during such
periods has not been denied indemnification for
any claims submitted under any of its insurance policies.
FCB Disclosure Schedule 4.10.3
identifies all policies of
insurance maintained by FCB and each FCB Subsidiary, including the name of the insurer, the policy number, the type of policy and
any applicable deductibles, as well as the other matters required to be disclosed under this Section 4.10.3. FCB has made
available to BHLB copies of all of the policies listed on
FCB Disclosure Schedule 4.10.3
.
4.11
Legal
Proceedings.
Except as set forth on
FCB Disclosure Schedule
4.11
, there is no suit, action, investigation or proceeding pending or, to its Knowledge, threatened against or affecting FCB
or any FCB Subsidiary (and FCB is not aware of any facts that reasonably could be expected to be the basis for any such suit, action
or proceeding) (1) that involves a Governmental Entity or Bank Regulator, or (2) that, individually or in the aggregate, is (A)
material to FCB’s and FCB’s Subsidiaries, taken as a whole, or reasonably likely to result in a restriction on FCB’s
business or any of the FCB Subsidiaries businesses, or, after the Effective Time, BHLB’s or any of its Subsidiaries’
businesses, or (B) reasonably likely to prevent or delay it from performing its obligations under, or consummating the transactions
contemplated by, this Agreement. There is no injunction, order, award, judgment, settlement, decree or written regulatory restriction
imposed upon or entered into by FCB, any of the FCB Subsidiaries or the assets of FCB or any of the FCB Subsidiaries.
4.12
Compliance
with Applicable Law.
Except as set forth on
FCB Disclosure Schedule 4.12
and in Section 4.15:
4.12.1 FCB and each FCB Subsidiary is in compliance in all material respects with all applicable federal, state, local and foreign statutes,
laws, regulations, ordinances, rules, judgments, orders or decrees applicable to it, its properties, assets and deposits, its business,
its conduct of business and its relationship with its employees, including, without limitation, the Uniting and Strengthening America
by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, the Equal Credit Opportunity Act, the
Truth in Lending Act, the Real Estate Settlement Procedures Act, the Consumer Credit Protection Act, the Fair Credit Reporting
Act, the Fair Debt Collections Act, the Fair Housing Act, the Community Reinvestment Act of 1977 (“
CRA
”), the
Home Mortgage Disclosure Act, and all other applicable fair lending laws and other laws relating to discriminatory business practices,
and neither FCB nor any FCB Subsidiary has received any written notice to the contrary.
4.12.2 FCB
and each FCB Subsidiary has all material permits, licenses, authorizations, orders and approvals of, and has made all filings,
applications and registrations with, all Governmental Entities and Bank Regulators that are required in order to permit it to own
or lease its properties and to conduct its business as presently conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and no suspension or cancellation of any such permit, license, certificate, order
or approval is threatened or will result from the consummation of the transactions contemplated by this Agreement, subject to obtaining
the Regulatory Approvals.
4.12.3 For
the period beginning January 1, 2012, except as disclosed in FCB Disclosure Schedule 4.12.3, neither FCB nor any FCB Subsidiary
has received any written notification or any other communication from any Bank Regulator (i) asserting that FCB or any FCB
Subsidiary is not in material compliance with any of the statutes, regulations or ordinances which such Bank Regulator enforces;
(ii) threatening to revoke any license, franchise, permit or governmental authorization; (iii) requiring or threatening to
require FCB or any FCB Subsidiary, or indicating that FCB or any FCB Subsidiary may be required, to enter into a cease and desist
order, agreement or memorandum of understanding or any other agreement with any federal or state governmental agency or authority
which is charged with the supervision or regulation of banks, or engages in the insurance of bank deposits, restricting or limiting,
or purporting to restrict or limit the operations of FCB or any FCB Subsidiary, including without limitation any restriction on
the payment of dividends; or (iv) directing, restricting or limiting, or purporting to direct, restrict or limit the operations
of FCB or any FCB Subsidiary (any such notice, communication, memorandum, agreement or order described in this sentence is hereinafter
referred to as a “
Regulatory Agreement
”). Except as disclosed in
FCB Disclosure Schedule 4.12.3
, neither
FCB nor any FCB Subsidiary has consented to or entered into any Regulatory Agreement that is currently in effect. The most recent
regulatory rating given to FCB as to compliance with CRA is “Satisfactory” or better.
4.13
Employee
Benefit Plans.
4.13.1
FCB
Disclosure Schedule 4.13.1
contains a list of all written and unwritten pension, retirement, profit-sharing, thrift, savings,
deferred compensation, stock option, employee stock ownership, employee stock purchase, restricted stock, severance pay, retention,
vacation, bonus or other incentive plans, all employment, change in control, consulting, severance and retention agreements, all
other written employee programs, arrangements or agreements, all medical, vision, dental, disability, life insurance, workers’
compensation, employee assistance or other health or welfare plans, and all other employee benefit or fringe benefit plans, including
“employee benefit plans” as that term is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored
in whole or in part by, or contributed to by FCB or any of its ERISA Affiliates for the benefit of employees, former employees,
retirees (or the dependents, including spouses, of the foregoing), directors, independent contractors or other service providers
to FCB or FCLS and under which employees, former employees, retirees, dependents, spouses, directors, or other service providers
of FCB or FCLS are eligible to participate (collectively, the “
FCB and FCLS Benefit Plans
”). FCB has furnished
or otherwise made available to BHLB true and complete copies of (i) the plan documents and summary plan descriptions for each
written FCB and FCLS Benefit Plan, (ii) a summary of each unwritten FCB and FCLS Benefit Plan (if applicable), (iii) the
annual report (Form 5500 series) for the three (3) most recent years for each FCB and FCLS Benefit Plan (if applicable), (iv)
the actuarial valuation reports with respect to each tax-qualified FCB and FCLS Benefit Plan that is a defined benefit pension
plan for the three (3) most recent years, (v) all related trust agreements, insurance contracts or other funding agreements
which currently implement the FCB and FCLS Benefit Plans (if applicable), (vi) the most recent IRS determination letter with respect
to each tax-qualified FCB and FCLS Benefit Plan (or, for a FCB and FCLS Benefit Plan maintained under a pre-approved prototype
or volume submitter plan, the IRS determination letter on such pre-approved plan) and (vii) all substantive correspondence
relating to any liability of or non-compliance relating to any FCB and FCLS Benefit Plan addressed to or received from the IRS,
the Department of Labor or any other Governmental Entity within the past three (3) years. Each FCB and FCLS Benefit Plan that
may be subject to Section 409A of the Code (“
FCB Non-qualified Deferred Compensation Plan
”) has been maintained
and operated in compliance with Section 409A of the Code such that no Taxes under Section 409A of the Code may be imposed
on participants in such plans.
4.13.2 All
FCB and FCLS Benefit Plans are in material compliance with (and have been managed and administrated in accordance with) the applicable
terms of ERISA, the Code and any other applicable laws. Except as set forth on
FCB Disclosure Schedule 4.13.2
, each
FCB and FCLS Benefit Plan governed by ERISA that is intended to be a qualified retirement plan under Section 401(a) of the Code
has either (i) received a favorable determination letter from the IRS (and FCB is not aware of any circumstances likely to
result in revocation of any such favorable determination letter) or timely application has been made therefore, or (ii) is
maintained under a prototype plan which has been approved by the IRS and is entitled to rely upon the IRS National Office opinion
letter issued to the prototype plan sponsor. To the Knowledge of FCB and the FCB Subsidiaries, there exists no fact which would
adversely affect the qualification of any of the FCB and FCLS Benefit Plans intended to be qualified under Section 401(a) of the
Code, or any threatened or pending claim against any of the FCB and FCLS Benefit Plans or their fiduciaries by any participant,
beneficiary or Governmental Entity (other than routine claims for benefits).
4.13.3 Except
as set forth on
FCB Disclosure Schedule 4.13.3
, no “defined benefit plan” (as defined in Section 414(j)
of the Code) has been maintained at any time by FCB or any of its ERISA Affiliates for the benefit of the employees or former employees
of FCB or the FCB Subsidiaries.
4.13.4 Within
the last six (6) years, neither FCB nor any of its ERISA Affiliates maintained or had any obligation to contribute to a FCB and
FCLS Benefit Plan which is a “multiemployer plan” within the meaning of Section 3(37) of ERISA, and within the
last six (6) years neither FCB nor any of its ERISA Affiliates has incurred any withdrawal liability within the meaning of Section 4201
of ERISA to any such “multiemployer plan.” Neither FCB nor any of its ERISA Affiliates has incurred any unsatisfied
liability (other than PBGC premiums) to the PBGC, the IRS or any other individual or entity under Title IV of ERISA or Section 412
of the Code, and no event or condition exists that could reasonably be expected to result in the imposition of any liability on
FCB or any of its ERISA Affiliates under such provisions or that could reasonably be expected to have an adverse effect on BHLB
or the Bank.
4.13.5 FCB
has complied in all material respects with the notice and continuation requirements of Parts 6 and 7 of Subtitle B of Title I of
ERISA and Section 4980B of the Code (“
COBRA
”), and the regulations thereunder. All reports, statements,
returns and other information required to be furnished or filed with respect to FCB and FCLS Benefit Plans have been timely furnished,
filed or both in accordance with Sections 101 through 105 of ERISA and Sections 6057 through 6059 of the Code, and they
are true, correct and complete. To FCB’s Knowledge, records with respect to FCB and FCLS Benefit Plans have been maintained
in compliance with Section 107 of ERISA. To FCB’s Knowledge, neither FCB nor any other fiduciary (as that term is defined
in Section 3(21) of ERISA) with respect to any of FCB and FCLS Benefit Plans has any liability for any breach of any fiduciary
duties under Sections 404, 405 or 409 of ERISA. No FCB and FCLS Benefit Plan fails to meet the applicable requirements of Section
105(h)(2) of the Code (determined without regard to whether such FCB and FCLS Benefit Plan is self-insured).
4.13.6 FCB
has not, with respect to any FCB and FCLS Benefit Plan, nor, to FCB’s Knowledge, has any administrator of any FCB and FCLS
Benefit Plan, the related trusts or any trustee thereof, engaged in any prohibited transaction which would subject FCB, any ERISA
Affiliate of FCB, or any FCB and FCLS Benefit Plan to a Tax or penalty on prohibited transactions imposed by ERISA, Section 4975
of the Code, or to any other liability under ERISA.
4.13.7 Except
as set forth on
FCB Disclosure Schedule 4.13.7
, FCB has no liability for retiree health and life benefits under any
FCB and FCLS Benefit Plan other than any benefits required under COBRA or similar state laws.
4.13.8 Except
as set forth on
FCB Disclosure Schedule 4.13.8
, neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will (A) result in any payment (including severance) becoming due to any director or any
employee of FCB or FCLS from FCB or FCLS, respectively, under any FCB and FCLS Benefit Plan, (B) increase any benefits otherwise
payable under any FCB and FCLS Benefit Plan or (C) result in any acceleration of the time of payment or vesting of any such
benefit. Except as set forth on
FCB Disclosure Schedule 4.13.8
, no payment which in connection with the transactions
contemplated by this Agreement is or may reasonably be expected to be made by, from or with respect to any FCB and FCLS Benefit
Plan, either alone or in conjunction with any other payment will or could properly be characterized as an “excess parachute
payment” under Section 280G of the Code on which an excise tax under Section 4999 of the Code is payable or will or
could, either individually or collectively, provide for any payment by FCB or any of its ERISA Affiliates that would not be deductible
under Code Section 162(m).
4.13.9 The
actuarial present values of all accrued FCB Non-qualified Deferred Compensation Plans (including, to the extent applicable, entitlements
under any executive compensation, supplemental retirement, or employment agreement) of employees and former employees of FCB or
FCLS and their respective beneficiaries, other than entitlements accrued pursuant to funded retirement plans subject to the provisions
of Section 412 of the Code or Section 302 of ERISA, have been fully reflected on the FCB Financial Statements to the
extent required by and in accordance with GAAP.
4.13.10 There
is not, and has not been, any trust or fund maintained by or contributed to by FCB or its employees to fund an employee benefit
plan which would constitute a Voluntary Employees’ Beneficiary Association or a “welfare benefit fund” within
the meaning of Section 419(a) of the Code.
4.13.11 No
claim, lawsuit, arbitration or other action has been asserted or instituted or, to the Knowledge of FCB, has been threatened or
is anticipated, against any FCB and FCLS Benefit Plan (other than routine claims for benefits and appeals of such claims), FCB
or any FCB Subsidiary or any director, officer or employee thereof, or any of the assets of any trust of any FCB and FCLS Benefit
Plan.
4.14
Brokers,
Finders and Financial Advisors.
Neither FCB nor any FCB Subsidiary, nor any
of their respective officers, directors, employees or agents, has employed any broker, finder or financial advisor in connection
with the transactions contemplated by this Agreement, or incurred any liability or commitment for any fees or commissions to any
such Person in connection with the transactions contemplated by this Agreement except for the retention of Houlihan Lokey by FCB
and the
fees payable pursuant thereto. A true and correct
copy of each of the engagement agreement with Houlihan Lokey setting forth the fees payable to Houlihan Lokey for its services
rendered to FCB in connection with the Merger and transactions contemplated by this Agreement, is attached to
FCB Disclosure
Schedule 4.14
.
4.15
Environmental
Matters.
4.15.1 Except
as may be set forth in
FCB Disclosure Schedule 4.15
, with respect to FCB and each FCB Subsidiary:
(A) Each
of FCB and the FCB Subsidiaries, and the FCB Loan Properties (as defined in Section 4.15.2) are, and have been, in material
compliance with any Environmental Laws;
(B) Neither
FCB nor any FCB Subsidiary has received written notice in the last five (5) years that there is any material suit, claim, action,
demand, executive or administrative order, directive, request for information, investigation or proceeding pending and, to the
Knowledge of FCB and the FCB Subsidiaries, no such action is threatened, before any court, governmental agency or other forum against
them or any FCB Loan Property (x) for alleged noncompliance (including by any predecessor) with, or liability under, any Environmental
Law or (y) relating to the presence of or release into the environment of any Materials of Environmental Concern, whether
or not occurring at or on a site owned, leased or operated by FCB, or any of the FCB Subsidiaries;
(C) To
the Knowledge of FCB and the FCB Subsidiaries, the properties currently owned or operated by FCB or any FCB Subsidiary (including,
without limitation, soil, groundwater or surface water on, or under the properties, and buildings thereon) are not contaminated
with and do not otherwise contain any Materials of Environmental Concern other than in amounts permitted under applicable Environmental
Law or which are de minimis in nature and extent;
(D) There
are no underground storage tanks on, in or under any properties owned or operated by FCB or any of the FCB Subsidiaries or any
FCB Loan Property, and no underground storage tanks have been closed or removed from any properties owned or operated by FCB or
any of the FCB Subsidiaries or any FCB Loan Property except as in compliance with Environmental Laws; and
(E) During
the period of (a) FCB’s or any of the FCB Subsidiaries’ ownership or operation of any of their respective current
properties or (b) FCB’s or any of the FCB Subsidiaries’ participation in the management of any FCB Loan Property,
to the Knowledge of FCB and the FCB Subsidiaries, there has been no material contamination by or material release of Materials
of Environmental Concern in, on, under or affecting such properties. To the Knowledge of FCB and the FCB Subsidiaries, prior to
the period of (x) FCB’s or any of the FCB Subsidiaries’ ownership or operation of any of their respective current
properties or (y) FCB’s or any of the FCB Subsidiaries’ participation in the management of any FCB Loan Property,
there was no material contamination by or release of Materials of Environmental Concern in, on, under or affecting such properties.
(F) Neither
FCB nor any other FCB Subsidiary has conducted any environmental studies during the past five (5) years (other than Phase
I studies or Phase II studies which did not indicate any contamination of the environment by Materials of Environmental Concern
above reportable levels) with respect to any properties owned or leased by it or any of its Subsidiaries, or with respect to any
FCB Loan Property.
4.15.2 For
purposes of this Section 4.15, “
FCB Loan Property
” means any property in which FCB or a FCB Subsidiary
presently holds a direct or indirect security interest securing to a loan or other extension of credit made by them, including
through a FCB Loan Participation, and “
FCB Loan Participation
” means a participation interest in a loan or other
extension of credit other than by FCB or a FCB Subsidiary.
4.16
Loan
Portfolio.
4.16.1 The
allowances for loan losses reflected in the notes to FCB’s audited consolidated statements of financial condition at December
31, 2015 and 2014 were, and the allowance for loan losses shown in
the notes to the unaudited consolidated financial
statements for periods ending after December 31, 2015 were, or will be, adequate, as of the dates thereof, under GAAP.
4.16.2
FCB
Disclosure Schedule 4.16.2
sets forth a listing, as of the most recently available date (and in no event earlier than
March 31, 2016), by account, of: (A) all loans (including loan participations) of FCB that have been accelerated during the
past twelve (12) months; (B) with respect to all commercial loans (including commercial real estate loans), all notification
letters and other written communications from FCB to any borrowers, customers or other parties during the past twelve (12) months
wherein FCB has requested or demanded that actions be taken to correct existing defaults or facts or circumstances which may become
defaults; (C) each borrower, customer or other party which has notified FCB during the past twelve (12) months of, or has
asserted against FCB or FCLS, in each case in writing, any “lender liability” or similar claim, and, to the Knowledge
of FCB and FCLS, each borrower, customer or other party which has given FCB or FCLS any oral notification of, or orally asserted
to or against FCB or FCLS, any such claim; and (D) all loans, (1) that are contractually past due ninety (90) days or
more in the payment of principal and/or interest, (2) that are on non-accrual status, (3) that as of March 31, 2016 are classified
as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,” “Doubtful,”
“Loss,” “Classified,” “Criticized,” “Watch list” or words of similar import, together
with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the obligor thereunder, (4) where
a reasonable doubt exists as to the timely future collectability of principal and/or interest, whether or not interest is still
accruing or the loans are less than ninety (90) days past due, (5) where the interest rate terms have been reduced and/or
the maturity dates have been extended subsequent to the agreement under which the loan was originally created due to concerns regarding
the borrower’s ability to pay in accordance with such initial terms, or (6) where a specific reserve allocation exists
in connection therewith; and (E) all other assets classified by FCB as real estate acquired through foreclosure or in lieu
of foreclosure, including in-substance foreclosures, and all other assets currently held that were acquired through foreclosure
or in lieu of foreclosure.
FCB Disclosure Schedule 4.16.2
may exclude any individual loan with a principal outstanding
balance of less than $100,000, provided that
FCB Disclosure Schedule 4.16.2
includes, for each category described, the aggregate
amount of individual loans with a principal outstanding balance of less than $100,000 that has been excluded.
4.16.3 All
loans receivable (including discounts) and accrued interest entered on the books of FCB arose out of bona fide arm’s-length
transactions, were made for good and valuable consideration in the ordinary course of FCB’s and FCLS’s respective businesses,
and the notes or other evidences of indebtedness with respect to such loans (including discounts) are true and genuine and are
what they purport to be. The loans, discounts and the accrued interest reflected on the books of FCB and FCLS are subject to no
defenses, set-offs or counterclaims (including, without limitation, those afforded by usury or truth-in-lending laws), except as
may be provided by bankruptcy, insolvency or similar laws affecting creditors’ rights generally or by general principles
of equity. All such loans are owned by FCB or FCLS free and clear of any liens other than Permitted Liens.
4.16.4 The
notes and other evidences of indebtedness evidencing the loans described above, and all pledges, mortgages, deeds of trust and
other collateral documents or security instruments relating thereto are valid, true and genuine, and what they purport to be.
4.16.5 Attached
as
FCB Disclosure Schedule 4.16.5
is a list of each agreement pursuant to which FCB or FCB Subsidiary has sold one or more
mortgage loans on the secondary market within the past three (3) years preceding the date of this Agreement.
4.16.6 Attached
as
FCB Disclosure Schedule 4.16.6
is a schedule, as of May 31, 2016, of all loans held for sale or resale and all other
residential mortgage loan applications in process by FCB or any FCB Subsidiary, FCB’s or any FCB Subsidiary’s rights
and interest in and to any pre-paid application fees from prospective borrowers, promissory notes receivable and prepaid expenses
(collectively, the “
Asset Pipeline
”), which are true and correct as of the date of this Agreement and shall
be true and correct as of the Closing Date.
4.17
Related
Party Transactions.
Neither FCB nor any FCB Subsidiary is a party
to any transaction (including any loan or other credit accommodation) with any Affiliate of FCB or any FCB Subsidiary, except as
set forth in
FCB Disclosure Schedule 4.17
. Except as described in
FCB Disclosure Schedule 4.17
, all such
transactions (a) were made in the
ordinary course of business, (b) were made
on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions
with other Persons, and (c) did not involve more than the normal risk of collectability or present other unfavorable features.
No loan or credit accommodation to any Affiliate of FCB or any FCB Subsidiary is presently in default or, during the three (3)-year
period prior to the date of this Agreement, has been in default or has been restructured, modified or extended. Neither FCB nor
any FCB Subsidiary has been notified that principal or interest with respect to any such loan or other credit accommodation will
not be paid when due or that the loan grade classification accorded such loan or credit accommodation is inappropriate.
4.18
Deposits.
Except as set forth on
FCB Disclosure Schedule
4.18
, none of the deposits of FCB as of March 31, 2016 are a “brokered deposit” as defined in 12 C.F.R. Section 337.6(a)(2).
4.19
Board
Approval.
The Board of Directors of FCB determined that
the Merger is fair to, and in the best interests of, FCB and its stockholders, approved and declared advisable this Agreement,
the Merger, and the other transactions contemplated hereby, resolved to recommend adoption of this Agreement to the holders of
FCB Common Stock, and directed that this Agreement be submitted to the holders of FCB Common Stock for their adoption
.
4.20
Registration
Obligations.
Neither FCB nor any FCB Subsidiary is under
any obligation, contingent or otherwise, which will survive the Effective Time by reason of any agreement to register any transaction
involving any of its securities under the Securities Act.
4.21
Risk
Management Instruments.
All interest rate swaps, caps, floors, option
agreements, futures and forward contracts and other similar risk management arrangements, whether entered into for FCB’s
own account, or for the account of one or more of FCB’s Subsidiaries or their customers, in force and effect as of March
31, 2016 (all of which are set forth in
FCB Disclosure Schedule 4.21
), were entered into in compliance with all applicable
laws, rules, regulations and regulatory policies, and to the Knowledge of FCB and each FCB Subsidiary, with counterparties believed
to be financially responsible at the time; and to FCB’s and each FCB Subsidiary’s Knowledge each of them constitutes
the valid and legally binding obligation of FCB or such FCB Subsidiary, enforceable in accordance with its terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors’ rights or by general equity principles), and is in full force and effect.
Neither FCB nor any FCB Subsidiary, nor any other party thereto, is in breach of any of its obligations under any such agreement
or arrangement.
4.22
Fairness
Opinion.
FCB has received an opinion, a copy of which
will be provided to BHLB promptly following the date of this Agreement, from Ambassador Financial Group to the effect that, subject
to the terms, conditions and qualifications set forth therein, as of the date hereof, the Merger Consideration to be received by
the shareholders of FCB pursuant to this Agreement is fair to such shareholders from a financial point of view. Such opinion has
not been amended or rescinded as of the date of this Agreement.
4.23
Intellectual
Property.
FCB and each FCB Subsidiary owns or, to FCB’s
Knowledge, possesses valid and binding licenses and other rights (subject to expirations in accordance with their terms) to use
all patents, copyrights, trade secrets, trade names, computer software, service marks and trademarks used in its respective business,
each without payment, and neither FCB nor any FCB Subsidiary has received any notice of breach or conflict with respect thereto
that asserts
the rights of others. FCB and each FCB Subsidiary
have performed all the obligations required to be performed, and are not in default in any respect, under any contract, agreement,
arrangement or commitment relating to any of the foregoing.
4.24
Duties
as Fiduciary.
Other than as set forth on
FCB Disclosure
Schedule 4.24
, FCB has, if required by virtue of any line of business in which it is or previously was engaged in a “fiduciary
capacity,” to its Knowledge performed all of its duties in a fashion that complied with all applicable laws, regulations,
orders, agreements, wills, instruments, and common law standards in effect at that time. FCB has not received notice of any claim,
allegation, or complaint from any Person that FCB failed to perform these duties in a manner that complied with all applicable
laws, regulations, orders, agreements, wills, instruments, and common law standards, except for notices involving matters that
have been resolved and any cost of such resolution is reflected in FCB’s Financial Statements. For purposes of this Section 4.24,
the term “fiduciary capacity” (i) shall mean (a) acting as trustee, executor, administrator, registrar of
stocks and bonds, transfer agent, guardian, assignee, receiver, or custodian under a uniform gifts to minors act and (b) possessing
investment discretion on behalf of another, and (ii) shall exclude FCB’s capacity with respect to individual retirement
accounts or the FCB and FCLS Benefit Plans.
4.25
Employees;
Labor Matters.
4.25.1
FCB
Disclosure Schedule 4.25.1
sets forth the following information with respect to each employee of FCB and the FCB Subsidiaries
as of March 31, 2016: job location, job title, current annual base salary, year of hire and years of service.
4.25.2 There
are no labor or collective bargaining agreements to which FCB or any FCB Subsidiary is a party. There is no union organizing effort
pending or, to the Knowledge of FCB, threatened against FCB or any FCB Subsidiary. There is no labor strike, labor dispute (other
than routine employee grievances that are not related to union employees), work slowdown, stoppage or lockout pending or, to the
Knowledge of FCB, threatened against FCB or any FCB Subsidiary. There is no unfair labor practice or labor arbitration proceeding
pending or, to the Knowledge of FCB, threatened against FCB or any FCB Subsidiary (other than routine employee grievances that
are not related to union employees). FCB and each FCB Subsidiary is in compliance with all applicable laws respecting employment
and employment practices, terms and conditions of employment and wages and hours, and are not engaged in any unfair labor practice.
Neither FCB nor any FCB Subsidiary is a party to, or bound by, any agreement for the leasing of employees.
4.25.3 Except
as to the Unfunded Loan Commissions and Funded Loan Commissions, FCB and each FCB Subsidiary has paid in full, or has made adequate
provision for payment in full of, all wages, salaries, commissions that have been earned in accordance with FCB’s and any
FCB Subsidiary’s commission and bonus policies, and other compensation for all services performed by its employees. FCB and
each FCB Subsidiary is in compliance with all applicable laws respecting employment, retention of independent contractors, employment
practices, terms and conditions of employment and wages and hours.
4.25.4 To
FCB’s Knowledge, all Persons who have been treated as independent contractors by FCB or any FCB Subsidiary for Tax purposes
have met the criteria to be so treated under all applicable federal, state and local Tax laws, rules and regulations.
4.26
FCB
Information Supplied.
The information relating to FCB and any FCB
Subsidiary to be contained in the Merger Registration Statement, or in any other document filed with any Bank Regulator or other
Governmental Entity in connection herewith, will not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading.
4.27
Internal
Controls.
4.27.1 The
records, systems, controls, data and information of FCB and the FCB Subsidiaries 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 FCB or the FCB Subsidiaries 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. FCB and the FCB Subsidiaries have devised
and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of
financial reporting and the preparation of financial statements in accordance with GAAP. FCB has designed and implemented disclosure
controls and procedures to ensure that material information relating to it and its Subsidiaries is made known to its management
by others within those entities as appropriate to allow timely decisions regarding required disclosure.
4.27.2 Since
December 31, 2015, (A) neither FCB nor any of the FCB Subsidiaries nor, to its knowledge, any director, officer, employee, auditor,
accountant or representative of FCB or any of the FCB Subsidiaries has received or otherwise had or obtained knowledge of any material
complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures,
methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of FCB or any of
the FCB Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion
or claim that FCB or any of the FCB Subsidiaries has engaged in questionable accounting or auditing practices, and (B) no attorney
representing FCB or any of the FCB Subsidiaries, whether or not employed by FCB or any of the FCB Subsidiaries, has reported evidence
of a material violation of securities laws, breach of fiduciary to duty or similar violation by FCB, FCLS, or any of the FCB Subsidiaries
or any of their respective officers, directors, employees or agents to their respective board of directors or any committee thereof
or to any of their respective directors and officers.
4.28
Bank
Owned Life Insurance.
FCB and each FCB Subsidiary has obtained the
written consent of each employee on whose behalf bank owned life insurance (“
BOLI
”) has been purchased. FCB
has taken all actions necessary to comply with applicable law in connection with its purchase of BOLI.
FCB Disclosure Schedule 4.28
sets forth all BOLI owned by FCB or any FCB Subsidiary, a breakdown of the cash surrender values on each policy, the purpose for
which each policy was purchased, the beneficiaries of such policy and a list of the lives insured thereunder.
4.30
Stock
Transfer Records.
The stock transfer books and records of FCB
are materially complete and accurate and reflect all transactions related to FCB Stock.
ARTICLE
V
REPRESENTATIONS AND WARRANTIES OF BHLB
BHLB represents and warrants to FCB that the
statements contained in this Article V are correct as of the date of this Agreement and will be correct as of the Closing
Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article V),
subject to the standard set forth in Section 5.1 and except as set forth in the BHLB Disclosure Schedule delivered by BHLB
to FCB on the date hereof, and except as to any representation or warranty which specifically relates to an earlier date, which
only need be so correct as of such earlier date,
provided
,
however
, that disclosure in any section of such BHLB Disclosure
Schedule shall apply only to the indicated Section of this Agreement except to the extent that it is reasonably apparent that such
disclosure is relevant to another section of this Agreement. References to the Knowledge of BHLB shall include the Knowledge of
the Bank.
5.1
Standard.
Except as set forth in the following sentence,
no representation or warranty of BHLB contained in this Article V shall be deemed untrue or incorrect, and BHLB shall not
be deemed to have breached a representation or warranty, as a consequence of the existence of any fact, circumstance or event unless
such fact, circumstance or event, individually or taken together with all other facts, circumstances or events inconsistent with
any paragraph of this Article V, has had or reasonably could be expected to have a Material Adverse Effect, disregarding for
these purposes (x) any qualification or exception for, or reference to, materiality in any such representation or warranty
and (y) any use of the terms “material,” “materially,” “in all material respects,” “Material
Adverse Effect” or similar terms or phrases in any such representation or warranty. The foregoing standard shall not apply
to representations and warranties contained in Sections 5.2 (other than Sections 5.2.3, 5.2.4, and 5.2.5 and the last sentence
of Sections 5.2.1 and 5.2.2), Section 5.3 and 5.4 (other than Section 5.4.2(iii)) which shall be true and correct in all material
respects.
5.2
Organization.
5.2.1 BHLB
is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and is duly registered
as a bank holding company under the BHCA. BHLB has full corporate power and authority to carry on its business as now conducted
and is duly licensed or qualified to do business in the states of the United States and foreign jurisdictions where its ownership
or leasing of property or the conduct of its business requires such qualification.
5.2.2 The
Bank is a Massachusetts trust company duly organized, validly existing and in good standing under the laws of the Commonwealth
of Massachusetts. The deposits in the Bank are insured by the FDIC to the fullest extent permitted by law, and all premiums and
assessments required to be paid in connection therewith have been paid. The Bank is a member in good standing of the FHLB and owns
the requisite amount of stock, which amount, as of March 31, 2016, of FHLB, is set forth on
BHLB Disclosure Schedule 5.2.2
.
5.2.3
BHLB
Disclosure Schedule 5.2.3
sets forth each BHLB Subsidiary and its jurisdiction of incorporation or organization. Each
BHLB Subsidiary (other than the Bank) is a corporation, limited liability company or other legal entity as set forth on
BHLB
Disclosure Schedule 5.2.3
, duly organized, validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization. Each BHLB Subsidiary is duly licensed and/or qualified to do business in the states of the United
States and foreign jurisdictions where its ownership or leasing of property or conduct of its business requires such license and/or
qualification.
5.2.4 The
respective minute books of BHLB and the Bank accurately record all corporate actions of their respective shareholders and boards
of directors (including committees).
5.2.5 Prior
to the date of this Agreement, BHLB has made available to FCB true and correct copies of the certificate of incorporation or articles
of association, as applicable, and bylaws or other governing documents of BHLB and the Bank and each other BHLB Subsidiary.
5.3
Capitalization.
5.3.1 The
authorized capital stock of BHLB consists of (i) 50,000,000 shares of BHLB Common Stock and (ii) 1,000,000 shares of
preferred stock, $0.01 par value per share (“
BHLB Preferred Stock
” and collectively with the BHLB Common Stock,
the “
BHLB Stock
”). As of May 31, 2016, there are (i) 32,321,962 shares of BHLB Common Stock validly issued
and outstanding, fully paid and non-assessable and free of preemptive rights, (ii) 1,062,374 shares of BHLB Common Stock held
by BHLB as treasury stock, and (iii) no shares of BHLB Preferred Stock outstanding. The Bank does not own, of record or beneficially,
any shares of BHLB Stock, other than shares held as treasury stock. Neither BHLB nor any BHLB Subsidiary has or is bound by any
Rights or other arrangements of any character relating to the purchase, sale or issuance or voting of, or right to receive dividends
or other distributions on, any capital stock of BHLB, or any other security of BHLB or an BHLB Subsidiary or any securities representing
the right to vote, purchase or otherwise receive any capital stock of BHLB or an BHLB Subsidiary or any other security of BHLB
or any BHLB Subsidiary, other than shares of BHLB Common Stock
underlying the options and restricted stock granted
pursuant to benefit plans maintained by BHLB. BHLB has granted outstanding options to acquire 262,522 shares of BHLB Common Stock
at a weighted average exercise price of $21.07 per share. All shares of BHLB Common Stock issuable pursuant to option plans maintained
by BHLB will be duly authorized, validly issued, fully paid and non-assessable when issued upon the terms and conditions specified
in the instruments pursuant to which they are issuable.
5.3.2 BHLB
owns all of the capital stock of each BHLB Subsidiary free and clear of all liens, security interests, pledges, charges, encumbrances,
agreements and restrictions of any kind or nature, except for Permitted Liens and as set forth in the certificate of incorporation
and bylaws or other governing documents and applicable securities laws. Except for the BHLB Subsidiaries and as set forth in
BHLB
Disclosure Schedule 5.3.2
, BHLB as of the date of this Agreement does not possess, directly or indirectly, any equity interest
in any corporate or other legal entity, except for equity interests held in the investment portfolios of BHLB or any BHLB Subsidiary
(which as to any one issuer, do not exceed five percent (5%) of such issuer’s outstanding equity securities) and equity interests
held in the Bank with the lending activities of the Bank, including stock in the FHLB.
5.3.3 Except
as set forth on
BHLB Disclosure Schedule 5.3.3
, to the Knowledge of BHLB, as of the date hereof, no Person is the beneficial
owner (as defined in Section 13(d) of the Exchange Act) of five percent (5%) or more of the outstanding shares of BHLB Common Stock.
5.3.4 No
bonds, debentures, notes or other indebtedness having the right to vote on any matters on which BHLB’s shareholders may vote
have been issued by BHLB and are outstanding.
5.4
Authority;
No Violation.
5.4.1 BHLB
has full corporate power and authority to execute and deliver this Agreement and, subject to receipt of the Regulatory Approvals,
to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this
Agreement by BHLB and the completion by BHLB of the transactions contemplated hereby, up to and including the Merger, have been
duly and validly approved by the Board of Directors of BHLB. This Agreement has been duly and validly executed and delivered by
BHLB, and subject to the receipt of the Regulatory Approvals, FCB Shareholder Approval, and due and valid execution and delivery
of this Agreement by FCB, constitutes the valid and binding obligations of BHLB, enforceable against BHLB in accordance with its
terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, and subject,
as to enforceability, to general principles of equity.
5.4.2 (a) Subject
to compliance of FCB with the terms and conditions of this Agreement, the execution and delivery of this Agreement by BHLB and
the Bank, subject to receipt of the Regulatory Approvals, and compliance by FCB, BHLB and the Bank with any conditions contained
therein, and subject to the receipt of the FCB Shareholder Approval, the consummation of the transactions contemplated hereby,
and (b) compliance by BHLB with the terms and provisions hereof will not (i) conflict with or result in a breach of any
provision of the certificate of incorporation or articles of association, as applicable, and bylaws or other governing documents
of BHLB or any BHLB Subsidiary; (ii) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree
or injunction applicable to BHLB or any BHLB Subsidiary or any of their respective properties or assets; or (iii) violate,
conflict with, result in a breach of any provisions of, constitute a default (or an event which, with notice or lapse of time,
or both, would constitute a default) under, result in the termination or amendment of, accelerate the performance required by,
or result in a right of termination or acceleration or the creation of any lien, security interest, charge or other encumbrance
upon any of the properties or assets of BHLB or any BHLB Subsidiary under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other investment or obligation to which BHLB or any BHLB
Subsidiary is a party, or by which they or any of their respective properties or assets may be bound or affected.
5.5
Consents.
Except for (a) the receipt of the Regulatory
Approvals and compliance with any conditions contained therein, (b) compliance with applicable requirements of the Securities
Act, the Exchange Act and state securities or “blue sky” laws, (c) the filing of the Articles of Merger with the
MDOB and the requisite certifications with the NJDOBI, (d) the filing with the SEC of (i) the Merger Registration Statement
and (ii) such reports under
Sections 13(a), 13(d), 13(g) and 16(a) of
the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby and the obtaining
from the SEC of such orders as may be required in connection therewith, (e) notification of the listing of BHLB Common Stock
to be issued in the Merger on the NYSE and (f) the approval of this Agreement by the FCB Shareholder Approval, no consents,
waivers or approvals of, or filings or registrations with, any Governmental Entity or Bank Regulator are necessary, and, to the
Knowledge of BHLB, no consents, waivers or approvals of, or filings or registrations with, any other third parties are necessary,
in connection with (x) the execution and delivery of this Agreement by BHLB, the completion by BHLB of the Merger and the
performance by BHLB of its obligations hereunder. To the Knowledge of BHLB and the Bank, no fact or circumstance exists, including
any possible other transaction pending or under consideration by BHLB or any of its Subsidiaries, that (a) would reasonably be
expected to prevent or delay in any material respect, (i) any filings with or approvals or waivers required from the FRB, the FDIC,
the NJDOBI or the MDOB or (ii) any required Regulatory Approvals, (b) would cause a Bank Regulator or Governmental Entity acting
pursuant to the Bank Merger Act, the BHCA, the New Jersey Banking Law or the Massachusetts General Laws or any other applicable
law or regulation to seek to prohibit or materially delay consummation of the transactions contemplated hereby or impose a Burdensome
Condition or (c) any Bank Regulator or Governmental Entity having jurisdiction over the affairs of BHLB and the Bank, the consent
or approval of which is not required or approval of which is not required pursuant to the rules of which a filing is not required,
will object to the completion of the transactions contemplated by this Agreement.
5.6
Financial
Statements.
5.6.1 The
BHLB Regulatory Reports have been prepared in all material respects in accordance with applicable regulatory accounting principles
and practices throughout the periods covered by such statements, and fairly present in all material respects the consolidated financial
position, results of operations and changes in shareholders’ equity of BHLB as of and for the periods ended on the dates
thereof, in accordance with applicable regulatory accounting principles applied on a consistent basis.
5.6.2 BHLB
has previously made available to FCB the BHLB Financial Statements. The BHLB Financial Statements have been prepared in accordance
with GAAP in all material respects, and (including the related notes where applicable) fairly present in each case in all material
respects (subject in the case of the unaudited interim statements to normal year-end adjustments) the consolidated financial position,
results of operations and cash flows of BHLB and the Bank on a consolidated basis as of and for the respective periods ending on
the dates thereof, in accordance with GAAP during the periods involved, except as indicated in the notes thereto, or in the case
of unaudited statements, as permitted by Form 10-Q.
5.6.3 At
the date of the most recent consolidated statement of financial condition included in the BHLB Financial Statements or in the BHLB
Regulatory Reports, BHLB did not have any liabilities, obligations or loss contingencies of any nature (whether absolute, accrued,
contingent or otherwise) of a type required to be reflected in such BHLB Financial Statements or in the footnotes thereto which
are not fully reflected or reserved against therein or fully disclosed in a footnote thereto, in each case to the extent required
in accordance with GAAP, except for liabilities, obligations and loss contingencies which are not material individually or in the
aggregate or which are incurred in the ordinary course of business, consistent with past practice, and subject, in the case of
any unaudited statements, to normal, recurring audit adjustments and the absence of footnotes.
5.7
Taxes.
5.7.1 Except
as provided in this Agreement, neither BHLB nor any of its Subsidiaries has taken or agreed to take any action, has failed to take
any action or knows of any fact, agreement, plan or other circumstance that could reasonably be expected to prevent the Merger
from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code. BHLB and the BHLB Subsidiaries
that are corporations for federal income Tax purposes are members of the same affiliated group within the meaning of Code Section 1504(a).
BHLB, on behalf of itself and its Subsidiaries, has timely (taking into account extensions) filed or caused to be filed all Tax
Returns (including, but not limited to, those filed on a consolidated, combined or unitary basis) required to have been filed by
BHLB and the BHLB Subsidiaries prior to the date hereof, or requests for extensions to file such returns and reports have been
timely filed. All such Tax Returns are true, correct, and complete in all material respects. BHLB and the BHLB Subsidiaries have
timely paid or, prior to the Effective Time will pay, all Taxes, whether or not
shown on such returns or reports, due or claimed
to be due to any Governmental Entity prior to the Effective Time other than Taxes which are being contested in good faith. BHLB
and the BHLB Subsidiaries have declared on their Tax Returns all positions taken therein that could give rise to a substantial
underpayment of United States federal income Tax within the meaning of Section 6662 of the Code (or any corresponding provision
of state or local laws). The unpaid accrued but unpaid Taxes of BHLB and the BHLB Subsidiaries did not, as of the most recent BHLB
Financial Statements, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the most recent BHLB balance sheet (rather than in any notes
thereto). BHLB and its Subsidiaries are subject to Tax audits in the ordinary course of business. BHLB management does not believe
that an adverse resolution to any of such audits of which it has Knowledge would be reasonably likely to have a Material Adverse
Effect on BHLB. BHLB and the BHLB Subsidiaries have not been notified in writing by any jurisdiction that the jurisdiction believes
that BHLB or any of the BHLB Subsidiaries were required to file any Tax Return in such jurisdiction that was not filed. Neither
BHLB nor any of the BHLB Subsidiaries (A) has been a member of a group with which they have filed or been included in a combined,
consolidated or unitary income Tax Return other than a group the common parent of which was BHLB or (B) has any liability for the
Taxes of any Person (other than BHLB or any of the BHLB Subsidiaries) under Treas. Reg. § 1.1502-6 (or any similar provision
of state, local, or non-U.S. law), as a transferee or successor, by contract, or otherwise. As of the date hereof, all deficiencies
proposed in writing as a result of any audits have been paid or settled. There are no written claims or assessments pending against
BHLB or any BHLB Subsidiary for any alleged deficiency in any Tax, and neither BHLB nor any BHLB Subsidiary has been notified in
writing of any proposed Tax claims or assessments against BHLB or any BHLB Subsidiary. BHLB and the BHLB Subsidiaries each have
duly and timely withheld, collected and paid over to the appropriate taxing authority all amounts required to be so withheld and
paid under all applicable laws, and have duly and timely filed all Tax Returns with respect to such withheld Taxes, within the
time prescribed under any applicable law. BHLB and the BHLB Subsidiaries have delivered to FCB true and complete copies of all
income Tax Returns of BHLB and the BHLB Subsidiaries for taxable periods ending on or after December 31, 2013. Neither BHLB nor
any of the BHLB Subsidiaries is or has been a party to any “reportable transaction,” as defined in Code § 6707A(c)(1)
and Treas. Reg. § 1.6011-4(b). Neither BHLB nor any of the BHLB Subsidiaries has distributed stock of another Person,
or has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or
in part by Code § 355 or Code § 361. Neither BHLB nor any of the BHLB Subsidiaries has been a United States
real property holding corporation within the meaning of Code § 897(c)(2) during the applicable period specified in Code
§ 897(c)(1)(A)(ii).
5.8
No
Material Adverse Effect.
Neither BHLB nor any BHLB Subsidiary has suffered
any Material Adverse Effect since December 31, 2015 and, to BHLB’s Knowledge, no event has occurred or circumstance
arisen since that date which, in the aggregate, has had or reasonably would be expected to have a Material Adverse Effect on BHLB.
5.9
Ownership
of Property; Insurance Coverage.
5.9.1 Except
as set forth on
BHLB Disclosure Schedule 5.9.1
, BHLB and each BHLB Subsidiary has good and, as to real property, insurable
title to all assets and properties owned by BHLB or such BHLB Subsidiary, as applicable, in the conduct of its businesses, whether
such assets and properties are real or personal, tangible or intangible, including assets and property reflected in the most recent
consolidated statement of financial condition contained in the BHLB Financial Statements or acquired subsequent thereto (except
to the extent that such assets and properties have been disposed of in the ordinary course of business, since the date of such
consolidated statement of financial condition), subject to no encumbrances, liens, mortgages, security interests or pledges, except
Permitted Liens. BHLB and the BHLB Subsidiaries, as lessee, have the right under valid and existing leases of real and personal
properties used by BHLB and the BHLB Subsidiaries in the conduct of their businesses to occupy or use all such properties as presently
occupied and used by each of them. Such existing leases and commitments to lease constitute or will constitute operating leases
for both tax and financial accounting purposes and the lease expense and minimum rental commitments with respect to such leases
and lease commitments are as disclosed in all material respects in the notes to the BHLB Financial Statements.
5.9.2 With
respect to all material agreements pursuant to which BHLB or any BHLB Subsidiary has purchased securities subject to an agreement
to resell, if any, BHLB or such BHLB Subsidiary, as the
case may be, has a lien or security interest (which
to BHLB’s Knowledge is a valid, perfected first lien) in the securities or other collateral securing the repurchase agreement,
and the value of such collateral equals or exceeds the amount of the debt secured thereby.
5.9.3 BHLB
and each BHLB Subsidiary currently maintain insurance considered by each of them to be reasonable for their respective operations.
Neither BHLB nor any BHLB Subsidiary, has received notice from any insurance carrier on or before the date hereof that (i) such
insurance will be canceled or that coverage thereunder will be reduced or eliminated, or (ii) premium costs with respect to
such policies of insurance will be substantially increased. Except as listed on
BHLB Disclosure Schedule 5.9.3
, there
are presently no claims pending under such policies of insurance and no notices of claim have been given by BHLB or any BHLB Subsidiary
under such policies. All such insurance is valid and enforceable and in full force and effect (other than insurance that expires
in accordance with its terms), and within the last three (3) years BHLB and each BHLB Subsidiary has received each type of insurance
coverage for which it has applied and during such periods has not been denied indemnification for any claims submitted under any
of its insurance policies.
BHLB Disclosure Schedule 5.9.3
identifies all policies of insurance maintained by BHLB and
each BHLB Subsidiary, including the name of the insurer, the policy number, the type of policy and any applicable deductibles,
as well as the other matters required to be disclosed under this Section 5.9.3. BHLB has made available to FCB copies of all
of the policies listed on
BHLB Disclosure Schedule 5.9.3
.
5.10
Legal
Proceedings.
Except as set forth on
BHLB Disclosure Schedule
5.10
, there is no suit, action, investigation or proceeding pending or, to its Knowledge, threatened against or affecting BHLB
or any of its Subsidiaries (and it is not aware of any facts that reasonably could be expected to form the basis for any such suit,
action or proceeding) (1) that involves a Governmental Entity or Bank Regulator, or (2) that, individually or in the aggregate,
is (A) material to it and its Subsidiaries, taken as a whole, or reasonably likely to result in a restriction on its or any of
its Subsidiaries’ businesses or, or after the Effective Time, BHLB’s or any of its Subsidiaries’ businesses,
or (B) reasonably likely to prevent or delay it from performing its obligations under, or consummating the transactions contemplated
by, this Agreement. There is no injunction, order, award, judgment, settlement, decree or written regulatory restriction imposed
upon or entered into by BHLB, any of its Subsidiaries or the assets of it or any of its Subsidiaries.
5.11
Compliance
with Applicable Law.
Except as set forth on
BHLB Disclosure Schedule 5.11
:
5.11.1 To
BHLB’s Knowledge, BHLB and each BHLB Subsidiary is in compliance in all material respects with all applicable federal, state,
local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable to it, its properties,
assets and deposits, its business, its conduct of business and its relationship with its employees, including, without limitation,
the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,
the Equal Credit Opportunity Act, the Truth in Lending Act, the Real Estate Settlement Procedures Act, the Consumer Credit Protection
Act, the Fair Credit Reporting Act, the Fair Debt Collections Act, the Fair Housing Act, the CRA, the Home Mortgage Disclosure
Act, and all other applicable fair lending laws and other laws relating to discriminatory business practices, and neither BHLB
nor any BHLB Subsidiary has received any written notice to the contrary.
5.11.2 BHLB
and each BHLB Subsidiary has all material permits, licenses, authorizations, orders and approvals of, and has made all filings,
applications and registrations with, all Governmental Entities and Bank Regulators that are required in order to permit it to own
or lease its properties and to conduct its business as presently conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and, to the Knowledge of BHLB, no suspension or cancellation of any such permit,
license, certificate, order or approval is threatened or will result from the consummation of the transactions contemplated by
this Agreement, subject to obtaining the Regulatory Approvals.
5.11.3 For
the period beginning January 1, 2012, neither BHLB nor any BHLB Subsidiary has received any written notification or any other
communication from any Bank Regulator or Insurance Regulator (i) asserting that BHLB or any BHLB Subsidiary is not in material
compliance with any of the statutes, regulations
or ordinances which such Bank Regulator or Insurance
Regulator enforces; (ii) threatening to revoke any license, franchise, permit or governmental authorization; (iii) requiring
or threatening to require BHLB or any BHLB Subsidiary, or indicating that BHLB or any BHLB Subsidiary may be required, to enter
into a cease and desist order, agreement or memorandum of understanding or any other agreement with any federal or state governmental
agency or authority which is charged with the supervision or regulation of banks, bank holding companies or insurance agencies,
or engages in the insurance of bank deposits, restricting or limiting, or purporting to restrict or limit the operations of BHLB
or any BHLB Subsidiary, including without limitation any restriction on the payment of dividends; or (iv) directing, restricting
or limiting, or purporting to direct, restrict or limit the operations of BHLB or any BHLB Subsidiary. Neither BHLB nor any BHLB
Subsidiary has consented to or entered into any Regulatory Agreement that is currently in effect. The most recent regulatory rating
given to the Bank as to compliance with the CRA is “Satisfactory” or better.
5.12
Employee
Benefit Plans.
5.12.1
BHLB
Disclosure Schedule 5.12.1
contains a list of all written and unwritten pension, retirement, profit-sharing, thrift, savings,
deferred compensation, stock option, employee stock ownership, employee stock purchase, restricted stock, severance pay, retention,
vacation, bonus or other incentive plans, all employment, change in control, consulting, severance and retention agreements, all
other written employee programs, arrangements or agreements, all medical, vision, dental, disability, life insurance, workers’
compensation, employee assistance or other health or welfare plans, and all other employee benefit or fringe benefit plans, including
“employee benefit plans” as that term is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored
in whole or in part by, or contributed to by BHLB or any of its ERISA Affiliates for the benefit of employees, former employees,
retirees (or the dependents, including spouses, of the foregoing), directors, independent contractors or other service providers
to BHLB and under which employees, former employees, retirees, dependents, spouses, directors, or other service providers of BHLB
are eligible to participate (collectively, the “
BHLB Benefit Plans
”). BHLB has furnished or otherwise made available
to FCB true and complete copies of (i) the plan documents and summary plan descriptions for each written BHLB Benefit Plan,
(ii) a summary of each unwritten BHLB Benefit Plan (if applicable), (iii) the annual report (Form 5500 series) for the three
(3) most recent years for each BHLB Benefit Plan (if applicable), (iv) the actuarial valuation reports with respect to each
tax-qualified BHLB Benefit Plan that is a defined benefit pension plan for the three (3) most recent years, (v) all related
trust agreements, insurance contracts or other funding agreements which currently implement the BHLB Benefit Plans (if applicable),
(vi) the most recent IRS determination letter with respect to each tax-qualified BHLB Benefit Plan (or, for a BHLB Benefit Plan
maintained under a pre-approved prototype or volume submitter plan, the IRS determination letter on such pre-approved plan) and
(vii) all substantive correspondence relating to any liability of or non-compliance relating to any BHLB Benefit Plan addressed
to or received from the IRS, the Department of Labor or any other Governmental Entity within the past three (3) years. Each
BHLB Benefit Plan that may be subject to Section 409A of the Code (“
BHLB Non-qualified Deferred Compensation Plan
”)
has been maintained and operated in compliance with Section 409A of the Code such that no Taxes under Section 409A of the
Code may be imposed on participants in such plans.
5.12.2 All
BHLB Benefit Plans are in material compliance with (and have been managed and administrated in accordance with) the applicable
terms of ERISA, the Code and any other applicable laws. Except as set forth on
BHLB Disclosure Schedule 5.12.2
, each
BHLB Benefit Plan governed by ERISA that is intended to be a qualified retirement plan under Section 401(a) of the Code has either
(i) received a favorable determination letter from the IRS (and BHLB is not aware of any circumstances likely to result in
revocation of any such favorable determination letter) or timely application has been made therefore, or (ii) is maintained
under a prototype plan which has been approved by the IRS and is entitled to rely upon the IRS National Office opinion letter issued
to the prototype plan sponsor. To the Knowledge of BHLB and the BHLB Subsidiaries, there exists no fact which would adversely affect
the qualification of any of the BHLB Benefit Plans intended to be qualified under Section 401(a) of the Code, or any threatened
or pending claim against any of the BHLB Benefit Plans or their fiduciaries by any participant, beneficiary or Governmental Entity
(other than routine claims for benefits).
5.12.3 Except
as set forth on
BHLB Disclosure Schedule 5.12.3
, no “defined benefit plan” (as defined in Section 414(j)
of the Code) has been maintained at any time by BHLB or any of its ERISA Affiliates for the benefit of the employees or former
employees of BHLB or its Subsidiaries.
5.12.4 Within
the last six (6) years, neither BHLB nor any of its ERISA Affiliates maintained or had any obligation to contribute to a BHLB Benefit
Plan which is a “multiemployer plan” within the meaning of Section 3(37) of ERISA, and within the last six (6)
years neither BHLB nor any of its ERISA Affiliates has incurred any withdrawal liability within the meaning of Section 4201
of ERISA to any such “multiemployer plan.” Neither BHLB nor any of its ERISA Affiliates has incurred any unsatisfied
liability (other than PBGC premiums) to the PBGC, the IRS or any other individual or entity under Title IV of ERISA or Section 412
of the Code, and no event or condition exists that could reasonably be expected to result in the imposition of any liability on
BHLB or any of its ERISA Affiliates under such provisions or that could reasonably be expected to have an adverse effect on BHLB
or the Bank.
5.12.5 BHLB
has complied in all material respects with the notice and continuation requirements of COBRA, and the regulations thereunder. All
reports, statements, returns and other information required to be furnished or filed with respect to BHLB Benefit Plans have been
timely furnished, filed or both in accordance with Sections 101 through 105 of ERISA and Sections 6057 through 6059 of
the Code, and they are true, correct and complete. To BHLB’s Knowledge, records with respect to BHLB Benefit Plans have been
maintained in compliance with Section 107 of ERISA. To BHLB’s Knowledge, neither BHLB nor any other fiduciary (as that
term is defined in Section 3(21) of ERISA) with respect to any of BHLB Benefit Plans has any liability for any breach of any
fiduciary duties under Sections 404, 405 or 409 of ERISA. No BHLB Benefit Plan fails to meet the applicable requirements of Section
105(h)(2) of the Code (determined without regard to whether such BHLB Benefit Plan is self-insured).
5.12.6 BHLB
has not, with respect to any BHLB Benefit Plan, nor, to BHLB’s Knowledge, has any administrator of any BHLB Benefit Plan,
the related trusts or any trustee thereof, engaged in any prohibited transaction which would subject BHLB, any ERISA Affiliate
of BHLB, or any BHLB Benefit Plan to a Tax or penalty on prohibited transactions imposed by ERISA, Section 4975 of the Code,
or to any other liability under ERISA.
5.12.7 Except
as set forth on
BHLB Disclosure Schedule 5.12.7
, BHLB has no liability for retiree health and life benefits under any
BHLB Benefit Plan other than any benefits required under COBRA or similar state laws.
5.12.8 Except
as set forth on
BHLB Disclosure Schedule 5.12.8
, neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will (A) result in any payment (including severance) becoming due to any director or any
employee of BHLB from BHLB under any BHLB Benefit Plan, (B) increase any benefits otherwise payable under any BHLB Benefit
Plan or (C) result in any acceleration of the time of payment or vesting of any such benefit. Except as set forth on
BHLB
Disclosure Schedule 5.12.8
, no payment which in connection with the transactions contemplated by this Agreement is or
may reasonably be expected to be made by, from or with respect to any BHLB Benefit Plan, either alone or in conjunction with any
other payment will or could properly be characterized as an “excess parachute payment” under Section 280G of the
Code on which an excise tax under Section 4999 of the Code is payable or will or could, either individually or collectively, provide
for any payment by BHLB or any of its ERISA Affiliates that would not be deductible under Code Section 162(m).
5.12.9 The
actuarial present values of all accrued BHLB Non-qualified Deferred Compensation Plans (including, to the extent applicable, entitlements
under any executive compensation, supplemental retirement, or employment agreement) of employees and former employees of BHLB and
their respective beneficiaries, other than entitlements accrued pursuant to funded retirement plans subject to the provisions of
Section 412 of the Code or Section 302 of ERISA, have been fully reflected on the BHLB Financial Statements to the extent
required by and in accordance with GAAP.
5.12.10 There
is not, and has not been, any trust or fund maintained by or contributed to by BHLB or its employees to fund an employee benefit
plan which would constitute a Voluntary Employees’ Beneficiary Association or a “welfare benefit fund” within
the meaning of Section 419(a) of the Code.
5.12.11 No
claim, lawsuit, arbitration or other action has been asserted or instituted or, to the Knowledge of BHLB, has been threatened or
is anticipated, against any BHLB Benefit Plan (other than routine
claims for benefits and appeals of such claims),
BHLB or any BHLB Subsidiary or any director, officer or employee thereof, or any of the assets of any trust of any BHLB Benefit
Plan.
5.13
Brokers,
Finders and Financial Advisors.
Neither BHLB nor any BHLB Subsidiary, nor any
of their respective officers, directors, employees or agents, has employed any broker, finder or financial advisor in connection
with the transactions contemplated by this Agreement, or incurred any liability or commitment for any fees or commissions to any
such Person in connection with the transactions contemplated by this Agreement, except for the retention of Sandler O’Neill
& Partners, L.P. by BHLB and the fee payable thereto. A true and correct copy of the engagement agreement with Sandler O’Neill
& Partners, L.P., setting forth the fee payable to Sandler O’Neill & Partners, L.P. for its services rendered to
BHLB in connection with the Merger and transactions contemplated by this Agreement is attached to
BHLB Disclosure Schedule 5.13
.
5.14
BHLB
Information Supplied.
The information relating to BHLB and any BHLB
Subsidiary to be contained in the Merger Registration Statement, or in any other document filed with any Bank Regulator or other
Governmental Entity in connection herewith, will not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading.
5.15
Securities
Documents.
Since January 1, 2014, BHLB has filed with
the SEC all forms, reports, schedules, registration statements, definitive proxy statements and information statements or other
filings (“
BHLB SEC Reports
”) required to be filed by it with the SEC. As of their respective dates, the BHLB
SEC Reports complied as to form with the requirements of the Exchange Act or the Securities Act, as applicable, and the applicable
rules and regulations of the SEC promulgated thereunder in all material respects. As of their respective dates and as of the date
any information from the BHLB SEC Reports has been incorporated by reference, the BHLB SEC Reports did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein made,
in light of the circumstances under which they were made, not misleading. BHLB has filed all material contracts, agreements and
other documents or instruments required to be filed as exhibits to the BHLB SEC Reports (the “
BHLB
Material Agreements
”).
5.16
Internal
Controls.
5.17.1 The
records, systems, controls, data and information of BHLB and its Subsidiaries 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 BHLB or its Subsidiaries 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. BHLB and its Subsidiaries have devised
and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of
financial reporting and the preparation of financial statements in accordance with GAAP. BHLB has designed and implemented disclosure
controls and procedures (within the meaning of Rules 13a-15(e) and 15D-15(e) of the Exchange Act) to ensure that material information
relating to it and its Subsidiaries is made known to its management by others within those entities as appropriate to allow timely
decisions regarding required disclosure and to make the certifications required by the Exchange Act and Section 302 and 906 of
the Sarbanes-Oxley Act.
5.17.2 BHLB’s
management has completed an assessment of the effectiveness of its internal control over financial reporting in compliance with
the requirements of Section 404 of the Sarbanes-Oxley Act for the year ended December 31, 2015, and such assessment concluded that
such controls were effective. It has previously disclosed, based on its most recent evaluation prior to the date hereof, to its
auditors and the audit committee of the FCB Board; (A) any significant deficiencies and material weaknesses in the design or operation
of internal controls over financial reporting and (B) any fraud, whether or not material, that involves management or
other employees who have a significant role in
its internal controls over financial reporting.
5.17.3 Since
December 31, 2015, (A) neither BHLB nor any of its Subsidiaries nor, to its knowledge, any director, officer, employee, auditor,
accountant or representative of BHLB or any of its Subsidiaries has received or otherwise had or obtained knowledge of any material
complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures,
methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of it or any of
its subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim
that it or any of its subsidiaries has engaged in questionable accounting or auditing practices, and (B) no attorney representing
BHLB or any of its Subsidiaries, whether or not employed by it or any of its Subsidiaries, has reported evidence of a material
violation of securities laws, breach of fiduciary duty or similar violation by BHLB or any of its officers, directors, employees
or agents to its board of directors or any committee thereof or to any of its directors or officers.
5.17
BHLB
Common Stock.
The shares of BHLB Common Stock to be issued
pursuant to this Agreement, when issued in accordance with the terms of this Agreement, will be duly authorized, validly issued,
fully paid and non-assessable and subject to no preemptive rights.
5.18
Available
Funds
Immediately prior to the Effective Time, BHLB
will have cash sufficient to pay or cause to be deposited into the Exchange Fund as required by Section 3.2.
5.19
Fairness
Opinion.
BHLB has received an opinion, a copy of which
will be provided to FCB promptly following the date of this Agreement, from Sandler O’Neill & Partners, L.P., to the
effect that, subject to the terms, conditions and qualifications set forth therein, as of the date hereof, the Merger Consideration
to be received by the shareholders of FCB pursuant to this Agreement is fair to BHLB and its shareholders from a financial point
of view. Such opinion has not been amended or rescinded as of the date of this Agreement.
5.20
Board
Approval.
The Board of Directors of BHLB determined that
the Merger is fair to, and in the best interests of, BHLB and its stockholders, approved and declared advisable this Agreement,
the Merger and the other transactions contemplated hereby.
5.21
Related
Party Transactions.
5.21.1 Neither
BHLB nor any BHLB Subsidiary is a party to any transaction (including any loan or other credit accommodation) with any Affiliate
of BHLB or any BHLB Subsidiary, except as set forth in
BHLB Disclosure Schedule 5.25
or as described in BHLB’s
proxy statement dated March 24, 2016 distributed in connection with its annual meeting of shareholders held on May 5, 2016. Except
as described in such proxy statement or in
BHLB Disclosure Schedule 5.25
, all such transactions (a) were made
in the ordinary course of business, (b) were made on substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with other Persons, and (c) did not involve more than the normal risk
of collectability or present other unfavorable features. No loan or credit accommodation to any Affiliate of BHLB or any BHLB Subsidiary
is presently in default or, during the three (3)-year period prior to the date of this Agreement, has been in default or has been
restructured, modified or extended. Neither BHLB nor any BHLB Subsidiary has been notified that principal or interest with respect
to any such loan or other credit accommodation will not be paid when due or that the loan grade classification accorded such loan
or credit accommodation is inappropriate.
5.22
Risk
Management Instruments.
All interest rate swaps, caps, floors, option
agreements, futures and forward contracts and other similar risk management arrangements, whether entered into for BHLB’s
own account, or for the account of one or more of BHLB’s Subsidiaries or their customers, in force and effect as of March
31, 2016 (all of which are set forth in
BHLB Disclosure Schedule 5.26
), were entered into in compliance with all applicable
laws, rules, regulations and regulatory policies, and to the Knowledge of BHLB and each BHLB Subsidiary, with counterparties believed
to be financially responsible at the time; and to BHLB’s and each BHLB Subsidiary’s Knowledge each of them constitutes
the valid and legally binding obligation of BHLB or such BHLB Subsidiary, enforceable in accordance with its terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors’ rights or by general equity principles), and is in full force and effect.
Neither BHLB nor any BHLB Subsidiary, nor any other party thereto, is in breach of any of its obligations under any such agreement
or arrangement.
5.23
Duties
as Fiduciary.
Other than as set forth on
BHLB Disclosure
Schedule 5.27
, the Bank has, if required by virtue of any line of business in which it is or previously was engaged in
a “fiduciary capacity,” to its Knowledge has performed all of its duties in a fashion that complied with all applicable
laws, regulations, orders, agreements, wills, instruments, and common law standards in effect at that time. The Bank has not received
notice of any claim, allegation, or complaint from any Person that the Bank failed to perform these duties in a manner that complied
with all applicable laws, regulations, orders, agreements, wills, instruments, and common law standards, except for notices involving
matters that have been resolved and any cost of such resolution is reflected in the BHLB Financial Statements. For purposes of
this Section 5.27, the term “fiduciary capacity” (i) shall mean (a) acting as trustee, executor, administrator,
registrar of stocks and bonds, transfer agent, guardian, assignee, receiver, or custodian under a uniform gifts to minors act and
(b) possessing investment discretion on behalf of another, and (ii) shall exclude the Bank’s capacity with respect
to individual retirement accounts or the BHLB Benefit Plans.
5.24
Employees;
Labor Matters.
There are no labor or collective bargaining
agreements to which BHLB or any BHLB Subsidiary is a party. There is no union organizing effort pending or, to the Knowledge of
BHLB, threatened against BHLB or any BHLB Subsidiary. There is no labor strike, labor dispute (other than routine employee grievances
that are not related to union employees), work slowdown, stoppage or lockout pending or, to the Knowledge of BHLB, threatened against
BHLB or any BHLB Subsidiary. There is no unfair labor practice or labor arbitration proceeding pending or, to the Knowledge of
BHLB, threatened against BHLB or any BHLB Subsidiary (other than routine employee grievances that are not related to union employees).
BHLB and each BHLB Subsidiary is in compliance with all applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and are not engaged in any unfair labor practice. Neither BHLB nor any BHLB Subsidiary
is a party to, or bound by, any agreement for the leasing of employees.
ARTICLE
VI
COVENANTS OF FCB
6.1
Conduct
of Business.
6.1.1
Affirmative
Covenants.
During the period from the date of this Agreement to the Effective Time, except with the written consent of BHLB,
which consent will not be unreasonably withheld, conditioned or delayed, FCB will, and it will cause each FCB Subsidiary to: operate
its business only in the usual, regular and ordinary course of business; use commercially reasonable efforts to preserve intact
its business organization and assets and maintain its rights and franchises; conduct its mortgage servicing business and maintain
its mortgage servicing agreements in the ordinary course of business; and voluntarily take no action which reasonably would be
expected to: (i) materially adversely affect the ability of the parties to obtain the Regulatory Approvals or materially increase
the period of time necessary to obtain the Regulatory Approvals, (ii) materially adversely affect its ability to perform its
covenants and agreements under this Agreement or (iii) result in the representations and warranties
contained in Article IV of this Agreement
not being true and correct on the date of this Agreement or at any future date on or prior to the Closing Date or in any of the
conditions set forth in Article IX hereof not being satisfied.
6.1.2
Negative
Covenants
. FCB agrees that from the date of this Agreement to the Effective Time, except as otherwise specifically permitted
or required by this Agreement or consented to by BHLB in writing (which consent will not be unreasonably withheld, conditioned
or delayed), it will not, and it will cause each of the FCB Subsidiaries not to:
(A) take
any action that would, or is reasonably likely to, prevent the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code;
(B) change
or waive any provision of FCB’s or FCLS’s certificate of incorporation or bylaws, except as required by law;
(C) change
the number of authorized or issued shares of its capital stock, issue any shares of FCB Common Stock that are held as Treasury
Stock as of the date of this Agreement, or issue or grant any Right or agreement of any character relating to its authorized or
issued capital stock or any securities convertible into shares of such stock, make any grant or award under the FCB Equity Incentive
Plan, or split, combine or reclassify any shares of capital stock, or declare, set aside or pay any dividend or other distribution
in respect of capital stock, or redeem or otherwise acquire any shares of capital stock, except that (i) FCB may issue shares
of FCB Common Stock upon the valid exercise, in accordance with the information set forth in
FCB Disclosure Schedule 4.3.1
,
of presently outstanding FCB Stock Options issued under the FCB Equity Incentive Plan and FCB Warrants provided that FCB shall
prohibit the exercise of any FCB Stock Option or FCB Warrant beginning on and after the fifth trading day immediately preceding
the Closing Date, (ii) FCB may issue shares of FCB Common Stock upon the valid exercise of the conversion rights of the FCB
Preferred Stock, (iii) shall continue to declare and pay regular monthly cash dividends on FCB Preferred Stock, with the total
quarterly amount of dividends to FCB Preferred Stockholders not to exceed $386,875 and with payment and record dates consistent
with past practice, (iv) FCB may pay a dividend to the holders of FCB Common Stock as provided in Section 6.15, and (v) any
FCB Subsidiary may pay dividends to its parent company (as permitted under applicable law or regulations).
(D) enter
into, amend in any material respect or terminate any material contract or agreement (including without limitation any outstanding
mortgage servicing agreement or settlement agreement with respect to litigation) in excess of $100,000, except in the ordinary
course of business or as contemplated by this Agreement;
(E) make
application for the opening or closing of any, or open or close any, branch or automated banking facility;
(F) grant
or agree to pay any bonus (discretionary or otherwise), severance or termination to, or enter into, renew or amend any employment
agreement, severance agreement and/or supplemental executive agreement with, or increase in any manner the compensation or fringe
benefits of, any of its directors, officers, employees or consultants, except (i) as may be required pursuant to commitments
existing on the date hereof and set forth on
FCB Disclosure Schedules 4.9.1 and 4.13.1
, (ii) for salary adjustments
in the ordinary course of business consistent with past practice provided that any increases to such amounts shall not exceed four
percent (4%)
in the aggregate or (iii) as otherwise contemplated by this Agreement. Neither FCB nor any FCB Subsidiary
shall hire or promote any employee to a rank having a title of vice president or other more senior rank or hire any new employee
at an annual rate of compensation in excess of $75,000 (excluding commissions);
provided
,
however
, that that neither
FCB nor any FCB Subsidiary shall hire any new employee without first seeking to fill any position internally. Neither FCB nor or
any FCB Subsidiary shall pay expenses of any employee or director for attending conventions held after the date hereof;
(G) except
as set forth on
FCB Disclosure Schedule 6.1.2(G)
, enter into or, except as may be required by law or any such plan or agreement
or by the terms of this Agreement and the transactions contemplated herein, modify any pension, retirement, stock option, stock
purchase, stock appreciation right, stock grant, savings, profit sharing, deferred compensation, supplemental retirement, consulting,
bonus, group insurance or other employee benefit, incentive or welfare contract, plan or arrangement, or any trust agreement related
thereto, in respect of any of its directors, officers or employees, or make any contributions to any defined contribution or
defined benefit plan not in the ordinary course
of business consistent with past practice and provided further that FCB and FCLS may not make any discretionary contributions to
the FCB 401(k) Plan;
(H) merge
or consolidate FCB or any FCB Subsidiary with any other Person; sell or lease all or any substantial portion of the assets or business
of FCB or FCLS; make any acquisition of all or any substantial portion of the business or assets of any other Person other than
in connection with foreclosures, settlements in lieu of foreclosure, troubled loan or debt restructuring, or the collection of
any loan or credit arrangement between FCB or FCLS and any other Person; enter into a purchase and assumption transaction with
respect to deposits and liabilities; incur deposit liabilities, other than liabilities incurred in the ordinary course of business
consistent with past practice; permit the revocation or surrender by FCB of its certificate of authority to maintain, or file an
application for the relocation of, any existing branch office, or file an application for a certificate of authority to establish
a new branch office; permit the revocation or surrender by FCLS of its certificate of authority to maintain, or file an application
for the relocation of, any existing loan production office, or file an application for a certificate of authority to establish
a new loan production office;
(I) except
as set forth on
FCB Disclosure Schedule 6.1.2(I)
, sell or otherwise dispose of any asset of FCB or any FCB Subsidiary, including
loans and securities, other than in the ordinary course of business consistent with past practice; except for transactions with
the FHLB, subject any asset of FCB or of any FCB Subsidiary to a lien, pledge, security interest or other encumbrance (other than
in connection with deposits, repurchase agreements, bankers acceptances, pledges in connection with acceptance of governmental
deposits, and transactions in “federal funds” and the satisfaction of legal requirements in the exercise of trust powers)
other than in the ordinary course of business consistent with past practice; incur any indebtedness for borrowed money (or guarantee
any indebtedness for borrowed money), except in the ordinary course of business consistent with past practice;
(J) change
its ordinary and customary methods, practices or principles of accounting, including but not limited to, make any reduction in
its allowance for loan losses, make any negative provisions for loan losses, recognize unrealized gain or loss on securities, and
deferral of any obligation due in the ordinary course of business, except as may be required from time to time by any Bank Regulator
responsible for regulating FCB or any FCB Subsidiary;
(K) waive,
release, grant or transfer any rights of value or modify or change any existing agreement or indebtedness to which FCB or any FCB
Subsidiary is a party;
(L) purchase
any securities except securities (i) rated “A” or higher by either Standard & Poor’s Ratings Services
or Moody’s Investors Service, (ii) having a face amount in the aggregate of not more than $3,000,000, in the case of
U. S. Treasury and other U. S. Government agencies bonds, including mortgage-backed securities, and $1,000,000 in the case of all
other bonds, (iii) which will, when combined with all other securities of FCB, result in a weighted average duration of not more
than four (4) years and (iv) otherwise in the ordinary course of business consistent with past practice;
(M) except
as specifically provided below, and except for commitments issued prior to the date of this Agreement which have not yet expired
and which have been disclosed on
FCB Disclosure Schedule 6.1.2(M)
(which schedule need not include any individual commitment
which is less than $100,000 in amount provided that such schedule includes the aggregate amount of individual commitments which
are less than $100,000 that have been excluded from the schedule), and the renewal of existing lines of credit, make any new loan
or other credit facility commitment (including without limitation, lines of credit and letters of credit) (i) in an amount in excess
of $5.0 million for commercial loans, $750,000 for residential loans and $200,000 for home equity loans or lines of credit, (ii)
that involves an exception to policy or (iii) other than as qualified in subsection (i) for a one- to four-family residential real
estate loan that is not eligible for sale in the secondary market to Fannie Mae or Freddie Mac or other investor to which FCLS
sells such loans in the ordinary course of business consistent with past practice; provided that BHLB shall have been deemed to
have consented to any loan in excess of such amount or otherwise not permitted by this section if BHLB does not object to any such
proposed loan within three business days of receipt by BHLB of a request by FCB to exceed such limit along with all financial or
other data that BHLB may reasonably request in order to evaluate such loan;
(N) enter
into, renew, extend or modify any other transaction (other than a deposit transaction) with any Affiliate;
(O) enter
into any futures contracts, options, interest rate caps, interest rate floors, interest rate exchange agreements or other agreements
or take any other action for purposes of hedging the exposure of its interest-earning assets and interest-bearing liabilities to
changes in market rates of interest, other than with respect to the Asset Pipeline in the ordinary course of business consistent
with past practices;
(P) FCB
and each FCB Subsidiary shall manage the Asset Pipeline in the ordinary course of business consistent with past practice and shall
consult with the Bank with respect to all hedging transactions pertaining to the Asset Pipeline;
(Q) except
for the execution of this Agreement, and actions taken or which will be taken in accordance with this Agreement and performance
hereunder, take any action that would give rise to a right of payment to any individual under any employment agreement;
(R) make
any change in policies in existence on the date of this Agreement with regard to: the extension of credit, or the establishment
of reserves with respect to the possible loss thereon or the charge off of losses incurred thereon; investments; asset/liability
management; or other banking policies except as may be required by changes in applicable law or regulations, GAAP or regulatory
accounting principles or by a Bank Regulator;
(S) except
for the execution of this Agreement, and the transactions contemplated herein and any terminations of employment, take any action
that would give rise to an acceleration of the right to payment to any individual under any FCB and FCLS Benefit Plan;
(T) make
any capital expenditures in excess of $25,000
individually or $100,000 in the aggregate, other than pursuant to binding
commitments existing on the date hereof which are set forth on
FCB Disclosure Schedule 6.1.2(T)
which includes the
budget for each such pre-existing commitment.
(U) except
as set forth on
FCB Disclosure Schedule 6.1.2(U)
, purchase or otherwise acquire, or sell or otherwise dispose of, any assets
or incur any liabilities other than in the ordinary course of business consistent with past practices and policies;
(V) except
for existing commitments to sell any participation interest in any loan, sell any participation interest in any loan (other than
sales of loans secured by one- to four-family real estate that are consistent with past practice) unless BHLB has been given the
first opportunity and a reasonable time to purchase any loan participation being sold, or purchase any participation interest in
any loan other than purchases of participation interests from BHLB;
(W) undertake
or enter into any lease, contract or other commitment for its account, other than in the ordinary course of providing credit to
customers as part of its banking business, involving a payment by FCB or any FCB Subsidiary of more than $25,000 annually, or containing
any financial commitment extending beyond twelve (12) months from the date hereof;
(X) pay,
discharge, settle or compromise any claim, action, litigation, arbitration or proceeding, other than any such payment, discharge,
settlement or compromise in the ordinary course of business consistent with past practice that involves solely money damages in
the amount not in excess of $25,000
individually or $50,000 in the aggregate, and that does not create negative precedent
for other pending or potential claims, actions, litigation, arbitration or proceedings;
(Y) foreclose
upon or take a deed or title to any commercial real estate without having a Phase I environmental assessment of the property conducted
as of a reasonably current date and, in the event such Phase I environmental assessment of the property indicates the presence
of Materials of Environmental Concern, providing notice to BHLB thereof prior to final sale;
(Z) purchase
or sell any mortgage loan servicing rights other than in the ordinary course of business consistent with past practice;
(AA) issue
any broadly distributed communication to employees relating to post-Closing employment, benefit or compensation information without
the prior consent of BHLB (which shall not be unreasonably withheld, conditioned or delayed) or issue any broadly distributed communication
of a general nature to customers without the prior approval of BHLB (which shall not be unreasonably withheld, conditioned or delayed),
except as required by law or for communications in the ordinary course of business consistent with past practice that do not relate
to the Merger or other transactions contemplated hereby;
(BB) make,
change or rescind any material election concerning Taxes or Tax Returns, file any amended Tax Return, enter into any closing agreement
with respect to Taxes, settle or compromise any material Tax claim or assessment or surrender any right to claim a refund of Taxes
or obtain any Tax ruling;
(CC) enter
into any modification of a Funded Loan; or
(DD) enter
into any contract with respect to, or otherwise agree or commit to do, any of the foregoing.
6.2
Subsidiaries.
6.2.1 FCB
shall cause the proper and lawful dissolution of any of its Subsidiaries that are inactive as of the date of this Agreement.
6.2.2 Prior
to the Effective Time, FCB shall dissolve Kingston Title Agency. Prior to such time, FCB shall not and shall not permit any of
its Subsidiaries to utilize any services of Kingston Title Agency.
6.3
Current
Information.
6.3.1 During
the period from the date of this Agreement to the Effective Time, FCB will cause one or more of its representatives to confer with
representatives of BHLB to inform BHLB regarding FCB’s operations at such times as BHLB may reasonably request. FCB will
promptly notify BHLB of any change in the ordinary course of its business or in the operation of its properties and, to the extent
permitted by applicable law, of any governmental complaints, investigations or hearings (or communications indicating that the
same may be contemplated), or the institution or the threat of material litigation involving FCB or any FCB Subsidiary. Without
limiting the foregoing, senior officers of BHLB and FCB shall meet monthly to review, to the extent permitted by applicable law,
the financial and operational affairs of FCB and the FCB Subsidiaries, and FCB shall give due consideration to BHLB’s input
on such matters, with the understanding that, notwithstanding any other provision contained in this Agreement, neither BHLB nor
the Bank shall under any circumstance be permitted to exercise control of FCB or any FCB Subsidiary prior to the Effective Time.
6.3.2 FCB
and BHLB shall cooperate regarding a plan for the conversion of data processing and related electronic informational systems of
FCB to those used by BHLB, which planning shall include, but not be limited to, discussion of the possible termination by FCB of
third-party service provider arrangements effective at the Effective Time or at a date thereafter, non-renewal of personal property
leases and software licenses used by FCB in connection with its systems operations, retention of outside consultants and additional
employees to assist with the conversion, and outsourcing, as appropriate, of proprietary or self-provided system services, it being
understood that FCB shall not be obligated to take any such action prior to the Effective Time and, unless FCB otherwise agrees
and provided it is permitted by applicable law, no conversion shall take place prior to the Effective Time. BHLB and the Bank shall
indemnify FCB for any reasonable out-of-pocket fees, expenses, or charges that FCB or any FCB Subsidiary may incur as a result
of taking, at the request of BHLB or any BHLB Subsidiary, any action to facilitate the conversion, and, in the event that this
Agreement is terminated prior to the Effective Time, as a result of abandoning the conversion.
6.3.3 FCB
shall provide BHLB, within fifteen (15) Business Days of the end of each calendar month, a written list of nonperforming assets
(the term “nonperforming assets,” for purposes of this subsection, means (i) loans that are “troubled debt
restructuring” as defined in Accounting Standards Codification 310-40, (ii) loans on nonaccrual, (iii) real estate
owned, (iv) all loans ninety (90) days or more past due as of the end of such month and (v) and impaired loans.
On a monthly basis, FCB shall provide BHLB with a schedule of all (x) loan grading changes and (y) loan approvals, which
schedule shall indicate the loan amount, loan type and other material features of the loan. FCB will promptly prepare and provide
BHLB with the minutes of all FCB officer and director loan committee meetings.
6.3.4 FCB
shall promptly inform BHLB, to the extent permitted by applicable law, upon receiving notice of any legal, administrative, arbitration
or other proceedings, demands, notices, audits or investigations (by any federal, state or local commission, agency or board) relating
to the alleged liability of FCB or any FCB Subsidiary under any labor or employment law.
6.4
Access
to Properties and Records.
Subject to Section 11.1, FCB shall permit
BHLB access upon reasonable notice and at reasonable times to its properties and those of the FCB Subsidiaries, and shall disclose
and make available to BHLB during normal business hours all of its books and records relating to the assets, properties, operations,
obligations and liabilities, including, but not limited to, all books of account (including the general ledger), tax records, minute
books of directors’ and shareholders’ meetings (other than minutes that discuss any of the transactions contemplated
by this Agreement or any other subject matter that FCB reasonably determines should be kept confidential), organizational documents,
bylaws, material contracts and agreements, filings with any regulatory authority, litigation files, plans affecting employees,
and any other business activities or prospects in which BHLB may have a reasonable interest;
provided, however,
that FCB
shall not be required to take any action that would provide access to or to disclose information where such access or disclosure,
in FCB’s reasonable judgment, would interfere with the normal conduct of FCB’s business or would violate or prejudice
the rights or business interests or confidences of any customer or other Person or entity or would result in the waiver by it of
the privilege protecting communications between it and any of its counsel or contravene any applicable law. FCB shall provide and
shall request its auditors to provide BHLB with such historical financial information regarding it (and related audit reports and
consents) as BHLB may reasonably request for Securities Law disclosure purposes. BHLB shall use commercially reasonable efforts
to minimize any interference with FCB’s and FCB Subsidiaries’ regular business operations during any such access to
FCB’s and FCB’s Subsidiaries’ property, books and records. FCB and each FCB Subsidiary shall permit BHLB, at
BHLB’s expense, to (i) cause a Phase I environmental assessment to be performed at any physical location owned or occupied
by FCB or any FCB Subsidiary, subject to compliance with the applicable lease in the case of any non-owned, occupied location,
and (ii) cause an appraisal to be performed in respect of any real property owned by FCB or any FCB Subsidiary.
6.5
Financial
and Other Statements.
6.5.1 Promptly
upon receipt thereof, FCB will furnish to BHLB copies of each annual, interim or special audit of the books of FCB and the FCB
Subsidiaries made by its independent registered public accountants and copies of all internal control reports submitted to FCB
by such accountants, or by any other accounting firm rendering internal audit services, in connection with each annual, interim
or special audit of the books of FCB and the FCB Subsidiaries made by such accountants.
6.5.2 As
soon as reasonably available, but in no event later than the date such documents are filed with the FDIC, NJDOBI, or any other
state regulatory agency regulating the business of FCB or any FCB Subsidiary, FCB will deliver to BHLB the FCB Regulatory Report
filed by FCB or any FCB Subsidiary. Within twenty-five (25) days after the end of each month, FCB will deliver to BHLB a consolidating
balance sheet and a consolidating statement of operations, without related notes, for such month prepared in accordance with current
financial reporting practices, as well as a month-end and year to date comparison to budget.
6.5.3 To
the extent permitted by applicable law or regulation, FCB promptly will advise upon receipt and permit review by BHLB of any inquiry
or examination report of any Bank Regulator with respect to the condition or activities of FCB or any FCB Subsidiary.
6.5.4 With
reasonable promptness, FCB will furnish to BHLB such additional financial data that FCB possesses and as BHLB may reasonably request,
including without limitation, detailed monthly financial statements and loan reports and detailed deposit reports.
6.6
Maintenance
of Insurance.
FCB shall use commercially reasonable efforts
to maintain, and to cause the FCB Subsidiaries to maintain, insurance in such amounts as are reasonable to cover such risks as
are customary in relation to the character and location of its properties and the nature of its business, with such coverage and
in such amounts not less than that maintained by FCB and the FCB Subsidiaries as of the date of this Agreement and set forth in
FCB Disclosure Schedule 4.10.3
. FCB will promptly inform BHLB if FCB or any FCB Subsidiary receives notice from an
insurance carrier that (i) an insurance policy will be canceled or that coverage thereunder will be reduced or eliminated,
or (ii) premium costs with respect to any policy of insurance will be substantially increased.
6.7
Disclosure
Supplements.
From time to time prior to the Effective Time,
FCB will promptly supplement or amend the FCB Disclosure Schedule delivered in connection herewith with respect to any matter hereafter
arising which, if existing, occurring or known at the date of this Agreement, would have been required to be set forth or described
in such FCB Disclosure Schedule or which is necessary to correct any information in such FCB Disclosure Schedule which has been
rendered materially inaccurate thereby. No supplement or amendment to such FCB Disclosure Schedule shall have any effect for the
purpose of determining satisfaction of the conditions set forth in Article IX.
6.8
Consents
and Approvals of Third Parties.
FCB shall use its commercially reasonable efforts,
and shall cause each FCB Subsidiary to use its commercially reasonable efforts, to obtain as soon as practicable all consents and
approvals of any other Persons or entities necessary for the consummation of the transactions contemplated by this Agreement.
6.9
All
Reasonable Efforts.
Subject to the terms and conditions herein provided,
FCB agrees to use, and agrees to cause each FCB Subsidiary to use, all commercially reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary under applicable laws and regulations to consummate the
transactions contemplated by this Agreement.
6.10
Failure
to Fulfill Conditions.
In the event that FCB determines that a condition
to its obligation to complete the Merger cannot be fulfilled and that it will not waive that condition, it will promptly notify
BHLB.
6.11
No
Solicitation.
6.11.1 From
and after the date hereof until the termination of this Agreement, neither FCB, nor any FCB Subsidiary, nor any of their respective
officers, directors, employees, representatives, agents and affiliates including, without limitation, any investment banker, attorney
or accountant retained by FCB or any of the FCB Subsidiaries (collectively, “
Representatives
”), will, directly
or indirectly, initiate, solicit or knowingly encourage (including by way of furnishing non-public information or assistance) any
inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal (as
defined by Section 6.11.2), or enter into or maintain or continue discussions or negotiate with any Person in furtherance of such
inquiries or to obtain an Acquisition Proposal or agree to or endorse any Acquisition Proposal, or authorize or permit any of its
officers, directors, or employees or any of its Subsidiaries or any investment banker, financial advisor, attorney, accountant
or other representative retained by any of its Subsidiaries to take any such action, and FCB shall notify BHLB orally and in writing
(as promptly as practicable but no later than one business day of receipt of such inquiry or proposal) of all of the relevant details
relating to all inquiries and proposals which FCB or any of the FCB
Subsidiaries or any of their respective officers,
directors or employees, or, to FCB’s Knowledge, investment bankers, financial advisors, attorneys, accountants or other representatives
of FCB may receive relating to any of such matters;
provided
,
however
, that nothing contained in this Section 6.11
shall prohibit the Board of Directors of FCB from (i) complying with its disclosure obligations under federal or state law;
or (ii) prior to the receipt of FCB Shareholder Approval, furnishing information to, or entering into discussions or negotiations
with, any Person or entity that makes an unsolicited Acquisition Proposal, if, and only to the extent that (A) such Acquisition
Proposal did not result from a breach of this Section 6.11 by FCB, (B) the Board of Directors of FCB or any appropriate committee
thereof has determined in its good faith judgment, after consultation with FCB’s financial advisor and outside counsel, that
such Acquisition Proposal is reasonably likely to be consummated in accordance with its terms, taking into account all legal, financial
(including the financing terms thereof) and regulatory aspects of the proposal and the Person making the proposal, and (C) such
Acquisition Proposal is reasonably likely to result in a transaction more favorable to FCB shareholders from a financial point
of view than the Merger (taking into account all relevant factors, including, without limitation, the timing of consummation as
compared to the Merger and after giving effect to all of the adjustments, if any, which may be offered by BHLB pursuant to Section
10.1.8) (such proposal that satisfies clauses (A), (B) and (C) being referred to herein as a “
Superior Proposal
”);
provided
,
however
, that nothing contained in this Agreement shall prohibit FCB and, if applicable, any of its Representatives
from (i) informing any Person of the existence of the provisions of this Section 6.11, (ii) contacting any Person solely to clarify
the terms and conditions of an Acquisition Proposal, or (iii) otherwise disclosing any information to its shareholders that the
FCB Board of Directors determines in good faith (after consultation with its outside legal counsel) that it is required to disclose
in order to not breach its fiduciary duties to FCB’s shareholders under applicable law, subject to compliance with the requirements
of this Section 6.11 and Section 6.12. FCB shall promptly, but in no event later than one (1) calendar day, notify BHLB of such
inquiries, proposals or offers received by, any such information requested from, or any such discussions or negotiations sought
to be initiated or continued with FCB or any of its representatives indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any inquiries, proposals or offers, and receives from such Person an executed confidentiality
agreement in form and substance identical in all material respects to the Confidentiality Agreement.
6.11.2 “
Acquisition
Proposal
” shall mean any proposal or offer as to any of the following (other than the transactions contemplated hereunder)
involving FCB or any of the FCB Subsidiaries: (i) any merger, consolidation, share exchange, business combination, or other
similar transactions; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 25% or more of the
assets of FCB and the FCB Subsidiaries, taken as a whole, in a single transaction or series of transactions; (iii) any tender
offer or exchange offer for 25% or more of the outstanding shares of capital stock of FCB or the filing of a registration statement
under the Securities Act in connection therewith; or (iv) any public announcement of a proposal, plan or intention to do
any of the foregoing or any agreement to engage in any of the foregoing.
6.12
Board
of Directors and Committee Meetings.
Following the receipt of all Regulatory Approvals
(without regard to any waiting periods associated therewith), FCB and the FCB Subsidiaries shall permit two (2) representatives
of BHLB to attend any meeting of their Board of Directors, executive committee, loan (or credit) committee and asset liability
committee as observers (together, the “
BHLB Observers
”), provided that neither FCB nor any FCB Subsidiary shall
be required to permit the BHLB Observers to remain present during any confidential discussion of this Agreement and the transactions
contemplated hereby or any Acquisition Proposal or during any other matter that the respective Board of Directors has been advised
of by counsel that such attendance by the BHLB Observers may violate or be inconsistent with a confidentiality obligation or fiduciary
duty or any legal or regulatory requirement.
6.13
FCB
401(k) Plan.
Effective as of the day preceding
the Closing Date, and subject to the occurrence of the Effective Time, in the sole discretion of BHLB, BHLB may direct FCB to adopt
such resolutions and/or amendments to cause the FCB 401(k) Plan (the “
FCB
401(k) Plan
”) to be terminated,
merged or other such actions as permitted by applicable law, including, but not limiting to, amending the FCB 401(k) Plan to provide
that: (i) the plan sponsor will be FCLS instead of FCB, (ii) the plan name will change to the FCLS 401(k) Plan, (iii) only employees
of FCLS will be eligible to participate in the FCLS 401(k) Plan and any employees of a controlled group, within the meaning of
Section 414(b) of the Code, will be excluded from participating in the FCLS 401(k) Plan, and (iv) as may be further
amended pursuant to the direction of BHLB. The
form and substance of such resolutions and any necessary amendments shall be subject to the review and approval of BHLB, which
shall not be unreasonably withheld. FCB shall deliver to BHLB an executed copy of such resolutions and any necessary amendments
as soon as practicable following their adoption by the Board of Directors of FCB and shall fully comply with such resolutions and
any necessary amendments.
6.14
Tangible
Book Value.
For purposes of this Agreement, “
Tangible
Book Value
” shall mean, on a consolidated basis, FCB’s and FCB’s Subsidiaries (a) total assets on a consolidated
basis less (b) the sum of (i) total liabilities, (ii) goodwill, and (iii) total intangible assets. For purposes of calculating
Tangible Book Value and Final Tangible Book Value, the parties shall not give any effect to adjustments from June 20, 2016 to the
Closing Date related to actions which are not consistent with FCB’s ordinary and customary methods or practices or GAAP,
including but not limited to, any reduction in the allowance for loan losses or the provisions thereto, the gain on sale of any
securities or loans not in the ordinary course of business, the conversions of unrealized gains to realized gains, increases or
decreases in unrealized gains on securities, decreases in non-interest expenses or the deferral of any obligation due in the ordinary
course of business, and the related tax effect of any of these listed adjustments. The calculation of Tangible Book Value per share
shall include each share of FCB Common Stock issued after giving effect to the conversion of all of the FCB Preferred Stock prior
to the Effective Time, as described in Section 3.4, and the exercise of all of the FCB Stock Options and FCB Warrants prior to
the Effective Time. For the purpose of assessing Tangible Book Value, BHLB may request from FCB, and FCB shall provide, such reasonable
information and documentation that provides support to FCB’s determination of Tangible Book Value, consistent with this Section,
GAAP and FCB’s past practices.
6.15
FCB
Common Stock Special Dividend.
Provided that Final Tangible Book Value per
share exceeds $14.22 per share and FCB has a positive Core Net Income, FCB may pay a per share dividend to the holders of FCB Common
Stock immediately prior to the Effective Time in an aggregate amount not to exceed 35% of Core Net Income in excess of the $14.22
Tangible Book Value per share.
ARTICLE
VII
COVENANTS OF BHLB
7.1
Conduct
of Business.
7.1.1
Affirmative
Covenants
.
(A) During
the period from the date of this Agreement to the Effective Time, except with the written consent of FCB, which consent will not
be unreasonably withheld, conditioned or delayed, BHLB will, and it will cause each BHLB Subsidiary to: operate its business only
in the usual, regular and ordinary course of business; use reasonable best efforts to preserve intact its business organization
and assets and maintain its rights and franchises; and voluntarily take no action which would (i) change or waive any provision
of its certificate of incorporation (or articles or organization in the case of the Bank) or bylaws in any way adverse to the rights
of the FCB shareholders, except as required by law, except as set forth on
BHLB Disclosure Schedule 7.1.1(A)(i)
; (ii) materially
adversely affect the ability of the parties to obtain the Regulatory Approvals or materially increase the period of time necessary
to obtain such approvals; (iii) materially adversely affect its ability to perform its covenants and agreements under this
Agreement; (iv) result in the representations and warranties contained in Article V of this Agreement not being true
and correct on the date of this Agreement or at any future date on or prior to the Closing Date or in any of the conditions set
forth in Article IX hereof not being satisfied; (v) prevent or impede, or be reasonably likely to prevent or impede, the Merger
from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(B) Promptly
after the Closing and prior to the Effective Time, BHLB shall deposit, or shall cause to be deposited, with the Exchange Agent
the Exchange Fund.
7.2
Disclosure
Supplements.
From time to time prior to the Effective Time,
BHLB will promptly supplement or amend the BHLB Disclosure Schedule delivered in connection herewith with respect to any matter
hereafter arising which, if existing, occurring or known at the date of this Agreement, would have been required to be set forth
or described in such BHLB Disclosure Schedule or which is necessary to correct any information in such BHLB Disclosure Schedule
which has been rendered materially inaccurate thereby. No supplement or amendment to such BHLB Disclosure Schedule shall have any
effect for the purpose of determining satisfaction of the conditions set forth in Article IX.
7.3
Consents
and Approvals of Third Parties.
BHLB shall use its commercially reasonable efforts,
and shall cause each BHLB Subsidiary to use its commercially reasonable efforts, to obtain as soon as practicable all consents
and approvals of any other Persons necessary for the consummation of the transactions contemplated by this Agreement.
7.4
Reasonable
Best Efforts.
Subject to the terms and conditions herein provided,
BHLB agrees to use and agrees to cause each BHLB Subsidiary to use reasonable best efforts in good faith to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary under applicable laws and regulations to consummate the
transactions contemplated by this Agreement as promptly as practicable.
7.5
Employees;
Benefit Plans
Following the Closing Date, BHLB may choose
to maintain any or all of the FCB and FCLS Benefit Plans in its sole discretion and FCB and FCLS shall cooperate with BHLB in order
to effect any plan terminations to be made as of the Effective Time.
7.5.1
Benefit
Plans Covering FCB Employees
. For any FCB benefit plan, which generally covers only FCB employees, which is terminated and
for which there is a comparable BHLB Benefit Plan of general applicability, BHLB shall take all reasonable action so that eligible
FCB employees at the Closing Date and who remain so employed immediately following the Effective Time (the “
Continuing
FCB Employees
”) shall be entitled to participate in such BHLB Benefit Plan to the same extent as similarly-situated employees
of BHLB (it being understood that inclusion of Continuing FCB Employees in the BHLB Benefit Plans may occur at different times
with respect to different plans and that this Section 7.5.1 does not apply to FCLS employees). BHLB shall cause each BHLB Benefit
Plan in which Continuing FCB Employees are eligible to participate to take into account for purposes of eligibility and vesting
under the BHLB Benefit Plans (but not for purposes of benefit accrual) the service of such employees with FCB to the same extent
as such service was credited for such purpose by FCB;
provided, however,
that such service shall not be recognized to the
extent that such recognition would result in a duplication of benefits. Nothing herein shall limit the ability of BHLB to amend
or terminate any of the FCB and FCLS Benefit Plans or BHLB Benefit Plans in accordance with their terms at any time;
provided,
however,
that BHLB shall continue to maintain the FCB benefit plans (other than stock-based or incentive plans) for which there
is a comparable BHLB Benefit Plan until the FCB employees are permitted to participate in the BHLB Benefit Plans, unless such BHLB
Benefit Plan has been frozen or terminated with respect to similarly-situated employees of BHLB or any Subsidiary of BHLB.
7.5.2
Benefit
Plans Covering FCLS Employees
. An FCLS benefit plan, which generally covers only FCLS employees at the Closing Date (the “
FCLS
Benefit Plans
”), may be continued, modified or terminated after the Effective Time. To the extent such plan or plans
are not terminated, eligible FCLS employees at the Closing Date and who remain so employed immediately following the Effective
Time (the “
Continuing FCLS Employees
”) shall be entitled to participate in the FCLS Benefit Plans to the same
extent as such employees participated in the FCLS Benefit Plans immediately prior to the Effective Time. Nothing herein shall limit
the ability of BHLB to amend or terminate any of the FCLS Benefit Plans
7.5.3
Bank
401(k) Plan Participation
. All Continuing FCB Employees shall be eligible to participate in Bank’s 401(k) plan on the
day after the Closing Date. All rights to participate in Bank’s 401(k) Plan
are subject to Bank’s right to amend or
terminate Bank’s 401(k) plan in its sole and absolute discretion and are subject to the terms of Bank’s 401(k) plan
including, but not limited to, the eligibility and vesting provisions of such plan. Continuing FCLS Employees shall continue to
participate in the FCB 401(k) Plan or its successor, subject to Section 6.13 of this Agreement and as the plan may be further amended
in the sole discretion of BHLB.
7.5.4
Welfare
Benefits
. If Continuing FCB Employees become eligible to participate in a medical, dental or health plan of BHLB upon termination
of such plan of FCB or FCLS, BHLB shall make all commercially reasonable efforts to cause each such plan to (i) waive any
preexisting condition limitations to the extent such conditions are covered under the applicable medical, health or dental plans
of BHLB, (ii) honor under such plans any deductible, co-payment and out-of-pocket expenses incurred by the employees and their
beneficiaries during the portion of the calendar year prior to such participation and (iii) waive any waiting period limitation
or evidence of insurability requirement which would otherwise be applicable to such employee on or after the Effective Time, in
each case to the extent such employee had satisfied any similar limitation or requirement under an analogous FCB Benefit Plan prior
to the Effective Time. Continuing FCLS Employees will continue to be covered by medical, dental and health plans as maintained
by FCLS prior to the Closing Date, and the FCLS benefit plan may be amended or terminated in the sole discretion of BHLB.
7.5.5
Paid
Time Off Programs
. BHLB will give Continuing FCB Employees credit, for purposes of BHLB’s vacation and/or other paid
leave benefit programs, for such individuals accrued and unpaid vacation and/or paid leave balance with FCB as of the Closing Date.
Continuing FCLS Employees may continue to be covered by paid time off programs maintained by FCLS prior to the Closing Date.
7.5.6
BHLB
to Honor Agreements
. Subject to any required regulatory approval or satisfaction of a condition in any Regulatory Approval,
BHLB agrees to honor all employment agreements, change in control agreements, severance agreements, deferred compensation agreements
and consulting agreements that FCB and FCLS has with its current and former employees and which have been identified in
FCB
Disclosure Schedule 4.9.1
, except to the extent any such agreements shall be superseded or terminated at the Closing Date
or following the Closing Date with the written consent of the affected parties and provided that no payments made under such agreements
would be characterized as an “excess parachute payment” as such term is defined in Code Section 280G.
7.5.7
No
Guarantee of Employment, Severance
. Except to the extent of commitments herein or other contractual commitments, if any, specifically
made or assumed by BHLB hereunder or by operation of law, BHLB shall have no obligation arising from and after the Closing Date
to continue in its employ or in any specific job or to provide to any specified level of compensation or any incentive payments,
benefits or perquisites to any Person who is an employee of FCB of any FCB Subsidiary as of the Closing Date. Each Person who is
an employee of FCB or any FCB Subsidiary as of the Closing Date and who is terminated by BHLB for a reason other than cause within
twelve (12) months subsequent to the Closing Date or is not offered employment with BHLB as of the Effective Time or resigns
for good reason, excluding those employees who are entitled to benefits under employment or change of control arrangements, shall
be entitled to severance benefits pursuant to FCB or FCLS’s severance plan or policy, as applicable, or BHLB’s current
severance plan or policy, if such payments would be more favorable to such Person;
provided
,
however
, if such benefits
pursuant to FCB or FCLS’s plan or policy, as applicable, will result in an excise tax under Code Section 4980D, such plan
or policy shall be modified to the extent necessary so as to avoid the imposition of such excise tax and the affected participant
under such plan or policy shall be paid an additional amount such that his or her benefit, net applicable taxes, equals the value
of the benefit reduced or eliminated by such action.
7.5.8
Worker
Adjustment and Retraining Notification Act
. If requested by BHLB, FCB shall take all such actions as BHLB may request in order
to fully and timely comply with any and all requirements of both the federal Worker Adjustment and Retraining Notification Act
of 1988 (“
WARN Act
”) and any state specific WARN Act statutes, including providing notices to FCB’s and
FCB Subsidiaries’ employees.
7.6
Directors
and Officers Indemnification and Insurance.
7.6.1 Prior
to the Effective Time, BHLB shall obtain and fully pay the premium for the extension of (i) the Side A coverage part (directors’
and officers’ liability) of FCB’s existing directors’ and officers’ insurance policies, and (ii) FCB’s
existing fiduciary liability insurance policies, in each case for a claims reporting or
discovery period of at least six (6) years from
and after the Effective Time, from an insurance carrier with the same or better credit rating as FCB’s current insurance
carrier with respect to directors’ and officers’ liability insurance and fiduciary liability insurance (collectively,
“
D&O Insurance
” and such insurance carrier, the “
Insurance Carrier
”) with terms, conditions,
retentions and limits of liability that are at least as favorable as FCB’s existing policies with respect to any actual or
alleged error, misstatement, misleading statement, act, omission, neglect, breach of duty or any matter claimed against any Person
covered thereby that arose, existed, or occurred at or prior to the Effective Time (including in connection with this Agreement
or the transactions or actions contemplated hereby);
provided
,
however
, that in no event shall BHLB be required to
expend for such “tail” policy a premium amount in excess of an amount equal to 200% of the annual premiums paid by
FCB for D&O Insurance in effect as of the date of this Agreement. In connection with the foregoing, FCB agrees, in order for
BHLB to fulfill its agreement, to provide the Insurance Carrier with such representations as such insurer may request with respect
to the reporting of any prior claims.
7.6.2 In
addition to Section 7.6.1, BHLB shall, from and after the Effective Date, to the fullest extent that would have been permitted
to FCB under New Jersey law and the FCB certificate of incorporation (to the extent not prohibited by federal law), indemnify,
defend and hold harmless each Person who is now, or who has been at any time before the date hereof or who becomes before the Effective
Time, an officer or director of FCB or any FCB Subsidiary (the “
Indemnified Parties
”) against all losses, claims,
damages, costs, expenses (including attorneys’ fees), liabilities or judgments or amounts that are paid in settlement (which
settlement shall require the prior written consent of BHLB, which consent shall not be unreasonably withheld, conditioned or delayed)
of or in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, or administrative (each,
a “
Claim
”) in which an Indemnified Party is or is threatened to be made a party or witness in whole or in part
or arising in whole or in part out of the fact that such Person is or was an Indemnified Party if such Claim pertains to any matter
of fact arising, existing, or occurring before the Effective Time (including, without limitation, the Merger and the other transactions
contemplated hereby), regardless of whether such Claim is asserted or claimed before, or after, the Effective Time. Any Indemnified
Party wishing to claim indemnification under this Section 7.6.2 upon learning of any Claim, shall notify BHLB (but the failure
so to notify BHLB shall not relieve it from any liability which it may have under this Section 7.6.2, except to the extent
such failure materially prejudices BHLB). In the event of any such Claim (whether arising before or after the Effective Time) (1) BHLB
shall have the right to assume the defense thereof (in which event the Indemnified Parties will cooperate in the defense of any
such matter) and upon such assumption BHLB shall not be liable to any Indemnified Party for any legal expenses of other counsel
or any other expenses subsequently incurred by any Indemnified Party in connection with the defense thereof, except that if BHLB
elects not to assume such defense, or counsel for the Indemnified Parties reasonably advises the Indemnified Parties that there
are or may be (whether or not any have yet actually arisen) issues which raise conflicts of interest between BHLB and the Indemnified
Parties, the Indemnified Parties may retain counsel reasonably satisfactory to them, and BHLB shall pay the reasonable fees and
expenses of such counsel for the Indemnified Parties, (2) except to the extent otherwise required due to conflicts of interest,
BHLB shall be obligated pursuant to this paragraph to pay for only one (1) firm of counsel for all Indemnified Parties unless there
is a conflict of interest that necessitates more than one law firm, and (3) BHLB shall not be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed).
7.6.3 In
the event that either BHLB or any of its successors or assigns (i) consolidates with or merges into any other Person and shall
not be the continuing or surviving company or entity of such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any Person, then, and in each such case, proper provision shall be made so that the successors
and assigns of BHLB shall assume the obligations set forth in this Section 7.6.
7.6.4 The
obligations of BHLB provided under this Section 7.6 are intended to be enforceable against BHLB directly by the Indemnified
Parties and shall be binding on all respective successors and permitted assigns of BHLB.
7.7
Stock
Listing.
BHLB agrees to file a notification form for
the listing on the NYSE (or such other national securities exchange on which the shares of BHLB Common Stock shall be listed as
of the Closing Date) of the shares of BHLB Common Stock to be issued in the Merger.
7.8
Reservation
of Stock.
BHLB agrees at all times from the date of this
Agreement until the Merger Consideration has been paid in full to reserve a sufficient number of shares of BHLB Common Stock to
fulfill its obligations under this Agreement.
7.9
Communications
to FCB Employees; Training
BHLB and FCB agree that as promptly as practicable
following the execution of this Agreement, meetings with employees of FCB and the FCB Subsidiaries shall be held at such locations
as BHLB and FCB shall mutually agree, provided that representatives of FCB shall be permitted to attend such meetings. BHLB and
FCB shall mutually agree in advance as to the scope and content of all communications to the employees of FCB and the FCB Subsidiaries.
At mutually agreed upon times following execution of this Agreement, representatives of BHLB shall be permitted to meet with the
employees of FCB and the FCB Subsidiaries to discuss employment opportunities with BHLB, provided that representatives of FCB shall
be permitted to attend any such meeting. From and after the first date on which all Regulatory Approvals (and waivers, if applicable)
and the FCB Shareholder Approval necessary for the consummation of the Merger (disregarding any waiting period) have been obtained,
BHLB shall also be permitted to conduct training sessions outside of normal business hours or at other times as FCB may agree,
with the employees of FCB and the FCB Subsidiaries and may conduct such training seminars at any branch location of FCB or loan
production office of FCLS; provided that BHLB will in good faith attempt to schedule such training sessions in a manner which does
not unreasonably interfere with FCB’s or FCLS’s normal business operations.
7.10
Current
Information.
During the period from the date of this Agreement
to the Effective Time, BHLB will cause one or more of its representatives to confer with representatives of FCB to inform FCB regarding
BHLB’s operations at such times as FCB may reasonably request. BHLB will promptly notify FCB of any change in the ordinary
course of its business or in the operation of its properties and, to the extent permitted by applicable law, of any governmental
complaints, investigations or hearings (or communications indicating that the same may be contemplated), or the institution or
the threat of material litigation involving BHLB or any BHLB Subsidiary.
7.11
Access
to Properties and Records.
Subject to Section 11.1, BHLB shall permit
FCB access upon reasonable notice and at reasonable times to its properties and those of the BHLB Subsidiaries, and shall disclose
and make available to FCB during normal business hours all of its books and records relating to the assets, properties, operations,
obligations and liabilities, including, but not limited to, all books of account (including the general ledger), tax records, minute
books of directors’ and shareholders’ meetings (other than minutes that discuss any of the transactions contemplated
by this Agreement or any other subject matter that BHLB reasonably determines should be kept confidential), organizational documents,
bylaws, material contracts and agreements, filings with any regulatory authority, litigation files, plans affecting employees,
and any other business activities or prospects in which FCB may have a reasonable interest;
provided, however,
that BHLB
shall not be required to take any action that would provide access to or to disclose information where such access or disclosure,
in BHLB’s reasonable judgment, would interfere with the normal conduct of BHLB’s business or would violate or prejudice
the rights or business interests or confidences of any customer or other Person or entity or would result in the waiver by it of
the privilege protecting communications between it and any of its counsel or contravene any applicable law. BHLB shall provide
and shall request its auditors to provide FCB with such historical financial information regarding it (and related audit reports
and consents) as FCB may reasonably request for Securities Law disclosure purposes. FCB shall use commercially reasonable efforts
to minimize any interference with BHLB’s regular business operations during any such access to BHLB’s property, books
and records. BHLB and each BHLB Subsidiary shall permit FCB, at FCB’s expense, to (i) cause a Phase I environmental assessment
to be performed at any physical location owned or occupied by BHLB or any BHLB Subsidiary and (ii) cause an appraisal to be performed
in respect of any real property owned by BHLB or any BHLB Subsidiary.
7.12
Financial
and Other Statements.
7.12.1 Promptly
upon receipt thereof, BHLB will furnish to FCB copies of each annual, interim or special audit of the books of BHLB and the BHLB
Subsidiaries made by its independent registered public accountants and copies of all internal control reports submitted to BHLB
by such accountants, or by any other accounting firm rendering internal audit services, in connection with each annual, interim
or special audit of the books of BHLB and the BHLB Subsidiaries made by such accountants.
7.12.2 As
soon as reasonably available, but in no event later than the date such documents are filed with the MDOB, FRB or FDIC, BHLB will
deliver to FCB the BHLB Regulatory Report filed by BHLB or the Bank. Within twenty-five (25) days after the end of each month,
the Bank will deliver to FCB a consolidating balance sheet and a consolidating statement of operations, without related notes,
for such month prepared in accordance with current financial reporting practices, as well as a month-end and year to date comparison
to budget.
7.12.3 BHLB
promptly will advise upon receipt and permit review by FCB of any inquiry or examination report of any Bank Regulator with respect
to the condition or activities of BHLB or the Bank.
ARTICLE
VIII
REGULATORY AND OTHER MATTERS
8.1
Meeting
of Shareholders.
FCB will (i) take all steps necessary to duly
call, give notice of, convene and hold a special meeting of its shareholders as promptly as practicable after the Merger Registration
Statement is declared effective by the SEC, for the purpose of considering this Agreement and the Merger (the “
FCB Shareholders
Meeting
”), except as otherwise provided in this Section, (ii) in connection with the solicitation of proxies with respect
to the FCB Shareholders Meeting, have its Board of Directors recommend approval of this Agreement to the FCB shareholders; and
(iii) cooperate and consult with BHLB with respect to each of the foregoing matters. The Board of Directors of FCB may fail to
make such a recommendation referred to in clause (ii) above, or withdraw, modify or change any such recommendation only if such
Board of Directors, after having consulted with and considered the advice of its financial and legal advisors, has determined that
the making of such recommendation, or the failure to withdraw, modify or change its recommendation, would constitute a breach of
the fiduciary duties of such directors under applicable law.
8.2
Proxy
Statement-Prospectus; Merger Registration Statement.
8.2.1 For
the purposes (i) of registering BHLB Common Stock to be offered to holders of FCB Common Stock in connection with the Merger with
the SEC under the Securities Act, and (ii) of holding the FCB Shareholders Meeting, BHLB shall draft and prepare, and FCB
shall cooperate in the preparation of, the Merger Registration Statement, including a proxy statement and prospectus satisfying
all applicable requirements of applicable state securities and banking laws, and of the Securities Act and the Exchange Act, and
the rules and regulations thereunder (such proxy statement/prospectus in the form mailed by FCB to the FCB shareholders, together
with any and all amendments or supplements thereto, being herein referred to as the “
Proxy Statement-Prospectus
”).
BHLB shall provide FCB and its counsel with appropriate opportunity to review and comment on the Proxy Statement-Prospectus, and
shall incorporate all appropriate comments thereto, prior to the time it is initially filed with the SEC or any amendments are
filed with the SEC. BHLB shall file the Merger Registration Statement, including the Proxy Statement-Prospectus, with the SEC.
Each of BHLB and FCB shall use its reasonable best efforts to have the Merger Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing, and FCB shall thereafter promptly mail the Proxy Statement-Prospectus
to its shareholders. BHLB shall also use its reasonable best efforts to obtain all necessary state securities law or “blue
sky” permits and approvals required to carry out the transactions contemplated by this Agreement, and FCB shall furnish all
information concerning FCB and the holders of FCB Common Stock as may be reasonably requested in connection with any such action.
8.2.2 BHLB
shall, as soon as practicable but in no event later than September 30, 2016, file the Merger Registration Statement with the SEC
under the Securities Act in connection with the transactions contemplated by this Agreement. BHLB will advise FCB promptly after
BHLB receives notice of the time when the Merger Registration Statement has become effective or any supplement or amendment has
been filed, of the issuance of any stop order or the suspension of the registration of the shares of BHLB Common Stock issuable
pursuant to the Merger Registration Statement, or the initiation or threat of any proceeding for any such purpose, or of any request
by the SEC for the amendment or supplement of the Merger Registration Statement, or for additional information, and BHLB will provide
FCB with as many copies of such Merger Registration Statement and all amendments thereto promptly upon the filing thereof as FCB
may reasonably request.
8.2.3 FCB
and BHLB shall promptly notify the other party if at any time it becomes aware that the Proxy Statement-Prospectus or the Merger
Registration Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading.
In such event, FCB shall cooperate with BHLB in the preparation of a supplement or amendment to such Proxy Statement-Prospectus
that corrects such misstatement or omission, and BHLB shall file an amended Merger Registration Statement with the SEC, and FCB
shall mail an amended Proxy Statement-Prospectus to its shareholders.
8.3
Regulatory
Approvals.
Each of FCB and BHLB, and their respective Subsidiaries,
will cooperate with the other and use reasonable efforts to promptly prepare and as soon as practicable following the date hereof
but in no event later than August 31, 2016, file all necessary documentation to obtain all necessary permits, consents, waivers,
approvals and authorizations of the MDOB, the NJDOBI, the FDIC, the FRB, the SBA, the Department of Justice, the Federal Trade
Commission and any other third parties and Governmental Entities or Bank Regulators necessary to consummate the transactions contemplated
by this Agreement;
provided, however,
that in no event shall BHLB or the Bank be required to agree to any prohibition,
limitation, or other requirement of any Bank Regulator that would, in BHLB’s or the Bank’s sole discretion (a)
prohibit or materially limit
the ownership or operation by BHLB or the Bank of all or any material portion of the
business
or assets of FCB or any FCB Subsidiary, (b) compel BHLB or the Bank to dispose
of or hold separate all or any material portion
of the business or assets of FCB or any FCB
Subsidiary, (c) impose a material compliance burden, penalty or obligation on
BHLB or the
Bank resulting from noncompliance by FCB with its regulatory obligations, including but not limited to its regulatory
obligations as an SBA lender; or (d) otherwise
materially impair the value of FCB and the FCB Subsidiaries (any such requirement
alone, or more than one such requirement together, a “Burdensome Condition”). FCB and BHLB will furnish each other
and each other’s counsel with all information concerning themselves, their Subsidiaries, directors, officers and shareholders
and such other matters as may be necessary or advisable in connection with any application, petition or other statement made by
or on behalf of FCB or BHLB to any Bank Regulator or Governmental Entity in connection with the Merger and the other transactions
contemplated by this Agreement. FCB shall have the right to review and approve in advance all characterizations of the information
relating to FCB and any FCB Subsidiary which appear in any filing made in connection with the transactions contemplated by this
Agreement with any Governmental Entity. In addition, FCB and BHLB shall each furnish to the other for review a copy of each such
filing made in connection with the transactions contemplated by this Agreement with any Governmental Entity prior to its filing.
Each of FCB and BHLB will cooperate with each other and use their reasonable best efforts to address any conditions in any regulatory
approval to allow for the consummation of the transactions contemplated by this Agreement.
ARTICLE
IX
CLOSING CONDITIONS
9.1
Conditions
to Each Party’s Obligations under this Agreement.
The respective obligations of each party under
this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following conditions, none of which may
be waived:
9.1.1
Shareholder
Approval
. This Agreement and each transaction contemplated hereby requiring stockholder approval shall have been approved and
adopted by the requisite votes of the shareholders of FCB.
9.1.2
Injunctions
.
None of the parties hereto shall be subject to any order, decree or injunction of a court or agency of competent jurisdiction,
and no statute, rule or regulation shall have been enacted, entered, promulgated, interpreted, applied or enforced by any Governmental
Entity or Bank Regulator, that enjoins or prohibits the consummation of the transactions contemplated by this Agreement.
9.1.3
Regulatory
Approvals
. All Regulatory Approvals required to complete the Merger shall have been obtained and shall remain in full force
and effect and all waiting periods relating thereto shall have expired.
9.1.4
Effectiveness
of Merger Registration Statement
. The Merger Registration Statement shall have become effective under the Securities Act and
no stop order suspending the effectiveness of the Merger Registration Statement shall have been issued, and no proceedings for
that purpose shall have been initiated or threatened by the SEC and, if the offer and sale of BHLB Common Stock in the Merger is
subject to the state securities or “blue sky” laws of any state, shall not be subject to a stop order of any state
securities commissioner.
9.1.5
NYSE
Listing
. BHLB shall have filed a notification form for the listing of the BHLB Common Stock to be issued in the Merger.
9.2
Conditions
to the Obligations of BHLB and the Bank under this Agreement.
The obligations of BHLB and the Bank under this
Agreement shall be further subject to the satisfaction of the conditions set forth in Sections 9.2.1 through 9.2.6 at or prior
to the Closing Date:
9.2.1
Representations
and Warranties
. Each of the representations and warranties of FCB set forth in this Agreement shall be true and correct as
of the date of this Agreement and upon the Effective Time with the same effect as though all such representations and warranties
had been made at the Effective Time (except to the extent such representations and warranties speak as of an earlier date, which
only need be true and correct as of such earlier date), in any case subject to the standard set forth in Section 4.1; and
FCB shall have delivered to BHLB a certificate to such effect signed by the Chief Executive Officer and the Chief Financial Officer
of FCB as of the Effective Time.
9.2.2
Agreements
and Covenants
. FCB and each FCB Subsidiary shall have performed in all material respects all obligations and complied in all
material respects with all agreements or covenants to be performed or complied with by each of them at or prior to the Effective
Time, and BHLB shall have received a certificate signed on behalf of FCB by the Chief Executive Officer and Chief Financial Officer
of FCB to such effect dated as of the Effective Time.
9.2.3
Permits, Authorizations, Etc
. The parties shall have obtained any and all permits, authorizations, consents, waivers, clearances
or approvals required for the lawful consummation of the Merger and the acquisition of FCLS as a wholly-owned subsidiary of the
Bank, the failure of which to obtain would have a Material Adverse Effect on either FCB or BHLB and the Bank.
9.2.4
No
Material Adverse Effect
. There shall have been no changes, other than changes contemplated by this Agreement, in the business,
operations, condition (financial or otherwise), assets or liabilities of FCB and the FCB Subsidiaries (regardless of whether or
not such events or changes are inconsistent with the representations and warranties given herein) that individually or in the aggregate
has had or reasonably would be expected to have a Material Adverse Effect on FCB.
9.2.5
Regulatory
Conditions
. No Regulatory Approval required for consummation of the Merger and the acquisition of FCLS as a wholly-owned subsidiary
of the Bank shall include any condition or requirement that would result in a Material Adverse Effect or Burdensome Condition on
BHLB or FCB, and their respective Subsidiaries.
9.2.6
Dissenting
Shares
. As of immediately prior to the Effective Time, not more than 10.0% of the issued and outstanding shares of FCB Common
Stock shall have served a written notice of dissent from this Agreement to FCB under the New Jersey Banking Law.
9.2.7
Disqualified
Loans Liability Determination.
BHLB, in its sole discretion, shall have determined as to whether or not the Disqualified Loans
Liability has been sufficiently determined or formalized.
9.2.8
First
Choice Loan Services, Inc.
Immediately prior to the Effective Time, the key executive officers of FCLS who previously entered
into executive retention agreements with BHLB, the Bank and FCLS, remain employed by FCLS in the same capacities as of the date
of this Agreement and continue to abide by the terms and conditions of such executive retention agreements in all material respects.
9.2.9
Tax
Opinion.
BHLB shall have received a written opinion, dated as of the Closing Date, of Luse Gorman, PC, or another law firm
acceptable to BHLB, reasonably satisfactory in form and substance to BHLB (and its counsel). based upon representation letters
reasonably required by such counsel, dated on or about the date of such opinion, and such other facts, representations and customary
limitations as such counsel may reasonably deem relevant, to the effect that the Merger will be treated for federal income tax
purposes as a reorganization under Section 368(a) of the Code.
9.3
Conditions
to the Obligations of FCB under this Agreement.
The obligations of FCB under this Agreement
shall be further subject to the satisfaction of the conditions set forth in Sections 9.3.1 through 9.3.5 at or prior to the
Closing Date:
9.3.1
Representations
and Warranties
. Each of the representations and warranties of BHLB set forth in this Agreement shall be true and correct as
of the date of this Agreement and upon the Effective Time with the same effect as though all such representations and warranties
had been made at the Effective Time (except to the extent such representations and warranties speak as of an earlier date, which
only need be true and correct as of such earlier date), in any case subject to the standard set forth in Section 5.1; and
BHLB shall have delivered to FCB a certificate to such effect signed by the Chief Executive Officer and Chief Financial Officer
of BHLB as of the Effective Time.
9.3.2
Agreements
and Covenants
. BHLB and the Bank shall have performed in all material respects all obligations and complied in all material
respects with all agreements or covenants to be performed or complied with by each of them at or prior to the Effective Time, and
FCB shall have received a certificate signed on behalf of BHLB and the Bank by the Chief Executive Officer and Chief Financial
Officer of BHLB and the Bank to such effect dated as of the Effective Time.
9.3.3
Permits,
Authorizations, Etc
. The parties shall have obtained any and all permits, authorizations, consents, waivers, clearances or
approvals required for the lawful consummation of the Merger and the acquisition of FCLS as a wholly-owned subsidiary of the Bank,
the failure of which to obtain would have a Material Adverse Effect on BHLB and the Bank, taken as a whole.
9.3.4
No
Material Adverse Effect.
There shall have been no changes, other than changes contemplated by this Agreement, in the business,
operations, condition (financial or otherwise), assets or liabilities of BHLB and the BHLB Subsidiaries (regardless of whether
or not such events or changes are inconsistent with the representations and warranties given herein) that individually or in the
aggregate has had or reasonably would be expected to have a Material Adverse Effect on BHLB or the Bank.
9.3.5
Tax
Opinion.
FCB shall have received a written opinion of Pepper Hamilton, LLP, dated the Closing Date, based upon representation
letters reasonably required by such counsel, dated on or about the date of such opinion, and such other facts, representations
and customary limitations as such counsel may reasonably deem relevant, to the effect that the Merger will be treated for federal
income tax purposes as a reorganization under Section 368(a) of the Code.
ARTICLE
X
TERMINATION, AMENDMENT AND WAIVER
10.1
Termination.
This Agreement may be terminated at any time
prior to the Closing Date, whether before or after approval of the Merger by the shareholders of FCB (except as otherwise indicated
below):
10.1.1 At
any time by the mutual written agreement of BHLB, the Bank and FCB;
10.1.2 By
either party (provided, that the terminating party is not then in breach of any representation, warranty, covenant or other agreement
contained herein) if there shall have been a breach of any of the representations or warranties set forth in this Agreement on
the part of the other party, which breach by its nature cannot be cured prior to the Closing Date or shall not have been cured
within thirty (30) days after written notice of such breach by the terminating party to the other party, conditioned upon
the defaulting party promptly commencing to cure the default and thereafter continuing to cure the default; provided, however,
that neither party shall have the right to terminate this Agreement pursuant to this Section 10.1.2 unless the breach of representation
or warranty, together with all other such breaches, would entitle the terminating party not to consummate the transactions contemplated
hereby under Section 9.2.1 (in the case of a breach of a representation or warranty by FCB) or Section 9.3.1 (in the case
of a breach of a representation or warranty by BHLB or the Bank);
10.1.3 By
either party (provided, that the terminating party is not then in breach of any representation, warranty, covenant or other agreement
contained herein) if there shall have been a failure to perform or comply with any of the covenants or agreements set forth in
this Agreement on the part of the other party or its Subsidiaries, which failure by its nature cannot be cured prior to the Closing
Date or shall not have been cured within thirty (30) days after written notice of such failure by the terminating party to
the other party, conditioned upon the defaulting party promptly commencing to cure the default and thereafter continuing to cure;
provided, however, that neither party shall have the right to terminate this Agreement pursuant to this Section 10.1.3 unless
the breach of covenant or agreement, together with all other such breaches, would entitle the terminating party not to consummate
the transactions contemplated hereby under Section 9.2.2 (in the case of a breach of covenant by FCB) or Section 9.3.2
(in the case of a breach of covenant by BHLB or the Bank);
10.1.4 At
the election of either party, if the Closing shall not have occurred by the Termination Date, or such later date as shall have
been agreed to in writing by BHLB and FCB; provided, that no party may terminate this Agreement pursuant to this Section 10.1.4
if the failure of the Closing to have occurred on or before said date was due to such party’s material breach of any representation,
warranty, covenant or other agreement contained in this Agreement;
10.1.5 By
either party, if the shareholders of FCB shall have voted at the FCB Shareholders Meeting on the transactions contemplated by this
Agreement and such vote shall not have been sufficient to approve and adopt such transactions.
10.1.6 By
either party if (i) final action has been taken by a Bank Regulator whose approval is required in order to satisfy the conditions
to the parties’ obligations to consummate the transactions contemplated hereby as set forth in Article IX, which final
action (x) has become unappealable and (y) does not approve this Agreement or the transactions contemplated hereby, (ii)
any court of competent jurisdiction or other Governmental Entity shall have issued an order, decree, ruling or taken any other
action restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become
final and unappealable;
10.1.7 By
the Board of Directors of BHLB if each of the following conditions are satisfied: (i) FCB has received a Superior Proposal and
the Board of Directors of FCB has entered into an acquisition agreement with respect to the Superior Proposal, withdrawn its recommendation
of this Agreement, has failed to make such recommendation, or has modified or qualified its recommendation in a manner adverse
to BHLB, (ii) either (x) the Board of Directors of FCB submits this Agreement to its stockholders without a recommendation for
approval or (y) the Board of Directors of FCB withdraws, qualifies or adversely modifies (or publicly proposes or resolves to
withdraw, qualify or adversely modify) its recommendation
of this Agreement to the FCB stockholders, and (iii) the FCB stockholders do not approve this Agreement.
10.1.8 By
the Board of Directors of FCB if FCB has received a Superior Proposal and the Board of Directors of FCB has made a determination
to accept such Superior Proposal; provided that FCB shall not terminate this Agreement pursuant to this Section 10.1.8 and
enter into a definitive agreement with respect to the Superior Proposal until the expiration of three (3) Business Days following
BHLB’s receipt of written notice advising BHLB that FCB has received a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal (and including a copy thereof with all accompanying documentation, if in writing) identifying
the Person making the Superior Proposal and stating whether FCB intends to enter into a definitive agreement with respect to the
Superior Proposal (a “
Notice of Superior Proposal
”). After providing such Notice of Superior Proposal, FCB shall
provide a reasonable opportunity to BHLB during the three (3)-day period to make such adjustments in the terms and conditions of
this Agreement as would enable FCB to proceed with the Merger on such adjusted terms. Any material amendment of such Superior Proposal
shall require a new Notice of Superior Proposal and FCB shall be required to comply again with the requirements of this Section
10.1.8;
provided
,
however
, that references to the three (3) Business Day period above shall be deemed to be references
to a two (2) Business Day period.
10.1.9 By
the Board of Directors of FCB if it so determines by a majority vote of the members of the entire Board of Directors of FCB, at
any time during the five-day period commencing on the Determination Date, such termination to be effective on the 30
th
day following such Determination Date, if and only if both of the following conditions are satisfied:
(1) The
BHLB Market Value on the Determination Date is less than $21.52; and
(2) the
number obtained by dividing the BHLB Market Value on the Determination Date by the Initial BHLB Market Value shall be less than
the number obtained by dividing (x) the Final Index Price by (y) the Initial Index Price minus 0.20;
subject
,
however
, to the following three sentences.
If FCB elects to exercise its termination right
pursuant to this Section 10.1.9, it shall give prompt written notice thereof to BHLB. During the five Business Day period
commencing with its receipt of such notice, BHLB shall have the option of paying additional Merger Consideration by increasing
the Exchange Ratio to equal the number obtained by dividing (1) $15.54 by the greater of (i) the product of 0.80 and
the Initial BHLB Market Value or (ii) the product obtained by multiplying the Index Ratio by the Initial BHLB Market Value.
If within such five Business Day period, BHLB delivers written notice to FCB that it intends to proceed with the Merger by paying
such additional consideration as contemplated by the preceding sentence, then no termination shall have occurred pursuant to this
Section 10.1.9, and this Agreement shall remain in full force and effect in accordance with its terms (except that the Exchange
Ratio shall have been so modified and, thereafter, any reference in this Agreement to “Merger Consideration” shall
be deemed to refer to the Merger Consideration reflecting the Exchange Ratio as modified pursuant to this Section 10.1.9).
For purposes of this Section 10.1.9, the
following terms shall have the meanings indicated below:
“
Acquisition Transaction
”
means (i) a merger or consolidation, or any similar transaction, involving the relevant companies, (ii) a purchase, lease
or other acquisition of all or substantially all of the assets of the relevant companies, (iii) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of securities representing 10% or more of the voting power
of the relevant companies; or (iv) agree or commit to take any action referenced above.
“
BHLB Market Value
”
means,
as of any specified date, the average of the daily closing sales prices of a share of BHLB Common Stock as reported on the NYSE
for the ten consecutive trading days immediately preceding such specified date.
“
Determination Date
” means
the first date on which all Regulatory Approvals (and waivers, if applicable)
necessary for consummation of the Merger have
been received (disregarding any waiting period).
“
Index
” means the KBW Regional
Bank Index.
“
Index Ratio
” means the Final
Index Price divided by the Initial Index Price.
“
Initial BHLB Market Value
”
means $26.91.
“
Initial Index Price
” means
the average of the daily closing prices of the Index for the 10 consecutive trading days immediately preceding the date of the
Agreement.
“
Final Index Price
” means
the sum average of the daily closing prices of the Index for the 10 consecutive trading days immediately preceding the Determination
Date.
If any company belonging to the Index declares
or effects a stock dividend, reclassification, recapitalization, split-up, combination, exchange of shares or similar transaction
between the date of this Agreement and the Determination Date, the prices for the common stock of such company shall be appropriately
adjusted for the purposes of applying this Section 10.1.9. If a company belonging to the Index announces a sale between the
date of this Agreement and the Determination Date, such company shall be removed from the Index and the relative weighting of the
companies remaining in the Index shall be appropriately adjusted.
10.2
Effect
of Termination.
10.2.1 In
the event of termination of this Agreement pursuant to any provision of Section 10.1, this Agreement shall forthwith become void
and have no further force, except that (i) the provisions of Sections 10.2, 11.1, 11.2, 11.3, 11.4, 11.5, 11.6, 11.8,
11.9, 11.10, 11.11, and any other section which, by its terms, relates to post-termination rights or obligations, shall survive
such termination of this Agreement and remain in full force and effect.
10.2.2 If
this Agreement is terminated, expenses and damages of the parties hereto shall be determined as follows:
(A) Except
as provided below, whether or not the Merger is consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated by this Agreement shall be paid by the party incurring such expenses.
(B) In
the event of a termination of this Agreement because of a breach of any representation, warranty, covenant or agreement contained
in this Agreement, the breaching party shall remain liable for any and all damages, costs and expenses, including all reasonable
attorneys’ fees, sustained or incurred by the non-breaching party as a result thereof or in connection therewith or with
respect to the enforcement of its rights hereunder.
(C) As
used in this Agreement, “
Termination Fee
” shall mean $
4.1 million
. As a condition of BHLB’s willingness,
and in order to induce BHLB to enter into this Agreement, and to reimburse BHLB for incurring the costs and expenses related to
entering into this Agreement and consummating the transactions contemplated by this Agreement, FCB hereby agrees to pay BHLB, and
BHLB shall be entitled to payment of, the Termination Fee by wire transfer of same day funds on the earlier of (x) the date
of termination or, if such date is not a Business Day, on the next following Business Day or (y) within three (3) Business
Days after written demand for payment is made by BHLB, as applicable, following the occurrence of any of the events set forth below:
(i) FCB
terminates this Agreement pursuant to Section 10.1.8 or BHLB and the Bank terminate this Agreement pursuant to Section 10.1.7;
or
(ii) The
entering into a definitive agreement by FCB relating to an Acquisition Proposal or the consummation of an Acquisition Proposal
involving FCB within one (1) year after the occurrence of any of the following: (i) the termination of this Agreement by BHLB
and the Bank pursuant to Section 10.1.2 or
10.1.3 because of a breach by FCB or any FCB Subsidiary
after the occurrence of a bona fide Acquisition Proposal has been publicly announced or otherwise made known to the senior management
or board of directors of FCB; or (ii) the termination of this Agreement by BHLB and the Bank or FCB pursuant to Section 10.1.5
because of the failure of the shareholders of FCB to approve this Agreement at the FCB Shareholders Meeting after the occurrence
of an Acquisition Proposal has been publicly announced or otherwise made known to the shareholders of FCB.
(D) The
parties acknowledge that the agreements contained in this Section 10.2.2 are an integral part of the transactions contemplated
by this Agreement, and that, without these agreements, BHLB and the Bank would not enter into this Agreement. The amount payable
by FCB pursuant to this Section 10.2.2 constitutes liquidated damages and not a penalty and shall be the sole and exclusive monetary
remedy of such party in the event of termination of this Agreement on the bases specified in such section.
10.3
Amendment,
Extension and Waiver.
Subject to applicable law, at any time prior
to the Effective Time (whether before or after approval thereof by the shareholders of FCB), the parties hereto by action of their
respective Boards of Directors, may (a) amend this Agreement, (b) extend the time for the performance of any of the obligations
or other acts of any other party hereto, (c) waive any inaccuracies in the representations and warranties contained herein
or in any document delivered pursuant hereto, or (d) waive compliance with any of the agreements or conditions contained herein;
provided, however, that after any approval of this Agreement and the transactions contemplated hereby by the shareholders of FCB,
there may not be, without further approval of such shareholders, any amendment of this Agreement which decreases the amount or
value, or changes the form of, the Merger Consideration to be delivered to FCB’s shareholders pursuant to this Agreement.
This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. Any agreement
on the part of a party hereto to any extension or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party, but such waiver or failure to insist on strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Any termination of this Agreement
pursuant to this Article X may only be effected upon a vote of a majority of the entire Board of Directors of the terminating
party.
ARTICLE
XI
MISCELLANEOUS
11.1
Confidentiality.
Except as specifically set forth herein, the
parties mutually agree to be bound by the terms of the Confidentiality Agreement, which are hereby incorporated herein by reference,
and all information furnished by either party to the other party or its representatives pursuant hereto (including pursuant to
Sections 6.3 and 6.4) shall be subject to, and the parties shall hold such information in confidence in accordance with, the
provisions of the Confidentiality Agreement. The parties hereto agree that the Confidentiality Agreement shall continue in accordance
with its terms, notwithstanding the termination of this Agreement.
11.2
Public
Announcements.
The parties shall cooperate with each other
in the development and distribution of all news releases and other public disclosures with respect to this Agreement, and except
as may be otherwise required by law, neither FCB nor BHLB shall issue any news release, or other public announcement or communication
with respect to this Agreement unless such news release or other public announcement or communication has been mutually agreed
upon by the parties hereto.
11.3
Survival.
All representations, warranties and covenants
in this Agreement or in any instrument delivered pursuant hereto shall expire and be terminated and extinguished at the Effective
Time, except for those covenants and agreements contained herein which by their terms apply in whole or in part after the Effective
Time.
11.4
Notices.
All notices or other communications hereunder
shall be in writing and shall be deemed given if delivered by (i) receipted hand delivery, (ii) facsimile with confirmation
of transmission, (iii) mailed by prepaid registered or certified mail (return receipt requested), or (iv) by recognized overnight
courier addressed as follows:
If to FCB, to:
|
|
Paul E. Fitzgerald
|
|
|
President and Chief Executive Officer
|
|
|
First Choice Bank
|
|
|
669 Whitehead Road
|
|
|
Lawrenceville, New Jersey 08648
|
|
|
|
With required copies to:
|
|
Pepper Hamilton LLP
|
|
|
Suite 400
|
|
|
301 Carnegie Center
|
|
|
Princeton, New Jersey 08543-5276
|
|
|
Attention: Michael J. Mann, Esq.
|
|
|
|
If to BHLB or Berkshire Bank, to:
|
|
Michael P. Daly
|
|
|
President and Chief Executive Officer
|
|
|
Berkshire Hills Bancorp, Inc.
|
|
|
24 North Street
|
|
|
Pittsfield, Massachusetts 01201
|
|
|
|
With required copies to:
|
|
Wm. Gordon Prescott, Esq.
|
|
|
Senior Vice President and General Counsel
|
|
|
Berkshire Hills Bancorp, Inc.
|
|
|
24 North Street
|
|
|
Pittsfield, Massachusetts 01201
|
|
|
|
|
|
Lawrence Spaccasi, Esq.
|
|
|
Marc Levy, Esq.
|
|
|
Luse Gorman, PC
|
|
|
5335 Wisconsin Avenue, NW
|
|
|
Suite 780
|
|
|
Washington, DC 20015
|
|
|
|
or such other address as shall be furnished in writing by any party,
and any such notice or communication shall be deemed to have been given, as applicable: (i) as of the date delivered by hand,
(ii) upon confirmation of transmission, (iii) three (3) Business Days after being delivered to the U.S. mail, postage
prepaid, or (iv) one (1) Business Day after being delivered to the overnight courier.
11.5
Parties
in Interest.
This Agreement and the Voting Agreements shall
be binding upon and shall inure to the benefit of the parties hereto or thereto and their respective successors and assigns; provided,
however, that neither this Agreement and the Voting Agreements nor any of the rights, interests or obligations hereunder or thereunder
shall be assigned by any party hereto without the prior written consent of the other party. Except for Section 7.6 hereof
nothing in this Agreement is intended to confer upon any Person or entity other than the parties hereto any rights or remedies
under or by reason of this Agreement.
11.6
Complete
Agreement.
This Agreement, including the Exhibits and Disclosure
Schedules hereto and the documents and other writings referred to herein or therein or delivered pursuant hereto, and the Confidentiality
Agreement, contains the entire agreement and understanding of the parties with respect to its subject matter. There are no restrictions,
agreements, promises, warranties, covenants or undertakings between the parties other than those expressly set forth herein or
therein. This Agreement supersedes all prior agreements and understandings (other than the Confidentiality Agreement) between the
parties, both written and oral, with respect to its subject matter.
11.7
Counterparts.
This Agreement may be executed in one or more
counterparts all of which shall be considered one and the same agreement and each of which shall be deemed an original. A facsimile
or other electronic copy of a signature page shall be deemed to be an original signature page.
11.8
Severability.
In the event that any one or more provisions
of this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, by any court of competent jurisdiction,
such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement and the parties shall use
their reasonable efforts to substitute a valid, legal and enforceable provision which, insofar as practical, implements the purposes
and intents of this Agreement.
11.9
Governing
Law.
Except to the extent that the Merger is governed
by Massachusetts and New Jersey law, this Agreement shall be governed by and construed in accordance with the laws of the State
of Delaware, without giving effect to principles of conflicts of law.
11.10
Interpretation.
When a reference is made in this Agreement to
Articles, Sections or Exhibits, such reference shall be to an Article or Section of or Exhibit to this Agreement unless otherwise
indicated. The recitals hereto constitute an integral part of this Agreement. References to sections include subsections, which
are part of the related Section (e.g., a section numbered “Section 5.5.1” would be part of “Section 5.5”
and references to “Section 5.5” would also refer to material contained in the subsection described as “Section 5.5.1”).
The table of contents, index and headings contained in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or “including”
are used in this Agreement, they shall be deemed to be followed by the words “without limitation”. The phrases “the
date of this Agreement”, “the date hereof” and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to the date set forth in the Preamble to this Agreement. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, 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 of the provisions of this Agreement.
11.11
Specific
Performance.
The parties hereto agree that irreparable damage
would occur in the event that the provisions contained in this Agreement were not performed in accordance with its specific terms
or was otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions, without
the posting of bond or other security, to prevent breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which
they are entitled at law or in equity. Each party agrees that it will not seek and will agree to waive any requirement for the
securing or posting of a bond in connection with the other party’s seeking or obtaining such relief.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed under seal by their duly authorized officers as of the date first set forth above.
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BERKSHIRE HILLS BANCORP, INC.
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/s/Sean A. Gray
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Name:
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Sean A. Gray
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Title:
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Senior Executive Vice President
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BERKSHIRE BANK
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/s/Sean A. Gray
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Name:
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Sean A. Gray
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Title:
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Chief Operating Officer
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FIRST CHOICE BANK
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/s/Paul E. Fitzgerald
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Name:
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Paul E. Fitzgerald
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Title:
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President and Chief Executive Officer
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[Signature Page for Agreement and Plan of
Merger]
ANNEX
B
June
24, 2016
Board
of Directors
First
Choice Bank
840
Route 33
Mercerville,
New Jersey 08619
Dear
Board of Directors,
This
letter sets forth the opinion of Ambassador Financial Group, Inc. (“Ambassador”) as to the fairness, from a financial
point of view, to the holders of the common stock of First Choice Bank (“First Choice”) of Mercerville, New Jersey
of the Exchange Ratio (as defined below) provided for in the Merger Agreement (as defined below) in connection with the merger
of First Choice into Berkshire Bank (“Berkshire Bank”), the bank subsidiary of Berkshire Hills Bancorp, Inc. (“Berkshire
Hills”) of Pittsfield, Massachusetts (such merger, the “Merger”). In the Merger, each outstanding share of the
common stock, par value $5.00, of First Choice (“First Choice Common Stock”) will be converted into the right to receive
0.5773 (the “Exchange Ratio”) of a share of the common stock, par value $0.01, of Berkshire Hills (“Berkshire
Hills Common Stock”). The terms and conditions of the Merger are more fully set forth in the Merger Agreement.
In
rendering our opinion, we:
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·
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Reviewed
a draft dated June 23, 2016 of the Agreement and Plan of Merger to be entered into by
First Choice and Berkshire Hills (the “Merger Agreement”);
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·
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Reviewed
First Choice’s audited consolidated financial statements as of December 31, 2015
and 2014 and related audited consolidated balance sheets, consolidated statements of
income, consolidated statements of comprehensive income, consolidated statements of changes
in shareholders’ equity and consolidated statements of cash flows for the years
ending December 31, 2015 and 2014;
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·
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Reviewed
Berkshire Hills’ Form 10-Q for the quarterly period ended March 31, 2016 and Form
10-K for the fiscal year ended December 31, 2015, including the financial statements
contained therein;
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·
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Reviewed
First Choice’s and Berkshire Bank’s respective quarterly call reports for
June 30, 2015, September 30, 2015, December 31, 2015, and March 31, 2016;
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·
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Reviewed
other publicly available information regarding First Choice and Berkshire Hills, including
certain publicly available research analysts estimates for Berkshire Hills;
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·
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Reviewed
certain non-public information provided to us by or on behalf of First Choice and Berkshire
Hills regarding First Choice (including financial projections and forecasts for First
Choice provided to us by the management of First Choice) and projected cost savings anticipated
by the management of Berkshire Hills to be realized from the Merger;
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·
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Reviewed
recently reported stock prices and trading activity of Berkshire Hills Common Stock;
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·
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Discussed
the past and current operations, financial condition and future prospects of each company
with senior executives of First Choice and Berkshire Hills;
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·
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Reviewed
and analyzed certain publicly available financial and stock market data of banking companies
that we selected as relevant to our analysis of Berkshire Hills;
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·
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Reviewed
and analyzed certain publicly available financial data of transactions that we selected
as relevant to our analysis of First Choice;
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·
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Considered
Berkshire Hills’ financial and capital position and certain potential pro forma
financial effects of the Merger on Berkshire Hills;
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·
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Conducted
other analyses and reviewed other information we considered necessary or appropriate;
and
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·
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Incorporated
our assessment of the overall economic environment and market conditions, as well as
our experience in mergers and acquisitions, bank stock valuations and other transactions.
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In
rendering our opinion, we also relied upon and assumed, without independent verification, the accuracy, reasonableness and completeness
of the information provided to us by or on behalf of First Choice and Berkshire Hills (“Materials Received”) and publicly
available information used in our analyses. Ambassador does not assume any responsibility for the accuracy, reasonableness and
completeness of any of the foregoing Materials Received and publicly available information or for the independent verification
thereof. With respect to the financial projections and forecasts for First Choice reviewed by us and other non-public information
related to projected cost savings referred to above, we have assumed, with your consent, that they have been reasonably prepared
on bases reflecting the best currently available estimates and judgments of the managements of First Choice and Berkshire Hills,
as the case may be, as to the future financial performance of First Choice and such cost savings and that the financial results
reflected in such projections and forecasts as well as such cost savings will be realized in the amounts and at the times projected.
With respect to the publicly available research analyst estimates for Berkshire Hills referred to above, we have assumed, with
your consent, that such estimates represent reasonable estimates and judgments as to the future financial performance of Berkshire
Hills. We assume no responsibility for and express no view as to any of the foregoing financial projections and forecasts, other
non-public information and publicly available research analyst estimates reviewed by us or the assumptions on which they are based.
Ambassador
is not an expert in the evaluation of deposit accounts or loan, mortgage or similar portfolios or allowances for losses with respect
thereto and we were not requested to, and we did not, conduct a review of individual credit files or loan, mortgage or similar
portfolios. We assume no responsibility for and express no view as to the adequacy or sufficiency of allowances for losses or
other matters with respect thereto and we have assumed that each of First Choice and Berkshire Hills has, and the pro forma combined
company will have, appropriate reserves to cover any such losses. We have not conducted any independent valuation or appraisal
of any of the assets or liabilities (contingent or otherwise) of First Choice or Berkshire Hills, and we have not been furnished
with any such valuation or appraisal.
This
opinion is based on conditions as they existed and the information we received, as of the date of this opinion. Ambassador does
not have any obligation to update, revise or reaffirm this opinion. Ambassador expresses no opinion as to the actual value of
Berkshire Hills Common Stock when issued in the Merger or the prices at which Berkshire Hills Common Stock might trade at any
time.
In
rendering our opinion, we have assumed, with your consent, that the Merger and related transactions (including, without limitation,
the payment of a special dividend to holders of First Choice Common Stock equal to 35% of First Choice’s core net income
from July 1, 2016 until the month end immediately preceding the closing of the Merger, subject to certain conditions and limitations)
will be consummated on the terms described in the Merger Agreement, without any waiver or modification of any material terms or
conditions. We also have assumed, with your consent, that, in the course of obtaining the necessary governmental, regulatory and
other third party approvals, consents and releases for the Merger, including with respect to any divestiture or other requirements,
no delay, limitation, restriction or condition will be imposed that would have an adverse effect on
First Choice, Berkshire Hills
or the Merger (including the contemplated benefits thereof). We also have assumed, with your consent, that the final Merger Agreement
will not differ from the draft reviewed by us in any respect material to our analyses or opinion. We further have assumed, with
your consent, that the Merger will qualify for U.S. federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended.
We
express no view or opinion as to any terms or other aspects (other than the Exchange Ratio to the extent expressly specified herein)
of the Merger or any related transaction, including the treatment of First Choice preferred stock or the fairness to, or any other
consideration of, the holders of any class of securities, creditors or other constituencies of First Choice (other than holders
of First Choice Common Stock to the extent expressly specified herein) or any other party to the Merger. Our opinion does not
address the relative merits of the Merger as compared to any other transaction or business strategy in which First Choice might
engage or the merits of the underlying decision by First Choice to engage in the Merger. Ambassador expresses no opinion with
respect to the fairness of the amount or nature of any compensation to any of the officers, directors, or employees of any party
to the Merger, or any class of such persons, relative to the Exchange Ratio or otherwise.
Ambassador’s
fairness committee has approved the issuance of this fairness opinion letter.
First
Choice has engaged the services of Ambassador solely to render a fairness opinion and has agreed to pay Ambassador a fee for such
services, the majority of which is payable upon presentation of our opinion. In addition, a portion of Ambassador’s fee
became payable upon the signing of our engagement agreement, a portion is payable for an updated fairness opinion, if requested
by First Choice and rendered by Ambassador, and a portion is payable upon close of the Merger.
We
are an approved broker-dealer for First Choice and periodically purchase and sell securities to First Choice.
Over
the past two years, we have not provided investment banking or other consulting services to Berkshire Hills for which we have
received compensation from Berkshire Hills. In the future, Ambassador may pursue the opportunities to provide investment banking
and other consulting services to First Choice and Berkshire Hills, but none have been discussed or contemplated.
Our
engagement and the opinion expressed herein are for the benefit of the Board of Directors of First Choice (in its capacity as
such) and our opinion is rendered to the Board of Directors of First Choice in connection with its evaluation of the Merger. Our
opinion is not intended to and does not constitute a recommendation to any stockholder as to how such stockholder should vote
or act with respect to the Merger or any matter relating thereto.
Based
on the foregoing, our experience, and other factors we deemed relevant, it is our opinion that, as of the date hereof, that the
Exchange Ratio provided for in the Merger is fair to the holders of First Choice Common Stock from a financial point of view.
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Respectfully submitted,
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/s/ Ambassador Financial Group, Inc.
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Ambassador Financial Group, Inc.
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ANNEX C
STATUTORY
PROVISIONS RELATING TO DISSENTERS’ RIGHTS
New Jersey Statutes Annotated
(
“
NJSA
”
) 17:9A-140
A.
A shareholder who
(1) is entitled to vote at the meeting of shareholders prescribed
by section 137; and who
(2) serves a written notice of dissent from the Merger Agreement,
in the manner, at the place, and within the time prescribed in subsections B and C of this section; and who
(3) does not vote to approve the Merger
Agreement at the meeting prescribed by section 137, or at any adjournment thereof, may, within thirty days after the filing of
the agreement in the department as provided by section 137, serve a demand upon the receiving bank at its principal office, for
the payment to him of the value of his shares of stock. The receiving bank may, within ten days after the receipt of such demand,
offer to pay the shareholder a sum for his shares, which, in the opinion of the board of directors of the receiving bank, does
not exceed the amount which would be paid upon such shares if the business and assets of the bank whose stock such shareholder
holds were liquidated on the day of the filing of the agreement pursuant to section 137.
B. Service of the notice of dissent
prescribed by paragraph (2) of subsection A of this section shall be made at the principal office of the bank whose stock
is held by the dissenting shareholder, and shall be made not later than the third day prior to the day fixed for the meeting of
the shareholders of such bank pursuant to section 137.
C. Service of the notice of dissent
and of the demand for payment prescribed by this section may be made by registered mail or personally by the dissenting shareholder
or his agent.
NJSA 17:9A-141
If a shareholder fails to accept the
sum offered for his shares pursuant to section one hundred forty, he may, within three weeks after the receipt by him of the bank's
offer of payment, or, if no offer is made by the bank, within three weeks after the date upon which his demand was served upon
the bank as specified in section one hundred forty, institute an action in the Superior Court for the appointment of a board of
three appraisers to determine the value of his shares of stock as of the day of the filing of the Merger Agreement pursuant to
section one hundred thirty-seven. The court may proceed in the action in a summary manner or otherwise. Any other shareholder who
has the right to institute a similar action may intervene. The court shall, in respect to any one bank, appoint a single board
of three appraisers to determine the value of the shares of all shareholders of such bank who are parties to such action.
NJSA 17:9A-142
A. The appraisers shall be sworn to
the faithful discharge of their duties. They shall meet at such place or places, and shall give such notice of their meetings as
the court may prescribe. The bank and each shareholder who is a party to the action instituted pursuant to section one hundred
forty-one, may be represented by attorneys in the proceedings before such appraisers, and may present such evidence to them as
shall be material to the issue. The determination of any two of the appraisers shall control. Upon the conclusion of their deliberations,
the appraisers shall file in the Superior Court a report and appraisal of the value of the shares of stock, and shall mail a copy
thereof to the bank and to each shareholder who is a party to said action.
B. The bank and each shareholder who
is a party to said action shall have ten days after the filing of the report and appraisal within which to object thereto in the
Superior Court. In the absence of any objections, the report and appraisal shall be binding upon the bank and upon such shareholders,
and the bank shall pay each such shareholder the value of his shares, as reported by the appraisers, with interest from the date
of the filing of the Merger Agreement pursuant to section one hundred thirty-seven, at such rate, not in excess of the legal rate,
as shall be fixed by the appraisers. If objections are made, the court shall make such order or judgment thereon as shall be just.
C. The Superior Court shall fix the
compensation of the appraisers, which shall be paid by the bank, and shall be vested with full jurisdiction over all matters arising
out of an action instituted pursuant to section one hundred forty-
one. In the case of a vacancy in the board of appraisers, the
Superior Court shall, on its own motion, or upon motion of a shareholder, or of the receiving bank, fill such vacancy.
NJSA 17:9A-143
Upon payment by the bank of the value
of shares of stock pursuant to this article, the holder thereof shall assign such shares to the bank.
NJSA 17:9A-144
A shareholder who fails to act pursuant
to sections 140 or 141 shall be forever barred from bringing any action to enforce his right to be paid the value of his shares
in lieu of continuing his status as a shareholder in the receiving bank.
NJSA 17:9A-145
An offer by the bank and an acceptance
thereof by the shareholder pursuant to section 140 and the determination of value upon proceedings brought pursuant to sections
141 and 142 shall constitute a debt of the receiving bank for the recovery of which an action will lie.