NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held on June 20, 2016
To the Stockholders of 1st Century Bancshares, Inc.:
Notice is hereby given that a special meeting, which we refer to as the special meeting, of the stockholders of 1st Century Bancshares, Inc., a Delaware corporation, which
we refer to as 1st Century, will be held at 5:00 p.m., local time, on June 20, 2016, at 1875 Century Park East, Suite 100, Los Angeles, California 90067, for the following
purposes:
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1.
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To
consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of March 10, 2016, by and among 1st Century, Midland
Financial Co., an Oklahoma corporation, which we refer to as Midland, and MC 2016 Corp., a Delaware corporation and a wholly-owned subsidiary of Midland, which we refer to as Merger Sub, as
such agreement may be amended from time to time, which we refer to as the merger agreement. The merger agreement provides for the acquisition by Midland of 1st Century through the merger of
Merger Sub with and into 1st Century, which we refer to as the merger, with 1st Century as the surviving corporation. A copy of the merger agreement is attached as
Annex A
to the
accompanying proxy statement and is incorporated therein by reference.
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2.
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To
consider and vote on a proposal to approve, by non-binding, advisory vote, certain compensation arrangements for 1st Century's named executive
officers in connection with the merger.
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3.
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To
consider and vote on a proposal to adjourn the special meeting, if necessary, desirable or appropriate, to solicit additional proxies if, at the time of
the special meeting, there are an insufficient number of votes in favor of adopting the merger agreement.
The
merger agreement, the merger and the other transactions contemplated by the merger agreement are described more fully in the attached proxy statement and the annexes thereto, and we
urge you to read the proxy statement and its annexes carefully and in their entirety.
The
board of directors of 1st Century, upon the favorable recommendation of the special transaction committee of the board of directors, which we refer to as the special
transaction committee, has unanimously (i) determined that the merger agreement and the transactions contemplated by the merger agreement are fair to, and in the best interest of,
1st Century and its stockholders, (ii) approved and declared advisable the merger agreement and the transactions contemplated by the merger agreement, and (iii) resolved that the
merger agreement be submitted for consideration and adoption by the stockholders of 1st Century entitled to vote thereon and recommended that the 1st Century stockholders adopt the
merger agreement. 1st Century's board of directors made its determination upon the recommendation of the special transaction committee and after consultation with its legal and financial
advisors and consideration of a number of factors.
Approval
of the proposal to adopt the merger agreement requires the affirmative vote of holders of a majority of the outstanding shares of our common stock, par value $0.01 per share,
each of which we refer to as a 1st Century share, entitled to vote on the proposal. The approval of the proposal to approve, by non-binding, advisory vote, certain compensation arrangements for
1st Century's named executive officers in connection with the merger requires the affirmative vote of holders of a majority of the outstanding 1st Century shares present in person or
represented by proxy at the special meeting and entitled to vote at the meeting. The approval of the proposal to adjourn the special meeting, if necessary, desirable or appropriate, to solicit
additional proxies if, at the time of the special meeting,
there are an insufficient number of votes in favor of adopting the merger agreement requires the affirmative vote of holders of a majority of the outstanding 1st Century shares present in
person or represented by proxy at the special meeting and entitled to vote at the meeting.
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The board of directors of 1st Century unanimously recommends that you vote "FOR" approval of the proposal to adopt the merger agreement, "FOR" approval of
the proposal to approve, by non-binding, advisory vote, certain compensation arrangements for 1st Century's named executive officers in connection with the merger and "FOR" approval of the
proposal to adjourn the special meeting, if necessary, desirable or appropriate, to solicit additional proxies if, at the time of the special meeting, there are an insufficient number of votes in
favor of adopting the merger agreement.
Your vote is very important, regardless of the number of 1st Century shares you own.
The merger cannot be completed unless the
proposal to adopt the merger agreement is approved by the affirmative vote of holders of a majority of the outstanding 1st Century shares entitled to vote on the proposal. Even if you plan to
attend the special meeting in person, we request that you complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or submit your
proxy by telephone or the Internet prior to the special meeting to ensure that your 1st Century shares will be represented at the special meeting if you are unable to attend. If you fail to
cause your 1st Century shares to be present and voted at the special meeting either by failing to attend the special meeting and voting thereat or failing to return your proxy card or submit
your proxy by phone or the Internet, it will have the same effect as a vote
"AGAINST"
approval of the proposal to adopt the merger agreement.
1st Century shares held in the 1st Century Bank 401(k) Plan, which we refer to as the 1st Century 401(k) plan, are held of record and are voted by the trustee of the
1st Century 401(k) plan at the direction of 1st Century 401(k) plan participants. Participants in the 1st Century 401(k) plan will be provided with a proxy card and voting
instructions with these proxy materials. If you participate in the 1st Century 401(k) plan, you may give voting instructions as to the number of full and fractional 1st Century shares
allocable to your account as of the record date for determining the stockholders entitled to receive notice of, and to vote at, the special meeting and any adjournments or postponements thereof. You
may provide voting instructions to the trustee under the 1st Century 401(k) plan by completing and returning the proxy card accompanying this proxy statement, or submitting your proxy by
telephone or the Internet. The trustee will vote your 1st Century shares in accordance with your completed proxy card if it is received by June 15, 2016. If you do not send instructions
by this deadline or submit a proxy by following the instructions set forth herein, or if you return your proxy card with an unclear voting designation or no voting designation at all, the trustee will
vote the number of full and fractional 1st Century shares allocable to your account in the same proportion that it votes 1st Century shares for which it did receive timely instructions,
unless contrary to the Employee Retirement Income Security Act of 1974, as amended.
1st Century shares held in the 1st Century 401(k) plan may NOT be voted in person at the special meeting as the trustee of the 1st Century
401(k) plan votes the applicable 1st Century shares two business days prior to the special meeting, after receiving voting instructions from the plan participants.
The board of directors of 1st Century has fixed the close of business on May 17, 2016 as the record date for determining the stockholders entitled to receive notice of, and
to vote at, the special meeting and any adjournments or postponements thereof. Only stockholders of record at the close of business on the record date are entitled to receive notice of, and to vote at
(in person or by proxy), the special meeting and at any adjournment or postponement thereof. You will be entitled to one vote for each 1st Century share that you owned on the record date. A
complete list of our stockholders of record entitled to vote at the special meeting will be available for inspection at our principal place of business for a period of at least ten days prior to the
date of the special meeting during ordinary business hours of 1st Century for any purpose germane to the special meeting. The list of our stockholders of record will also be available during
the special meeting at the place of the special meeting for inspection by any stockholder present at the special meeting for any purpose germane to the special meeting.
Only
stockholders of record, their duly authorized proxy holders, beneficial stockholders with proof of ownership and our guests may attend the special meeting. To gain admittance,
please bring the
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admission ticket with you to the special meeting. If your 1st Century shares are held through a bank, brokerage firm or other nominee, please send proof of your ownership to the Corporate
Secretary at 1875 Century Park East, Suite 1400, Los Angeles, California 90067, and 1st Century will send you an admission ticket. Alternatively, please bring to the special meeting
proof of your beneficial ownership of 1st Century shares. Acceptable proof could include an account statement showing that you owned 1st Century shares on the record date, May 17,
2016. If you are the representative of a corporate or institutional stockholder, you must present valid photo identification along with proof that you are the representative of such stockholder.
Please note that cameras, recording devices and other electronic devices will not be permitted at the special meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE
ACCOMPANYING PREPAID REPLY ENVELOPE, OR SUBMIT YOUR PROXY BY TELEPHONE OR THE INTERNET. IF YOU ATTEND THE SPECIAL MEETING AND VOTE IN PERSON, YOUR VOTE BY BALLOT WILL REVOKE ANY PROXY PREVIOUSLY
SUBMITTED.
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By Order of the Board of Directors,
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Jessica R. Graham
Corporate Secretary
EVP, General Counsel
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Los Angeles, California
Dated: May 18, 2016
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TABLE OF CONTENTS
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Table of Contents
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Annex A
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Agreement and Plan of Merger, dated as of March 10, 2016, among 1st Century Bancshares, Inc., Midland Financial Co. and MC 2016 Corp.
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Annex B
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Voting Agreement, dated as of March 10, 2016, between Midland Financial Co. and certain stockholders of 1st Century Bancshares, Inc.
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Annex C
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Section 262 of the General Corporation Law of the State of Delaware
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Annex D
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Opinion of Sandler O'Neill & Partners, L.P., dated as of March 10, 2016
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Table of Contents
This proxy statement and a proxy card are first being mailed on or about May 20, 2016, to stockholders who owned outstanding shares of common stock, par
value $0.01 per share, of 1st Century Bancshares, Inc., which we refer to as 1st Century shares, as of the close of business on May 17, 2016, the record date for
determining stockholders entitled to notice of and to vote at the special meeting.
SUMMARY
The following summary highlights selected information in this proxy statement and may not contain all the
information that may be important to you. Accordingly, we encourage you to read carefully this entire proxy statement, its annexes and the documents incorporated by reference or otherwise referred to
in this proxy statement. Each item in this summary includes a page reference directing you to a more complete description of that topic. You may obtain the information incorporated by reference in
this proxy statement without charge by following the instructions in "Where You Can Find More Information".
Parties to the Merger (Page 25)
1st Century Bancshares, Inc.
, a Delaware corporation, which we refer to
as 1st Century, is a bank holding company with one subsidiary, 1st Century Bank, National Association, which we refer to as 1st Century Bank. 1st Century Bank commenced
operations on March 1, 2004 in the State of California operating under the laws of a national association regulated by the Office of the Comptroller of the Currency, which we refer to as the
OCC. 1st Century Bank is a commercial bank that focuses on family and closely held middle market businesses, professional service firms, real estate professionals and investors, the legal,
accounting and medical professions, and small and medium-sized businesses and individuals principally in Los Angeles County. 1st Century Bank provides a wide range of banking services to meet
the financial needs of the local residential community, with an orientation primarily directed toward owners and employees of 1st Century Bank's business client base. Upon completion of the
subsequent merger (as defined below), 1st Century, as the surviving corporation of the merger (as defined below), will cease to exist as a separate entity.
Midland Financial Co.
, an Oklahoma corporation, which we refer to as Midland, is a savings and loan holding company and the holding
company for MidFirst Bank, a privately held federal savings association, which we refer to as MidFirst. Headquartered in Oklahoma City, MidFirst serves more than 600,000 customers as of
December 31, 2015.
MidFirst
has more than 50 banking centers in Oklahoma, 24 banking centers in Arizona and three banking centers in Denver. Additionally, it has commercial lending offices in Atlanta,
Dallas, Houston, New York and Southern California.
MC 2016 Corp.
, a Delaware corporation and wholly-owned subsidiary of Midland, which we refer to as Merger Sub, was formed by Midland for
the purpose of entering into the Agreement and Plan of Merger among 1st Century, Midland and Merger Sub, as such agreement may be amended from time to time, which we refer to as the merger
agreement, and completing the transactions contemplated by the merger agreement. Upon completion of the merger of Merger Sub with and into 1st Century, which we refer to as the merger, with
1st Century being the surviving corporation, which we refer to as the surviving corporation, Merger Sub will cease to exist as a separate entity.
The Special Meeting (Page 27)
Date, Time and Place of the Special Meeting (Page 27)
The special meeting of the holders of 1st Century shares to vote upon, in addition to the other matters described in this proxy
statement, the proposal to adopt the merger agreement, which we refer to as the special meeting, will be held on June 20, 2016, at 5:00 p.m., local time, at 1875 Century Park East,
Suite 100, Los Angeles, California 90067.
At
the special meeting, holders of 1st Century shares will be asked to approve the proposal to adopt the merger agreement, to approve the proposal to approve, by non-binding,
advisory vote, certain compensation arrangements for 1st Century's named executive officers in connection with the merger
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and
to approve the proposal to adjourn the special meeting, if necessary, desirable or appropriate, to solicit additional proxies if, at the time of the special meeting, there are an insufficient
number of votes in favor of adopting the merger agreement.
You are entitled to receive notice of, and to vote at, the special meeting if you owned 1st Century shares at the close of
business on May 17, 2016, which 1st Century has set as the record date for the determination of stockholders entitled to notice of, and to vote at, the special meeting and which we refer
to as the record date. You will be entitled to one vote for each 1st Century share that you owned on the record date. As of the record date, there were 10,336,884 1st Century shares
outstanding and entitled to vote at the special meeting, held by 273 holders of record. Holders of a majority of all 1st Century shares issued and outstanding and entitled to vote upon a
question to be considered at the special meeting, present in person or represented by proxy, constitute a quorum for the purposes of the special meeting. Abstentions (as described in "Questions and
Answers about the Special Meeting and the Merger") are counted as present for the purpose of determining whether a
quorum is present. Because, under applicable rules, brokers, banks and other nominees holding shares in "street name" do not have discretionary voting authority with respect to any of the three
proposals described in this proxy statement, if a beneficial owner of 1st Century shares held in "street name" does not give voting instructions to the broker, bank or other nominee, then those
shares will not be counted as present in person or by proxy at the special meeting if no other proposals are brought before the special meeting.
Approval of the proposal to adopt the merger agreement requires the affirmative vote of holders of a majority of the outstanding
1st Century shares entitled to vote on the proposal.
The
proposal to approve, by non-binding, advisory vote, certain compensation arrangements for 1st Century's named executive officers in connection with the merger, as described in
"Advisory Vote on Merger-Related Compensation for 1st Century's Named Executive Officers", requires the affirmative vote of holders of a majority of the outstanding 1st Century shares
present in person or represented by proxy at the special meeting and entitled to vote at the meeting. 1st Century is providing stockholders with the opportunity to approve, on a non-binding,
advisory basis, such merger-related executive compensation in accordance with Section 14A of the Securities Exchange Act of 1934 (as amended), which we refer to as the Exchange Act.
The
proposal to adjourn the special meeting, if necessary, desirable or appropriate, to solicit additional proxies if, at the time of the special meeting, there are an insufficient
number of votes in favor of adopting the merger agreement requires the affirmative vote of holders of a majority of the outstanding 1st Century shares present in person or represented by proxy
at the special meeting and entitled to vote at the meeting.
As of May 17, 2016, the record date, the directors and executive officers of 1st Century beneficially owned and were entitled to vote, in the aggregate, 2,342,004
1st Century shares, representing approximately 22.66% of the outstanding 1st Century shares. As a condition and inducement to the willingness of Midland to enter into the merger
agreement, concurrently with the execution and delivery of the merger agreement, Midland entered into a voting agreement, which we refer to as the voting agreement, with certain directors and
executive officers of 1st Century, who collectively own approximately 21.42% of the outstanding 1st Century shares as of the record date, in their capacity as stockholders of
1st Century. We currently expect that each of our directors and executive officers will vote their 1st Century shares in favor of each of the proposals to be presented at the special
meeting.
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At the special meeting, abstentions will be counted as present for purposes of determining whether a quorum exists. Abstaining from
voting will have the same effect as a vote
"AGAINST"
the proposal to adopt the merger agreement, the proposal to approve, by non-binding, advisory vote,
certain compensation arrangements for 1st Century's named executive officers in connection with the merger and the proposal to adjourn the special meeting, if necessary, desirable or
appropriate, to solicit additional proxies.
If
no instruction as to how to vote is given (including no instruction to abstain from voting) in an executed, duly returned and not revoked proxy, the proxy will be voted
"FOR"
the proposal to adopt the
merger agreement, the proposal to approve, by non-binding, advisory vote, certain compensation arrangements for
1st Century's named executive officers in connection with the merger and the proposal to adjourn the special meeting, if necessary, desirable or appropriate, to solicit additional proxies.
"Broker
non-votes" are shares held in "street name" by brokers, banks and other nominees that are present or represented by proxy at the special meeting, but with respect to which the
broker, bank or other nominee is not instructed by the beneficial owner of such shares how to vote on a particular proposal and such broker, bank or other nominee does not have discretionary voting
power on such proposal. Because, under applicable rules, brokers, banks and other nominees holding shares in "street name" do not have discretionary voting authority with respect to any of the three
proposals described in this proxy statement, if a beneficial owner of 1st Century shares held in "street name" does not give voting instructions to the broker, bank or other nominee, then those
shares will not be counted as present in person or by proxy at the special meeting. As the vote to approve the proposal to adopt the merger agreement is based on the total number of 1st Century
shares outstanding at the close of business on the record date, not just the shares that are counted as present in person or by proxy at the special meeting, if you fail to issue voting instructions
to your broker, bank or other nominee, it will have the same effect as a vote
"AGAINST"
the proposal to adopt the merger agreement. Although we do not
expect to bring any matters before the meeting other than the three proposals described in this proxy statement, if an additional matter is brought before the meeting and is one on which brokers have
discretionary voting authority, then broker non-votes will be counted for purposes of determining a quorum and any broker non-votes will have the same effect as a vote
"AGAINST"
the proposal to approve,
by non-binding, advisory vote, certain compensation arrangements for 1st Century's named executive officers in
connection with the merger and the proposal to adjourn the special meeting, if necessary, desirable or appropriate, to solicit additional proxies.
Any stockholder of record entitled to vote at the special meeting may submit a proxy by telephone, over the Internet or by returning
the enclosed proxy card in the accompanying prepaid reply envelope, or may vote in person by appearing at the special meeting. If your 1st Century shares are held in "street name" through a
bank, brokerage firm or other nominee, you should instruct your bank, brokerage firm or other nominee on how to vote your 1st Century shares using the instructions provided by your bank,
brokerage firm or other nominee. If you fail to submit a proxy or to vote in person at the special meeting, or do not provide your bank, brokerage firm or other nominee with instructions, as
applicable, your 1st Century shares will not be voted on the proposal to adopt the merger agreement, which will have the same effect as a vote
"AGAINST"
approval of the proposal to adopt the merger
agreement. If you fail to submit a proxy or attend the special meeting in person, or if you fail
to provide instructions to your broker in respect of the proposal to approve the merger-related executive compensation or the proposal to adjourn the special meeting, if necessary, desirable or
appropriate, to solicit additional proxies if, at the time of the special meeting, there are an insufficient number of votes in favor of adopting the merger agreement and no additional matter is
brought before
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the
special meeting on which brokers have discretionary voting authority, the 1st Century shares held by you or your broker will not be counted in respect of, and will not have an effect on,
the proposal to approve the merger-related executive compensation or the proposal to adjourn the special meeting, if necessary, desirable or appropriate, to solicit additional proxies if, at the time
of the special meeting, there are an insufficient number of votes in favor of adopting the merger agreement, as applicable. Although we do not expect to bring any matters before the meeting other than
the three proposals described in this proxy statement, if an additional matter is brought before the meeting and is one on which brokers have discretionary voting authority and you fail to provide
instructions to your broker in respect of the proposal to approve the merger-related executive compensation or the proposal to adjourn the special meeting, such broker non-votes will have the same
effect as a vote
"AGAINST"
such proposals.
You
have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is exercised, by submitting a later dated proxy through any of
the methods available to you, by giving written notice of revocation to 1st Century's Corporate Secretary, which must be filed with the Corporate Secretary by 5:00 p.m. on the business
day immediately prior to the date of the special meeting, or by attending the special meeting and voting in person. Attending the special meeting alone, without voting at the special meeting, will not
be sufficient to revoke your proxy. Written notice of revocation should be mailed to: 1st Century Bancshares, Inc., Attention: Corporate Secretary, 1875 Century Park East,
Suite 1400, Los Angeles, California 90067.
1st Century shares held in the 1st Century Bank 401(k) Plan, which we refer to as the 1st Century 401(k) plan, are
held of record and are voted by the trustee of the 1st Century 401(k) plan at the direction of 1st Century 401(k) plan participants. Participants in the 1st Century 401(k) plan
will be provided with a proxy card and voting instructions with these proxy materials. If you participate in the 1st Century 401(k) plan, you may give voting instructions as to the number of
full and fractional 1st Century shares allocable to your account as of the record date for determining the stockholders entitled to receive notice of, and to vote at, the special meeting and
any adjournments or postponements thereof. You may provide voting instructions to the trustee under the 1st Century 401(k) plan by completing and returning the proxy card accompanying this
proxy statement, or submitting your proxy by telephone or the Internet. The trustee will vote your 1st Century shares in accordance with your completed proxy card if it is received by
June 15, 2016. If you do not send instructions by this deadline or submit a proxy by following the instructions set forth herein, or if you return your proxy card with an unclear voting
designation or no voting designation at all, the trustee will vote the number of full and fractional 1st Century shares allocable to your account in the same proportion that it votes
1st Century shares for which it did receive timely instructions, unless contrary to the Employee Retirement Income Security Act of 1974, as amended.
1st Century shares held in the 1st Century 401(k) plan may NOT be voted in person at the special meeting as the trustee of the 1st Century
401(k) plan votes the applicable 1st Century shares two business days prior to the special meeting, after receiving voting instructions from the plan participants.
The Merger (Page 34)
The merger agreement provides that, on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into
1st Century, with 1st Century surviving the merger as a wholly-owned subsidiary of Midland. Simultaneously with the merger, 1st Century Bank will merge with and into MidFirst,
which we refer to as the bank merger, with MidFirst surviving. Immediately after the merger and bank merger described above, 1st Century (as the surviving corporation in the merger) will merge
with and into Midland, which we refer to as the subsequent merger, with Midland surviving.
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Each 1st Century share that is issued and outstanding immediately prior to the effective time of the merger, which we refer to
as the effective time, other than excluded shares and dissenting shares (as defined below) will be converted into the right to receive an amount in cash equal to $11.22, without interest, less any
applicable withholding or transfer taxes, which we refer to as the per share merger consideration.
1st Century
shares owned by Midland, 1st Century (other than any shares held in connection with the 1st Century 401(k) plan) or any direct or indirect wholly-owned
subsidiary of Midland or 1st Century, in each case not held in respect of a debt previously contracted, are referred to as excluded shares, and 1st Century shares that are owned by
stockholders who have validly made and not effectively withdrawn a demand for appraisal rights pursuant to Section 262 of the General Corporation Law of the State of Delaware, which we refer to
as the DGCL, are referred to as dissenting shares.
After careful consideration of various factors described in "The MergerReasons for the Merger; Recommendation of the Board
of Directors", the board of directors of 1st Century, which we refer to as the 1st Century board, upon the favorable recommendation of the special transaction committee of the board of
directors, which we refer to as the special transaction committee, has unanimously (i) determined that the merger agreement and the transactions contemplated by the merger agreement are fair
to, and in the best interest of, 1st Century and its stockholders, (ii) approved and declared advisable the merger agreement and the transactions contemplated by the merger agreement,
and (iii) resolved that the merger agreement be submitted for consideration and adoption by the stockholders of 1st Century entitled to vote thereon and recommended that the
1st Century stockholders adopt the merger agreement. 1st Century's board of directors made its determination upon the recommendation of the special transaction committee and after
consultation with its legal and financial advisors and consideration of a number of factors.
In
considering the recommendation of the 1st Century board with respect to the proposal to adopt the merger agreement, you should be aware that our directors and executive
officers have interests in the merger that are different from, or in addition to, yours. The 1st Century board was aware of and considered these interests, among other matters, in evaluating
and negotiating the merger agreement and the merger, and in recommending that the merger agreement be adopted by 1st Century's stockholders. See "The MergerInterests of Certain
Persons in the Merger".
The
1st Century board unanimously recommends that you vote
"FOR"
approval of the proposal to adopt the merger agreement,
"FOR"
approval of the proposal to
approve, by non-binding, advisory vote, certain compensation arrangements for 1st Century's named executive
officers in connection with the merger, and
"FOR"
approval of the proposal to adjourn the special meeting, if necessary, desirable or appropriate, to
solicit additional proxies if, at the time of the special meeting, there are an insufficient number of votes in favor of adopting the merger agreement.
Opinion of Sandler O'Neill & Partners, L.P. (Page 49)
By letter dated January 26, 2016, 1st Century retained Sandler O'Neill & Partners, L.P., which we refer to
as Sandler, to act as financial advisor to the 1st Century board in connection with 1st Century's consideration of a possible business combination. Sandler is a nationally recognized
investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Sandler is regularly engaged in the valuation of
financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions. The 1st Century board selected Sandler on the basis of the firm's
reputation and its experience and expertise in the industry.
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Sandler
acted as financial advisor in connection with the merger and participated in certain of the negotiations leading to the execution of the merger agreement. At the March 10,
2016 meeting of the 1st Century board at which the 1st Century board considered and discussed the terms of the merger agreement and the merger, Sandler delivered to the
1st Century board its oral opinion, which was subsequently confirmed in writing, to the effect that, as of such date, the per share merger consideration was fair to the holders of
1st Century shares from a financial point of view.
The full text of Sandler's opinion is attached as Annex D to this proxy statement. The opinion outlines the
procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler in rendering its opinion. The description of the opinion set forth in
"Opinion of Sandler O'Neill & Partners, L.P." is qualified in its entirety by reference to the full text of
the opinion. Holders of 1st Century shares are urged to read the entire opinion carefully in connection with their consideration of the merger.
Financing of the Merger (Page 58)
The obligations of Midland and Merger Sub to complete the merger are not contingent upon the receipt of any financing. Midland has
informed 1st Century that it expects that funds needed by Midland in connection with the merger will be derived from Midland or MidFirst's (i) cash on hand, (ii) borrowings from
existing credit facilities, or (iii) any combination of the foregoing.
Interests of Certain Persons in the Merger (Page 59)
The interests of 1st Century's directors and executive officers in the merger that are different from, or in addition to, those
of the 1st Century stockholders generally are described below. The special transaction committee was aware of and considered these interests, among other matters, in making its recommendation
to the 1st Century board. In addition, the 1st Century board was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the
merger, and in recommending that the merger agreement be adopted by its stockholders. These interests include (i) the accelerated vesting and payment of 1st Century restricted shares (as
defined in "The Merger Agreement"); (ii) certain severance and other separation benefits that may be payable upon termination of employment following the consummation of the
merger, pursuant to new employment arrangements which certain executive officers have entered into with Midland in connection with the merger; and (iii) entitlement to continued
indemnification, expense advancement and insurance coverage under the merger agreement.
Material U.S. Federal Income Tax Consequences of the Merger (Page 64)
The exchange of 1st Century shares for cash pursuant to the merger generally will be a taxable transaction to U.S. holders (as
defined in "The MergerMaterial U.S. Federal Income Tax Consequences of the Merger") for U.S. federal income tax purposes. Stockholders who are U.S. holders and who exchange their
1st Century shares in the merger will generally recognize gain or loss in an amount equal to the difference, if any, between the cash payments made pursuant to the merger and their adjusted tax
basis in their
1st Century shares. Backup withholding may also apply to the cash payments made pursuant to the merger unless the holder or other payee provides a taxpayer identification number, certifies that
such number is correct and otherwise complies with the backup withholding rules. You should read "The MergerMaterial U.S. Federal Income Tax Consequences of the Merger" for a definition
of "U.S. holder" and a more detailed discussion of the U.S. federal income tax consequences of the merger. You should also consult your tax advisor for a complete analysis of the effect of the merger
on your federal, state and local and/or foreign taxes.
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Regulatory Approvals (Page 66)
To complete the merger, the parties must make filings with and obtain authorizations, approvals or consents from certain regulatory
authorities. Under the terms of the merger agreement, the merger cannot be completed until approvals from the Board of Governors of the Federal Reserve System, which we refer to as the Federal
Reserve, and the OCC are received and any statutory waiting periods in respect thereof have expired, without the imposition of a burdensome condition (as defined in "The Merger
AgreementEfforts; Consents of Governmental Entities; Third Party Consents") on Midland or any of its affiliates or shareholders. The parties have agreed to cooperate and use their
respective reasonable best efforts to prepare or cause to be prepared all documentation, to make or cause to be made all filings and to obtain or cause to be obtained all permits, consents, approvals
and authorizations of all third parties and governmental entities necessary to consummate the transactions contemplated by the merger agreement, including the regulatory consents required from the
Federal Reserve and the OCC, referred to as the requisite regulatory consents. Midland must use its reasonable best efforts to resolve objections, if any, which may be asserted with respect to the
merger, the subsequent merger or the bank merger under any applicable
law or order, and avoid the entry of, or to have vacated, lifted, reversed or overturned any order, whether temporary, preliminary or permanent, that would restrain, prevent or delay the closing of
the merger, which we refer to as the closing; provided that in no event will Midland or any of its affiliates or shareholders be required to accept a burdensome condition.
The
regulatory approvals to which completion of the merger and bank merger are subject are described in more detail in "The MergerRegulatory Approvals".
Litigation Related to the Merger (Page 68)
On May 3, 2016, a putative stockholder class action lawsuit, captioned Dean Drulias v. 1st Century
Bancshares, Inc. et. al, Case No. 16CV294673, was filed in the Superior Court of the State of California in and for the County of Santa Clara in connection with the merger, which we
refer to as the "Drulias Action". The Drulias Action alleges, among other things, that the members of the 1st Century board breached their fiduciary duties by causing 1st Century to
agree to the merger based on the individual interests of such directors as opposed to the best interests of 1st Century's stockholders. The Drulias Action also alleges that 1st Century
and the 1st Century board failed to disclose material information in the preliminary proxy statement filed with the Securities and Exchange Commission in connection with the merger. The
plaintiff in this action seeks, among other things, declaratory and injunctive relief, compensatory and/or rescissory damages, interest, attorney's fees, expert fees and other costs, and other relief.
At this stage, it is not possible to predict the outcome of the proceedings or their impact on 1st Century or the merger.
The Merger Agreement (Page 69)
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and,
at the effective time, each such 1st Century restricted share will be converted into the right to receive the same merger consideration with respect to each such 1st Century
restricted share as is payable in respect of other 1st Century shares generally.
No Solicitation or Negotiation of Takeover Proposals (Page 82)
The merger agreement provides that 1st Century may not, and will cause 1st Century Bank and their respective
representatives not to, directly or indirectly:
-
-
solicit, initiate, propose or knowingly encourage (including by way of furnishing non-public information) any inquiries or the
submission of any proposal that constitutes, or could reasonably be expected to lead to, an acquisition proposal (as defined in "The Merger AgreementNo Solicitation or Negotiation of
Takeover Proposals") or otherwise knowingly facilitate any effort or attempt to make an acquisition proposal; or
-
-
enter into, continue or otherwise participate in any discussions (other than as necessary to ascertain facts or clarify terms with
respect to an acquisition proposal that did not result from a breach of the non-solicitation provisions in the merger agreement) or negotiations regarding, furnish to any person any non-public
information relating to, afford access to the business, books and records and assets of 1st Century or 1st Century Bank in connection with, or otherwise cooperate with any person with
respect to, any acquisition proposal or any inquiry, proposal or offer that could reasonably be expected to lead to an acquisition proposal.
Notwithstanding
these restrictions, under certain circumstances, 1st Century may, prior to the time the merger agreement is adopted by 1st Century's stockholders, make
available information regarding 1st Century and 1st Century Bank with respect to certain unsolicited written
bona fide
acquisition
proposals or engage in discussions with a person with respect to certain unsolicited written
bona fide
acquisition proposals.
At
any time before the time the merger agreement is adopted by the holders of a majority of the outstanding 1st Century shares as of the applicable record date, which we refer to
as the requisite stockholder approval, to the extent that the 1st Century board determines in good faith, after consultation with outside legal counsel, that failure to take such action would
reasonably be expected to constitute a breach of the 1st Century board's fiduciary duties under applicable law, 1st Century may terminate the merger agreement to enter into a specified
agreement (as defined in "The Merger AgreementNo Change in Recommendation or Alternative Acquisition Agreement") with respect to an acquisition proposal that the 1st Century board
has determined in good faith, after consultation with its outside legal counsel and its financial advisor, is a superior proposal (as defined in "The Merger AgreementNo Solicitation or
Negotiation of Takeover Proposals"), or make a 1st Century adverse recommendation change (as defined in "The Merger AgreementNo Change in Recommendation or Alternative Acquisition
Agreement") in respect of a superior proposal, so long as 1st Century has first complied with certain terms of the merger agreement, including (i) negotiating with Midland in good faith
regarding revisions proposed by Midland to the terms of the merger agreement for a period of five business days, subject to unlimited additional three-business day negotiation periods if the terms of
the superior proposal materially change during such negotiation period and (ii) paying to Midland a termination fee of $4,500,000, which we refer to as the termination fee, in the event the
merger agreement is terminated. In addition, at any time prior to the time at which the requisite stockholder approval is obtained, under certain circumstances, the 1st Century board may make a
1st Century adverse recommendation change based on an intervening event (as defined in "The Merger AgreementNo Change in Recommendation or Alternative Acquisition Agreement").
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The respective obligations of 1st Century, Midland and Merger Sub to consummate the merger are subject to the satisfaction or
waiver of certain customary conditions, including the absence of any legal prohibitions, the adoption of the merger agreement by 1st Century stockholders, receipt of certain regulatory consents
without the imposition of a burdensome condition, the accuracy of the representations and warranties of the parties (subject to customary materiality qualifiers) and compliance by the parties with
their respective obligations under the merger agreement (subject to customary materiality qualifiers). In addition, the obligation of Midland to consummate the Merger is further subject to certain
conditions regarding (i) the continued employment of Alan Rothenberg, 1st Century's Chief Executive Officer, and Jason DiNapoli, 1st Century's Chief Operating Officer, and
(ii) such officers' compliance with obligations under the employment agreements entered into with MidFirst concurrently with the execution and delivery of the merger agreement. See "The Merger
AgreementConditions to Completion of the Merger".
The merger agreement may be terminated and the merger may be abandoned, at any time prior to the effective time (whether before or
after the adoption of the merger agreement by the 1st Century stockholders (unless otherwise specified below)) under the following
circumstances:
-
-
by mutual written consent of 1st Century and Midland;
-
-
by either Midland or 1st Century if any governmental entity that must grant a requisite regulatory consent has denied approval
of the merger and such denial has become final and nonappealable or any governmental entity of competent jurisdiction has issued a final and nonappealable order permanently enjoining or otherwise
prohibiting or making illegal the consummation of the transactions contemplated by the merger agreement;
-
-
if 1st Century or Midland effects an outside date termination, a breach termination or a stockholder no-vote termination (each,
as defined in "The Merger AgreementTermination of the Merger Agreement");
-
-
if 1st Century effects a superior proposal termination (as defined in "The Merger AgreementTermination of the
Merger Agreement"); or
-
-
by Midland if:
-
-
a 1st Century adverse recommendation change has occurred;
-
-
at any time after public announcement of an acquisition proposal or an acquisition proposal otherwise becoming public,
the 1st Century board, prior to the time that the requisite stockholder approval is obtained (and not thereafter), has failed to reaffirm the 1st Century board recommendation (as defined
in "The Merger AgreementNo Change in Recommendation or Alternative Acquisition Proposals") prior to the earlier of (i) ten business days following receipt of any written request to
do so from Midland and (ii) the close of business on the business day immediately preceding the special meeting;
-
-
1st Century has materially breached its obligations described in "The Merger AgreementNo Solicitation
or Negotiation of Takeover Proposals", "The Merger AgreementNo Change in Recommendation or Alternative Acquisition Proposals" or "The Merger Agreement1st Century
Stockholder Meeting"; or
-
-
1st Century or the 1st Century board (or any committee thereof) has publicly announced its intention to do
any of the foregoing.
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1st Century must pay a termination fee of $4,500,000 to Midland if:
-
-
Midland effects a termination for a 1st Century adverse recommendation change (as defined in "The Merger
AgreementTermination of the Merger Agreement");
-
-
1st Century effects a superior proposal termination;
-
-
Midland or 1st Century effects an outside date termination or a stockholder no-vote termination, in either case at any time at
which Midland was entitled to effect a termination for a 1st Century adverse recommendation change;
-
-
each of the following occurs (referred to collectively as a tail fee termination):
-
-
Midland or 1st Century effects an outside date termination or stockholder no-vote termination or Midland effects a
breach termination;
-
-
after the date of the merger agreement and prior to a termination described in the bullet above, an acquisition proposal
has been publicly announced, otherwise becomes public or is otherwise communicated to the 1st Century board or any person has publicly announced an intention to make an acquisition proposal;
and
-
-
within 12 months of the date of a termination described in the first bullet above, 1st Century enters into
a definitive agreement with respect to or recommended to the 1st Century stockholders an acquisition proposal or an acquisition proposal has been consummated (provided that for the purposes of
the foregoing bullets, each reference to "15%" in the definition of acquisition proposal will be deemed to be a reference to "50%").
If
the termination fee is payable under circumstances involving a termination for a 1st Century adverse recommendation change or either an outside date termination or a
stockholder no-vote termination at any time at which Midland was entitled to effect a termination for a 1st Century adverse recommendation change, the termination fee must be paid within two
business days after such termination. If the termination fee is payable under circumstances involving a superior proposal termination, the termination fee must be paid immediately before and as a
condition to such termination. If the termination fee is payable under circumstances involving a tail fee termination, the termination fee (less the amount of any expense reimbursement already paid)
must be paid concurrently with the occurrence of the applicable event triggering such obligation.
In
the event that the termination fee becomes payable and is paid by 1st Century pursuant to the merger agreement, the termination fee will be Midland's and Merger Sub's sole and
exclusive remedy for monetary damages under the merger agreement.
All costs and expenses incurred in connection with the merger agreement shall be paid by the party incurring such cost or expense;
provided, however, that except if the termination fee is paid as provided above, 1st Century must promptly, and in no event later than two days after being notified of such amounts by Midland,
pay to Midland an amount equal to all of the documented out-of-pocket expenses incurred by Midland or any of its affiliates in connection with the merger agreement and the transactions contemplated by
the merger agreement, up to a maximum amount of $1,000,000 if:
-
-
Midland effects a breach termination;
-
-
Midland or 1st Century effects a stockholder no-vote termination; or
-
-
Midland or 1st Century effects an outside date termination at any time at which Midland was entitled to effect a breach
termination or a stockholder no-vote termination;
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Each of the parties is entitled to specific performance of the terms of the merger agreement, including an injunction or injunctions to
prevent breaches of the merger agreement and to enforce specifically the terms and provisions of the merger agreement (including the obligation to consummate the merger) in addition to any other
remedy such party is entitled at law or in equity.
Voting Agreement (Page 93)
As a condition and inducement to the willingness of Midland to enter into the merger agreement, concurrently with the execution and
delivery of the merger agreement, Midland entered into the voting agreement, with certain directors and executive officers of 1st Century, who collectively own approximately 21.42% of the
outstanding 1st Century shares as of the record date, in their capacity as stockholders of 1st Century. The voting agreement, which is attached as
Annex B
to this proxy statement,
requires such stockholders to vote all of their 1st Century shares in favor of adoption of the merger
agreement and certain related matters as applicable and against alternative transactions and generally prohibits them from entering into agreements regarding or transferring their shares, subject to
certain exceptions. The voting agreement also prohibits the stockholders party thereto from soliciting or negotiating any alternative business combination transactions. The voting agreement will
terminate upon the earlier to occur of (i) the consummation of the merger or (ii) the termination of the merger agreement in accordance with its terms. The voting agreement is described
in more detail in "Voting Agreement".
Shareholder Non-Compete and Restrictive Covenant Agreements (Page 95)
As a condition and inducement to the willingness of Midland to enter into the merger agreement, concurrently with the execution and
delivery of the merger agreement, Midland entered into shareholder non-compete and restrictive covenant agreements, which we refer to as the non-competition agreements, with each of Alan Rothenberg,
Jason DiNapoli, Lewis Wolff, Barry Pressman and Dave Brooks as stockholders of 1st Century (the effectiveness of which is conditioned upon the closing) pursuant to which such persons are
prohibited, for three years (or four years in the case of Mr. DiNapoli and five years in the case of Mr. Rothenberg) after the closing date of the merger, which we refer to as the
closing date, from, among other things: (i) holding certain investments in or performing services that are generally performed by an executive officer for any business which is competitive with
1st Century; (ii) soliciting for employment anyone who was an employee of 1st Century
before the closing; and (iii) soliciting any individual or entity that was a customer of 1st Century on or in the six-month period preceding the closing to reduce the extent of such
customer's relationship with 1st Century. The non-competition agreements are described in more detail under the section entitled "Shareholder Non-Compete and Restrictive Covenant Agreement".
Market Price of 1st Century Shares (Page 98)
The closing price of 1st Century shares on the NASDAQ Stock Market LLC Capital Market, which we refer to as NASDAQ, on
March 10, 2016, the last trading day prior to the public announcement of the execution of the merger agreement, was $8.23 per 1st Century share. If the merger is completed, for each
1st Century share you own you will be entitled to receive $11.22 in cash, without interest, less any applicable withholding or transfer taxes (unless you have validly made and not effectively
withdrawn a demand for appraisal rights). The per share merger consideration of $11.22 per 1st Century share represents an approximately 36.3% premium over 1st Century's closing share
price on March 10, 2016, the last trading day before the transaction was announced, and an approximately 37.4% premium over 1st Century's volume-weighted average trading price for the
30-day trading period ending March 10, 2016.
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On May 17, 2016, the most recent practicable date before this proxy statement was mailed to our stockholders, the closing price for 1st Century shares on NASDAQ was $11.09
per share of common stock. You are encouraged to obtain current market quotations for 1st Century common stock in connection with voting your 1st Century shares.
Appraisal Rights (Page 100)
Stockholders are entitled to appraisal rights under the DGCL in connection with the merger. This means that you are entitled to have
the fair value of your 1st Century shares determined by the Delaware Court of Chancery and to receive payment based on that valuation in lieu of the per share merger consideration if you follow
exactly the procedures specified under Section 262 of the DGCL, the Delaware appraisal rights statute. The ultimate amount you receive in an
appraisal proceeding may be less than, equal to or more than the amount you would have received under the merger agreement.
To
exercise your appraisal rights, you must submit a written demand for appraisal to 1st Century before the vote is taken on the proposal to adopt the merger agreement and you
must
NOT
vote (either in person or by proxy) in favor of the proposal to adopt the merger agreement, as provided under Section 262 of the DGCL.
Your failure to follow exactly the procedures specified under Section 262 of the DGCL may result in the loss of your appraisal rights. See "Appraisal Rights" and the text of Section 262
of the DGCL reproduced in its entirety as
Annex C
to this proxy statement. If you hold your 1st Century shares through a bank, brokerage
firm or other nominee and you wish to exercise appraisal rights, you should consult with your bank, brokerage firm or other nominee to determine the appropriate procedures for the making of a demand
for appraisal by your bank, brokerage firm or other nominee. In view of the complexity of Section 262 of the DGCL, stockholders who may wish to pursue appraisal rights should consult their
legal and financial advisors promptly.
Delisting and Deregistration of 1st Century Shares (Page 104)
If the merger is completed, 1st Century shares will be delisted from NASDAQ, and deregistered under the Exchange Act, and
1st Century will no longer file periodic reports with the Securities and Exchange Commission, which we refer to as the SEC, on account of 1st Century shares.
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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers are intended to address briefly some commonly asked questions regarding the
merger, the merger agreement and the special meeting. These questions and answers may not address all questions that may be important to you as a stockholder of 1st Century. Please refer to the
"Summary" and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy
statement, which you should read carefully and in their entirety. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions in
"Where You Can Find More Information".
-
Q.
-
What is the proposed merger transaction and what effects will it have on
1st Century?
-
A.
-
The
proposed merger transaction is the acquisition of 1st Century by Midland pursuant to the merger agreement. If the proposal to adopt the merger
agreement is approved by 1st Century stockholders and the other closing conditions under the merger agreement have been satisfied or waived, Merger Sub will merge with and into
1st Century, with 1st Century being the surviving corporation. Simultaneously with the merger, 1st Century Bank will merge with and into MidFirst, with MidFirst surviving.
Subsequently, 1st Century (as the surviving corporation in the merger) will merge with and into Midland, with Midland surviving. As a result of the merger, 1st Century (as the surviving
corporation in the merger) will no longer be a publicly held corporation, and you, as a holder of 1st Century shares, will no longer have any interest in the future earnings or growth of
1st Century. In addition, following the merger, 1st Century shares will be delisted from NASDAQ and deregistered under the Exchange Act, and 1st Century will no longer file
periodic reports with the SEC on account of 1st Century shares.
-
Q.
-
What will I receive if the merger is completed?
-
A.
-
Upon
completion of the merger, for each 1st Century share that you own (unless you have validly made and not effectively withdrawn a demand for
appraisal rights) you will be entitled to receive $11.22 in cash, without interest, less any applicable withholding or transfer taxes. For example, if you own 100 1st Century shares, you will
receive $1,122 cash consideration, less any applicable withholding or transfer taxes.
Please do NOT return your stock certificate(s) with your
proxy.
-
Q.
-
What will a holder of 1
st
Century restricted shares receive in the
merger?
-
A.
-
In
addition, at the effective time, each 1st Century restricted share that is outstanding immediately prior to the effective time will vest in full
and become free of certain applicable restrictions and any repurchase right will lapse, as of the effective time and, at the effective time, each such 1st Century restricted share will be
converted into the right to receive the per share merger consideration.
-
Q.
-
How does the per share consideration compare to the market price of 1st Century shares on the last trading day prior to
announcement of the merger?
-
A.
-
The
per share merger consideration represents an approximately 36.3% premium over 1st Century's closing share price on March 10, 2016, the last
trading day before the transaction was announced, and an approximately 37.4% premium over 1st Century's volume-weighted average trading price for the 30-day trading period ending
March 10, 2016.
-
Q.
-
How does the 1st Century board recommend that I vote?
-
A.
-
The
1st Century board unanimously recommends that you vote
"FOR"
approval of the proposal to adopt the
merger agreement,
"FOR"
approval of the proposal to approve, by non-binding, advisory
13
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vote,
certain compensation arrangements for 1st Century's named executive officers in connection with the merger and
"FOR"
approval of the
proposal to adjourn the special meeting, if necessary, desirable or appropriate, to solicit additional proxies if, at the time of the special meeting, there are an insufficient number of votes in
favor of adopting the merger agreement.
Certain
directors of 1st Century in their capacities as stockholders of 1st Century have entered into the voting agreement with Midland, pursuant to which each such director has agreed
to vote
"FOR"
the proposal to adopt the merger agreement and
"FOR"
any other actions related thereto.
For more information regarding the voting agreements, please see "Voting Agreement".
-
Q.
-
When do you expect the merger to be completed?
-
A.
-
We
are working towards completing the merger as soon as possible. Assuming timely satisfaction of the necessary closing conditions, we currently expect the
closing to occur in the second half of 2016 or sooner.
-
Q.
-
What happens if the merger is not completed?
-
A.
-
If
the merger agreement is not adopted by the stockholders of 1st Century or if the merger is not completed for any other reason, the stockholders of
1st Century will not receive any payment for their 1st Century shares in connection with the merger. Instead, 1st Century will remain an independent public company and
1st Century shares will continue to be listed and traded on NASDAQ. Under specified circumstances in the merger agreement, 1st Century may be required to disburse the termination fee
with respect to the termination of the merger agreement, as described in "The Merger AgreementTermination Fees and Expenses".
-
Q.
-
What conditions must be satisfied to complete the merger?
-
A.
-
1st Century,
Midland and Merger Sub are not required to complete the merger unless a number of conditions are satisfied or waived as described in "The
Merger AgreementConditions to Completion of the Merger". These conditions include, among others, (i) the absence of any law or order prohibiting the consummation of the merger;
(ii) holders of a majority of the outstanding 1st Century shares entitled to vote on the proposal to adopt the merger agreement having duly adopted the merger agreement at the special
meeting or any adjournment or postponement thereof; and (iii) the receipt of the requisite regulatory consents from the Federal Reserve and the OCC and the expiration of any statutory waiting
periods in respect thereof, without the imposition of a burdensome condition on Midland or any of its affiliates or shareholders.
Completion
of the merger is also subject to other customary conditions in favor of the parties, regarding the accuracy of the other party's or parties' representations and warranties (subject to
customary materiality qualifiers) and the other party's or parties' compliance with its covenants and agreements contained in the merger agreement (subject to customary materiality qualifiers).
Midland's
and Merger Sub's obligations to complete the merger are also subject certain conditions regarding (i) the continued employment of 1st Century's Chief Executive Officer and
Chief Operating Officer and (ii) such officers' compliance with obligations under the employment agreements entered
into with MidFirst concurrently with the execution and delivery of the merger agreement.
-
Q.
-
Is the merger expected to be taxable to U.S. holders?
-
A.
-
Yes.
The exchange of 1st Century shares for cash pursuant to the merger generally will be a taxable transaction to U.S. holders for U.S. federal
income tax purposes. If you are a U.S. holder and you exchange your 1st Century shares in the merger for cash, you will generally recognize gain
14
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or
loss in an amount equal to the difference, if any, between the amount of cash received with respect to such 1st Century shares and your adjusted tax basis in such 1st Century shares.
Backup withholding may also apply to the cash payments made pursuant to the merger unless the holder or other payee provides a taxpayer identification number, certifies that such number is correct and
otherwise complies with the backup withholding rules. You should read "The MergerMaterial U.S. Federal Income Tax Consequences of the Merger" for a more detailed discussion of the U.S.
federal income tax consequences of the merger. You should also consult your tax advisor for a complete analysis of the effect of the merger on your federal, state and local and/or foreign taxes.
-
Q.
-
Why am I receiving this proxy statement and proxy card or voting instruction form?
-
A.
-
You
are receiving this proxy statement and proxy card or voting instruction form because you owned 1st Century shares as of the record date for the
determination of stockholders entitled to notice of, and to vote at, the special meeting. This proxy statement describes matters on which we urge you to vote and is intended to assist you in deciding
how to vote your 1st Century shares with respect to such matters.
-
Q.
-
When and where is the special meeting?
-
A.
-
The
special meeting of stockholders of 1st Century will be held on June 20, 2016, at 5:00 p.m., local time, at 1875 Century Park East,
Suite 100, Los Angeles, California 90067.
-
Q.
-
What am I being asked to vote on at the special meeting?
-
A.
-
You
are being asked to consider and vote on a (i) proposal to adopt the merger agreement, which provides for the acquisition of 1st Century by
Midland, (ii) a proposal to approve, by non-binding, advisory vote, certain compensation arrangements for 1st Century's named executive officers in connection with the merger and
(iii) a proposal to adjourn the special meeting, if necessary, desirable or appropriate, to solicit additional proxies if, at the time of the special meeting, there are an insufficient number
of votes in favor of adopting the merger agreement.
-
Q.
-
Why am I being asked to consider and vote on a proposal to approve, by non-binding, advisory vote, certain compensation arrangements
for 1st Century's named executive officers in connection with the merger?
-
A.
-
Under
Section 14A of the Exchange Act and SEC rules, we are required to seek a non-binding, advisory vote with respect to the compensation that may be
paid or become payable to 1st Century's named executive officers that is based on or otherwise relates to the merger, or "golden parachute" compensation.
-
Q.
-
What will happen if 1st Century's stockholders do not approve the golden parachute
compensation?
-
A.
-
Approval
of the compensation that may be paid or become payable to 1st Century's named executive officers that is based on or otherwise relates to the
merger is not a condition to completion of the merger. The vote is an advisory vote and will not be binding on 1st Century or the surviving corporation. Because the merger-related compensation
to be paid to the named executive officers in connection with the merger is based on contractual arrangements with the named executive officers and the merger agreement, such compensation may be
payable, regardless of the outcome of this advisory vote, if the merger agreement is adopted (subject only to the contractual obligations applicable thereto).
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-
Q.
-
What vote is required for 1st Century's stockholders to approve the proposal to adopt the merger
agreement?
-
A.
-
The
adoption of the merger agreement requires the affirmative vote of holders of a majority of the outstanding 1st Century shares entitled to vote on
the proposal to adopt the merger agreement.
Because
the affirmative vote required to approve the proposal to adopt the merger agreement is based upon the total number of outstanding 1st Century shares entitled to vote on the proposal, if
you fail to submit a proxy or vote in person at the special meeting, or abstain, or you do not provide your bank, brokerage firm or other nominee with instructions, as applicable, this will have the
same effect as a vote "
AGAINST
" approval of the proposal to adopt the merger agreement.
-
Q.
-
What vote of 1st Century stockholders is required to approve the proposal to approve, by non-binding, advisory vote, certain
compensation arrangements for 1st Century's named executive officers in connection with the merger?
-
A.
-
Approving
the merger-related executive compensation requires the affirmative vote of holders of a majority of the outstanding 1st Century shares
present in person or represented by proxy at the special meeting and entitled to vote at the meeting.
Accordingly,
abstentions will have the same effect as a vote
"AGAINST"
the proposal to approve the merger-related executive compensation. If you fail to
submit a proxy or attend the special meeting in person, or if you fail to provide instructions to your broker in respect of the proposal to approve the merger-related executive compensation and no
additional matter is brought before the special meeting on which brokers have discretionary voting authority, the 1st Century shares held by you or your broker will not be counted in respect
of, and will not have an effect on, the proposal to approve the merger-related executive compensation. Although we do not expect to bring any matters before the meeting other than the three proposals
described in this proxy statement, if an additional matter is brought before the meeting and is one on which brokers have discretionary voting authority and you fail to provide instructions to your
broker in respect of the proposal to approve the merger-related executive compensation, such broker non-votes will have the same effect as a vote
"AGAINST"
such proposal.
-
Q.
-
What vote of our stockholders is required to approve the proposal to adjourn the special meeting, if necessary, desirable or
appropriate, to solicit additional proxies if, at the time of the special meeting, there are an insufficient number of votes in favor of adopting the merger
agreement?
-
A.
-
Approval
of the proposal to adjourn the special meeting, if necessary, desirable or appropriate, to solicit additional proxies if, at the time of the special
meeting, there are an insufficient number of votes in favor of adopting the merger agreement requires the affirmative vote of holders of a majority of the outstanding 1st Century shares present
in person or represented by proxy at the special meeting and entitled to vote at the meeting.
Abstaining
will have the same effect as a vote
"AGAINST"
approval of the proposal to adjourn the special meeting, if necessary, desirable or
appropriate, to solicit additional proxies if, at the time of the special meeting, there are an insufficient number of votes in favor of adopting the merger agreement. If you fail to submit a proxy or
attend the special meeting in person, or if you fail to provide instructions to your broker in respect of the proposal to adjourn the special meeting and no additional matter is brought before the
special meeting on which brokers have discretionary voting authority, the 1st Century shares held by you or your broker will not be counted in respect of, and will not have an effect on, the
proposal to adjourn the special meeting. Although we do not expect to bring any matters before the meeting other than the three proposals described in this proxy statement, if an additional matter is
brought before the meeting and is one on which brokers have discretionary voting authority and you fail to provide instructions to your broker in respect of
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the
proposal to adjourn the special meeting, such broker non-votes will have the same effect as a vote
"AGAINST"
such proposal.
-
Q.
-
How do I vote if I own 1st Century shares through the 1st Century Bank 401(k)
Plan?
-
A.
-
1st Century
shares held in the 1st Century Bank 401(k) Plan, which we refer to as the 1st Century 401(k) plan, are held of record and
are voted by the trustee of the 1st Century 401(k) plan at the direction of 1st Century 401(k) plan participants. Participants in the 1st Century 401(k) plan will be provided with
a proxy card and voting instructions with these proxy materials. If you participate in the 1st Century 401(k) plan, you may give voting instructions as to the number of full and fractional
1st Century shares allocable to your account as of the record date for determining the stockholders entitled to receive notice of, and to vote at, the special meeting and any adjournments or
postponements thereof. You may provide voting instructions to the trustee under the 1st Century 401(k) plan by completing and returning the proxy card accompanying this proxy statement, or
submitting your proxy by telephone or the Internet. The trustee will vote your 1st Century shares in accordance with your completed proxy card if it is received by June 15, 2016. If you
do not send instructions by this deadline or submit a proxy by following the instructions set forth herein, or if you return your proxy card with an unclear voting designation or no voting designation
at all, the trustee will vote the number of full and fractional 1st Century shares allocable to your account in the same proportion that it votes 1st Century shares for which it did
receive timely instructions, unless contrary to the Employee Retirement Income Security Act of 1974, as amended.
1st Century shares held in the 1st Century 401(k) plan may NOT be voted in person at the special meeting as the trustee of the 1st Century 401(k) plan
votes the applicable 1st Century shares two business days prior to the special meeting, after receiving voting instructions from the plan
participants.
-
Q.
-
Are there any voting agreements with existing stockholders?
-
A.
-
Yes.
As a condition and inducement to the willingness of Midland to enter into the merger agreement, concurrently with the execution and delivery of the
merger agreement, Midland entered into the voting agreement with certain directors and executive officers of 1st Century, who collectively own approximately 21.42% of the outstanding
1st Century shares as of the record date, in their capacity as stockholders of 1st Century. The voting agreement, which is attached as
Annex B
to this proxy statement, requires such
stockholders to vote all of their 1st Century shares in favor of adoption of the merger
agreement and certain related matters as applicable and against alternative transactions and generally prohibits them from entering into agreements regarding or transferring their shares, subject to
certain exceptions. The voting agreement also prohibits the stockholders party thereto from soliciting or negotiating any alternative business combination transactions. The voting agreement will
terminate upon the earlier to occur of (i) the consummation of the merger or (ii) the termination of the merger agreement in accordance with its terms. See "Voting Agreement".
-
Q.
-
Do any of 1st Century's directors or officers have interests in the merger that may differ from or be in addition to my
interests as a stockholder?
-
A.
-
In
considering the recommendation of the 1st Century board with respect to the proposal to adopt the merger agreement, you should be aware that our
directors and executive officers have interests in the merger that are different from, or in addition to, the interests of 1st Century stockholders generally. The 1st Century board was
aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending that the merger agreement be adopted by the
stockholders of 1st Century. See
17
Table of Contents
"The
MergerInterests of Certain Persons in the Merger" and "Advisory Vote on Merger-Related Compensation for 1st Century's Named Executive Officers".
-
Q.
-
What is the difference between holding 1st Century shares as a stockholder of record and as a beneficial
owner?
-
A.
-
If
on May 17, 2016, your 1st Century shares were registered directly in your name with our transfer agent, then you are a stockholder "of
record". If you are a stockholder of record, you may vote in person at the special meeting, or submit a proxy by mail, over the Internet or by telephone. Whether or not you plan to attend the special
meeting, we urge you to submit a proxy to ensure your vote is counted. You may still attend the special meeting and vote in person if you have already submitted a proxy. Voting in person at the
special meeting will revoke any previously submitted proxy.
If
on May 17, 2016, your 1st Century shares were held not in your name, but rather in an account at a brokerage firm, bank, dealer, or other similar organization, then your
1st Century shares are held in "street name" and you are the beneficial owner of the 1st Century shares. If you are a beneficial owner of 1st Century shares registered in the name
of your broker, bank, or other agent, you should have received a proxy card and voting instructions with these proxy materials from that organization rather than from us. Please complete and mail that
proxy card to ensure that your vote is counted. Alternatively, you may submit voting instructions over the Internet, as instructed by your broker or bank. To vote in person at the special meeting, you
must obtain a valid proxy from your broker, bank, or other agent. Follow the instructions from your broker or bank included with these proxy materials or contact your broker or bank to request such a
proxy form.
-
Q.
-
If my 1st Century shares are held in "street name" by my bank, brokerage firm or other nominee, will my bank, brokerage firm
or other nominee vote my 1st Century shares for me?
-
A.
-
Your
bank, brokerage firm or other nominee will only be permitted to vote your 1st Century shares if you instruct your bank, brokerage firm or other
nominee how to vote. You should follow the procedures provided by your bank, brokerage firm or other nominee regarding the voting of your 1st Century shares. Banks, brokerage firms or other
nominees who hold shares in "street name" for customers have the authority to vote on "routine" proposals when they have not received instructions from beneficial owners. However, banks, brokerage
firms and other nominees are precluded from exercising their voting discretion with respect to approving non-routine matters, such as the proposals to be considered at the special meeting, and, as a
result, absent specific instructions from the beneficial owner of such 1st Century shares, banks, brokerage firms or other nominees are not empowered to vote those 1st Century shares on
non-routine matters. If you do not instruct your bank, brokerage firm or other nominee to vote your 1st Century shares, your 1st Century shares will not be voted, and the effect will be
the same as a vote
"AGAINST"
approval of the proposal to adopt the merger agreement, and your 1st Century shares will not have an effect on the
proposal to approve the merger-related executive compensation or on the proposal to adjourn the special meeting. Although we do not expect to bring any matters before the meeting other than the three
proposals described in this proxy statement, if an additional matter is brought before the meeting and is one on which brokers have discretionary voting authority, then broker non-votes will have the
same effect as a vote
"AGAINST"
the proposal to approve, by non-binding, advisory vote, certain compensation arrangements for 1st Century's named
executive officers in connection with the merger and the proposal to adjourn the special meeting, if necessary, desirable or appropriate, to solicit additional proxies.
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Table of Contents
-
Q.
-
Who can vote at the special meeting?
-
A.
-
Only
stockholders of record at the close of business on May 17, 2016, the record date for the determination of stockholders entitled to notice of, and
to vote at, the special meeting, are entitled to notice of, and to vote at, the special meeting or any adjournment or postponement of the meeting. On the record date, 10,336,884 1st Century
shares were outstanding, each of which is entitled to one vote upon each of the matters to be presented at the meeting.
If
you are a beneficial owner of 1st Century shares registered in the name of your broker, bank, or other agent, you should have received a proxy card and voting instructions with these proxy
materials from that organization rather than from us. Please complete and mail that proxy card to ensure that your vote is counted. Alternatively, you may vote over the Internet, as instructed by your
broker or bank. To vote in person at the special meeting, you must obtain a valid proxy from your broker, bank, or other agent. Follow the instructions from your broker or bank included with these
proxy materials or contact your broker or bank to request such a proxy form.
-
Q.
-
How many votes do I have?
-
A.
-
Each
holder of 1st Century shares is entitled to cast one vote on each matter properly brought before the special meeting for each 1st Century
share that such holder owned as of the record date of May 17, 2016 for the determination of stockholders entitled to notice of, and to vote at, the special meeting. As of the close of business
on the record date, there were 10,336,884 1st Century shares outstanding and entitled to vote, held by 273 holders of record.
-
Q.
-
What is the quorum requirement?
-
A.
-
Under
the Bylaws of 1st Century, as amended, which we refer to as the bylaws, holders of a majority of the 1st Century shares issued and
outstanding and entitled to vote at the special meeting, present in person or represented by proxy, will constitute a quorum for the transaction of business at the special meeting. Abstentions will be
counted as shares present for purposes of determining the presence of a quorum. Because, under applicable rules, brokers, banks and other nominees holding shares in "street name" do not have
discretionary voting authority with respect to any of the three proposals described in this proxy statement, if a beneficial owner of 1st Century shares held in "street name" does not give
voting instructions to the broker, bank or other nominee, then those shares will not be counted as present in person or by proxy at the special meeting if no other matters are brought before the
meeting. Although we do not expect to bring any matters before the meeting other than the three proposals described in this proxy statement, if an additional matter is brought before the meeting and
is one on which brokers have discretionary voting authority, then broker non-votes will be counted for purposes of determining a quorum.
-
Q.
-
How do I vote?
-
A.
-
Stockholder of Record
. If you are a stockholder of record, you may have your 1st Century
shares voted on matters presented at the special meeting in any of the following ways:
-
-
In Person.
You may attend the special meeting and cast
your vote there.
-
-
Via Our Internet Voting Site at www.
Investorvote.com/FCTY.
If you received printed proxy materials, follow the instructions for submitting your proxy via the Internet
printed on your proxy card.
-
-
By Telephone.
Call toll-free
1-800-652-VOTE
(1-800-652-8683) in the United States, U.S.
territories and Canada from any touch-tone telephone and follow the instructions. You can
also submit your proxy by telephone by following the instructions provided on the Internet voting site
19
Table of Contents
-
Q.
-
How can I change or revoke my proxy?
-
A.
-
If
you own 1st Century shares in your own name, you may revoke any prior proxy or voting instructions, regardless of how your proxy or voting
instructions were originally submitted, by:
-
-
sending a written statement to that effect to our Corporate Secretary, which must be received by us by 5:00 p.m. on the
business day immediately prior to the date of the special meeting;
-
-
submitting a properly signed proxy card or voting instruction form dated a later date;
-
-
submitting a later dated proxy or providing new voting instructions via the Internet or by telephone; or
-
-
attending the meeting in person and voting your 1st Century shares.
If
you hold 1st Century shares in "street name", you should contact the intermediary for instructions on how to change your voting instruction.
-
Q.
-
What is a proxy?
-
A.
-
A
proxy is your legal designation of another person, referred to as a "proxy", to vote your 1st Century shares. The written document describing the
matters to be considered and voted on at the special meeting is called a "proxy statement". The document used to designate a proxy to vote your 1st Century shares is called a "proxy card".
-
Q.
-
If a stockholder gives a proxy, how are the 1st Century shares voted?
-
A.
-
Regardless
of the method you choose to submit your proxy, the individuals named on the enclosed proxy card will vote your 1st Century shares in the
way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify whether your 1st Century shares should be voted for or against or to abstain from
voting on all, some or none of the specific items of business to come before the special meeting.
If
you own 1st Century shares that are registered in your own name and return a signed proxy card or grant a proxy via the Internet or by telephone, but do not indicate how you wish your
1st Century shares to be voted, the 1st Century shares represented by your properly signed proxy will be voted
"FOR"
approval of the
proposal to adopt the merger agreement,
"FOR"
approval of the proposal to approve, by non-binding, advisory vote, certain compensation arrangements for
20
Table of Contents
1st Century's
named executive officers in connection with the merger and
"FOR"
approval of the proposal to adjourn the special meeting, if
necessary, desirable or appropriate, to solicit additional proxies if, at the time of the special meeting, there are an insufficient number of votes in favor of adopting the merger agreement.
-
Q.
-
How are votes counted?
-
A.
-
For
the proposal to adopt the merger agreement, you may vote
"FOR"
,
"AGAINST"
or
"ABSTAIN"
. Abstentions will
have the same effect as if you voted
"AGAINST"
approval of the proposal to adopt the merger agreement. If you fail to issue voting instructions to your broker, bank or other nominee, it
will have the same effect as a vote
"AGAINST"
the proposal to adopt the merger agreement.
For
the proposal to approve the merger-related executive compensation, you may vote
"FOR"
,
"AGAINST"
or
"ABSTAIN"
. Abstentions will have the same effect as if you voted
"AGAINST"
approval of the proposal. If
a quorum is present at the special meeting and any additional matter is brought before the special meeting on which brokers have discretionary voting authority, if you fail to issue voting
instructions to your broker, bank or other nominee, it will have the effect of a vote
"AGAINST"
the proposal.
For
the proposal to adjourn the special meeting, if necessary, desirable or appropriate, to solicit additional proxies if, at the time of the special meeting, there are an insufficient number of votes
in favor of adopting the merger agreement, you may vote
"FOR"
,
"AGAINST"
or
"ABSTAIN"
. Abstentions will have
the same effect as if you voted
"AGAINST"
approval of the proposal. If
a quorum is present at the special meeting and any additional matter is brought before the special meeting on which brokers have discretionary voting authority, if you fail to issue voting
instructions to your broker, bank or other nominee, it will have the effect of a vote
"AGAINST"
the proposal.
-
Q.
-
What do I do if I receive more than one proxy or set of voting instructions?
-
A.
-
If
you received more than one proxy card, your 1st Century shares are likely registered in different names or with different addresses or are in more
than one account. You must separately vote the 1st Century shares shown on each proxy card that you receive in order for all of your 1st Century shares to be voted at the meeting.
-
Q.
-
What happens if I sell my 1st Century shares before the special meeting?
-
A.
-
The
record date for stockholders entitled to vote at the special meeting is earlier than both the date of the special meeting and the consummation of the
merger. If you transfer your 1st Century shares after the record date but before the special meeting, unless special arrangements (such as provision of a proxy) are made between you and the
person to whom you transfer your 1st Century shares and each of you notifies 1st Century in writing of such special arrangements, you will retain your right to vote such
1st Century shares at the special meeting but will transfer the right to receive the per share merger consideration to the person to whom you transfer your 1st Century shares.
-
Q.
-
What happens if I sell my 1st Century shares after the special meeting but before the effective time of the
merger?
-
A.
-
If
you transfer your 1st Century shares after the special meeting but before the effective time, you will have transferred the right to receive the
per share merger consideration to the person to whom you transfer your 1st Century shares. In order to receive the per share merger consideration, you must hold your 1st Century shares
through the completion of the merger.
21
Table of Contents
-
Q.
-
Who is paying for this proxy solicitation?
-
A.
-
1st Century
has engaged Georgeson LLC to assist in the solicitation of proxies for the special meeting. 1st Century estimates that it
will pay Georgeson LLC a fee of $8,500 and telephone charges. 1st Century has agreed to reimburse Georgeson LLC for certain fees and expenses and will also indemnify
Georgeson LLC, its affiliates and their respective officers, directors, employees and agents against certain losses, claims, damages, costs, charges, counsel fees and expenses, payments,
expenses and liability. 1st Century may also reimburse banks, brokers or their agents for their expenses in forwarding proxy materials to beneficial owners of 1st Century shares. Our
directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person, but they will not be paid any additional amounts for soliciting proxies.
-
Q.
-
What do I need to do now?
-
A.
-
Even
if you plan to attend the special meeting, after carefully reading and considering the information contained in this proxy statement, please promptly
submit your proxy to ensure that your 1st Century shares are represented at the special meeting. If you hold your 1st Century shares in your own name as the stockholder of record, you
may submit a proxy to have your 1st Century shares voted at the special meeting in one of three ways: (i) using the Internet in accordance with the instructions set forth on the enclosed
proxy card, (ii) calling toll-free at
1-800-652-VOTE
(1-800-652-8683) in the United States, U.S. territories and Canada from any touch-tone
telephone and following the instructions or (iii) completing, signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope. If you decide to attend the
special meeting and vote in person, your vote by ballot will revoke any proxy previously submitted. If you are a beneficial owner of 1st Century shares held in "street name", please refer to
the instructions provided by your bank, brokerage firm or other nominee to see which of the above choices are available to you.
-
Q.
-
Should I send in my stock certificates now?
-
A.
-
No.
If the proposal to adopt the merger agreement is approved, after the completion of the merger, you will be sent a letter of transmittal promptly
describing how you may exchange your 1st Century shares for the per share merger consideration. If your 1st Century shares are held in "street name" through a bank, brokerage firm or
other nominee, you should contact your bank, brokerage firm or other nominee for instructions as to how to effect the surrender of your "street name" 1st Century shares in exchange for the per
share merger consideration.
Please do NOT return your stock certificate(s) with your proxy.
-
Q.
-
Am I entitled to exercise appraisal rights under Section 262 of the DGCL instead of receiving the per share merger
consideration for my 1st Century shares?
-
A.
-
Yes.
As a holder of 1st Century shares, you are entitled to exercise appraisal rights under Section 262 of the DGCL in connection with the
merger if you take certain actions, including submitting a proper demand, and meet certain conditions, including that you do not vote (in person or by proxy) in favor of adoption of the merger
agreement. See "Appraisal Rights".
-
Q.
-
Who can help answer any other questions I might have?
-
A.
-
If
you have additional questions about the merger, need assistance in submitting your proxy or voting your 1st Century shares, or need additional
copies of the proxy statement or the enclosed proxy card, please contact Georgeson LLC, our proxy solicitor, by calling toll-free at (866) 695-6078, or by e-mailing
1stcentury@georgeson.com.
22
Table of Contents
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Statements about 1st Century and its business in this proxy statement which are not statements of historical fact, including,
but not limited to, statements regarding the expected completion of the merger (including the timing thereof), the ability to consummate the merger (including but not limited to the receipt of all
required regulatory approvals), 1st Century's future strategy and plans and commentary regarding future results of operations and prospects, are forward-looking statements and are intended to
be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by
terminology such as "may", "might", "will", "should", "could", "likely", "expects", "intends", "targets", "assumes", "seeks to", "plans", "anticipates", "believes", "projects", "estimates",
"predicts", "potential", "future", "goal", "objective", or "continue", or the negative of such terms or other variations thereof or comparable terminology, or by discussions of strategy that involve
risks and uncertainties. Forward-looking statements are not guarantees or assurances of future performance, and actual results could differ materially from those indicated by the forward-looking
statements.
Actual
results may differ materially from those set forth in this proxy statement due to the risks and uncertainties related to the merger and/or inherent in our business, including,
without limitation: the risk that 1st Century stockholders do not approve the merger; the occurrence of any event, change or other circumstances that could give rise to the termination of the
merger agreement; the response by stockholders to the merger; the failure to satisfy each of the conditions to the consummation of the merger, including but not limited to, the risk that a
governmental entity may prohibit, delay or refuse to grant approval for the consummation of the merger on acceptable terms, or at all; risks related to disruption of management's attention from
1st Century's ongoing business operations due to the merger; the effect of the announcement of the merger on 1st Century's relationships with its customers, suppliers, operating results
and business generally; the risk that any announcements relating to the merger could have adverse effects on the market price of 1st Century shares; the outcome of any legal proceedings related
to the merger; risks related to employee retention as a result of the merger; the risk that the merger will not be consummated within the expected time period or at all; the impact of changes in
interest rates; political instability; changes in the monetary policies of the U.S. Government; a renewed decline in economic conditions or continued sluggish growth; deterioration in the value of
California real estate, both residential and commercial; an increase in the level of non-performing assets and charge-offs; further increased competition among financial institutions;
1st Century's ability to continue to attract interest bearing deposits and quality loan customers; further government regulation, including regulations regarding capital requirements, and the
implementation and costs associated with the same; internal and external fraud and cyber-security threats including the loss of bank or customer funds, loss of system functionality or the theft or
loss of data; and management's ability to successfully manage 1st Century's operations.
These
forward-looking statements are also qualified by, and should be read together with, the "Forward-Looking Statements", the "Risk Factors" and the other statements in
1st Century 's Annual Report on Form 10-K for the year ended December 31, 2015 as filed with the Securities and Exchange Commission and available at www.sec.gov, and investors
should refer to such risk factors and other statements in evaluating the forward-looking statements contained in this proxy statement (see "Where You Can Find More Information").
Any
forward-looking statements speak only as of the date of this proxy statement, and 1st Century does not undertake any obligation to correct or update any forward-looking
statements to reflect events or circumstances after the date on which such statements are made or to reflect the occurrence of unanticipated events except as otherwise required by law. New factors may
emerge from time to time, and it is not possible for 1st Century to predict all such factors. Furthermore, it may not be possible for 1st Century to assess the impact of any such factor
on its business (viewed independently or together) or the extent to which any factor, or combination of factors, may cause results to differ materially from
23
Table of Contents
those
contained in any forward-looking statement. The foregoing factors should not be construed as exhaustive.
You
are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this proxy statement or, in the case of documents referred to or
incorporated by reference, the dates of those documents.
24
Table of Contents
PARTIES TO THE MERGER
1st Century Bancshares, Inc.
1st Century Bancshares, Inc.
1875 Century Park East, Suite 1400
Los Angeles, CA 90067
Telephone: (310) 270-9500
1st Century
Bancshares, Inc., a Delaware corporation, is registered with the Federal Reserve as a bank holding company under the Bank Holding Company Act of 1956, as
amended, which we refer to as the BHC Act. 1st Century has one subsidiary, 1st Century Bank, National Association. 1st Century Bank is subject to both the regulation of, and
periodic examinations by the OCC, which is 1st Century Bank's primary federal regulatory agency. 1st Century's common stock trades on NASDAQ under the symbol "FCTY".
1st Century's
principal source of income is dividends from 1st Century Bank. 1st Century's operating costs, including certain professional fees and stockholders'
costs, are paid from dividends paid to 1st Century by 1st Century Bank.
At
December 31, 2015 and 2014, 1st Century had consolidated assets of $732.0 million and $585.2 million, respectively, total loans of $598.4 million
and $442.9 million, respectively, deposits of $598.2 million and $503.2 million, respectively, and stockholders' equity of $64.9 million and $61.7 million,
respectively.
1st Century
maintains a website at http://www.1cbank.com. By including the foregoing website address, 1st Century does not intend to and will not be deemed to incorporate
by reference any material contained therein. See also "Where You Can Find More Information".
Headquartered in the West Los Angeles area of Los Angeles, California, known as Century City, 1st Century Bank is a full service
commercial bank. 1st Century Bank was organized as a national banking association on October 27, 2003 and opened for business on March 1, 2004. In addition to a full service
branch in Century City, 1st Century Bank has relationship offices in Santa Monica and Beverly Hills, California. 1st Century Bank's primary focus is relationship banking to family and
closely held middle market businesses, professional service firms, and high net worth individuals, real estate investors and entrepreneurs. 1st Century Bank also provides a wide range of
banking services to meet the financial needs of the local residential community, with an orientation primarily directed toward owners and employees of our business client base.
Midland Financial Co.
Midland Financial Co.
501 NW Grand Boulevard
Oklahoma City, OK 73118
(405) 840-7600
Midland
Financial Co. is, an Oklahoma corporation, is a savings and loan holding company and the holding company for MidFirst Bank, a federal savings association. Headquartered in
Oklahoma City, MidFirst serves more than 600,000 customers as of December 31, 2015.
MidFirst
has more than 50 banking centers in Oklahoma, 24 banking centers in Arizona and three banking centers in Denver. Additionally, it has commercial lending offices in Atlanta,
Dallas, Houston, New York and Southern California.
25
Table of Contents
Merger Sub
MC 2016 Corp.
501 NW Grand Boulevard
Oklahoma City, OK 73118
(405) 840-7600
Merger
Sub is a wholly-owned indirect subsidiary of Midland and was formed on February 17, 2016. Merger Sub was formed solely for the purpose of engaging in the transactions
contemplated by the merger agreement and has not engaged in any business activities other than those incidental to its formation and in connection with the transactions contemplated by the merger
agreement.
26
Table of Contents
THE SPECIAL MEETING
Date, Time and Place of the Special Meeting
This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by the 1st Century board for
use at the special meeting to be held on June 20, 2016, at 5:00 p.m., local time, at 1875 Century Park East, Suite 100, Los Angeles, California 90067, or at any postponement or
adjournment thereof.
Purpose of the Special Meeting
At the special meeting, holders of 1st Century shares will be asked to:
-
-
consider and vote on a proposal to adopt the merger agreement (Proposal 1 on your proxy card);
-
-
consider and vote on a proposal to approve, by non-binding, advisory vote, certain compensation arrangements for 1st Century's
named executive officers in connection with the merger (Proposal 2 on your proxy card); and
-
-
consider and vote on a proposal to adjourn the special meeting, if necessary, desirable or appropriate, to solicit additional proxies
if, at the time of the special meeting, there are an insufficient number of votes in favor of adopting the merger agreement (Proposal 3 on your proxy card).
The 1st Century board unanimously recommends that you vote "FOR" each of the above proposals.
1st Century's
stockholders must approve the proposal to adopt the merger agreement in order for the merger to occur. If our stockholders fail to approve the proposal to adopt the
merger agreement, the merger will not occur. A copy of the merger agreement is attached as
Annex A
to this proxy statement, which we encourage
you to read carefully and in its entirety.
Record Date and Quorum
We have fixed the close of business on May 17, 2016 as the record date for the determination of stockholders entitled to notice
of, and to vote at, the special meeting, and only holders of record of 1st Century shares on the record date are entitled to notice of, and to vote at (in person or by proxy), the special
meeting. As of the close of business on the record date, there were 10,336,884 1st Century shares outstanding and entitled to vote, held by 273 holders of record. You will have one vote on all
matters properly coming before the special meeting for each 1st Century share that you owned on the record date.
Holders
of a majority of the 1st Century shares issued and outstanding and entitled to vote at the special meeting, present in person or represented by proxy, will constitute a
quorum for the transaction of business at the special meeting. 1st Century shares represented at the special meeting but not voted, including 1st Century shares for which proxies have
been received but for which stockholders have abstained, will be treated as present at the special meeting for purposes of determining the presence or absence of a quorum for the transaction of all
business. In the event that a quorum is not present at the special meeting, the special meeting and any adjourned or postponed session of the special meeting may be adjourned or postponed to solicit
additional proxies. Pursuant to the bylaws, approval of the adjournment of the special meeting in a situation in which a quorum is not present or represented at the special meeting requires the
affirmative vote of holders of a majority of 1st Century shares represented either in person or by proxy at the special meeting. Approval of the proposal to adjourn the special meeting, if
necessary, desirable or appropriate, to solicit additional proxies if, at the time of the special meeting, there are an insufficient number of votes in favor of adopting the merger
27
Table of Contents
agreement
requires the affirmative vote of holders of a majority of the outstanding 1st Century shares present in person or represented by proxy at the special meeting and entitled to vote at
the meeting.
Attendance
Only stockholders of record, their duly authorized proxy holders, beneficial stockholders with proof of ownership and our guests may
attend the special meeting. To gain admittance, please bring the admission ticket provided with these proxy materials with you to the meeting. If your 1st Century shares are held through a
bank, brokerage firm or other nominee, please
send proof of your ownership to 1st Century's Corporate Secretary at 1875 Century Park East, Suite 1400, Los Angeles, California 90067, and 1st Century will send you an
admission ticket. Alternatively, please bring to the special meeting proof of your beneficial ownership of 1st Century shares. Acceptable proof could include an account statement showing that
you owned 1st Century shares on the record date, May 17, 2016. If you are the representative of a corporate or institutional stockholder, you must present valid photo identification
along with proof that you are the representative of such stockholder. Please note that cameras, recording devices and other electronic devices will not be permitted at the special meeting.
Vote Required
Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the outstanding
1st Century shares entitled to vote on the proposal. For the proposal to adopt the merger agreement, you may vote
"FOR"
,
"AGAINST"
or
"ABSTAIN"
. Abstentions will not be counted as votes cast in favor of the proposal to adopt
the merger agreement, but will count for the purpose of determining whether a quorum is present.
If you fail to submit a proxy or to vote in person at the special meeting, or
abstain, it will have the same effect as a vote "AGAINST" approval of the proposal to adopt the merger agreement.
If
your 1st Century shares are registered directly in your name with our transfer agent, you are considered, with respect to those 1st Century shares, the "stockholder of
record". This proxy statement and proxy card have been sent directly to you by 1st Century.
If
your 1st Century shares are held through a bank, brokerage firm or other nominee, you are considered the "beneficial owner" of 1st Century shares held in "street name".
In that case, this proxy statement has been forwarded to you by your bank, brokerage firm or other nominee who is considered, with respect to those 1st Century shares, the stockholder of
record. As the beneficial owner, you have the right to direct your bank, brokerage firm or other nominee how to vote your 1st Century shares by following their instructions for voting.
Because,
under applicable rules, brokers, banks and other nominees holding shares in "street name" do not have discretionary voting authority with respect to any of the three proposals
described in this proxy statement, if a beneficial owner of 1st Century shares held in "street name" does not give voting instructions to the broker, bank or other nominee, then those shares
will not be counted as present in person or by proxy at the special meeting. As the vote to approve the proposal to adopt the merger agreement is based on the total number of 1st Century shares
outstanding at the close of business on the record date, not just the shares that are counted as present in person or by proxy at the special meeting, if you fail to issue voting instructions to your
broker, bank or other nominee, it will have the same effect as a vote
"AGAINST"
the proposal to adopt the merger agreement. Although we do not expect to
bring any matters before the meeting other than the three proposals described in this proxy statement, if an additional matter is brought before the meeting and is one on which brokers have
discretionary voting authority, then broker non-votes will be counted for purposes of determining a quorum and any broker non-votes will have the same effect as a vote
"AGAINST"
the proposal to approve,
by non-binding, advisory vote, certain compensation arrangements for 1st Century's named
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executive
officers in connection with the merger and the proposal to adjourn the special meeting, if necessary, desirable or appropriate, to solicit additional proxies.
The
proposal to approve, by non-binding, advisory vote, certain compensation arrangements for 1st Century's named executive officers in connection with the merger requires the
affirmative vote of holders of a majority of the outstanding 1st Century shares present in person or represented by proxy at the special meeting and entitled to vote at the special meeting. For
the proposal to approve the merger-related executive compensation, you may vote
"FOR"
,
"AGAINST"
or
"ABSTAIN"
. For purposes of this proposal, if you attend the special meeting and abstain on this proposal, or if you have given a proxy and abstained on
this proposal, this will have the same effect as if you voted
"AGAINST"
approval of the proposal. If you fail to submit a proxy or attend the special
meeting in person, or if you fail to provide instructions to your broker in respect of the proposal to approve the merger-related executive compensation and no additional matter is brought before the
special meeting on which brokers have discretionary voting authority, the 1st Century shares held by you or your broker will not be counted in respect of, and will not have an effect on, the
proposal to approve the merger-related executive compensation. Although we do not expect to bring any matters before the meeting other than the three proposals described in this proxy statement, if an
additional matter is brought before the meeting and is one on which brokers have discretionary voting authority and you fail to provide instructions to your broker in respect of the proposal to
approve the merger-related executive compensation, such broker non-votes will have the same effect as a vote
"AGAINST"
such proposal.
The
proposal to adjourn the special meeting, if necessary, desirable or appropriate, to solicit additional proxies if, at the time of the special meeting, there are an insufficient
number of votes in favor of adopting the merger agreement requires the affirmative vote of holders of a majority of the outstanding 1st Century shares present in person or represented by proxy
at the special meeting and entitled to vote at the special meeting. For the proposal to adjourn the special meeting, if necessary, desirable or appropriate, you may vote
"FOR"
,
"AGAINST"
or
"ABSTAIN"
. For purposes of this
proposal, if you attend the special meeting and abstain on this proposal, or if you have given a proxy and abstained on this proposal, this will have the same effect as if you voted
"AGAINST"
approval
of the proposal. If you fail to submit a proxy or attend the special meeting in person, or if you fail to provide instructions to
your broker in respect of the proposal to adjourn the special meeting and no additional matter is brought before the special meeting on which brokers have discretionary voting authority, the
1st Century shares held by you or your broker will not be counted in respect of, and will not have an effect on, the proposal to adjourn the special meeting. Although we do not expect to bring
any matters before the meeting other than the three proposals described in this proxy statement, if an additional matter is brought before the meeting and is one on which brokers have discretionary
voting authority and you fail to provide instructions to your broker in respect of the proposal to adjourn the special meeting, such broker non-votes will have the same effect as a vote
"AGAINST"
such
proposal.
1st Century shares held in the 1st Century Bank 401(k) Plan, which we refer to as the 1st Century 401(k) plan, are held of record and are voted by the trustee of the
1st Century 401(k) plan at the direction of 1st Century 401(k) plan participants. Participants in the 1st Century 401(k) plan will be provided with a proxy card and voting
instructions with these proxy materials. If you participate in the 1st Century 401(k) plan, you may give voting instructions as to the number of full and fractional 1st Century shares
allocable to your account as of the record date for determining the stockholders entitled to receive notice of, and to vote at, the special meeting and any adjournments or postponements thereof. You
may provide voting instructions to the trustee under the 1st Century 401(k) plan by completing and returning the proxy card accompanying this proxy statement, or submitting your proxy by
telephone or the Internet. The trustee will vote your 1st Century shares in accordance with your completed proxy card if it is received by June 15, 2016. If you do not send instructions
by this deadline or submit a proxy by following the instructions set forth herein, or if you return your proxy card with an unclear voting designation or no voting designation at all, the trustee
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will vote the number of full and fractional 1st Century shares allocable to your account in the same proportion that it votes 1st Century shares for which it did receive timely
instructions, unless contrary to the Employee Retirement Income Security Act of 1974, as amended.
1st Century shares held in the 1st Century 401(k) plan may NOT be voted in person at the special meeting as the trustee of the 1st Century
401(k) plan votes the applicable 1st Century shares two business days prior to the special meeting, after receiving voting instructions from the plan participants.
Certain stockholders of 1st Century have entered into the voting agreement with Midland, pursuant to which each such stockholder has agreed to vote
"FOR"
the proposal to adopt the merger agreement and
"FOR"
any other actions related thereto and against
alternative transactions and generally prohibits them from entering into agreements regarding or transferring their shares, subject to certain exceptions. As of the close of business on the record
date, these stockholders beneficially owned, in the aggregate, 2,213,988 1st Century shares, allowing them to exercise approximately 21.42% of the voting power of 1st Century shares. The
voting agreement also prohibits the stockholders party thereto from soliciting or negotiating any alternative business combination transactions. The voting agreement will terminate upon the earlier to
occur of (i) the consummation of the merger or (ii) the termination of the merger agreement in accordance with its terms.
If
you are a stockholder of record, you may have your 1st Century shares voted on matters presented at the special meeting in any of the following
ways:
-
-
by proxystockholders of record have a choice of submitting a proxy:
-
-
by telephone or over the Internet, by accessing the telephone number or website specified on the enclosed proxy card. The
control number provided on your proxy card is designed to verify your identity when voting by telephone or by Internet. Please be aware that if you vote over the Internet, you may incur costs such as
telephone and Internet access charges for which you will be responsible;
-
-
by signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope; or
-
-
in personyou may attend the special meeting and cast your vote there.
If
you are a beneficial owner of 1st Century shares held in "street name", you should receive instructions from your bank, brokerage firm or other nominee that you must follow in
order to have your 1st Century shares voted. Those instructions will identify which of the above choices are available to you in order to have your 1st Century shares voted. Please note
that if you are a beneficial owner of 1st Century shares held in "street name" and wish to vote in person at the special meeting, you must provide a legal proxy from your bank, brokerage firm
or other nominee at the special meeting.
Please
refer to the instructions on your proxy or voting instruction card to determine the deadlines for submitting your proxy over the Internet or by telephone. If you choose to submit
a proxy by mailing a proxy card, your proxy card should be mailed in the accompanying prepaid reply envelope, and your proxy card must be filed with our Corporate Secretary by the time the special
meeting begins.
Please do not send in your stock certificates with your proxy card.
When the merger is completed, a separate letter of transmittal will
be mailed to you that will enable you to receive the per share merger consideration in exchange for your stock certificates.
If
you submit a proxy, regardless of the method you choose to submit such proxy, the individuals named on the enclosed proxy card, and each of them, with full power of substitution, will
vote your 1st Century shares in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify whether your 1st Century shares should
be voted for or against or to
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abstain
from voting on all, some or none of the specific items of business to come before the special meeting.
If
you properly sign your proxy card but do not mark the boxes showing how your 1st Century shares should be voted on a matter, the 1st Century shares represented by your
properly signed proxy will be voted
"FOR"
approval of the proposal to adopt the merger agreement,
"FOR"
approval of the proposal to approve, by non-binding, advisory vote, certain compensation arrangements for 1st Century's named executive officers in connection with the merger and
"FOR"
approval of
the proposal to adjourn the special meeting, if necessary, desirable or appropriate, to solicit additional proxies if, at the time of
the special meeting, there are an insufficient number of votes in favor of adopting the merger agreement.
If
you have any questions or need assistance voting your 1st Century shares, please contact Georgeson LLC, our proxy solicitor, by calling toll-free at
(866) 695-6078, or by e-mailing 1stcentury@georgeson.com.
IT IS IMPORTANT THAT YOU VOTE YOUR 1ST CENTURY SHARES AT THE MEETING PROMPTLY. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE ACCOMPANYING PREPAID REPLY ENVELOPE, OR SUBMIT YOUR PROXY BY TELEPHONE OR THE INTERNET. STOCKHOLDERS WHO ATTEND THE
SPECIAL MEETING MAY REVOKE THEIR PROXIES BY VOTING IN PERSON.
As of May 17, 2016, the record date, the directors and executive officers of 1st Century beneficially owned and were entitled to vote, in the aggregate, 2,342,004
1st Century shares, representing approximately 22.66% of the outstanding 1st Century shares. We currently expect that each of our directors and executive officers will vote their
1st Century shares in favor of each of the proposals to be presented at the special meeting.
Proxies and Revocation
Any stockholder of record entitled to vote at the special meeting may submit a proxy by telephone, over the Internet or by returning
the enclosed proxy card in the accompanying prepaid reply envelope, or may vote in person by appearing at the special meeting. If your 1st Century shares are held in "street name" through a
bank, brokerage firm or other nominee, you should instruct your bank, brokerage firm or other nominee on how to vote your 1st Century shares using the instructions provided by your bank,
brokerage firm or other nominee. If you fail to submit a proxy or to vote in person at the special meeting, or do not provide your bank, brokerage firm or other nominee with instructions, as
applicable, your 1st Century shares will not be voted on the proposal to adopt the merger agreement, which will have the same effect as a vote
"AGAINST"
approval of the proposal to adopt the merger
agreement. If you fail to submit a proxy or attend the special meeting in person, or if you fail
to provide instructions to your broker in respect of the proposal to approve the merger-related executive compensation or the proposal to adjourn the special meeting, if necessary, desirable or
appropriate, to solicit additional proxies if, at the time of the special meeting, there are an insufficient number of votes in favor of adopting the merger agreement and no additional matter is
brought before the special meeting on which brokers have discretionary voting authority, the 1st Century shares held by you or your broker will not be counted in respect of, and will not have
an effect on, the proposal to approve the merger-related executive compensation or the proposal to adjourn the special meeting, if necessary, desirable or appropriate, to solicit additional proxies
if, at the time of the special meeting, there are an insufficient number of votes in favor of adopting the merger agreement, as applicable. Although we do not expect to bring any matters before the
meeting other than the three proposals described in this proxy statement, if an additional matter is brought before the meeting and is one on which brokers have discretionary voting authority and you
fail to provide instructions to your broker in
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respect
of the proposal to approve the merger-related executive compensation or the proposal to adjourn the special meeting, such broker non-votes will have the same effect as a vote
"AGAINST"
such proposals.
You
have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is exercised, by submitting a later dated proxy through any of
the methods available to you, by giving written notice of revocation to 1st Century's Corporate Secretary, which must be filed with the Corporate Secretary by 5:00 p.m. on the business
day immediately prior to the date of the special meeting, or by attending the special meeting and voting in person. Attending the special meeting alone, without voting at the special meeting, will not
be sufficient to revoke your proxy. Written notice of revocation should be mailed to: 1st Century Bancshares, Inc., Attention: Corporate Secretary, 1875 Century Park East,
Suite 1400, Los Angeles, California 90067.
Shares Held in the 1st Century Bank 401(k) Plan
1st Century shares held in the 1st Century Bank 401(k) Plan, which we refer to as the 1st Century 401(k) plan, are
held of record and are voted by the trustee of the 1st Century 401(k) plan at the direction of 1st Century 401(k) plan participants. Participants in the 1st Century 401(k) plan
will be provided with a proxy card and voting instructions with these proxy materials. If you participate in the 1st Century 401(k) plan, you may give voting instructions as to the number of
full and fractional 1st Century shares allocable to your account as of the record date for determining the stockholders entitled to receive notice of, and to vote at, the special meeting and
any adjournments or postponements thereof. You may provide voting instructions to the trustee under the 1st Century 401(k) plan by completing and returning the proxy card accompanying this
proxy statement, or submitting your proxy by telephone or the Internet. The trustee will vote your 1st Century shares in accordance with your completed proxy card if it is received by
June 15, 2016. If you do not send instructions by this deadline or submit a proxy by following the instructions set forth herein, or if you return your proxy card with an unclear voting
designation or no voting designation at all, the trustee will vote the number of full and fractional 1st Century shares allocable to your account in the same proportion that it votes
1st Century shares for which it did receive timely instructions, unless contrary to the Employee Retirement Income Security Act of 1974, as amended.
1st Century shares held in the 1st Century 401(k) plan may NOT be voted in person at the special meeting as the trustee of the 1st Century
401(k) plan votes the applicable 1st Century shares two business days prior to the special meeting, after receiving voting instructions from the plan participants.
Adjournments
Although it is not currently expected, the special meeting and any adjourned or postponed session of the special meeting may be
adjourned, if necessary, desirable or appropriate, to solicit additional proxies if, at the time of the special meeting, there are an insufficient number of votes in favor of adopting the merger
agreement. Pursuant to the bylaws, approval of the adjournment of the special meeting in a situation in which a quorum is not present or represented at the special meeting requires the affirmative
vote of the holders of a majority of 1st Century shares present in person or represented by proxy. Approval of the proposal to adjourn the special meeting, if necessary, desirable or
appropriate, to solicit additional proxies if, at the time of the special meeting, there are an insufficient number of votes in favor of adopting the merger agreement requires the affirmative vote of
the holders of a majority of 1st Century shares present in person or represented by proxy and entitled to vote at the meeting. Any adjournment of the special meeting for the purpose of
soliciting additional proxies will allow 1st Century's stockholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting as adjourned.
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Anticipated Date of Completion of the Merger
We are working towards completing the merger as soon as possible. Assuming timely satisfaction of the necessary closing conditions, we
currently expect the closing to occur in the second half of 2016 or sooner. If our stockholders vote to approve the proposal to adopt the merger agreement, the merger will become effective as soon as
practicable following the satisfaction or waiver of the other conditions to the merger and the filing of a certificate of merger with the Secretary of State of the State of Delaware, subject to the
terms of the merger agreement. See "The Merger AgreementEffects of the Merger".
Rights of Stockholders Who Seek Appraisal
Stockholders are entitled to appraisal rights under Section 262 of the DGCL in connection with the merger. This means that you
are entitled to have the fair value of your 1st Century shares determined by the Delaware Court of Chancery and to receive payment based on that valuation in lieu of the per share merger
consideration if you follow exactly the procedures specified under Section 262 of the DGCL. The ultimate amount you receive in an appraisal proceeding may be less than, equal to or more than
the amount you would have received under the merger agreement.
To
exercise your appraisal rights, you must submit a written demand for appraisal to 1st Century before the vote is taken on the proposal to adopt the merger agreement and you
must not vote (either in person or by proxy) in favor of the proposal to adopt the merger agreement. Your failure to follow exactly the procedures specified under Section 262 of the DGCL may
result in the loss of your appraisal rights. See "Appraisal Rights" and the text of the Delaware appraisal rights statute reproduced in its entirety as
Annex C
to this proxy statement. If you hold
your 1st Century shares through a bank, brokerage firm or other nominee and you wish to
exercise appraisal rights, you should consult with your bank, brokerage firm or other nominee to determine the appropriate procedures for the making of a demand for appraisal by your bank, brokerage
firm or other nominee. In view of the complexity of Section 262 of the DGCL, stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors promptly.
Solicitation of Proxies; Payment of Solicitation Expenses
1st Century has engaged Georgeson LLC to assist in the solicitation of proxies for the special meeting.
1st Century estimates that it will pay Georgeson LLC a fee of $8,500 and telephone charges. 1st Century has agreed to reimburse Georgeson LLC for certain fees and expenses
and will also indemnify Georgeson LLC, its affiliates and their respective officers, directors, employees and agents against certain losses, claims, damages, costs, charges, counsel fees and
expenses, payments, expenses and liability. 1st Century may also reimburse banks, brokers or their agents for their expenses in forwarding proxy materials to beneficial owners of
1st Century shares. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional
amounts for soliciting proxies.
Questions and Additional Information
If you have more questions about the merger or how to submit your proxy, or if you need additional copies of this proxy statement or
the enclosed proxy card or voting instructions, please contact Georgeson LLC, our proxy solicitor, by calling toll-free at (866) 695-6078, or by e-mailing 1stcentury@georgeson.com.
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THE MERGER
This discussion of the merger is qualified in its entirety by reference to the merger agreement, which is
attached to this proxy statement as
Annex A
. You should read the entire merger agreement carefully as it is the legal document that governs the
merger.
The
merger agreement provides that, on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into 1st Century, with 1st Century
surviving the merger as a wholly-owned subsidiary of Midland. Simultaneously with the merger, 1st Century Bank will merge with and into MidFirst, with MidFirst surviving the bank merger.
Immediately after the merger and bank merger described above, 1st Century (as the surviving corporation in the merger) will merge with and into Midland, with Midland surviving. As a result of
the merger, 1st Century (as the surviving corporation in the merger) will cease to be a publicly traded company and will become a wholly-owned direct or indirect subsidiary of Midland. You will
not own any shares of the capital stock of the surviving corporation in any of the entities surviving the bank merger of the subsequent merger.
Merger Consideration
At the effective time, each 1st Century share issued and outstanding immediately prior to the effective time (other than
excluded shares or dissenting shares) will be converted into the right to receive $11.22 per 1st Century share, without interest.
As
of the effective time, all such 1st Century shares will no longer be outstanding and will automatically be cancelled and will cease to exist, and will thereafter represent only
the right to receive the per share merger consideration to be paid in accordance with the merger agreement, without interest.
In
addition, at the effective time, each 1st Century restricted share that is outstanding immediately prior to the effective time will vest in full and become free of certain
applicable restrictions and any repurchase right will lapse, as of the effective time and, at the effective time, each such 1st Century restricted shares will be converted into the right to
receive the per share merger consideration.
Background of the Merger
The 1st Century board, along with 1st Century's senior management, regularly reviews 1st Century's operations,
financial performance, capital structure and strategies. As part of this review, from time to time, the 1st Century board has considered a variety of strategic alternatives to maximize
stockholder value, including a potential sale of 1st Century, a merger of 1st Century with another community bank and other financial and strategic alternatives, taking into account
1st Century's business strategy and changes in the industry, including the continued consolidation of community banks. Among other things, Alan Rothenberg, 1st Century's Chief Executive
Officer, and Jason DiNapoli, 1st Century's President and Chief Operating Officer, have met from time to time with various representatives from community banks both in and outside of Los
Angeles, California.
On
September 17, 2015, the 1st Century board held a special meeting at which the board and management discussed the need of 1st Century to raise additional capital
in order to sustain its growth. At the invitation of the 1st Century board, representatives of Sandler participated in the meeting. At the meeting, members of management presented a number of
options that management had evaluated in order to address this need, including raising capital through a public offering as well as a potential sale or merger. Sandler then discussed the relative
merits of such options with the 1st Century board and management. Based on these discussions, an evaluation of the various alternatives presented and the
potential risks and benefits associated with each alternative, the 1st Century board determined that it was advisable and in the best interests of 1st Century and its stockholders to
support 1st Century's organic growth strategy by raising $25 million or more in new capital through a public offering of
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common
stock and approved the engagement of Sandler as lead underwriter in the capital raise. On September 24, 2015, the 1st Century board held a special meeting at which the
1st Century board and certain members of management reviewed a draft Registration Statement on Form S-1, which we refer to as the S-1, with respect to a public offering of
1st Century shares. After a discussion regarding the S-1, the 1st Century board determined to increase the amount to be registered to $30 million and approved the filing of the
S-1 with the Securities and Exchange Commission, which we refer to as the SEC. 1st Century filed the S-1 the following day.
Following
the filing of the S-1, Messrs. Rothenberg and DiNapoli had additional meetings with various representatives of certain community banks who, without making any definitive
offers, indicated varying levels of interest in a potential acquisition of 1st Century, including a meeting on October 12, 2015, with Jeffrey Records, Midland's Chief Executive Officer.
On
October 20, 2015, certain funds affiliated with Maltese Capital Management LLC, which we refer to as Maltese and which had been encouraging 1st Century to review
strategic alternatives, including a sale process, filed a Schedule 13D with the SEC which stated that Maltese collectively beneficially owned approximately 9.69% of 1st Century's
outstanding common stock as of the filing date.
On
November 5, 2015, the 1st Century board held a meeting with certain members of management also in attendance. The 1st Century board discussed the status of the
plan to raise capital and the recent Schedule 13D filing by Maltese. Among other things, the 1st Century board discussed various alternatives including, but not limited to, continuing
with the $30 million capital raise as contemplated by the S-1, potentially decreasing the size of the offering and potentially conducting a market check for a potential sale of
1st Century. After significant discussion, the 1st Century board determined that it was advisable and in the best interests of 1st Century and its stockholders to determine
whether there was interest among potential buyers in an acquisition of 1st Century and instructed management to work with Sandler to identify potential buyers and to explore the possibility of
a sale of 1st Century.
On
November 10, 2015, at the direction of the 1st Century board, members of management met with representatives of Sandler to discuss a number of topics, including
potential strategic alternatives and a list of potential companies that management and Sandler believed might be interested in a potential acquisition of 1st Century based on their professional
judgment and knowledge of the marketplace. Based on the direction of the 1st Century board, management authorized Sandler to begin reaching out to parties that might be interested in an
acquisition of 1st Century.
Over
the course of the next several weeks, representatives of Sandler, in consultation with members of management, contacted 15 companies that management and Sandler believed could be
interested in acquiring 1st Century. Seven of the 15 companies expressed initial interest in a potential transaction with 1st Century and entered into confidentiality agreements. Each of
the these seven confidentiality agreements include a one year standstill provision pursuant to which the applicable counterparty is prohibited from taking certain actions with respect to
1st Century during such period, including requesting that 1st Century waive the standstill (subject to certain exceptions in the case of the confidentiality agreement with Midland).
Following the entry into confidentiality agreements, 1st Century granted six of these parties access to an electronic data room populated with certain information regarding 1st Century
and five of these parties participated in meetings with members of 1st Century's management. The seventh party only received limited non-public information because it did not agree to a
non-solicitation provision and therefore was not provided certain employee information. During this period, representatives of two other companies that were potentially interested in an acquisition of
1st Century contacted Sandler or Messrs. Rothenberg or DiNapoli. After preliminary discussions, each of these other two companies determined not to participate further in the process.
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On
December 10, 2015, after discussions with members of management, representatives of Sandler sent the six parties that remained interested in participating in the process
guidelines regarding the procedure for submitting a preliminary non-binding indication of interest to acquire or merge with 1st Century. The guidelines stated, among other things, that
preliminary non-binding indications of interest were due by December 16, 2015.
By
December 16, 2015, Sandler had received six preliminary indications of interest, including an indication of interest from Midland. Three of the indications of interest
contemplated that the bidder's stock would make up 100% of the consideration, two of the indications of interest contemplated a mix of cash and stock consideration with the cash component comprising
up to 50% of the total consideration and the indication of interest from Midland contemplated an all cash transaction. The indications of interest, including Midland's all-cash bid of $10.75 per
share, all contemplated a per share value between $10.00 and $11.00, inclusive, and, in the case of indications of interest contemplating stock consideration, calculated using the applicable implied
price per share.
On
December 21, 2015, the 1st Century board held a meeting that was also attended by certain members of management and representatives of Manatt, Phelps &
Philips LLP, legal counsel to 1st Century, which we refer to as Manatt, and Sandler at the request of the 1st Century board. Representatives of Manatt discussed the directors'
fiduciary duties in connection with a potential sale of 1st Century, and discussed, among other things, forming a special transaction committee of the 1st Century board. The
1st Century board discussed whether any parties that had not been approached by Sandler were likely to be interested in and capable of effecting an acquisition of 1st Century.
Representatives of Sandler indicated that prior to the meeting, one other company had verbally communicated interest in a potential
stock-for-stock merger, but, based on their stock price, a transaction would likely be at a discount to 1st Century's then current market price. Members of management and representatives of
Sandler indicated that they did not know of any companies that had expressed a potential interest or, in their judgment, were likely to be interested in acquiring 1st Century, other than the
parties Sandler had already contacted or those who subsequently reached out and declined to participate in the process. Representatives of Sandler and members of management led a discussion of
1st Century's standalone long-term business plan and capital needs. Representatives of Sandler next reviewed the details of the six preliminary indications of interest and discussed the various
bidders. Following a review of each of the bids, the 1st Century board discussed the fact that the certainty of value and higher degree of certainty of closing provided by Midland's all-cash
bid significantly outweighed the attractiveness of the other bids at their current levels, none of which provided for all cash consideration. In addition, the 1st Century board discussed with
management and representatives of Sandler whether any of the other bidders could or would be likely to raise its bid to such an extent that a part- or all-stock bid would outweigh the benefits of the
all-cash bid, by considering, among other things, the publicly available financial information of such other bidders, and their capital ratios in order to assess their capacity to make a higher bid.
The 1st Century board and 1st Century's representatives also discussed, among other things, certain other aspects included in the preliminary indications of interest, including that the
preliminary indication of interest from Midland included a request for a 60-day exclusivity right for Midland to conduct due diligence and negotiate definitive documentation. Among other things, the
preliminary indication of interest from Midland noted that Midland currently had no operations in Los Angeles, that it intended for 1st Century to continue to operate in a manner substantially
consistent with its existing operations, and that Midland therefore believed it was particularly important to retain 1st Century's executives, business producers and other employees following
any transaction. The preliminary indication of interest from Midland stated that Midland would require certain key employees identified during due diligence, including Messrs. Rothenberg and
DiNapoli, to enter into employment agreements to be effective upon the closing, the effectiveness of which would be a condition to closing. Following this discussion, the 1st Century board
instructed Sandler to counter Midland's $10.75 per share cash proposal with a price
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of
$12.00 per share, and authorized management to execute a non-binding letter of intent granting Midland exclusivity if Midland agreed to the $12.00 per share counter-proposal.
On
December 22, 2015, Midland presented a revised non-binding indication of interest, which we refer to as the indication of interest, providing for an all cash acquisition at
$12.00 per share subject to completion of confirmatory due diligence. As contemplated by Midland's preliminary indication of interest described above, the indication of interest included a 60-day
exclusivity right for Midland to conduct due diligence and negotiate definitive documentation. As contemplated by Midland's preliminary indication of interest described above, the indication of
interest stated that Midland would require certain key employees identified during due diligence, including Messrs. Rothenberg and DiNapoli, to enter into employment agreements to be effective
upon the closing, the effectiveness of which would be a condition to closing. Mr. Rothenberg countersigned the indication of interest later that day pursuant to the 1st Century board's
previous instructions.
On
December 23, 2015, and on December 30, 2015, representatives of 1st Century and Midland held organizational calls with certain of their advisors to discuss the
due diligence process and proposed timeline. Over the course of the following weeks, employees of 1st Century and employees of Midland conducted a number of in person and telephonic due
diligence sessions.
On
January 7, 2016, the 1st Century board held a meeting that was also attended by certain members of management and representatives of Manatt and Sandler at the request of
the 1st Century board. At the meeting, Mr. Rothenberg updated the 1st Century board regarding the discussions with Midland and noted that Midland had scheduled meetings in the
coming weeks to, among other things, coordinate Midland's due diligence on 1st Century and discuss the proposed employment arrangements contemplated by the indication of interest. At the
meeting, the 1st Century board determined to form a special transaction committee, which we refer to as the special transaction committee, consisting of three independent and
disinterested directors: Dave Brooks, Eric George and Alan Levy. The 1st Century board authorized the special transaction committee to, among other things, review, consider, evaluate, direct
and oversee negotiations with Midland, direct and oversee management and 1st Century's outside advisors, evaluate and review any potential alternative transaction and to make (or refrain from
making) a recommendation to the 1st Century board regarding the proposed transaction with Midland or any alternative transaction. The 1st Century board further determined that it would
not recommend a possible transaction or alternative thereto without a prior favorable recommendation by the special transaction committee. 1st Century also engaged Richards, Layton &
Finger, P.A. as Delaware legal counsel, whom we refer to as RLF.
Later
on January 7, 2016, the special transaction committee held a meeting that was also attended by certain members of management and representatives of Manatt and Sandler at the
request of the special transaction committee. At the meeting, the special transaction committee elected Eric George to serve as the chair of the special transaction committee.
During
the week of January 11, members of management continued to discuss and provide certain due diligence materials in connection with Midland's ongoing due diligence
investigation. 1st Century also determined to engage Sullivan & Cromwell LLP, which we refer to as Sullivan & Cromwell, as legal counsel to 1st Century for the
potential transaction going forward.
On
January 14, 2016, the special transaction committee held a meeting that was also attended by certain members of management and representatives of Sullivan & Cromwell and
Sandler at the request of the special transaction committee. Messrs. Rothenberg and DiNapoli provided the special transaction committee members with an update regarding the due diligence
process, including with respect to Midland's continued review of documents posted to the electronic data room as well as in person and telephonic due diligence sessions between certain
1st Century employees and their counterparts at Midland that had taken place in the preceding week. Representatives of Sullivan & Cromwell then provided an overview of next steps and
milestones in connection with the transaction
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and
other transaction related matters. Management and 1st Century's advisors also discussed the need and plans for certain reverse due diligence with respect to Midland.
On
January 18, 2016, Midland and representatives of Covington & Burling LLP, legal counsel to Midland, which we refer to as Covington, provided a draft merger
agreement to 1st Century and Sullivan & Cromwell.
On
January 22, 2016, the special transaction committee held a meeting that was also attended by certain members of management and representatives of Sullivan & Cromwell and
Sandler at the request of the special transaction committee. At the meeting, members of management provided the special transaction committee with an update regarding Midland's due diligence and due
diligence sessions taking place with certain 1st Century employees and their counterparts at Midland. Representatives of Sullivan & Cromwell then reviewed the terms of the current draft
merger agreement with the special transaction committee, and discussed, among other things, regulatory approvals, the conditions to closing (including a condition requiring certain then unspecified
1st Century employees to have entered into employment agreements and that such agreements be in full force and effect and the applicable employees be ready, willing and able to perform their
duties thereunder), the provisions that enable the directors to change their recommendation of the merger under certain circumstances and the termination fee payable by 1st Century upon
termination for specified reasons. Sullivan & Cromwell then reviewed the directors' fiduciary duties generally and in the context of the proposed merger. After receiving input from management
and the special transaction committee, the special transaction committee authorized management and Sullivan & Cromwell, in consultation with RLF, to proceed with negotiations on the terms of
the merger agreement with Covington.
On
January 26, 2016, certain members of management of 1st Century, representatives of Sullivan & Cromwell and Sandler participated in a conference call regarding
certain reverse diligence matters related to Midland with certain members of management of Midland and representatives of Covington.
On
January 27, 2016, the special transaction committee held a meeting that was also attended by certain members of management and representatives of Sullivan & Cromwell at
the request of the special transaction committee. Management and Sullivan & Cromwell updated the special transaction committee regarding the reverse due diligence call and the status of the
draft documentation.
On
January 28, 2016, the 1st Century board held a regularly scheduled meeting that was also attended by certain members of management and representatives of
Sullivan & Cromwell at the request of the 1st Century board. During the course of that meeting, the 1st Century board received a transaction update from Mr. Rothenberg,
including, among other things, a discussion on Midland's due diligence process, the status of negotiations on the merger agreement and an update regarding the reverse due
diligence call with Midland. In light of the discussions with Midland, the 1st Century board deferred approval of certain restricted stock grants.
On
February 2, 2016, Mr. Records and Todd Dobson, Midland's Chief Financial Officer, met with Messrs. Rothenberg and DiNapoli in Los Angeles to discuss personnel
matters. Midland provided Messrs. Rothenberg and DiNapoli with term sheets outlining proposed employment terms and the terms of certain non-compete and restrictive covenant agreements to be
entered into by Messrs. Rothenberg and DiNapoli.
Also
on February 2, 2016, Sullivan & Cromwell and Covington discussed Sullivan & Cromwell's markup to the draft merger agreement, including, among other things, the
standard for securing regulatory approvals, the scope of the representations and warranties, certain interim operating covenants, the provisions allowing 1st Century to discuss and negotiate
acquisition proposals with third parties and to change its recommendation of the merger (including for intervening events), conditions to closing, the termination rights, the events that would give
rise to the payment of a termination fee
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and
the size of the termination fee. That same day, Covington circulated a revised draft of the merger agreement and a draft voting agreement pursuant to which directors and certain officers of
1st Century, who collectively own approximately 21.5% of 1st Century's outstanding shares, would be obligated, among other things, to vote in favor of the proposed transaction and
against any competing proposals.
On
February 3, 2016, the special transaction committee held a meeting that was also attended by certain members of management and representatives of Sullivan & Cromwell and
Sandler at the request of the special transaction committee. Messrs. Rothenberg and DiNapoli updated the special transaction committee regarding their discussions with Midland regarding their
employment terms and indicated that Midland wanted to negotiate the terms of Mr. Rothenberg and Mr. DiNapoli's employment before negotiating arrangements with certain other management
personnel. Sullivan & Cromwell discussed the revised draft merger agreement provided by Covington, including, among other things, the conditions to closing, specifically the condition related
to the employment arrangements, and the fact that Midland had not yet confirmed that such condition would be limited to Messrs. Rothenberg and DiNapoli, as well as the termination and
termination fee provisions.
From
February 3, 2016 through February 10, 2016, Sullivan & Cromwell and Covington continued to negotiate the key terms of the proposed merger agreement. During this
time, Sullivan & Cromwell continued to seek confirmation from Covington that the only employees subject to the employment closing condition in the merger agreement would be
Messrs. Rothenberg and DiNapoli, and asked Covington to identify any additional employees that would be required to enter into employment agreements as a condition to the signing of the merger
agreement.
On
February 10, 2016, the special transaction committee held a meeting that was also attended by certain members of management and representatives of Sullivan & Cromwell
and Sandler at the request of the special transaction committee. Sullivan & Cromwell updated the special transaction committee on the terms of the draft merger agreement and noted that
Covington had conveyed that Midland would require that three additional employees (other than Messrs. Rothenberg and DiNapoli), who we refer to as the first three employees, enter into
employment agreements as a condition to its signing the merger agreement and would impose an additional closing condition that at least two out of the first three employees continue to be employed at
closing. These three employees were at that time only parties to severance, and not employment, agreements with 1st Century. Additionally, Sullivan & Cromwell informed the special
transaction committee that Midland had not yet conveyed which or how many additional employees would be required to enter into employment agreements as a condition to signing the merger agreement.
Representatives of Sullivan & Cromwell informed the special transaction committee that they had advised Covington that it was imperative that such additional employees be identified as soon as
possible, because it would take time to negotiate agreements with any such individuals. Messrs. Rothenberg and DiNapoli indicated that based on their discussions with representatives from
Midland, they were anticipating that Midland would seek to require up to six additional employees to enter into employment agreements and/or retention agreements prior to signing the merger agreement.
Messrs. Rothenberg and DiNapoli then updated the special transaction committee regarding the negotiation of their respective employment arrangements, noting that Midland had still only provided
term sheets. The special transaction committee instructed management and Sullivan & Cromwell that any conversations with Midland should not indicate acceptance of Midland's request regarding
the expansion of the employee closing condition to the first three employees and should emphasize that Midland needs to identify any additional employees for whom employment agreements or retention
agreements would be required as a condition to signing, and provide drafts of all expected employment or retention agreements as soon as possible.
On
February 11, 2016, Covington and Sullivan & Cromwell discussed the open issues relating to the draft merger agreement, including the conditions to closing, termination
rights and related fees and expenses.
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Later
on February 11, 2016, Covington circulated a revised draft of the merger agreement and a draft form of non-competition and restrictive covenant agreement to
Sullivan & Cromwell.
On
February 12, 2016, Midland circulated proposed term sheets to the first three employees. On this same day, certain members of management of 1st Century and
representatives of Sandler participated in a conference call during which they reviewed 1st Century's 2015 year end results, revised financial projections reflecting updates to
1st Century's expected future results, and certain due diligence questions with certain members of management of Midland and representatives of Macquarie Capital, Midland's investment banker,
which we refer to as Macquarie. During the discussion, year-end results versus budgeted financials, deposit growth, funding costs, capital raise related expenses, material
changes in the interest rate environment and 1st Century's capital needs were reviewed. Furthermore, January 2016 results were provided by 1st Century. Following the call,
1st Century provided Midland and Macquarie with the updated budget for years 2016 - 2019.
On
February 15, 2016, Mr. Dobson indicated to Mr. DiNapoli that three additional employees (other than Messrs. Rothenberg and DiNapoli and the first three
employees), who we refer to as the second three employees, would be required to execute employment agreements as a condition to signing of the merger agreement. These three employees were at that time
only parties to severance, and not employment, agreements with 1st Century. In addition, Mr. Dobson indicated that Midland would require that five additional employees (beyond those with
whom Midland was requesting employment agreements) execute retention agreements prior to signing.
On
February 16, 2016, the special transaction committee held a meeting that was also attended by certain members of management and representatives of Sullivan & Cromwell at
the request of the special transaction committee. Mr. DiNapoli updated the special transaction committee on, among other things, the employment term sheets Midland had circulated to the first
three employees, certain initial negative reactions of these employees, certain substantive issues regarding the proposed employment agreements with Messrs. Rothenberg and DiNapoli and the
request from Midland that the second three employees enter into employment agreements and five additional employees enter into retention agreements as a condition to signing the merger agreement.
Representatives of Sullivan & Cromwell updated the special transaction committee on the latest draft merger agreement received from Covington. The special transaction committee also discussed,
among other things, how the additional employment and retention agreement issues could potentially impact the timing of signing a definitive merger agreement and noted that the 60-day exclusivity
period contemplated by the indication of interest would expire on February 20, 2016.
Later
on February 16, Midland communicated through Macquarie that Midland was lowering its proposed offering price from $12.00 per share to $11.13 per share. Thereafter, on
February 16, 2016 and February 17, 2016, representatives of Sandler participated on calls with Mr. Records and Macquarie regarding the proposed change in price. On
February 17, 2016, the special transaction committee held a meeting that was also attended by certain members of management and representatives of Sullivan & Cromwell and Sandler at the
request of the special transaction committee. Representatives of Sandler updated the special transaction committee regarding, among other things, their discussions with Mr. Records and
representatives of Macquarie regarding the changed price proposal from Midland, noting that Sandler had not made any indication as to whether 1st Century would be agreeable to the change and
that they were still in the process of analyzing the revised offer. The special transaction committee expressed disappointment in the lower price and instructed Sandler to continue to analyze the
reduced price and engage in additional discussions with Midland and Macquarie regarding their purported justifications therefor. The special transaction committee also informed members of management
and 1st Century's advisors that, in light of Midland's continued insistence on employment agreements as a condition to executing the merger agreement, members of 1st Century management
should continue to work to resolve outstanding employee matters. In light of the proposed reduction in the purchase price and the on-going employment discussions, the special transaction committee
supervised a process under which the negotiation of the substantive terms of the employment agreements were separate and distinct from the negotiation of the purchase price.
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Later on February 17, 2016, Mr. Dobson emailed Mr. DiNapoli a spreadsheet outlining the proposed terms for the second three employees
required to execute employment agreements and the five employees Midland had identified to execute retention agreements, in each case prior to execution of the merger agreement.
On
February 18, 2016, Messrs. Rothenberg and DiNapoli met at Midland's headquarters with Messrs. Records and Dobson, as well as Midland's head of Human Resources, to
discuss the substantive remaining issues regarding their respective employment arrangements and the employment and retention arrangements Midland was proposing with respect to additional members of
1st Century management.
Also
on February 18, 2016, and again on February 19, 2016, the special transaction committee held meetings that were also attended by certain members of management and
representatives of Sullivan & Cromwell and Sandler at the request of the special transaction committee. At the meetings, Messrs. Rothenberg and DiNapoli updated the special transaction
committee regarding, among other
things, their discussions with Midland regarding proposed employment and personnel arrangements, including, among other things, progress regarding Mr. Rothenberg and DiNapoli's arrangements and
the comments from counsel to the first three employees. Mr. Rothenberg reported that he was satisfied with the substantive terms of his employment agreement. Mr. Rothenberg further
reported that Midland and Mr. DiNapoli agreed that the term of Mr. DiNapoli's employment agreement would be four years (instead of three as requested by Mr. DiNapoli), the term of
Mr. DiNapoli's non-compete agreement would be four years (instead of three as requested by Mr. DiNapoli), Mr. DiNapoli would agree to additional restrictive covenants not included
in his existing employment agreement and Midland would pay Mr. DiNapoli an additional retention bonus payable one-half in year three and one-half in year four of his new employment agreement.
Messrs. Rothenberg and DiNapoli then updated the special transaction committee regarding certain discussions with Messrs. Records and Dobson in which they agreed that (i) the
first three employees need not be covered by the employee related closing condition, but would still be required to enter into employment agreements at signing and (ii) the proposed retention
agreements with the five additional individuals would not be required as a condition to signing so long as 1st Century agreed to use reasonable best efforts to cause such agreements to be
executed between signing and closing. The special transaction committee instructed Mr. DiNapoli to speak with the employees to discuss their concerns.
Discussions
continued with the first three employees and their counsel through the weekend of February 20 and 21, 2016. On Monday, February 22, 2016, these three employees
met with representatives from Midland to discuss their respective roles following the proposed merger.
Later
on February 22, 2016, the special transaction committee held a meeting that was also attended by certain members of management and representatives of Sullivan &
Cromwell and Sandler at the request of the special transaction committee. Sandler discussed with the special transaction committee, among other things, Midland's proposed reduction in price and
certain justifications Midland and Macquarie had provided to Sandler, which, among other things, included the change in expected future interest rates that had occurred since December 2015 and the
resulting expected impact on 1st Century's net interest margin through 2020, the greater than expected compliance overhead, and a differential versus 1st Century's projections of
$70 million in deposits as of January 31, 2016, $50 million of which Midland assumed to be a permanent shortfall. Sandler, the special transaction committee and members of
management went on to discuss the general downturn and disruption in the stock markets, in particular discussing the significant decline in the stock prices for bank holding companies since the
beginning of the year. The meeting participants also discussed, among other things, Midland's revised offer relative to the other bids that had been provided in December prior to the renewed
volatility in the markets. Messrs. Rothenberg and DiNapoli updated the special transaction committee regarding their discussions on employment and personnel matters,
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including
whether 1st Century could satisfy Midland's conditions to signing regarding additional employment agreements.
On
February 23, 2016, one of the initial bidders that had submitted a bid in December contemplating an acquisition of 1st Century for 100% stock consideration emailed
Messrs. Rothenberg and DiNapoli indicating that the company remained interested in a potential acquisition of 1st Century. This bidder's preliminary indication of interest contemplated a
fixed-exchange ratio at an implied price per share of $11.00.
Later
on February 23, 2016, representatives of Sandler had an additional discussion with representatives of Macquarie regarding Midland's proposed reduction in price and the
justifications Midland and Macquarie had provided to Sandler.
On
February 24, 2016, the special transaction committee held a meeting that was also attended by certain members of management and representatives of Sullivan & Cromwell
and Sandler at the request of the special transaction committee. At the meeting, the special transaction committee and representatives of Sullivan & Cromwell and Sandler discussed the email of
February 23, 2016, including, among other things, the price previously offered by this bidder, the proposed form of consideration such bidder had offered, the progress that had been made with
Midland towards reaching a definitive agreement and regarding their due diligence process, the belief that a definitive agreement with Midland could potentially be reached in a relatively short time,
the need for this other bidder to conduct due diligence if further discussions were to be pursued, and other advantages and disadvantages of reengaging with this alternative bidder, including the risk
of Midland withdrawing its offer. Representatives of Sullivan & Cromwell advised the special transaction committee, among other things, regarding their fiduciary duties in this context and the
special transaction committee determined that the email from the other bidder would be discussed with the full 1st Century board.
Messrs. Rothenberg
and DiNapoli and two of the first three employees met with Mr. Dobson on February 25, 2016, to discuss some of the remaining open points
pertaining to employment and personnel issues and the arrangements that Midland was requiring as a condition to signing.
On
February 26, 2016, the special transaction committee held a meeting that was also attended by certain members of management and representatives of Sullivan & Cromwell
and Sandler at the request of the special transaction committee. The attendees discussed the status of the remaining open items generally, including the proposed reduction in purchase price, the email
correspondence from one of the initial bidders that had submitted a bid in December, and whether 1st Century could satisfy Midland's conditions to signing regarding additional employment and
retention agreements. The special transaction committee instructed management and 1st Century's advisors that they should continue to try to resolve the open employment and personnel issues
that Midland was continuing to require as a condition to signing.
On
February 29, 2016, Midland contacted Mr. DiNapoli to convey its proposed resolution of the open employment agreement issues with the first three employees.
Also
on February 29, 2016, the special transaction committee held a meeting that was also attended by certain members of management and representatives of Sullivan &
Cromwell and Sandler at the request of the special transaction committee. Mr. DiNapoli reported on the status of the transaction documentation and the outstanding employment and personnel
issues.
On
March 2, 2016, Midland sent draft employment agreements for the second three employees. These three employees only had minor comments to the proposed agreements that were
resolved with their counsel over the next few days.
Later
on March 2, 2016, the special transaction committee held a meeting that was also attended by certain members of management and representatives of Sullivan & Cromwell
and Sandler at the request of the special transaction committee. Mr. DiNapoli provided the special transaction committee
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with
an update regarding, among other things, the outstanding employment and personnel issues noting that the first three employees had agreed on substantive business terms with Midland.
Mr. DiNapoli reported that the final terms did not provide any additional financial remuneration to such employees beyond what they would have otherwise received as a result of the merger under
1st Century's existing arrangements, but instead modified the timing of such payments, and included additional conditions and restrictive covenants. The special transaction committee concluded
that 1st Century would likely be able to satisfy Midland's conditions to signing regarding additional employment agreements and asked representatives of Sandler to present an overview of the
timeline and discussions with Midland to date. Representatives of Sandler then recapped the indications of interest received in December. In addition, Sandler reviewed with the special transaction
committee their financial analyses regarding 1st Century including in light of Midland's currently proposed purchase price, and including, among other things, a comparable company analysis, a
net present value analysis and certain comparable transaction analyses. Representatives of Sandler and members of the special transaction committee also reviewed 1st Century's stand-alone
financial projections prepared by 1st Century management. The attendees at the meeting proceeded to discuss, among other things, the unsolicited email of February 23, 2016 that had been
received from one of the initial bidders, the justifications that Midland and Macquarie had provided to Sandler regarding the price reduction, the process undertaken to date as well as strategy for
responding to Midland's proposed price reduction and authorized Messrs. Rothenberg and DiNapoli to arrange a meeting with Midland to discuss the price reduction.
On March 3, 2016, the 1st Century board held a regularly scheduled meeting that was also attended by certain members of management and representatives of Sullivan &
Cromwell and Sandler at the request of the 1st Century board. During the course of that meeting, the 1st Century board received a transaction update from Messrs. Rothenberg and
DiNapoli, including, among other things, a discussion of Midland's proposed price reduction. Sandler discussed certain justifications that Midland and Macquarie had provided to Sandler regarding the
price reduction, which justifications had previously been discussed with the special transaction committee, and Sandler, management and the 1st Century
board also discussed the general downturn and disruption in the markets, in particular discussing the significant decline in the stock prices for bank holding companies since the beginning of the
year. The 1st Century board also discussed the unsolicited email of February 23, 2016 that had been received from one of the initial bidders indicating that it remained interested in a
potential acquisition of 1st Century. This included discussions regarding, among other things, the price previously offered by this bidder, the proposed form of consideration such bidder had
offered, the progress that had been made with Midland towards reaching a definitive agreement and the belief that a definitive agreement with Midland could potentially be reached in a relatively short
time, Midland's due diligence process, the need for this other bidder to conduct due diligence if further discussions were to be pursued, and other risks related to reengaging with this or any other
alternative bidder, including the risk of Midland withdrawing its offer. Based on these discussions and the factors mentioned above, the 1st Century board determined that 1st Century
should continue to focus on the proposed transaction with Midland and that Messrs. Rothenberg and DiNapoli should go back to Midland to discuss the proposed transaction price and see if they
could achieve any improvement over the $11.13 proposal.
Also on March 3, 2016, prior to and following the 1st Century board meeting, Messrs. Rothenberg and DiNapoli had discussions with Messrs. Records and Dobson.
In their discussions, in an effort to get Midland to improve its offered price, Messrs. Rothenberg and DiNapoli discussed Midland's justifications for the reduced purchase price.
Messrs. Rothenberg, DiNapoli, Records and Dobson also discussed the process going forward with respect to purchase price discussions.
On
March 4, 2016, Midland sent Messrs. Rothenberg and DiNapoli a letter requesting confirmation that 1st Century had formally rejected the $11.13 offer price. In
response to this letter, Messrs. Rothenberg and DiNapoli called Mr. Dobson and indicated that the $11.13 price had not yet been formally presented to the 1st Century board for
approval, which was confirmed by email. On this telephone call, Messrs. Rothenberg and DiNapoli further noted that following receipt of the letter,
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Mr. Rothenberg
canvassed the 1st Century board and believed that the 1st Century board would likely support a transaction with Midland in the $11.40s.
On
March 7, 2016, Midland sent Messrs. Rothenberg and DiNapoli a letter including what Midland characterized as its non-binding "best and final" proposal to acquire
1st Century at a price per share of $11.22 in cash. The letter also stated that Midland's proposal was contingent on entry into a proposed merger agreement in substantially the form to be
submitted by Covington later on March 7, and entry into the voting agreement, employment agreements and non-compete and restrictive covenant agreements in substantially the forms last provided
to 1st Century and that the proposal would expire if not countersigned by midday on March 8, 2016. Prior to receipt of a revised draft merger agreement from Covington, Sullivan &
Cromwell verbally conveyed to Covington comments on the merger agreement and the non-compete and restrictive covenant agreements. As contemplated by the letter,
Covington sent a revised draft merger agreement later that day reflecting certain comments raised in the earlier discussions with Sullivan & Cromwell.
On
March 8, 2016, the special transaction committee held a meeting that was also attended by certain members of management and representatives of Sullivan & Cromwell and
Sandler at the request of the special transaction committee. At the meeting, representatives of Sullivan & Cromwell and Sandler provided an update to the special transaction committee on, among
other things, the process of finalizing outstanding items with representatives of Midland and Covington. Representatives of Sullivan & Cromwell provided an update on the terms of the draft
merger agreement and the other documents received from Covington. A representative of Sandler reviewed with the special transaction committee Sandler's financial analysis of the per share merger
consideration, including, among other things, that the proposed price represented a 43.8% premium over 1st Century's March 7, 2016 closing price, a comparable company analysis, a net
present value analysis and certain comparable transaction analyses. Representatives of Sandler and members of the special transaction committee also reviewed 1st Century's stand-alone financial
projections prepared by 1st Century management. The members of the special transaction committee engaged in an extensive discussion regarding the proposed transaction.
Later
on March 8, 2016, the 1st Century board held a meeting that was also attended by certain members of management and representatives of Sullivan & Cromwell and
Sandler at the request of the 1st Century board. A representative of Sullivan & Cromwell discussed the directors' fiduciary duties and reviewed the terms of the proposed merger
agreement, including, among other things, the conditions to closing, the deal protection measures in the proposed merger agreement and the proposed voting agreement, and the interaction between the
deal protection measures and the standstill provisions included in the confidentiality agreements entered into with the other parties who had submitted bids. The 1st Century board also
considered the progress that had been made with Midland and the advantages and disadvantages of reengaging with alternative bidders. A representative of Sandler reviewed with the 1st Century
board Sandler's draft financial analysis of the per share merger consideration, including, among other things, that the proposed price represented a 43.8% premium over 1st Century's
March 7, 2016 closing price, a comparable company analysis, a net present value analysis and certain comparable transaction analyses. Representatives of Sandler and members of the
1st Century board also reviewed 1st Century's stand-alone financial projections prepared by 1st Century management. Following these discussions, the 1st Century board
instructed Mr. Rothenberg to indicate verbally to Midland that the 1st Century board would be supportive of a purchase price of $11.22 per share, acknowledging that final details of the
transaction documents needed to be worked out.
Over
the course of the next two days, members of 1st Century management and representatives of Sullivan & Cromwell and Sandler worked with Midland and its representatives
to finalize the merger agreement, disclosure schedules and the other definitive transaction documentation.
In
the morning of March 10, 2016, the special transaction committee held a meeting that was also attended by certain members of management and representatives of Sullivan &
Cromwell and Sandler
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at
the request of the special transaction committee. At the meeting, representatives of Sandler and Sullivan & Cromwell provided an update to the special transaction committee on the state of
the documentation and the process of finalizing outstanding items with representatives of Midland and Covington. Representatives of Sullivan & Cromwell provided an update on, among other
things, the terms of the draft merger agreement, employment agreements, non-competition and restrictive covenant agreements and voting agreement, reviewed the agenda for the 1st Century board
meeting, including a review of the directors' fiduciary duties with respect to the proposed transaction, as well as next steps after signing definitive documentation. A representative of Sandler
reviewed with the special transaction committee Sandler's financial analysis of the per share merger consideration, including, among other things, that the proposed price represented a 40.3% premium
over 1st Century's March 9, 2016 closing price, and Sandler indicated it was prepared to issue a fairness opinion later that day at the 1st Century board meeting. The members of
the special transaction committee engaged in an extensive discussion regarding the proposed transaction, including, among other things, the financial analysis undertaken by Sandler, the indications of
interest received in December, the terms of the proposed final documentation, the progress that had been made with Midland and the advantages and disadvantages of reengaging with alternative bidders.
At the conclusion of the discussion, the special transaction committee determined to recommend to the 1st Century board that, subject to the 1st Century board receipt of the opinion of
Sandler that the per share merger consideration to be paid to the holders of 1st Century shares pursuant to the merger agreement was fair, from a financial point of view, the 1st Century
board (i) determine that the merger agreement and the transactions contemplated by the merger agreement are fair to and in the best interests of 1st Century and its stockholders,
(ii) approve and declare advisable the merger agreement and the transactions contemplated by the merger agreement and (iii) resolve to recommend that the stockholders of
1st Century vote to adopt the merger agreement.
Later
on March 10, 2016, the 1st Century board held a meeting that was also attended by certain members of management and representatives of Sullivan & Cromwell and
Sandler at the request of the 1st Century board. Representatives of Sullivan & Cromwell discussed the directors' fiduciary duties and reviewed the terms of the proposed merger agreement,
including, among other things, the conditions to closing, the deal protection measures in the proposed merger agreement and the proposed voting agreement, and the interaction between the deal
protection measures and the standstill provisions included in the confidentiality agreements entered into with the other parties who had submitted bids as well as the employment agreements and
non-competition and restrictive covenant agreements. Representatives of Sandler reviewed with the board of directors Sandler's financial analysis of the per share merger consideration, including,
among other things, that the proposed price represented a 40.3% premium over 1st Century's March 9, 2016 closing price, and rendered to the 1st Century board an oral opinion,
which was subsequently confirmed by delivery of a written opinion dated March 10, 2016 that, as of such date and based upon and subject to various assumptions made, procedures followed, matters
considered, and qualifications and limitations upon the review undertaken in preparing its opinion, the per share merger consideration to be paid to the holders of 1st Century shares (other
than certain excluded shares) pursuant to the merger agreement was fair, from a financial point of view, to such holders. For a more detailed discussion of Sandler's opinion, please see below under
the caption "Opinion of Sandler O'Neill + Partners, L.P.". Such opinion is attached to this proxy statement as
Annex D
. The 1st Century board then engaged in discussions
regarding the proposed transaction, including, among other things, the
indications of interest received in December, the terms of the proposed final documentation, the progress that had been made with Midland and the advantages and disadvantages of reengaging with
alternative bidders. Following consideration of the
merger agreement and the transactions contemplated by the merger agreement and the recommendation of the special transaction committee, the 1st Century board, among other things, unanimously
(i) determined that the merger agreement and the transactions contemplated by the merger agreement are fair to, and in the best interest of, 1st Century and its stockholders,
(ii) approved and declared advisable the merger agreement and the transactions contemplated by the merger
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agreement,
(iii) resolved that the merger agreement be submitted for consideration and adoption by the stockholders of 1st Century entitled to vote thereon and recommended that the
1st Century stockholders adopt the merger agreement. The 1st Century board also discussed and approved the amendment to 1st Century's bylaws to include a forum selection clause.
Thereafter
on March 10, 2016, Midland, Merger Sub and 1st Century executed the merger agreement and Midland and/or MidFirst entered into the voting agreement, employment
agreements and non-competition and restrictive covenant agreements with the individuals party thereto. 1st Century and Midland subsequently issued a joint press release announcing the execution
of the merger agreement.
Reasons for the Merger; Recommendation of the Board of Directors
The 1st Century board unanimously recommends that you vote "FOR" the proposal to adopt the merger
agreement.
In
reaching its decision to approve and recommend the adoption of the merger agreement and the transactions contemplated by the merger agreement, the 1st Century board consulted
with 1st Century's management, as well as its financial and legal advisors, and considered a number of factors, including the following material factors:
-
-
Per Share Merger Consideration.
The 1st Century
board considered that the per share merger consideration represented an approximately 40.3% premium over 1st Century's closing share price on March 9, 2016, the day before the
transaction was announced. The 1st Century board considered that in its view it had obtained Midland's "best and final" offer and that, as of the date of the merger agreement, the per share
cash consideration represented the highest per share consideration reasonably obtainable.
-
-
Business, Financial Condition and Prospects of
1st Century.
The 1st Century board considered the current and historical financial condition, results of operations,
business, competitive position, assets and prospects of 1st Century and the risks and challenges associated with remaining an independent institution. The 1st Century board also
considered the current environment in the financial services industry, including national, regional and local economic conditions and the continued low interest rate environment, continued
consolidation, increased operating costs resulting from regulatory initiatives and compliance mandates, increasing nationwide and global competition, the current environment for community banks and
current financial market conditions. The 1st Century board weighed the certainty of realizing a compelling value for 1st Century's common stock in the merger compared to the uncertain
potential value that might result from other alternatives reasonably available to 1st Century, including the alternative of remaining a standalone independent company. In light of a number of
factors, including the risks and uncertainty associated with 1st Century and its business (including, among other things, the risk factors set forth in 1st Century's Annual Report on
Form 10-K for the fiscal year ended December 31, 2015), the 1st Century board believed that a sale of 1st Century to Midland for $11.22 per 1st Century share in cash
was more favorable to 1st Century's stockholders than the alternative of remaining a standalone independent company.
-
-
Market Check.
1st Century and Sandler actively
sought proposals from other parties they believed would potentially be interested in acquiring 1st Century (as more fully described above in "Background of the Merger"). The
1st Century board also considered a variety of strategic alternatives to maximize stockholder value, including, among other things, raising additional capital to sustain 1st Century's
organic growth, a potential sale of 1st Century or a merger of 1st Century with another community bank, taking into account, among other things, 1st Century's business strategy
and prospects, changes in the industry and the continued consolidation of community banks.
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-
-
Negotiation Process.
The 1st Century board
considered the fact that the terms of the merger agreement were the result of arm's-length negotiations conducted by 1st Century, with the knowledge and at the direction of the special
transaction committee and the 1st Century board, and with the assistance of independent financial and legal advisors.
-
-
Certainty of Consideration.
The 1st Century board
considered the fact that the merger consideration is to be paid entirely in cash, which will allow 1st Century's stockholders to realize, upon the closing, a certainty of value and liquidity
particularly when viewed in light of the risks and uncertainties inherent in 1st Century's prospects and the market, economic and other risks that arise from owning an equity interest in a
public company.
-
-
Likelihood of Consummation.
The 1st Century board
considered the likelihood of the merger being completed, based on, among other factors, the absence of a financing condition in the merger agreement and the requirement that both parties use
reasonable best efforts to obtain applicable regulatory approvals. In addition, the 1st Century board considered its understanding of Midland's ability to successfully complete the merger,
including its understanding of the financial capability of Midland, Midland's regulatory relations, prevailing trends affecting the regulatory approval of bank mergers and the factors considered by
bank regulators in approving such mergers, and the expectation that such regulatory approvals would be received in a timely manner and without the imposition of a burdensome condition.
-
-
Opinion of Financial Advisor.
The 1st Century
board considered the presentation of Sandler and the oral opinion of Sandler to the 1st Century board (which was subsequently confirmed in writing by delivery of Sandler's written opinion dated
March 10, 2016, a copy of which is attached to this information statement as
Annex B
and which you should read carefully in its entirety)
to the effect that, as of March 10, 2016 and subject to the assumptions, qualifications, limitations and other matters considered in the opinion, the merger consideration to be received by the
holders of 1st Century shares was fair, from a financial point of view, to such stockholders. For a further discussion of Sandler's opinion, see "Opinion of Sandler O'Neill &
Partners, L.P."
-
-
Certain Management Projections.
The 1st Century
board considered certain prospective forecasts for 1st Century prepared by senior management of 1st Century, which reflect an application of various commercial assumptions of
1st Century senior management. For further discussion, see "Certain Unaudited 1st Century Forecasts".
-
-
Other Terms of the Merger Agreement.
The
1st Century board considered other terms of the merger agreement, which are more fully described in "The Merger Agreement". Certain provisions of the merger agreement that the
1st Century board considered important include, among other things, the provisions relating to (i) the ability to respond to unsolicited acquisition proposals in certain circumstances,
(ii) the ability of 1st Century to terminate the merger agreement in certain circumstances to enter an agreement with respect to a superior proposal (subject to certain matching rights
and the payment of the termination fee), (iii) the ability of the 1st Century board to change its recommendation in certain circumstances (subject to certain matching rights and
potentially requiring 1st Century's payment of the termination fee), (iv) the obligations of 1st Century and Midland to use their respective reasonable best efforts to satisfy the
conditions to the consummation of the merger, (v) the outside date (as defined in "The Merger AgreementTermination of the Merger Agreement"), after which the merger agreement may
be terminated if the merger has not been consummated and (vi) the ability of 1st Century stockholders to vote on the adoption of the merger agreement.
-
-
Availability of Appraisal Rights.
The 1st Century
Board considered the fact that stockholders who do not vote to adopt the merger agreement and who follow certain procedures prescribed by the
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The
1st Century board also considered a variety of potentially negative reasons in its deliberations concerning the merger agreement and the merger, including the following (not
in any relative order of importance):
-
-
No Ongoing Equity Interest in 1st Century.
The
1st Century board considered that the merger would preclude 1st Century's stockholders from having the opportunity to participate in the future performance of 1st Century's assets
and any potential future appreciation of the value of 1st Century's business.
-
-
Inability to Solicit Other Takeover Proposals.
The
1st Century board considered the covenant in the merger agreement prohibiting 1st Century from further soliciting other potential acquisition proposals and restricting its ability to
entertain other potential acquisition proposals unless certain conditions are satisfied.
-
-
Expense Reimbursement and Termination Fees.
The
1st Century board considered the fact that 1st Century may be required to pay the termination fee of $4,500,000 if the merger agreement is terminated under certain circumstances,
including to accept a superior proposal, and that the amount of the termination fee is comparable to termination fees in transactions of a similar size, was reasonable, would not likely deter
competing bids and would not likely be required to be paid unless 1st Century entered into a more favorable transaction. Additionally, the 1st Century board considered that if the merger
agreement is terminated under certain circumstances (as described in "The Merger AgreementTermination Fees and Expenses") then 1st Century must reimburse up to $1,000,000 of
Midland's documented out-of-pocket expenses.
-
-
Effect of Announcement.
The 1st Century board
considered the effect of the public announcement of the transaction on 1st Century's operations, the price of 1st Century shares and employees, as well as its ability to attract and
retain key personnel while the merger is pending and the possibility of any suit, action or proceeding in respect of the merger agreement or the transactions contemplated thereby.
-
-
Interim Operating Covenants.
The 1st Century board
considered the restrictions in the merger agreement on the conduct of 1st Century's business prior to the consummation of the merger, requiring 1st Century to use its reasonable efforts
to conduct its business in the ordinary course, and that may limit 1st Century from taking specified actions, subject to specific limitations, which may delay or prevent 1st Century from
undertaking business opportunities that may arise pending consummation of the merger.
-
-
Risks the Merger May Not Be Completed.
The
1st Century board considered the risk that the conditions to the merger may not be satisfied and that, therefore, the merger would not be consummated. The 1st Century board also
considered the risks and costs to 1st Century if the merger is not consummated, including the diversion of management and employee attention, potential employee attrition, the potential effect
on 1st Century's business operations, including its relationships with customers, partners and others that do business with 1st Century, and the potential effect on the trading price of
1st Century shares.
-
-
Potential Conflicts of Interest.
The 1st Century
board considered the potential conflict of interest created by the fact that 1st Century's executive officers and directors have financial interests in the transactions contemplated by the
merger agreement, including the merger, that may be different from or in addition to those of other 1st Century stockholders, as more fully described in "The MergerInterests of
Certain Persons in the Merger".
-
-
Regulatory Approval.
The 1st Century board
considered the risks associated with the regulatory and other approvals required in connection with the merger.
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-
-
Tax Treatment.
The 1st Century board considered
the fact that the receipt of the per share merger consideration generally would be taxable to 1st Century's stockholders that are U.S. holders for United States federal income tax purposes.
The
foregoing discussion of the information and reasons considered by the 1st Century board is not intended to be exhaustive, but includes the material reasons considered by the
1st Century board. In view of the variety of reasons considered in connection with its evaluation of the merger, the 1st Century board did not find it practicable to, and did not,
quantify or otherwise assign relative weights to the specific reasons considered in reaching its determination and recommendation. In addition, individual directors may have given different weights to
different reasons. The 1st Century board did not undertake to make any specific determination as to whether any reason, or any particular aspect of any reason, supported or did not support its
ultimate determination. The 1st Century board based its recommendation on the totality of the information presented. After considering these reasons, the 1st Century board concluded that
the positive reasons related to the merger agreement and the transactions contemplated thereby substantially outweighed the potential negative reasons.
Portions
of this explanation of the reasons for the merger and other information presented in this section are forward-looking in nature and, therefore, should be read in light of
"Cautionary Statement Regarding Forward-Looking Statements".
Opinion of Sandler O'Neill & Partners, L.P.
By letter dated January 26, 2016, 1st Century retained Sandler to act as financial advisor to the 1st Century
board in connection with 1st Century's consideration of a possible business combination. Sandler is a nationally recognized investment banking firm whose principal business specialty is
financial institutions. In the ordinary course of its investment banking business, Sandler is regularly engaged in the valuation of financial institutions and their securities in connection with
mergers and acquisitions and other corporate transactions. The 1st Century board selected Sandler on the basis of the firm's reputation and its experience and expertise in the industry.
Sandler
acted as financial advisor in connection with the merger and participated in certain of the negotiations leading to the execution of the merger agreement. At the March 10,
2016 meeting of the 1st Century board at which the 1st Century board considered and discussed the terms of the merger agreement and the merger, Sandler delivered to the
1st Century board its oral opinion, which was subsequently confirmed in writing, to the effect that, as of such date, the per share merger consideration was fair to the holders of
1st Century shares from a financial point of view.
The full text of Sandler's opinion is attached as Annex D to this proxy statement. The opinion outlines the
procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler 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. Holders of 1st Century shares are urged to read the entire opinion carefully in connection with their
consideration of the merger.
Sandler's opinion speaks only as of the date of the opinion. The opinion was directed to the 1st Century board in connection with its consideration of the
merger and is directed only to the fairness, from a financial point of view, of the per share merger consideration to the holders of 1st Century shares. Sandler's opinion does not constitute a
recommendation to any holder of 1st Century shares as to how such holder of 1st Century shares should vote with respect to the merger or any other matter. It does not address the
underlying business decision of 1st Century to engage in the merger or any other aspect of the merger, the relative merits of the merger as compared to any other alternative business strategies
that might exist for 1st Century or the effect of any other transaction in which 1st Century might engage.
Sandler did not express any opinion as to the fairness
of the amount or nature of the compensation to be received in the merger by 1st Century's officers, directors, or employees, or class of such persons, relative to the per share merger
consideration to be
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received
by 1st Century's stockholders. Sandler's opinion was approved by Sandler's fairness opinion committee.
In
connection with rendering its opinion, Sandler reviewed, among other things:
-
-
a draft of the merger agreement, dated March 10, 2016;
-
-
certain publicly available financial statements and other historical financial information of 1st Century that Sandler deemed
relevant;
-
-
certain publicly available financial statements and other historical financial information of Midland and Midland's wholly-owned
subsidiary, MidFirst, that Sandler deemed relevant;
-
-
internal financial projections for 1st Century for the years ending December 31, 2016 through December 31, 2019
as well as an estimated asset growth rate for the year ending December 31, 2020, as provided by management of 1st Century;
-
-
the pro forma financial impact of the merger on Midland's capital ratios;
-
-
a comparison of certain financial information for 1st Century with similar institutions for which publicly available
information is available;
-
-
the financial terms of certain recent business combinations in the commercial banking 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
considered relevant.
Sandler
also discussed with certain members of management of 1st Century the business, financial condition, results of operations and prospects of 1st Century and held
similar discussions with management of Midland regarding the business, financial condition, results of operations and prospects of Midland.
In
performing its review, Sandler relied upon, without independent verification, the accuracy and completeness of all of the financial and other information that was available to Sandler
from public sources, that was provided to Sandler by 1st Century or Midland or their respective representatives or that was otherwise reviewed by Sandler and Sandler assumed such accuracy and
completeness for purposes of preparing its opinion. Sandler relied, at the direction of 1st Century, without independent verification or investigation, on the assessments of the management of
1st Century as to its existing and future relationships with key employees and partners, clients, products and services and Sandler assumed, with 1st Century's consent, that there would
be no developments with respect to any such matters that would affect Sandler's analyses or opinion. Sandler further relied on the assurance of the management of 1st Century that it was not
aware of any facts or circumstances that would have made any of such information inaccurate or misleading and Sandler assumed that no facts or circumstances existed that would have made any of the
information provided by Midland inaccurate or misleading. Sandler was not asked to and did not undertake an independent verification of any of such information and did not assume any responsibility or
liability for the accuracy or completeness thereof. Sandler 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 1st Century or Midland or any of their respective subsidiaries, nor was Sandler furnished with any such evaluations or appraisals. Sandler rendered no opinion or
evaluation on the collectability of any assets or the future performance of any loans of 1st Century or Midland. Sandler did not make an independent evaluation of the adequacy of the allowance
for loan losses of 1st Century or Midland, or the combined entity after the merger and did not review any individual credit files relating to 1st Century or Midland. Sandler assumed,
with 1st Century's consent, that the respective allowances for loan losses for both 1st Century and Midland were adequate to cover such losses and would be adequate on a pro forma basis
for the combined entity.
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In preparing its analyses, Sandler used internal financial projections for 1st Century for the years ending December 31, 2016 through
December 31, 2019, as well as an estimated asset growth rate for the year ending December 31, 2020, as provided by management of 1st Century. With respect to those projections and
estimates, management of 1st Century confirmed to Sandler that those projections and estimates reflected the best currently available projections and estimates of management of the future
financial performance of 1st Century, and Sandler assumed that such performance would be achieved. Sandler expressed no opinion as to such projections or estimates, or the assumptions on which
they were based. Sandler also assumed that there had been no material change in 1st Century's or Midland's assets, financial condition, results of operations, business or prospects since the
date of the most recent financial statements made available to Sandler. Sandler also assumed in all respects material to its analysis that 1st Century and Midland would remain as going concerns
for all periods relevant to its analyses.
Sandler
also assumed, with 1st Century's consent, 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 1st Century, Midland or the merger or any related transaction, and (iii) the merger and any related transaction would be
consummated in accordance with the terms of the 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. Finally, with 1st Century's consent, Sandler relied upon the advice that 1st Century received from its legal, accounting and tax advisors as to all legal,
accounting and tax matters relating to the merger and the other transactions contemplated by the merger agreement.
Sandler's
analyses and the views expressed therein are necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to
Sandler as of, the date of its opinion. Events occurring after the date thereof could materially affect Sandler's views. Sandler has not undertaken to update, revise, reaffirm or withdraw its opinion
or otherwise comment upon events occurring after the date thereof.
In
rendering its opinion, Sandler performed a variety of financial analyses. The summary below is not a complete description of all the analyses underlying Sandler's opinion or the
presentation made by Sandler to the 1st Century board, but is a summary of the material analyses performed and presented by Sandler. 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
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's comparative analyses
described below is identical to 1st Century or Midland 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
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the
case may be, of 1st Century and Midland and the companies to which they were compared. In arriving at its opinion, Sandler did not attribute any particular weight to any analysis or factor
that it considered. Rather, Sandler made qualitative judgments as to the significance and relevance of each analysis and factor. Sandler 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 made its determination as to the fairness of the per share merger consideration 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 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 1st Century, Midland and Sandler. The analyses performed by Sandler 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 prepared its analyses solely for purposes of rendering its opinion and provided such analyses to the
1st Century board at its March 10, 2016, meeting. 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's analyses do not necessarily reflect the
value of 1st Century's common stock or the prices at which 1st Century shares may be sold at any time. The analyses of Sandler and its opinion were among a number of factors taken into
consideration by the 1st Century board in making its determination to approve the merger agreement and the analyses described below should not be viewed as determinative of the decision of the
1st Century board or management with respect to the fairness of the merger.
Summary of Proposed Merger Consideration and Implied Transaction Metrics.
Sandler reviewed the financial terms of the proposed
merger. Pursuant to
the terms of the merger agreement, upon the effective time, each 1st Century share issued and outstanding immediately prior to the effective time, other than certain shares described in the
merger agreement, will be converted into the right to receive, without interest, $11.22 in cash. Based upon financial information for 1st Century as or for the twelve months ended
December 31, 2015, Sandler calculated the following implied transaction metrics:
|
|
|
|
|
Transaction Price / LTM Earnings Per Share
|
|
|
43.2x
|
|
Transaction Price / Book Value Per Share
|
|
|
178
|
%
|
Transaction Price / Tangible Book Value Per Share
|
|
|
178
|
%
|
Tangible Book Premium / Core Deposits(1)
|
|
|
9.3
|
%
|
Market Premium as of March 9, 2016
|
|
|
40.3
|
%
|
-
(1)
-
Core
deposits calculated as deposits less CDs greater than $100,000
Comparable Company Analyses.
Sandler used publicly available information to compare selected financial information for
1st Century with a
group of financial institutions selected by Sandler. The 1st Century peer group, consisted of California commercial banks whose securities are publicly traded with between $500 million
and $1 billion in assets, as of December 31, 2015. The 1st Century peer group consisted of the following companies:
|
|
|
|
|
Oak Valley Bancorp
|
|
California Bank of Commerce
|
|
Plumas Bancorp
|
California First National Bancorp
|
|
American River Bankshares
|
|
CommerceWest Bank
|
First Choice Bank
|
|
Bay Commercial Bank
|
|
Seacoast Commerce Banc Holdings
|
Commonwealth Business Bank
|
|
Community West Bancshares
|
|
1st Capital Bank
|
United Security Bancshares
|
|
Open Bank
|
|
Summit State Bank
|
Presidio Bank
|
|
Avidbank Holdings, Inc.
|
|
Santa Cruz County Bank
|
The
analysis compared publicly available financial information for 1st Century with the corresponding data for the 1st Century peer group as of or for the twelve months
ended December 31,
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2015
(unless otherwise noted), with pricing data as of March 9, 2016. The table below sets forth the data for 1st Century and the median and mean data for the 1st Century peer
group.
1st Century Comparable Company Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
1st Century
|
|
1st Century
Peer
Group Mean
|
|
1st Century
Peer
Group Median
|
|
Total Assets ($ millions)
|
|
|
732
|
|
|
646
|
|
|
622
|
|
Market Capitalization ($ millions)
|
|
|
83
|
|
|
74
|
|
|
71
|
|
Price / Tangible Book Value
|
|
|
127
|
%
|
|
116
|
%
|
|
104
|
%
|
Price / LTM Earnings Per Share(1)
|
|
|
30.8x
|
|
|
15.5x
|
|
|
14.9x
|
|
Dividend Yield
|
|
|
0.00
|
%
|
|
0.66
|
%
|
|
0.00
|
%
|
LTM Net Interest Margin
|
|
|
3.50
|
%
|
|
3.92
|
%
|
|
3.96
|
%
|
LTM Efficiency Ratio
|
|
|
76
|
%
|
|
63
|
%
|
|
64
|
%
|
LTM Return on Average Assets
|
|
|
0.39
|
%
|
|
0.85
|
%
|
|
0.88
|
%
|
LTM Return on Average Equity
|
|
|
4.0
|
%
|
|
8.0
|
%
|
|
7.4
|
%
|
Tangible Common Equity / Tangible Assets
|
|
|
8.9
|
%
|
|
10.5
|
%
|
|
10.2
|
%
|
Loan Loss Reserve / Gross Loans
|
|
|
1.5
|
%
|
|
1.4
|
%
|
|
1.3
|
%
|
Non-Performing Assets / Total Assets(2)
|
|
|
0.1
|
%
|
|
0.7
|
%
|
|
0.4
|
%
|
LTM Net Charge-offs / Average Loans
|
|
|
(0.0
|
)%
|
|
0.1
|
%
|
|
0.0
|
%
|
-
(1)
-
Price
/ LTM Earnings Per Share multiples of greater than 50.0x or less than 0.0x defined as not meaningful.
-
(2)
-
Non-Performing
Assets equal to nonaccrual loans and leases, renegotiated loans and leases, and real estate owned as a percentage of total assets.
Analysis of Selected Merger Transactions.
Sandler reviewed two groups of recent merger and acquisition transactions consisting
of a nationwide group
as well as a California group. The nationwide group consisted of nationwide commercial bank transactions announced between January 1, 2015 and March 9, 2016, where the target's reported
assets were between $500 million and $1 billion and the target's reported ratio of tangible common equity to tangible assets was between 7.0% and 10.0%, which we refer to as nationwide
precedent transactions. The California group consisted of commercial bank transactions with targets located in California announced between January 1, 2013 and March 9, 2016 and where
the target's reported assets were between $300 million and $1 billion, the target's reported last twelve months' return on average assets was greater than 0.0%, and the target's ratio of
non-performing assets to assets was less than 5.0%, which we refer to as California precedent transactions.
53
Table of Contents
The
nationwide precedent transactions group was composed of the following transactions:
|
|
|
Acquirer
|
|
Target
|
Hampton Roads Bankshares, Inc.
|
|
Xenith Bankshares, Inc.
|
BOK Financial Corporation
|
|
MBT Bancshares, Inc.
|
WSFS Financial Corporation
|
|
Penn Liberty Financial Corp.
|
First Midwest Bancorp, Inc.
|
|
NI Bancshares Corporation
|
Heartland Financial USA, Inc.
|
|
CIC Bancshares, Inc.
|
Pacific Premier Bancorp, Inc.
|
|
Security California Bancorp
|
Ameris Bancorp
|
|
Jacksonville Bancorp, Inc.
|
Park Sterling Corporation
|
|
First Capital Bancorp, Inc.
|
BNC Bancorp
|
|
Southcoast Financial Corporation
|
Prosperity Bancshares, Inc.
|
|
Tradition Bancshares, Inc.
|
Independent Bank Group, Inc.
|
|
Grand Bank
|
Heartland Financial USA, Inc.
|
|
Premier Valley Bank
|
Pinnacle Financial Partners, Inc.
|
|
Magna Bank
|
Pinnacle Financial Partners, Inc.
|
|
CapitalMark Bank & Trust
|
Farmers National Banc Corp.
|
|
National Bancshares Corporation
|
The
California precedent transactions group was composed of the following transactions:
|
|
|
Acquirer
|
|
Target
|
RBB Bancorp
|
|
TFC Holding Company
|
Pacific Premier Bancorp, Inc.
|
|
Security California Bancorp
|
Heartland Financial USA, Inc.
|
|
Premier Valley Bank
|
Heritage Commerce Corp
|
|
Focus Business Bank
|
Pacific Premier Bancorp, Inc.
|
|
Independence Bank
|
SKBHC Holdings LLC
|
|
Greater Sacramento Bancorp
|
CU Bancorp
|
|
1st Enterprise Bank
|
CVB Financial Corp.
|
|
American Security Bank
|
TriCo Bancshares
|
|
North Valley Bancorp
|
Heritage Oaks Bancorp
|
|
Mission Community Bancorp
|
Wilshire Bancorp, Inc.
|
|
Saehan Bancorp
|
Using
then latest publicly available information prior to the announcement of the relevant transaction, Sandler reviewed the following transaction metrics: transaction price to
last-twelve-months earnings per share, transaction price to tangible book value per share, tangible book premium to core deposits, and one-day market premium. Sandler compared the indicated
transaction metrics for the merger to the median metrics for each of the nationwide precedent transactions and California precedent transactions groups.
|
|
|
|
|
|
|
|
|
|
|
|
|
Midland /
1st Century
|
|
Median for
Nationwide
Precedent
Transactions
|
|
Median for
California
Precedent
Transactions
|
|
Transaction price/LTM earnings per share
|
|
|
43.2x
|
|
|
18.2x
|
|
|
21.4x
|
|
Transaction price/Tangible book value per share
|
|
|
178
|
%
|
|
165
|
%
|
|
164
|
%
|
Core deposit premium
|
|
|
9.3
|
%
|
|
8.7
|
%
|
|
7.8
|
%
|
1-Day market premium
|
|
|
40.3
|
%
|
|
25.0
|
%
|
|
31.1
|
%
|
Net Present Value Analyses.
Sandler performed an analysis that estimated the net present value per share of 1st Century
shares assuming
1st Century performed in accordance with internal financial projections for the years ending December 31, 2016 through December 31, 2019 as well as an estimated
54
Table of Contents
asset
growth rate for the year ending December 31, 2020, as provided by management of 1st Century. Such internal projections also included the following assumptions, as provided by
management of 1st Century: (i) the issuance of 218,000 restricted stock units during the first fiscal quarter of 2016, (ii) the issuance of $25 million of common equity in
the second fiscal quarter of 2016, issued at $7.25 per
share with a 6.0% gross spread and $350,000 in estimated offering related expenses, the net proceeds of such capital raising transaction to be invested in securities with a pre-tax yield of 2.0%, and
(iii) the issuance of subordinated debentures to achieve an 11% total risk-based capital ratio for 1st Century in the years ending December 31, 2019 and December 31, 2020,
with such debt assumed to be issued with a 7.0% coupon and the net proceeds of such capital raising transaction to be invested in securities with a pre-tax yield of 2.0%. To approximate the terminal
value of 1st Century shares at December 31, 2020, Sandler applied price to 2020 earnings multiples ranging from 12.0x to 22.0x and multiples of December 31, 2020 tangible book
value ranging from 100% to 150%. The terminal values were then discounted to present values using different discount rates ranging from 10.0% to 16.0%, which were chosen to reflect different
assumptions regarding required rates of return of holders of prospective buyers of 1st Century shares. As illustrated in the following tables, the analyses indicated an imputed range of values
per share of 1st Century shares of $4.22 to $10.09 when applying multiples of earnings and $4.35 to $8.51 when applying multiples of tangible book value.
Earnings Per Share Multiples
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount
Rate
|
|
12.0x
|
|
14.0x
|
|
16.0x
|
|
18.0x
|
|
20.0x
|
|
22.0x
|
|
|
10.0
|
%
|
$
|
5.50
|
|
$
|
6.42
|
|
$
|
7.34
|
|
$
|
8.25
|
|
$
|
9.17
|
|
$
|
10.09
|
|
|
11.0
|
%
|
$
|
5.26
|
|
$
|
6.14
|
|
$
|
7.01
|
|
$
|
7.89
|
|
$
|
8.77
|
|
$
|
9.64
|
|
|
12.0
|
%
|
$
|
5.03
|
|
$
|
5.87
|
|
$
|
6.70
|
|
$
|
7.54
|
|
$
|
8.38
|
|
$
|
9.22
|
|
|
13.0
|
%
|
$
|
4.81
|
|
$
|
5.61
|
|
$
|
6.41
|
|
$
|
7.21
|
|
$
|
8.02
|
|
$
|
8.82
|
|
|
14.0
|
%
|
$
|
4.60
|
|
$
|
5.37
|
|
$
|
6.14
|
|
$
|
6.90
|
|
$
|
7.67
|
|
$
|
8.44
|
|
|
15.0
|
%
|
$
|
4.41
|
|
$
|
5.14
|
|
$
|
5.87
|
|
$
|
6.61
|
|
$
|
7.34
|
|
$
|
8.08
|
|
|
16.0
|
%
|
$
|
4.22
|
|
$
|
4.92
|
|
$
|
5.63
|
|
$
|
6.33
|
|
$
|
7.03
|
|
$
|
7.74
|
|
Tangible Book Value Multiples
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount
Rate
|
|
100%
|
|
110%
|
|
120%
|
|
130%
|
|
140%
|
|
150%
|
|
|
10.0
|
%
|
$
|
5.67
|
|
$
|
6.24
|
|
$
|
6.81
|
|
$
|
7.37
|
|
$
|
7.94
|
|
$
|
8.51
|
|
|
11.0
|
%
|
$
|
5.42
|
|
$
|
5.96
|
|
$
|
6.51
|
|
$
|
7.05
|
|
$
|
7.59
|
|
$
|
8.13
|
|
|
12.0
|
%
|
$
|
5.18
|
|
$
|
5.70
|
|
$
|
6.22
|
|
$
|
6.74
|
|
$
|
7.26
|
|
$
|
7.78
|
|
|
13.0
|
%
|
$
|
4.96
|
|
$
|
5.45
|
|
$
|
5.95
|
|
$
|
6.45
|
|
$
|
6.94
|
|
$
|
7.44
|
|
|
14.0
|
%
|
$
|
4.74
|
|
$
|
5.22
|
|
$
|
5.69
|
|
$
|
6.17
|
|
$
|
6.64
|
|
$
|
7.12
|
|
|
15.0
|
%
|
$
|
4.54
|
|
$
|
5.00
|
|
$
|
5.45
|
|
$
|
5.90
|
|
$
|
6.36
|
|
$
|
6.81
|
|
|
16.0
|
%
|
$
|
4.35
|
|
$
|
4.78
|
|
$
|
5.22
|
|
$
|
5.65
|
|
$
|
6.09
|
|
$
|
6.52
|
|
Sandler
also considered and discussed with the 1st Century board how this analysis would be affected by changes in the underlying assumptions, including variations with respect to
net income. To illustrate this impact, Sandler performed a similar analysis assuming 1st Century's net income varied from 25% above projections to 25% below projections. This analysis resulted
in the following range of per share values for 1st Century shares, applying the price to 2020 earnings multiples range of 12.0x to 22.0x referred to above and a discount rate of 13.94%.
55
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variance to
Projections
|
|
12.0x
|
|
14.0x
|
|
16.0x
|
|
18.0x
|
|
20.0x
|
|
22.0x
|
|
|
(25.0
|
)%
|
$
|
3.46
|
|
$
|
4.04
|
|
$
|
4.61
|
|
$
|
5.19
|
|
$
|
5.77
|
|
$
|
6.35
|
|
|
(15.0
|
)%
|
$
|
3.92
|
|
$
|
4.58
|
|
$
|
5.23
|
|
$
|
5.88
|
|
$
|
6.54
|
|
$
|
7.19
|
|
|
(5.0
|
)%
|
$
|
4.38
|
|
$
|
5.11
|
|
$
|
5.85
|
|
$
|
6.58
|
|
$
|
7.31
|
|
$
|
8.04
|
|
|
0.0
|
%
|
$
|
4.61
|
|
$
|
5.38
|
|
$
|
6.15
|
|
$
|
6.92
|
|
$
|
7.69
|
|
$
|
8.46
|
|
|
5.0
|
%
|
$
|
4.85
|
|
$
|
5.65
|
|
$
|
6.46
|
|
$
|
7.27
|
|
$
|
8.08
|
|
$
|
8.88
|
|
|
15.0
|
%
|
$
|
5.31
|
|
$
|
6.19
|
|
$
|
7.08
|
|
$
|
7.96
|
|
$
|
8.84
|
|
$
|
9.73
|
|
|
25.0
|
%
|
$
|
5.77
|
|
$
|
6.73
|
|
$
|
7.69
|
|
$
|
8.65
|
|
$
|
9.61
|
|
$
|
10.58
|
|
Pro Forma Merger Analysis.
Sandler analyzed the potential pro forma effects of the merger on Midland's capital ratios at closing,
based on the
following assumptions, as provided by Midland: (i) a per share purchase price of $11.22 in cash; (ii) an aggregate transaction value of approximately $116 million;
(iii) 100% cash consideration; (iv) after-tax transaction costs at or prior to closing of $4.8 million; (v) a core deposit intangible asset of $11.7 million; and
(vi) the reversal of 1st Century's allowance for loan and lease losses. The analysis indicated that Midland would remain well capitalized after the closing of the merger.
Sandler's Relationship.
Sandler is acting as financial advisor to the 1st Century board in connection with the merger and a
will receive a fee
in an amount equal to 1.375% of the aggregate purchase price, which will become due and payable to Sandler upon the closing. Sandler received a fee in an amount equal to $250,000 from
1st Century upon rendering its opinion, which opinion fee will be credited in full towards the transaction fee becoming due upon the closing. 1st Century has also agreed to indemnify
Sandler against certain liabilities arising out of Sandler's engagement and to reimburse Sandler for certain of its out-of-pocket expenses incurred in connection with the engagement.
In
the two years preceding the date of its opinion, as Sandler previously advised the 1st Century board, Sandler provided certain investment banking services to Midland in
connection with Midland's acquisition of Steele Street Bank & Trust, which transaction closed on January 7, 2015, and received fees in an amount of $500,000 for such services and may
provide, and receive compensation for, investment banking services to Midland in the future, including during the pendency of the merger. In the ordinary course of its business as a broker-dealer,
Sandler may purchase securities from and sell securities to 1st Century and Midland and their respective affiliates. Sandler may also actively trade the equity and
debt securities of Midland or its affiliates for Sandler's own account and for the accounts of Sandler customers.
Certain Unaudited 1st Century Forecasts
1st Century does not as a matter of course publicly disclose forecasts or projections, due to, among other reasons, the
uncertainty of the underlying assumptions and estimates. However, 1st Century is including in this proxy statement certain unaudited prospective financial information that was made available to
Sandler and Midland in connection with the merger, which we refer to as the forecasts. These forecasts were prepared by management in good faith based on management's reasonable best estimates and
assumptions with respect to 1st Century's future financial performance at the time they were prepared and speak only as of that time. The forecasts, with certain additional adjustments and
assumptions, were used by Sandler in connection with the rendering of its fairness opinion to the 1st Century board and performing its related financial analysis, as described in "The
MergerOpinion of Sandler O'Neill & Partners, L.P."
The
summaries of these forecasts are not included in this proxy statement to induce any 1st Century stockholder to vote in favor of the adoption of the merger agreement or any
other proposals to be voted on at the special meeting, but because these forecasts were made available to the 1st Century board, Sandler and Midland. The inclusion of these forecasts should not
be regarded as an
56
Table of Contents
indication
that 1st Century, the 1st Century board, Sandler or Midland considered, or now considers, these forecasts to be a reliable prediction of future results or to support or fail
to support your decision whether to vote for or against the proposal to adopt the merger agreement. No person has made or makes any representation or warranty to any 1st Century stockholder
regarding the information included in these forecasts.
While
these forecasts were prepared in good faith by management, no assurance can be made regarding future events. These forecasts also reflect assumptions as of the time of their
respective preparation as to certain business decisions that are subject to change. Although presented with numerical specificity, these forecasts are based upon a variety of estimates and numerous
assumptions made by management with respect to, among other matters, industry performance, the future interest rate environment, general business, economic, regulatory, market and financial conditions
and other matters, including the factors described in "Cautionary Statement Regarding Forward-Looking Statements", many of which are difficult to predict, are subject to significant economic and
competitive
uncertainties, and are beyond 1st Century's control. These forecasts also assume that 1st Century would continue to operate as a standalone company and do not reflect any impact of the
merger. In addition, because these forecasts cover multiple years, such information by its nature becomes less reliable with each successive year. As a result, there can be no assurance that the
estimates and assumptions made in preparing these forecasts will prove accurate, that the projected results will be realized or that actual results will not be significantly higher or lower than
projected results. These forecasts cannot, therefore, be considered a guaranty of future operating results, and this information should not be relied on as such.
These
forecasts were not prepared with a view toward public disclosure, soliciting proxies or complying with U.S. Generally Accepted Accounting Principles, which we refer to as GAAP, the
published guidelines of the SEC regarding financial projections and forecasts or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation
of financial projections and forecasts. Neither 1st Century's independent registered public accounting firm nor any other independent registered public accounting firm has examined, compiled or
otherwise performed any procedures with respect to the prospective financial information contained in these forecasts and, accordingly, neither 1st Century's independent registered public
accounting firm nor any other independent registered public accounting firm has expressed any opinion or given any other form of assurance on such information or its achievability, and assumes no
responsibility for, and disclaims any association with, the prospective financial information.
The
forecasts were prepared by 1st Century's management based on certain assumptions they believed to be potentially achievable. In connection with the rendering of its fairness
opinion to the 1st Century board and performing its related financial analysis, Sandler included certain additional adjustments and assumptions as described in "The MergerOpinion
of Sandler O'Neill & Partners, L.P."
The
following table summarizes 1st Century's unaudited prospective financial information for the years ending December 31, 2016 through 2019 provided to Sandler and Midland
and discussed by 1st Century with each such party and, in the case of Sandler, used, with certain further adjustments and assumptions as described above in "Opinion of Sandler
O'Neill & Partners, L.P.", in connection with its fairness opinion to the 1st Century board. In addition, 1st Century management provided Sandler
57
Table of Contents
with
an estimated asset growth rate for the year ending December 31, 2020, which was substantially consistent with the annual growth rates shown in the forecasts below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
|
|
($ in thousands)
|
|
Net Interest Income
|
|
|
29,092.3
|
|
|
35,430.6
|
|
|
43,066.4
|
|
|
52,360.4
|
|
Non-Interest Income
|
|
|
668.7
|
|
|
776.6
|
|
|
906.8
|
|
|
1,061.6
|
|
Non-Interest Expense
|
|
|
20,102.3
|
|
|
22,162.2
|
|
|
26,659.8
|
|
|
35,113.3
|
|
Net Income
|
|
|
4,381.8
|
|
|
6,782.4
|
|
|
8,524.7
|
|
|
8,931.7
|
|
Total Assets
|
|
|
851,990
|
|
|
1,021,364
|
|
|
1,230,056
|
|
|
1,490,399
|
|
Financing of the Merger
The obligations of Midland and Merger Sub to complete the merger are not contingent upon the receipt of any financing. Midland has
informed 1st Century that it expects that funds needed by Midland in connection with the merger will be derived from Midland or MidFirst's (i) cash on hand, (ii) borrowings from
existing credit facilities, or (iii) any combination of the foregoing.
Closing and Effective Time of Merger
The closing is required to take place on the third business day following the date that the conditions set forth in the merger
agreement (described in "The Merger AgreementConditions to Completion of the Merger") have been satisfied or, to the extent permissible, waived by the party or parties entitled to the
benefit of such conditions, or at such other place or time as Midland and 1st Century may mutually agree.
Assuming timely satisfaction of the necessary closing conditions, we currently expect the closing to occur in the second half of 2016 or sooner.
The
merger will become effective at such time as such certificate of merger is duly filed with the Secretary of State of the State of Delaware or at such later time as may be specified
in such certificate of merger.
Payment of Merger Consideration and Surrender of Stock
Certificates
Prior to the closing date, Midland will appoint a paying agent, which we refer to as the paying agent, with 1st Century's prior
approval (which approval may not be unreasonably withheld, conditioned or delayed) to make payments of the per share merger consideration to 1st Century's stockholders.
Prior
to or on the closing date, Midland will make available to the paying agent immediately available funds, which we refer to as the exchange fund, necessary for the aggregate per
share merger consideration to be paid in respect of 1st Century shares and 1st Century restricted shares. Promptly after the effective time, Midland or the paying agent will send to each
holder of 1st Century shares that have been converted into the right to receive the per share merger consideration a letter of transmittal and instructions advising stockholders how to
surrender their stock certificates and uncertificated shares in exchange for the per share merger consideration.
Upon
surrender to the paying agent of a certificate (or affidavit of loss in lieu thereof), together with a properly completed letter of transmittal, or receipt of an "agent's message"
by the paying agent (or such other evidence, if any, of transfer as the paying agent may reasonably request) in the case of a book-entry transfer of uncertificated shares, each 1st Century
stockholder (other than with respect to excluded shares and dissenting shares) will be entitled to receive the per share merger consideration for each 1st Century share formerly represented by
a certificate or for each uncertificated 1st Century
58
Table of Contents
share.
To the extent reasonably practicable, Midland will have the option to fund the per share merger consideration to be paid with respect to certain 1st Century shares that previously
represented 1st Century restricted shares by funding the necessary amounts to the payroll processor of 1st Century or Midland or any of their respective affiliates for payment of the per
share merger consideration to the applicable holders by such payroll processor.
No interest will be paid or accrued on any amount payable upon surrender of the certificates.
If
a 1st Century share certificate has been lost, stolen or destroyed, then, before a 1st Century stockholder will be entitled to receive the per share merger consideration
in respect thereof, such stockholder will need to deliver an affidavit of that fact and, if required by the surviving corporation, post a bond (in such reasonable amount as the surviving corporation
may direct) as indemnity against any claim that may be made with respect to such lost certificate.
Each
of the paying agent, the payroll processor, the surviving corporation and Midland will be entitled to deduct and withhold from the consideration otherwise payable to any person
pursuant to the merger agreement such amounts to the extent it is required to deduct and withhold with respect to the making of such payment under any provision of tax law. Any amounts so withheld
will be remitted to the applicable governmental entity and treated for all purposes of the merger agreement as having been paid to such person.
Interests of Certain Persons in the Merger
In considering the recommendation of the 1st Century board with respect to the proposal to adopt the merger agreement, you
should be aware that executive officers and directors of 1st Century have certain interests in the merger that are different from, or in addition to, the interests of 1st Century
stockholders generally. The directors of 1st Century were aware of these interests and considered them at the time they evaluated and negotiated the merger agreement and the merger, and in
recommending that the merger agreement be adopted by the stockholders of 1st Century. These interests are described below.
The
executive officers of 1st Century are: Alan Rothenberg (Chairman and Chief Executive Officer); Jason DiNapoli (President and Chief Operating Officer); Bradley Satenberg
(Executive Vice President and Chief Financial Officer); and Kevin Sampson (Executive Vice President and Chief Credit Officer). The nine non-employee directors of 1st Century are: Stanley R.
Zax; Lewis Wolff; Nadine I. Watt; Barry D. Pressman; Robert Allen Moore; Alan D. Levy; Eric M. George; Dave Brooks; and William Warren Brien.
1st Century's equity awards are comprised of restricted shares. 1st Century restricted shares held by its employees
(including the executive officers) and non-employee directors immediately prior to the effective time will fully vest and be cancelled in exchange for a cash payment of the same merger consideration
payable in respect of other 1st Century shares generally, described further in the sections titled "The Merger AgreementMerger Consideration" and "The Merger
AgreementTreatment of 1st Century Restricted Shares".
The following table sets forth for (i) each executive officer and (ii) the non-employee directors (as a group), the number of 1st Century restricted shares held by
the executive officer or group of non-employee directors, as applicable, that will vest upon the closing, and the aggregate amount of merger consideration payable (on a pre-tax basis) in respect
thereof, assuming solely for this purpose that the completion of the merger occurs on June 23, 2016. The amounts reflected in the table below are based on the number of 1st Century
restricted shares held by the executive officers and directors as of the date of this proxy statement, taking into account scheduled vesting prior to June 23, 2016.
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Depending
on when the merger occurs, certain 1st Century restricted shares that are unvested as of the date hereof and included in the table below may vest pursuant to their terms, independent
of the merger.
|
|
|
|
|
|
|
|
|
|
Restricted
Shares
(#)
|
|
Aggregate Merger
Consideration in
Respect of
Restricted Shares
($)
|
|
Alan Rothenberg
|
|
|
120,000
|
|
|
1,346,400
|
|
Jason DiNapoli
|
|
|
120,000
|
|
|
1,346,400
|
|
Bradley Satenberg
|
|
|
47,750
|
|
|
535,755
|
|
Kevin Sampson
|
|
|
47,750
|
|
|
535,755
|
|
Non-Employee Directors (as a group)
|
|
|
18,000
|
|
|
201,960
|
|
Employment Arrangements with Certain Executive Officers
Current Individual Employment Arrangements
Each of 1st Century's executive officers is party to an employment letter agreement or a severance agreement with
1st Century. We refer to such agreements collectively as the current executive agreements. As described below, as a condition to entry into the merger agreement, Midland has required certain
key employees of 1st Century, including the executive officers of 1st Century, to enter into employment agreements with MidFirst. Such employment agreements with MidFirst will become
effective as of and are conditioned upon the closing and thereafter replace the current executive agreements. Nonetheless, as the current executive agreements were in effect as of the date of signing
the merger agreement, continue to govern the executive officers' employment with 1st Century through the closing and in certain respects served as the basis for the new agreements with
MidFirst, their material terms are described below.
The
current executive agreements provide enhanced severance and other separation benefits if an executive officer experiences a qualifying termination of employment in connection with
the completion of a transaction such as the merger. If the executive's employment is terminated by 1st Century without "cause" (as defined below) or if the executive resigns for "good reason"
(as defined below) within one year following completion of the merger (or, for Messrs. Rothenberg and DiNapoli, at any time, regardless of whether a merger occurs), subject to the executive
officer's execution and non-revocation of a release of claims in favor of 1st Century, he will be paid (1) a lump sum cash severance amount equal to 2 (for Messrs. Rothenberg and
DiNapoli) or 1.25 (for Messrs. Satenberg and Sampson) times the sum of (x) the highest amount of such executive's annual base salary plus (y) the highest annual bonus paid, in
each case within the three-year period preceding the termination, plus (2) a prorated annual cash bonus for the number of months during the year in which the employment termination occurred. In
addition, each executive officer is also entitled to continued welfare benefits (or in certain cases a cash payment in respect of such benefits, on an after-tax basis) for 12 months following
the closing (or if earlier, upon attaining comparable coverage from a new employer). Finally, all equity awards held by an executive that remain unvested will become vested on the date such executive
is terminated under the circumstances described above.
In
addition, under their current executive agreements, Messrs. Rothenberg and DiNapoli are each subject to post-termination employee non-solicitation and business non-solicitation
provisions for a period of 12 months from the date of termination of employment. Messrs. Rothenberg and DiNapoli would be entitled to a gross-up payment if they are subject to excise tax
under Section 280G and 4999
of the Internal Revenue Code as a result of payments made by 1st Century or Midland to or for their benefit and such payments exceed 110% of their respective Section 280G "safe harbor"
limits.
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For
purposes of the current executive agreements:
"Cause"
generally means: (i) a significant act of dishonesty, deceit or breach of fiduciary duty; (ii) gross neglect or willful failure to perform substantially the duties
of employment after a written demand for performance; (iii) willful acts or failure to act in any other way that materially and adversely affects 1st Century or its subsidiaries;
(iv) removal and/or permanent prohibition from participating in the conduct of 1st Century or any of its subsidiaries' affairs by an order issued under Section 8(e)(3) or 8(g)(l)
of the Federal Deposit Insurance Act (12 U.S.C. Section 1818(e)(3) or (g)(l)); (v) violation of any applicable statutes, regulations or rules of any appropriate Federal banking agency
and/or state bank supervisor, as defined in the FDI Act Section 3, 12 U.S.C. 1813, which violation materially and adversely affects 1st Century or its subsidiaries;
(vi) 1st Century or any of its subsidiaries has received a cease-and-desist order that requires in substance that 1st Century or any of its subsidiaries retain a qualified
executive with the applicable executive's title acceptable to bank regulators with the experience, skill and other qualifications required to ensure compliance with such order and 1st Century
or any of its subsidiaries' regulators have determined the executive does not meet these qualifications; or (vii) solely in the case of the current executive agreements with
Messrs. Rothenberg and DiNapoli, a material breach of any provision of the current executive agreement.
"Good
Reason" generally means: (i) a material diminution of the executive's authority, duties or responsibilities, unless such events follow events that would constitute "cause"
for termination; (ii) a material diminution in such executive's salary; (iii) the relocation of the executive's principal place of employment to any location more than 50 miles from
1st Century's headquarters; or (iv) solely in the case of the current executive agreements with Messrs. Rothenberg and DiNapoli, material breach by 1st Century of any
material terms of the executive agreement.
As a condition to entry into the merger agreement, Midland has required certain key employees of 1st Century, including the
executive officers of 1st Century, to enter into employment agreements with MidFirst. These employment agreements specify certain compensation and benefits payable to such executive officers
for their continuing employment with MidFirst following
the completion of the merger, and are generally consistent, in most respects, with the compensation and benefits arrangements that currently apply to the executive officers' employment with
1st Century other than with respect to certain differences described below. Each of these agreements becomes effective as of and conditioned upon the closing. Upon and following the closing,
the new employment agreements determine the executive officers' terms of employment.
Each
employment agreement provides for certain payments and benefits upon a termination of the executive's employment by MidFirst without "cause", resignation by the executive for "good
reason", or termination because the executive dies or becomes "disabled", in each case as set forth below. Any payment upon termination is contingent upon execution by the executive (or, in the case
of the executive's death, the executive's estate) of a release of claims and compliance with the restrictive covenants described below.
Retention Bonus
: Each executive officer will be eligible to receive payment of a cash retention bonus, which will vest over a period of
time, subject
to such executive officer's continued employment through each applicable vesting date (each, a "retention bonus"). The amount of each retention bonus equals the amount that the executive officer would
have received in cash severance under his executive agreement with 1st Century if employment were terminated by 1st Century without "cause" or the executive officer resigned for "good
reason" within 12 months after the completion of the merger. If
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employment
terminates before vesting, each executive officer will be entitled to receive the full amount of his unpaid retention bonus as a single lump sum cash payment if (a) his employment is
terminated by MidFirst without "cause", (b) the executive terminates his employment for "good reason", or (c) his employment terminates due to his death or because he becomes "disabled".
Messrs. Rothenberg and DiNapoli will be entitled to retention bonuses of $888,252 and $1,024,726, respectively, half of which will vest on each of the first and second anniversaries of the
closing. Messrs. Satenberg and Sampson will be entitled to retention bonuses of $424,338 and $404,418, respectively, one-third of which will vest on each of the six-, twelve-, and
eighteen-month anniversaries of the closing.
2016 Retention Pool Bonus
: Each executive officer will be eligible to receive cash retention pool bonuses, subject to such executive
officer's
continued employment with MidFirst (or, in the case of Mr. Rothenberg, his continued provision of consulting services to MidFirst) through the applicable retention pool vesting date (each, a
"retention pool bonus"). The retention pool bonuses are intended to replace 2016 annual restricted stock grants that would have been granted by 1st Century had the merger agreement not been
entered into, and the retention pool bonuses maintain the vesting schedule that would have applied to such awards based on 1st Century's past practice. Each retention pool bonus provides for
accelerated vesting and payment of the entire unpaid amount if, after the completion of the merger (a) the executive officer's employment is terminated by MidFirst without "cause",
(b) he resigns his employment for "good reason" or (c) his employment terminates due to his death or because he becomes "disabled". Retention pool bonuses for Messrs. Rothenberg
and DiNapoli are $540,000 each, vesting 50% on the third anniversary of the closing, and 25% on each of the fourth and fifth anniversaries of the closing. Retention pool bonuses for
Messrs. Satenberg and Sampson are $180,000 each, vesting 20% on each of the first through fifth anniversaries of the closing.
2016 Annual Bonuses
: Each executive officer will be entitled to a guaranteed annual cash bonus for fiscal year 2016 equal to the amount
of their 2015
annual bonuses, subject to his continued employment for the remainder of the year, in the following amounts: Mr. Rothenberg, $100,000; Mr. DiNapoli, $130,000; Mr. Satenberg,
$88,011; and Mr. Sampson, $94,462. For fiscal years 2017 and later, each executive officer's MidFirst annual bonus will be discretionary (which is consistent with 1st Century's current
practice). Except as described below for Mr. Satenberg, no portion of the 2016 annual bonus is payable upon a termination of employment prior to December 31, 2016, other than a prorated
annual bonus payment to be made if the executive officer dies or becomes disabled.
Arrangements for Mr. DiNapoli
: In addition to the payments and benefits described above, Mr. DiNapoli will be entitled to a
cash bonus
of $500,000, payable subject to his continued employment through the applicable payment dates, in equal 50% installments on each of the third and fourth anniversaries of the closing, respectively (or,
upon Mr. DiNapoli's earlier termination of employment by MidFirst without "cause" or by Mr. DiNapoli for "good reason"). Mr. DiNapoli's new arrangements include a non-competition
covenant with a duration of four years from the closing, even though Mr. DiNapoli's existing arrangements with 1st Century do not include a non-compete covenant following termination of
his employment. In addition, if Mr. DiNapoli's employment is terminated by MidFirst without "cause" or Mr. DiNapoli terminates his employment for "good reason", he will be entitled to
continued payment
of his base salary (currently $382,363 per year) with payment beginning on the termination date or, if later, the second anniversary of the closing and ending on the fourth anniversary of the closing.
Mr. DiNapoli would also be entitled to a gross-up payment if he is subject to excise tax under Section 280G and 4999 of the Internal Revenue Code as a result of payments made by
1st Century or MidFirst to or for his benefit and such payments exceed 110% of his Section 280G "safe harbor" limit.
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Arrangements for Mr. Satenberg
: Pursuant to Mr. Satenberg's new employment agreement, he will have the right to terminate his
employment with MidFirst after the six month anniversary of the closing. If he exercises this right, he will be entitled to the same cash payments and other benefits as if his employment with MidFirst
had been terminated by MidFirst without "cause" or he had terminated his employment with MidFirst for "good reason", other than as related to his 2017 discretionary annual bonus. If
Mr. Satenberg's employment is terminated by MidFirst without "cause" or Mr. Satenberg terminates his employment for "good reason", he will be entitled to continued medical care,
disability and life insurance under MidFirst's benefit plans on the same basis as provided to Mr. Satenberg prior to his termination until the earlier of 12 months following such
termination or the date Mr. Satenberg becomes eligible for coverage with a subsequent employer. If Mr. Satenberg's employment is terminated by MidFirst without "cause" or
Mr. Satenberg terminates his employment for "good reason", he will be entitled to a lump sum termination payment equal to twelve weeks of his base salary, plus one additional week of base
salary per full year of service with 1st Century or MidFirst. If Mr. Satenberg's employment is terminated by MidFirst without "cause" or Mr. Satenberg terminates his employment
for "good reason", he will be entitled to a pro rata portion of his 2016 annual bonus or his 2017 annual bonus.
Periodic Bonuses for Messrs. Rothenberg, DiNapoli and Sampson
: Messrs. Rothenberg, DiNapoli and Sampson will be entitled to
receive
discretionary periodic bonuses subject to their continuous employment by MidFirst (or, in the case of Mr. Rothenberg, if he continuously provides consulting services to MidFirst) through the
applicable vesting dates. These periodic bonuses will vest, and be payable in installments, on the third, fourth and fifth anniversaries of the closing, respectively. The amount of each periodic bonus
for Messrs. Rothenberg and DiNapoli will be at the discretion of MidFirst's chief executive officer based upon the former 1st Century executive's personal performance, the performance of
any business or support unit managed by the executive, and the financial performance of MidFirst. Mr. Rothenberg will be entitled to periodic bonuses of $0-$150,000, Mr. DiNapoli will be
entitled to bonuses of $50,000-$200,000, and Mr. Sampson will be entitled to bonuses of $60,000. These periodic bonuses will not be payable if the executive's employment with MidFirst
terminates for any reason prior to the applicable vesting date, other than a prorated amount of periodic bonus for Mr. DiNapoli or Mr. Sampson in the event of their death.
Restrictive Covenants
: Messrs. Rothenberg and Mr. DiNapoli, only, will be subject to non-competition restrictions through the
fifth and
fourth anniversaries of the closing, respectively, employee non-solicitation restrictions through the later of the 24-month anniversary of the termination of their respective employment with MidFirst
or the fifth (for Mr. Rothenberg) or fourth (for Mr. DiNapoli) anniversary of the closing, and will be subject to business non-solicitation restrictions through the fifth (for
Mr. Rothenberg) or fourth (for Mr. DiNapoli) anniversary of the closing. Messrs. Satenberg and Sampson will each be subject to employee non-solicitation restrictions through the
12 month anniversary of the termination of their employment with MidFirst. By contrast, as described above, under their current executive agreements with 1st Century,
Messrs. Rothenberg and DiNapoli are each subject to post-termination employee non-solicitation and business non-solicitation provisions for a period of 12 months from the employment
termination date.
For
purposes of their MidFirst employment arrangements:
"Cause"
generally means (i) conduct amounting to fraud or material dishonesty against MidFirst, (ii) refusal to follow the reasonable directions of the Chief Executive
Officer or Board of Directors, (iii) knowing violations of the law in the course of employment, (iv) knowing violations of a written policy that has caused or can reasonably be expected
to cause material damage to MidFirst, (v) repeated absences from work without a reasonable excuse, (vi) intoxication while on MidFirst's premises during regular business hours,
(vii) illegal use of any controlled substance, (viii) conviction or guilty or nolo contendre plea to a felony or a crime involving moral turpitude, (ix) violation of any law,
rule, regulation (other than traffic violations or similar offenses), or final cease-and-desist order as
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proven
in court or to which the executive officer has pled guilty or nolo contendere, (x) material breach or violation of any written agreement with MidFirst or any of its subsidiaries,
(xi) breach of fiduciary duty to MidFirst or any of its subsidiaries in a manner that results in personal profit, (xii) demonstrated incompetence, or (xii) engaging in willful
misconduct, and for items (ii), (iv), (x) and (xii) above, failure to remediate such failures within 30 days of receiving notice from MidFirst. Termination for "cause" also
includes terminations mandated by the OCC.
"Disabled"
generally means the executive's qualification for benefits under MidFirst's long-term disability plan and the executive's inability to perform the essential functions of his
position even when provided with reasonable accommodation.
"Good
Reason" generally means: (i) material breach by MidFirst of any material provision of an employment agreement; (ii) the assignment of duties inconsistent with the
executive officer's position,
material demotion or removal from the executive officer's position, material reduction in responsibilities, or change in duties; (iii) a material reduction in the executive officer's base
salary; or (iv) the relocation of more than 50 miles from 1st Century's headquarters as of the closing.
A
summary of the amounts that may be received under these arrangements by Messrs. Rothenberg, DiNapoli and Satenberg upon a qualifying termination of
employment immediately after the completion of the merger (assuming solely for this purpose that the merger is completed and employment is terminated on June 30, 2016), are provided in
"Advisory Vote on Merger-Related Compensation for 1st Century's Named Executive OfficersGolden Parachute Compensation". A summary of such amounts for Mr. Sampson is:
$404,418 cash for his retention bonus and $180,000 for his retention pool bonus.
Pursuant to the terms of the merger agreement, 1st Century's directors and officers will be entitled to certain ongoing
indemnification, expense advancement and coverage under directors' and officers' liability insurance policies. See "The Merger AgreementDirector and Officer Indemnification and Insurance"
for a description of such ongoing indemnification, expense advancement and coverage obligations.
For
further information with respect to the arrangements between 1st Century and its named executive officers, see the information included in "Advisory Vote on Merger-Related
Compensation for 1st Century's Named Executive OfficersGolden Parachute Compensation".
Material U.S. Federal Income Tax Consequences of the Merger
The following is a summary of the material U.S. federal income tax consequences of the merger to U.S. holders whose 1st Century
shares are converted into the right to receive cash in the merger. This summary does not purport to consider all aspects of U.S. federal
income taxation that might be relevant to 1st Century stockholders. This discussion applies to you only if you hold 1st Century shares as capital assets for U.S. federal income tax
purposes, and does not apply to you if you are a member of a special class of holders subject to special rules, including:
-
-
Non-U.S. holders;
-
-
Dealers in securities;
-
-
Traders in securities that elect to use a mark-to-market method of accounting for securities holdings;
-
-
Tax-exempt organizations;
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-
-
Life insurance companies;
-
-
Persons that own or have owned, actually or constructively, ten percent or more of 1st Century shares;
-
-
Persons that use 1st Century shares as part of a straddle or a hedging or conversion transaction;
-
-
Persons that have a functional currency other than the U.S. dollar;
-
-
Persons that acquired 1st Century shares upon the exercise of stock options or otherwise as compensation; or
-
-
Stockholders who hold an equity interest, actually or constructively in Midland.
This
discussion is based on the Internal Revenue Code of 1986 (as amended), its legislative history, existing and proposed regulations, published rulings and court decisions, all as of
the date of this proxy statement. These laws are subject to change, possibly on a retroactive basis.
This
discussion addresses only U.S. federal income taxation. This discussion does not address any tax consequences arising under the unearned income Medicare contribution tax pursuant to
the Health Care and Education Reconciliation Act of 2010, nor does it address any aspect of foreign, state, local, alternative minimum, estate, gift or other tax law that may be applicable to a
holder.
This
discussion is intended to provide only a general summary of the material U.S. federal income tax consequences of the merger to holders of 1st Century shares.
1st Century does not intend for this discussion to be a complete analysis or description of all potential U.S. federal income tax consequences of the merger. The U.S. federal income tax laws
are complex and subject to varying interpretations. Accordingly, the Internal Revenue Service, which we refer to as the IRS, may not agree with the tax consequences described in this proxy statement.
If
a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds 1st Century shares, the tax treatment of a partner
generally will depend on the status of the partner and the activities of the partner and the partnership. A partner of a partnership holding 1st Century shares should consult the partner's tax
advisor regarding the U.S. federal income tax consequences of the merger to such partner.
Stockholders are urged to consult with their own tax advisors as to the tax consequences of the merger in their particular circumstances, including the
applicability and effect of U.S. federal (including the alternative minimum tax), state, local or non-U.S. and other tax laws and of changes in those laws.
For
purposes of this discussion, we use the term "U.S. holder" to mean a beneficial owner of 1st Century shares that is, for U.S. federal income tax
purposes:
-
-
An individual who is a citizen or resident of the United States;
-
-
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;
-
-
A trust that (i) is subject to the supervision of a court within the United States and the control of one or more United States
persons or (ii) has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a United States person; or
-
-
An estate that is subject to U.S. federal income tax on the estate's income regardless of its source.
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The exchange of 1st Century shares for cash in the merger will be a taxable transaction for U.S. federal income tax purposes. In
general, a U.S. holder whose 1st Century shares are converted into the right to receive cash in the merger will recognize capital gain or loss for U.S. federal income tax purposes equal to the
difference, if any, between the amount of cash received with respect to such shares (determined before the deduction of any applicable withholding taxes, as described below under "Backup
Withholding and Information Reporting") and the U.S. holder's adjusted tax basis in such shares. A U.S. holder's adjusted tax basis will generally equal the price the U.S. holder paid for such shares.
Gain or loss will be determined separately for each block of 1st Century shares (i.e., shares of common stock acquired at the same cost in a single transaction). Such capital gain or
loss will be long-term capital gain or loss; provided that the U.S. holder's holding period for such shares of common stock exceeds one year at the effective time. Long-term capital gains of
non-corporate U.S. holders are generally eligible for a reduced rate of U.S. federal income taxation. There are limitations on the deductibility of capital losses.
A U.S. holder may, under certain circumstances, be subject to information reporting and backup withholding (at a rate of 28%) with
respect to the per share merger consideration, unless such holder properly establishes an exemption or provides its correct tax identification number and otherwise complies with the applicable
requirements of the backup withholding rules.
Backup
withholding is not an additional tax. Any amounts withheld under the backup withholding rules can be refunded or credited against a payee's U.S. federal income tax liability, if
any, provided that such U.S. holder furnishes the required information to the IRS in a timely manner.
The U.S. federal income tax consequences described above are not intended to constitute a complete description of all tax consequences relating to the merger.
Because individual circumstances may differ, each stockholder should consult the stockholder's tax advisor regarding the applicability of the rules discussed above to the stockholder and the
particular tax effects to the stockholder of the merger in light of such stockholder's particular circumstances, and the application of state, local and foreign tax laws.
Regulatory Approvals
To complete the merger, the parties must make filings with and obtain authorizations, approvals or consents from certain regulatory
authorities. Under the terms of the merger agreement, the merger cannot be completed until the requisite regulatory consents from the Federal Reserve and the OCC are received and any statutory waiting
periods in respect thereof have expired, without the imposition of a burdensome condition on Midland or any of its affiliates or shareholders. The parties have agreed to cooperate and use their
respective reasonable best efforts to prepare or cause to be prepared all documentation, to make or cause to be made all filings and to obtain or cause to be obtained all permits, consents, approvals
and authorizations of all third parties and governmental entities necessary to consummate the transactions contemplated by the merger agreement, including the regulatory consents required from the
Federal Reserve and the OCC. Midland must use its reasonable best efforts to resolve objections, if any, which may be asserted with respect to the merger, the subsequent merger or the bank merger
under any applicable law or order, and avoid the entry of, or to have vacated, lifted, reversed or overturned any order, whether temporary, preliminary or permanent, that would restrain, prevent or
delay the closing; provided that in no event will Midland or any of its affiliates or
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shareholders
be required to accept a burdensome condition. The merger agreement defines "burdensome condition" as conditions requiring Midland to:
-
-
accept any new change, restriction or condition on Midland, Merger Sub, MidFirst or any of Midland's other affiliates or shareholders
which is materially burdensome on Midland, any of Midland's affiliates or shareholders, 1st Century or 1st Century Bank or the business of any of the foregoing that would, or would be
reasonably likely to, after the effective time (but regardless of when such action, condition or restriction is to be taken or implemented), (i) individually or in the aggregate, after giving
effect to such action(s) together with all facts, circumstances, changes, events, developments or occurrences with respect to 1st Century or 1st Century Bank since the date of the merger
agreement, have a material adverse effect on Midland and its subsidiaries, on the one hand, or 1st Century and 1st Century Bank, on the other hand, in each case measured on a scale
relative to 1st Century and 1st Century Bank, taken as a whole, or (ii) require Midland, Merger Sub, MidFirst or any of Midland's other affiliates or shareholders,
1st Century or 1st Century Bank to enter into an operating agreement or raise an amount of additional capital that would materially reduce the economic benefits of the transactions
contemplated by the merger agreement to Midland or any of Midland's affiliates or shareholders, as the case may be; or
-
-
proffer to, or agree to, sell, divest, lease, license, transfer, dispose of or otherwise encumber or hold separate and agree to sell,
divest, lease, license, transfer, dispose of or otherwise encumber before, on or after the effective time, any assets, licenses, operations, rights, product lines, businesses or other interests of
Midland, any of Midland's affiliates or shareholders or any of their affiliates, 1st Century or 1st Century Bank or any of their assets, licenses, operations, rights, businesses or
interests thereon or to any agreement by 1st Century or 1st Century Bank to take any of the foregoing actions that would, or would be reasonably likely to, after the effective time (but
regardless of when such action, condition or restriction is to be taken or implemented), (i) individually or in the aggregate, after giving effect to such action(s) together with all facts,
circumstances, changes, events, developments or occurrences with respect to 1st Century or 1st Century Bank since the date of the merger agreement, have a material adverse effect on
Midland and its subsidiaries, on the one hand, or 1st Century and 1st Century Bank, on the other hand, in each case measured on a scale relative to 1st Century and
1st Century Bank, taken as a whole, or (ii) require Midland, Merger Sub, MidFirst or any of Midland's other affiliates or shareholders, 1st Century or 1st Century Bank to
enter into an operating agreement or raise an amount of additional capital that would materially reduce the economic benefits of the transactions contemplated by the merger agreement to Midland or any
of Midland's affiliates or shareholders, as the case may be.
1st Century is a bank holding company as defined in the BHC Act. The acquisition of control of a bank holding company requires
the prior approval of the Federal Reserve pursuant to Section 3 of the BHC Act. Prior to consummating the merger and the bank merger, Midland must obtain a waiver from the application
requirements of Section 3 of the BHC Act, or if required by the Federal Reserve, apply under Section 3 of the BHC Act. Midland submitted a request to the Federal Reserve on
April 27, 2016 to seek such a waiver and received the requested waiver from the Federal Reserve on May 9, 2016.
1st Century Bank and MidFirst are regulated and supervised by the OCC. The bank merger requires prior approval of the OCC under
Section 18(c) of the Federal Deposit Insurance Act, referred to as the Bank Merger Act. MidFirst filed its Bank Merger Act Application seeking approval of the
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bank merger with the OCC on April 21, 2016. In reviewing applications under the Bank Merger Act, the OCC must consider, among other factors: the financial and managerial resources and future
prospects of the existing and proposed institutions; the convenience and needs of the communities to be served; the effectiveness of both institutions in combating money laundering; and the risks to
the stability of the U.S. banking or financial system.
In
addition, the OCC may not approve a merger:
-
-
that will result in a monopoly or be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any part of the United States;
-
-
if the effect of the merger in any section of the country may be substantially to lessen competition or tend to create a monopoly; or
-
-
if the merger would in any other manner be a restraint of trade unless the OCC finds that the anticompetitive effects of the merger
are clearly outweighed by the public interest and the probable effect of the merger in meeting the convenience and needs of the communities to be served.
Under
the Community Reinvestment Act of 1977, the OCC must also take into account the records of performance of 1st Century Bank and MidFirst in meeting the credit needs of their
respective markets, including low and moderate income neighborhoods served by each institution. As part of the merger review process, the OCC may receive comments and protests from community groups
and others.
In
general, the OCC relies on written information submitted during the comment period to reach a decision on an application. However, the OCC will consider obtaining information through
other means, such as a public hearing, if useful in reaching a decision. A decision by the OCC that such a hearing or meeting would be appropriate regarding any application could prolong the period
during which the application is subject to review.
Mergers
approved by the OCC under the Bank Merger Act generally may not be consummated until 30 days after the date of approval, during which time the U.S. Department of Justice
may challenge the merger on antitrust grounds and may seek to require the divestiture of certain assets and liabilities. With approval of the OCC and the Department of Justice, that waiting period may
be, and customarily is, reduced to no less than 15 days. There can be no assurance that the Department of Justice will not challenge the merger or, if such a challenge is made, that the result
of that challenge will be favorable to 1st Century Bank and MidFirst.
Although
1st Century currently believes it should be able to obtain all requisite regulatory consents in a timely manner, 1st Century cannot be certain when or if
1st Century will obtain them or, if obtained, whether such approvals will contain a burdensome condition.
Litigation Related to the Merger
On May 3, 2016, a putative stockholder class action lawsuit, captioned Dean Drulias v. 1st Century
Bancshares, Inc. et. al, Case No. 16CV294673, was filed in the Superior Court of the State of California in and for the County of Santa Clara in connection with the merger, which we
refer to as the "Drulias Action". The Drulias Action alleges, among other things, that the members of the 1st Century board breached their fiduciary duties by causing 1st Century to
agree to the merger based on the individual interests of such directors as opposed to the best interests of 1st Century's stockholders. The Drulias Action also alleges that 1st Century
and the 1st Century board failed to disclose material information in the preliminary proxy statement filed with the Securities and Exchange Commission in connection with the merger. The
plaintiff in this action seeks, among other things, declaratory and injunctive relief, compensatory and/or rescissory damages, interest, attorney's fees, expert fees and other costs, and other relief.
At this stage, it is not possible to predict the outcome of the proceedings or their impact on 1st Century or the merger.
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THE MERGER AGREEMENT
This section describes the material terms of the merger agreement. The description in this section and elsewhere in this proxy
statement is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached as
Annex A
and is
incorporated by reference into this proxy statement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. You
are encouraged to read the merger agreement carefully and in its entirety before making any decisions regarding the merger, including approval of the proposal to adopt the merger agreement, as it is
the legal document governing the merger. This section is not intended to provide you with any factual information about 1st Century or Midland. Such information can be found elsewhere in this
proxy statement and in the public filings 1st Century makes with the SEC, as described under the heading "Where You Can Find More Information".
Explanatory Note Regarding the Merger Agreement
The merger agreement, a copy of which is attached to this proxy statement as
Annex A
, and this summary of its terms are included to
provide you with information regarding the terms of the merger agreement. Factual
disclosures about 1st Century contained in this proxy statement or in 1st Century's public reports filed with the SEC may supplement, update or modify the factual disclosures about
1st Century contained in the merger agreement. The representations, warranties and covenants made in the merger agreement by 1st Century and Midland were made solely to the parties to,
and solely for the purposes of, the merger agreement and as of specific dates and were qualified and subject to important limitations agreed to by 1st Century and Midland in connection with
negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to
bear in mind that the representations and warranties were negotiated with the principal purpose of establishing the circumstances in which a party to the merger agreement may have the right not to
consummate the merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the merger
agreement, rather than establishing matters as facts. The representations and warranties also may be subject to a contractual standard of materiality different from those generally applicable to
stockholders and reports and documents filed with the SEC and in some cases were qualified by the matters contained in the confidential disclosure schedules that 1st Century provided to Midland
in connection with the merger agreement, which we refer to as the disclosure schedules, which disclosures were not reflected in the merger agreement. Moreover, information concerning the subject
matter of the representations and warranties may have changed since the date of the merger agreement. Investors should not rely on the representations, warranties and covenants or any description
thereof as characterizations of the actual state of facts of 1st Century, Midland and Merger Sub or any of their respective subsidiaries or affiliates.
Effects of the Merger
The merger agreement provides that, on the terms and subject to the conditions set forth therein and in accordance with the DGCL, at
the effective time, Merger Sub will merge with and into 1st Century, with 1st Century surviving the merger as a wholly-owned subsidiary of Midland. Upon consummation of the merger, the
separate corporate existence of Merger Sub will terminate. Simultaneously with the merger, 1st Century Bank will merge with and into MidFirst Bank. MidFirst will be the surviving entity of the
bank merger and, following the bank merger, the separate corporate existence of 1st Century Bank will terminate. Immediately after the merger and bank merger described above, 1st Century
(as the surviving corporation in the merger), will merge with and into Midland.
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Midland
will be the surviving entity of the subsequent merger and, following the subsequent merger, the separate corporate existence of 1st Century will terminate.
The
closing is required to take place on the third business day following the date that the conditions set forth in the merger agreement (other than conditions that by their nature are
to be satisfied at the closing, but subject to the satisfaction or, to the extent permissible, waiver of those conditions at the closing) have been satisfied or, to the extent permissible, waived by
the party or parties entitled to the benefit of such conditions, or at such other place or time as Midland and 1st Century may mutually agree.
The
merger will become effective at such time as the certificate of merger is duly filed with the Delaware Secretary of State or at such later time as may be specified in such
certificate of merger.
Charter; Bylaws
The certificate of incorporation of 1st Century will be amended at the effective time to read in its entirety as set forth in
Exhibit B to the merger agreement and, as so amended, will be the certificate of incorporation of the surviving corporation until duly amended or repealed.
The
bylaws of the Merger Sub in effect immediately prior to the effective time will be the bylaws of the surviving corporation until duly amended or repealed.
Directors and Officers
The directors of Merger Sub in office immediately prior to the effective time will serve as the directors of the surviving corporation
from and after the effective time in accordance with the bylaws of the surviving corporation. The officers of Merger Sub in office
immediately prior to the effective time will serve as the officers of the surviving corporation from and after the effective time in accordance with the bylaws of the surviving corporation.
Merger Consideration
The merger agreement provides that, at the effective time, each 1st Century share issued and outstanding immediately prior to
the effective time (other than excluded shares and dissenting shares) will be converted into the right to receive the per share merger consideration. As of the effective time, all such
1st Century shares will no longer be outstanding and will automatically be cancelled and will cease to exist, and will thereafter represent only the right to receive the per share merger
consideration to be paid in accordance with the merger agreement, without interest.
The
merger agreement also provides that, at the effective time, each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the
effective time will be converted into one share of common stock, par value $0.01 per share, of the surviving corporation, which will constitute the only shares of capital stock of the surviving
corporation.
Adjustments
The merger agreement provides that if, during the period between the date of the merger agreement and the effective time, the
outstanding 1st Century shares are changed into a different number of shares or a different class (including by reason of any reclassification, recapitalization, stock split, merger or
combination, exchange or readjustment of 1st Century shares, or stock dividend thereon with a record date during such period), the per share merger consideration and any other amounts payable
pursuant to the merger agreement will be appropriately adjusted.
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Treatment of 1st Century Restricted Shares
Each 1st Century restricted share that is outstanding immediately prior to the effective time will vest in full and become free
of certain applicable restrictions and any repurchase right will lapse, as of the effective time and, at the effective time, each such 1st Century restricted share will be converted into the
right to receive the per share merger consideration.
Exchange of Certificates
Prior to the closing date, Midland will appoint the paying agent with 1st Century's prior approval (which approval may not be
unreasonably withheld, conditioned or delayed) to make payments of the per share merger consideration to 1st Century's stockholders.
Prior
to or on the closing date, Midland will make available to the paying agent immediately available funds necessary for the aggregate per share merger consideration to be paid in
respect of 1st Century shares and 1st Century restricted shares. Promptly after the effective time, Midland or the paying agent will send to each holder of 1st Century shares that
have been converted into the right to receive the per share merger consideration a letter of transmittal and instructions advising stockholders how to surrender their stock certificates and
uncertificated shares in exchange for the per share merger consideration.
Upon
surrender to the paying agent of a certificate (or affidavit of loss in lieu thereof), together with a properly completed letter of transmittal, or receipt of an "agent's message"
by the paying agent (or such other evidence, if any, of transfer as the paying agent may reasonably request) in the case of a book-entry transfer of uncertificated shares, each 1st Century
stockholder (other than with respect to excluded shares and dissenting shares) will be entitled to receive the per share merger consideration for each 1st Century share formerly represented by
a certificate or for each uncertificated 1st Century share. To the extent reasonably practicable, Midland will have the option to fund the per share merger consideration to be paid with respect
to certain 1st Century shares that previously represented 1st Century restricted shares by funding the necessary amounts to the payroll processor of 1st Century or Midland or any
of their respective affiliates for payment of the per share merger consideration to the applicable holders by such payroll processor.
No Transfers Following the Effective Time
The merger agreement provides that after the effective time, there will be no further registration of transfers of 1st Century
shares. If, after the effective time, certificates or uncertificated shares are presented to the surviving corporation or the paying agent, they will be cancelled and exchanged for the amount in
immediately available funds to which the holder of the certificate is entitled pursuant to, and in accordance with, the procedures set forth in the merger agreement.
Termination of Exchange Fund
Any portion of the exchange fund made available to the paying agent pursuant to the merger agreement (and any interest or other income
earned thereon) that remains unclaimed by the holders of 1st Century shares twelve months after the effective time will be returned to Midland or one of its affiliates, upon demand, and any
holder who has not exchanged its 1st Century shares for the per share merger consideration in accordance with the merger agreement prior to that time must thereafter look only to Midland for
payment of the per share merger consideration.
Neither
Midland nor any of its affiliates will be liable to any holder of 1st Century shares for any amounts paid to a public official pursuant to applicable abandoned property,
escheat or similar laws. Any amounts remaining unclaimed by holders of 1st Century shares immediately prior to such time when the amounts would otherwise escheat to or become property of any
governmental entity will
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become,
to the extent permitted by applicable law, the property of Midland free and clear of any claims or interest of any person previously entitled thereto.
Lost, Stolen or Destroyed Certificates
If a 1st Century share certificate has been lost, stolen or destroyed, then, before a 1st Century stockholder will be
entitled to receive the per share merger consideration in respect thereof, such stockholder will need to deliver an affidavit of that fact and, if required by the surviving corporation, post a bond
(in such reasonable amount as the surviving corporation may direct) as indemnity against any claim that may be made with respect to such lost certificate.
Appraisal Rights
1st Century stockholders who do not vote in favor of the adoption of the merger agreement and who otherwise comply with the
applicable provisions of Section 262 of the DGCL will be entitled to exercise appraisal rights thereunder. Any 1st Century shares held by a 1st Century stockholder as of the
record date who has not voted in favor of the adoption of the merger agreement and who has validly made and not effectively withdrawn a demand for appraisal rights pursuant to Section 262 of
the DGCL will not be converted into a right to receive the per share merger consideration, unless such holder effectively waives, withdraws or loses such holder's rights under Section 262 of
the DGCL.
Under
the merger agreement, 1st Century must give Midland (i) reasonably prompt notice of any demands for appraisal, attempted withdrawals of such demands, and any other
instruments served pursuant to applicable law that are received by 1st Century relating to stockholders' rights of appraisal and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under Section 262 of the DGCL. 1st Century may not, except with the prior written consent of Midland, voluntarily make any payment with
respect to any demands for appraisal, offer to settle or settle any such demands or approve any withdrawal of any such demands.
THE
PROCESS OF DEMANDING AND EXERCISING APPRAISAL RIGHTS REQUIRES STRICT COMPLIANCE WITH TECHNICAL PREREQUISITES. IF YOU WISH TO EXERCISE YOUR APPRAISAL RIGHTS, YOU SHOULD CONSULT WITH
YOUR OWN LEGAL COUNSEL IN CONNECTION WITH COMPLIANCE UNDER SECTION 262 OF THE DGCL, THE FULL TEXT OF WHICH AS OF THE DATE HEREOF IS ATTACHED TO THIS PROXY STATEMENT AS
ANNEX C
.
SUBMISSION OF STOCKHOLDER PROPOSALS
If the merger is consummated, we will not have public stockholders and there will be no public participation in any future meeting of
stockholders. However, if the merger is not completed, we expect to hold an annual meeting of stockholders in 2016, which we refer to as our 2016 Annual Meeting.
Some
proposals pursuant to Rule 14a-8 under the Exchange Act may be eligible for inclusion in the proxy statement for our 2016 Annual Meeting. In order for a stockholder proposal
to be considered for inclusion in 1st Century's proxy materials for the 2016 Annual Meeting, assuming the 2016 Annual Meeting is held between April 7, 2016 and July 6, 2016, a
stockholder's notice must have been delivered to and received by the Corporate Secretary at the principal executive offices of 1st Century not later than the close of business on
February 5, 2016 and not earlier than the close of business on January 7, 2016; provided, however, that in the event that the date of the 2016 Annual Meeting is before April 7,
2016 or after July 6, 2016, any notice by the stockholder of business or the nomination of directors for election or reelection to be brought before the annual meeting to be timely must be so
delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual
meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. Submitting a stockholder proposal does not guarantee that we will include it in our
proxy statement if it does not satisfy the standards set forth in the rules of the SEC.
WHERE YOU CAN FIND MORE INFORMATION
1st Century files annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and
copy any reports, statements or other information that 1st Century files at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information.
1st Century's public filings are also available in electronic format to the public from commercial document retrieval services and at the website maintained by the SEC at http://www.sec.gov.
You can also review 1st Century's SEC filings on its website at www.1cbank.com. Information included on 1st Century's website is not a part of, and is not incorporated in, this proxy
statement.
The
SEC allows 1st Century to "incorporate by reference" information into this proxy statement, which means that we can disclose important information to you by referring you to
another document filed separately with the SEC. The information incorporated by reference is deemed to be part of this proxy statement, except for any information superseded by information contained
directly in this proxy statement. This proxy statement incorporates by reference the documents described below that 1st Century has previously filed with the SEC, as well as the annexes to this
proxy statement. These documents contain important information about 1st Century and its financial condition.
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The
following documents listed below that 1st Century has previously filed with the SEC are incorporated by reference:
-
-
Annual Report on Form 10-K, for the fiscal year ended December 31, 2015, filed with the SEC on March 4, 2016 (as
amended by Annual Report on Form 10-K/A filed with the SEC on April 28, 2016)
-
-
Quarterly Report on Form 10-Q, for the quarter ended March 31, 2016, filed with the SEC on May 5, 2016; and
-
-
Current Reports on Form 8-K, filed with the SEC on March 11, 2016 and April 27, 2016.
All
documents that 1st Century files pursuant to Sections 13(a), 13(c), 14 or 15(d) under the Exchange Act from the date of this proxy statement to the date on which the
special meeting is held, including any adjournments or postponements, will also be deemed to be incorporated by reference in this proxy statement. Notwithstanding anything herein to the contrary, any
information furnished under Item 2.02 or Item 7.01 of 1st Century's Current Reports on Form 8-K, and any other information which is furnished but not filed with the SEC, is
not incorporated herein by reference.
You
may obtain any of the documents incorporated by reference from the SEC's Internet website described above. Documents incorporated by reference in this proxy statement are also
available from 1st Century without charge, excluding all exhibits unless specifically incorporated by reference in such documents. Stockholders may obtain documents incorporated by reference in
this proxy statement by requesting them in writing or by telephone from 1st Century at the following address:
1st Century Bancshares, Inc.
1875 Century Park East, Suite 1400
Los Angeles, CA 90067
Telephone: (310) 270-9500
Attn: Corporate Secretary
If you would like to request documents, please do so by June 6, 2016 to receive them before the special meeting. If you request any incorporated documents, 1st Century
undertakes to mail them to you by first-class mail, or another equally prompt means, within one business day of receipt of your request.
You should rely only on the information contained in this proxy statement, including the annexes attached hereto or the information incorporated by reference herein, to vote your
1st Century shares at the special meeting of 1st Century stockholders. 1st Century has not authorized anyone to provide you with information that differs from that contained in
this proxy statement. This proxy statement is dated May 18, 2016. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date,
and the mailing of this proxy statement to stockholders will not create any implication to the contrary.
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Annex A
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Agreement and Plan of Merger, dated as of March 10, 2016, among 1st Century Bancshares, Inc., Midland Financial Co. and MC 2016 Corp.
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Annex B
|
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Voting Agreement, dated as of March 10, 2016, between Midland Financial Co. and certain stockholders of 1st Century Bancshares, Inc.
|
Annex C
|
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Section 262 of the General Corporation Law of the State of Delaware
|
Annex D
|
|
Opinion of Sandler O'Neill & Partners, L.P., dated as of March 10, 2016
|
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Annex A
EXECUTION
VERSION
AGREEMENT
AND PLAN OF MERGER
AMONG
MIDLAND
FINANCIAL CO.,
MC
2016 CORP.
AND
1ST
CENTURY BANCSHARES, INC.
DATED
AS OF MARCH 10, 2016
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Exhibits
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Exhibit A
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Employees
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Exhibit B
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Form of Amended and Restated Certificate of Incorporation
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Exhibit C
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Subsidiary Plan of Merger
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Exhibit D
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Retention Agreement Employees
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AGREEMENT AND PLAN OF MERGER (this "
Agreement
") dated as of March 10, 2016, among Midland
Financial Co., an Oklahoma corporation ("
Purchaser
"), MC 2016 Corp., a Delaware corporation and a wholly-owned subsidiary of Purchaser
("
Merger Sub
"), and 1st Century Bancshares, Inc., a Delaware corporation (the "
Company
").
INTRODUCTION
The
Board of Directors of the Company (the "
Company Board
") has unanimously (i) approved and declared
advisable this Agreement and the transactions contemplated by this Agreement, including the strategic business combination transaction provided for in this Agreement in which the Merger Sub will, on
the terms and subject to the conditions set forth herein, merge with and into the Company (the "
Merger
"), with the Company being the surviving entity in
the Merger, (ii) determined that this Agreement and such transactions are fair to, and in the best interests of, the Company and its stockholders and (iii) resolved to recommend that the
Company's stockholders adopt this Agreement;
Each
of the boards of directors of Purchaser and Merger Sub has approved and declared advisable this Agreement and the transactions contemplated by this Agreement, including the Merger,
upon the terms and subject to the conditions set forth herein;
As
a condition and inducement to the willingness of Purchaser to enter into this Agreement, certain stockholders of the Company are entering into a voting agreement with Purchaser (the
"
Stockholder Voting Agreement
") simultaneously with the execution and delivery of this Agreement;
As
a condition and inducement to the willingness of Purchaser to enter into this Agreement, each of the individuals listed on
Exhibit A
hereto have entered into employment agreements with MidFirst
Bank (such new or amended agreements, the
"
Employment Agreements
") simultaneously with the execution and delivery of this Agreement, the effectiveness of which are conditioned upon the
occurrence of Closing;
As
a condition and inducement to the willingness of Purchaser to enter into this Agreement, and in order to protect Purchaser's legitimate interest in the goodwill and other assets
associated with the business of the Company, certain stockholders of the Company have entered into non-competition agreements with Purchaser simultaneously with the execution and delivery of this
Agreement, the effectiveness of which are conditioned upon the occurrence of the Closing; and
Purchaser,
Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements specified herein in connection with this Agreement.
In
consideration of the above and the warranties, representations, covenants, and agreements set forth herein, the Parties agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.01.
Certain Definitions
.
Terms defined in
Annex A
attached hereto and used herein without definition shall have the meanings given to them in
Annex A
.
Section 1.02.
Rules of Construction
.
(a) Unless
the express context otherwise requires:
(i) the
word "extent" in the phrase "to the extent" means the degree to which a subject or other thing extends, and such phrase does not mean simply "if";
(ii) the
words "hereof", "herein", and "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any
particular provision of this Agreement;
(iii) the
terms defined in the singular have a comparable meaning when used in the plural and vice versa;
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(iv) the
terms "Dollars" and "$" mean United States Dollars;
(v) references
in this Agreement to a specific Article, Section, Clause, Exhibit or Annex shall refer, respectively, to Articles, Sections, Clauses, Exhibits or Annexes of
this Agreement;
(vi) wherever
the word "include," "includes," or "including" is used in this Agreement, it shall be deemed to be followed by the words "without limitation"; and
(vii) wherever
used, the word "or" is used in the inclusive sense (and/or).
(b) The
descriptive headings of the several Articles and Sections of this Agreement, the Table of Contents to this Agreement and the Company Disclosure Schedule are inserted
for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement.
(c) This
Agreement was prepared jointly by the Parties and no rules that it be construed against the drafter shall have any application in its construction or
interpretation. In the event that an ambiguity or a 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 provision of this Agreement.
(d) The
Parties intend that each representation, warranty and covenant contained herein will have independent significance. If any Party has breached or violated, or if
there is an inaccuracy in, any representation, warranty or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant related to the same subject
matter (regardless of the relative levels of specificity), which the Party has not breached or violated, or with respect to which there is not an inaccuracy, will not detract from or mitigate the fact
that the Party has breached or violated, or there is an inaccuracy in, the first representation, warranty or covenant.
(e) As
used in this Agreement, the words "made available", "provided" or "delivered" to Purchaser or its Representatives, or similar formulations, mean (i) in the
case of materials "made available", "provided" or "delivered" (or similar formulations) prior to or as of the date hereof, (A) provided by one Party or its Representatives to the other Party or
its Representatives prior to the date hereof, (B) filed by a Party with the SEC and publicly available on EDGAR prior to the date hereof or (C) included in the Data Room in unredacted
form prior to the date hereof and (ii) in the case of materials to be "made available", "provided" or "delivered" (or similar formulations) after the date hereof and prior to the Closing,
(A) provided by one Party or its Representatives to the other Party or its Representatives not later than two Business Days prior to the Closing, (B) filed by a Party with the SEC and
publicly available on Edgar not later than two Business Days prior to the Closing or (C) included in the Data Room in unredacted form not later than two Business Days prior to the Closing.
ARTICLE II
TRANSACTIONS AND TERMS OF MERGER
Section 2.01.
Merger
.
Upon the terms and subject to the conditions of this Agreement, at the Effective Time, Merger Sub shall be merged with and into the Company in accordance with the provisions of
Section 251 of the General Corporation Law of the State of Delaware (the "
DGCL
") with the effects set forth in the DGCL. The Company shall be the
Surviving Corporation of the Merger. Upon consummation of the Merger, the separate corporate existence of Merger Sub shall terminate. From and after the Effective Time, the Surviving Corporation shall
possess all the rights, powers, privileges and franchises and be subject to all of the obligations, liabilities, restrictions and disabilities of the Company and Merger Sub, all as provided under the
DGCL.
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Section 2.02.
Time and Place of Closing
.
The closing of the transactions contemplated hereby (the "
Closing
") will take place at 10:00 A.M., Eastern Time, on the third
Business Day following the date that the conditions set forth in
Article VIII
(other than conditions that by their nature are to be satisfied at
the Closing, but subject to the satisfaction or, to the extent permissible, waiver of those conditions at the Closing) have been satisfied or, to the extent permissible, waived by the Party or Parties
entitled to the benefit of such conditions, or at such other place or time as Purchaser and the Company may mutually agree. The Closing shall be held at the offices of Covington &
Burling LLP located at 620 Eighth Avenue, New York, New York 10018, unless another location is mutually agreed upon by the Parties.
Section 2.03.
Effective Time; Closing Date
.
At the Closing, the Company shall file a certificate of merger with the Delaware Secretary of State and make all other filings or recordings required by the DGCL in connection
with the Merger. The Merger shall become effective at such time as such certificate of merger is duly filed with the Delaware Secretary of State or at such later time as may be specified in such
certificate of merger (the "
Effective Time
"). The date on which the Closing occurs is referred to in this Agreement as the
"
Closing Date
."
Section 2.04.
Charter
.
The certificate of incorporation of the Company shall be amended at the Effective Time to read in its entirety as set forth in
Exhibit B
and, as so amended, shall be the
certificate of incorporation of the Surviving Corporation until duly amended or repealed.
Section 2.05.
Bylaws
.
The bylaws of the Merger Sub in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation until duly amended or repealed.
Section 2.06.
Directors and Officers
.
The directors of Merger Sub in office immediately prior to the Effective Time shall serve as the directors of the Surviving Corporation from and after the Effective Time in accordance
with the bylaws of the Surviving Corporation. The officers of Merger Sub in office immediately prior to the Effective Time shall serve as the officers of the Surviving Corporation from and after the
Effective Time in accordance with the bylaws of the Surviving Corporation. The Parties shall take all actions necessary to effect the provisions of this
Section 2.06
.
Section 2.07.
Bank Merger
.
Simultaneously with the Merger, 1st Century Bank, National Association, a national banking association and a wholly-owned subsidiary of the Company (the
"
Bank
"), will merge (the "
Bank Merger
") with and into MidFirst Bank, a federal savings association and a
wholly-owned subsidiary of Purchaser ("
MidFirst
"). MidFirst shall be the surviving entity of the Bank Merger and shall continue its corporate existence
under the name "MidFirst Bank," and, following the Bank Merger, the separate corporate existence of the Bank shall terminate. The Parties agree that the Bank Merger shall become effective
simultaneously with the Effective Time. The Bank Merger shall be implemented pursuant to a subsidiary plan of merger, attached as
Exhibit C
hereto (the "
Subsidiary Plan of Merger
"). In order to obtain the necessary regulatory approvals for the Bank Merger, the Parties shall cause the
following to be accomplished prior to the filing of applications for regulatory approval: (a) the Company shall cause the Board of Directors of the Bank to approve the Subsidiary Plan of
Merger, the Company, as the sole shareholder of the Bank, shall approve the Subsidiary Plan of Merger and the Company shall cause the Subsidiary Plan of Merger to be duly executed by the Bank and
delivered to Purchaser and (b) Purchaser shall cause the Board of Directors of MidFirst to approve the Subsidiary Plan of Merger, Purchaser, as the sole stockholder of MidFirst, shall approve
the Subsidiary Plan of Merger and Purchaser shall cause MidFirst to duly execute and deliver the Subsidiary Plan of Merger to the Company. Prior to the Effective Time, the Company shall cause the
Bank, and Purchaser shall cause MidFirst, to execute such articles of combination, bank merger applications, required merger certificates, and such other documents and certificates as are necessary to
make the Bank Merger effective simultaneously with the Effective Time.
Section 2.08.
Subsequent Merger
.
Immediately following the Effective Time, the Company will be merged with and into Purchaser (the "
Subsequent Merger
"). Purchaser shall be
the surviving entity of
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the
Subsequent Merger and shall continue its corporate existence under the name "Midland Financial Co." and, following the Subsequent Merger, the separate corporate existence of the Company
shall terminate.
ARTICLE III
EFFECT OF THE MERGER ON CAPITAL STOCK;
EXCHANGE OF CERTIFICATES
Section 3.01.
Effect on Capital Stock
.
At the Effective Time, by virtue of the Merger and without any action on the part of Purchaser, Merger Sub, the Company or any holder of capital stock of any of the foregoing:
(a) Merger
Consideration. Each share of the Common Stock, par value $0.01 per share (the "
Common Stock
"), of the
Company (each a "
Share
" and, collectively, the "
Shares
") issued and outstanding immediately prior to the
Effective Time (other than (i) the Excluded Shares and (ii) Shares that are owned by stockholders who have validly made and not effectively withdrawn a demand for appraisal rights
pursuant to Section 262 of the DGCL ("
Dissenting Shares
")) shall be converted into the right to receive $11.22 per Share (the
"
Per Share Merger Consideration
"), without interest. As of the Effective Time, all such Shares shall no longer be outstanding and shall automatically be
cancelled and shall cease to exist, and shall thereafter represent only the right to receive the Per Share Merger Consideration to be paid in accordance with
Section 3.02
, without interest.
(b) Cancellation
of Excluded Shares. Each Excluded Share shall cease to be outstanding, be cancelled without payment of any consideration therefor and shall
cease to exist.
(c) Dissenting
Shares. Notwithstanding anything to the contrary contained herein, the holders of any Dissenting Share shall be entitled only to such rights and
payments as are granted by Section 262 of the DGCL;
provided
,
however
, that if any such holder
shall effectively waive, withdraw or lose such holder's rights under Section 262 of the DGCL, each of such holder's Dissenting Shares shall thereupon be deemed to have been converted at the
Effective Time into the right to receive the Per Share Merger Consideration, without interest and after giving effect to any required Tax withholdings as provided in
Section 3.03
, and such holder
thereof shall cease to have any other rights with respect thereto. The Company shall give Purchaser
(i) reasonably prompt notice of any demands for appraisal, attempted withdrawals of such demands, and any other instruments served pursuant to applicable Law that are received by the Company
relating to stockholders' rights of appraisal and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under Section 262 of the DGCL. The
Company shall not, except with the prior written consent of Purchaser, voluntarily make any payment with respect to any demands for appraisal, offer to settle or settle any such demands or approve any
withdrawal of any such demands.
(d) Merger
Sub. At the Effective Time, each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into one share of common stock, par value $0.01 per share, of the Surviving Corporation, which shall constitute the only shares of capital stock of the Surviving
Corporation.
Section 3.02.
Exchange of Certificates
.
(a) Prior
to the Closing Date, Purchaser shall appoint an agent with the Company's prior approval (which approval shall not be unreasonably withheld, conditioned or delayed)
(the "
Paying Agent
") for the purpose of exchanging for the Per Share Merger Consideration (i) certificates representing Shares (the
"
Certificates
") (or affidavits of loss in lieu of the Certificates as provided in
Section 3.02(g)
) or (ii) uncertificated Shares (the
"
Uncertificated Shares
"). Prior to or
on the Closing Date, Purchaser shall, or shall cause MidFirst to, make available to the Paying Agent immediately available funds necessary for the aggregate Per Share Merger Consideration to be paid
in respect of
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the
Certificates, the Uncertificated Shares and the Company Restricted Shares pursuant to this
Article III
, other than any Per Share Merger
Consideration Purchaser elects to have paid by the Payroll Processor pursuant to
Section 3.02(b)
(the "
Exchange
Fund
"). Promptly after the Effective Time, Purchaser shall send, or shall cause the Paying Agent to send, to each holder of Shares that have been converted into the right to
receive the Per Share Merger Consideration at the Effective Time a letter of transmittal and instructions (which shall specify that the delivery shall be effected, and risk of loss and title shall
pass, only upon proper delivery of the Certificates (or affidavits of loss in lieu of the Certificates as provided in
Section 3.02(g)
) or
transfer of the Uncertificated Shares to the Paying Agent) for use in such exchange.
(b) Each
holder of Shares that have been converted into the right to receive the Per Share Merger Consideration shall be entitled to receive, upon surrender to the Paying
Agent of a Certificate (or affidavits of loss in lieu of the Certificates as provided in
Section 3.02(g)
), together with a properly completed
letter of transmittal, or receipt of an "agent's message" by the Paying Agent (or such other evidence, if any, of transfer as the Paying Agent may reasonably request) in the case of a book-entry
transfer of Uncertificated Shares, the Per Share Merger Consideration payable for each Share formerly represented by a Certificate or for each Uncertificated Share. Until so surrendered or
transferred, as the case may be, each such Certificate or Uncertificated Share shall represent after the Effective Time for all purposes only the right to receive the Per Share Merger Consideration.
To the extent reasonably practicable, Purchaser shall have the option to fund the Per Share Merger Consideration to be paid with respect to certain Shares that previously represented Company
Restricted Shares by funding the necessary amounts to the payroll processor of the Company or Purchaser or any of their respective Affiliates (the "
Payroll
Processor
") for payment by the Payroll Processor of the Per Share Merger Consideration to the applicable holders, subject to
Section 3.03
.
(c) If
any portion of the Per Share Merger Consideration is to be paid to a Person other than the Person in whose name the surrendered Certificate or the transferred
Uncertificated Share is registered, it shall be a condition to such payment that (i) such Certificate shall be properly endorsed or shall otherwise be in proper form for transfer or such
Uncertificated Share shall be properly transferred and (ii) the Person requesting such payment shall pay to the Paying Agent any transfer or other Taxes required as a result of such payment to
a Person other than the registered holder of such Certificate or Uncertificated Share or establish to the satisfaction of the Paying Agent that such Tax has been paid or is not payable.
(d) After
the Effective Time, there shall be no further registration of transfers of Shares. If, after the Effective Time, Certificates or Uncertificated Shares are
presented to the Surviving Corporation or the Paying Agent, they shall be cancelled and exchanged for the amount in immediately available funds to which the holder of the Certificate is entitled
pursuant to, and in accordance with the procedures set forth in, this
Article III
.
(e) Any
portion of the Exchange Fund made available to the Paying Agent pursuant to
Section 3.02(a)
(and any interest
or other income earned thereon) that remains unclaimed by the holders of Shares twelve months after the Effective Time shall be returned to Purchaser or one of its Affiliates, upon demand, and any
such holder who has not exchanged its Shares for the Per Share Merger Consideration in accordance with this
Section 3.02
prior to that time shall
thereafter look only to Purchaser for payment of the Per Share Merger Consideration in respect of such Shares without any interest thereon. Notwithstanding the foregoing, neither Purchaser nor any of
its Affiliates shall be liable to any holder of Shares for any amounts paid to a public official pursuant to applicable abandoned property, escheat or similar Laws. Any amounts remaining unclaimed by
holders of Shares immediately prior to such time when the amounts would otherwise escheat to or become property of any Governmental Entity shall become, to the extent permitted by applicable Law, the
property of Purchaser free and clear of any claims or interest of any Person previously entitled thereto.
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(f) Any
portion of the Exchange Fund made available to the Paying Agent pursuant to
Section 3.02(a)
to pay for Shares
for which appraisal rights have been perfected shall be returned to Purchaser upon demand.
(g) If
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, if required by the Surviving Corporation, the posting by such Person of a bond, in such reasonable amount as the Surviving Corporation may direct, as indemnity against any claim that
may be made against it with respect to such Certificate, the Paying Agent (or Payroll Processor) shall pay, in exchange for such lost, stolen or destroyed Certificate, the Per Share Merger
Consideration to be paid in respect of the Shares formerly represented by such Certificate, as contemplated by this
Article III
.
Section 3.03.
Withholding Rights
.
Notwithstanding any provision contained herein to the contrary, each of the Paying Agent, the Payroll Processor, the Surviving Corporation and Purchaser shall be entitled to deduct and
withhold from the consideration otherwise payable to any Person pursuant to this
Article III
such amounts to the extent it is required to deduct
and withhold with respect to the making of such payment under any provision of Tax law. If the Paying Agent, the Payroll Processor, the Surviving Corporation or Purchaser, as the case may be, so
withholds amounts, such amounts shall be remitted to the applicable Governmental Entity and treated for all purposes of this Agreement as having been paid to such Person in respect of which the Paying
Agent, the Surviving Corporation or Purchaser, as the case may be, made such deduction and withholding.
Section 3.04.
Adjustments
.
If, during the period between the date of this Agreement and the Effective Time, the outstanding Shares shall be changed into a different number of shares or a different class (including
by reason of any reclassification, recapitalization, stock split, merger or combination, exchange or readjustment of Shares, or stock dividend thereon with a record date during such period), the Per
Share Merger Consideration and any other amounts payable pursuant to this Agreement shall be appropriately adjusted.
Section 3.05.
Company Restricted Shares.
Each share of Common Stock subject to vesting,
repurchase, transfer or other lapse restrictions pursuant to any of the Company Benefit Plans (each, a
"
Company Restricted Share
") that is outstanding immediately prior to the Effective Time shall vest in full and become free of such restrictions and any
repurchase right shall lapse, as of the Effective Time and, at the Effective Time, the holder thereof shall be entitled to receive the Per Share Merger Consideration with respect to each such Company
Restricted Share provided in
Section 3.01
and
Section 3.02
and subject to the terms and
conditions applicable to Shares under this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to Purchaser and Merger Sub, except as (a) disclosed by the Company in any forms, statements, certifications,
reports and documents filed with the SEC pursuant to the Securities Act or the Exchange Act since January 1, 2015 and publicly available prior to the date of this Agreement (excluding any
disclosures contained under the heading "Risk Factors" and any disclosure of risks included in any "forward-looking statements" disclaimer or other statements that are similarly non-specific and
cautionary and are predictive or forward-looking in nature) or (b) as set forth in the disclosure schedule (with specific reference to the particular Section or subsection of this Agreement to
which such disclosure schedule relates;
provided
that any information set forth in one Section or subsection of the disclosure schedule shall be deemed
applicable to any other Section or subsection of this Agreement to the extent applicability of such disclosure would be reasonably apparent from the text of the disclosure without any independent
knowledge on the part of the reader
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regarding
the matter(s) so disclosed) delivered to Purchaser at the time of entry into this Agreement (the "
Company Disclosure Schedule
"):
Section 4.01.
Organization, Good Standing and Qualification.
(a) The
Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company is a bank holding company duly
registered under the Bank Holding Company Act of 1956, as amended, and meets the applicable requirements for qualification as such. The Company has all corporate power and authority to own or lease
all the Assets owned or leased by it and to conduct its business as it is now being conducted. The Company is duly licensed or qualified to do business and in good standing as a foreign corporation in
all jurisdictions (i) in which the nature of the activities conducted by the Company requires such license or qualification and (ii) in which the Company owns or leases Real Property,
other than such failures that would not, individually or in the aggregate, have any material impact on the Company, or prevent, materially delay or materially impair the consummation of the
transactions contemplated hereby. The certificate of incorporation of the Company complies in all material respects with applicable Law. A true, complete and correct copy of each of the certificate of
incorporation and the bylaws of the Company, as amended and as currently in effect, has been delivered or made available to Purchaser. The Company is not, and since January 1, 2013 has not
been, in Default in any material respect under any of the provisions of its certificate of incorporation or bylaws (or other governing instruments).
(b) The
Bank is a wholly-owned Subsidiary of the Company and is a national banking association duly organized and validly existing under the National Bank Act, 12 U.S.C.
§ 1 et seq. The Bank has the corporate power and authority to own or lease all of the Assets owned or leased by it and to conduct its business as it is now being conducted. The Bank
is duly licensed or qualified to do business and in good standing in all jurisdictions (i) in which the nature of the activities conducted by the Bank requires such qualification and
(ii) in which the Bank owns or leases Real Property, other than such failures that would not, individually or in the aggregate, have any material impact on the Bank, or prevent, materially
delay or materially impair the consummation of the transactions contemplated hereby. The articles of association of the Bank comply in all material respects with applicable Law. A true, complete and
correct copy of each of the articles of association of the Bank and the bylaws of the Bank, as amended and as currently in effect, has been delivered or made available to Purchaser. The Bank is not,
and since January 1, 2013 has not been, in Default in any material respect under any of the provisions of its articles of association or bylaws (or other governing instruments).
Section 4.02.
Authority of the Company; No Breach By Agreement.
(a) The
Company has all requisite corporate power and authority and has taken all corporate action necessary in order to execute, deliver and perform its obligations under
this Agreement and to consummate the transactions contemplated hereby (other than the Subsequent Merger), subject only (i) with respect to the Merger, to adoption of this Agreement by the
holders of a majority of the outstanding Shares as of the applicable record date (the "
Requisite Stockholder Approval
") and the filing of the
certificate of merger with the Delaware Secretary of State in connection with the Merger and (ii) with respect to the Bank Merger, the filing of the Subsidiary Plan of Merger or any other
documents or certificates to be filed in connection therewith in connection with the Bank Merger. This Agreement has been duly and validly executed and delivered by the Company and, assuming due
authorization, execution and delivery by Purchaser and Merger Sub, is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms (except as enforcement
may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar Laws of general applicability relating to or affecting creditors' rights and to general equitable
principles, regardless of whether such enforceability is considered in a proceeding in equity or at law (the "
Solvency and Equity Exception
")). Other
than in connection with the Subsequent Merger, no other corporate proceedings, other than the Requisite Stockholder Approval, the filing of the certificate of
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merger
with the Delaware Secretary of State and the filing of the Subsidiary Plan of Merger or any other documents or certificates to be filed in connection therewith in connection with the Bank
Merger, are necessary for the execution and delivery by the Company of this Agreement, the performance by it of its obligations hereunder or the consummation by it of the transactions contemplated
hereby. The Company Board, by a unanimous vote thereof, has adopted resolutions (i) determining that this Agreement and such transactions are fair to, and in the best interests of, the Company
and its stockholders, (ii) approving and declaring advisable this Agreement and the transactions contemplated hereby and (iii) recommending that the Company's stockholders adopt this
Agreement (such recommendation, the "
Company Board Recommendation
").
(b) Neither
the execution and delivery by the Company of this Agreement, nor the consummation of the transactions contemplated hereby, nor compliance by the Company and the
Bank with any of the provisions hereof, will (i) with or without notice, lapse of time or both, violate, conflict with, or result in a breach of any provision of, or constitute a Default under,
or result in the termination of, or result in the loss to the Company or the Bank of any benefit or result in the creation of any Liens, other than Permitted Liens, upon any of the material Assets of
the Company or the Bank under any of the terms, conditions or provisions of (1) the certificate of incorporation or bylaws (or similar governing documents) of the Company or the articles of
association, charter, bylaws or other governing instrument of the Bank or (2) any Contract or Permit to which the Company or the Bank is party or by which it may be bound or possess, or to
which the Company or the Bank or any of the Assets of the Company or the Bank may be subject, or (ii) subject to compliance with the statutes and regulations referred to in
Section 4.02(c)
,
violate any Law or Order applicable to the Company or the Bank or any of their respective material Assets, except in the case of
clauses (i)(2) and (ii) that would not, individually or in the aggregate, have a material impact on the Company and the Bank, taken as a whole, or prevent, materially delay or materially
impair the consummation of the transactions contemplated hereby.
(c) Other
than (i) applicable requirements of the Securities Act, the Exchange Act, Nasdaq and state securities takeover and "blue sky" laws as may be required in
connection with this Agreement and the transactions contemplated hereby, (ii) the filing of the Delaware certificate of merger, (iii) the filing of a certificate of merger or any other
documents or certificates to be filed with the States of Delaware or Oklahoma in connection with the Subsequent Merger, (iv) the filing of applications, notices and articles of combination with
the Board of Governors of the Federal Reserve System (the "
Federal Reserve
") and the Office of the Comptroller of the Currency (the
"
OCC
") and approval or non-objection thereof and the expiration of any related waiting periods, (v) such applications, filings and consents as
may be required under the banking laws of any state and approval thereof and (vi) such other consents of, filings with, authorizations or approvals from and registrations with any Governmental
Entity which if not obtained or made would not, individually or in the aggregate, be material to the Company and the Bank taken as a whole, or prevent, materially delay or materially impair the
consummation of the transactions contemplated hereby (such approvals or non-objections in clauses (iv) through (vi) collectively, the "
Regulatory
Consents
"), no notice to, application or filing with, or consent of, any Governmental Entity is necessary in connection with the Company's execution, delivery or performance of
this Agreement, the Bank's execution, delivery or performance of the Subsidiary Plan of Merger, and the consummation of the Merger, the Bank Merger, the Subsequent Merger and the other transactions
contemplated hereby. A list of all Requisite Regulatory Consents and any other applications, filings and consents as may be required under the banking laws of any state and approval thereof and any
other material applications, filings and consents as may be required under any other applicable Law that are required by the Company, the Bank or any of their Affiliates in each case as of the date
hereof in connection with the transactions contemplated hereby is set forth on
Section 4.02(c)
of the Company Disclosure Schedule.
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Section 4.03.
Capitalization.
(a) The
authorized capital stock of the Company consists of 50,000,000 Shares and 10,000,000 shares of preferred stock, $0.01 par value per share. As of March 9,
2016, there were outstanding (i) 10,336,884 Shares (excluding treasury shares) (of which an aggregate of 667,750 Shares are Company Restricted Shares), (ii) no shares of preferred stock
and (iii) no options to purchase Shares. All outstanding shares of capital stock of the Company have been, and all shares that may be issued pursuant to any Company Security will be, when
issued in accordance with the respective terms thereof, duly authorized and validly issued, fully paid and nonassessable and free of preemptive rights.
Section 4.03(a)
of the Company Disclosure
Schedule contains a complete and correct list, as of March 9, 2016, of each outstanding Company
Restricted Share, including the holder, date of grant, vesting schedule and number of Shares subject thereto. Each Company Restricted Share, before it is vested and free of transfer restrictions, is
entitled to the same voting rights and rights to receive dividends as the Shares, as though they were Shares not subject to any vesting or transfer restrictions.
(b) There
are no outstanding bonds, debentures, notes or other Indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which stockholders of the Company may vote. Except as set forth in
Section 4.03(a)
, there are no
issued, reserved for issuance or outstanding (i) shares of capital stock or other voting securities of or ownership interests in the Company, (ii) securities of the Company convertible
into or exchangeable for shares of capital stock or other voting securities of or ownership interests in the Company, (iii) warrants, calls, options or other rights to acquire from the Company,
or other obligation of the Company to issue, any capital stock or other voting securities or ownership interests in or any securities convertible into or exchangeable or exercisable for capital stock
or other voting securities or ownership interests in the Company or (iv) restricted shares, stock appreciation rights, performance units, contingent value rights, "phantom" stock or similar
securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any capital stock or voting securities of the Company (the items in
clauses (i) through (iv) being referred to collectively as the "
Company Securities
"). There are no outstanding obligations of the Company
or the Bank to repurchase, redeem or otherwise acquire any of the Company Securities. Neither the Company nor the Bank is party to any voting agreement with respect to the voting of any Company
Securities, and to the Knowledge of the Company there are no other Contracts with respect to the voting of any Company Securities other than the Stockholder Voting Agreement.
(c) The
authorized capital stock of the Bank consists of 10,000,000 shares of common stock, par value $5.00 per share. All of the outstanding capital stock or other
voting securities of, or ownership interests in the Bank is owned by the Company, directly or indirectly, free and clear of any Lien and free of any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital stock or other voting securities or ownership interests). All outstanding shares of capital stock of the Bank have been, and
all shares that may be issued pursuant to any Bank Security will be, when issued in accordance with the respective terms thereof, duly authorized and validly issued, fully paid and nonassessable and
free of preemptive rights. There are no outstanding bonds, debentures, notes or other Indebtedness of the Bank having the right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of the Bank may vote. Except as set forth in this
Section 4.03(c)
, there are no issued,
reserved for issuance or outstanding (i) shares of capital stock or other voting securities of or ownership interests in the Bank, (ii) securities of the Bank convertible into or
exchangeable for shares of capital stock or other voting securities of or ownership interests in the Bank, (iii) warrants, calls, options or other rights to acquire from the Company or the
Bank, or other obligation of the Bank to issue, any capital stock or other voting securities or ownership interests in or any securities convertible into or exchangeable or exercisable for capital
stock or other voting securities or ownership interests in the Bank or (iv) restricted shares, stock appreciation rights, performance units, contingent value rights,
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"phantom"
stock or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any capital stock or voting securities of
the Bank (the items in clauses (i) through (iv) being referred to collectively as the "
Bank Securities
"). There are no outstanding
obligations of the Company or the Bank to repurchase, redeem or otherwise acquire any of the Bank Securities. Neither the Company nor the Bank is party to any voting agreement with respect to the
voting of any Bank Securities.
(d) Except
for the Bank Securities, the Company does not own, directly or indirectly, any capital stock or other voting securities of, or ownership interests in, any Person.
Section 4.04.
Company Reports.
(a) Since
January 1, 2013, each of the Company and the Bank has timely filed or furnished all material reports, registrations, documents, filings, statements and
submissions, together with any amendments thereto, that it was required to file with or furnish to any Governmental Entity (the foregoing, collectively, the "
Company
Reports
") and has paid all material fees and assessments due and payable in connection therewith. As of their respective dates of filing or furnishing, or, if amended, as of
the date of the last such amendment prior to the date of this Agreement, the Company Reports complied in all material respects with all statutes and applicable rules and regulations of the applicable
Governmental Entities. Other than the Form S-1 filed by the Company with the SEC on September 25, 2015 (the "
Company S-1
"), to the
Company's Knowledge as of the date hereof, no Company Report is the subject of ongoing review, comment or investigation by any Governmental Entity. In the case of each such Company Report filed with
or furnished to the SEC, such Company Report did not, as of its date or if amended prior to the date of this Agreement, as of the date of such amendment and any Company Reports filed with or furnished
to the SEC subsequent to the date of this Agreement and prior to the Closing will not, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made in it, in light of the circumstances under which they were made, not misleading and complied as to form in all material respects with the applicable
requirements of the Securities Act and the Exchange Act. With respect to all other Company Reports filed since January 1, 2013 or to be filed subsequent to the date of this Agreement and prior
to the Closing, the Company Reports will be complete and accurate in all material respects as of their respective dates, or the dates of their respective amendments. No executive officer of the
Company or the Bank has failed in any respect to make the certifications required of him or her under Sections 302 or 906 of the Sarbanes-Oxley Act of 2002 (collectively,
"
Sarbanes-Oxley
"). The Bank is not required to file periodic reports with the SEC pursuant to Sections 13 or 15(d) of the Exchange Act. Except
for normal examinations conducted by a Governmental Entity in the regular course of the business of the Company and the Bank, no Governmental Entity has initiated any proceeding or, to the Knowledge
of the Company, investigation into the business or operations of the Company or the Bank since January 1, 2013. There are no unresolved material violations set forth in any report relating to
any examinations or inspections by any Governmental Entity of the Company or the Bank. There are no unresolved "matters requiring attention," "matters requiring immediate attention" or similar items
which have previously been communicated to the Company or the Bank by the Federal Reserve or the OCC which are reasonably likely to have a material impact on the Company or the Bank.
(b) The
records, systems, controls, data and information of each of the Company and the Bank are recorded, stored, maintained and operated under means (including any
electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of the Company or the Bank or their accountants (including all
means of access thereto and therefrom), except as would not reasonably be expected to have a material adverse effect on the Company's system of internal accounting controls.
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(c) The
Company maintains disclosure controls and procedures required by Rule 13a-15 or 15d-15 under the Exchange Act. Such disclosure controls and procedures are
designed and maintained to ensure that information required to be disclosed by the Company is recorded and reported on a timely basis to the individuals responsible for the preparation of the
Company's filings with the SEC and other public disclosure documents. The Company maintains internal control over financial reporting (as defined in Rule 13a-15 or 15d-15, as applicable, under
the Exchange Act). Such internal control over financial reporting is designed and maintained to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles and includes policies and procedures that (i) pertain to the maintenance of records that
in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company, (ii) provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company and (ii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
Company's assets that could have a material effect on its financial statements. The Company has disclosed, based on the most recent evaluation of its Chief Executive Officer and its Chief Financial
Officer prior to the date of this Agreement, to the Company's auditors and the audit committee of the Company Board (1) any significant deficiencies in the design or operation of its internal
controls over financial reporting that are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information and has identified for the
Company's auditors and audit committee of the Company Board any material weaknesses in internal control over financial reporting and (2) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Company's internal control over financial reporting. The Company has made available to Purchaser (A) any such written disclosure
made by management to the Company's auditors and audit committee since January 1, 2013 and (B) any written communication since January 1, 2012 made by management or the Company's
auditors to the audit committee required or contemplated by listing standards of Nasdaq, the audit committee's charter or professional standards of the Public Company Accounting Oversight Board. Since
January 1, 2013, no material complaints from any source regarding accounting, internal accounting controls or auditing matters, and no concerns from the Company Employees regarding questionable
accounting or auditing matters, have been received by the Company. The Company has made available to Purchaser a summary of all material complaints or concerns relating to other matters made since
January 1, 2013 through the Company's whistleblower hot line or equivalent system for receipt of employee concerns regarding possible violations of Law. No attorney representing the Company or
the Bank, whether or not employed by the Company or the Bank, has reported evidence of a violation of securities Law, breach of fiduciary duty or similar violation by the Company or any of its
officers, directors, employees or agents to the Company's chief legal officer, audit committee (or other committee designated for the purpose) of the Company Board or the Company Board pursuant to the
rules adopted pursuant to Section 307 of Sarbanes-Oxley or any Company policy contemplating such reporting, including in instances not required by those rules.
(d) The
Company has complied with and is in compliance in all material respects with all applicable listing and corporate governance requirements of Nasdaq.
Section 4.05.
Company Financial Statements.
(a) The
Company has previously made available to Purchaser copies of the audited consolidated balance sheets of the Company as of December 31, 2015 and
December 31, 2014, and the related consolidated statements of operations and comprehensive income, changes in stockholders' equity, and cash flows for the years then ended, as reported in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed by it with the SEC on March 4, 2016 (the
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"
Company 10-K
"), in each case accompanied by the audit report of Crowe Horwath LLP (collectively, and including the related notes, the
"
Financial Statements
").
(b) Each
of the Financial Statements has been prepared, and each of the financial statements to be filed by the Company with the SEC after the date of this Agreement and
prior to the Closing will be prepared, in accordance with GAAP consistently applied throughout the periods covered by each such statement (except for inconsistencies in the application of GAAP as
indicated in such financial statements or in the notes thereto and subject, in the case of any unaudited interim financial statements, to normal year end adjustments), is consistent with the Books and
Records of the Company, or in the case of financial statements to be filed after the date of this Agreement, which expressly do not include the Financial Statements, will be consistent with the Books
and Records of the Company, and fairly presents, or in the case of financial statements to be filed after the date of this Agreement will fairly present, in all material respects, the consolidated
financial condition of the Company as of the respective dates and the results of operations and cash flows of the Company for the respective periods then ended, as applicable (subject, in the case of
any unaudited interim financial statements, to normal year end adjustments).
(c) Since
January 1, 2013, there have been no significant changes in the "off-balance sheet arrangements," as defined in and disclosed under Item 303 of
Regulation S-K under the Securities Act, to which the Company or the Bank is a party.
(d) The
Books and Records of the Company and the Bank in all material respects have been, and are being, maintained in accordance with applicable legal and accounting
requirements and reflect only actual transactions.
(e) Crowe
Horwath LLP, which has expressed its opinion with respect to the consolidated financial statements contained in the Company 10-K, was as of the date of such
opinion, the Company's registered independent public accountants, within the meaning of the Code of Professional Conduct of the American Institute of Certified Public Accountants, as required by the
Exchange Act and by the rules of the Public Company Accounting Oversight Board.
Section 4.06.
Absence of Undisclosed Liabilities.
There are no Liabilities of the Company or the
Bank other than Liabilities: (i) as accrued or reserved against in the Company Balance Sheet;
(ii) that have arisen since the Company Balance Sheet Date in the ordinary course of business consistent with past practice; (iii) incurred since the Company Balance Sheet Date pursuant
to or in connection with this Agreement or the transactions contemplated hereby; (iv) arising under the executory portion of a Contract (none of which results from, arises out of, or relates
to, or was caused by any breach of contract, breach of warranty, tort, infringement, or violation of Law); or (v) that would not reasonably be expected to, individually or in the aggregate,
have a material impact on the Company and the Bank, taken as a whole.
Section 4.07.
Disclosure Documents.
(a) At
the time the proxy statement to be filed with the SEC in connection with the Merger (the "
Company Proxy Statement
") or
any amendment or supplement thereto is first mailed to stockholders of the Company, at the time such stockholders vote on the adoption of this Agreement, the Company Proxy Statement, as supplemented
or amended, if applicable, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not misleading.
(b) None
of the information supplied with respect to the Company or the Bank or to be supplied by the Company, the Bank or any Affiliate thereof expressly for inclusion in
any documents to be filed by Purchaser, Merger Sub or any Affiliate thereof with any Governmental Entity in connection with the transactions contemplated hereby, will, at the respective time such
documents are filed, be false or
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misleading
with respect to any material fact, or omit to state any material fact necessary to correct any statement in any earlier communication with any Governmental Entity.
(c) The
representations and warranties contained in
Section 4.07(a)
will not apply to statements or omissions included
or incorporated by reference in the Company Proxy Statement or any documents to be filed by Purchaser, Merger Sub or any Affiliate thereof with any Governmental Entity based upon information supplied
by Purchaser, Merger Sub or any of their respective Representatives specifically for use or incorporation by reference therein.
Section 4.08.
Call Reports.
The financial statements contained in the Call Reports for the 12
consecutive calendar quarters ended December 31, 2015 made available to Purchaser
(i) have been prepared in all material respects in accordance with the form of Consolidated Reports of Condition and Income for a Bank With Domestic Offices Only (FFIEC Form 041) and the
related instructions thereto and (ii) fairly present in all material respects the financial condition of the Bank as of the respective dates set forth therein and the results of operations and
stockholders' equity for the respective periods set forth therein, subject to normal year-end adjustments. The financial statements contained in the Call Reports to be prepared after the date of this
Agreement and prior to the Closing (1) will be prepared in all material respects in accordance with the form of Consolidated Reports of Condition and Income for a Bank With Domestic Offices
Only (FFIEC Form 041) and the related instructions thereto and (2) will fairly present in all material respects the financial condition of the Bank as of the respective dates set forth
therein and the results of operations and stockholders' equity of the Bank for the respective periods set forth therein, subject to normal year-end adjustments.
Section 4.09.
Absence of Certain Changes or Events.
(a) Since
the Company Balance Sheet Date, there has not been a Company Material Adverse Effect.
(b) From
the Company Balance Sheet Date until the date hereof, the business of the Company and the Bank has been conducted in all material respects in the ordinary course of
business consistent with past practice and there has not been any action taken by the Company or the Bank that, if taken during the period from the date of this Agreement through the Effective Time
without Purchaser's consent, would constitute a breach of
Section 6.01(b)
.
Section 4.10.
Tax Matters.
(a) The
Company and the Bank have timely filed (taking into account any extension of time within which to file) with the appropriate taxing authorities all material Tax
Returns in all jurisdictions in which such Tax Returns are required to be filed, and such Tax Returns are correct and complete in all material respects. Neither the Company nor the Bank is the
beneficiary of any extension of time within which to file any Tax Return. All material income and other Taxes of the Company and the Bank (whether or not shown on any Tax Return) that are due have
been fully and timely paid (other than Taxes being contested in good faith by appropriate proceedings and for which adequate reserves have been established). There are no Liens for any amount of Taxes
(other than a Lien for Taxes not yet due and payable) on any of the Assets of any of the Company or the Bank. To the Company's Knowledge, no claim has ever been made in writing by an authority in a
jurisdiction where the Company or the Bank does not file a Tax Return that the Company or the Bank may be subject to Taxes by that jurisdiction.
(b) Neither
the Company nor the Bank has received any written notice of assessment or proposed assessment in connection with any material amount of Taxes, and there are no
threatened in writing or pending disputes, claims, audits or examinations regarding any Taxes of the Company or the Bank or the Assets of the Company or the Bank. Neither the Company nor the Bank has
waived any statute of limitations in respect of any Taxes.
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(c) Each
of the Company and the Bank has complied in all material respects with all applicable Laws relating to the withholding of Taxes and the payment thereof to
appropriate authorities, including Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee or independent contractor, and Taxes required to be withheld
and paid pursuant to Sections 1441 and 1442 of the Internal Revenue Code or similar provisions under foreign Law.
(d) The
unpaid Taxes of each of the Company and the Bank (i) did not, as of the most recent fiscal month end, materially 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 balance sheet (rather than in any notes thereto) for
the Company or the Bank and (ii) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with past custom and practice of the Company and the Bank
in filing their Tax Returns.
(e) Neither
the Company nor the Bank is a party to any Tax indemnity, allocation or sharing agreement (other than any agreement solely between the Company and the Bank and
other than any customary Tax indemnifications contained in credit or other commercial agreements the primary purpose of which agreements does not relate to Taxes) and neither the Company nor the Bank
has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was the Company) or has any Tax Liability of any Person under
Treasury Regulation Section 1.1502-6 or any similar provision of state, local or foreign Law (other than the other members of the consolidated group of which the Company is parent), or as a
transferee or successor.
(f) Since
December 31, 2010, neither the Company nor the Bank was a distributing corporation or a controlled corporation in a transaction intended to be governed by
Section 355 of the Internal Revenue Code.
(g) There
is no Litigation before a Governmental Entity pending or, to the Company's Knowledge, threatened against or with respect to the Company or the Bank in respect of
any material Tax or Tax asset.
(h) Neither
the Company nor the Bank will be required to include after the Closing any material adjustment in taxable income pursuant to Section 481 of the Internal
Revenue Code or any comparable provision under state or foreign Tax Laws as a result of transactions or events occurring prior to the Closing. Neither the Company nor the Bank has participated in any
"listed transactions" within the meaning of Treasury Regulation Section 1.6011-4.
Section 4.11.
Deposit Insurance.
The Bank is an "insured depository
institution" as defined in the Federal Deposit Insurance Act and applicable regulations thereunder, the deposits in which are
insured by the Federal Deposit Insurance Corporation (the "
FDIC
") through the Deposit Insurance Fund to the maximum amount permitted by applicable Law
and all premiums and assessments required to be paid in connection therewith have been paid when due. No proceedings for the revocation or termination of such deposit insurance are pending or, to the
Knowledge of the Company, threatened.
Section 4.12.
Compliance with Laws.
(a) Each
of the Company and the Bank has in effect all Permits necessary for it to own, lease, or operate its material Assets and to carry on its business as now conducted
and there has occurred no Default under any such Permit, except as would not, individually or in the aggregate, reasonably be expected to have a material impact on the Company or the Bank, or prevent,
materially delay or materially impair the consummation of the transactions contemplated hereby.
(b)
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(ii)
Section 4.12(b)(ii)
of the Company Disclosure Schedule sets forth each Regulatory Agreement to which the Company
or the Bank has been subject or party to since January 1, 2011. Except for notifications or communications in connection with and preceding the issuance of the Regulatory Agreements set forth
on
Section 4.12(b)(ii)
of the Company Disclosure Schedule, since January 1, 2011, neither the Company nor the Bank (1) has been
advised by any Governmental Entity that it is considering or issuing any such Regulatory Agreement or (2) has received any written notification or communication from any Governmental Entity or
the staff thereof asserting that any of the Company or the Bank is not in compliance with any Laws or Orders.
(iii) Since
January 1, 2013 each of the Company and the Bank has been in compliance in all material respects with each Regulatory Agreement to which it is or was
party or subject, and neither the Company nor the Bank has received any written notice from any Governmental Entity indicating that either the Company or Bank is or was not in compliance with any such
Regulatory Agreement.
(c) Each
of the Company and the Bank is, and since January 1, 2013, has been, in compliance in all material respects with all applicable Law, regulatory capital
requirements, or Orders to which they or their Assets may be subject, including applicable Law of the Consumer Financial Protection Bureau, Federal Reserve, the FDIC, and the OCC, any applicable
state, federal or self-regulatory organization, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Federal Deposit Insurance Act, the National Bank Act, the Bank Holding Company Act of
1956, as amended, the Federal Reserve Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act, Currency and Foreign Transactions
Reporting Act of 1970 (commonly referred to as the Bank Secrecy Act), as amended by the USA PATRIOT Act of 2001, all other applicable fair lending and fair housing Laws or other Laws relating to
discrimination (including anti-redlining, equal credit opportunity and fair credit reporting), truth-in-lending, real estate settlement procedures or consumer credit (including the Consumer Credit
Protection Act, the Truth-in-Lending Act, the Real Estate Settlement Procedures Act of 1974, the SAFE Mortgage Licensing Act of 2008, and the Equal Credit Opportunity Act), all agency requirements
relating to the origination, sale and servicing of mortgage and consumer loans, Laws related to data protection or privacy, the International Money Laundering Act, the money laundering statutes of any
jurisdiction, the rules and regulations thereunder and any related or similar rules, regulations or guidelines issued, administered or enforced by any Governmental Entity, Sarbanes-Oxley, the
Securities Act, the Exchange Act, the Investment Company Act of 1940, and the Investment Advisers Act of 1940, or any applicable regulations under any of the foregoing Laws.
(d) The
Bank has timely and properly filed and maintained in all material respects all requisite Currency Transaction Reports and all, to the Company's Knowledge, mandatory
Suspicious Activity Reports and other related forms, including any requisite Custom Reports required by any agency of the U.S. Department of Treasury. The Bank has been at all times and is currently
in compliance with its internal policies and procedures relating to the Currency and Foreign Transactions Reporting Act of 1970 (commonly referred to as the Bank Secrecy Act) and money laundering
statutes, rules and regulations, including those policies and procedures listed on
Section 4.12(d)
of the Company Disclosure Schedule.
Section 4.13.
Community Reinvestment Act Compliance.
The Bank has received a Community
Reinvestment Act rating of "satisfactory" in its most recently completed exam, and to the Knowledge of the Company, there does
not exist any fact or circumstance or set of facts or circumstances which could reasonably be expected to result in the Bank having its current rating lowered in its next exam.
Section 4.14.
No Improper Payments.
Since January 1, 2013, none of the Company or the Bank,
or to the Knowledge of the Company, any director, officer, employee, agent or other Person acting
on behalf of the Company or the Bank has, in the course of its actions for, or on behalf of the Company
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or
the Bank (a) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity, (b) made, offered, authorized,
facilitated or promised any direct or indirect unlawful payment or anything else of value to any foreign or domestic government official or employee from corporate funds, (c) violated or is in
violation of any provision of the United States Foreign Corrupt Practices Act of 1977, as amended, or the Anti-Terrorist Financing Act, or any other anti-corruption or anti-bribery law or requirement
applicable to the Company or the Bank or (d) made, authorized, solicited or received any bribe, unlawful rebate, payoff, influence payment, kickback or other unlawful payment.
Section 4.15.
Sanctions.
None of the Company or the Bank, or to the Knowledge of the Company, any
director, officer, employee, agent or other Person acting on behalf of the Company or the
Bank is (i) a Person currently the subject or target of any economic or trade sanctions administered or enforced by the United States government, including the U.S. Department of the Treasury's
Office of Foreign Assets Control, the European Union, Her Majesty's Treasury, or other sanctions authority (collectively, "
Sanctions
") or
(ii) located, organized or ordinarily resident in Iran, Sudan, Syria, North Korea, Cuba, or the Crimea Region of Ukraine. The Company and the Bank are in compliance and, within the past five
years preceding the date of this Agreement, have been in compliance in all material respects with all applicable Laws related to Sanctions (except to the extent inconsistent with U.S. Law).
Section 4.16.
Marijuana-Related Businesses.
To the Company's Knowledge, the Bank does not accept
deposits from, has not originated any Loan to and does not otherwise transact business with any Person
engaged in the manufacture, production, distribution, sale, or other dispensation of marijuana. To the Company's Knowledge, no borrower under any Loan (i) is engaged in the manufacture,
production, distribution, sale or other dispensation of marijuana or (ii) leases any Assets to any Person engaged in the manufacture, production, distribution or dispensation of marijuana. To
the Company's Knowledge, the Bank has timely and properly filed all mandatory Suspicious Activity Reports related to marijuana and has complied with applicable guidance related to marijuana banking
from any Governmental Entity.
Section 4.17.
Assets and Properties.
(a)
Section 4.17(a)
of the Company Disclosure Schedule identifies (i) the street address of each parcel of Real
Property owned by the Company or the Bank and (ii) the street address of each parcel of Real Property leased, occupied or otherwise used by the Company or the Bank, and a list, as of the date
of this Agreement, of all leases for each parcel of Real Property leased by the Company or the Bank, including identification of the lessee and lessor thereunder. The Bank is in possession of the
properties listed on
Section 4.17(a)
of the Company Disclosure Schedule, and there is a valid lease for each such leased Real Property, without
material default thereunder by the lessee or, to the Knowledge of the Company, the lessor. The Company or the Bank has a valid leasehold interest in all such Real Property, free and clear of all
Liens, except (a) statutory Liens securing payments not yet due, (b) Liens for real property Taxes not yet due and payable, or due and payable but not delinquent or the amount or
validity of which is being challenged in good faith by appropriate proceedings, (c) zoning, entitlement, building codes and other land use regulations imposed by Governmental Entities,
(d) Liens securing obligations of the owner of leased Real Property, (e) easements, rights of way, and other similar encumbrances that do not materially affect the use of the Assets
subject thereto or affected thereby or otherwise materially impair business operations at such properties, and (f) such imperfections or irregularities of title or Liens as do not, individually
or in the aggregate, materially affect the use of the Assets subject thereto or affected thereby or otherwise materially impair business operations at such properties (clauses (a), (b), (c),
(e) and (f) collectively, "
Permitted Liens
").
(b)
Section 4.17(b)
of the Company Disclosure Schedule identifies each parcel of Real Property and other material
Assets that were acquired in a foreclosure, by deed in lieu of foreclosure or similar event since January 1, 2013 through the date hereof ("
Foreclosed
Property
"). The foreclosure
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proceedings
by which the Foreclosed Properties were acquired by the Company or the Bank were (i) conducted in accordance with all applicable Law in all material respects and (ii) did not
result in any negative impact on title received by the Company or the Bank to such Foreclosed Property.
(c) The
Company or the Bank has good and marketable title to those Assets reflected in the Company Balance Sheet or acquired after the date thereof (except for Assets sold
or otherwise disposed of since the date thereof in the ordinary course of business consistent with past practice) free and clear of all Liens, except Permitted Liens.
Section 4.18.
Intellectual Property.
(a)
Section 4.18(a)
of the Company Disclosure Schedule lists all patents, patent applications, Trademarks, copyright
registrations and pending applications for registration, and internet domain name registrations owned by the Company and the Bank as of the date hereof. The Company or the Bank owns or has the right
to use all Intellectual Property necessary to conduct the business of the Company and the Bank as currently conducted (the "
Bank Intellectual
Property
").
(b) Except
as would not, individually or in the aggregate, reasonably be expected to have a material impact on the Company and the Bank, taken as a whole: (i) the
Intellectual Property currently licensed or used by the Company and the Bank, and the Company's and the Bank's conduct of its business, do not infringe, violate, or misappropriate (and have not
resulted in the infringement, violation, or misappropriation of) the Intellectual Property of any Person; (ii) to the Knowledge of the Company, no Person is or has been infringing, violating,
or misappropriating any Bank Intellectual Property; (iii) there is no Litigation before a Governmental Entity pending, or to the Knowledge of the Company, threatened alleging that the Company
or the Bank is or was infringing, violating, or misappropriating any Intellectual Property of any other Person, and (iv) there is no Litigation before a Governmental Entity pending, or
threatened to be initiated, by the Company or the Bank against any Person concerning the infringement, violation or misappropriation of any Bank Intellectual Property.
(c) The
Company and the Bank have taken commercially reasonable steps to ensure the continued operation of the software and data included in the Bank Intellectual Property,
as well as all of the computers and other information technology infrastructure and Assets used in connection with the operation or conduct of the business of the Company and the Bank (collectively,
the "
IT Assets
"). The IT Assets operate and perform in all material respects as is necessary and sufficient to operate and conduct the Company's and the
Bank's business in the manner in which it is currently being operated and conducted. To the Knowledge of the Company, all software included in the Bank Intellectual Property is free from malicious
code and does not contain any bugs, errors or problems that, in each case, would reasonably be expected to materially adversely impact the operation of the IT Assets, taken as a whole.
Section 4.19.
Privacy.
(a) The
Company and the Bank and, to the Knowledge of the Company, any third parties acting on the Company's or the Bank's behalf have collected, maintained, used,
disclosed, transferred, protected, stored, retained, deleted, and otherwise processed all Personal Data in compliance in all material respects with, and otherwise complied in all material respects
with, applicable Law and Orders, including Subtitle A of Title V of the Gramm-Leach-Bliley Act and Regulation P issued by the Consumer Financial Protection Bureau thereunder (collectively, the
"
GLBA
") and other federal and state privacy and financial privacy, data security, or electronic or mobile marketing laws (collectively with GLBA,
"
Privacy Laws
"), and since January 1, 2013, there have been no material breaches with respect thereto. None of the Company, the Bank or, to the
Knowledge of the Company, any third party with whom the Company or the Bank has entered into a Contract in connection with the processing of Personal Data has breached such Contract in a manner that
would violate Privacy Laws in any material respect.
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(b) The
Company, the Bank and, to the Knowledge of the Company, any third parties acting on the Company's or the Bank's behalf have implemented and maintained commercially
reasonable and appropriate measures to protect the operation, confidentiality, integrity, and security of all Personal Data and all IT Assets of the Company, the Bank or third parties acting on their
behalf against unauthorized access, acquisition, interruption, or modification. The Company and the Bank have implemented commercially reasonable backup and disaster recovery policies, procedures and
systems consistent with generally accepted industry standards for a community bank, and sufficient to reasonably maintain the operation of the businesses of the Company and the Bank in all material
respects.
(c) There
are no asserted or, to the Knowledge of the Company, threatened claims, notices or complaints against the Company or the Bank (whether by a Governmental Entity or
any other party) relating to the Company's or the Bank's collection, maintenance, use, disclosure, transfer, protection, storage, retention, deletion or other processing of Personal Data. The Company
does not have any Knowledge that the Company, the Bank, or any third party acting on the Company's or the Bank's behalf, has experienced any security breach or other instance of compromised or lost
Personal Data or other confidential information.
Section 4.20.
Environmental Matters.
(a) For
purposes of this Agreement: (i) "
Environmental Laws
" means all applicable laws, permits, and orders relating
to pollution, protection of the environment, natural resources or human health (including but not limited to all laws, regulations, ordinances and orders relating to releases, discharges, emissions or
disposals to air, water, land or groundwater, to the withdrawal or use of groundwater, to the use, handling or disposal of polychlorinated biphenyls, asbestos, mold or urea formaldehyde, to the
treatment, storage, disposal or management of, or to exposure to, any substance regulated pursuant to any Environmental Law, including any Hazardous Substances); and
(ii) "
Hazardous Substances
" means all pollutants, contaminants, chemicals, wastes, and any toxic or otherwise hazardous substances or materials
regulated under any Environmental Law, including but not limited to radiation and radioactive materials, polychlorinated biphenyls, petroleum and petroleum products and by-products, lead, pesticides,
natural gas, and nuclear fuel, all within the meaning of any applicable Law of any applicable Governmental Entity relating to or imposing liability or standards of conduct pertaining thereto.
(b) The
Company and the Bank have complied in all material respects with all Environmental Laws, regulations, ordinances, requirements of any Governmental Entity. In
addition, and irrespective of such compliance, neither the Company nor the Bank is subject to any material Liability for any exposure to any Hazardous Substance or any contamination, environmental
remediation or cleanup obligations pursuant to any Environmental Law including any Liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, or the Resource
Conservation and Recovery Act of 1976. Since January 1, 2012, there have been no legal, administrative, arbitral or other Litigation before a Governmental Entity or notices of any nature
seeking to impose, or that would reasonably be expected to result in the imposition of, on the Company or the Bank, any material Liability of the Company or the Bank with respect to any Environmental
Law.
(c) There
is no private or governmental, environmental health or safety investigation or remediation activity of any nature arising under any Environmental Law pending or,
to the Knowledge of the Company, threatened against the Company or the Bank or, to the Knowledge of the Company, any property in which the Company or the Bank has taken a security interest. To the
Knowledge of the Company there is no reasonable basis for, or circumstances that would reasonably be expected to give rise to, any such Litigation or remediation; and neither the Company nor the Bank
is subject to any agreement, letter or memorandum or Order by or with any Governmental Entity that would reasonably be expected to impose any such environmental Liability. No property currently or
formerly owned or
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operated
by the Company or the Bank was contaminated with any Hazardous Substance during or prior to such period of ownership or operation in a manner that would result in any Liability that could
reasonably be expected to have, individually or in the aggregate, a material impact on the Company and the Bank, taken as a whole, or a material impact on the consummation of the transactions
contemplated by this Agreement. The Company has made available to Purchaser copies of all material environmental reports, studies, assessments, sampling data and other material environmental documents
in its possession as of the date hereof relating to the Company, the Bank or their current or former properties and properties in which the Company or the Bank has taken a security interest having a
book value in excess of $2,000,000. The Company and the Bank have complied in all material respects with all FDIC guidelines concerning environmental due diligence and risk management in lending, loan
administration, workout and foreclosure activities including FDIC Bulletin FIL-14-93, and update FIL-98-2006.
Section 4.21.
Labor Relations.
(a) (i)
Neither the Company nor the Bank is party to, bound by, or has any obligations under, any collective bargaining agreement, labor agreement, works council agreement,
or similar agreement with any labor union, trade union, works council or other labor organization (collectively, a "
Labor Organization
");
(ii) neither the Company nor the Bank is party to any collective bargaining relationship with any Labor Organization; (iii) no Company Employees are represented by a Labor Organization
with respect to their employment with any of the Company or the Bank; (iv) to the Knowledge of the Company, as of the date of this Agreement, no Labor Organization or group of employees of the
Company or the Bank has made a pending demand for recognition or certification and there are no representation or certification proceedings or petitions seeking a representation proceeding presently
pending or, to the Knowledge of the Company, threatened to be brought or filed with the National Labor Relations Board or any other Governmental Entity; and, (v) to the Knowledge of the
Company, there are no current union organizing activities with respect to the workforce of the Company or the Bank.
(b) There
has been no, and to the Knowledge of the Company, there is no threatened: (i) grievance, arbitration, lockout, work stoppage, walk-out, slowdown, strike or
other labor dispute against or affecting the Company or the Bank, or (ii) unfair labor practice charge or complaint before the National Labor Relations Board or any other Governmental Entity.
To the Knowledge of the Company, none of the Company, the Bank or any of their employees, agents or Representatives have committed any material unfair labor practice as defined in the National Labor
Relations Act or any similar Law.
(c) Each
of the Company and the Bank is in compliance in all material respects with all Laws pertaining to labor, employment and employment practices including, but not
limited to, all Laws regarding health and safety, wages and hours, labor relations, employment discrimination, disability rights or benefits, equal opportunity, immigration, affirmative action,
employee leave issues, unemployment insurance and workers' compensation, and the Company and the Bank are not, and have not been since January 1, 2013, a party to any Litigation before a
Governmental Entity alleging a violation of any Law pertaining to labor, employment or employment practices and, to the Knowledge of the Company, no such Litigation is pending or threatened.
(d) Since
January 1, 2013, neither the Company nor the Bank has (i) effectuated a "plant closing" (as defined in the Worker Adjustment and Retraining
Notification Act and any similar state or local Law relating to plant closings or layoffs (the "
WARN Act
")), (ii) effectuated a "mass layoff" (as
defined in the WARN Act), or (iii) undertaken any other similar action requiring advance notice of such action to affected employees, employee representatives or Governmental Entities.
Section 4.21(d)
of the Company Disclosure Schedule contains a list of each employee who has suffered an "employment loss" within the meaning of
the WARN Act in the past six months prior to the date hereof.
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(e)
Section 4.21(e)
of the Company Disclosure Schedule contains a complete and accurate list of all Company Employees
and independent contractors (who are individuals) describing for each such Person, as applicable, the name, the position, whether a Company Employee or an independent contractor, whether classified as
exempt or non-exempt for wage and hour purposes, date of hire, business location, 2015 and 2016 annual base salary, whether paid on a salary, hourly or commission basis and the actual rates of
compensation, bonus paid with respect to fiscal year 2014 and projected fiscal year 2015 bonus, fringe benefits (other than employee benefits applicable to all employees, which benefits are set forth
on a separate list in
Section 4.22(a)
of the Company Disclosure Schedule), immigration status and status
(
i.e.
, active or inactive and if inactive, the type of leave and, to the Knowledge of the Company, estimated duration). All such individuals have their
principal place of employment in the United States.
(f) All
Company Employees employed in the United States are either United States citizens or are legally entitled to work in the United States under the Immigration Reform
and Control Act of 1986, as amended, other United States immigration Laws and the Laws related to the employment of non-United States citizens applicable in the state in which the employees are
employed. Each of the Company and the Bank: (i) has properly classified and treated all of their workers as independent contractors or employees, (ii) has properly classified and treated
all of their employees as "exempt" or "nonexempt" from overtime requirements under applicable Law, (iii) is not delinquent in any material respect in any payments to, or on behalf of, any
current or former independent contractors or employees for any services or amounts required to be reimbursed or otherwise paid, (iv) has withheld and reported all material amounts required by
Law or by agreement to be withheld and reported with respect to wages, salaries and other payments to any current or former independent contractors or employees, and (v) is not liable for any
payment to any trust or other fund governed by or maintained by or on behalf of any Governmental Entity with respect to unemployment compensation benefits, social security or other benefits or
obligations for any current or former independent contractors or employees (other than routine payments to be made in the normal course of business consistent with past practice). Neither the Company
nor the Bank has any material liability as a result of any misclassification of any Person as an independent contractor rather than as an employee or as a result of any misclassification of any
employee as "exempt" or "nonexempt" from overtime requirements under applicable Law.
(g) To
the Knowledge of the Company, no Company Employee is in material violation of any employment agreement, nondisclosure agreement, common law nondisclosure obligation,
non-competition agreement, restrictive covenant or other similar obligations: (i) to the Company or the Bank or (ii) to a former or other current employer of any such Company Employee,
in each case, to the extent such material violation relates (1) to the right of any such Company Employee to be employed by the Company or the Bank or (2) to the knowledge or use of
trade secrets or proprietary information in connection with such Person's employment with the Company or the Bank.
(h) As
of the date of this Agreement, the Company has no Knowledge that any current employee of the Company or the Bank with an annual base salary exceeding $75,000 in the
aggregate presently intends to terminate or is contemplating terminating his or her employment.
(i) Other
than pursuant to a Contract set forth on
Section 4.21(i)
of the Company Disclosure Schedule, the employment
of each Company Employee and the engagement of each independent contractor of the Company or the Bank are terminable at will by the Company or the Bank, as applicable, without any penalty, liability
or severance obligation incurred by the Company or the Bank.
Section 4.22.
Employee Benefits.
(a) The
Company has made available to Purchaser true and correct copies of each material Employee Benefit Plan adopted, maintained by, sponsored in whole or in part by, or
contributed to by any of the Company, the Bank or any ERISA Affiliate for the benefit of employees, retirees,
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dependents,
spouses, directors, independent contractors, or other beneficiaries or under which employees, retirees, former employees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate or with respect to which the Company, the Bank or any ERISA Affiliate has or may have any obligation or Liability (collectively, whether or not material, the
"
Company Benefit Plans
").
Section 4.22(a)
of Company Disclosure Schedule has a complete and
accurate list of all such Company Benefit Plans. No Company Benefit Plan is subject to any Laws other than those of the United States and any state, county, or municipality in the United States.
(b) The
Company has made available to Purchaser (i) all trust agreements or other funding arrangements for all Company Benefit Plans, (ii) all determination
letters, opinion letters, information letters or advisory opinions issued by the United States Internal Revenue Service ("
IRS
"), the United States
Department of Labor or the Pension Benefit Guaranty Corporation during this calendar year or any of the preceding three calendar years with respect to any Company Benefit Plan, (iii) annual
reports or returns, audited or unaudited financial statements, actuarial reports and valuations required to be prepared for any Company Benefit Plan for the current plan year and the preceding plan
year, (iv) the most recent summary plan descriptions and any material modifications thereto for any Company Benefit Plan required to have a summary plan description and (v) all material
correspondence with any Governmental Entity regarding any Company Benefit Plan.
(c) Each
Company Benefit Plan is and has been maintained in all material respects in accordance with the terms and the applicable requirements of the Internal Revenue Code,
ERISA, and any other applicable Law. Each Company Benefit Plan that is intended to be qualified under Section 401(a) of the Internal Revenue Code is so qualified and has received a favorable
determination letter, or for a prototype plan, opinion letter, from the IRS that is still in effect, applies to the Company Benefit Plan, and on which the Company or the Bank, as applicable, is
entitled to rely.
(d) There
are no pending, or to the Knowledge of the Company, threatened claims or disputes under the terms of, or in connection with, the Company Benefit Plans other than
claims for benefits in the ordinary course of business consistent with past practice and no action, proceeding, prosecution, inquiry, hearing or investigation has been commenced with respect to any
Company Benefit Plan.
(e) Neither
the Company nor the Bank has engaged in any nonexempt "prohibited transaction" (described in Internal Revenue Code Section 4975(c) or ERISA
Section 406), and, to the Knowledge of the Company, no "party in interest" (as defined in ERISA Section 3(14)) or "disqualified person" (as defined in Internal Revenue Code
Section 4975(e)(2)) of any Company Benefit Plan has engaged in any such nonexempt "prohibited transaction." All assets of any Company Benefit Plan consist of cash or actively traded securities.
(f) None
of the Company, the Bank or any ERISA Affiliate has at any time been a party to or maintained, sponsored, contributed to or has been obligated to contribute to, or
had any liability with respect to: (i) any plan subject to Title IV of ERISA, including a "multiemployer plan" (as defined in ERISA Section 3(37) and 4001(a)(3)); (ii) a "multiple
employer plan" (within the meaning of ERISA or the Internal Revenue Code); (iii) a self-funded health or welfare benefit plan; (iv) any voluntary employees' beneficiary association
(within the meaning of Section 501(c)(9) of the Internal Revenue Code); or (v) an arrangement that is not either exempt from, or in compliance with, Section 409A of the Internal
Revenue Code or that provides for indemnification for or gross-up of any taxes thereunder.
(g) Each
Company Benefit Plan that is a health plan is in compliance with the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act
of 2010 (collectively, the "
2010 Health Care Law
"). The operation of each such plan has not resulted in the incurrence of any penalty to the Company or
the Bank pursuant to the 2010 Health Care Law. If the Company or the Bank is an Applicable Large Employer (as defined in the 2010 Health Care Law), the Company or the Bank, as applicable, has offered
all full-time employees (within the meaning of the 2010 Health
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Care
Law) the ability to elect minimum essential coverage that provides minimum value for themselves and their dependents, such that there will not be any liability or excise tax under
Section 4980H(a) of the Internal Revenue Code. If the Company or the Bank is an Applicable Large Employer, there will not be any penalty or excise tax assessed against the Company or the Bank,
as applicable, under 4980H(b) of the Internal Revenue Code. There is nothing that would create a reporting obligation or excise tax under 4980D of the Internal Revenue Code. Neither the Company, the
Bank, nor any ERISA Affiliate has or could reasonably be expected to have any liability for taxes under Sections 4975 through 4980 or Sections 4980A through 4980I of the Internal Revenue
Code.
(h) Neither
the Company nor the Bank has any Liability for health or life benefits for any period extending beyond the termination of any individual's employment or period
of service, other than as required under Section 4980B of the Internal Revenue Code or similar state health care continuation laws.
(i) All
contributions required to be made to any Company Benefit Plan by applicable Law or regulation or by any plan document or other contractual undertaking, and all
premiums due or payable with respect to insurance policies funding any Company Benefit Plan, for any period through the date hereof, have been timely made or paid in full or, to the extent not
required to be made or paid on or before the date hereof, have been fully reflected on the Books and Records of the Company and the Bank.
(j) Neither
the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in conjunction with any other
event) result in, cause the vesting, exercisability or delivery of, or increase in the amount or value of, any payment, right or other benefit to any employee, officer, director or other service
provider of the Company or the Bank, or result in any (i) requirement to fund any benefits or set aside benefits in a trust (including a rabbi trust) or (ii) limitation on the right of
the Company or the Bank to amend, merge, terminate or receive a reversion of assets from any Company Benefit Plan or related trust. Without limiting the generality of the foregoing, no amount paid or
payable (whether in cash, in property, or in the form of benefits) by the Company or the Bank in connection with the transactions contemplated hereby (either solely as a result thereof or as a result
of such transactions in conjunction with any other event) will be an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code.
Section 4.22(i)
of the Company
Disclosure Schedule sets forth accurate and complete data with respect to each individual who has a contractual
right to severance pay or pay or benefits triggered by or following a change in control and the amounts potentially payable to each such individual in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby (either alone or in conjunction with any other event) or as a result of a termination of employment or service, taking into
account any contractual provisions relating to Section 280G of the Internal Revenue Code. No Company Benefit Plan provides for the gross-up or reimbursement of Taxes under Sections 409A
or 4999 of the Internal Revenue Code, or otherwise.
Section 4.23.
Material Contracts.
(a)
Section 4.23(a)
of the Company Disclosure Schedule sets forth a true, complete and correct list of any of the
following Contracts which the Company or the Bank is party to or is bound as of the date hereof (whether or not set forth on
Section 4.23(a)
of
the Company Disclosure Schedule, together with any Contracts referred to in
Section 4.02(b)(i)(2)
and
Section 4.31
(other than any Company
Benefit Plan) each a "
Material Contract
"):
(i) any
Contract which is a "material contract" within the meaning of Item 601(b)(10) of Regulation S-K under the Securities Act;
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(ii) any
Contract relating to Indebtedness of the Bank (other than Contracts evidencing deposit liabilities, purchases of federal funds, fully-secured repurchase agreements,
and Federal Home Loan Bank advances of depository institution Subsidiaries, and trade payables);
(iii) any
Contract relating to the purchase or sale of any goods or services by the Company or the Bank providing for (1) annual payments under any individual
Contract in excess of $75,000 after the date hereof or (2) aggregate payments over the remaining term under any individual Contract in excess of $100,000;
(iv) any
Contract that provides for the payment by any of the Company or the Bank of any termination fee (individually or in the aggregate, and whether contingent or
otherwise) in excess of $20,000;
(v) any
Contract not terminable on the part of the Company or the Bank on 60 days or less notice without penalty or fee of $20,000 or more;
(vi) any
Contract prohibiting the Company or the Bank from soliciting or hiring any individual for employment, consulting or other services;
(vii) any
Contract pursuant to which any of the Company or the Bank is a lessor or lessee of any Real Property or any machinery, equipment, furniture, fixtures or other
personal property involving in excess of $75,000 per annum;
(viii) any
Contract (1) that restricts the ability of the Company or the Bank to compete in any business or geographic area or any particular medium or
(2) that grants a Person other than the Company or the Bank "most favored nation" status or "exclusivity" or similar rights;
(ix) any
Contract which limits the payment of dividends by the Company or the Bank;
(x) any
Contract pursuant to which the Company or the Bank has agreed with any third parties to become a member of, manage or control a joint venture, partnership, limited
liability company or other similar entity;
(xi) any
Contract pursuant to which the Company or the Bank has agreed with any third party to a change of control transaction such as an acquisition, divestiture or merger
and which contains representations, covenants, indemnities or other obligations (including indemnification, "earn-out" or other contingent obligations) that are still in effect; or
(xii) any
Contract which relates to the Bank Intellectual Property involving payment of more than $10,000 per annum, other than relating to software that is generally
commercially available and is mass marketed and licensed pursuant to a standard form, non-negotiated click-wrap or shrink-wrap agreement.
(b) With
respect to each Material Contract: (i) the Contract is valid and binding on the Company or the Bank, as the case may be and, to the Knowledge of the Company,
each other party thereto, and is in full force and effect, except for such failures to be valid and binding or to be in full force and effect as would not, reasonably be expected to, individually or
in the aggregate, be material to the Company and the Bank, taken as a whole; (ii) neither the Company nor the Bank is in material Default thereunder; (iii) neither the Company nor the
Bank has repudiated or waived any material provision of any such Contract; and (iv) no other party to any such Contract is, to the Knowledge of the Company, in Default in any material respect
or has repudiated or waived any material provision thereunder. Copies of each Material Contract, including all amendments thereto, have been provided to Purchaser by the Company prior to the date
hereof.
Section 4.24.
Derivative Instruments and Transactions.
All existing material
derivative instruments, including, swaps, caps, floors and option Contracts, whether entered into for the account of the Company or the Bank
or for the account of a customer of the Company or the Bank are set forth on
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Section 4.24
of the Company Disclosure Schedule and were entered into (a) only in the ordinary course of business consistent with past practice, (b) in
accordance with prudent banking practices and in all material respects with all applicable Laws and with the rules, regulations and policies of applicable Governmental Entities, and (c) with
counterparties believed to be financially responsible at the time. The financial position of the Company and the Bank, as applicable, on a consolidated basis under or with respect to each such
derivative instrument has been reflected on the Company's and the Bank's Books in accordance with GAAP.
Section 4.25.
Legal Proceedings.
There is no, and since January 1, 2013 there has been no,
Litigation before a Governmental Entity pending against, or, to the Knowledge of the Company,
threatened against or affecting, the Company or the Bank or any of their respective properties or, to the Knowledge of the Company, any present or former officer, director or employee of the Company
or the Bank or any Person for whom the Company or the Bank may be liable before (or, in the case of threatened Litigation would be before) or by any Governmental Entity or arbitrator that,
individually or in the aggregate, would reasonably be expected to have a material impact on the Company and the Bank, taken as a whole, or prevent, materially delay or materially impair the
consummation of the transactions contemplated hereby. There is no material Order imposed upon the Company, the Bank or the Assets of the Company or the Bank.
Section 4.26.
Regulatory Matters.
As of the date of this Agreement, the Company does not have
Knowledge of any reason relating to the Company or the Bank why any Requisite Regulatory Consent and,
to the extent necessary, any other approvals, authorizations, filings, registrations and notices required for the consummation of the Merger, the Bank Merger, the Subsequent Merger and the other
transactions contemplated by this Agreement will not be obtained or that any Requisite Regulatory Consent will not be granted reasonably promptly and without the imposition of a Burdensome Condition,
provided
,
however
, that the Company does not make any representation or warranty with respect to the
management, capital, ownership structure, regulatory status or any other aspect of Purchaser or any of its Affiliates or shareholders.
Section 4.27.
Loan Matters.
(a) All
Loans that as of February 29, 2016 were contractually past due 90 days or more in the payment of principal or interest or were classified as "Other
Loans Specially Mentioned," "Special Mention," "Substandard," "Doubtful," "Loss," "Classified," "Criticized," "Credit Risk Assets," "Concerned Loans," "Watch List" or words of similar import are
listed on
Section 4.27(a)
of the Company Disclosure Schedule.
(b) All
Loans (i) are, to the Knowledge of the Company, genuine, valid and legally binding obligations of the borrowers thereunder, (ii) have been, to the
Knowledge of the Company, duly executed by a borrower of legal capacity, (iii) are enforceable in accordance with their respective terms, except as enforcement may be limited by the Solvency
and Equity Exception, and (iv) to the extent secured, have been and continue to be secured by valid Liens and security interests that have been perfected. The Bank has not engaged in any acts
or conduct or made any omissions (including by virtue of the Bank's holding of any funds or property of, or owing amounts or property to, any borrower or obligor under a Loan) that would give rise to
any right of rescission, setoff, abatement, diminution, counterclaim or defense. The Bank has not, and, to the Knowledge of the Company, no other Person has engaged in fraud or has made any material
and intentional misrepresentation with respect to any Loan. The Bank has not received any notice that any of the borrowers of any Loan intends to terminate or materially reduce its relationship with
the Bank after the Closing.
(c) Each
Loan was originated by the Bank or, to the Knowledge of the Company, by an originator not affiliated with the Bank, in all material respects in accordance with all
applicable Law, loan policies, loan sale agreements and procedures of the Bank or such originator not affiliated with the Bank, as applicable, and the underlying Loan (or acquisition thereof) was
approved by the Bank in
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accordance
with the then applicable approval process. With respect to each Loan, the Bank is the sole legal and beneficial owners of and has good title to such Loan. The Bank has not sold,
transferred, assigned or participated any Loan or the economic rights associated with any Loan.
(d) Each
outstanding Loan is administered and the relevant Loan Documents are being maintained in all material respects in accordance with all applicable Law, loan policies,
loan sale agreements and procedures of the Bank.
(e) Except
as evidenced by the Loan Documents, none of the material provisions of any Loan Document have been waived, modified, or altered in any respect, or subordinated in
any respect, by the Bank or, to the Knowledge of the Company, the originator of the Loan.
(f) The
Loans (i) originated by the Bank have arisen from bona fide transactions entered into by the Bank in the ordinary course of business consistent with past
practice and (ii) originated by an entity other than the Bank, to the Company's Knowledge, have arisen from bona fide transactions entered into by the originator in the ordinary course of
business consistent with past practice.
(g) The
reserve for bad debts arising after December 31, 2015 on the accounting records of the Bank, has been determined in all material respects in accordance with
GAAP.
(h) There
are no escrow or reserve accounts related to Taxes, insurance or other charges, for any Loan.
(i) To
the Knowledge of the Company, none of the material collateral of any Loan is subject to any expropriation or condemnation proceedings instituted by any applicable
Governmental Entity that would materially and adversely affect the value of such collateral.
(j) No
Loan is cross-collateralized with a loan that is not a Loan.
(k) The
Bank does not service loans for any third party.
(l)
Section 4.27(l)
of the Company Disclosure Schedule sets forth a list of all Loans pursuant to which the Bank, to
the Knowledge of the Company and other than any Permitted Liens, does not have the most senior lien position with respect to the collateral security interests relating to such Loan. With respect to
each secured Loan not listed on
Section 4.27(l)
of the Company Disclosure Schedule, to the Knowledge of the Company and other than any Permitted
Liens, there is no Person other than the applicable borrower with an interest in the collateral relating to such Loan senior to the Bank.
Section 4.28.
Deposits.
All of the deposits held by the Bank (including the records and
documentation pertaining to such deposits) have been established and are held in compliance in all
material respects with (a) all applicable policies, practices and procedures of the Bank, and (b) all applicable Law, including the Anti-Money Laundering Laws and anti-terrorism, or
embargoed person requirements.
Section 4.29.
Allowance for Loan and Lease Losses.
The allowance for loan and lease losses
reflected in the Company Balance Sheet and the Call Reports was as of such date adequate based upon the Company and the
Bank's past business practices to provide for possible or specific or general losses, net of recoveries relating to loans previously charged off, on Loans outstanding as of the applicable dates of the
Company Balance Sheet and Call Reports.
Section 4.30.
Insurance.
The Company and the Bank are, and since January 1, 2014 have been,
insured with reputable insurers against such risks and in such amounts as is
(a) prudent and consistent with industry practice and (b) sufficient for compliance with all material requirements of applicable Law and all Material Contracts.
Section 4.30
of Company
Disclosure Schedule contains a true, correct and complete list and a brief description (including the name of the
insurer, agent, coverage and the expiration date) of all insurance policies in force on the date hereof with respect to the business and Assets of the Company and the Bank, true, correct and complete
copies of which policies have been
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provided
to Purchaser prior to the date hereof. The Company and the Bank are in material compliance with their insurance policies and are not in Default under any of the material terms thereof, which
Defaults have not been cured. Each such policy is outstanding and in full force and effect. Except for policies insuring against potential Liabilities of officers, directors and employees of the
Company and the Bank, the Company or the Bank are the sole beneficiaries of such policies. All premiums and other payments due under any such policy have been paid, and all material claims thereunder
have been filed in due and timely fashion. Since January 1, 2013, neither the Company nor the Bank has received any written notice of cancellation or non-renewal of any such policies, nor is
the termination of any such policies threatened. There are no pending or, to the Knowledge of the Company, threatened material claims under any such policy. Since January 1, 2013, neither the
Company nor the Bank has been refused any insurance with respect to its Assets or operations by any insurance carrier to which it has applied for any such insurance or with which it has carried
insurance.
Section 4.31.
Related Party Contracts.
(a)
Section 4.31
of the Company Disclosure Schedule sets forth any extension of credit (as debtor, creditor, guarantor
or otherwise) with any (i) Affiliate of the Company or the Bank, (ii) insider or related interest of an insider, (iii) stockholder owning five percent or more of the outstanding
Common Stock or related interest of such a stockholder or (iv) employee who is not an executive officer (in the case of this clause (iv), other than credit and consumer banking
transactions on arms-length terms in the ordinary course of business consistent with past practice) (each Person described in clauses (i) through (iv) a "
Related
Party
"). For purposes of the preceding sentence, the terms "insider," "related interest," "executive officer" and "extension of credit" shall have the meanings assigned in the
Federal Reserve's Regulation O. Except as part of the normal customary terms of an individual's employment and those extensions of credit set forth on
Section 4.31
of the Company Disclosure
Schedule, neither the Company nor the Bank is party to any Contract for goods or services, lease or other
Contract with any Related Party.
(b) Each
of the Company and the Bank is in material compliance with, and has since January 1, 2013, materially complied with, Sections 23A and 23B of the
Federal Reserve Act, its implementing regulations, and the Federal Reserve's Regulation O.
Section 4.32.
Opinion of Financial Advisor.
The Company has received the opinion of Sandler
O'Neill & Partners, financial advisor to the Company, to the effect that, as of the date of this Agreement
and subject to the factors, assumptions and limitations set forth therein, the Per Share Merger Consideration is fair to the Company's stockholders from a financial point of view. The Company shall
deliver a correct and complete copy of the written opinion of Sandler O'Neill & Partners to Purchaser for informational purposes only promptly after receipt thereof by the Company.
Section 4.33.
Anti-takeover Statutes.
Assuming the accuracy of the representations and
warranties contained in
Section 5.08
, the Company Board
has taken all action necessary in approving this Agreement, the Stockholder Voting Agreement and the transactions contemplated hereby and thereby to render inapplicable to this Agreement, the
Stockholder Voting Agreement and the transactions contemplated hereby and thereby the restrictions on "business combinations" (as defined in Section 203 of the DGCL) as set forth in
Section 203 of the DGCL and, accordingly, neither Section 203 of the DGCL nor any other Takeover Provision applies or purports to apply to the transactions contemplated hereby or
thereby.
Section 4.34.
Finders' Fees.
Except for Sandler O'Neill & Partners, a copy of whose
engagement agreement has been provided to Purchaser, there is no investment banker, broker, finder
or other intermediary that has been retained by or is authorized to act on behalf of the Company or the Bank who might be entitled to any fee or commission from the Company or any of its Affiliates in
connection with the transactions contemplated by this Agreement.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser
represents and warrants to the Company:
Section 5.01.
Organization.
Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Oklahoma. Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of Delaware. MidFirst Bank is a wholly-owned subsidiary of Purchaser and is a federally chartered savings association and a
wholly-owned subsidiary of Purchaser duly organized and validly existing under the Home Owners' Loan Act, 12 U.S.C. § 1461 et seq. Each of Purchaser and MidFirst Bank
(i) have all corporate power and authority to own or lease all the Assets owned or leased by it and to conduct its business as it is now being conducted, and (ii) is duly licensed or
qualified to do business and in good standing as a foreign corporation in all jurisdictions (A) in which the nature of the activities conducted by Purchaser requires such license or
qualification and (ii) in which Purchaser owns or leases Real Property, other than, in the case of clause (i) and (ii), such failures that would not, individually or in the aggregate,
reasonably be expected to prevent, materially delay or materially impair the ability of Purchaser to consummate the transactions contemplated hereby. True, complete and correct copies of each of the
certificate of incorporation and the bylaws of Purchaser and Merger Sub and the charter of MidFirst Bank and the bylaws of MidFirst Bank, as amended and as currently in effect, have been delivered or
made available to the Company.
Section 5.02.
Authority of Purchaser and Merger Sub; No Breach By Agreement.
(a) Each
of Purchaser and Merger Sub has all requisite corporate power and authority and has taken all corporate action necessary in order to execute, deliver and perform
its obligations under this Agreement and to consummate the transactions contemplated hereby, subject only (i) with respect to the Merger, to adoption of this Agreement by Purchaser as the sole
stockholder of Merger Sub (which shall occur promptly following the execution of this Agreement) and the filing of the certificate of merger with the Delaware Secretary of State in connection with the
Merger, (ii) with respect to the Bank Merger, to the approval of the Subsidiary Plan of Merger by Purchaser as the sole stockholder of MidFirst and the filing of the Subsidiary Plan of Merger
or any other documents or certificates to be filed in connection with the Bank Merger and (iii) with respect to the Subsequent Merger, to approval of the board of directors of Purchaser and the
stockholders of Purchaser, the approval and declaring advisable by the board of directors of the Surviving Corporation, the adoption by Purchaser as the sole stockholder of the Surviving Corporation
and the filing of a certificate of merger or any other documents or certificates to be filed in connection with the Subsequent Merger. This Agreement has been duly and validly executed and delivered
by each of Purchaser and Merger Sub and, assuming due authorization, execution and delivery by the Company, is a valid and binding obligation of each of Purchaser and Merger Sub enforceable against
each of Purchaser and Merger Sub in accordance with its terms (except as enforcement may be limited by the Solvency and Equity Exception). Except as set forth above, no other corporate proceedings,
other than the adoption of this Agreement by Purchaser as the sole stockholder of Merger Sub, the filing of the certificate of merger with the Delaware Secretary of State in connection with the Merger
and the filings of the Subsidiary Plan of Merger or any other documents or certificates to be filed in connection with the Bank Merger and the Subsequent Merger, are necessary for the execution and
delivery by Purchaser and Merger Sub of this Agreement, the performance by them of its obligations hereunder or the consummation by them of the transactions contemplated hereby. Each of the boards of
directors of Purchaser and Merger Sub, by a unanimous vote thereof, has adopted resolutions (i) approving and declaring advisable this Agreement and the transactions contemplated by this
Agreement, including the Merger, upon the terms and subject to the conditions set forth herein, (ii) determining that this Agreement and such transactions are fair to, and in the best interests
of, Purchaser and Merger Sub, respectively, and the stockholders of Purchaser and
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Merger
Sub, respectively and (iii) in the case of the Board of Directors of Merger Sub, resolving to recommend that Merger Sub's stockholder adopt this Agreement.
(b) Neither
the execution and delivery by Purchaser and Merger Sub of this Agreement, nor the consummation of the transactions contemplated hereby, nor compliance by
Purchaser, MidFirst Bank and Merger Sub with any of the provisions hereof, will (i) with or without notice, lapse of time or both, violate, conflict with, or result in a breach of any provision
of, or constitute a Default under, or result in the termination of, or result in the loss to Purchaser, MidFirst or Merger Sub of any benefit or result in the creation of any Liens, other than
Permitted Liens, upon any of the material Assets of Purchaser, MidFirst or Merger Sub under any of the terms, conditions or provisions of (1) the certificate of incorporation or bylaws (or
similar governing documents) of Purchaser or Merger Sub or the charter, bylaws or other governing instrument of MidFirst or (2) any Contract or Permit to which Purchaser, MidFirst or Merger Sub
is party or by which Purchaser, MidFirst or Merger Sub may be bound, or to which Purchaser, MidFirst or Merger Sub or any of the Assets of Purchaser, MidFirst or Merger Sub may be subject, or
(ii) subject to compliance with the statutes and regulations referred to in
Section 5.02(c)
, violate any Law or Order applicable to
Purchaser, MidFirst or Merger Sub or any of their respective material Assets, except in the case of clauses (i)(2) and (ii) as would not reasonably be expected to prevent, materially
delay or materially impair Purchaser's, MidFirst's and Merger Sub's ability to consummate the transactions contemplated hereby.
(c) Other
than (i) applicable requirements of the Securities Act, the Exchange Act and state securities takeover and "blue sky" laws, as may be required in connection
with this Agreement and the transactions contemplated hereby, (ii) the filing of the Delaware certificate of merger in connection with the Merger, (iii) the filing of the Subsidiary Plan
of Merger or any other documents or certificates to be filed in connection with the Bank Merger, (iv) the filing of a certificate of merger or any other documents or certificates to be filed
with the States of Delaware or Oklahoma in connection with the Subsequent Merger and (v) the Regulatory Consents, no notice to, registration, declaration or filing with, exemption or review by,
or authorization, order, consent or approval of, any Governmental Entity, or expiration or termination of any statutory waiting period, is necessary in connection with Purchaser's and Merger Sub's
execution, delivery or performance of this Agreement, MidFirst's execution, delivery or performance of the Subsidiary Plan of Merger, and the consummation of the Merger, the Bank Merger, the
Subsequent Merger and the other transactions contemplated hereby.
Section 5.03.
Disclosure Documents.
(a) None
of the information supplied with respect to Purchaser or Merger Sub or to be supplied by Purchaser, Merger Sub or any Affiliate thereof expressly for inclusion in
the Company Proxy Statement to be mailed to the Company's stockholders in connection with the Company Stockholder Meeting, and any documents to be filed by Purchaser, Merger Sub or any Affiliate
thereof with any Governmental Entity in connection with the transactions contemplated hereby, will, at the respective time such documents are filed, and with respect to the Company Proxy Statement,
when first mailed to the Company's stockholders, be false or misleading with respect to any material fact, or omit to state any material fact required to be stated therein or necessary to make the
statements therein not misleading, or, in the case of the Company Proxy Statement or any amendment thereof or supplement thereto, at the time of the Company Stockholder Meeting, be false or misleading
with respect to any material fact, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of any proxy for the Company
Stockholder Meeting.
(b) The
representations and warranties contained in
Section 5.03(a)
will not apply to statements or omissions included
or incorporated by reference in the Company Proxy Statement or any documents to be filed by Purchaser, Merger Sub or any Affiliate thereof with any Governmental Entity based upon information supplied
by the Company, the Bank or any of their respective Representatives specifically for use or incorporation by reference therein.
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Section 5.04.
Available Funds.
Purchaser and MidFirst have, or will have at the Effective Time,
sufficient cash, available lines of credit or other sources of immediately available funds to
enable it to consummate the Merger and pay the aggregate Per Share Merger Consideration pursuant to the terms of this Agreement and to pay all related fees and expenses of Purchaser, MidFirst and
Merger Sub pursuant to this Agreement.
Section 5.05.
Merger Sub; No Prior Activities.
The authorized capital stock of Merger Sub
consists solely of 100 shares of common stock, par value $0.01 per share, all of which are validly issued and
outstanding. All of the issued and outstanding capital stock of Merger Sub is, and as of immediately prior to the Effective Time will be, owned by Purchaser or a Subsidiary thereof. Except in
connection with its incorporation or organization or the negotiation and consummation of this Agreement and the transactions contemplated hereby, Merger Sub has not incurred any Liabilities, and has
not engaged in any business or activities of any type or kind whatsoever or entered into any agreements or arrangements with any Person.
Section 5.06.
Regulatory Matters.
As of the date of this Agreement, Purchaser does not have
Knowledge of any reason relating to Purchaser, Merger Sub or MidFirst why any Requisite Regulatory
Consent and, to the extent necessary, any other approvals, authorizations, filings, registrations and notices required for the consummation of the Merger, the Bank Merger, the Subsequent Merger and
the other transactions contemplated by this Agreement will not be obtained or that any Requisite Regulatory Consent will not be granted reasonably promptly and without the imposition of a Burdensome
Condition,
provided
,
however
, that Purchaser does not make any representation or warranty with respect
to the management, capital, ownership structure, regulatory status or any other aspect of the Company or any of its Affiliates or shareholders.
Section 5.07.
Finders' Fees.
Except for Macquarie Capital (USA) Inc., there is no
investment banker, broker, finder or other intermediary that has been retained by or is authorized to
act on behalf of Purchaser or Merger Sub who might be entitled to any fee or commission from Purchaser or Merger Sub or any of their respective Affiliates in connection with the transactions
contemplated by this Agreement.
Section 5.08.
Ownership of Shares.
None of Purchaser, Merger Sub or any of their respective
"affiliates" or "associates" (as defined in Section 203 of the DGCL) is, or at any time during the
past three years has been, an "interested stockholder" of the Company (as defined in Section 203 of the DGCL).
ARTICLE VI
CONDUCT OF BUSINESS PENDING CONSUMMATION
Section 6.01.
Conduct of Business.
(a) From
the date of this Agreement until the earlier of the Effective Time or the termination of this Agreement, unless the prior written consent of Purchaser shall have
been obtained, and except as required by applicable Law or as otherwise expressly contemplated herein or as set forth in
Section 6.01(a)
of the
Company Disclosure Schedule, the Company shall, and shall cause the Bank to: (i) operate its business only in the ordinary course of business consistent with past practice; (ii) use its
reasonable best efforts to preserve intact its business (including its organization, Assets, goodwill and insurance coverage), and maintain its rights, authorizations, franchises, goodwill and
relationships of its employees, customers, lenders, suppliers, customers, borrowers and others having business relationships with the Company or the Bank; (iii) maintain loan loss reserves in
accordance with GAAP and consistent with past practices for the estimations of such reserves; and (iv) take no action which would reasonably be expected to (1) prevent, materially delay
or materially impair the receipt of any Requisite Regulatory Consent, (2) result in any of the conditions set forth in
Article VIII
not
being satisfied, or
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(3) prevent,
materially delay or materially impair the consummation of the transactions contemplated by this Agreement.
(b) From
the date of this Agreement until the earlier of the Effective Time or the termination of this Agreement, without the prior written consent of Purchaser (which
consent shall not be unreasonably withheld, conditioned or delayed), and except as required by applicable Law or as otherwise expressly contemplated herein or as set forth in
Section 6.01(b)
of the
Company Disclosure Schedule, the Company covenants and agrees that neither the Company nor the Bank will
(i) amend
its certificate of incorporation, articles of association, bylaws or other governing instruments;
(ii) incur
or guarantee any Indebtedness (other than Indebtedness incurred in the ordinary course of business consistent with past practice);
(iii) repurchase,
redeem, or otherwise acquire or exchange (other than in accordance with the terms of this Agreement), directly or indirectly, any Company Securities or
Bank Securities, or make, declare, pay or set aside for payment any dividend or set any record date for or declare or make any other distribution in respect of any Company Securities or Bank
Securities, except in connection with any tax withholding upon the vesting of any Company Restricted Shares;
(iv) issue,
sell, pledge, dispose of, encumber, authorize or propose the issuance of, enter into any Contract to issue, sell, pledge, dispose of, encumber, or authorize or
propose the issuance of, or otherwise permit to become outstanding, any additional shares of any Company Security or Bank Security;
(v) directly
or indirectly adjust, split, combine or reclassify any Company Security or Bank Security or issue or authorize the issuance of any other securities in respect
of or in substitution for Shares, or sell, transfer, lease, mortgage, permit any Lien, other than Permitted Liens, or otherwise dispose of, discontinue or otherwise encumber (i) any Company
Securities or Bank Securities or (ii) any Asset of the Company or the Bank other than pursuant to Contracts in force at the date of the Agreement
(
provided
that any limitations to the Company's actions with respect to investment securities are solely contained in
Section 6.01(b)(xviii))
;
(vi) (1)
purchase any securities or make any acquisition of or investment in, either by purchase of stock or other securities or equity interests, contributions to capital,
Asset transfers, purchase of any Assets
(including any investments or commitments to invest in Real Property or any Real Property development project) or other business combination, or by formation of any joint venture or other business
organization or by contributions to capital (other than by way of foreclosures or acquisitions of control in a fiduciary or similar capacity or in satisfaction of debts previously contracted in good
faith, in each case in the ordinary course of business consistent with past practice), any Person, or otherwise acquire direct or indirect control over any Person; or (2) enter into a plan of
consolidation, merger, share exchange, share acquisition, reorganization or complete or partial liquidation with any Person, or a letter of intent, memorandum of understanding or agreement in
principle with respect thereto (
provided
that any limitations to the Company's actions with respect to investment securities are solely contained in
Section 6.01(b)(xviii))
;
(vii) except
as required by the terms of any Company Benefit Plan or other Contract as in effect on the date hereof and disclosed on Section 4.22(a) or
Section 4.23(a) of the Company Disclosure Schedule (1) grant any increase in compensation or benefits to any Company Employee or independent contractor, except in the ordinary course of
business consistent with past practice; (2) pay any (A) severance or termination pay or (B) bonus, in either case other than cash bonuses in an aggregate amount not to exceed
$1,327,500 pursuant to a Company Benefit Plan in effect on the date hereof and paid in accordance with past practice, including with respect to the timing of
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payment,
in the case of (A) subject to receipt of an effective release of claims from the employee, and in the case of (B) to the extent required to be paid in cash under the terms of
the plan without the exercise of any upward discretion; (3) enter into or amend any severance agreements with any Company Employee; or (4) grant any increase in fees or other increases
in compensation or other benefits to directors or any Company Employee at the level of Vice President or above;
provided
that the restrictions in this
Section 6.01(b)(vii)
will not prohibit the Company from entering into compensation arrangements with newly-hired or promoted Company Employees in
the ordinary course of business consistent with past practice on terms substantially consistent with those provided to similarly-situated Company Employees;
(viii) enter
into, amend or renew any employment Contract between the Company or the Bank and any Person;
(ix) except
as required by Law, (1) adopt any new Employee Benefit Plan of the Company or the Bank (or adopt any plan that would be an Employee Benefit Plan of the
Company or the Bank had it been in existence on the date of this Agreement) or terminate or withdraw from, or amend, any Company Benefit Plan, other than in a manner that would not increase the cost
of maintaining such Company
Benefit Plan, or in connection with routine changes to Company Benefit Plans providing health and welfare benefits, (2) make any distributions from such Employee Benefit Plans, except as
required by the terms of such plans as in effect on the date of this Agreement or (3) fund or in any other way secure the payment of compensation or benefits under any Company Benefit Plan;
(x) make
any material change in any accounting principles, practices or methods or systems of internal accounting controls, except as may be required to conform to
regulatory accounting requirements or GAAP;
(xi) commence
any Litigation other than in the ordinary course of business consistent with past practice, or settle, waive or release or agree or consent to the issuance of
any Order in connection with any Litigation (1) involving any Liability of any of the Company or the Bank for money damages in excess of $25,000 per Litigation or $100,000 in the aggregate or
(2) arising out of or relating to the transactions contemplated hereby;
(xii) (1)
enter into, renew (other than renewals in the ordinary course of business consistent with past practice and without changes in the terms that are adverse to the
Company), extend (other than extensions in the ordinary course of business consistent with past practice and without changes in the terms that are adverse to the Company), materially modify,
materially amend or terminate (other than terminations in accordance with the stated term in any Contract in effect on the date hereof) any (A) Contract that calls for aggregate annual payments
of $25,000 or more, except in the ordinary course of business consistent with past practice or (B) Material Contract; or (2) waive, release, compromise or assign any material rights or
material claims under any Contract described in clause (1);
(xiii) enter
into any new line of business or change in any material respect its lending, investment, risk and asset-liability management, interest rate, fee pricing or
other material banking or operating policies;
(xiv) except
as set forth in the capital budgets set forth in Section 6.01(b)(xiv) of the Company Disclosure Schedule, make, or commit to make, any capital
expenditures in excess of $25,000 per project or $100,000 in the aggregate;
(xv) make
any material changes in its policies and practices with respect to (1) underwriting, pricing, originating, acquiring, selling, servicing, or buying or
selling rights to service, Loans, or (2) its hedging practices and policies;
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(xvi) cancel
or release any material Indebtedness owed to any Person or any claims held by any Person, except for (1) sales of Loans and sales of investment
securities, in each case in the ordinary course of business consistent with past practice, or (2) as expressly required by the terms of any Contracts in force at the date of the Agreement;
(xvii) permit
the commencement of any material construction of new structures or facilities upon, or purchase or lease any Real Property in respect of any branch or other
facility;
(xviii) materially
change its investment securities portfolio policy, or its policies with respect to the classification or reporting of such portfolios, or invest in any
mortgage-backed or mortgage related securities which would be considered "high-risk" securities under applicable regulatory pronouncements;
(xix) alter
materially its interest rate or fee pricing policies with respect to depository accounts or waive any material fees with respect thereto;
(xx) make,
change or revoke any material Tax election, change any material method of Tax accounting, adopt or change any taxable year or period, file any amended material
Tax Returns, agree to an extension or waiver of any statute of limitations with respect to the assessment or determination of Taxes, settle or compromise any material Tax liability of the Company or
the Bank, enter into any closing agreement with respect to any material Tax or surrender any right to claim a material Tax refund;
(xxi) enter
into any securitizations of any Loans or create any special purpose funding or variable interest entity other than on behalf of clients;
(xxii) foreclose
upon or take a deed or title to any commercial Real Property without first conducting a Phase I environmental assessment (except where such an
assessment has been conducted in the preceding twelve months) of the property or foreclose upon any commercial Real Property if such environmental assessment indicates the presence of Hazardous
Substances;
(xxiii) make
or acquire any Loan or issue a commitment (including a letter of credit) or renew or extend an existing commitment for any Loan, or amend or modify in any
material respect any Loan (including in any manner that would result in any additional extension of credit, principal forgiveness, or effect any uncompensated release of collateral,
i.e
., at a value
below the fair market value thereof as determined by the Bank), except (1) new Loans not in excess of $4,000,000,
(2) Loans or commitments for Loans that have previously been approved by the Bank prior to the date of this Agreement not in excess of $4,000,000, (3) modification, extension or
amendment of any Loan existing on the date hereof which is rated "pass" by the Bank in a manner that would not result in (A) any additional extension of credit in excess of $4,000,000,
(B) principal forgiveness or (C) any uncompensated release of collateral, or (4) any extension, for a time period no longer than one year, of an existing commitment for any Loan
which has been rated "pass" by the Bank;
provided
,
however
, Purchaser will be deemed to have given its
consent under this
Section 6.01(b)(xxiii)
unless Purchaser objects to such proposed transaction no later than 48 hours (non-Business Days
excluded) after actual receipt by Purchaser from the Company of all reasonable information (including the applicable credit presentation) relating to such making, acquisition, commitment, renewal,
extension, amendment or modification;
(xxiv) acquire
any Loans through bulk purchases that are not in process as of the date of this Agreement;
(xxv) make
any application for the opening, relocation or closing of any, or open, relocate or close any, branch office, loan production office or other significant office
or operations facility; or
(xxvi) resolve
to take, agree to take or make any commitment to take any of the actions prohibited by this
Section 6.01(b)
.
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(c) Without
limiting in any way any Party's rights or obligations under this Agreement (including this
Section 6.01
),
nothing contained in this Agreement shall give Purchaser or Merger Sub, directly or indirectly, the right to control or direct the Company or the Bank's operations prior to the Effective Time.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.01.
Efforts; Consents of Governmental Entities; Third Party Consents.
(a) Subject
to the terms and conditions of this Agreement, from the date hereof until the Closing, each Party shall use its reasonable best efforts to take such actions as
are necessary to expeditiously satisfy the conditions set forth in
Article VIII
hereof, as applicable.
(b) Without
limitation to the foregoing clause (a), Purchaser, on the one hand, and the Company, on the other hand, shall, and the Company shall cause the Bank to,
cooperate and use their respective reasonable best efforts to prepare or cause to be prepared all documentation, to make or cause to be made all filings and to obtain or cause to be obtained all
permits, consents, approvals and authorizations of all third parties and Governmental Entities necessary to consummate the transactions contemplated by this Agreement, including the Requisite
Regulatory Consents. Purchaser shall use its reasonable best efforts to (i) resolve objections, if any, which may be asserted with respect to the Merger, the Subsequent Merger or the Bank
Merger under any applicable Law or Order and (ii) avoid the entry of, or to have vacated, lifted, reversed or overturned any Order, whether temporary, preliminary or permanent, that would
restrain, prevent or delay the Closing;
provided
that in no event shall Purchaser or any of its Affiliates or shareholders be required to
(i) accept any new change, restriction or condition on Purchaser, Merger Sub, MidFirst or any of Purchaser's other Affiliates or shareholders which is materially burdensome on Purchaser, any of
Purchaser's Affiliates or shareholders, the Company or the Bank or the business of any of the foregoing, or (ii) proffer to, or agree to, sell, divest, lease, license, transfer, dispose of or
otherwise encumber or hold separate and agree to sell, divest, lease, license, transfer, dispose of or otherwise encumber before, on or after the Effective Time, any assets, licenses, operations,
rights, product lines, businesses or other interests of Purchaser, any of Purchaser's Affiliates or shareholders or any of their Affiliates, the Company or the Bank or any of their Assets, licenses,
operations, rights, businesses or interests thereon or to any agreement by the Company or the Bank to take any of the foregoing actions that would, or would be reasonably likely to, in each case of
clauses (i) and (ii) after the Effective Time (but regardless of when such action, condition or restriction is to be taken or implemented), (x) individually or in the aggregate,
after giving effect to such action(s) together with all facts, circumstances, changes, events, developments or occurrences with respect to the Company or the Bank since the date hereof, have a
material adverse effect on Purchaser and its Subsidiaries, on the one hand, or the Company and the Bank, on the other hand, in each case measured on a scale relative to the Company and the Bank, taken
as a whole, or (y) require Purchaser, Merger Sub, MidFirst or any of Purchaser's other Affiliates or shareholders, the Company or the Bank to enter into an operating agreement or raise an
amount of additional capital that would materially reduce the economic benefits of the transactions contemplated by this Agreement to Purchaser or any of Purchaser's Affiliates or shareholders, as the
case may be (any such condition or restriction, a "
Burdensome Condition
"). Purchaser and the Company shall have the right to review in advance, and to
the extent practicable the Parties will consult with one another, in each case subject to applicable Laws relating to the exchange of information, with respect to all material written information
submitted by a Party to any Governmental Entity (and, with respect to information submitted by the Company, to any other third party) in connection with the transactions contemplated by this Agreement
(other than any portions of material submitted in connection therewith that contain competitively sensitive business or other proprietary information or confidential supervisory information submitted
under a claim of confidentiality). Each Party hereto agrees that it will consult with the other
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Parties
hereto with respect to the obtaining of all material permits, consents, approvals and authorizations of third parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement, including the Requisite Regulatory Consents and each Party will keep the other Parties reasonably apprised of the status of material matters relating to
completion of the transactions contemplated hereby, including, subject to applicable Laws relating to the exchange of information, advising the other Parties upon receiving any communication from a
Governmental Entity, the consent or approval of which is required for the consummation of the Merger, the Subsequent Merger or the Bank Merger and the other transactions contemplated by this
Agreement, that causes such Party to believe that there is a reasonable likelihood that any required consent or approval from a Governmental Entity will not be obtained or that the receipt of such
consent or approval may be materially delayed (a "
Regulatory Communication
"). Upon the receipt of a Regulatory Communication, without limiting the scope
of the foregoing, the receiving Party shall, to the extent permitted by applicable Law relating to the exchange of information and confidential information and not in contravention of any contractual
obligation (i) promptly advise the other of the receipt of any substantive communication from a Governmental Entity with respect to the transactions contemplated hereby and (ii) provide
the other Parties with a reasonable opportunity to review any response thereto and any other substantive submission or communication to any Governmental Entity with respect to the transactions
contemplated hereby.
(c) Subject
to applicable Law, each Party agrees, upon request, to furnish the other Parties with all information concerning itself, its Subsidiaries, directors, officers
and stockholders and such other matters as may be reasonably necessary or advisable in connection with any filing, notice or application made with respect to any Requisite Regulatory Consent.
(d) As
promptly as practicable following the date hereof, in reasonable consultation with Purchaser, the Company shall (i) give all required notices to all third
parties described on
Section 7.01(d)(i)
of the Company Disclosure Schedule and (ii) use reasonable best efforts to obtain all required
consents or approvals from all third parties described in
Section 7.01(d)(ii)
of the Company Disclosure Schedule;
provided
that nothing contained in
this Agreement shall require the Company or the Bank to pay any fee or other consideration in connection with
obtaining such consents or approvals described in
Section 7.01(d)(ii)
of the Company Disclosure Schedule. Upon Purchaser's request, the Company
shall reasonably cooperate with Purchaser to create and be prepared to implement at the Closing a plan to replace the services provided by a third party described in
Section 7.01(d)(ii)
of the
Company Disclosure Schedule to an alternate provider.
Section 7.02.
Access to Information
.
From the date hereof until the Effective Time and subject to applicable Law and the Confidentiality Agreement, the Company shall (i) give to Purchaser and its Representatives
reasonable access to the offices, Assets and Books and Records and personnel of the Company and the Bank, (ii) furnish to Purchaser and its Representatives such financial and operating data and
other information as such Persons may reasonably request and (iii) instruct the employees, counsel, financial advisors, auditors and other authorized representatives of the Company and the Bank
to cooperate with Purchaser in its investigation of the Company and the Bank. Any investigation pursuant to this
Section 7.02
shall be conducted
in such manner as not to interfere unreasonably with the conduct of the business of the Company and the Bank. Neither the Company nor the Bank shall be required to provide access or to disclose
information where such access or disclosure would (i) violate the rights of the Company or the Bank's customers, (ii) jeopardize any attorney-client privilege or attorney work product
protection of the Company or the Bank (after giving due consideration to the existence of any common interest, joint defense or similar agreements between the Parties) or (iii) contravene any
applicable Law or Order. No information or knowledge obtained in any investigation pursuant to this
Section 7.02
shall affect or be deemed to
modify any representation or warranty made by any Party hereunder. Nothing in this
Section 7.02
will be construed to require the Company or the
Bank or any of their Representatives to prepare any analyses not already prepared at
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the
time of such request. All requests for access pursuant to this
Section 7.02
must be directed to the General Counsel of the Company. The terms
and conditions of the Confidentiality Agreement shall apply to any information provided pursuant to this
Section 7.02
.
Section 7.03.
Company Proxy Statement
.
(a) As
promptly as reasonably practicable (and in any event within 20 Business Days after the date hereof), the Company shall prepare and file, in preliminary form, the
Company Proxy Statement with the SEC. The Company shall use its reasonable best efforts to cause the Company Proxy Statement to be cleared by the SEC as soon as reasonably practicable after the date
hereof and to be mailed to its stockholders as promptly as practicable thereafter. The Company shall use its reasonable best efforts to ensure that the Company Proxy Statement, and any amendments or
supplements thereto, comply in all material respects with the rules and regulations promulgated by the SEC under the Exchange Act.
(b) Purchaser
and its counsel shall be given a reasonable opportunity to review and comment on the Company Proxy Statement before the Company Proxy Statement (or any
amendment thereto) is filed with the SEC, and the Company shall give reasonable and good faith consideration to any comments made by Purchaser and its counsel. The Company shall provide Purchaser and
its counsel with (i) any comments or other communications, whether written or oral, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the
Company Proxy Statement promptly after receipt of those comments or other communications and (ii) a reasonable opportunity to participate in the Company's response to those comments and to
provide comments on such response (to which reasonable and good faith consideration shall be given), including by participating with the Company or its counsel in any discussions or meetings with the
SEC.
(c) The
Company and Purchaser shall cooperate with one another (i) in connection with the preparation of the Company Proxy Statement and (ii) in taking such
actions or making any such filings, furnishing information required in connection with the Company Proxy Statement.
(d) Notwithstanding
(i) any Company Adverse Recommendation Change, (ii) the public proposal or announcement or other submission to the Company or any of its
Representatives of an Acquisition Proposal or (iii) anything in this Agreement to the contrary, unless this Agreement is terminated in accordance with its terms, the obligations of the Company
under this
Section 7.03
shall continue in full force and effect.
Section 7.04.
Company Stockholder Meeting
.
(a) The
Company shall cause a meeting of its stockholders (the "
Company Stockholder Meeting
") to be duly called and held as
promptly as reasonably practicable after the SEC or its staff advises that it has no further comments on the Company Proxy Statement or that the Company may commence mailing the Company Proxy
Statement for the purpose of voting on the adoption of this Agreement and shall comply with all applicable Law with respect to such meeting and the solicitation of proxies in connection therewith. The
Company shall cause the Company Proxy Statement to be mailed to the stockholders of the Company as of the record date established for the Company Stockholder Meeting as promptly as reasonably
practicable thereafter. The Company shall use its reasonable best efforts to solicit from the Company's stockholders proxies in favor of the adoption of this Agreement and shall take all other action
reasonably necessary or advisable to secure the Requisite Stockholder Approval unless the Company Board shall have made a Company Adverse Recommendation Change in compliance with
Section 7.05
.
(b) Unless
permitted by and in compliance with
Section 7.05
, the Company Board shall make the Company Board
Recommendation and not effect a Company Adverse Recommendation Change. The obligation of the Company to hold the Company Stockholder Meeting and to solicit proxies therefor shall not be affected by
any Acquisition Proposal or other event or circumstance (
provided
that if the
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Company
Board has withdrawn the Company Board Recommendation in compliance with
Section 7.05
, such solicitation need not request proxies in favor
of the adoption of this Agreement) and the Company agrees that it will not submit any Acquisition Proposal to its stockholders for a vote unless this Agreement is terminated in accordance with its
terms.
(c) Any
adjournment, delay or postponement of the Company Stockholder Meeting shall require the prior written consent of Purchaser;
provided
that (i) the Company shall be permitted to (and shall do so if
requested by Purchaser) adjourn, delay or postpone the Company
Stockholder Meeting (A) after consultation with Purchaser, for a period not to exceed 15 days if as of the time for which the Company Stockholder Meeting is originally scheduled (as set
forth in the Company Proxy Statement) there are insufficient Shares represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the Company Stockholder
Meeting or (B) after consultation with Purchaser, if the Company Board has determined in good faith based on the advice of outside counsel that it is necessary to ensure that any legally
required supplement or amendment to the Company Proxy Statement is provided to the stockholders of the Company with adequate time to review and (ii) Purchaser may require the Company to
adjourn, delay or postpone the Company Stockholder Meeting once for a period not to exceed 30 calendar days (but prior to the date that is two Business Days prior to the Outside Date) to solicit
additional proxies necessary to obtain the Requisite Stockholder Approval. Once the Company has established a record date for the Company Stockholder Meeting, the Company shall not change such record
date or establish a different record date for the Company Stockholder Meeting without the prior written consent of Purchaser, unless required to do so by applicable Law or the Company's organizational
documents. Without the prior written consent of Purchaser, the adoption of this Agreement and the transactions contemplated hereby (including the Merger) shall be the only matter (other than matters
of procedure and matters required by applicable Law to be voted on by the Company's stockholders in connection with the adoption of this Agreement and the transactions contemplated hereby) that the
Company shall propose to be acted on by the stockholders of the Company at the Company Stockholder Meeting.
(d) Notwithstanding
(i) any Company Adverse Recommendation Change, (ii) the public proposal or announcement or other submission to the Company or any of its
Representatives of an Acquisition Proposal or (iii) anything in this Agreement to the contrary, unless this Agreement is terminated in accordance with its terms, the obligations of the Company
under this
Section 7.04
shall continue in full force and effect.
Section 7.05.
No Solicitation; Other Offers
.
(a) The
Company shall not, and shall cause the Bank and their respective Representatives not to, directly or indirectly, (i) solicit, initiate, propose or knowingly
encourage (including by way of furnishing non-public information) any inquiries or the submission of any proposal that constitutes, or could reasonably be expected to lead to, an Acquisition Proposal
or otherwise knowingly facilitate any effort or attempt to make an Acquisition Proposal; (ii) enter into, continue or otherwise participate in any discussions (other than as necessary to
ascertain facts or clarify terms with respect to an Acquisition Proposal that did not result from a breach of this
Section 7.05
) or negotiations
regarding, furnish to any Person any non-public information relating to, afford access to the business, Books and Records and Assets of the Company or the Bank in connection with, or otherwise
cooperate with any Person with respect to, any Acquisition Proposal or any inquiry, proposal or offer that could reasonably be expected to lead to an Acquisition Proposal; or (iii) resolve,
propose or agree to do any of the foregoing;
provided
that if in response to an unsolicited,
bona fide
written Acquisition Proposal made after the date hereof and at any time prior to the time that the Requisite Stockholder Approval is obtained (but not thereafter) in circumstances not involving a
breach of this
Section 7.05
, the Company Board determines in good faith (after consultation with outside legal counsel and its financial advisor)
that such Acquisition Proposal constitutes, or could reasonably be expected to lead to, a Superior Proposal and with respect to which the Company Board determines in good faith, after consultation
with outside
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legal
counsel, that the failure to take such action would reasonably be expected to constitute a breach of its fiduciary duties under applicable Law, then the Company may at any time prior to the time
that the Requisite Stockholder Approval is obtained (but in no event after such time), furnish information with respect to the Company and the Bank to, or enter into discussions with, the Person
making such Acquisition Proposal and its Representatives;
provided
that (1) at least 24 hours prior to furnishing any such information to,
or entering into discussions with, such Person, Purchaser receives written notice from the Company of the identity of such Person and of the Company's intention to furnish information to, or enter
into discussions with, such Person, and the Company enters into with such Person a confidentiality agreement in a form that is no less favorable in all material respects to the Company than the
Confidentiality Agreement and (2) the Company concurrently furnishes all such information provided to such Person to Purchaser (to the extent such information has not been previously furnished
or made available by the Company to Purchaser and Purchaser's Representatives). Notwithstanding the foregoing, the Company shall not provide any commercially sensitive non-public information to any
competitor, except in a manner consistent with the Company's past practices in dealing with the disclosure of such information in the context of considering Acquisition Proposals prior to the date
hereof. The Company shall ensure that its Representatives are aware of the provisions of this
Section 7.05(a)
. The Company shall provide
Purchaser with an accurate and complete copy of any confidentiality agreement entered into pursuant to this S
ection 7.05(a)
within 24 hours of
the execution thereof.
(b) In
addition to the other obligations of the Company set forth in this
Section 7.05
, the Company shall as promptly
as practicable, and in any event no later than 24 hours after receipt thereof, advise Purchaser, orally and in writing, of any Acquisition Proposal, or any inquiry, proposal or offer that
expressly contemplates or could reasonably be expected to lead to an Acquisition Proposal, and shall, in any such notice to Purchaser, indicate the identity of the Person making such Acquisition
Proposal, inquiry, proposal or offer, the material terms and conditions of any Acquisition Proposal, proposal or offer (including any subsequent amendment or other modification to such terms and
conditions) or the nature of any inquiries or other contacts, and provide to Purchaser copies of any written materials received from or on behalf of such Person relating to such inquiry, proposal or
offer (including any subsequent amendment or other modification to such terms and conditions), and thereafter the Company shall promptly (and in any event within 24 hours) advise Purchaser of
any related material developments, discussions and negotiations on a reasonably current basis, including any subsequent amendment or other modification to such terms and conditions of such Acquisition
Proposal. The terms and conditions of the Confidentiality Agreement shall apply to any information provided pursuant to this
Section 7.05(b)
.
(c) Except
as expressly permitted by
Section 7.05(d)
,
Section 7.05(e)
or
Section 7.05(f)
, neither the
Company Board nor any committee thereof
shall (i) (1) withhold, fail to make or include in (or remove from) the Company Proxy Statement, withdraw, qualify or modify (or publicly propose or resolve to withhold, fail to make or include
in (or remove from) the Company Proxy Statement), in each case in a manner adverse to Purchaser, the Company Board Recommendation or (2) adopt, approve, recommend, submit to the Company's
stockholders or declare advisable (or resolve, determine or propose to adopt, approve, recommend, submit to the Company's stockholders or declare advisable) any Acquisition Proposal (any action
described in this clause (i) being referred to as a "
Company Adverse Recommendation Change
"), (ii) approve any transaction under, or any
Person becoming an "interested stockholder" under, Section 203 of the DGCL or (iii) adopt, approve, recommend, submit to Company's stockholders or declare advisable (or resolve,
determine or propose to adopt, approve, recommend, submit to the Company's stockholders or declare advisable), or allow the Company or the Bank to execute or enter into, any Contract, term sheet,
letter of intent, agreement in principle or other similar instrument constituting or related to, or that is intended to or could be reasonably likely to lead to, any Acquisition Proposal, or requiring
or reasonably likely to cause the Company to abandon, terminate, delay or fail to consummate, or that would otherwise prevent, materially delay or
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materially
impair the transactions contemplated hereby, other than a confidentiality agreement referred to in
Section 7.05(a)
entered into in
compliance with
Section 7.05(a)
.
(d) Notwithstanding
the foregoing provisions of this
Section 7.05
, at any time prior to the time that the Requisite
Stockholder Approval is obtained (but not thereafter), the Company Board may effect a Company Adverse Recommendation Change or terminate this Agreement to enter into a Specified Agreement, in each
case if, and only if, (i) the Company is not in material breach of this
Section 7.05
, (ii) the Company Board determines in good
faith, after consultation with the Company's outside legal counsel, that the failure to make the Company Adverse Recommendation Change or terminate this Agreement to enter into a Specified Agreement
would reasonably be expected to constitute a breach of its fiduciary duties under applicable Law, (iii) the Company has given Purchaser written notice of the Company Board's intention to make a
Company Adverse Recommendation Change or terminate this Agreement to enter into a Specified Agreement, including all information required to be provided to Purchaser under
Section 7.05(b)
, at least
five Business Days prior to making any such Company Adverse Recommendation Change or terminating this Agreement to
enter into a Specified Agreement (a "
Change of Recommendation Notice
"), (iv) if not based on an Intervening Event pursuant to
Section 7.05(e)
the
decision to make a Company Adverse Recommendation Change shall be in connection with an Acquisition Proposal or with the
Company's intent to terminate this Agreement to enter into a Specified Agreement in accordance with the terms of this Agreement, and the Company shall have complied with clauses (1) through
(4) as follows: (1) prior to giving effect to clauses (2) through (4), the Company Board shall have determined in good faith, after consultation with its outside legal counsel and
its financial advisor, that such Acquisition Proposal is a Superior Proposal, (2) the Company shall have provided to Purchaser in writing the material terms and conditions of such Acquisition
Proposal and copies of all material documents relating to such Acquisition Proposal in accordance with this
Section 7.05
, (3) the Company
shall have given Purchaser a five-Business Day period following Purchaser's receipt of the Change of Recommendation Notice to propose revisions to the terms of this Agreement or make other proposals
and shall have negotiated in good faith with Purchaser (and caused its Representatives to negotiate with Purchaser) with respect to such proposed revisions or other proposals, if any, so that the
Acquisition Proposal would no longer constitute a Superior Proposal and (4) after considering the results of negotiations with Purchaser and taking into account the proposals made by Purchaser,
if any, after consultation with its outside legal counsel and its financial advisor, the Company Board shall have determined in good faith that such Acquisition Proposal remains a Superior Proposal
and that the failure to make the Company Adverse Recommendation Change or terminate this Agreement to enter into a Specified Agreement would reasonably be expected to constitute a breach of its
fiduciary duties under applicable Law. For clarity, the provisions of this
Section 7.05(d)
shall also apply to any material amendment to any
Acquisition Proposal or any successive Acquisition Proposals, except that the five-Business Day notice period shall be replaced with a three-Business Day notice period. Neither the Company nor the
Company Board shall be permitted to approve, endorse or recommend any Acquisition Proposal, unless in each case, in connection therewith, the Company Board effects a Company Adverse Recommendation
Change in accordance with the terms of this Agreement.
(e) Notwithstanding
anything to the contrary contained in this Agreement, at any time prior to the time that the Requisite Stockholder Approval is obtained, the Company
Board may make a Company Adverse Recommendation Change based on an Intervening Event, if and only if: (i) the Company Board determines in good faith, after consultation with the Company's
outside legal counsel, that the failure to make the Company Adverse Recommendation Change would reasonably be expected to constitute a breach of its fiduciary duties under applicable Law;
(ii) Purchaser shall have received from the Company written notice thereof at least five Business Days prior to making any Company Adverse Recommendation Change, describing the Intervening
Event and the reasons for taking such action in reasonable detail, and copies of any correspondence and additional written materials sent or received that relate to such Intervening Event (as well as
written summaries of any oral
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communications
addressing such matters); (iii) during the five Business Day period provided in the foregoing clause (ii), the Company shall have given Purchaser a five-Business Day
period following Purchaser's receipt of the notice described in the foregoing clause (ii) to propose revisions to the terms of this Agreement or make other proposals and shall have negotiated
in good faith with Purchaser (and caused its Representatives to negotiate with Purchaser) with respect to such proposed revisions or other proposals, if any, that would obviate the need to make a
Company Adverse Recommendation Change; and (iv) after considering the results of negotiations with Purchaser and taking into account the proposals made by Purchaser, if any, after consultation
with its outside legal counsel, the Company Board shall have determined in good faith that the failure to make the Company Adverse Recommendation Change would reasonably be expected to constitute a
breach of its fiduciary duties under applicable Law.
(f) In
addition, nothing contained herein shall prevent the Company Board from complying with Rule 14d-9 or Rule 14e-2(a) under the Exchange Act or
Item 1012(a) of Regulation M-A under the Exchange Act with regard to an Acquisition Proposal so long as any action taken or statement made to so comply is consistent with this
Section 7.05
;
provided
that any such action taken or statement made that relates to an
Acquisition Proposal shall be deemed to be a Company Adverse Recommendation Change (except that a "stop, look and listen" disclosure in compliance with Rule 14d-9(f) of the Exchange Act or
similar communication shall not be deemed a Company Adverse Recommendation Change).
(g) To
the extent not already done, the Company shall, and shall cause the Bank and the Company\'s and the Bank's respective Representatives to, immediately cease and cause
to be terminated any activities, discussions or negotiations with any Person conducted heretofore with respect to an Acquisition Proposal, and promptly (but in no event later than 48 hours
following the execution of this Agreement) request and use reasonable best efforts to obtain the return from all such Persons, or cause the destruction, of all copies of confidential information
previously provided to such Persons by or on behalf of the Company, the Bank or their respective Representatives (and all analyses and other materials prepared by or on behalf of such Persons that
contain, reflect or analyze such confidential information).
Section 7.06.
Employee Benefits and Contracts
.
(a) For
a period of at least twelve months following the Effective Time, except as contemplated by this Agreement, Purchaser shall provide generally to officers and
employees (as a group) who are actively employed by the Company and the Bank on the Closing Date ("
Covered Employees
") while employed by the Surviving
Corporation or the Bank following the Closing Date with (1) annual base salaries or base wage rates no less than those in effect immediately before the Effective Time, (2) annual and
quarterly bonus opportunities no less than those in effect immediately prior to the Effective Time, (3) other employee benefits under Employee Benefit Plans, on terms and conditions which when
taken as a whole are substantially comparable to either (i) those currently, generally provided by Purchaser and its Subsidiaries to their similarly situated officers and employees or
(ii) those provided under the Company Benefit Plans, other than any equity compensation plans. Only for purposes of (1) eligibility to participate in and vesting under Purchaser's
Employee Benefit Plans, and (2) credit for years of service with the Company for vacation and sick leave accrual, and for no other purpose, the service of the Covered Employees prior to the
Effective Time shall be treated as service with Purchaser or a Subsidiary of Purchaser participating in such employee benefit plans, to the same extent that such service was recognized by the Company
or the Bank for purposes of a similar benefit plan;
provided
that such recognition of service shall not (i) operate to duplicate any benefits of
a Covered Employee with respect to the same period of service or (ii) apply for purposes of any plan, program or arrangement (A) under which similarly-situated employees of Purchaser or
any Subsidiary of Purchaser do not receive credit for prior service, (B) that is grandfathered or frozen, either with respect to level of benefits or participation, or (C) for purposes
of retiree medical benefits or level of
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benefits
under a defined benefit pension plan. Purchaser will use its reasonable best efforts to cause each employee (and employees' eligible dependents) who participated in the Company's medical
benefits on the closing date to be eligible to participate in Purchaser's medical benefits immediately following the Closing.
(b) If
requested by Purchaser in a writing delivered to the Company following the date hereof and at least 10 Business Days prior to the Closing Date, the Company and the
Bank shall take all necessary action (including the adoption of resolutions and plan amendments and the delivery of any required notices) to terminate, effective as of no later than the day before the
Closing Date, any Company Benefit Plan that is intended to constitute a tax-qualified defined contribution plan under Internal Revenue Code Section 401(k) (a "
401(k)
Plan
"). The Company shall provide Purchaser with a copy of the resolutions, plan amendments, notices and other documents prepared to effectuate the termination of the 401(k)
Plans in advance and give Purchaser a reasonable opportunity to comment on such documents (which comments shall be considered in good faith), and prior to the Closing Date, the Company shall provide
Purchaser with the final documentation evidencing that the 401(k) Plans have been terminated.
(c) The
provisions of this
Section 7.06
are solely for the benefit of the Parties to this Agreement, and no Covered
Employee, current or former employee or any other individual associated therewith shall be regarded for any purpose as a third party beneficiary of this Agreement, other than as provided in
Section 7.07
. The terms of this Agreement do not: (i) establish, amend, or modify any Company Benefit Plan or any "employee benefit plan"
as defined in Section 3(3) of ERISA, or any other benefit plan, program, agreement or arrangement maintained or sponsored by Purchaser, the Company or any of their respective Affiliates;
(ii) alter or limit the ability of Purchaser or any Subsidiary of Purchaser (including, after the Closing Date, the Company and the Bank) to amend, modify or terminate any Company Benefit Plan,
employment agreement or any other benefit or employment plan, program, agreement or arrangement after the Closing Date; or (iii) confer upon any current or former employee, officer, director or
consultant, any right to employment or continued employment or continued service with Purchaser or any Subsidiary of Purchaser (including, following the Closing Date, the Company and Purchaser), or
constitute or create an employment agreement with any employee.
(d) The
Company shall use its reasonable best efforts to cause each of the individuals set forth on
Exhibit D
hereto
to enter into a 2016 Retention Pool and Long Term Incentive Award Agreement with MidFirst promptly and in any event prior to the Closing, in the last form proposed by Purchaser prior to the date
hereof.
(e) No
more than two Business Days prior to the Closing, the Company shall update
Section 4.21(d)
of the Disclosure
Schedule so that it is current as of such date.
Section 7.07.
Director and Officer Indemnification and Insurance
.
(a) For
six years after the Effective Time, Purchaser shall indemnify and hold harmless and advance expenses to, each of the present and former officers and directors of the
Company and the Bank (each, an "
Indemnified Person
") in respect of acts or omissions occurring at or prior to the Effective Time to the fullest extent
permitted by the DGCL or any other Applicable Law or provided under the Company's certificate of incorporation and bylaws and the Bank's articles of association and bylaws and any Contracts providing
rights to indemnification or advancement of expenses of any Indemnified Person, in each case as in effect on the date hereof;
provided
that such
indemnification shall be subject to any limitation imposed from time to time under applicable Law;
provided further
that any Indemnified Person to whom
expenses are advanced provides an undertaking in a form satisfactory to Purchaser to repay such advances if it is ultimately determined that such Indemnified Person is not entitled to indemnification.
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(b) Purchaser
shall either (i) continue to maintain in effect for six years after the Effective Time the Company's and the Bank's directors' and officers' insurance
policies and fiduciary liability insurance policies (collectively, "
D&O Insurance
") in place as of the date hereof or (ii) purchase comparable
D&O Insurance for such six-year period, in each case with respect to any claim related to any period of time at or prior to the Effective Time with terms, conditions, retentions and limits of
liability that are at least as favorable as those contained in the D&O Insurance policies in effect as of the date hereof;
provided
that in no event
shall Purchaser be required to expend for such policies pursuant to this sentence an annual premium amount in excess of 200% of the amount per annum the Company or the Bank respectively paid in its
last full fiscal year, which amount is set forth on
Section 7.07(b)
of the Company Disclosure Schedule; and
provided
,
further
, that if the aggregate premiums of such insurance coverage exceed such amount,
Purchaser shall be obligated to obtain a policy with the greatest coverage available, with respect to matters occurring prior to the Effective Time, for a cost not exceeding such amount.
(c) If
Purchaser or any of its successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger, or (ii) transfers or conveys all or substantially all of its properties and assets to any Person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Purchaser shall assume the obligations set forth in this
Section 7.07
.
(d) The
rights of each Indemnified Person under this
Section 7.07
shall be in addition to any rights such Person may
have under the certificate of incorporation, articles of association or bylaws of the Company or the Bank, under the DGCL or any other applicable Law, or under any agreement of any Indemnified Person
with the Company or the Bank. These rights shall survive consummation of the Merger and are intended to benefit, and shall be enforceable by, each Indemnified Person. Notwithstanding anything to the
contrary set forth herein, the rights of indemnification and advancement of expenses of any Indemnified Person hereby in respect of any proceeding commenced within the six-year period set forth in
this
Section 7.07
shall continue until the final disposition of such proceeding.
(e) Notwithstanding
anything in this Agreement to the contrary, nothing in this
Section 7.07
shall require Purchaser,
the Company or the Bank (or any of their respective successors or assigns) to provide, obtain or maintain any directors' or officers' liability insurance policies or coverage, or any "tail" insurance
policies or coverage, in contravention of applicable Law or Order (including, for the avoidance of doubt, applicable federal banking Laws or Orders) or informal requirements and requests by any
regulatory body. It is understood and agreed that such certificates of incorporation, articles of association, bylaws and agreements or other documents, as applicable, may be amended following Closing
to comply with the foregoing.
Section 7.08.
Notification of Certain Matters.
Each of the Company and
Purchaser shall promptly notify the other of:
(a) any
notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this
Agreement;
(b) any
Litigation commenced or, to its Knowledge, threatened against, relating to or involving or otherwise affecting the Company and the Bank or Purchaser and any of its
Subsidiaries, as the case may be, (i) that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to any Section of this Agreement or
(ii) that relate to this Agreement or the consummation of the transactions contemplated hereby;
(c) any
inaccuracy in any material respect of any representation or warranty contained in this Agreement at any time during the term hereof;
provided
that no such notification shall affect or be deemed to
modify any representation or warranty of such Party set forth herein;
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(d) any
failure of that Party to comply in any material respect with or satisfy any covenant or agreement to be complied with or satisfied by it hereunder; and
(e) any
event, condition, fact or circumstance that has a materially adverse impact on the likelihood that all of the conditions set forth in
Article VIII
will be satisfied prior to the Outside Date;
provided
that the delivery of any notice pursuant to this
Section 7.08
shall not limit or
otherwise affect the remedies available hereunder to the Party receiving such notice and the failure to give such notice shall not separately constitute a failure of any condition
in
Article VIII
or a basis to terminate this Agreement unless the underlying fact, event or circumstance would independently result in such
failure or provide such basis. The terms and conditions of the Confidentiality Agreement shall apply to any information provided pursuant to this
Section 7.08
.
Section 7.09.
Financial Statements and Other Current Information.
(a) As
soon as reasonably practicable after they become available, but in no event more than 20 days after the end of each calendar month ending after the date
hereof, the Company will furnish to Purchaser: (i) unaudited consolidated financial statements (including balance sheets, statements of operations and stockholders' equity) of the Company or
the Bank (to the extent available) as of and for such month then ended (subject to normal quarter-end adjustments), (ii) to the extent available, internal management reports showing actual
financial performance against plan and previous period and (iii) to the extent permitted by applicable Law, any reports provided to the Company Board or any committee thereof relating to the
financial performance and risk management of the Company or the Bank.
Section 7.10.
Press Releases.
The initial press release concerning this Agreement and the
transactions contemplated hereby shall be a joint press release to be reasonably agreed upon by the
Company and Purchaser. Following such initial press release, Purchaser and the Company shall consult with each other before issuing any additional press release, making any other public statement or
scheduling any press conference, conference call or meeting with investors or analysts with respect to this Agreement or the transactions contemplated hereby and, except as may be required by
applicable Law or any listing agreement with or rule of any national securities exchange or association, shall not issue any such press release, make any such other public statement or schedule any
such press conference, conference call or meeting before such consultation;
provided
,
however
, that the
restrictions set forth in this
Section 7.10
shall not apply to any release or public statement made or proposed to be made by the Company in
compliance with
Section 7.04
or
Section 7.05
with respect to this Agreement, the Merger of
the transactions contemplated hereby (or by Purchaser in response thereto). Notwithstanding the foregoing, this Section 7.10 shall not apply to any press release or other public statement made
by the Company that is made in the ordinary course of business consistent with past practice and does not specifically relate to the signing of this Agreement or the transactions contemplated hereby.
Section 7.11.
Stockholder Litigation.
The Company shall give Purchaser the opportunity to
participate at its own expense in the defense or settlement of any stockholder litigation against the Company
or its directors relating to the transactions contemplated by this Agreement, and no such settlement shall be agreed to without Purchaser's prior written consent (such consent not to be unreasonably
withheld, conditioned or delayed).
Section 7.12.
Takeover Statutes.
The Company and the Company Board shall, to the extent
permitted by applicable Law, use its reasonable best efforts (a) to take all actions necessary to
ensure that no Takeover Provision is or becomes applicable to this Agreement, the Stockholder Voting Agreement or the transactions contemplated hereby or thereby, including the Merger, and
(b) if any Takeover Provision becomes applicable to this Agreement, the Stockholder Voting Agreement or the transactions contemplated hereby or thereby, to take all actions necessary to ensure
that the
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transactions
contemplated hereby or thereby may be consummated as promptly as practicable on the terms contemplated by this Agreement and the Stockholder Voting Agreement and otherwise to minimize the
effect of such Takeover Provision on Purchaser and Merger Sub, this Agreement, the Stockholder Voting Agreement and the transactions contemplated hereby or thereby.
Section 7.13.
Section 16 Matters.
Prior to the Effective Time, the Company shall take all
such steps as may be required to cause any dispositions of Shares (including derivative securities with
respect to such shares) resulting from the transactions contemplated by this Agreement by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with
respect to the Company to be exempt under Rule 16b-3 promulgated under the Exchange Act.
Section 7.14.
Stock Exchange Delisting; Securities Act Deregistration.
Prior to the Effective
Time, the Company shall cooperate with Purchaser and use its reasonable best efforts to take, or cause to be taken, all actions, and do or
cause to be done all things, reasonably necessary, proper or advisable on its part under applicable Law and rules and policies of Nasdaq to enable the delisting by the Surviving Corporation of the
Shares from Nasdaq and the deregistration of the Shares under the Exchange Act as promptly as practicable after the Effective Time, and in any event no more than ten days after the Closing Date.
Section 7.15.
Matters Requiring Attention.
The Company shall reasonably promptly use its
reasonable best efforts to resolve any unresolved "matters requiring attention" or "matters requiring immediate
attention" which have previously been communicated to the Company or the Bank by the Federal Reserve and the OCC or are communicated to the Company or the Bank following the date hereof.
Section 7.16.
Merger Sub.
Purchaser shall take all action necessary to cause Merger Sub to
perform its obligations under this Agreement and to consummate the Merger on the terms and
conditions set forth in this Agreement.
Section 7.17.
Company S-1.
Following the date hereof, the Company shall not, and shall cause its
Representatives not to, amend or update the Company S-1, issue any securities pursuant to
the Company S-1 or take any other action with respect to the Company S-1 other than a withdrawal of the Company S-1.
Section 7.18.
Further Assurances.
At and after the Effective Time, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of
the Company or Merger Sub, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of the Company or Merger Sub, any other actions and things to vest, perfect
or confirm of record or otherwise in the Surviving Corporation any and all right, title and interest in, to and under any of the rights or Assets of the Company acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger, the Bank Merger and the Subsequent Merger.
Section 7.19.
Change of Method.
Purchaser may at any time change the method of effecting the
Merger (including by omitting or altering the merger of the Company into Purchaser or the merger of
the Bank into MidFirst), and Company agrees to enter into such amendments to this Agreement as Purchaser may reasonably request in order to give effect to such restructuring;
provided
that no such
change or amendment shall (a) alter or change the amount or kind of the Per Share Merger Consideration provided for in this
Agreement or (b) be reasonably likely to cause (i) the Closing to be prevented or materially delayed beyond the Outside Date, (ii) the receipt of the Requisite Regulatory Consents
to be prevented or materially delayed beyond the Outside Date or (iii) be done in a manner inconsistent with the proviso contained in
Section 10.04(a)
.
Section 7.20.
Change in Accounting Method.
As promptly as practicable but in no event no more
than 30 days after the date hereof, the Company shall file with the IRS an IRS Form 3115,
Application
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for
Change in Accounting Method, requesting a change in how the Company accounts for bad debts for federal income Tax purposes from the reserve method to the specific charge-off method. Such change in
accounting method shall be effective for the Company's 2016 Tax year and shall request that the entire bad debt reserve be included in income for such Tax year pursuant to Section 7.03(3)(d) of
IRS Revenue Procedure 2015-13. The IRS Form 3115 required to be filed with the IRS pursuant to this
Section 7.20
shall be prepared by the
accounting firm set forth on
Section 7.20
of the Company Disclosure Schedule. The Company shall provide to Purchaser a copy of the prepared and
executed IRS Form 3115 at least five Business Days before its filing with the IRS.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
Section 8.01.
Conditions to Obligations of Each Party.
The obligations of the Company, Purchaser and
Merger Sub to consummate the Merger are subject to the satisfaction of the following conditions:
(a)
Requisite Stockholder Approval
. The Requisite Stockholder Approval shall have been obtained in accordance
with the DGCL.
(b)
Regulatory Approvals
. The Regulatory Consents required from the Federal Reserve and the OCC (the
"
Requisite Regulatory Consents
") shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof
shall have expired, without the imposition of a Burdensome Condition on Purchaser or any of its Affiliates or shareholders.
(c)
Legal Proceedings
. No Order issued by any court or agency of competent jurisdiction or other Law preventing
or making illegal the consummation of the Merger, the Subsequent Merger, the Bank Merger or any of the other transactions contemplated by this Agreement shall be in effect.
Section 8.02.
Conditions to Obligations of Purchaser.
The obligations of Purchaser and Merger
Sub to consummate the Merger are subject to the satisfaction of the following further conditions:
(a)
Representations and Warranties
. (i) The representations and warranties that are contained in
Section 4.01
(Organization, Good Standing and
Qualification) (other than the last sentence of Section 4.01(a) and the last sentence of
Section 4.01(b)),
Section 4.02(a)
(Authority of the Company, No Breach by Agreement),
Section 4.02(b)(i)(1
) (Authority of the Company, No
Breach by Agreement),
Section 4.32
(Opinion of Financial Advisor),
Section 4.33
(Anti-takeover Statutes) and
Section 4.34
(Finders' Fees) shall be true and correct in all respects as of the date of this Agreement and as of the Closing; (ii) the representations and warranties that are contained in
Section 4.03
(Capitalization) (except for the third sentence of Section 4.03(a)) shall be true and correct in all respects (except for
inaccuracies which are de minimis in amount) as of the date of this Agreement and as of the date of the Closing; (iii) the representations and warranties that are contained in
Section 4.02
(Authority of the Company, No Breach by Agreement) (other than
Section 4.02(a)
and
Section 4.02(b)(i)(1
)) shall be true and correct in all
material
respects as of the date of this Agreement and as of the Closing (except that if such representation or warranty is qualified by "Material Adverse Effect," "materiality," "materially," "in all material
respects" or other similar qualifications, such representation or warranty shall be true and correct in all respects as of the date of this Agreement and as of the Closing) and (iv) other than
those representations and warranties specified in clauses (i), (ii) or (iii) of this sentence, the representations and warranties of the Company contained in this Agreement shall
be true and correct as of the date hereof and as of the Closing except in the case of this clause (iv), where the failure to be so true and correct (without giving effect to any limitation as
to "materiality" or "Company Material Adverse Effect" set forth therein), individually or in the aggregate, has not had and could not reasonably be expected to have a Company Material Adverse Effect
(except, with respect to the foregoing clauses (i) through (iv), to the extent such representations and warranties are made as of another specified date, in which case such representations and
warranties shall be true and correct in the manner set forth in the foregoing clauses (i) through (iv) as applicable, as of such specified date).
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(b)
Performance of Agreements and Covenants
. The Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to the Effective Time.
(c)
Certificate
. The Company shall have delivered to Purchaser a certificate, dated as of the Closing Date and
signed on its behalf by the Chief Executive Officer, President or Chief Financial Officer of the Company, to the effect that the conditions set forth
Sections 8.02(a)
and
8.02(b)
have been satisfied.
(d)
Employment Agreements
. The Employment Agreements with both of the individuals set forth in section 1
of
Exhibit A
hereto (collectively, the "
Key Employees
") shall be in full force and effect and
each Key Employee shall (i) have remained actively employed by the Company through the Closing, (ii) not have repudiated his or her Employment Agreement, (iii) have affirmed in
writing to Purchaser immediately prior to the Closing that he has no present intention to terminate, and is not contemplating terminating, such employment prior to the term stated in the applicable
Employment Agreement, (iv) not be unable to perform in all material respects his or her obligations under the applicable Employment Agreement by reason of any fact or circumstance that, if such
fact or circumstance remained in existence, would constitute a "Disability" within the meaning of the Employment Agreement, and (iv) not have committed an act or omission that would permit his
or her termination for "cause" under the applicable Employment Agreement.
(e)
Company Material Adverse Effect
. There shall not have occurred a Company Material Adverse Effect.
Section 8.03.
Conditions to Obligations of the Company.
The obligations of the Company to
consummate the Merger are subject to the satisfaction of the following further conditions:
(a)
Representations and Warranties
. The representations and warranties set forth in
Article V
shall be true and correct in all respects as of
the date hereof and as of the Closing (except to the extent such representations and
warranties are made as of another specified date, in which case such representations and warranties shall be true and correct as of such specified date), except where the failure of such
representations and warranties to be true and correct (without giving effect to any limitation as to "materiality" set forth therein) would not reasonably be likely to, individually or in the
aggregate prevent, materially delay or materially impair the ability of Purchaser to consummate the transactions contemplated hereby.
(b)
Performance of Agreements and Covenants
. Purchaser and Merger Sub shall have performed in all material
respects all obligations required to be performed by them under this Agreement at or prior to the Effective Time.
(c)
Certificate
. Purchaser shall have delivered to the Company a certificate, dated as of the Closing Date and
signed on its behalf by the Chief Executive Officer, President or Chief Financial Officer of Purchaser, to the effect that the conditions set forth
Sections 8.03(a)
and
8.03
(b)
have been satisfied.
ARTICLE IX
TERMINATION
Section 9.01.
Termination.
This Agreement may be terminated and the Merger may be abandoned, at any
time prior to the Effective Time (whether before or after the adoption of this Agreement
by the stockholders of the Company (unless otherwise provided below)):
(a) by
the mutual written consent of the Company and Purchaser;
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(b) by
either the Company or Purchaser, if any Governmental Entity that must grant a Requisite Regulatory Consent has denied approval of the Merger and such denial has
become final and nonappealable or any Governmental Entity of competent jurisdiction shall have issued a final and nonappealable Order permanently enjoining or otherwise prohibiting or making illegal
the consummation of the transactions contemplated by this Agreement;
(c) by
either the Company or Purchaser, if the Merger shall not have been consummated on or before the first anniversary of the date of this Agreement (the
"
Outside Date
") unless the failure of the Closing to occur by such date shall be due to the failure of the Party seeking to terminate this Agreement to
perform or observe the covenants and agreements of such Party set forth in this Agreement;
(d) by
either the Company or Purchaser (
provided
that the terminating Party is not then in material breach of any
representation, warranty, covenant or other agreement contained herein), if there shall have been a breach of any of the covenants or agreements or any of the representations or warranties set forth
in this Agreement on the part of the Company, in the case of a termination by Purchaser, or on the part of Purchaser or Merger Sub, in the case of a termination by the Company, which breach, either
individually or in the aggregate with other breaches by such Party, would result in, if occurring or continuing on the Closing Date, the failure of any of the conditions set forth in
Section 8.02
or
8.03
, as the case may be, and which is not cured within the earlier of
(i) 30 days following written notice to the Party committing such breach and (ii) the Outside Date or by its nature or timing cannot be cured within such time period;
(e) by
either the Company or Purchaser, if the adoption of this Agreement by holders of Shares constituting the Requisite Stockholder Approval shall not have been obtained
at the Company Stockholders Meeting or at any adjournment or postponement of the Company Stockholders Meeting;
provided
that if the Company Stockholder
Meeting is adjourned by the Company pursuant to clause (i)(A) or clause (ii) of the first proviso of
Section 7.04(c)
to a date
satisfying the requirements of the applicable clause and the Company Stockholder Meeting is held on such date, the Company Stockholder Meeting with respect to which there shall be a termination right
as described in this
Section 9.01(e)
shall be the Company Stockholder Meeting giving effect to such adjournment; provided further that the
Company shall have no right to terminate pursuant to this
Section 9.01(e)
if the Company is in breach of
Section 7.04
;
(f) by
the Company, at any time prior to the time that the Requisite Stockholder Approval is obtained (and not thereafter), if (i) the Company is not in material
breach of any of the terms of
Section 7.05
, (ii) the Company Board shall have made a Company Adverse Recommendation Change in compliance
in all material respects with the terms of this Agreement, including
Section 7.05(d)
, in order to enter into a binding, written definitive
agreement providing for the consummation of a transaction constituting a Superior Proposal (a "
Specified Agreement
"), (iii) the Company shall
have paid the Termination Fee pursuant to
Section 9.03
in accordance with the terms, and at the time, specified therein and (iv) the
Company shall have entered into the Specified Agreement substantially concurrently with the termination of this Agreement pursuant to this
Section 9.01(f)
; or
(g) by
Purchaser if (i) a Company Adverse Recommendation Change shall have occurred, (ii) at any time after public announcement of an Acquisition Proposal or
an Acquisition Proposal otherwise becoming public, the Company Board, prior to the time that the Requisite Stockholder Approval is obtained (and not thereafter), shall have failed to reaffirm the
Company Board Recommendation prior to the earlier of (1) ten Business Days following receipt of any written request to do so from Purchaser and (2) the close of business on the Business
Day immediately preceding the Company Stockholder Meeting, (iii) the Company shall have materially breached its obligations under Section
7.04
or
7.05
or (iv) the Company or the Company Board (or any committee thereof) shall publicly announce its intention to do any of the foregoing.
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The Party desiring to terminate this Agreement pursuant to this
Section 9.01
(other than clause (a)
hereof) shall give written notice of such termination to the other Party in accordance with
Section 10.06
, specifying the provision or provisions
hereof pursuant to which such termination is effected.
Section 9.02.
Effect of Termination.
In the event of termination of this Agreement by either the
Company or Purchaser as provided in
Section 9.01
, this Agreement shall forthwith become void and have no effect, and none of the Company, Purchaser, any of their respective
Subsidiaries or any of the officers or directors of any of them shall have any liability of any nature whatsoever under this Agreement, or in connection with the transactions contemplated by this
Agreement, except that the Confidentiality Agreement and
Article I
, the last sentence of
Section 7.02
, the last sentence of
Section 7.05(b)
, the last sentence of
Section 7.08
, this
Section 9.02
,
Section 9.03
and
Article X
shall survive any termination of this Agreement, and
(ii) neither the Company nor Purchaser shall be relieved or released from any liabilities or damages arising out of its fraud or knowing and material breach of any provision of this Agreement.
Section 9.03.
Termination Fee.
(a) If
this Agreement is terminated by (i) Purchaser pursuant to
Section 9.01(g)
, (ii) the Company
pursuant to
Section 9.01(f)
or (iii) Purchaser or the Company pursuant to
Section 9.01(c)
or
Section 9.01(e)
in either case at any time at which Purchaser was
entitled to terminate this Agreement pursuant to
Section 9.01(g)
, then the Company shall pay to Purchaser in immediately available funds
$4,500,000 (the "
Termination Fee
"), in the case of a termination by Purchaser, within two Business Day after such termination and, in the case of a
termination by the Company, immediately before and as a condition to such termination.
(b) Except
if the Termination Fee is paid as provided in
Section 9.03(a)
, if this Agreement is terminated by
(i) Purchaser pursuant to
Section 9.01(d)
, (ii) Purchaser or the Company pursuant to
Section 9.01(e)
or (iii) Purchaser or the
Company pursuant to
Section 9.01(c)
at
any time at which Purchaser was entitled to terminate this Agreement pursuant to
Section 9.01(d)
or
Section 9.01(e)
, then the Company shall
promptly, and in no event later than two days after being notified of such amounts by Purchaser, pay to
Purchaser in immediately available funds an amount equal to all of the documented out-of-pocket expenses incurred by Purchaser or any of its Affiliates in connection with this Agreement and the
transactions contemplated by this Agreement up to a maximum amount of $1,000,000.
(c) Except
if the Termination Fee is paid as provided in
Section 9.03(a)
, if (i) this Agreement is terminated
by Purchaser or the Company pursuant to
Section 9.01(c)
or
Section 9.01(e)
, or by
Purchaser pursuant to
Section 9.01(d)
, (ii) after the date of this Agreement and prior to such termination, an Acquisition Proposal shall
have been publicly announced, otherwise become public or otherwise communicated to the Company Board or any Person shall have publicly announced an intention (whether or not conditional) to make an
Acquisition Proposal and (iii) within 12 months following the date of such termination, the Company shall have entered into a definitive agreement with respect to or recommended to its
stockholders an Acquisition Proposal or an Acquisition Proposal shall have been consummated (
provided
that for purposes of this
Section 9.03(b)
, each
reference to "15%" in the definition of Acquisition Proposal shall be deemed to be a reference to "50%"),
then the Company shall pay to Purchaser in immediately available funds, concurrently with the occurrence of the applicable event described in clause (iii) the Termination Fee (less the amount
of any expense reimbursement paid by the Company previously to Purchaser pursuant to
Section 9.03(b)
).
(d) The
Company acknowledges that the agreements contained in this
Section 9.03
are an integral part of the
transactions contemplated by this Agreement and that, without these agreements, Purchaser and Merger Sub would not enter into this Agreement. Accordingly, if the Company fails promptly to pay any
amount due to Purchaser pursuant to this
Section 9.03
, it shall also pay any costs and expenses
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incurred
by Purchaser or Merger Sub in connection with a legal action to enforce this Agreement, together with interest on the amount of any unpaid fee, cost or expense at a rate per annum equal to
the prime rate of interest reported from time to time in
The Wall Street Journal
, calculated on the basis of the actual number of days elapsed over
three hundred sixty from the date such fee, cost or expense was required to be paid to (but excluding) the payment date. Notwithstanding anything to the contrary in this Agreement, the Parties hereby
acknowledge that in the event that the Termination Fee becomes payable and is paid by the Company pursuant to this Section 9.03, the Termination Fee shall be Purchaser's and Merger Sub's sole
and exclusive remedy for monetary damages under this Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.01.
Nonsurvival of Representations, Warranties and Agreements.
None of the representations,
warranties, covenants or agreements set forth in this Agreement or in any instrument delivered shall survive the Effective Time
except for
Section 7.06
and
Section 7.07
and for those other covenants and agreements
contained in this Agreement that by their terms apply or are to be performed in whole or in part after the Effective Time.
Section 10.02.
Fees and Expenses.
Except as otherwise provided herein, all costs and expenses
incurred in connection with this Agreement shall be paid by the Party incurring such cost or expense.
Section 10.03.
No Third Party Beneficiaries.
Nothing in this Agreement expressed or implied, is
intended to confer upon any Person, other than the Parties or their respective successors, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement, other than as provided in
Section 7.07
, which is intended to benefit
each Indemnified Person.
Section 10.04.
Amendments and Waivers.
(a) Any
provision of this Agreement may be amended or waived prior to the Effective Time if, but only if, such amendment or waiver is in writing and is signed, in the case
of an amendment, by each Party to this Agreement or, in the case of a waiver, by each Party against whom the waiver is to be effective;
provided
that
after the Requisite Stockholder Approval has been obtained there shall be no amendment or waiver that would require the further approval of the stockholders of the Company under the DGCL without such
approval having first been obtained.
(b) No
failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by applicable Law.
Section 10.05.
Assignment.
Except as expressly contemplated hereby, neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any Party hereto
(whether by operation of Law or otherwise) without the prior written consent of the other Party. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the Parties and their respective successors and assigns.
Section 10.06.
Notices.
All notices or other communications which are required or permitted
hereunder shall be in writing and shall be deemed to have been given: (a) when
delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier, return receipt requested; (c) on the
date sent by facsimile or e-mail of a "pdf" document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent outside normal
business hours of the recipient; or (d) on the third Business Day after the date mailed, if certified or registered mail, return receipt requested, postage prepaid. Such communications must be
sent to all respective Parties at the following
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addresses
(or at such other addresses for a Party as shall be specified in a notice given in accordance with this
Section 10.06
):
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Purchaser and Merger Sub:
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Midland Financial Co.
501 NW Grand Boulevard
Oklahoma City, Oklahoma 73118
Attention: Greg Schaefer
Email: greg.schaefer@midfirst.com
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Copy to Counsel:
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Covington & Burling LLP
The New York Times Building
620 Eighth Avenue
New York, New York 10018
Attention: Scott Smith; J. D. Weinberg
Email: ssmith@cov.com; jweinberg@cov.com
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The Company:
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1st Century Bancshares, Inc.
1875 Century Park East, Suite 1400
Los Angeles, California
Attention: Jessica R. Graham
Email: jgraham@1cbank.com
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Copy to Counsel:
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Sullivan & Cromwell LLP
1888 Century Park East.
Los Angeles, California 90067
Attention: Patrick S. Brown; Rita-Anne O'Neill
Email: brownp@sullcrom.com; oneillr@sullcrom.com
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Section 10.07.
Governing Law; Jurisdiction; Waiver of Jury Trial.
(a) This
Agreement shall be governed by and construed in all respects in accordance with the laws of the State of Delaware without regard to the conflict of laws principles
thereof that would require the application of the Law of any other jurisdiction;
provided
, that the laws of the State of Oklahoma shall apply to the
extent mandatorily applicable with respect to the Subsequent Merger and the United States Code shall apply to the extent mandatorily applicable with respect to the Bank Merger.
(b) The
Parties agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or
the transactions contemplated hereby (whether brought by any Party or any of its Affiliates or against any Party or any of its Affiliates) shall be brought in the Delaware Chancery Court or, if such
court shall not have jurisdiction, any federal court located in the State of Delaware or other Delaware state court, and each of the Parties hereby irrevocably consents to the jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served on any Party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the
foregoing, each Party agrees that service of process on such Party as provided in
Section 10.06
shall be deemed effective service of process on
such Party. Each of the Parties agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by Law.
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(c) EACH
PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH
SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR OTHER
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT: (I) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE
FOREGOING WAIVER, (II) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 10.07
.
Section 10.08.
Specific Performance
(a).
The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were
otherwise breached. Accordingly, each of the Parties shall be entitled to specific performance of the terms hereof, including an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement (including the obligation to consummate the Merger), this being in addition to any other remedy to which such Party is entitled at law
or in equity. Each of the Parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any
law to post security as a prerequisite to obtaining equitable relief.
Section 10.09.
Counterparts; Signatures.
This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and
the same instrument. Executed signature pages to this Agreement may be delivered by facsimile transmission or by e-mail delivery of a "pdf" format data file and such signature pages will be deemed as
sufficient as if actual signature pages had been delivered. Until and unless each Party has received a counterpart hereof signed by each other Party hereto, this Agreement shall have no effect and no
Party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).
Section 10.10.
Entire Agreement.
This Agreement (including the Company Disclosure Schedule and
the Exhibits and Annexes hereto), the Confidentiality Agreement and the Stockholder Voting Agreement
(between Purchaser and the stockholders identified therein) constitute the entire agreement between the Parties with respect to the subject matter of this Agreement and supersede all prior agreements
and understandings, both oral and written, between the Parties with respect to the subject matter of this Agreement. EACH PARTY AGREES THAT, EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES
CONTAINED IN THIS AGREEMENT, NEITHER PURCHASER AND MERGER SUB NOR THE COMPANY NOR ANY OF THEIR REPRESENTATIVES MAKES OR HAS RELIED ON ANY OTHER REPRESENTATIONS, WARRANTIES, STATEMENTS, INFORMATION OR
INDUCEMENTS, AND EACH HEREBY DISCLAIMS RELIANCE ON ANY OTHER REPRESENTATIONS, WARRANTIES, STATEMENTS, INFORMATION OR INDUCEMENTS, EXPRESS OR IMPLIED, OR ON THE ACCURACY OR COMPLETENESS OF ANY
STATEMENTS OR OTHER INFORMATION, MADE BY, OR MADE AVAILABLE BY, ITSELF OR ANY OF ITS REPRESENTATIVES, WITH RESPECT TO, OR IN CONNECTION WITH, THE NEGOTIATION, EXECUTION OR DELIVERY OF THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE OTHER OR
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THE
OTHER'S REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING, AND WAIVES ANY CLAIMS OR CAUSES OF ACTION RELATING THERETO.
Section 10.11.
Severability.
Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.
Upon such a determination of unenforceability, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.
[signatures on following page]
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IN WITNESS WHEREOF
, each of the Parties has caused this Agreement to be executed on its behalf by its duly
authorized officers as of the day and year first above written.
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MIDLAND FINANCIAL CO.
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By:
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/s/ G. JEFFREY RECORDS, JR.
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Name:
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G. Jeffrey Records, Jr.
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Title:
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Chief Executive Officer
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MC 2016 CORP.
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By:
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/s/ GREG SCHAEFER
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Name:
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Greg Schaefer
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Title:
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Senior Vice President
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1ST CENTURY BANCSHARES, INC.
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By:
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/s/ JASON P. DINAPOLI
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Name:
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Jason P. DiNapoli
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Title:
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President and Chief Operating Officer
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[Signature
PageAgreement and Plan of Merger]
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ANNEX A
CERTAIN DEFINITIONS
"
Acquisition Proposal
" means, other than the transactions contemplated by this
Agreement, any third party offer, proposal or inquiry relating to, or any third party indication of interest in, (i) any acquisition or purchase, direct or indirect, of 15% or more of the
consolidated assets of the Company and the Bank or 15% or more of any class of equity or voting securities of the Company or the Bank, (ii) any tender offer or exchange offer that, if
consummated, would result in such third party beneficially owning 15% or more of any class of equity or voting securities of the Company or the Bank or (iii) a merger, consolidation, share
exchange, business combination, sale of substantially all the assets, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving the Company or the Bank.
"
Affiliate
" of a Person means any other Person directly, or indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person and "control" has the meaning provided under each of the Bank Holding Company Act of 1956, as amended, and the Exchange Act.
"
Assets
" of a Person means all of the assets, properties, deposits, businesses and rights of such Person of every kind, nature, character
and description, whether real, personal or mixed, tangible or intangible, accrued or contingent, or otherwise relating to or utilized in such Person's business, directly or indirectly, in whole or in
part, whether or not carried on the Books and Records of such Person, and whether or not owned in the name of such Person or any Affiliate of such Person and wherever located.
"
Books and Records
" of any Person means all files, ledgers and correspondence, all manuals, reports, texts, notes, memoranda, invoices,
receipts, accounts, accounting records and books, financial statements and financial working papers and all other records and documents of any nature or kind whatsoever, including those recorded,
stored, maintained, operated, held or otherwise wholly or partly dependent on discs, tapes and other means of storage, including any electronic, magnetic, mechanical, photographic or optical process,
whether computerized or not, and all software, passwords and other information and means of or for access thereto, belonging to such Person or relating to the business of such Person.
"
Business Day
" means any day other than a Saturday, a Sunday or a day on which all banking institutions in New York, New York or Los
Angeles, California are authorized or obligated by Law or executive order to close.
"
Call Reports
" mean the Bank's Consolidated Reports of Condition and Income (FFIEC Form 041) or any successor form of the Federal
Financial Institutions Examination Council.
"
Company Balance Sheet
" means the audited consolidated balance sheet of the Company as of December 31, 2015.
"
Company Balance Sheet Date
" means December 31, 2015.
"
Company Employee
" means any current employee of the Company or the Bank.
"
Company Material Adverse Effect
" means any fact, circumstance, event, change, effect, development or occurrence that, individually or in
the aggregate together with all other facts, circumstances, events, changes, effects, developments or occurrences, directly or indirectly, has had or would reasonably be
expected to result in a material adverse effect on the condition (financial or otherwise), results of operations, Assets, Liabilities or business of the Company and the Bank taken as a whole;
provided
that a "Company Material Adverse Effect" shall not be deemed to include effects to the extent resulting from (1) changes after the date
of this Agreement in GAAP or regulatory
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accounting
requirements, (2) changes after the date of this Agreement in Laws of general applicability to companies in the financial services industry, (3) changes after the date of this
Agreement in general economic or market conditions in the United States (including changes in interest rates or credit ratings or any suspension of trading in securities) or political conditions in
the United States affecting the financial services industry, (4) failure, in and of itself, to meet earnings projections or internal financial forecasts, but not including any underlying causes
thereof unless separately excluded hereunder, or changes in the trading price or trading volume of a Party's common stock or its credit rating, in and of itself, but not including any underlying
causes unless separately excluded hereunder, (5) the public announcement of the transactions contemplated by this Agreement, including any impact thereof on relationships, contractual or
otherwise, with customers, suppliers, lenders, partners or employees of the Company or the Bank (it being understood that this clause (5) shall not apply with respect to any representation or
warranty contained in this Agreement to the extent that the purpose of such representation or warranty is to address the consequences resulting from the execution and delivery or public announcement
of this Agreement) or (6) acts of war, sabotage or terrorism or hostilities or natural disasters involving the United States of America; except, with respect to clauses (1), (2),
(3) and (6) to the extent that the effects of such change disproportionately affect the Company and the Bank, taken as a whole, as compared to other companies in the industry in which
such Party and its Subsidiaries operate.
"
Confidentiality Agreement
" means the Confidentiality Agreement dated November 17, 2015, between Purchaser and the Company, by its
authorized representative Sandler O'Neill & Partners, LP.
"
Contract
" means, with respect to any Person, any legally binding contract, agreement, lease, sublease, license, commitment, sale or
purchase order, indenture, note, bond, loan, mortgage, deed of trust, instrument or other arrangement, whether written or oral, to which such Person is a party or by which such Person or such Person's
properties or assets are bound.
"
Data Room
" means the electronic data room maintained by Merrill DataSite under the project name "Shield VDR 2015."
"
Default
" means (i) any breach or violation of, default under, contravention of, or conflict with, any Contract, Law, Order, or
Permit, as applicable, (ii) any occurrence of any event that with the passage of time or the giving of notice or both would constitute a breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, as applicable, or (iii) any occurrence of any event that with or without the passage of time or the giving of notice
would give rise to a right of any Person to exercise any remedy or obtain any relief under, terminate or revoke, suspend, cancel, or modify or change the current terms of, or renegotiate, or to
accelerate the maturity or performance of, or to increase or impose any Liability under, any Contract, Law, Order, or Permit, as applicable.
"
Employee Benefit Plan
" means each pension, retirement, profit-sharing, deferred compensation, stock option, restricted stock, employee
stock ownership, share purchase, severance pay, employment, individual independent contractor, vacation, bonus, retention, change in control or other incentive plan, medical, vision, dental or other
health plan, any life insurance plan, flexible spending account, cafeteria plan, vacation, holiday, disability or any other employee benefit plan or fringe benefit plan, including any "employee
benefit plan," as that term is defined in Section 3(3) of ERISA, and any other plan, fund, policy, program, practice, custom understanding, Contract or arrangement providing compensation or
other benefits, whether or not intended to be (i) covered or qualified under the Internal Revenue Code, ERISA or any other applicable Law, (ii) written or oral, (iii) funded or
unfunded, (iv) actual or contingent or (v) arrived at through collective bargaining or otherwise.
"
ERISA
" means the Employee Retirement Income Security Act of 1974, as amended.
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"
ERISA Affiliate
" means any entity which together with the Company or the Bank would be treated as a single employer under Internal
Revenue Code Section 414.
"
Exchange Act
" means the Securities Exchange Act of 1934, as amended.
"
Excluded Shares
" means Shares owned by Purchaser, the Company (other than any shares held in connection with the Company's 401-K Plan) or
any direct or indirect wholly-owned Subsidiary of Purchaser or the Company, in each case not held in respect of a debt previously contracted.
"
GAAP
" means U.S. generally accepted accounting principles, consistently applied during the periods involved.
"
Governmental Entity
" means any supranational, national, state, municipal, local or foreign government, any court, tribunal, arbitrator,
administrative agency, board, commission or other governmental official, body, authority or instrumentality, in each case whether domestic or foreign, any stock exchange or similar self-regulatory
organization or any quasi-governmental or private body exercising any regulatory, Taxing or other governmental or quasi-governmental authority.
"
Indebtedness
" of any Person means (i) all indebtedness or other obligations of such Person for borrowed money, whether current,
short-term or long-term and whether secured or unsecured, including pre-payment penalties and obligations, (ii) all deposits or advances of any kind, including overdrafts, (iii) all
obligations of such Person evidenced by notes, bonds, debentures or similar instruments, (iv) all obligations of such Person upon which interest charges are customarily paid, other than trade
credit incurred in the ordinary course of business consistent with past practice, (v) all obligations of such Person under conditional sale or other title retention agreements relating to
property or assets purchased by such Person, (vi) all obligations of such Person issued or assumed as the deferred purchase price of property or services, (vii) all obligations of such
Person evidenced by any securitization or factoring agreements, (viii) all indebtedness of others secured by (or for which the holder of such indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (ix) all capital lease obligations of such
Person, (x) all liabilities of such Person in respect of interest rate, currency or commodity derivatives or hedging instruments, (xi) all obligations of such Person as an account party
in respect of letters of credit and bankers' acceptances and (xii) all guarantees or arrangements having the economic effect of a guarantee of such Person of any obligation of any other Person
of the type described in the foregoing clauses (i) through (xi).
"
Intellectual Property
" means any and all of the following in any jurisdiction throughout the world: (i) trademarks, service marks,
business names, trade dress, any other names, marks or indicators of origin together with all applications and registrations and the goodwill associated with any of the foregoing (collectively
"
Trademarks
") (ii) copyrighted works and copyrights, including all applications and registrations related to the foregoing; (iii) trade
secrets and confidential know-how; (iv) patents and patent applications; (v) internet domain name registrations; and (vi) data, databases and all other intellectual property and
related proprietary rights, interests and protections.
"
Internal Revenue Code
" means the Internal Revenue Code of 1986, as amended.
"
Intervening Event
" means any material fact, event, change, development or circumstance occurring or arising after the date hereof and
that was not known or reasonably foreseeable to the Company Board as of the date hereof, affecting the business, assets or operations of the Company or the Bank and not relating to any Acquisition
Proposal, which material fact, event, change, development or circumstance became known to the Company or the Company Board prior to the receipt of the Requisite Stockholder Approval, other than
(i) the receipt, existence of or terms of an Acquisition Proposal, (ii) any inquiry, indication of interest, proposal or offer that would reasonably be expected to lead to an Acquisition
Proposal, or the consequences thereof, (iii) developments or changes in the banking industry, (iv) any change in and of itself, in the market price or trading volume of the shares
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of
the Common Stock, but not including any underlying causes thereof or (v) the fact that, in and of itself, the Company exceeds any internal or published industry analyst projections or
forecasts or estimates of revenues or earnings, but not including any underlying causes thereof.
"
Knowledge
" as used with respect to a Person (including references to such Person being aware of a particular matter) means the actual
knowledge of each of the chairman, president, chief financial officer, chief credit officer, general counsel and the vice president in charge of human resources of such Person, and the knowledge of
any such Persons obtained or which would have been obtained from a reasonable investigation. "Knowledge" of the Company shall be deemed to include "Knowledge" of the Bank.
"
Law
" means any code, law (including common law), ordinance, regulation, reporting or licensing requirement, rule or statute applicable to
a Person or its Assets, Liabilities, or business, including those promulgated, interpreted or enforced by any Governmental Entity.
"
Liability
" means any direct or indirect, primary or secondary, liability, Indebtedness, obligation, penalty, cost or expense (including
costs of investigation, collection and defense), claim, deficiency, guaranty or endorsement of or by any Person (other than endorsements of notes, bills, checks, and drafts presented for collection or
deposit in the ordinary course of business) of any type, whether accrued, absolute or contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
"
Lien
" means any conditional sale agreement, default of title, easement, encroachment, encumbrance, hypothecation, lien, mortgage, pledge,
option, right of first refusal, restriction, security interest, title retention or other security arrangement, or any similar encumbrance whatsoever of, on, or with respect to any property or property
interest.
"
Litigation
" means any action or other alternative dispute resolution process, arbitration, cause of action, lawsuit, claim, complaint,
criminal prosecution, governmental or other investigation, administrative or other proceeding relating to or affecting a Party, its business, its records, its policies, its practices, its compliance
with Law, its actions, its Assets (including Contracts related to it), or the transactions contemplated by this Agreement, but shall not include regular, periodic examinations of depository
institutions and their Affiliates by any Governmental Entity.
"
Loan Documents
" means, with respect to any Loan, and all documentation in connection with the origination, processing, underwriting and
credit approval of such Loan, including the promissory note and collateral security instruments related thereto.
"
Loans
" means any loan, loan agreement, note, borrowing arrangement, other Indebtedness (or commitments therefor) originated or purchased
by the Bank, without regard to whether such loan is originated prior to, on or after the date of this Agreement and in each case with respect to which the Bank is a creditor.
"
Nasdaq
" means the NASDAQ Capital Market.
"
Order
" means any administrative decision or award, decree, injunction, judgment, order, consent decree, quasi-judicial decision or award,
ruling, or writ of any federal, state, local or foreign or other court, arbitrator, tribunal, administrative agency, or Governmental Entity.
"
Party
" means each of the Company, Merger Sub and Purchaser, and "Parties" means the Company, Merger Sub, and Purchaser.
"
Permit
" means any federal, state, local, or foreign governmental approval, authorization, certificate, filing, franchise, license, notice
or permit to which any Person is party or that is or may be binding upon or inure to the benefit of any Person or its securities, Assets, or business.
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"
Person
" means a natural person or any legal, commercial or governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company, limited liability partnership, trust or business association.
"
Personal Data
" means all data or information that is linked to any reasonably identifiable Person and any other data or information that
constitutes personal data or personal information under any applicable Privacy Laws, which information includes any financial, credit, transactional, medical or other information, names, addresses,
social security or insurance numbers, telephone numbers, facsimile numbers, email addresses or other contact information, or any device identifier.
"
Real Property
" means the real property together with all land, buildings, structures, facilities, improvements and fixtures erected
thereon and all appurtenances related thereto.
"
Regulatory Agreement
" means (i) any cease-and-desist or other similar order or enforcement action issued by, (ii) any
written agreement, consent agreement or memorandum of understanding with, (iii) commitment letter or similar written undertaking to, or (iv) any board resolutions adopted at the request
of, any Governmental Entity that restricts in any material respect the conduct of a Person's business or that in any material manner relates to such Person's capital adequacy, its liquidity and
funding policies and practices, its ability to pay dividends, its credit, risk management or compliance policies, its internal controls, its management or its operations or business, excluding any
"matters requiring attention" or "matters requiring immediate attention" but not excluding any orders, agreements, commitment letters or similar written undertakings or board resolutions arising out
of or responding to any "matters requiring attention" or "matters requiring immediate attention."
"
Representative
" means, with respect to any Person, any officer, director, employee, partner, manager, investment banker, financial or
other advisor, attorney, accountant, consultant, or other representative or agent of or engaged or retained by such Person.
"
SEC
" means the United States Securities and Exchange Commission.
"
Securities Act
" means the Securities Act of 1933, as amended.
"
Subsidiaries
" means all those corporations, associations, companies or other business entities of which the entity in question either
(i) owns or controls more than 50% of the outstanding equity securities or other ownership interests either directly or through an unbroken chain of entities as to each of which more than 50%
of the outstanding equity securities is owned directly or indirectly by its parent (
provided
that there shall not be included any such entity the equity
securities of which are owned or controlled in a fiduciary capacity), (ii) in the case of partnerships, serves as a general partner, (iii) in the case of a limited liability company,
serves as a managing member, (iv) otherwise has the ability to elect a majority of the directors, trustees or managing members thereof or has "control" over, as defined under the Bank Holding
Company Act of 1956, as amended.
"
Superior Proposal
" means a
bona fide
unsolicited written Acquisition Proposal made by any
Person after the date hereof and not in circumstances involving the Company's material breach of
Section 7.05
(i) that, if consummated,
would result in such Person acquiring, directly or indirectly, all or substantially all of the consolidated assets of the Company and the Bank, taken as a whole, or at least a majority of the
outstanding shares of the Common Stock or of the outstanding total voting power of the equity securities of the Company, (ii) is on terms that the Company Board determines in its good faith
judgment (after consultation with outside legal counsel and its financial advisor), taking into account all relevant financial, legal, regulatory and other factors relating to such Acquisition
Proposal, including any conditions to consummation, the anticipated timing of closing, the risk of non-consummation, the identity of the Person making the Acquisition Proposal and such Person's
ability to finance the transaction, any required regulatory approvals, authorizations or other third party consents, and any applicable break-up fees or expense reimbursement provisions,
(1) would, if consummated, result in a transaction that is more favorable to the holders of the Common Stock from a financial point of view
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than
the transactions contemplated hereby (including the terms of any proposal by Purchaser to modify the terms of the transactions contemplated hereby) and (2) is reasonably likely to be
consummated on its terms and (iii) for which financing, to the extent required, is then fully committed or, if not fully committed, for which the Company Board in its good faith judgment (after
consultation with outside legal counsel and its financial advisor) reasonably determines to be available.
"
Surviving Corporation
" means the Company as the surviving corporation resulting from the Merger.
"
Takeover Provisions
" means any "moratorium," "control share acquisition," "fair price," "interested stockholder," "affiliate
transaction," "business combination" or other antitakeover Laws, including Section 203 of the DGCL, or similar Law that might otherwise apply to this Agreement, the Stockholder Voting Agreement
or any of the transactions contemplated hereby or thereby, and any similarly restrictive provision in the Company's organizational documents.
"
Tax
" or "
Taxes
" means any federal, state, county, local, or foreign taxes, or, to the
extent in the nature of a tax, any charges, fees, levies, imposts, duties, or other assessments, including income, gross receipts, excise, employment, sales, use, transfer, recording license, payroll,
franchise, severance, documentary, stamp, occupation, windfall profits, environmental, commercial rent, capital stock, paid-up capital, profits, withholding, Social Security, single business and
unemployment, real property, personal property, registration, ad valorem, value added, alternative or add-on minimum, estimated, or other tax, imposed or required to be withheld by the United States
or any state, county, local or foreign government or subdivision or agency thereof, including any interest, penalties, and additions imposed thereon or with respect thereto.
"
Tax Return
" means any report, return, information return, or other document required to be supplied to a Governmental Entity in
connection with Taxes, including any return of an affiliated or combined or unitary group that includes a Party or its Subsidiaries.
"
third party
" means any Person, including as defined in Section 13(d) of the Exchange Act, other than Purchaser or any of its
Affiliates.
The
terms set forth below shall have the meanings ascribed thereto in the referenced pages:
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2010 Health Care Law
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27
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Agreement
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1
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401(k) Plan
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49
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Assets
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A-1
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Acquisition Proposal
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A-1
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Bank
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4
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Affiliate
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A-1
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Bank Intellectual Property
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21
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Bank Merger
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4
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FDIC
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17
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Bank Securities
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12
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Federal Reserve
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10
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Books and Records
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A-1
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Financial Statements
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14
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Burdensome Condition
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41
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Foreclosed Property
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20
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Business Day
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A-1
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GAAP
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A-3
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Call Reports
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A-1
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GLBA
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21
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Certificates
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6
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Governmental Entity
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A-4
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Change of Recommendation Notice
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47
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Hazardous Substances
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22
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Closing
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3
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Indebtedness
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A-4
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Closing Date
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3
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Indemnified Person
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50
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Common Stock
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5
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Intellectual Property
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A-4
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Company
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1
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Internal Revenue Code
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A-4
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Company 10K
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14
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Intervening Event
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A-4
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Company Adverse Recommendation
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IRS
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26
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Change
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46
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IT Assets
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21
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Company Balance Sheet
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A-1
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Key Employees
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55
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Company Balance Sheet Date
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2
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Knowledge
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A-5
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Company Benefit Plans
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25
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Labor Organization
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23
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Company Board
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1
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Law
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A-5
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Company Board Recommendation
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10
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Liability
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A-5
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Company Disclosure Schedule
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8
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Lien
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A-5
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Company Employee
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A-2
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Litigation
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A-5
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Company Material Adverse Effect
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A-2
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Loan Documents
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A-5
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Company Proxy Statement
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15
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Loans
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A-5
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Company Reports
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12
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Material Contract
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28
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Company Restricted Share
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8
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Merger
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1
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Company S-1
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12
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Merger Sub
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1
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Company Securities
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11
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MidFirst
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4
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Company Stockholder Meeting
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43
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Nasdaq
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A-5
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Confidentiality Agreement
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A-2
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OCC
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10
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Contract
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A-2
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Order
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A-5
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Covered Employees
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48
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Outside Date
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56
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D&O Insurance
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50
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Party
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A-6
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Data Room
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A-2
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Paying Agent
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A-6
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Default
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A-3
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Payroll Processor
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A-6
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DGCL
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3
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Per Share Merger Consideration
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5
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Dissenting Shares
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5
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Permit
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A-6
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Effective Time
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3
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Permitted Liens
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20
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Employee Benefit Plan
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A-3
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Person
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A-6
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Employment Agreements
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1
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Personal Data
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A-6
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Environmental Laws
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22
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Privacy Laws
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22
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ERISA
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A-3
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Purchaser
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1
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ERISA Affiliate
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A-3
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Real Property
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A-6
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Exchange Act
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A-3
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Regulatory Agreement
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A-6
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Exchange Fund
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6
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Regulatory Communication
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42
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Excluded Shares
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A-3
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Regulatory Consents
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10
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Related Party
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32
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Subsequent Merger
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4
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Representative
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A-6
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Subsidiaries
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A-7
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Requisite Regulatory Consents
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54
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Subsidiary Plan of Merger
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4
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Requisite Stockholder Approval
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9
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Superior Proposal
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A-7
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Sanctions
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19
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Surviving Corporation
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A-7
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Sarbanes-Oxley
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12
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Takeover Provisions
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A-7
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SEC
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A-6
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Tax
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A-7
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Securities Act
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A-6
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Tax Return
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A-8
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Share
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5
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Termination Fee
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58
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Shares
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5
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third party
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A-8
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Solvency and Equity Exception
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9
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Trademarks
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4
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Specified Agreement
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57
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Uncertificated Shares
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6
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Stockholder Voting Agreement
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1
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WARN Act
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24
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Table of Contents
Annex B
EXECUTION VERSION
STOCKHOLDER
VOTING AGREEMENT (this "
Agreement
") dated as of March 10, 2016, between Midland
Financial Co., an Oklahoma corporation ("
Purchaser
"), and the undersigned holders ("
Stockholders
"
and each a "Stockholder") of capital stock of 1st Century Bancshares, Inc., a Delaware Corporation (the "
Company
").
WHEREAS,
concurrently with the execution of this Agreement, Purchaser, MC 2016 Corp, a Delaware corporation and a wholly-owned subsidiary of Purchaser ("
Merger
Sub
"), and the Company, are entering into an Agreement and Plan of Merger dated as of the date hereof (as may be amended from time to time, the "
Merger
Agreement
"), pursuant to which, subject to the satisfaction of certain conditions, Merger Sub shall be merged with and into the Company (the
"
Merger
"), with the Company being the surviving entity in the Merger; and
WHEREAS,
in order to induce Purchaser to enter into the Merger Agreement with the Company, Purchaser has requested Stockholders, and Stockholders have agreed, to enter into this
Agreement with respect to all shares of Company Common Stock that each Stockholder beneficially owns including Company Restricted Shares (for the purposes of this Agreement, as defined in
Rule 13d-3 of the Securities Exchange Act of 1934, as amended) (the "
Shares
").
NOW,
THEREFORE, the parties hereto agree as follows:
ARTICLE I.
VOTING AGREEMENT
Section 1.01
Voting Agreement.
During the term of this Agreement, each Stockholder hereby agrees to
vote or exercise its right to consent with respect to all of the Shares that Stockholder is
entitled to vote at the time of any vote or action by written consent to adopt the Merger Agreement and any actions related thereto at any meeting of the stockholders of the Company, and at any
adjournment thereof, at which such Merger Agreement or such other actions are is submitted for the consideration and vote of the stockholders of the Company. Each Stockholder hereby agrees that it
will not vote any of the Shares in favor of, or consent to, and will vote against and not consent to, the approval of any (i) Acquisition Proposal, (ii) reorganization, recapitalization,
liquidation or winding-up of the Company or any other extraordinary transaction involving the Company other than the Merger, or (iii) corporate action the consummation of which would reasonably
be expected to prevent or materially delay the consummation, of the transactions contemplated by the Merger Agreement. If Stockholder is the beneficial owner, but not the record holder, of the Shares,
Stockholder agrees to take all actions necessary to cause the record holder and any nominees to vote all of the Shares in accordance with this Section 1.01.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
Each
Stockholder represents and warrants, as to itself, to Purchaser that:
Section 2.01
Authorization.
The execution, delivery and performance by Stockholder of this
Agreement and the consummation by Stockholder of the transactions contemplated hereby are within
the capacity of Stockholder. This Agreement constitutes a valid and binding Agreement of each Stockholder, enforceable against such Stockholder in accordance with its terms, subject only to the effect
of any applicable bankruptcy, insolvency, moratorium or similar law affecting creditors' rights generally and to rules of law governing specific performance, injunctive relief and other equitable
remedies. If Stockholder is married and the Shares and Company Restricted Shares set forth next to such Stockholder's name on Annex 1 constitute community property under applicable Law, this
B-1
Table of Contents
Agreement
has been duly authorized, executed and delivered by, and constitutes the valid and binding agreement of, such Stockholder's spouse, subject to the effect of any applicable bankruptcy,
insolvency, moratorium or similar law affecting creditors' rights generally and to rules of law governing specific performance, injunctive relief and other equitable remedies.
Section 2.02
Non-Contravention.
The execution, delivery and performance by Stockholder of this
Agreement and the consummation of the transactions contemplated hereby do not and will not
(i) violate any applicable Law, (ii) conflict with or violate or require any consent, approval, notice or other action by any Person under, constitute a default under, or give rise to
any right of termination, cancellation or acceleration or to a loss of any benefit to which Stockholder is entitled under any provision of any agreement or other instrument binding on Stockholder or
any of Stockholder's properties or assets, including, without limitation, the Shares or (iii) result in the imposition of any Lien on any asset of Stockholder.
Section 2.03
Ownership of Shares.
Stockholder (together with Stockholder's spouse if Stockholder
is married and the Shares constitute community property under applicable Law) is the beneficial
owner of the Shares, free and clear of any Lien (except, in the case of the Chief Executive Officer, for the Shares pledged as collateral for a loan as disclosed in the amended 13G filed by the Chief
Executive Officer prior to the date hereof) and any other limitation or restriction (including any restriction on the right to vote or dispose of the Shares except pursuant hereto). Except for this
Agreement, none of the Shares is subject to any voting agreement, voting trust or other agreement or arrangement, including any proxy, consent or power of attorney, with respect to the voting of the
Shares.
Section 2.04
Total Shares.
Except for the Shares set forth next to such Stockholder's name on
Annex 1 hereto, Stockholder does not beneficially own any (i) shares of capital
stock or other voting securities of or ownership interests in the Company, (ii) securities of the Company convertible into or exchangeable for shares of capital stock or other voting securities
of or ownership interests in the Company, or (iii) warrants, calls, options or other rights to acquire from the Company any capital stock or other voting securities or ownership interests in or
any securities convertible into or exchangeable or exercisable for capital stock or other voting securities or ownership interests in the Company.
Section 2.05
Absence of Litigation.
There is no action, suit, investigation or proceeding
pending against or, to the knowledge of Stockholder, threatened against or affecting Stockholder before or
by any Governmental Entity or arbitrator that could reasonably be expected to impair the ability of Stockholder to perform its obligations hereunder on a timely basis.
Section 2.06
Finder's Fees.
Other than Sandler O'Neill & Partners acting on behalf of
the Company, no investment banker, broker, finder or other intermediary is entitled to a fee or
commission from Purchaser, the Company or any of their respective Affiliates in respect of this Agreement or the Merger Agreement based upon any arrangement or agreement made by or on behalf of
Stockholder.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser
represents and warrants to each Stockholder:
Section 3.01
Corporation Authorization.
The execution, delivery and performance by Purchaser of
this Agreement and the consummation by Purchaser of the transactions contemplated hereby are within the
powers of Purchaser and have been duly authorized by all necessary action. This Agreement constitutes a valid and binding agreement of Purchaser, enforceable against Purchaser in accordance with its
terms, subject only to the effect of any applicable bankruptcy, insolvency, moratorium or similar law affecting creditors' rights generally and to rules of law governing specific performance,
injunctive relief and other equitable remedies.
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ARTICLE IV.
COVENANTS OF STOCKHOLDER
Each
Stockholder hereby covenants and agrees, as to itself, that:
Section 4.01
No Proxy, Transfer or Encumbrance with respect to Shares.
Stockholder shall not,
without the prior written consent of Purchaser, directly or indirectly, (i) grant any proxy, consent or power of attorney, or enter
into any voting trust or other agreement or arrangement, in each case with respect to the voting of any Shares (except as provided by this Agreement or pursuant to the consummation of the transactions
contemplated by the Merger Agreement or except in connection with any annual meeting where proxies are solicited relating to customary matters unrelated to the Merger) or (ii) sell, assign,
transfer, encumber or otherwise dispose of (except by will or under the laws of intestacy), or enter into any contract, option or other arrangement or understanding with respect to, the direct or
indirect sale, assignment, transfer, encumbrance or other disposition of any of the Shares during the term of this Agreement. This Section 4.01 shall not prohibit any transfer of Shares
(i) in the case of the Chief Executive Officer, pursuant to his pledge agreement relating to such Shares, (ii) to the Company in connection with any tax withholding upon the vesting of
any Company Restricted Shares or (iii) to any member of a Stockholder's immediate family, or to a trust for the benefit of the Stockholder or any member of the Stockholder's immediate family,
or upon the death of a Stockholder; provided, that, a transfer under the preceding clause (iii) shall be permitted only if, as a precondition to such transfer, the transferee agrees in writing,
reasonably satisfactory in form and substance to Purchaser, to be bound by the terms of this Agreement. Except as permitted by the preceding sentence, Stockholder shall not seek or solicit any such
acquisition or sale, assignment, transfer, encumbrance or other disposition or any such contract, option or other arrangement or understanding.
Section 4.02
Other Offers.
No Stockholder shall, directly or indirectly, (i) solicit,
initiate, propose or knowingly encourage (including by way of furnishing non-public information)
any inquiries or the submission of any proposal that constitutes or could reasonably be expected to lead to, an Acquisition Proposal or otherwise knowingly facilitate any effort or attempt to make any
Acquisition Proposal, or (ii) enter into or participate in any discussions or negotiations with, furnish any non-public information relating to the Company or the Bank or afford access to the
business, properties, assets, books or records of the Company or the Bank to, otherwise cooperate in any way with respect to any Acquisition Proposal, or knowingly assist, participate in, facilitate
or encourage any effort by any third party to make an Acquisition Proposal. Stockholder will notify Purchaser as promptly as practicable (and in no event more than 24 hours) after receipt by
Stockholder of an Acquisition Proposal, any indication that expressly contemplates or could reasonably be expected to lead to an Acquisition Proposal.
Section 4.03
Disclosure of Information Regarding Stockholder.
Stockholder hereby (i)
consents to and authorizes the publication and disclosure by Purchaser of Stockholder's identity and holding of Shares, and the
nature of Stockholder's commitments, arrangements and understandings under this Agreement, and any other information that Purchaser determines to be necessary in any document to be filed with the SEC
in connection with the Merger or any of the other transactions contemplated by the Merger Agreement and (ii) agrees to notify Purchaser as promptly as practicable of any inaccuracies or
omissions with respect to any information supplied by Stockholder specifically for use or incorporation by reference in any such document.
Section 4.04
Additional Shares.
In the event that Stockholder acquires record or beneficial
ownership of, or the power to vote or direct the voting of, any additional voting interest with
respect to the Company, Stockholder shall notify Purchaser as promptly as practicable (and in any event within 24 hours) after the applicable occurrence of such acquisition. Without further
action of Stockholder, Purchaser may elect to make such voting interests subject to the provisions of this Agreement by notifying Stockholder, and the number of Shares set forth next to such
Stockholder's name on Annex 1 hereto will be deemed amended accordingly.
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Section 4.05
Waiver of Appraisal and Dissenters' Rights and Actions.
Stockholder hereby
(a) waives and agrees not to exercise any rights (including under Section 262 of the DGCL) to demand appraisal of any Shares or
rights to dissent from the Merger which may arise with respect to the Merger and (b) agrees (i) not to commence or participate in, and (ii) to take all actions necessary to opt
out of any class in any class action with respect to, any claim, derivative or otherwise, against Purchaser, Merger Subsidiary, the Company or any of their respective Affiliates relating to the
negotiation, execution or delivery of this Agreement or the Merger Agreement or the consummation of the Merger, including any claim (A) challenging the validity of, or seeking to enjoin the
operation of, any provision of this Agreement or (B) alleging a breach of any fiduciary duty of the Company Board in connection with the Merger Agreement or the transactions contemplated
thereby.
Section 4.06
Directors and Officers.
Notwithstanding any provision of this Agreement to the
contrary, nothing in this Agreement shall limit or restrict Stockholder in his capacity as a director or
officer of the Company from acting in such capacity or voting in such person's sole discretion on any matter (it being understood that this Agreement shall apply to Stockholder solely in Stockholder's
capacity as a stockholder of the Company).
ARTICLE V.
MISCELLANEOUS
Section 5.01
Other Definitional and Interpretative Provisions.
The obligations of each Stockholder are
several and not joint. The words "hereof," "herein" and "hereunder" and words of like import used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or
interpretation hereof. References to Articles and Sections are to Articles and Sections of this Agreement unless otherwise specified. Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation,"
whether or not they are in fact followed by those words or words of like import. "Writing," "written" and comparable terms refer to printing, typing and other means of reproducing words (including
electronic media) in a visible form. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms
hereof and thereof. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or
through and including, respectively.
Section 5.02
Further Assurances.
Purchaser and each Stockholder will each execute and deliver,
or cause to be executed and delivered, all further documents and instruments as the other party may
reasonably request and use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable Law to
consummate and make effective the transactions contemplated by this Agreement.
Section 5.03
Amendments; Termination.
(a) To
the extent permitted by Law, any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the
case of an amendment, by each party to this Agreement or in the case of a waiver, by the party against whom the waiver is to be effective. No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by applicable Law.
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(b) If
Section 1.01
of this Agreement is in conflict with applicable banking Law, the number of Shares subject to
Section 1.01
shall automatically be
reduced to the minimum extent necessary to avoid such conflict. Such reduction shall be made pro rata among
the Stockholders based on the relative share of Shares beneficially owned by them.
(c) This
Agreement shall terminate upon the earliest to occur of (i) the Effective Time or (ii) the termination of the Merger Agreement in accordance with its
terms;
provided
,
however
, that the provisions of this
Section 5.03
and
Sections 5.01
,
5.05
,
5.07
,
5.08
,
5.09
,
5.10
,
5.14
,
5.15
, and
5.16
shall survive any termination of this Agreement.
(d) Nothing
in this
Section 5.03
and no termination of this Agreement shall relieve any party hereto from any
liability or damages incurred or suffered by the other party to the extent such liabilities or damages were the result of fraud or the material breach by a party of any of its representations,
warranties, covenants or other agreements set forth in this Agreement.
Section 5.04
No Ownership Interest.
Nothing contained in this Agreement shall be deemed to vest
in Purchaser any direct or indirect ownership or incidence of ownership of or with respect to any
Shares. All rights, ownership and economic benefits of and relating to the Shares shall remain vested in and belong to Stockholder, and Purchaser shall have no authority to direct Stockholder in the
voting or disposition of any of the Shares, except as otherwise provided herein.
Section 5.05
Expenses.
All costs and expenses incurred in connection with this Agreement shall
be paid by the party incurring such cost or expense.
Section 5.06
Successors and Assigns.
The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and assigns;
provided
that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other
parties hereto.
Section 5.07
Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to the conflict of laws principles thereof
that would require the application of the Law of any other jurisdiction.
Section 5.08
Jurisdiction.
The parties hereto agree that any suit, action or proceeding seeking
to enforce any provision of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated hereby (whether brought by any party or any of its Affiliates or against any party or any of its Affiliates) shall be brought in the Delaware Chancery
Court or, if such court shall not have jurisdiction, any federal court located in the State of Delaware or other Delaware state court, and each of the parties hereby irrevocably consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection
that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without
limiting the foregoing, each party agrees that service of process on such party as provided in
Section 5.15
shall be deemed effective service of
process on such party. Each of the parties agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in
any other manner provided by Law.
Section 5.09
WAIVER OF JURY TRIAL.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
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Section 5.10
Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which together shall constitute one and
the same instrument. Executed signature pages to this Agreement may be delivered by facsimile transmission or by e-mail delivery of a "pdf" format data file and such signature pages will be deemed as
sufficient as if actual signature pages had been delivered.
Section 5.11
Severability.
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. If
any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.
Section 5.12
Specific Performance.
The parties hereto agree that irreparable damage would occur
if any provision of this Agreement were not performed in accordance with the terms hereof and that
the non-breaching party shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms hereof, in addition to any other
remedy to which they are entitled at law or in equity.
Section 5.13
Entire Agreement.
Except as otherwise expressly provided herein, this Agreement
(including the documents and instruments referred to herein) constitutes the entire agreement
between the parties hereto with respect to the transactions contemplated hereunder and supersedes all prior arrangements or understandings with respect thereto, written or oral.
Section 5.14
Notices.
All notices or other communications which are required or permitted
hereunder shall be in writing and shall be deemed to have been given: (a) when
delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier, return receipt requested; (c) on the
date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent outside normal
business hours of the recipient; or (d) on the third Business Day after the date mailed, if certified or registered mail, return receipt requested, postage prepaid. Such communications must be
sent to all respective parties at the following addresses (or at such other addresses for a Party as shall be specified in a notice given in accordance with this
Section 5.15
):
(a) if
to Purchaser, to:
Midland
Financial Co.
501 NW Grand Boulevard
Oklahoma City, Oklahoma 73118
Attention: Greg Schaefer
Email: greg.schaefer@midfirst.com
with
a copy to:
Covington &
Burling LLP
The New York Times Building
620 Eighth Avenue
New York, New York 10018
Attention: Scott Smith; J. D. Weinberg
Email: ssmith@cov.com; jweinberg@cov.com
(b) if
to Stockholder, to the addresses set forth on the signature pages hereto.
Section 5.15
Capitalized Terms.
Capitalized terms used but not defined herein shall have the
respective meanings set forth in the Merger Agreement.
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Section 5.16
Parties Advised by Counsel.
This Agreement has been negotiated between unrelated
parties who are sophisticated and knowledgeable in the matters contained in this Agreement and who have acted
in their own self interest. In addition, each party has had the opportunity to seek advice of legal counsel. This Agreement was prepared jointly by the parties and no rules that it be construed
against the drafter shall have any application in its construction or interpretation. In the event that an ambiguity or a 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 provision of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.
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MIDLAND FINANCIAL CO.
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By:
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/s/ GREGORY SCHAEFER
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Name:
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Gregory Schaefer
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Title:
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Senior Vice President
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STOCKHOLDER
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By:
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/s/ WILLIAM W. BRIEN
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Name:
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William W. Brien, M.D.
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SPOUSE
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By:
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/s/ CONNIE BRIEN
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Name:
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Connie Brien
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STOCKHOLDER
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By:
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/s/ ALAN D. LEVY
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Name:
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Alan D. Levy
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SPOUSE
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By:
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/s/ ABBY J. LEVY
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Name:
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Abby J. Levy
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STOCKHOLDER
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By:
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/s/ LEWIS N. WOLFF
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Name:
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Lewis N. Wolf
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SPOUSE
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By:
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/s/ JEAN A. WOLFF
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Name:
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Jean A. Wolff
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STOCKHOLDER
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By:
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/s/ ERIC M. GEORGE
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Name:
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Eric M. George
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STOCKHOLDER
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By:
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/s/ ROBERT A. MOORE
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Name:
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Robert A. Moore
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STOCKHOLDER
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By:
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/s/ BARRY D. PRESSMAN
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Name:
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Barry D. Pressman
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SPOUSE
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By:
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/s/ SANDRA PRESSMAN
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Name:
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Sandra Pressman
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STOCKHOLDER
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By:
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/s/ ALAN I. ROTHENBERG
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Name:
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Alan I. Rothenberg
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SPOUSE
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By:
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/s/ GEORGINA ROTHENBERG
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Name:
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Georgina Rothenberg
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STOCKHOLDER
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By:
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/s/ BRADLEY S. SATENBERG
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Name:
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Bradley S. Satenberg
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SPOUSE
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By:
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/s/ KAREN SATENBERG
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Name:
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Karen Satenberg
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STOCKHOLDER
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By:
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/s/ DAVE BROOKS
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Name:
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Dave Brooks
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SPOUSE
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By:
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/s/ MARY ANN BROOKS
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Name:
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Mary Ann Brooks
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STOCKHOLDER
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By:
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/s/ JASON P. DINAPOLI
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Name:
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Jason P. DiNapoli
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SPOUSE
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By:
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/s/ DEIRDRA DINAPOLI
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Name:
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Deirdra DiNapoli
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STOCKHOLDER
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By:
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/s/ STANLEY R. ZAX
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Name:
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Stanley R. Zax
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SPOUSE
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By:
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/s/ BARBARA ZAX
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Name:
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Barbara Zax
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STOCKHOLDER
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By:
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/s/ NADINE I. WATT
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Name:
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Nadine I. Watt
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SPOUSE
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By:
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/s/ ANDREW JAMESON
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Name:
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Andrew Jameson
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ANNEX 1
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Stockholder
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Class of Capital Stock
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Shares Owned
(excluding Company
Restricted Shares)
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Shares Subject
to Company
Restricted Shares
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William W. Brien, M.D.
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Common Stock, par value $0.01 per share
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7,828
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2,000
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Dave Brooks
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Common Stock, par value $0.01 per share
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285,495
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2,000
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Jason P. DiNapoli
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Common Stock, par value $0.01 per share
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241,756
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142,500
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Eric M. George
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Common Stock, par value $0.01 per share
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28,353
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2,000
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Alan D. Levy
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Common Stock, par value $0.01 per share
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81,711
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2,000
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Robert A. Moore
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Common Stock, par value $0.01 per share
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48,997
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2,000
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Barry D. Pressman
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Common Stock, par value $0.01 per share
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125,728
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2,000
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Alan I. Rothenberg
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Common Stock, par value $0.01 per share
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743,139
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142,500
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Bradley S. Satenberg
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Common Stock, par value $0.01 per share
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38,734
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63,250
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Nadine I. Watt
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Common Stock, par value $0.01 per share
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35,269
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2,000
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Lewis N. Wolff
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Common Stock, par value $0.01 per share
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183,119
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2,000
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Stanley R. Zax
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Common Stock, par value $0.01 per share
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36,391
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2,000
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Table of Contents
Annex C
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
§ 262 Appraisal rights
(a) Any
stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with
respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to § 228 of this title shall be entitled to an appraisal by the Court of Chancery of
the fair value of the stockholder's shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word "stockholder" means a
holder of record of stock in a corporation; the words "stock" and "share" mean and include what is ordinarily meant by those words; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in 1 or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal
rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to § 251(g) of this title and, subject to paragraph (b)(3) of this section, § 251(h) of
this title), § 252, § 254, § 255, § 256, § 257, § 258, § 263 or
§ 264 of this title:
(1) Provided,
however, that, except as expressly provided in § 363(b) of this title, no appraisal rights under this section shall be available for the
shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of the meeting of
stockholders to act upon the agreement of merger or consolidation, were either: (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders; and
further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in § 251(f) of this title.
(2) Notwithstanding
paragraph (b)(1) of this section, appraisal rights under this section shall be available for the shares of any class or series of stock of a
constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to §§ 251, 252, 254, 255, 256, 257, 258, 263
and 264 of this title to accept for such stock anything except:
a. Shares
of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof;
b. Shares
of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository
receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or held of record by more than 2,000 holders;
c. Cash
in lieu of fractional shares or fractional depository receipts described in the foregoing paragraphs (b)(2)a. and b. of this section; or
d. Any
combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing
paragraphs (b)(2)a., b. and c. of this section.
(3) In
the event all of the stock of a subsidiary Delaware corporation party to a merger effected under § 251(h), § 253 or
§ 267 of this title is not owned by the parent immediately prior
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the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation.
(4) In
the event of an amendment to a corporation's certificate of incorporation contemplated by § 363(a) of this title, appraisal rights shall be
available as contemplated by § 363(b) of this title, and the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall
apply as nearly as practicable, with the word "amendment" substituted for the words "merger or consolidation," and the word "corporation" substituted for the words "constituent corporation" and/or
"surviving or resulting corporation."
(c) Any
corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its
stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the
assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this
section, shall apply as nearly as is practicable.
(d) Appraisal
rights shall be perfected as follows:
(1) If
a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for notice of such meeting (or such members who received notice in
accordance with § 255(c) of this title) with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) of this section that
appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section and, if 1 of the constituent corporations is a
nonstock corporation, a copy of § 114 of this title. Each stockholder electing to demand the appraisal of such stockholder's shares shall deliver to the corporation, before the
taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity
of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder's shares. A proxy or vote against the merger or consolidation shall not constitute such a
demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective; or
(2) If
the merger or consolidation was approved pursuant to § 228, § 251(h), § 253, or § 267 of
this title, then either a constituent corporation before the effective date of the merger or consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each
of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section and, if 1 of the constituent corporations is a
nonstock corporation, a copy of § 114 of this title. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice or, in the case of a
merger approved pursuant to § 251(h) of this title, within the later of the consummation of the tender or exchange offer contemplated by § 251(h) of this title
and 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holder's shares. Such
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demand
will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the
merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that
if such second notice is sent more than 20 days following the sending of the first notice or, in the case of a merger approved pursuant to § 251(h) of this title, later than
the later of the consummation of the tender or exchange offer contemplated by § 251(h) of this title and 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder's shares in accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date.
If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given.
(e) Within
120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) of this section hereof and who is otherwise entitled to appraisal rights, may commence an appraisal proceeding by filing a petition in the Court of Chancery
demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation,
any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party shall have the right to withdraw such stockholder's demand for appraisal and to accept the
terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) of this section hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a
statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholder's written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) of this section hereof, whichever is later.
Notwithstanding subsection (a) of this section, a person who is the beneficial owner of shares of such stock held either in a voting trust or by a nominee on behalf of such person may, in such
person's own name, file a petition or request from the corporation the statement described in this subsection.
(f) Upon
the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within
20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have
demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed
for the hearing of such petition by registered or certified mail to
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the
surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week
before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation.
(g) At
the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The
Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder.
(h) After
the Court determines the stockholders entitled to an appraisal, the appraisal proceeding shall be conducted in accordance with the rules of the Court of Chancery,
including any rules specifically governing appraisal proceedings. Through such proceeding the Court shall determine the fair value of the shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court
shall take into account all relevant factors. Unless the Court in its discretion determines otherwise for good cause shown, interest from the effective date of the merger through the date of payment
of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the
effective date of the merger and the date of payment of the judgment. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal
proceeding, the Court may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholder's certificates of stock to the Register in Chancery,
if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this section.
(i) The
Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders
entitled thereto. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the
surrender to the corporation of the certificates representing such stock. The Court's decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any state.
(j) The
costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a
stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal.
(k) From
and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section
shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record
at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e)
of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder's demand for
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an
appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section
or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of
Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just; provided, however that this provision
shall not affect the right of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder's demand for appraisal and to accept
the terms offered upon the merger or consolidation within 60 days after the effective date of the merger or consolidation, as set forth in subsection (e) of this section.
(l) The
shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or
consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation.
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Annex D
March 10,
2016
Board
of Directors
1
st
Century Bancshares, Inc.
1875 Century Park East, Suite 1400
Los Angeles, CA 90067
Ladies
and Gentlemen:
1
st
Century
Bancshares, Inc. ("Company"), Midland Financial Co. ("Purchaser") and MC 2016 Corp., a wholly-owned subsidiary of Purchaser
("Merger Sub"), are proposing to enter into an Agreement and Plan of Merger (the "Agreement") pursuant to which Merger Sub will merge with and into Company (the "Merger"), with Company surviving the
Merger, and immediately following the Effective Time, Company will be merged with and into Purchaser (the "Subsequent Merger"), with Purchaser surviving the Subsequent Merger. Pursuant to the terms of
the Agreement, upon the Effective Time of the Merger, each share of Company common stock, $0.01 par value per share ("Company Common Stock"), except for certain shares of Company Common Stock as
specified in the Agreement, shall be converted into the right to receive, without interest, $11.22 in cash (the "Per Share Merger Consideration"). Capitalized terms used herein without definition
shall have the meanings assigned to them in the Agreement. The terms and conditions of the Merger are more fully set forth in the Agreement. You have requested our opinion as to the fairness, from a
financial point of view, of the Per Share Merger Consideration to the holders of Company Common Stock.
Sandler
O'Neill & Partners, L.P. ("Sandler O'Neill", "we" or "our"), as part of its investment banking business, is regularly engaged in the valuation of financial
institutions and their securities in connection with mergers and acquisitions and other corporate transactions. In connection with this opinion, we have reviewed and considered, among other things:
(i) a draft of the Agreement, dated March 10, 2016; (ii) certain publicly available financial statements and other historical financial information of Company that we deemed
relevant; (iii) certain publicly available financial statements and other historical financial information of Purchaser and Purchaser's wholly-owned subsidiary, MidFirst Bank, that we deemed
relevant; (iv) internal financial projections for Company for the years ending December 31, 2016 through December 31, 2019 as well as an estimated asset growth rate for the year
ending December 31, 2020, as provided by the senior management of Company; (v) the pro forma financial impact of the Merger on Purchaser's capital ratios; (vi) a comparison of
certain financial information for Company with similar institutions for which publicly available information is available; (vii) the financial terms of certain recent business combinations in
the commercial banking industry (on a regional and nationwide basis), to the extent publicly available; (viii) the current market environment generally and the banking environment in
particular; and (ix) such other information, financial studies, analyses and investigations and financial, economic and market criteria as we considered relevant. We also discussed with certain
members of senior management of Company the business, financial condition, results of operations and prospects of Company and held similar discussions with certain members of senior management of
Purchaser regarding the business, financial condition, results of operations and prospects of Purchaser.
In
performing our review, we have relied upon the accuracy and completeness of all of the financial and other information that was available to and reviewed by us from public sources,
that was provided to us by Company or Purchaser or their respective representatives or that was otherwise reviewed by us and we have assumed such accuracy and completeness for purposes of rendering
this opinion without any independent verification or investigation. We have relied, at the direction of Company, without independent verification or investigation, on the assessments of the management
of Company as to its
existing and future relationships with key employees and partners, clients, products and services and we have assumed, with your consent, that there will be no developments with respect
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to
any such matters that would affect our analyses or opinion. We have further relied on the assurances of the respective managements of Company and Purchaser that they are not aware of any facts or
circumstances that would make any of such information inaccurate or misleading. We have not been asked to and have not undertaken an independent verification of any of such information and we do not
assume any responsibility or liability for the accuracy or completeness thereof. We 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 Company or Purchaser or any of their respective subsidiaries, nor have we been furnished with any such evaluations or appraisals. We render no
opinion or evaluation on the collectability of any assets or the future performance of any loans of Company or Purchaser. We did not make an independent evaluation of the adequacy of the allowance for
loan losses of Company or Purchaser, or the combined entity after the Merger and we have not reviewed any individual credit files relating to Company or Purchaser. We have assumed, with your consent,
that the respective allowances for loan losses for both Company and Purchaser are adequate to cover such losses and will be adequate on a pro forma basis for the combined entity.
In
preparing its analyses, Sandler O'Neill used internal financial projections for Company for the years ending December 31, 2016 through December 31, 2019 as well as an
estimated asset growth rate for the year ending December 31, 2020, as provided by the senior management of Company. With respect to those projections and estimates, the senior management of
Company confirmed to us that those projections and estimates reflected the best currently available projections and estimates of senior management of the future financial performance of Company, and
we assumed that such performance would be achieved. We express no opinion as to such projections or estimates, or the assumptions on which they are based. We have also assumed that there has been no
material change in Company's or Purchaser's assets, financial condition, results of operations, business or prospects since the date of the most recent financial statements made available to us. We
have assumed in all respects material to our analysis that Company and Purchaser will remain as going concerns for all periods relevant to our analyses.
We
have also assumed, with your consent, that (i) each of the parties to the Agreement will comply in all material respects with all material terms and conditions of the Agreement
and all related agreements, that all of the representations and warranties contained in such agreements are true and correct in all material respects, that each of the parties to such agreements will
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 are not
and will 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 will be imposed that would have an adverse effect on Company, Purchaser or the Merger or any related transaction, and (iii) the Merger and any related transaction will be consummated
in accordance with the terms of the 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.. Finally, with your consent, we have relied upon the advice that Company has received from its legal, accounting and tax advisors as
to all legal, accounting and tax matters relating to the Merger and the other transactions contemplated by the Agreement.
Our
opinion is necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. Events occurring
after the date hereof could materially affect this opinion. We have not undertaken to update, revise, reaffirm or withdraw this opinion or otherwise comment upon events occurring after the date
hereof.
We
have acted as Company's financial advisor in connection with the Merger and will receive a fee for our services, which fee is contingent upon consummation of the Merger. We will also
receive a fee for rendering this opinion, which opinion fee will be credited in full towards the fee that will become payable to us on the day of closing of the Merger. Company has also agreed to
indemnify us against
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certain
claims and liabilities arising out of our engagement and to reimburse us for certain of our out-of-pocket expenses incurred in connection with our engagement. In the two years preceding the
date of this opinion, as we have previously advised you, we have provided certain investment banking services to Purchaser and received fees for such services and may provide, and receive compensation
for, such services in the future, including during the pendency of the Merger. In the ordinary course of our business as a broker-dealer, we may purchase securities from and sell securities to Company
and Purchaser and their respective affiliates. We may also actively trade the equity and debt securities of Company or its affiliates for our own account and for the accounts of our customers.
Our
opinion is directed to the Board of Directors of Company in connection with its consideration of the Agreement and Merger and does not constitute a recommendation to any shareholder
of Company as to how any such shareholder should vote at any meeting of shareholders called to consider and vote upon the adoption of the Agreement and approval of the Merger. Our opinion is directed
only to the fairness, from a financial point of view, of the Per Share Merger Consideration to the holders of Company Common Stock and does not address the underlying business decision of Company to
engage in the Merger, the form or structure of the Merger or any other transactions contemplated in the Agreement, the relative merits of the Merger as compared to any other alternative transactions
or business strategies that might exist for Company or the effect of any other transaction in which Company might engage. We also do not express any opinion as to the amount of compensation to be
received in the Merger by any Company or Purchaser officer, director or employee, or any class of such persons, if any, relative to the amount of compensation to be received by any other shareholder.
This opinion has been approved by Sandler O'Neill's fairness opinion committee. This opinion shall not be reproduced without Sandler O'Neill's prior written consent, provided however Sandler O'Neill
will provide its consent for the opinion to be included in regulatory filings to be completed in connection with the Merger.
Based
upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Per Share Merger Consideration is fair to holders of Company Common Stock from a financial
point of view.
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Very truly yours,
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/s/ Sandler O'Neill & Partners, L.P.
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SANDLER O'NEILL & PARTNERS, L.P.
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D-3
1st Century Bancshares, Inc.
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IMPORTANT SPECIAL MEETING INFORMATION
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Electronic Voting Instructions
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Available 24 hours a day, 7 days a week!
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Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy.
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VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
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Proxies submitted by the Internet or telephone must be received by 3:00 a.m., Eastern Time, on June 20, 2016.
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Vote by Internet
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Go to
www.investorvote.com/FCTY
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Or scan the QR code with your smartphone
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Follow the steps outlined on the secure website
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Vote by telephone
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Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone
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Using a
black ink
pen, mark your votes with an
X
as shown in
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·
Follow the instructions provided by the recorded message
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this example. Please do not write outside the designated areas.
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Special Meeting Proxy Card
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IF YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
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Proposals The Board of Directors recommends a vote
FOR
Proposals 1, 2 and 3.
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For
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Against
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Abstain
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1.
To adopt the Agreement and Plan of Merger, dated as of March 10, 2016, by and among Midland Financial Co., MC 2016 Corp. and 1st Century Bancshares, Inc., as it may be amended from time to time.
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2.
To approve, by non-binding, advisory vote, certain compensation arrangements for 1st Century Bancshares, Inc.s named executive officers in connection with the merger.
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3.
To adjourn the special meeting, if necessary, desirable or appropriate, to solicit additional proxies if, at the time of the special meeting, there are an insufficient number of votes in favor of adopting the merger agreement.
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Non-Voting Items
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Change of Address
Please print your new address below.
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Comments
Please print your comments below.
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Meeting Attendance
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Mark the box to the right if you plan to attend the Special Meeting.
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Authorized Signatures This section must be completed for your vote to be counted. Date and Sign Below
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When shares are held by joint tenants, both should sign. Executors, administrators, trustees, etc., should give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer.
Date (mm/dd/yyyy) Please print date below.
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Signature 1 Please keep signature within the box.
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Signature 2 Please keep signature within the box.
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1 U P X
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02CH7D
IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS
FOR THE SPECIAL MEETING:
The Notice, Proxy Statement and Proxy Card are available at
http://www.1cbank.com/specialmeetingmaterials.html
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IF YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
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Proxy 1st Century Bancshares, Inc.
Special Meeting of Stockholders
June 20, 2016, 5:00 pm, local time
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The stockholder of record hereby appoints Robert A. Moore and Barry D. Pressman, M.D., and either of them, with full power of substitution, as proxies for
the stockholder to attend the Special Meeting of Stockholders of 1st Century Bancshares, Inc. (the Company), to be held at the Companys branch office located at 1875 Century Park East, Suite 100, Los Angeles, CA 90067, on June 20, 2016, at 5:00 p.m., local time and any adjournments thereof, and to vote all shares of the common stock of the Company that the stockholder is entitled to vote upon each of the matters referred to in this proxy and, at their discretion, upon such other matters as may properly come before the Special Meeting of Stockholders.
This proxy, when properly executed, will be voted in the manner directed herein by the stockholder of record as of May 17, 2016. If no direction is made,
this proxy will be voted FOR proposals 1, 2 and 3.
PLEASE PROVIDE YOUR INSTRUCTIONS TO VOTE BY TELEPHONE OR THE INTERNET OR COMPLETE, DATE, SIGN AND MAIL THIS PROXY
CARD PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.
1st Century Bancshares, Inc.
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IMPORTANT SPECIAL MEETING INFORMATION
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Using a
black ink
pen, mark your votes with an
X
as shown in
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this example. Please do not write outside the designated areas.
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Special Meeting Proxy Card
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PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
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Proposals The Board of Directors recommends a vote
FOR
Proposals 1, 2 and 3.
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For
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Against
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Abstain
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1.
To adopt the Agreement and Plan of Merger, dated as of
March 10, 2016, by and among Midland Financial Co., MC
2016 Corp. and 1st Century Bancshares, Inc., as it may be amended from time to time.
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2.
To approve, by non-binding, advisory vote, certain compensation arrangements for 1st Century Bancshares, Inc.s named executive officers in connection with the merger.
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3.
To adjourn the special meeting, if necessary, desirable or appropriate, to solicit additional proxies if, at the time of the special meeting, there are an insufficient number of votes in favor of adopting the merger agreement.
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Authorized Signatures This section must be completed for your vote to be counted. Date and Sign Below
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When shares are held by joint tenants, both should sign. Executors, administrators, trustees, etc., should give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer.
Date (mm/dd/yyyy) Please print date below.
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Signature 1 Please keep signature within the box.
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Signature 2 Please keep signature within the box.
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1 U P X
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02CH8C
IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS
FOR THE SPECIAL MEETING:
The Notice, Proxy Statement and Proxy Card are available at
http://www.1cbank.com/specialmeetingmaterials.html
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PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
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Proxy 1st Century Bancshares, Inc.
Special Meeting of Stockholders
June 20, 2016, 5:00 pm, local time
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The stockholder of record hereby appoints Robert A. Moore and Barry D. Pressman, M.D., and either of them, with full power of substitution, as proxies for
the stockholder to attend the Special Meeting of Stockholders of 1st Century Bancshares, Inc. (the Company), to be held at the Companys branch office located at 1875 Century Park East, Suite 100, Los Angeles, CA 90067, on June 20, 2016, at 5:00 p.m., local time and any adjournments thereof, and to vote all shares of the common stock of the Company that the stockholder is entitled to vote upon each of the matters referred to in this proxy and, at their discretion, upon such other matters as may properly come before the Special Meeting of Stockholders.
This proxy, when properly executed, will be voted in the manner directed herein by the stockholder of record as of May 17, 2016. If no direction is made,
this proxy will be voted FOR proposals 1, 2 and 3.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.
1st Century Bancshares, Inc.
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IMPORTANT SPECIAL MEETING INFORMATION
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Electronic Voting Instructions
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Available 24 hours a day, 7 days a week!
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Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy.
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VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
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Proxies submitted by the Internet or telephone must be received by 3:00 a.m., Eastern Time, on June 15, 2016.
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Vote by Internet
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Go to
www.investorvote.com/FCTY
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Or scan the QR code with your smartphone
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Follow the steps outlined on the secure website
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Vote by telephone
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Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone
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Using a
black ink
pen, mark your votes with an
X
as shown in
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Follow the instructions provided by the recorded message
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this example. Please do not write outside the designated areas.
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Special Meeting 401K Card
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IF YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
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Proposals The Board of Directors recommends a vote
FOR
Proposals 1, 2 and 3.
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For
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Against
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Abstain
|
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1.
To adopt the Agreement and Plan of Merger, dated as of March 10, 2016, by and among Midland Financial Co., MC 2016 Corp. and 1st Century Bancshares, Inc., as it may be amended from time to time.
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2.
To approve, by non-binding, advisory vote, certain compensation arrangements for 1st Century Bancshares, Inc.s named executive officers in connection with the merger.
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3.
To adjourn the special meeting, if necessary, desirable or appropriate, to solicit additional proxies if, at the time of the special meeting, there are an insufficient number of votes in favor of adopting the merger agreement.
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Non-Voting Items
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Change of Address
Please print your new address below.
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Comments
Please print your comments below.
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Meeting Attendance
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Mark the box to the right if you plan to attend the Special Meeting.
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Authorized Signatures This section must be completed for your vote to be counted. Date and Sign Below
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Date (mm/dd/yyyy) Please print date below.
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Signature 1 Please keep signature within the box.
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Signature 2 Please keep signature within the box.
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1 U P X
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02DD8C
IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS
FOR THE SPECIAL MEETING:
The Notice, Proxy Statement and Proxy Card are available at
http://www.1cbank.com/specialmeetingmaterials.html
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IF YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
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Proxy 1st Century Bancshares, Inc.
Special Meeting of Stockholders
June 20, 2016, 5:00 pm, local time
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The stockholder of record hereby appoints Robert A. Moore and Barry D. Pressman, M.D., and either of them, with full power of substitution, as proxies for
the stockholder to attend the Special Meeting of Stockholders of 1st Century Bancshares, Inc. (the Company), to be held at the Companys branch office located at 1875 Century Park East, Suite 100, Los Angeles, CA 90067, on Thursday, June 20, 2016, at 5:00 p.m., local time and any adjournments thereof, and to vote all shares of the common stock of the Company that the stockholder is entitled to vote upon each of the matters referred to in this proxy and, at their discretion, upon such other matters as may properly come before the Special Meeting of Stockholders.
This proxy, when properly executed, will be voted in the manner directed herein by the stockholder of record as of May 17, 2016. If no direction is made,
this proxy will be voted FOR proposals 1, 2 and 3.
PLEASE PROVIDE YOUR INSTRUCTIONS TO VOTE BY TELEPHONE OR THE INTERNET OR COMPLETE, DATE, SIGN AND MAIL THIS PROXY
CARD PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.
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