We cordially invite you
to attend the annual meeting of stockholders of PB Bancorp, Inc. (“PB Bancorp”). The annual meeting will be held at
The Crossings Restaurant located at 45 Main Street, Putnam, Connecticut, on February 7, 2020, at 9:00 a.m., local time.
On October 22, 2019, PB
Bancorp and its wholly owned subsidiary, Putnam Bank, entered into an Agreement and Plan of Merger with Centreville Bank pursuant
to which Centreville Bank will form a Maryland corporation as a wholly owned subsidiary of Centreville Bank, which will merge with
and into PB Bancorp with PB Bancorp as the surviving entity. If the merger is completed, at the closing, your shares of PB Bancorp
common stock will be converted into the right to receive $15.25 in cash for each share, without interest. Upon completion of the
merger, you will no longer own any stock or have any other interest in PB Bancorp.
At the annual meeting,
you will be asked to approve: (1) the election of three directors to the Board of Directors; (2) the Agreement and Plan of Merger,
dated as of October 22, 2019, by and among Centreville Bank, PB Bancorp and Putnam Bank (the “Merger Agreement”), and
the merger; (3) a non-binding advisory proposal regarding the compensation to be paid to the Named Executive Officers of PB Bancorp
in connection with the transactions contemplated by the Merger Agreement; (4) the consideration of an advisory, non-binding resolution
to approve the executive compensation described in the proxy statement; (5) the ratification of the appointment of Wolf & Company,
P.C. as the independent registered public accounting firm for PB Bancorp for the fiscal year ending June 30, 2020; (6) any adjournment
or postponement of the annual meeting, if deemed necessary or appropriate, to solicit additional proxies if there are not sufficient
votes at the time of the annual meeting to approve the Merger Agreement and the merger; and such other matters as may properly
come before the annual meeting, or any adjournment or postponement thereof. The Board of Directors is not aware of any other business
to come before the annual meeting.
The affirmative vote of
a majority of the shares of PB Bancorp common stock outstanding must be voted for approval of the Merger Agreement and the merger
for the merger to be completed. Assuming we receive stockholder approval and all other conditions described in the Merger Agreement
have been met or waived, the merger is expected to close during the first half of 2020.
Your exchange of shares
of PB Bancorp common stock for cash generally will cause you to recognize income or loss for federal, and possibly state, local
and foreign, income tax purposes. You should consult your personal tax advisor for a full understanding of the income tax consequences
of the merger to you.
This proxy statement provides
you with detailed information about the proposed merger and includes, as Appendix A, a copy of the Merger Agreement. We urge you
to read the enclosed materials carefully for a complete description of the merger.
If you have any questions
concerning the merger or need assistance in voting, please contact PB Bancorp’s proxy solicitor, Laurel Hill Advisory Group,
LLC. Banks and brokers can call (516) 933-3100, and all others can call, toll-free, (888) 742-1305.
On behalf of the Board,
we thank you for your prompt attention to this important matter.
This proxy statement is dated December 20,
2019 and is first being mailed to stockholders on or about January 3, 2020.
Certain Prospective Financial Information Provided by PB
Bancorp
PB Bancorp does not, as a matter of course,
publicly disclose forecasts or internal projections as to its future performance, earnings or other results due to, among other
things, the inherent uncertainty of certain underlying assumptions and estimates. However, in connection with the proposed merger,
PB Bancorp provided Centreville Bank with unaudited financial forecasts for PB Bancorp on a stand-alone basis. These unaudited
financial forecasts were prepared by PB Bancorp’s management as part of the annual budget process and are summarized below
because such forecasts were provided to Centreville Bank. They were also provided to KBW, along with other prospective financial
information provided below.
The unaudited financial forecasts described
below were not prepared with a view toward public disclosure or compliance with published guidelines of the SEC, the guidelines
established by the American Institute of Certified Public Accountants for Prospective Financial Information, or generally accepted
accounting principles (“GAAP”), and are included in this proxy statement only because they were made available to Centreville
Bank and KBW in connection with the proposed merger. The prospective financial information included in this proxy statement has
been prepared by, and is the responsibility of, PB Bancorp’s management. PB Bancorp’s independent registered public
accounting firm, Wolf & Company, P.C., did not examine, compile or perform any procedures with respect to the prospective financial
information described below and, accordingly, such firm does not express an opinion or any other form of assurance with respect
thereto.
The unaudited financial forecasts described
below are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially
from such estimates and should be read with caution. Although presented with numerical specificity, these estimates are based upon
a variety of assumptions made by PB Bancorp’s management with respect to, among other things, industry performance, general
economic, market, interest rate, and financial conditions, the timing and level of new loan originations and deposit generation,
operating and other revenues and expenses, effective tax rates, capital expenditures, working capital and other matters. Some or
all of the assumptions may not be realized, and as historical performance suggests, they are inherently subject to significant
business, economic and competitive uncertainties and contingencies, all of which are difficult to predict and many of which are
beyond the control of PB Bancorp. In addition, some of these assumptions, by their nature, are subjective in many respects.
Accordingly, the assumptions made in preparing
these estimates may prove to be inaccurate and actual results may differ materially from these estimates. In addition, the forecasts
do not take into account any of the expense savings or charges expected to result from the merger or any other matters contemplated
by the Merger Agreement, including limitations imposed in the Merger Agreement on PB Bancorp’s ability to engage in certain
activities pending completion of the merger without Centreville Bank’s consent.
For these reasons, the description of the
unaudited financial forecasts in this proxy statement should not be regarded as an indication that they are necessarily predictive
of actual future performance and they should not be relied on as such. No one has made, or makes, any representation regarding
these estimates by their inclusion in this proxy statement and, except as may be required by applicable securities laws, PB Bancorp
does not intend to update or otherwise revise the projections to reflect circumstances existing after the date when made or to
reflect the occurrences of future events even if any or all of the assumptions underlying the projections are shown to be in error.
For additional information on factors that may cause future financial results to materially vary from those reflected in the projections
prepared by PB Bancorp’s management, see the section entitled “Cautionary Statement Regarding Forward-Looking Information.”
Below are certain financial projections
that were prepared by PB Bancorp’s management and were provided to Centreville Bank in connection with the proposed merger.
Projected balance sheet (bank level only)
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At
June 30, 2020
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(In thousands)
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Total securities
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$
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93,432
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Total loans
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406,080
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Allowance for loan losses
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(3,444
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)
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Net loans
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402,636
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Total assets
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526,564
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Non-interest bearing deposits
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73,361
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Interest bearing deposits
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330,621
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Total deposits
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403,982
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Federal Home Loan Bank borrowings
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41,048
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Total liabilities
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453,526
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Total stockholders’ equity
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73,038
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Projected income statement
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For the
Year Ended
June 30, 2020
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(In thousands)
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Total interest income
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$
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19,657
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Total interest expense
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4,218
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Provision for loan losses
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600
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Net interest income after provision for loan
losses
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14,839
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Noninterest income
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2,547
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Non-interest expense
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12,480
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Income before taxes
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4,906
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Income taxes
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858
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Net income (bank only)
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4,048
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Parent company only adjustment
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(76
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)
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Consolidated net income
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$
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3,972
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The prospective
financial information for PB Bancorp that was provided to KBW (but not Centreville Bank) by PB Bancorp’s management and utilized
and relied upon by KBW, as described in “—Opinion of PB Bancorp’s Financial Advisor,” included additional
information from the financial projections disclosed above. Specifically, KBW was provided with and used the following estimates:
(1) PB Bancorp’s earnings would be $3.8 million for the calendar year ending December 31, 2019, $4.2 million for the calendar
year ending December 31, 2020, $4.5 million for the calendar year ending December 31, 2021 and $5.1 million for the calendar year
ending December 31, 2022, with 7.0% annual growth thereafter; and (2) that PB Bancorp’s balance sheet would be $523 million
at March 31, 2020, $550 million at December 31, 2020, $587 million at December 31, 2021 and $610 million at December 31, 2022,
with 5.0% annual growth thereafter.
Surrender of Certificates; Payment of Merger Consideration
No less than one business day prior
to the closing date of the merger, Centreville Bank will deposit with an paying agent cash in an amount equal to the
aggregate merger consideration payable pursuant to the Merger Agreement. The paying agent will facilitate the payment of the
merger consideration to the holders of certificates representing shares of PB Bancorp common stock. Centreville Bank will
select a paying agent reasonably satisfactory to PB Bancorp.
As promptly as practicable
after the effective time of the merger, but no later than five business days after the effective time of the merger, the paying
agent will mail to each holder of record of PB Bancorp common stock certificates a letter of transmittal with instructions on how
to surrender certificates representing shares of PB Bancorp common stock for the merger consideration.
Please do not send
in your PB Bancorp stock certificates until you receive the letter of transmittal and instructions from the paying agent. Do not
return your stock certificates with the enclosed proxy.
After you mail the letter
of transmittal and your PB Bancorp stock certificates in accordance with the instructions you will receive, you will then be mailed
a check in the amount of cash for the merger consideration that you are entitled to receive. The stock certificates you surrender
will be canceled. You will not be entitled to receive interest on any portion of the merger consideration.
Any portion of the merger
consideration that remains unclaimed by the stockholders of PB Bancorp for more than 12 months after the effective time of the
merger will be delivered by the paying agent to Centreville Bank. If you have not complied with the exchange procedures described
above within the time period previously described, you may only look to Centreville Bank for payment of the merger consideration
you are entitled to receive in exchange for your shares of common stock, without any interest, and subject to applicable abandoned
property, escheat and similar laws.
If your PB Bancorp stock
certificates have been lost, stolen or destroyed, you will be required to sign an affidavit before you receive any consideration
for your shares. The paying agent will send you instructions on how to complete such an affidavit. You may be required to post
a bond in an amount that the paying agent may reasonably direct as indemnity against any claim that may be made against it with
respect to your common stock.
Centreville
Bank, through the paying agent, will be entitled to deduct and withhold from the merger consideration otherwise payable to any
PB Bancorp stockholder the amounts Centreville Bank is required to deduct and withhold under any applicable federal, state, local
or foreign tax law. If Centreville Bank withholds any amounts, these amounts will be treated for all purposes of the merger as
having been paid to the stockholders from whom they were withheld.
Certain Federal Income Tax Consequences to U.S. Holders
The following is a discussion
of certain U.S. federal income tax consequences of the merger to U.S. holders (as defined below) of PB Bancorp common stock whose
shares are converted into the right to receive $15.25 in cash per share at closing. This discussion does not purport to consider
all aspects of U.S. federal income taxation that might be relevant to PB Bancorp stockholders. This discussion is based on the
provisions of the Internal Revenue Code of 1986, as amended (the “Code”), applicable current and proposed U.S. Treasury
Regulations, judicial authority, and administrative rulings and practice, all of which are subject to change, possibly on a retroactive
basis. Any such change could alter the tax consequences described herein.
For purposes of this discussion,
we use the term “U.S. holder” to mean a beneficial owner of shares of PB Bancorp common stock that is:
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·
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an individual citizen or resident of the United States,
as determined for U.S. federal income tax purposes;
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·
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a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created
or organized under the laws of the United States or any state thereof (or the District of Columbia);
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·
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a trust if it (1) is subject to the primary supervision of a court within the United States and
one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) has a valid election
in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person; or
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·
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an estate, the income of which is subject to U.S. federal income tax regardless of its source.
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This discussion assumes
that the PB Bancorp common stock is held for investment purposes. This discussion does not address all aspects of U.S federal income
tax that may be relevant to a PB Bancorp stockholder in light of its particular circumstances, or that may apply to a PB Bancorp
stockholder that is subject to special treatment under the U.S. federal income tax laws (including but not limited to foreign persons
(generally, a person that is not a citizen or resident of the United States, a U.S. domestic corporation, or a person that would
otherwise be subject to U.S. federal income tax on a net income basis with respect to their PB Bancorp common stock), financial
institutions, tax-exempt organizations, dealers in securities or foreign currencies, entities that are treated for federal income
tax purposes as partnerships or other pass-through entities, insurance companies or employees who acquired the stock pursuant to
the exercise of employee stock options or other compensation arrangements).
This discussion is
for general information only and is not tax advice. The U.S. federal income tax consequences described below are not intended
to constitute a complete description of all tax consequences relating to the merger. PB Bancorp stockholders are urged to consult
their own tax advisors to determine the tax consequences to them of, including the application and effect of any U.S. federal,
state, local and foreign income, estate, gift and other tax laws to, the receipt of the cash consideration in exchange for PB Bancorp
common stock pursuant to the merger.
The receipt of the merger
consideration by a U.S. holder in exchange for shares of PB Bancorp common stock pursuant to the merger will be a taxable transaction
for U.S. federal income tax purposes (and may also be a taxable transaction under applicable state, local and foreign income or
other tax laws). For U.S. federal income tax purposes, a U.S. holder of PB Bancorp common stock generally will recognize capital
gain or loss at the effective time of the merger equal to the difference, if any, between:
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·
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$15.25 in cash received by the U.S. holder in exchange for such PB Bancorp common stock; and
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·
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the U.S. holder’s adjusted tax basis in such PB Bancorp common stock.
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Such gain or loss generally
will be a long-term capital gain or loss if the U.S. holder’s holding period for the PB Bancorp common stock surrendered
in the merger exceeds one year as of the date of the merger. In general, long-term capital gain of individuals currently is subject
to U.S. federal income tax at a maximum rate of 20%. The deductibility of capital losses is subject to limitations under the Code.
The amount and character of gain or loss must be determined separately for each block of PB Bancorp common stock (i.e., shares
acquired at the same cost in a single transaction) exchanged for the merger consideration in the merger.
Under the Code, the cash consideration received
in the merger by a U.S. holder may be subject to U.S. information reporting and backup withholding. Backup withholding (currently
at a rate of 24%) will apply with respect to the amount of cash received by a non-corporate U.S. holder, unless the U.S. holder
provides proof of an applicable exemption or a correct taxpayer identification number on an IRS Form W-9 (enclosed with the letter
of transmittal sent by the paying agent), and otherwise complies with the applicable requirements of the backup withholding rules.
Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be refunded or credited
against a U.S. holder’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 FOREGOING DISCUSSION DOES NOT CLAIM
TO BE A COMPLETE DISCUSSION OF THE POTENTIAL TAX CONSEQUENCES OF THE MERGER. PB BANCORP STOCKHOLDERS ARE STRONGLY URGED TO CONSULT
THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF U.S. FEDERAL,
STATE, LOCAL AND FOREIGN INCOME, ESTATE, GIFT AND OTHER TAX LAWS IN THEIR PARTICULAR CIRCUMSTANCES. NOTHING IN THIS DISCUSSION
IS INTENDED TO BE, OR SHOULD BE CONSTRUED AS, TAX ADVICE.
Certain Effects of the Merger
If the Merger Agreement
and the merger are approved by PB Bancorp’s stockholders and certain other conditions to the closing of the merger are either
satisfied or waived, a subsidiary of Centreville Bank, formed specifically to facilitate completion of the merger, will merge with
and into PB Bancorp, with PB Bancorp as the surviving corporation, and thereafter Centreville Bank will cause Putnam Bank to transfer
all of its assets to Centreville, and Centreville Bank will assume at that time all of Putnam Bank’s liabilities, after which
Centreville Bank will cause each of Putnam Bank and PB Bancorp to dissolve and their respective corporate existence will cease.
When the merger is completed,
each share of common stock of PB Bancorp (other than shares of common stock that are owned by PB Bancorp as treasury stock or owned
by any subsidiary of PB Bancorp or Centreville Bank, or any shares held by the trustee of the ESOP that are to be remitted to PB
Bancorp to repay the outstanding ESOP loan) issued and outstanding immediately prior to the effective time of the merger will be
converted into the right to receive $15.25 in cash per share at closing. At the effective time of the merger, PB Bancorp’s
stockholders will cease to have ownership interests in PB Bancorp or rights as stockholders of PB Bancorp.
PB Bancorp’s shares
of common stock are currently registered under the Securities Exchange Act of 1934, as amended, and are traded on the Nasdaq Capital
Market under the symbol “PBBI.” As a result of the merger, shares of PB Bancorp’s common stock will cease to
be traded on the Nasdaq Capital Market. In addition, the registration of shares of PB Bancorp’s common stock under the Securities
Exchange Act of 1934, as amended, will be terminated, and PB Bancorp will no longer file periodic and other reports with the SEC.
Effects on PB Bancorp and Our Stockholders if the Merger
is Not Completed
If the Merger Agreement
is not approved by PB Bancorp’s stockholders or if the merger is not completed for any other reason, PB Bancorp’s stockholders
will not receive any payment for their shares in connection with the merger. If the Merger Agreement is terminated under certain
circumstances, PB Bancorp would be obligated to pay a $4.44 million termination fee to Centreville Bank. For a description of the
circumstances obligating payment of the termination fee, see “—Termination Fee.”
Appraisal Rights
Under PB Bancorp’s Articles of Incorporation,
PB Bancorp’s stockholders are not entitled to exercise any rights of an objecting stockholder provided under Title 3,
Subtitle 2 of the Maryland General Corporation Law, unless the Board of Directors determines that such rights apply with respect
to a transaction. The Board of Directors of PB Bancorp has not made such a determination with respect to the merger. Accordingly,
the stockholders of PB Bancorp do not have appraisal rights with respect to the merger.
Interests of PB Bancorp’s Directors and Executive
Officers in the Merger
In considering the recommendation of the
Board of Directors of PB Bancorp to approve and adopt the Merger Agreement, you should be aware that PB Bancorp’s directors
and executive officers have financial interests in the merger that are different from, or in addition to, the interests of PB Bancorp
stockholders generally, which are described below. PB Bancorp’s Board of Directors was aware of these interests and considered
them, among other matters, in approving the Merger Agreement and the transactions contemplated by the Merger Agreement.
Treatment of Stock Options. The
Merger Agreement provides that all options to purchase PB Bancorp common stock outstanding at the effective time of the
merger, whether or not vested, will be cancelled and the holder will be entitled to receive a lump sum cash payment equal to
the product of (1) the number of shares of PB Bancorp common stock subject to the PB Bancorp stock option, multiplied by (2)
the amount by which $15.25 exceeds the exercise price of such PB Bancorp stock option, less required withholding taxes.
Treatment of Restricted Stock Awards.
The Merger Agreement provides that at the effective time of the merger, each unvested share of restricted stock issued
by PB Bancorp and outstanding at the effective time of the merger will vest and convert into the right to receive the same merger
consideration that all other shares of PB Bancorp common stock are entitled to receive in the merger.
Stock Options and Restricted Stock
Awards Held by PB Bancorp's Executive Officers and Directors. For an estimate of the amounts that would be payable to each
of PB Bancorp’s Named Executive Officers on settlement of their unvested PB Bancorp equity awards, see “—Merger-Related
Executive Compensation for PB Bancorp’s Named Executive Officers” below. PB Bancorp’s non-employee directors
Charles W. Bentley, Jr., Paul M. Kelly, Charles H. Puffer, Richard A. Loomis, John P. Miller and Jitendra K. Sinha who each hold
20,850 vested and non-vested stock options, respectively, will each receive an estimated cash payment of $106,335, respectively,
upon termination of the stock options. Charles W. Bentley, Jr., Paul M. Kelly, Charles H. Puffer, Richard A. Loomis, John P. Miller
and Jitendra K. Sinha each hold 5,439 restricted stock awards (of which 1,813 are scheduled to vest on March 30, 2020, and accordingly,
if the merger occurs after such date, each director will hold 3,626 restricted stock awards), respectively, that will become fully
vested at the effective time of the merger and convert into the right to receive the same merger consideration that all other shares
of PB Bancorp common stock are entitled to receive in the merger.
Payments Under Change in Control Agreements
With PB Bancorp and Putnam Bank. PB Bancorp and Putnam Bank previously entered into change in control agreements with Thomas
A. Borner, and Robert J. Halloran, Jr. and three other officers. Each of the agreements with Messrs. Borner and Halloran provide
that, in the event that the executive’s employment is involuntarily terminated without cause (as such term defined in the
agreement) or voluntarily terminated for good reason (as such term defined in the agreement) within twelve months following a change
in control (as such term defined in the agreement), he will be entitled to receive a lump sum payment equal to three times (two
times for Mr. Halloran) his base salary as of his termination date (or if higher, the base salary in effect immediately prior to
the change in control). Concurrent with the signing of the Merger Agreement, each officer entered into a settlement agreement with
PB Bancorp, Putnam Bank and Centreville Bank that cancelled the officer’s applicable change in control agreement and quantified
the amount of the cash severance payment each officer will be entitled to receive at closing.
Settlement Agreements. In
connection with the Merger Agreement, PB Bancorp, Putnam Bank and Centreville Bank entered into a settlement agreement with each
of Messrs. Borner and Halloran and three other officers that fixed the amount of cash severance payable pursuant to the terms of
each individual’s change in control agreement with PB Bancorp and Putnam Bank. None of the payments will be subject to an
excise tax under Section 4999 of the Code or subject to penalties under Section 280G of the Code. For an estimate of the amount
that would be payable to each of PB Bancorp’s Named Executive Officers, Messrs. Borner and Halloran, under their settlement
agreements, see “—Merger-Related Executive Compensation for PB Bancorp’s Named Executive Officers” below.
Consulting, Non-Competition and Release
Agreement With Thomas A. Borner. In connection with the Merger Agreement, Centreville Bank entered into a consulting, non-competition
and release agreement with Mr. Borner that provides generally that Mr. Borner may not compete with Centreville Bank or solicit
business, customers and employees from Centreville Bank for 180 days following the date of the merger. In addition, the agreement
provides for a full release of all legal claims. For an estimate of the amount that would be payable to Mr. Borner under this agreement,
see “—Merger-Related Executive Compensation for PB Bancorp’s Named Executive Officers” below.
Appointment of One Director to Centreville
Bank’s Board. The Merger Agreement provides that Centreville Bank will take all action necessary to appoint one director
of PB Bancorp to its Board, effective as of and conditioned upon the closing of the merger. Prior to closing, Centreville Bank
will also offer each other PB Bancorp director the opportunity to serve as a corporator of Centreville Bank.
Indemnification and Insurance of Directors
and Officers. In the Merger Agreement, Centreville Bank has agreed to indemnify and hold harmless each of the current and
former officers and directors of PB Bancorp and its subsidiaries against any costs, expenses, judgments, fines, amounts paid in
settlements, damages and other liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether
arising before or after the effective time of the merger, pertaining to any matter that existed or occurred at or before the effective
time of the merger to the fullest extent permitted by applicable law. Centreville Bank has also agreed to maintain in effect for
a period of six years following the effective time of the merger the directors’ and officers’ liability insurance policy
currently maintained by PB Bancorp or to provide a policy with comparable coverage, provided that, to obtain such insurance coverage,
Centreville Bank is not obligated to expend, in the aggregate, an amount exceeding 175% of the amount of the annual premium currently
paid by PB Bancorp for such insurance.
Merger-Related Executive Compensation
for PB Bancorp’s Named Executive Officers. The following table sets forth the estimated potential severance benefits
to PB Bancorp’s Named Executive Officers on termination of employment in connection with a change in control and assumes
that the effective time of the merger will be March 31, 2020, the last practicable date prior to the date of these materials.
If the merger closes after March 31, 2020, then the estimated payments in connection with a change of control listed below will
be reduced as some of the stock options and restricted stock awards will have vested without regard to the change of control.
This table does not include the value of benefits in which the Named Executive Officers are vested without regard to the occurrence
of a change in control. The amounts shown below are estimates based on multiple assumptions that may or may not actually occur,
and as a result, the actual amounts to be received by a Named Executive Officer may differ materially from the amounts shown below.
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Executive
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Cash(1)
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|
Equity(2)
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Total
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Thomas A. Borner
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|
$
|
1,198,250
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|
|
$
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502,793
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|
|
$
|
1,701,043
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|
|
Robert J. Halloran, Jr.
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|
|
463,883
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|
|
|
207,711
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|
|
|
671,594
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|
|
(1)
|
The cash payments consist of: (a) for Mr. Borner only, a payment of $1,118,250 pursuant to a settlement agreement, and a payment
in the amount of $80,000 pursuant to a consulting, non-competition and release agreement, both of which were entered into on the
date of the merger; and (b) for Mr. Halloran, the amount payable under his settlement agreement. The amounts payable to Messrs.
Borner and Halloran under their settlement agreements are considered a “single trigger” benefit since the amounts are
payable upon the occurrence of the merger without regard to termination of employment.
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|
(2)
|
Represents the estimated cash payment to be made in exchange for the cancellation of the unvested stock options and the value
of unvested restricted stock awards that vest at the effective time of the merger. The value of the stock options and restricted
stock awards is based on $15.25, which is the per share price of the merger consideration. The amounts payable under this column
are considered a “single trigger” benefit since it is payable upon a change in control of PB Bancorp without regard
to termination of employment.
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Employee Matters. Each person
who is an employee of PB Bancorp or Putnam Bank as of the effective time of the merger (whose employment is not specifically terminated
as of the merger date) will become an employee of Centreville Bank and will be eligible to participate in employee benefit plans
and compensation opportunities that are substantially comparable to the employee benefit and compensation opportunities that are
generally made available to similarly situated employees of Centreville Bank. With respect to any Centreville Bank medical, dental
or vision insurance plan, Centreville Bank will cause any preexisting condition limitations or eligibility waiting periods to be
waived and credit each continuing employee for any co-payments or deductibles incurred by such continuing employee under a PB Bancorp
health plan for the plan year in which coverage commences under Centreville Bank’s health plan. Continuing employees will
receive prior service credit for purposes of eligibility and vesting (but not for purposes of benefit accrual) provided that such
recognition of service will not operate to duplicate any benefits with respect to the same period of service.
Each full-time employee of PB Bancorp or
Putnam Bank whose employment is involuntarily terminated by Centreville Bank (other than for cause) or who voluntarily terminates
employment for good reason within twelve months following the effective time of the merger and who is not covered by a separate
employment agreement, change in control agreement or other agreement that provides for the payment of severance will, upon executing
an appropriate release in the form reasonably determined by Centreville Bank, receive a severance payment equal to two weeks of
base pay for each year of service with PB Bancorp, with a minimum payment equal to four weeks of base pay and a maximum payment
equal to 26 weeks of base pay.
Regulatory Approvals
General.
Completion of the merger is subject to the prior approval or receipt of a waiver from regulatory authorities, including the Federal
Reserve Board, the FDIC, the Rhode Island Department of Business Regulation, Division of Banks and the Connecticut Banking Department.
Centreville Bank has filed the required regulatory applications and will file any waivers prior to closing, but has not yet received
any approvals or waivers from these regulators. Although we do not know of any reason why the regulatory approvals or waivers cannot
be obtained timely, we cannot be certain when or if such approvals will be obtained.
Acquisition of PB
Bancorp and Putnam Bank. Centreville Bank’s acquisition of PB Bancorp requires the approval or non-objection of the
Federal Reserve Board. The Federal Reserve Board will consider factors such as financial and managerial resources, future prospects,
the convenience and needs of the community and competitive factors. Centreville Bank will submit a request for a waiver of any
prior approval requirements by the Federal Reserve Board prior to closing. Centreville Bank’s acquisition of PB Bancorp is
also subject to approval by the Connecticut Department of Banking, which considers, among other things, the net benefits to the
public, competitive factors, the sufficiency of the surviving bank’s capital and management and additional considerations,
as well as the parties’ records of serving the needs of the community and effectiveness in combating money laundering activities.
Acquisition of Putnam
Bank. Centreville Bank’s acquisition of the assets and assumption of the liabilities of Putnam Bank is subject to
the approval of the FDIC under the Bank Merger Act. In granting its approval under the Bank Merger Act, the FDIC must consider
the financial and managerial resources and future prospects of the existing and resulting institutions, the convenience and needs
of the communities to be served, competitive factors, any risk to the stability of the United States banking or financial system
and the effectiveness of the institutions involved in combating money laundering activities. In addition, a period of 15 to 30 days
must expire following approval by the FDIC before completion of the acquisition is allowed, within which period the United States
Department of Justice may file objections to the acquisition under the federal antitrust laws. While the parties believe that the
likelihood of objection by the Department of Justice is remote in this case, there can be no assurance that the Department of Justice
will not initiate proceedings to block Centreville Bank’s acquisition of the assets and assumption of the liabilities of
Putnam Bank.
Centreville Bank’s
acquisition of the assets and assumption of the liabilities of Putnam Bank is also subject to approval by the Rhode Island Department
of Business Regulation, Banking Division and Connecticut Department of Banking under the provisions of the respective states’
banking laws. In granting its approval, the Rhode Island Department of Business Regulation, Banking Division will consider, among
other things, whether the acquisition promotes the safety and soundness of the Rhode Island entity to be acquired and the convenience
and advantage of the communities served by that entity, and whether the acquisition is likely to have a significant impact on Rhode
Island’s economy, employment levels and tax base. In granting its approval, the Connecticut Department of Banking will consider
similar factors as those described above in connection with Centreville Bank’s acquisition of PB Bancorp.
Accounting Treatment
Centreville Bank will
account for the merger under the purchase method of accounting. This means that Centreville Bank and PB Bancorp will be treated
as one company as of the date of the merger and Centreville Bank will record the fair value of PB Bancorp’s assets and liabilities
on its financial statements. Centreville Bank will record the excess of its purchase price over the fair value of PB Bancorp’s
identifiable net assets as goodwill.
Terms of the Merger Agreement
The following describes
the material provisions of the Merger Agreement. The following description of the Merger Agreement is subject, and qualified in
its entirety by reference, to the Merger Agreement, which is attached to this document as Appendix A, which is incorporated by
reference into this document. We urge you to read the Merger Agreement carefully and in its entirety, as it is the legal document
governing the merger.
General. The
Merger Agreement provides for the merger of a subsidiary of Centreville Bank, formed specifically to facilitate completion of the
merger, with and into PB Bancorp, with PB Bancorp as the surviving corporation. Following the merger, Centreville Bank will cause
Putnam Bank to transfer all of its assets to Centreville, and Centreville Bank will assume at that time all of Putnam Bank’s
liabilities, after which Centreville Bank will cause each of Putnam Bank and PB Bancorp to dissolve and their respective corporate
existence will cease.
Cash. Each
outstanding share of common stock of PB Bancorp (other than shares of common stock that are owned by PB Bancorp as treasury stock
or owned by any subsidiary of PB Bancorp, or Centreville Bank or any shares held by the trustee of the ESOP that are to be remitted
to Centreville Bank to repay the outstanding ESOP loan) will be converted into the right to receive $15.25 in cash, without interest,
at closing.
Surviving Corporation, Governing Documents and Directors
At the effective time
of the merger, the articles of incorporation and bylaws of the subsidiary formed by Centreville Bank in effect immediately prior
to the effective time of the merger will be the articles of incorporation of the surviving corporation after completion of the
merger until thereafter amended in accordance with applicable law. At the effective time of the merger, the directors and officers
of the subsidiary formed by Centreville Bank immediately prior to the effective time of the merger will be the directors and officers
of the surviving corporation after completion of the merger.
Treatment of PB Bancorp Stock Options and Other Equity-Based
Awards
PB Bancorp Stock Options.
The directors and executive officers of PB Bancorp held options to purchase an aggregate of 89,692 shares of common stock exercisable
within 60 days of December 16, 2019.
Pursuant to the Merger Agreement, at the
effective time of the merger, all outstanding and unexercised PB Bancorp stock options, whether or not vested, will be converted
into the right to receive an amount in cash equal to the product of (1) the number of shares of PB Bancorp common stock subject
to each stock option and (2) the amount by which the $15.25 merger consideration exceeds the exercise price of the option, less
applicable federal and state tax withholdings.
If
the exercise price of a stock option equals or exceeds $15.25 per share, the option will be cancelled at the effective time of
the merger and the holder of such stock option will not be entitled to any consideration in connection with the merger.
PB Bancorp Restricted
Shares. Each outstanding restricted stock award, whether
vested or unvested, that is outstanding immediately prior to the effective date of the merger will be canceled, in exchange for
a cash payment equal to the number of shares subject to the restricted stock award, multiplied by $15.25, less applicable federal
and state tax withholdings.
Closing and Effective Time of the Merger
The merger will be completed
only if all conditions to the merger discussed in this proxy statement and set forth in the Merger Agreement are either satisfied
or waived. See “—Conditions to Complete the Merger.”
The merger of the subsidiary
of Centreville Bank, formed specifically to facilitate completion of the merger, and PB Bancorp will become effective when the
articles of merger are filed with the Department of Assessments and Taxation of the State of Maryland. The completion of the merger
will occur no later than five business days after the satisfaction or waiver of the latest to occur of the conditions to the closing
of the merger set forth in the Merger Agreement, unless extended by mutual agreement of the parties to the Merger Agreement. The
completion of the merger is currently anticipated to occur during the first half of 2020, subject to the receipt of stockholder
approval, regulatory approvals and other customary closing conditions. Neither PB Bancorp nor Centreville Bank can guarantee when
or if the merger will be completed.
Representations and Warranties
The representations and
warranties described below and included in the Merger Agreement were made only for purposes of the Merger Agreement and as of specific
dates, are solely for the benefit of Centreville Bank and PB Bancorp, may be subject to limitations, qualifications or exceptions
agreed upon by the parties, including those included in disclosure schedules made for the purposes of, among other things, allocating
contractual risk between Centreville Bank and PB Bancorp rather than establishing matters as facts, and may be subject to standards
of materiality that differ from those standards relevant to investors. You should not rely on the representations, warranties,
covenants or any description thereof as characterizations of the actual state of facts or condition of Centreville Bank, PB Bancorp
or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations,
warranties and covenants may change after the date of the Merger Agreement, which subsequent information may or may not be fully
reflected in public disclosures by Centreville Bank or PB Bancorp. The representations and warranties and other provisions of the
Merger Agreement should not be read alone, but instead should be read only in conjunction with the information provided elsewhere
in this proxy statement.
The Merger Agreement contains
customary representations and warranties of Centreville Bank and PB Bancorp relating to their respective businesses. The representations
and warranties in the Merger Agreement do not survive the effective time of the merger.
The representations and
warranties made by PB Bancorp to Centreville Bank relate to a number of matters, including the following:
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corporate matters, including due organization and qualification and subsidiaries;
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authority relative to execution and delivery of the Merger Agreement, and the absence of conflicts with, or violations of,
organizational documents or other obligations as a result of the merger;
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required governmental and other regulatory filings and consents in connection with the merger;
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reports to regulatory authorities;
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financial statements; off-balance sheet arrangements and controls;
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broker’s fees payable in connection with the merger;
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the absence of certain changes or events;
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legal and regulatory proceedings;
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employee matters and employee benefit plans;
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compliance with applicable laws;
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contracts and other agreements;
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agreements with regulatory agencies;
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risk management instruments;
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ownership and policies related to investment securities and commodities;
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title to real property;
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intellectual property, information technology and cyber security matters;
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related party transactions;
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inapplicability of takeover statutes;
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charitable organizations;
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the opinion of PB Bancorp’s financial advisor;
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the accuracy of information supplied for inclusion in this proxy statement and applications filed with bank regulators;
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The representations and
warranties made by Centreville Bank to PB Bancorp relate to a number of matters, including the following:
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corporate matters, including due organization and qualification;
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authority relative to execution and delivery of the Merger Agreement, and the absence of conflicts with, or violations of,
organizational documents or other obligations as a result of the merger;
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required governmental and other regulatory filings and consents in connection with the merger;
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reports to regulatory authorities;
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broker’s fees payable in connection with the merger;
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the absence of certain changes or events;
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legal and regulatory proceedings;
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employee benefit plans;
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compliance with applicable laws;
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regulatory capitalization;
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agreements with regulatory agencies;
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ability to pay the merger consideration;
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the accuracy of information supplied for inclusion in this proxy statement and applications filed with bank regulators.
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Certain representations
and warranties of Centreville Bank and PB Bancorp are qualified as to “materiality” or “material adverse effect.”
For purposes of the Merger Agreement, a “material adverse effect,” when used in reference to Centreville Bank, PB Bancorp
or Putnam Bank, as applicable, means any effect, change, event, circumstance, condition, occurrence or development, individually
or in the aggregate, has had or would reasonably be expected to have a material adverse effect on the business, properties, assets,
liabilities, results of operations or financial condition of such party and its subsidiaries, taken as a whole, or that would materially
impair the ability of such party to perform its obligations under the Merger Agreement or otherwise materially impairs the ability
of such party to timely consummate the transactions contemplated by the Merger Agreement.
A “material adverse
effect” does not include the impact of (1) changes in United States generally accepted accounting principles or applicable
regulatory accounting requirements, (2) changes in laws, rules or regulations of general applicability to companies in the industries
in which such party and its subsidiaries operate, or interpretations thereof by courts or governmental entities, (3) changes in
global, national or regional political conditions (including the outbreak of war or acts of terrorism) or in economic or market
(including equity, credit and debt markets, as well as changes in interest rates) conditions affecting the financial services industry
generally and not specifically relating to such party or its subsidiaries, (4) public disclosure of the transactions contemplated
by the Merger Agreement or actions or omissions expressly required by the Merger Agreement or that are taken with the prior written
consent of the other party, including expenses incurred by the parties, in contemplation of the transactions contemplated by the
Merger Agreement, (5) a decline in the trading or market prices of PB Bancorp’s common stock or the failure, in and of itself,
to meet earnings projections or internal financial forecasts, but not, in either case, including any underlying causes thereof
or (6) natural disaster or other force majeure event; except, with respect to subclause (1), (2), (3) or (6), to the extent that
the effects of such change are materially disproportionately adverse to the business, properties, assets, liabilities, results
of operations or financial condition of such party and its subsidiaries, taken as a whole, as compared to other companies in the
banking industry.
Covenants and Agreements
Conduct of Businesses
Prior to the Completion of the Merger. PB Bancorp
has agreed that, prior to the effective time of the merger (or the termination of the Merger Agreement), except as expressly contemplated
by the Merger Agreement, required by law, or with the prior written consent of Centreville Bank, it will, and will cause its subsidiaries
to (1) conduct its business in the ordinary course in all material respects, (2) use reasonable best efforts to maintain and preserve
intact its business organization, employees, independent contractors and advantageous customer and other business relationships
or (3) take no action that would reasonably be expected to prevent or adversely affect or delay the receipt of any necessary regulatory
approvals, the timely consummation of the merger or PB Bancorp’s performance of its covenants under the Merger Agreement.
PB Bancorp has agreed
that, prior to the effective time of the merger (or the termination of the Merger Agreement), except as expressly contemplated
by the Merger Agreement, required by law, or with the prior written consent of Centreville Bank, PB Bancorp will not, and will
not permit any of its subsidiaries to undertake the following actions:
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incur any indebtedness for borrowed money or assume, guarantee, endorse or otherwise become responsible for the obligations
of any individual, corporation or other entity, other than in the ordinary course of business (including deposits, federal funds
borrowings and advances from the Federal Home Loan Bank);
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adjust, split, combine or reclassify any capital stock;
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make, declare or pay any dividends (other than regular quarterly cash dividends not in excess of $0.07 per share or dividends
paid by Putnam Bank to PB Bancorp) or redeem, purchase or acquire any shares of its capital stock, except for shares accepted to
pay for the exercise price for stock options for withholding of taxes incurred in connection with the exercise of stock options
or the vesting or shares of restricted stock;
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grant any equity awards or other right to acquire shares of its capital stock except pursuant to the exercise, vesting or settlement
of outstanding stock options;
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issue, sell or otherwise permit to become outstanding any additional shares of capital stock, except pursuant to the exercise,
vesting or settlement of outstanding stock options;
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sell, transfer, mortgage, encumber or otherwise dispose of any material properties or assets other than in the ordinary course
of business consistent with past practice;
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acquire any property or assets or make any material investment except in the ordinary course of business consistent with past
practice;
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purchase any bank owned life insurance;
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terminate, materially amend or waive any provision of certain contracts, agreements and leases described in the Merger Agreement
other than normal renewals of contracts and leases in the ordinary course of business and without material adverse changes of terms;
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except as required under applicable law or the terms of any benefit plan:
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enter into, adopt, terminate or amend any benefit plans,
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increase the compensation or benefits to any current or former employee, officer, director, independent contractor or consultant,
except for annual base salary or wages in the ordinary course of business to which Centreville Bank consents in writing,
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pay or award, or commit to pay or award, any bonuses or incentive compensation, except for bonuses earned in 2019 under Putnam
Bank’s Senior Management Short Term Incentive Plan consistent with past practice,
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grant any equity or equity-based awards or other compensation,
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negotiate or enter into any new, or amend any existing, employment, severance, change in control, retention, bonus, guarantee,
collective bargaining agreement or similar agreement,
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fund any rabbi trust or similar arrangement,
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terminate the employment or services of any officer, employee, consultant or independent contractor whose annual base compensation
is equal to or greater than $50,000, other than for cause, or hire or promote any employee, independent contractor or consultant
whose annual base compensation is equal to or greater than $50,000, or
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settle any material claim, suit, action or proceeding, except in the ordinary course of business in an amount and for consideration
not in excess of $50,000, individually or in the aggregate, and that would not impose any material restriction on the business
of PB Bancorp or its subsidiaries;
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amend its articles of incorporation or bylaws or the comparable governing documents of its subsidiaries;
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merge, consolidate, restructure, reorganize or completely or partially liquidate or dissolve itself or any subsidiary;
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materially restructure or materially its investment securities or derivatives portfolio or its interest rate exposure or the
manner in which the portfolio is classified or reported or purchase any security rated below investment grade;
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take any action that is intended or expected to result in any of its representations or warranties becoming untrue in any material
respect or in any of the conditions to the closing of the merger not being satisfied;
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implement or adopt any material change in accounting practices or principles, other than as may be required by GAAP;
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enter into a new line of business;
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make, renegotiate, renew, increase, extend, modify or purchase any loan, loan commitment, letter or credit or extensions of
credit other than in the ordinary course of business, consistent with recent past practice in amounts that do not exceed $750,000
for real estate loans or $500,000 for non-real estate loans, and with respect to any new extension of credit in excess of $2.0
million, PB Bancorp must consult with Centreville Bank on the terms of the extension of credit (provided, that, with respect to
classified loans, the loan thresholds are $250,000);
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make any material changes to certain policies and practices regarding lending, investment, deposit pricing, risk and asset
and liability management or other banking and operating matters, or hedging;
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make any capital expenditure in excess of $25,000 individually or $50,000 in the aggregate;
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make or commit to make any investment in, or acquire or foreclose on, real estate or in any real estate development project
or in connection with loans or loan commitments in excess of $250,000 without first conducting a Phase I environmental assessment
of the property (other than single-family residential properties);
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make, change or revoke any tax election, change an annual accounting period, adopt or change any tax accounting method, file
any amended tax return, fail to timely file any tax return, settle or compromise any tax liability, claim or assessment, agree
to any adjustment of any tax attribute, or agree to an extension or waiver of the limitation period to any tax claim or assessment,
grant any power of attorney with respect to taxes, surrender any right to claim a refund of taxes or enter into any closing agreement
with respect to any tax or refund or amend any tax return;
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make contributions to tax exempt organizations other than in the ordinary course and consistent with past practice;
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apply to open, relocate, acquire or sell any branch office, loan production office or other significant office or operations
facility;
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materially reduce insurance coverage or fail to renew any material existing insurance policy; or
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agree to take or make any commitment to take any of the above prohibited actions.
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Regulatory Matters.
PB Bancorp and Centreville Bank have also agreed to cooperate with each other and use their reasonable best efforts to promptly
prepare and file all necessary documentation, to effect all applications and other similar documents, and to obtain as promptly
as practicable all permits, consents, approvals and authorizations of all third parties and governmental entities that are necessary
or advisable to consummate the transactions contemplated by the Merger Agreement. Centreville Bank and PB Bancorp have the right
to review in advance, and, to the extent practicable, each will consult the other on, any filing made with any third party or governmental
entities in connection with the transactions contemplated by the Merger Agreement. Additionally, Centreville Bank and PB Bancorp
agree to consult with each other with respect to obtaining all permits, consents, approvals and authorizations of third parties
or governmental entities necessary or advisable to consummate the transactions contemplated by the Merger Agreement, and each party
will keep the other party apprised promptly of the status of filings and applications, including applicable communications with
governmental entities.
To
the extent permitted by law, PB Bancorp and Centreville Bank will promptly advise each other upon receiving any communication from
any governmental entity pertaining to the merger that causes such party to believe that there is a reasonable likelihood that any
required regulatory approval will not be obtained, will be subject to a materially burdensome regulatory condition or may be materially
delayed.
A
materially burdensome condition is any action, or commitment to take any action, or agreement to any condition or restriction,
in connection with obtaining the required regulatory authorizations, consents, permits, orders, approvals, waivers or non-objections
of governmental entities that would reasonably be expected to have a material adverse effect on Centreville Bank, after giving
effect to the transactions contemplated by the Merger Agreement.
Continuing Employees from PB Bancorp
and Putnam Bank. Without providing a legal right to continuing employment, Centreville Bank will endeavor to retain as
many of PB Bancorp’s and Putnam Bank’s employees as it deems reasonably practical in its sole discretion and will use
its reasonable efforts to provide such employees with meaningful career opportunities at Centreville Bank following the merger.
Employees of PB Bancorp and Putnam Bank
continuing at Centreville Bank will receive employee benefits and will be entitled to participate in Centreville Bank’s benefit
plans at a level that is comparable to similarly-situated employees of Centreville Bank.
Centreville Bank will offer to PB Bancorp
and Putnam Bank employees who continue to be employed by Centreville Bank health coverage on the same basis as it provides such
coverage to similarly situated employees of Centreville Bank, provided, that pre-existing conditions, exclusions, evidence of insurability
and waiting periods will be waived for such continuing employees.
Each of Centreville Bank’s benefit
plans in which employees of PB Bancorp or Putnam Bank are eligible to participate will recognize the service of such employees
with PB Bancorp or Putnam Bank, as applicable (to the same extent as such service was credited for such purpose immediately prior
to the effective time of the merger), for purposes of determining eligibility to participate in such benefit plans and the vesting
of benefits, but not for purposes of accrual of benefits under any defined benefit pension plan or to the extent that recognizing
the service of such employees would result in a duplication of benefits.
Severance Benefits. Any
employee of PB Bancorp or Putnam Bank, other than an employee who is a party to a severance or change in control agreement
who, within 12 months following the completion of the merger, is terminated involuntarily and without cause or who
voluntarily terminates his or her employment as a result of not being offered substantially similar employment, determined in
good faith by Centreville Bank, or as a result of a relocation of more than 30 miles from his or her current office, will
receive a lump sum cash severance payment from Centreville Bank equal to two weeks’ pay for each full year of service
with PB Bancorp or Putnam Bank, subject to a minimum of four weeks and a maximum of 26 weeks.
Putnam Bank Tax-Qualified Retirement
Plans. Pursuant to the terms of the Merger Agreement, Putnam Bank is required to take all necessary action to terminate
the Putnam Bank 401(k) Plan, contingent on the closing. The accounts of all participants and beneficiaries in the Putnam Bank 401(k)
Plan will become fully vested upon termination of the plan. As soon as practicable following termination of such plan, the account
balances will be distributed as a participant or beneficiary may direct. Any participant that continues employment with Centreville
Bank and who elects to participate in Centreville Bank’s 401(k) Plan may elect to have his or her account balance rolled
over into such plan.
In addition, in accordance with the Merger
Agreement, the ESOP will be terminated at the closing of the merger and all ESOP participants’ accounts shall be fully vested.
The ESOP will be required to sell a sufficient number of shares in the ESOP suspense account (which would include a sale to PB
Bancorp at $15.25 per share) in order to extinguish the ESOP loan. If shares exist in the ESOP suspense account following the sale,
the remaining shares will be converted to the merger consideration and will be allocated to ESOP participants who are active employees
of Putnam Bank at the termination date of the ESOP, as earnings, in accordance with the terms of the ESOP. In the unlikely event
that the loan repayment amount exceeds the proceeds from the sale of the shares in the ESOP suspense account, the remainder of
the ESOP loan will be forgiven and PB Bancorp will have no further obligation with respect to the ESOP loan.
Change in Control Agreements, Deferred
Compensation Retirement Plan, Settlement Agreements and Consulting and Release Agreement. Centreville Bank will honor the
terms of all PB Bancorp and Putnam Bank change in control agreements and the Putnam Bank Amended and Restated Deferred Compensation
Retirement Plan, subject to the terms of the Merger Agreement. Centreville Bank also agreed that the timing and amount of the payments
under the Putnam Bank Amended and Restated Deferred Compensation Retirement Plan will not be accelerated and will continue to be
made in accordance with the terms of such plan.
Concurrently with the execution of the Merger
Agreement, certain officers of PB Bancorp and Putnam Bank, including Mr. Borner and Mr. Halloran, executed a settlement agreement
to accept in full settlement of his or her rights under his or her change in control agreement, and Mr. Borner executed a consulting
and release agreement that will become effective as of the effective time of the merger.
Director and
Officer Indemnification and Insurance. Centreville
Bank has agreed that, to the fullest extent permitted by applicable law, it will indemnify and hold harmless and advance expenses
as incurred, to the extent such persons are indemnified as of the date of the Merger Agreement pursuant to the governing documents
of PB Bancorp, Putnam Bank or their subsidiaries, each current and former directors, officers and employees of PB Bancorp and its
subsidiaries following the completion of the merger, and will maintain PB Bancorp’s existing directors’ and officers’
liability insurance for six years following the completion of the merger, subject to a limit on premium payments. See “Interests
of PB Bancorp’s Directors and Executive Officers in the Merger—Indemnification and Insurance of Directors and Officers”
above for a complete description.
Certain Additional
Covenants. The Merger Agreement also contains additional
covenants, including covenants relating to the filing of this proxy statement, filing certain reports with the SEC, providing notice
of a material adverse effect or a breach of a representation, warranty or agreement, obtaining required consents, access to information
of the other company and public announcements with respect to the transactions contemplated by the Merger Agreement.
PB Bancorp’s Stockholder Meeting and Recommendation
of PB Bancorp’s Board of Directors
PB Bancorp has
agreed to hold a meeting of its stockholders to vote on approval of the Merger Agreement and the merger as promptly as
practicable. PB Bancorp will use commercially reasonable efforts to solicit the approval of the Merger Agreement and the
merger by its stockholders, including by recommending that its stockholders approve the Merger Agreement and the merger
(subject to the provisions governing making a change in PB Bancorp’s recommendation as described below).
PB Bancorp’s Board
of Directors has unanimously agreed to recommend that PB Bancorp’s stockholders vote in favor of approval of the Merger Agreement
and the merger. However, if PB Bancorp receives a superior proposal (as defined below) and its Board of Directors determines, in
good faith, based upon the advice of outside counsel and, with respect to financial matters, its financial advisor, that it would
violate the Board’s fiduciary duties under applicable law to continue to recommend the Merger Agreement and the merger, then
the Board of Directors may submit the Merger Agreement and the merger to the stockholders without recommendation, or with an adverse
recommendation, in which event the Board of Directors may communicate the basis for the change in the recommendation to the extent
required by law. PB Bancorp’s Board of Directors may not take any of the foregoing actions unless (1) PB Bancorp gives Centreville
Bank at least three business days’ prior written notice of its intention to take such action and a reasonable description
of the events or circumstances giving rise to its determination to take such action (including its basis for determining that the
acquisition proposal constitutes a superior proposal); (2) during such three business day period, PB Bancorp has considered and
negotiated (and has caused its representatives to consider and negotiate) with Centreville Bank in good faith (to the extent Centreville
Bank desires to negotiate) regarding any adjustments or modifications to the terms and conditions of the Merger Agreement; and
(3) at the end of such notice period, PB Bancorp’s Board of Directors takes into account any amendment or modification to
the Merger Agreement proposed by Centreville Bank, and after receiving the advice of its outside counsel and, with respect to financial
matters, its financial advisor, again determines in good faith that it would nevertheless result in a violation of its fiduciary
duties under applicable law to continue to recommend the Merger Agreement.
Agreement Not to Solicit Other Offers
PB Bancorp has agreed
that it will not, and will cause each of its subsidiaries and its and their officers, directors, agents, advisors and representatives
not to, directly or indirectly:
|
|
·
|
initiate, solicit, knowingly encourage or knowingly facilitate inquiries or proposals with respect
to an acquisition proposal (as defined below);
|
|
|
·
|
engage or participate in any negotiations regarding an acquisition proposal; or
|
|
|
·
|
provide any confidential or nonpublic information or data to, or have or participate in any discussions
with, any person relating to any acquisition proposal.
|
Notwithstanding the foregoing
provisions, prior to the approval of the Merger Agreement by the PB Bancorp stockholders and after PB Bancorp and its Board of
Directors has concluded in good faith (after receiving the advice of its outside counsel and, with respect to financial matters,
its financial advisor) that such acquisition proposal constitutes or is reasonably likely to lead to a superior proposal and that
failure to take such actions would violate the Board’s fiduciary duties under applicable law, PB Bancorp may, with respect
to an unsolicited bona fide written acquisition proposal, furnish or cause to be furnished nonpublic information or data and participate
in discussions; provided that prior to providing any confidential information or data, PB Bancorp will have entered into a confidentiality
agreement with such third party on terms no less favorable to PB Bancorp than the confidentiality agreement with Centreville Bank
and which will not provide such person with any exclusive right to negotiate with PB Bancorp.
PB Bancorp and its representatives
have agreed to immediately cease and cause to be terminated any activities, discussions or negotiations that had been conducted
before signing of the Merger Agreement with any third party with respect to any acquisition proposal and will make all reasonable
best efforts to enforce any confidentiality, standstill or other similar agreement related to an acquisition proposal.
PB Bancorp must advise
Centreville Bank within 24 hours of the receipt of any acquisition proposal or any inquiry that could reasonably be expected to
lead to an acquisition proposal, and the substance of such proposal. PB Bancorp has also agreed to keep Centreville Bank reasonably
apprised of any developments related to an acquisition proposal.
For purposes of the Merger
Agreement, an “acquisition proposal” means any offer, proposal or inquiry relating to any third-party indication of
interest in, (1) any acquisition or purchase, direct or indirect, of 25% or more of the consolidated assets of PB Bancorp
and its subsidiaries or 25% or more of any class of equity or voting securities of PB Bancorp or its subsidiaries whose assets,
individually or in the aggregate, constitute more than 25% of the consolidated assets of PB Bancorp, (2) any tender offer (including
a self-tender offer) or exchange offer that, if consummated, would result in such third party beneficially owning 25% or more
of any class of equity or voting securities of PB Bancorp or one or more of its subsidiaries whose assets, individually or in the
aggregate, constitute more than 25% of the consolidated assets of PB Bancorp, or (3) a merger, consolidation, share exchange,
business combination, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving PB Bancorp
its subsidiaries whose assets, individually or in the aggregate, constitute more than 25% of the consolidated assets of PB Bancorp.
For purposes of the Merger Agreement, a
“superior proposal” means any unsolicited bona fide written offer or proposal made by a third party to consummate an
acquisition proposal that PB Bancorp’s Board of Directors determines in good faith (after receiving the advice of its outside
counsel and, with respect to financial matters, its financial advisor) (1) would, if consummated, result in the acquisition of
all, but not less than all, of the issued and outstanding shares of PB Bancorp’s common stock or all, or substantially all,
of the assets of PB Bancorp; (2) would result in a transaction that (a) involves consideration to the holders of the shares of
PB Bancorp common stock that is more favorable, from a financial point of view, than the consideration to be paid to the stockholders
of PB Bancorp pursuant to the Merger Agreement, considering, among other things, the nature of the consideration being offered
and which proposal is not conditioned upon obtaining financing and (b) is, in light of the other terms of such proposal, more favorable
to the stockholders of PB Bancorp than the merger and the other transactions contemplated by the Merger Agreement considering,
among other things, and any material regulatory approvals or other risks associated with the timing of the proposed transaction
beyond, or in addition to, those specifically contemplated hereby; and (3) is reasonably likely to be completed on the terms proposed,
in each case, taking into account all legal, financial, regulatory and other aspects of the acquisition proposal.
Appointment of Trustee
The Merger Agreement provides that Centreville
Bank will take all action necessary to appoint one director of PB Bancorp to its Board of Trustees, effective as of and conditioned
upon the closing of the merger. Prior to closing, Centreville Bank will also offer each other PB Bancorp director the opportunity
to serve as a corporator of Centreville Bank.
Conditions to Complete the Merger
Centreville Bank’s
and PB Bancorp’s respective obligations to complete the merger are subject to the fulfillment or waiver of the following
conditions, among others:
|
|
·
|
the approval of the Merger Agreement by PB Bancorp’s stockholders;
|
|
|
·
|
the receipt of required regulatory approvals and the expiration of all related statutory waiting periods;
|
|
|
·
|
the absence of (a) any order, injunction or decree by any governmental entity or (b) any law, statute,
rule, regulation, order, injunction or decree enacted, entered, promulgated or enforced by any governmental entity, that prohibits
the consummation of the transactions contemplated by the Merger Agreement; and
|
|
|
·
|
the accuracy of the representations and warranties of the parties in the Merger Agreement as of the
closing date of the merger, subject to the materiality standards provided in the Merger Agreement, and the performance of the parties
in all material respects of all obligations required to be performed by each party at or prior to the effective time of the merger
under the Merger Agreement (and the receipt by each party of certificates from the other party to such effect).
|
The obligation of Centreville
Bank to complete the merger is also conditioned on, among other things, no requisite regulatory approval containing any materially
burdensome regulatory condition and all third party consents and approvals required pursuant to the agreement being obtained.
The obligation of PB Bancorp
to complete the merger is also conditioned on, among other things, Centreville Bank delivering the merger consideration to the
paying agent not less than one business day prior to the closing date of the merger.
Neither PB Bancorp nor
Centreville Bank can provide assurance as to when or if all of the conditions to the merger can or will be satisfied or may be
waived by the appropriate party.
Termination of the Merger Agreement
The Merger Agreement can
be terminated at any time prior to completion of the merger by mutual consent, or by either party in the following circumstances:
|
|
·
|
if approval by a governmental authority required for the consummation of the transactions contemplated by the Merger Agreement
has been denied and the denial has become final and nonappealable;
|
|
|
·
|
if the merger has not been completed by July 31, 2020, unless the failure of the closing to occur by such date is due to the
failure of the party seeking to terminate the Merger Agreement to perform its obligations under the Merger Agreement;
|
|
|
·
|
if there is a breach by the non-terminating party of any of the covenants or agreements or any of the representations or warranties
set forth in the Merger Agreement, which breach, either individually or in the aggregate, would constitute the failure of a condition
to the obligations of the terminating party under the Merger Agreement, and which is not cured within 45 days (or such fewer days
as remain prior to July 31, 2020) following written notice to the breaching party or by its nature or timing cannot be cured during
such period; or
|
|
|
·
|
if PB Bancorp stockholders fail to approve the Merger Agreement at the annual meeting, provided that PB Bancorp can only terminate
under this section it has fulfilled its obligations related to calling and holding a stockholder meeting.
|
Centreville Bank may terminate
the Merger Agreement prior to the annual meeting if PB Bancorp breaches its covenants regarding the solicitation of competing offers
or its obligation to call a stockholders’ meeting, or if its Board of Directors (1) does not recommend approval of the Merger
Agreement to its stockholders at the meeting or withdraws, modifies or amends its recommendation, (2) fails to recommend against
acceptance of any publicly disclosed tender offer for shares of PB Bancorp common stock or (3) recommends or endorses a third-party
proposal.
In addition, PB Bancorp
may terminate the Merger Agreement after it has received and accepted a superior proposal; provided it has not breached its obligations
with respect to soliciting third-party proposals, has approved a Merger Agreement with such third party and pays the termination
fee as discussed below.
Effect of Termination
If the Merger Agreement
is terminated, it will become void, except that (1) neither Centreville Bank or PB Bancorp will be relieved or released from any
liabilities or damages arising out of its fraud or any knowing, intentional and material breach of any of its representations,
warranties, covenants or agreements in the Merger Agreement, and (2) designated provisions of the Merger Agreement will survive
the termination, including those relating to payment of fees and expenses and the confidential treatment of information.
Termination Fee
In the event that the Merger Agreement is
terminated under certain circumstances, PB Bancorp must pay Centreville Bank in immediately available funds a termination fee of
$4.44 million.
PB Bancorp must pay the termination fee
if: (1) Centreville Bank terminates the Merger Agreement as a result of a breach by PB Bancorp of its covenants regarding the solicitation
of competing offers or its obligation to call a stockholders’ meeting, if PB Bancorp’s Board of Directors fails to
recommend against acceptance of any publicly disclosed tender offer for shares of PB Bancorp common stock, or if PB Bancorp’s
Board of Directors fails to recommend approval of the merger or withdraws, qualifies, or revises its recommendation to approve
the merger; or (2) PB Bancorp terminates the Merger Agreement after it has received and accepted a superior proposal.
PB Bancorp also must pay the termination
fee if: (1) prior to the effective time of the merger, any person shall have made an acquisition proposal, which proposal
has been publicly disclosed or made known to management or the Board of Directors of PB Bancorp or its stockholders generally,
or any person shall have publicly announced or made known to management or the Board of Directors of PB Bancorp an intention (whether
or not conditional) to make an acquisition proposal, (2) thereafter the Merger Agreement is terminated by (a) either
party after July 31, 2020, (b) either party if PB Bancorp has held its stockholders meeting to consider the Merger Agreement and
the merger and stockholders have not approved the Merger Agreement and the merger by the required vote, or (c) Centreville Bank
due to a willful breach by PB Bancorp of any of the covenants or agreements or any of the representations or warranties set forth
in the Merger Agreement, which breach would, individually or in the aggregate with all other breaches, result in the conditions
to closing the merger not being satisfied, and which breach either is not cured within a specified time period or cannot be cured,
and (3) within 12 months after such termination of the Merger Agreement, PB Bancorp enters into a definitive agreement or
consummates a transaction with respect to an acquisition proposal (whether or not the same acquisition proposal as that referred
to above).
Amendment, Waiver and Extension of the Merger Agreement
Subject to applicable
law, Centreville Bank and PB Bancorp may amend the Merger Agreement. Such amendment must be in writing and signed by each of the
parties to the Merger Agreement. However, after any approval of the Merger Agreement by PB Bancorp’s stockholders, there
may not be, without further approval by PB Bancorp’s stockholders, any amendment of the Merger Agreement that requires further
approval under applicable law.
At any time prior to the
effective time of the merger, each party, to the extent legally allowed, may extend the time for the performance of any of the
obligations or other acts of the other party; waive any inaccuracies in the representations and warranties of the other party;
and waive compliance by the other party with any of the agreements and conditions contained in the Merger Agreement. Any such extension
or waiver must be in writing and signed by the agreeing party. However, after any approval of the Merger Agreement by PB Bancorp’s
stockholders, there may not be, without further approval by PB Bancorp’s stockholders, any extension or waiver of the Merger
Agreement that requires further approval under applicable law.
Expenses and Fees
Except as set forth above
regarding the termination fee, all costs and expenses incurred in connection with the Merger Agreement and the transactions contemplated
thereby will be paid by the party incurring such expense.
OWNERSHIP
OF PB BANCORP COMMON STOCK BY
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information
as of December 16, 2019, with respect to persons known by PB Bancorp to be the beneficial owners of more than 5% of PB Bancorp’s
outstanding common stock. A person may be considered to own any shares of common stock over which he or she has, directly or indirectly,
sole or shared voting or investing power. Percentages are based on 7,447,204 shares of PB Bancorp common stock outstanding for
voting purposes as of as of December 16, 2019.
|
Name and Address of Beneficial Owners
|
|
Amount of Shares
Owned and Nature
of Beneficial
Ownership
|
|
|
Percent of Shares
of Common Stock
Outstanding
|
|
|
FMR LLC(1)
|
|
|
661,331
|
|
|
|
8.9
|
%
|
|
245 Summer Street
|
|
|
|
|
|
|
|
|
|
Boston, Massachusetts 02210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Putnam Bank Employee Stock Ownership Plan(2)
|
|
|
605,986
|
|
|
|
8.1
|
%
|
|
40 Main Street
|
|
|
|
|
|
|
|
|
|
Putnam, Connecticut 06260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M3 Partners, LP(3)
|
|
|
523,878
|
|
|
|
7.0
|
%
|
|
10 Exchange Place, Suite 510
|
|
|
|
|
|
|
|
|
|
Salt Lake City, Utah 84111
|
|
|
|
|
|
|
|
|
|
(1)
|
As disclosed in a schedule 13G/A filed with the SEC on February 13, 2019.
|
|
(2)
|
As disclosed in a schedule 13G/A filed with the SEC on February 12, 2019.
|
|
(3)
|
As disclosed in a schedule 13G/A filed with the SEC on January 30, 2019.
|
Management of PB Bancorp,
Inc. knows of no arrangements, including any pledge by any person or securities of PB Bancorp, Inc., the operation of which may
at a subsequent date result in a change in control of the registrant.
The following table provides
information as of December 16, 2019 regarding stock ownership by our directors and executive officers. A person may be considered
to own any shares of common stock over which he or she has, directly or indirectly, sole or shared voting power. Percentage ownership
in the table is based on 7,447,204 shares of common stock outstanding as of December 16, 2019, plus, for each person, the number
of shares that such person may acquire within 60 days by exercising stock options.
|
Name
|
|
Shares of Common Stock
Beneficially Owned on
Record Date(1) (2) (3)
|
|
|
Percent
|
|
|
Charles W. Bentley, Jr.
|
|
|
133,127
|
(4)
|
|
|
1.8
|
%
|
|
Paul M. Kelly
|
|
|
74,468
|
|
|
|
1.0
|
|
|
Charles H. Puffer
|
|
|
140,165
|
|
|
|
1.9
|
|
|
Robert J. Halloran, Jr.
|
|
|
53,363
|
(5)
|
|
|
0.7
|
|
|
Jitendra K. Sinha
|
|
|
53,414
|
|
|
|
0.7
|
|
|
Thomas A. Borner
|
|
|
333,233
|
(6)
|
|
|
4.5
|
|
|
Richard A. Loomis
|
|
|
63,418
|
|
|
|
0.9
|
|
|
John P. Miller
|
|
|
42,948
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
All directors and executive officers as a group (8 persons)
|
|
|
894,136
|
|
|
|
12.0
|
%
|
|
(1)
|
Except as otherwise noted in these footnotes, the individual has sole voting and investment power over the shares.
|
|
(2)
|
Included in the shares beneficially owned by the listed individuals includes shares of restricted stock, which were granted
under the PB Bancorp, Inc. 2017 Stock-Based Incentive Plan, as follows: Mr. Bentley 5,439, Mr. Borner 18,300, Mr. Halloran
7,560, Mr. Kelly 5,439, Mr. Loomis 5,439, Mr. Miller 5,439, Mr. Puffer 5,439, Mr. Sinha 5,439.
|
|
(3)
|
Included in the shares beneficially owned by the listed individuals are options to purchase shares of PB Bancorp stock, which
are exercisable within 60 days of September 6, 2019, as follows: Mr. Borner 28,060, Mr. Kelly 8,340, Mr. Loomis 8,340, Mr.
Puffer 8,340, Mr. Halloran 11,592, Mr. Miller 8,340, Mr. Sinha 8,340 and Mr. Bentley 8,340.
|
|
(4)
|
Includes 26,957 shares held by Mr. Bentley’s spouse.
|
|
(5)
|
Includes 11,137 allocated shares held in the ESOP and 2,500 shares held by Mr. Halloran’s spouse.
|
|
(6)
|
Includes 12,979 allocated shares held in the ESOP, 248,478 shares owned jointly with Mr. Borner’s spouse and 13,216 shares
held by Mr. Borner’s spouse.
|
STOCKHOLDER
PROPOSALS
The merger is expected to be consummated
prior to the next regularly scheduled annual meeting of our stockholders, in which case the annual meeting would not be convened.
If the merger is not consummated prior to the next regularly scheduled annual meeting of our stockholders, any proposal which a
stockholder wishes to have included in our proxy materials for the next annual meeting must have been received at PB Bancorp’s
executive office, 40 Main Street, Putnam, Connecticut 06260, no later than September 5, 2020. However, if next year’s annual
meeting is held on a date more than 30 calendar days from February 7, 2020, a stockholder proposal must be received by a reasonable
time before PB Bancorp begins to print and mail its proxy solicitation materials. Any stockholder proposals will be subject to
the requirements of the proxy rules adopted under the Securities Exchange Act of 1934, as amended.
ADVANCE
NOTICE OF BUSINESS TO BE CONDUCTED AT AN ANNUAL MEETING
PB Bancorp’s Bylaws provide an
advance notice procedure for certain business, or nominations to the Board of Directors, to be brought before an annual
meeting of stockholders. In order for a stockholder to properly bring business before an annual meeting, or to propose a
nominee to the Board of Directors, PB Bancorp’s Secretary must receive written notice not earlier than the
120th day nor later than the 110th day prior to date of the annual meeting; provided, however, that in
the event the date of the annual meeting is advanced more than 30 days prior to the anniversary of the preceding year’s
annual meeting, then, to be timely, notice by the stockholder must be so received not later than the tenth day following the
day on which public announcement of the date of such meeting is first made.
The notice with respect to stockholder proposals
that are not nominations for director must set forth as to each matter such stockholder proposes to bring before the annual meeting:
(1) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting; (2) the name and address of such stockholder as they appear on PB Bancorp’s books and
of the beneficial owner, if any, on whose behalf the proposal is made; (3) the class or series and number of shares of capital
stock of PB Bancorp which are owned beneficially or of record by such stockholder and such beneficial owner; (4) a description
of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection
with the proposal of such business by such stockholder and any material interest of such stockholder in such business; and (5) a
representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before
the meeting.
The notice with respect to director nominations
must include: (a) as to each person whom the stockholder proposes to nominate for election as a director, (1) all information
relating to such person that would indicate such person’s qualification to serve on the Board of Directors of PB Bancorp;
(2) an affidavit that such person would not be disqualified under the provisions of Article II, Section 12 of PB Bancorp’s
Bylaws; (3) such information relating to such person that is required to be disclosed in connection with solicitations of proxies
for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act
of 1934, as amended, or any successor rule or regulation; and (4) a written consent of each proposed nominee to be named as a nominee
and to serve as a director if elected; and (b) as to the stockholder giving the notice: (1) the name and address of such
stockholder as they appear on PB Bancorp’s books and of the beneficial owner, if any, on whose behalf the nomination is made;
(2) the class or series and number of shares of capital stock of PB Bancorp which are owned beneficially or of record by such
stockholder and such beneficial owner; (3) a description of all arrangements or understandings between such stockholder and
each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made
by such stockholder; (4) a representation that such stockholder intends to appear in person or by proxy at the meeting to
nominate the persons named in its notice; and (5) any other information relating to such stockholder that would be required
to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election
of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, or any successor rule or regulation.
The merger is expected to be consummated
prior to the next regularly scheduled annual meeting of our stockholders, in which case the annual meeting would not be convened.
However, if the merger is not consummated prior to the 2020 annual meeting of stockholders, such meeting is expected to be held
on or about October 30, 2020. If next year’s annual meeting is held on a date more than 30 calendar days from February 7,
2020, a stockholder proposal must be received no later than the tenth day following the day on which public announcement of the
date of such meeting is first made.
Appendix A
AGREEMENT
AND PLAN OF MERGER
by and
among
CENTREVILLE
BANK,
PB
BANCORP, INC.,
and
PUTNAM
BANK
Dated as of October 22, 2019
TABLE OF CONTENTS
|
ARTICLE
I THE MERGER
|
A-1
|
|
|
|
|
1.1
|
The Merger; Transfer and Assumption of Bank Assets and Liabilities
|
A-1
|
|
|
|
|
|
1.2
|
Closing
|
A-2
|
|
|
|
|
|
1.3
|
Effective Time
|
A-2
|
|
|
|
|
|
1.4
|
Effects of the Merger
|
A-2
|
|
|
|
|
|
1.5
|
Articles of Incorporation and Bylaws
|
A-2
|
|
|
|
|
|
1.6
|
Directors of the Surviving Corporation
|
A-2
|
|
|
|
|
|
1.7
|
Officers of the Surviving Corporation
|
A-3
|
|
|
|
|
|
ARTICLE
II MERGER CONSIDERATION; EXCHANGE PROCEDURES
|
A-3
|
|
|
|
|
2.1
|
Conversion of Seller Common Stock
|
A-3
|
|
|
|
|
|
2.2
|
Exchange Procedures
|
A-4
|
|
|
|
|
|
2.3
|
No Appraisal Rights
|
A-6
|
|
|
|
|
|
2.4
|
Reservation of Right to Revise Structure
|
A-6
|
|
|
|
|
|
ARTICLE
III REPRESENTATIONS AND WARRANTIES OF SELLER AND SELLER BANK
|
A-6
|
|
|
|
|
3.1
|
Making of Representations and Warranties
|
A-6
|
|
|
|
|
|
3.2
|
Corporate Organization
|
A-8
|
|
|
|
|
|
3.3
|
Capitalization
|
A-9
|
|
|
|
|
|
3.4
|
Authority; No Violation
|
A-10
|
|
|
|
|
|
3.5
|
Consents and Approvals
|
A-11
|
|
|
|
|
|
3.6
|
Reports
|
A-12
|
|
|
|
|
|
3.7
|
Financial Statements
|
A-12
|
|
|
|
|
|
3.8
|
Broker’s Fees
|
A-14
|
|
|
|
|
|
3.9
|
Absence of Certain Changes or Events
|
A-14
|
|
|
|
|
|
3.10
|
Legal and Regulatory Proceedings
|
A-14
|
|
|
|
|
|
3.11
|
Taxes and Tax Returns
|
A-14
|
|
|
|
|
|
3.12
|
Employees
|
A-17
|
|
|
|
|
|
3.13
|
SEC Reports
|
A-21
|
|
|
|
|
|
3.14
|
Compliance with Applicable Law
|
A-21
|
|
|
|
|
|
3.15
|
Certain Contracts
|
A-23
|
|
|
|
|
|
3.16
|
Agreements with Regulatory Agencies
|
A-25
|
|
3.17
|
Risk Management Instruments
|
A-25
|
|
|
|
|
|
3.18
|
Environmental Matters
|
A-26
|
|
|
|
|
|
3.19
|
Investment Securities and Commodities
|
A-28
|
|
|
|
|
|
3.20
|
Real Property
|
A-28
|
|
|
|
|
|
3.21
|
Intellectual Property; Seller Systems; Cybersecurity
|
A-29
|
|
|
|
|
|
3.22
|
Related Party Transactions
|
A-31
|
|
|
|
|
|
3.23
|
State Takeover Laws
|
A-31
|
|
|
|
|
|
3.24
|
Charitable Organizations
|
A-31
|
|
|
|
|
|
3.25
|
Opinion
|
A-31
|
|
|
|
|
|
3.26
|
Seller Information
|
A-31
|
|
|
|
|
|
3.27
|
Loan Portfolio
|
A-32
|
|
|
|
|
|
3.28
|
Insurance
|
A-33
|
|
|
|
|
|
3.29
|
Deposits
|
A-34
|
|
|
|
|
|
ARTICLE
IV REPRESENTATIONS AND WARRANTIES OF BUYER
|
A-34
|
|
|
|
|
4.1
|
Making of Representations and Warranties
|
A-34
|
|
|
|
|
|
4.2
|
Corporate Organization
|
A-35
|
|
|
|
|
|
4.3
|
Authority; No Violation
|
A-35
|
|
|
|
|
|
4.4
|
Consents and Approvals
|
A-36
|
|
|
|
|
|
4.5
|
Reports
|
A-36
|
|
|
|
|
|
4.6
|
Financial Statements
|
A-37
|
|
|
|
|
|
4.7
|
Broker’s Fees
|
A-37
|
|
|
|
|
|
4.8
|
Absence of Certain Changes or Events
|
A-37
|
|
|
|
|
|
4.9
|
Legal and Regulatory Proceedings
|
A-37
|
|
|
|
|
|
4.10
|
Employees
|
A-38
|
|
|
|
|
|
4.11
|
Compliance with Applicable Law
|
A-38
|
|
|
|
|
|
4.12
|
Regulatory Capitalization
|
A-39
|
|
|
|
|
|
4.13
|
Agreements with Regulatory Agencies
|
A-39
|
|
|
|
|
|
4.14
|
Sufficient Funds
|
A-39
|
|
|
|
|
|
4.15
|
Insurance
|
A-39
|
|
|
|
|
|
4.16
|
Buyer Information
|
A-39
|
|
|
|
|
|
ARTICLE
V COVENANTS RELATING TO CONDUCT OF BUSINESS
|
A-39
|
|
|
|
|
5.1
|
Conduct of Business of Seller Prior to the Effective Time
|
A-39
|
|
5.2
|
Seller Forbearances
|
A-40
|
|
|
|
|
|
ARTICLE
VI ADDITIONAL AGREEMENTS
|
A-44
|
|
|
|
|
6.1
|
Regulatory Matters
|
A-44
|
|
|
|
|
|
6.2
|
Access to Information; Confidentiality
|
A-45
|
|
|
|
|
|
6.3
|
Seller Shareholders’ Approval
|
A-46
|
|
|
|
|
|
6.4
|
Legal Conditions to Merger
|
A-48
|
|
|
|
|
|
6.5
|
Exchange Act Deregistration
|
A-49
|
|
|
|
|
|
6.6
|
Employee Matters
|
A-49
|
|
|
|
|
|
6.7
|
Indemnification; Directors’ and Officers’ Insurance
|
A-51
|
|
|
|
|
|
6.8
|
Additional Agreements
|
A-53
|
|
|
|
|
|
6.9
|
Advice of Changes
|
A-53
|
|
|
|
|
|
6.10
|
Litigation and Claims
|
A-53
|
|
|
|
|
|
6.11
|
Dividends
|
A-53
|
|
|
|
|
|
6.12
|
Corporate Governance
|
A-54
|
|
|
|
|
|
6.13
|
Acquisition Proposals
|
A-54
|
|
|
|
|
|
6.14
|
Board and Committee Meetings
|
A-56
|
|
|
|
|
|
6.15
|
Public Announcements
|
A-56
|
|
|
|
|
|
6.16
|
Operating Functions
|
A-56
|
|
|
|
|
|
6.17
|
Restructuring Efforts
|
A-56
|
|
|
|
|
|
6.18
|
Takeover Laws
|
A-57
|
|
|
|
|
|
6.19
|
Section 16b-3
|
A-57
|
|
|
|
|
|
6.20
|
Classified Loans
|
A-57
|
|
|
|
|
|
6.21
|
ESOP Matters
|
A-57
|
|
|
|
|
|
6.22
|
Coordination
|
A-58
|
|
|
|
|
|
6.23
|
Environmental Assessments
|
A-59
|
|
|
|
|
|
6.24
|
Certain Tax Matters
|
A-59
|
|
|
|
|
|
6.25
|
Formation of Merger Sub; Accession
|
A-60
|
|
|
|
|
|
6.26
|
Other Actions
|
A-60
|
|
|
|
|
|
ARTICLE
VII CONDITIONS TO CONSUMMATION OF THE MERGER
|
A-60
|
|
|
|
|
7.1
|
Conditions to Each Party’s Obligations to Effect the Merger
|
A-60
|
|
|
|
|
|
7.2
|
Conditions to the Obligations of Buyer
|
A-61
|
|
|
|
|
|
7.3
|
Conditions to the Obligations of Seller and Seller Bank
|
A-61
|
|
7.4
|
Frustration of Closing Conditions
|
A-62
|
|
|
|
|
|
ARTICLE
VIII TERMINATION
|
A-62
|
|
|
|
|
8.1
|
Termination
|
A-62
|
|
|
|
|
|
8.2
|
Effect of Termination and Abandonment
|
A-63
|
|
|
|
|
|
ARTICLE
IX MISCELLANEOUS
|
A-65
|
|
|
|
|
9.1
|
Amendment
|
A-65
|
|
|
|
|
|
9.2
|
Extension; Waiver
|
A-65
|
|
|
|
|
|
9.3
|
Nonsurvival of Representations, Warranties and Agreements
|
A-65
|
|
|
|
|
|
9.4
|
Expenses
|
A-65
|
|
|
|
|
|
9.5
|
Notices
|
A-66
|
|
|
|
|
|
9.6
|
Interpretation
|
A-67
|
|
|
|
|
|
9.7
|
Counterparts
|
A-67
|
|
|
|
|
|
9.8
|
Entire Agreement
|
A-68
|
|
|
|
|
|
9.9
|
Governing Law; Consent to Jurisdiction
|
A-68
|
|
|
|
|
|
9.10
|
Waiver of Jury Trial
|
A-68
|
|
|
|
|
|
9.11
|
Assignment; Third-Party Beneficiaries
|
A-68
|
|
|
|
|
|
9.12
|
Specific Performance
|
A-69
|
|
|
|
|
|
9.13
|
Severability
|
A-69
|
|
|
|
|
|
9.14
|
Confidential Supervisory Information
|
A-69
|
|
|
|
|
|
9.15
|
Delivery by Facsimile or Electronic Transmission
|
A-69
|
|
Exhibit A
|
Form of Voting Agreement
|
|
Exhibit B
|
Form of Release
|
INDEX OF DEFINED TERMS
|
Acquisition
Proposal
|
A-55
|
|
Adverse
Recommendation Change
|
A-47
|
|
affiliate
|
A-67
|
|
Agreement
|
A-1
|
|
Articles
of Merger
|
A-2
|
|
Audited
Financial Statements
|
A-12
|
|
Bank
Combination
|
A-2
|
|
BOLI
|
A-33
|
|
business
day
|
A-67
|
|
Buyer
|
A-1
|
|
Buyer
401(k) Plan
|
A-50
|
|
Buyer
Benefit Plans
|
A-38
|
|
Buyer
Disclosure Letter
|
A-34
|
|
Buyer
Financial Statements
|
A-37
|
|
Buyer
Regulatory Agreement
|
A-39
|
|
Cause
|
A-49
|
|
CERCLA
|
A-27
|
|
Certificate
|
A-4
|
|
Classified
Loans
|
A-32
|
|
Closing
|
A-2
|
|
Closing
Date
|
A-2
|
|
Code
|
A-16
|
|
Confidentiality
Agreement
|
A-46
|
|
Deferred
Plan
|
A-51
|
|
Derivative
Contract
|
A-25
|
|
Designated
Seller Director
|
A-54
|
|
Dissolution
|
A-2
|
|
DOL
|
A-18
|
|
Effective
Time
|
A-2
|
|
Enforceability
Exceptions
|
A-10
|
|
Environment
|
A-27
|
|
Environmental
Laws
|
A-27
|
|
ERISA
|
A-18
|
|
ESOP
|
A-9
|
|
ESOP
Loan
|
A-21
|
|
ESOP
Termination Date
|
A-57
|
|
Exchange
Act
|
A-13
|
|
Exchange
Fund
|
A-4
|
|
Exception
Shares
|
A-3
|
|
FDIA
|
A-8
|
|
FDIC
|
A-8
|
|
Federal
Reserve Board
|
A-11
|
|
FHLB
|
A-8
|
|
Financial
Statements
|
A-12
|
|
FINRA
|
A-11
|
|
GAAP
|
A-7
|
|
Governmental
Entity
|
A-11
|
|
Hazardous
Material
|
A-27
|
|
Health
Plan
|
A-51
|
|
Indemnified
Parties
|
A-49
|
|
Intellectual
Property
|
A-30
|
|
IRS
|
A-18
|
|
knowledge
|
A-67
|
|
Leased
Real Property
|
A-28
|
|
Liens
|
A-10
|
|
Loan
Participation
|
A-32
|
|
Loan
Property
|
A-27
|
|
Loans
|
A-32
|
|
made
available
|
A-67
|
|
Material
Adverse Effect
|
A-7
|
|
Materially
Burdensome Regulatory Condition
|
A-45
|
|
Meeting
|
A-47
|
|
Merger
|
A-1
|
|
Merger
Consideration
|
A-3
|
|
Merger
Sub
|
A-1
|
|
MGCL
|
A-1
|
|
Most
Recent Balance Sheet
|
A-12
|
|
Multiemployer
Plan
|
A-19
|
|
Multiple
Employer Plan
|
A-19
|
|
Oil
|
A-27
|
|
Option
Consideration
|
A-3
|
|
Owned
Real Property
|
A-28
|
|
Paying
Agent
|
A-4
|
|
PBGC
|
A-18
|
|
Permitted
Encumbrances
|
A-28
|
|
person
|
A-67
|
|
Personal
Data
|
A-22
|
|
Phase
I Assessment
|
A-43
|
|
Phase
II Assessment
|
A-59
|
|
Premium
Cap
|
A-52
|
|
Proxy
Materials
|
A-47
|
|
Proxy
Statement
|
A-11
|
|
Real
Estate Leases
|
A-28
|
|
Recommendation
|
A-47
|
|
Regulatory
Agencies
|
A-12
|
|
Requisite
Regulatory Approvals
|
A-44
|
|
Requisite
Seller Vote
|
A-10
|
|
Restrictive
Covenant
|
A-20
|
|
Sarbanes-Oxley
Act
|
A-13
|
|
SDAT
|
A-2
|
|
SEC
|
A-8
|
|
Securities
Act
|
A-21
|
|
Security
Breach
|
A-22
|
|
Seller
401(k) Plan
|
A-50
|
|
Seller
|
A-1
|
|
Seller
Articles
|
A-8
|
|
Seller
Bank
|
A-1
|
|
Seller
Bylaws
|
A-8
|
|
Seller
Benefit Plans
|
A-17
|
|
Seller
Common Stock
|
A-1
|
|
Seller
Contract
|
A-24
|
|
Seller
Disclosure Letter
|
A-6
|
|
Seller
ERISA Affiliate
|
A-19
|
|
Seller
Expenses
|
A-57
|
|
Seller
Health Plan
|
A-52
|
|
Seller
Offering
|
A-10
|
|
Seller
Preferred Stock
|
A-9
|
|
Seller
Qualified Plans
|
A-18
|
|
Seller
Regulatory Agreement
|
A-25
|
|
Seller
Reports
|
A-21
|
|
Seller
Stock Option
|
A-3
|
|
Seller
Stock Plan
|
A-3
|
|
Seller
Systems
|
A-30
|
|
SRO
|
A-11
|
|
Subsidiary
|
A-8
|
|
Superior
Proposal
|
A-55
|
|
Surviving
Corporation
|
A-1
|
|
Suspense
Shares
|
A-57
|
|
Takeover
Laws
|
A-31
|
|
Tax
|
A-17
|
|
Taxes
|
A-17
|
|
Tax
Return
|
A-17
|
|
Termination
Date
|
A-62
|
|
Termination
Fee
|
A-64
|
|
the
date hereof
|
A-67
|
|
Transactions
|
A-3
|
|
Trust
|
A-21
|
|
Trustee
|
A-21
|
|
Voting
Agreement
|
A-1
|
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of
October 22, 2019 (this “Agreement”), by and among Centreville Bank, a Rhode Island-chartered non-member
savings bank (“Buyer”), PB Bancorp, Inc., a Maryland corporation (“Seller”), and Putnam Bank,
a Connecticut-chartered savings bank and wholly owned subsidiary of Seller (“Seller Bank”).
W I T N E S S E T H:
WHEREAS, the Board of Trustees of Buyer
and the Boards of Directors of Seller and Seller Bank unanimously have determined that it is in the best interests of their respective
institutions, constituencies, communities and shareholders, as the case may be, to consummate the strategic business combination
and related transactions provided for herein, pursuant to which (i) Buyer will form a Maryland corporation (“Merger Sub”)
as a wholly owned subsidiary of Buyer, and (ii) Merger Sub will merge with and into Seller (the “Merger”), with
Seller as the surviving entity in the Merger;
WHEREAS, in furtherance thereof, the Board
of Trustees of Buyer and the Boards of Directors of Seller and Seller Bank have approved this Agreement and the transactions contemplated
hereby;
WHEREAS, concurrently with the execution
and delivery of this Agreement, as a condition and inducement for Buyer to enter into this Agreement, each executive officer and
director of Seller has simultaneously herewith entered into a voting agreement with Buyer substantially in the form attached hereto
as Exhibit A (each, a “Voting Agreement”), pursuant to which each such executive officer and director,
solely in his or her capacity as a shareholder of Seller, has agreed to, among other things, vote the shares of Seller common stock,
par value $0.01 per share (the “Seller Common Stock”), held by such executive officer or director in favor of
the approval of this Agreement and the transactions contemplated hereby, upon the terms and subject to the conditions set forth
in the Voting Agreement; and
WHEREAS, the parties desire to make certain
representations, warranties and agreements in connection with the strategic business combination and related transactions provided
for herein and to prescribe certain conditions thereto.
NOW, THEREFORE, in consideration of the
mutual covenants, representations, warranties and agreements contained herein, and intending to be legally bound hereby, the parties
agree as follows:
ARTICLE
I
THE MERGER
1.1 The
Merger; Transfer and Assumption of Bank Assets and Liabilities. Subject to the terms and conditions of this Agreement, in
accordance with the General Laws of Rhode Island and the Maryland General Corporation Law (the “MGCL”), at
the Effective Time, Merger Sub shall merge with and into Seller pursuant to this Agreement. Seller shall survive and
continue its corporate existence under the laws of the State of Maryland (Seller, as the surviving entity in the Merger,
being sometimes referred to herein as the “Surviving Corporation”). Upon consummation of the Merger, the
separate corporate existence of Merger Sub shall terminate. It is the intent of Buyer that (i) immediately after the
Effective Time, Buyer and the Surviving Corporation shall cause Seller Bank to transfer all of Seller Bank’s assets to
Buyer, and Buyer shall assume at that time all of Seller Bank’s liabilities, including all of Seller Bank’s
deposits and any contingent liability (collectively, the “Bank Combination”), and (ii) immediately
after the Bank Combination, Buyer shall cause each of Seller Bank and the Surviving Corporation to dissolve and their
respective corporate existence shall cease (collectively, the “Dissolution”). Commencing upon the
Effective Time and continuing for at least two (2) years after the Closing Date, Buyer will, subject to regulatory approval,
brand Seller Bank’s existing branch offices in Seller Bank’s current market area as “Putnam Bank, a
Division of Centreville Bank” or use a substantially similar name that Buyer in its sole discretion shall determine; provided, however,
that any branch offices established by Buyer after the Effective Date in Seller Bank’s current market area may be
branded as “Centreville Bank”, “Putnam Bank, a Division of Centreville Bank” or a substantially
similar name that Buyer in its sole discretion shall determine.
1.2
Closing. Subject to the terms and conditions of this Agreement, the closing of the transactions contemplated by this
Agreement (the “Closing”) will take place by electronic exchange of documents at 10:00 a.m., Eastern time, on
a date which shall be no later than five (5) business days after the satisfaction or waiver (subject to applicable law) of all
of the conditions set forth in Article VII hereof (other than those conditions that by their nature can only be satisfied
at the Closing, but subject to the satisfaction or waiver thereof), unless another date, time or place is agreed to in writing
by Buyer and Seller. The date on which the Closing occurs is referred to as the “Closing Date.”
1.3
Effective Time. On or (if agreed by Buyer and Seller) prior to the Closing Date, Merger Sub and Seller shall cause
to be filed articles of merger with the State of Maryland Department of Assessments and Taxation (the “SDAT”)
(collectively, the “Articles of Merger”). The Merger shall become effective at such time as specified in the
Articles of Merger in accordance with the relevant provisions of the MGCL, or at such other time as shall be provided by applicable
law (such time hereinafter referred to as the “Effective Time”).
1.4
Effects of the Merger. At and after the Effective Time, the Merger shall have the effects set forth in the applicable
provisions of the MGCL.
1.5
Articles of Incorporation and Bylaws. The Articles of Incorporation of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation, until thereafter amended as provided
therein and in accordance with applicable law. The Bylaws of Merger Sub, as in effect immediately prior to the Effective Time,
shall be the Bylaws of the Surviving Corporation, until thereafter amended as provided therein and in accordance with applicable
law.
1.6
Directors of the Surviving Corporation. The directors of Merger Sub immediately prior to the Effective Time shall
be all of the directors of the Surviving Corporation, each of whom shall serve in accordance with the Articles of Incorporation
and Bylaws of the Surviving Corporation.
1.7
Officers of the Surviving Corporation. The officers of Merger Sub immediately prior to the Effective Time shall be
all of the officers of the Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and Bylaws
of the Surviving Corporation.
ARTICLE
II
MERGER CONSIDERATION; EXCHANGE PROCEDURES
2.1
Conversion of Seller Common Stock. At the Effective Time, by virtue of the Merger and without any action on the part
of Buyer, Seller, Seller Bank or the holder of any securities of Seller:
(a)
Each share of Seller Common Stock issued and outstanding immediately prior to the Effective Time (other than the Exception
Shares and Suspense Shares (each as defined below)), shall become and be converted into, as provided in and subject to the limitations
set forth in this Agreement, the right to receive $15.25, without interest, in cash (the “Merger Consideration”).
(b)
Each share of Seller Common Stock issued and outstanding immediately prior to the Effective Time that is held by Seller
as treasury stock or held by Seller, any Subsidiary of Seller or Buyer (in each case other than shares of Seller Common Stock held
in any employee benefit plans or related trust accounts, managed accounts, mutual funds and the like or otherwise held in any fiduciary
or agency capacity or as a result of debts previously contracted) and each Suspense Share remitted to Seller prior to the Effective
Time for purposes of repayment of the ESOP Loan as contemplated by Section 6.21 (collectively, the “Exception Shares”),
shall automatically be canceled and retired and shall cease to exist, and no Merger Consideration shall be paid or provided with
respect thereto.
(c)
At the Effective Time, each option to purchase shares of Seller Common Stock under Seller’s 2017 Equity Incentive
Plan and 2005 Stock-Based Incentive Plan (collectively, the “Seller Stock Plan”) that is outstanding and unexercised
immediately prior to the Effective Time (a “Seller Stock Option”), whether vested or unvested, shall by
virtue of the Merger and without any action on the part of the holder thereof and without regard to any future vesting date thereof,
automatically be cancelled and converted into the right to receive a cash payment in an amount determined by multiplying (i) the
number of shares of Seller Common Stock subject to such Seller Stock Option, by (ii) the excess, if any, of (A) the Merger Consideration
over (B) the exercise price per share of such Seller Stock Option (the “Option Consideration”); provided,
however, that there shall be withheld from such cash payment any applicable taxes required to be withheld by applicable
law with respect to such payment. The payment of the Option Consideration shall be made by Seller or Seller Bank immediately prior
to the Effective Time, subject to Buyer’s approval of the payment amounts. Seller and Seller Bank will be entitled to deduct
and withhold from the Option Consideration such amounts required under the Code, or any applicable provision of U.S. federal, state
or local law. For the avoidance of doubt, any Seller Stock Option that has an exercise price per share that is greater than or
equal to the Merger Consideration shall be cancelled at the Effective Time for no consideration or payment.
(d)
At the Effective Time, any vesting restrictions on each outstanding restricted stock award under the Seller Stock Plan shall
automatically lapse and shall be treated as issued and outstanding shares of Seller Common Stock for the purposes of this Agreement,
including but not limited to, the provisions of this Section 2.1; provided, however, that there shall be withheld
from such cash payment any applicable taxes required to be withheld by applicable law with respect to such payment.
(e)
All of the shares of Seller Common Stock converted into the right to receive the Merger Consideration pursuant to this Section
2.1 shall no longer be outstanding and shall automatically be cancelled and shall cease to exist as of the Effective Time,
and each certificate (each, a “Certificate,” it being understood that any reference herein to “Certificate”
shall be deemed to include reference to book-entry account statements relating to the ownership of shares of Seller Common Stock)
previously representing any such shares of Seller Common Stock shall thereafter represent only the right to receive, for each such
share, the Merger Consideration. At the Effective Time, holders of shares shall cease to be, and shall have no rights as, shareholders
of Seller, other than the right to receive the Merger Consideration.
(f)
Each share of capital stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted
into a share of common stock, $0.01 par value per share, of the Surviving Corporation.
2.2
Exchange Procedures.
(a)
Not less than one (1) business day prior to the Closing Date, Buyer shall deposit, or shall cause to be deposited, with
a bank, trust company, transfer agent and registrar or other similar entity selected by Buyer and reasonably satisfactory to Seller
(the “Paying Agent”), for the benefit of the holders of Certificates, an aggregate amount of cash sufficient
to pay the aggregate Merger Consideration payable under Section 2.1(a) (such cash being hereinafter referred to from
and after the Effective Time as the “Exchange Fund”). In the event the Exchange Fund shall be insufficient to
make all such payments, Buyer shall promptly deposit, or cause to be deposited, additional funds with the Paying Agent in an amount
that is equal to the deficiency in the amount of funds required to make such payments. No shareholder of Seller will have any right
or interest in the Exchange Fund unless and until the Effective Time occurs and the shareholder satisfies the requirements of this
Section 2.2.
(b) As
promptly as practicable following the Effective Time, but in no event later than five (5) business days thereafter, and
provided that Seller has delivered, or caused to be delivered, to the Paying Agent all information which is necessary for the
Paying Agent to perform its obligations as specified herein, the Paying Agent shall mail to each holder of record of a
Certificate or Certificates, a form of letter of transmittal and instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration into which the shares represented by such Certificate or Certificates
shall have been converted pursuant to Section 2.1(a) of this Agreement. The letter of transmittal shall be
prepared by Buyer, which shall be subject to the reasonable approval of Seller, prior to the Effective Time and which shall
specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent. Upon proper surrender of a Certificate or Certificates for exchange and cancellation to the
Paying Agent, together with such properly completed letter of transmittal, duly executed, the holder of such Certificate or
Certificates shall be entitled to receive in exchange therefor, as applicable, a check representing that amount of cash to
which such former holder of shares shall have become entitled pursuant to this Agreement in respect of the Certificate or
Certificates surrendered pursuant to this Agreement, and the Certificate or Certificates so surrendered shall forthwith be
cancelled. Until surrendered as contemplated by this Section 2.2(b), each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive, upon surrender, the Merger Consideration. No interest shall
be paid or accrued on any cash constituting the Merger Consideration.
(c)
The stock transfer books of Seller shall be closed immediately upon the Effective Time and from and after the Effective
Time there shall be no transfers on the stock transfer records of Seller of any shares of Seller Common Stock. If, after the Effective
Time, Certificates are presented to Buyer, they shall be canceled and exchanged for the Merger Consideration deliverable in respect
thereof pursuant to this Agreement in accordance with the procedures set forth in this Section 2.2.
(d)
The Paying Agent or Buyer, as the case may be, shall not be obligated to deliver cash to which a holder of Shares would
otherwise be entitled as a result of the Merger until such holder surrenders the Certificate or Certificates representing the Shares
for exchange as provided in this Section 2.2, or an appropriate affidavit of loss and indemnity agreement and/or a bond
in an amount as may be required in each case by the Paying Agent or Buyer.
(e)
Any portion of the Exchange Fund that remains unclaimed by the shareholders of Seller for twelve (12) months after the Effective
Time (as well as any interest or proceeds from any investment thereof) shall be delivered by the Paying Agent to Buyer. Any shareholder
of Seller who has not theretofore complied with this Section 2.2 shall thereafter look only to Buyer for the Merger Consideration
deliverable in respect of each Certificate or Certificates representing the shares such shareholder holds as determined pursuant
to this Agreement, in each case without any interest being paid or accrued on any cash constituting the Merger Consideration. If
any outstanding Certificate or Certificates for one or more shares is not surrendered or the payment of the Merger Consideration
attributable to such Seller Common Stock is not claimed prior to the date on which such cash would otherwise escheat to or become
the property of any governmental unit or agency, the unclaimed Merger Consideration shall, to the extent permitted by abandoned
property, escheat and any other applicable law, become the property of Buyer (and to the extent not in its possession shall be
delivered to it), free and clear of all claims or interest of any Person previously entitled to such property. Neither the Paying
Agent nor any party to this Agreement shall be liable to any holder of Shares represented by any Certificate for any consideration
paid to a public official pursuant to applicable abandoned property, escheat or similar laws. Buyer and the Paying Agent shall
be entitled to rely upon the share transfer books of Seller to establish the identity of those Persons entitled to receive the
Merger Consideration specified in this Agreement, which books shall be conclusive with respect thereto. In the event of a dispute
with respect to ownership of any Shares represented by any Certificate, Buyer and the Paying Agent shall be entitled to deposit
any Merger Consideration represented thereby in escrow with an independent third party and thereafter be relieved with respect
to any claims thereto.
(f)
Buyer (through the Paying Agent, if applicable) shall be entitled to deduct and withhold from any amounts otherwise payable
pursuant to this Agreement to any holder of Shares such amount as Buyer is required to deduct and withhold under applicable law.
Any amount so deducted and withheld shall be treated for all purposes of this Agreement as having been paid to the holder of Shares
in respect of which such deduction and withholding was made by Buyer.
(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 the posting by such person of a bond in such amount as the Paying
Agent may reasonably direct as indemnity against any claim that may be made against it with respect to such Certificate, the Paying
Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration deliverable in respect thereof.
2.3
No Appraisal Rights(a). Holders of shares of Seller Common Stock are not entitled to appraisal rights in respect
of such shares provided for under Title 3, Subtitle 2 of the MGCL and Seller’s Articles of Incorporation.
2.4
Reservation of Right to Revise Structure. Buyer may at any time change the method of effecting any of the Transactions
if and to the extent that it deems such a change to be desirable; provided, however, that no such change shall (a)
alter or change the amount or form of the consideration to be issued to holders of shares as Merger Consideration as currently
contemplated in this Agreement; (b) reasonably be expected to materially impede or delay consummation of the Merger; (c) require
submission to or approval of Seller’s shareholders after receipt of the Requisite Seller Vote; (d) require approval of regulators
after receipt of Regulatory Approval; or (e) result in the imposition of a Materially Burdensome Regulatory Condition. In the event
that Buyer elects to make such a change, the parties agree to execute appropriate documents to reflect the change.
ARTICLE
III
REPRESENTATIONS AND WARRANTIES OF SELLER AND SELLER BANK
3.1
Making of Representations and Warranties.
(a) On
or prior to the date hereof, Seller has delivered to Buyer a letter that will be treated confidentially (the
“Seller Disclosure Letter”) listing, among other things, items the disclosure of which is necessary or
appropriate either in response to an express disclosure requirement contained in a provision of this Agreement or as an
exception to one or more representations or warranties contained in Article III or to one or more of its covenants
contained in Article V; provided, however, that (i) the mere inclusion of an item in the Seller
Disclosure Letter as an exception to a representation or warranty shall not be deemed an admission by Seller that such item
represents a material exception or fact, event or circumstance or that such item is or would reasonably be expected to have a
Material Adverse Effect with respect to Seller, and (ii) any disclosure made with respect to a section of this Article
III shall be deemed to qualify any other section of this Article III (A) specifically referenced or
cross-referenced in such disclosure or (B) to the extent it is reasonably apparent on its face (notwithstanding the absence
of a specific cross-reference) from a reading of the disclosure that such disclosure applies to such other sections of this Article
III.
(b)
Except as set forth in the Seller Disclosure Letter or in the Seller Reports, Seller and Seller Bank represent and warrant,
jointly and severally, to Buyer that the statements contained in this Article III are correct as of the date of this
Agreement and will be correct as of the Closing Date (as though made on and as of the Closing Date), except as to any representation
or warranty which specifically speaks as of an earlier date (including without limitation representations made as of “the
date of this Agreement”), which only need be correct as of the specified earlier date. No representation or warranty of Seller
contained in this Article III shall be deemed untrue or incorrect, and Seller shall not be deemed to have breached a representation
or warranty, as a consequence of the existence of any fact, circumstance or event unless such fact, circumstance, or event, individually
or taken together with all other facts, circumstances or events inconsistent with any section of this Article III, has had
or would reasonably be expected to have a Material Adverse Effect with respect to Seller, disregarding for the purposes of this
Section 3.1(b) any materiality or Material Adverse Effect qualification contained in any representation or warranty; provided,
however, that the foregoing standard shall not apply to the representations and warranties contained in (a) Section 3.3(a),
which shall be deemed untrue and incorrect if not true and correct except to a de minimis extent, (b) Sections 3.8
and 3.9(a), which shall be deemed untrue and incorrect if not true and correct, and (c) Sections 3.2(a), 3.3(b),
3.4(a) and 3.4(b)(i), which shall be deemed untrue and incorrect if not true and correct in all material respects.
(c)
For purposes of this Agreement:
(i) “Material
Adverse Effect” means, with respect to Buyer, Seller or Seller Bank, as the case may be, any effect, change, event,
circumstance, condition, occurrence or development that, either individually or in the aggregate, has had or would reasonably
be expected to have a material adverse effect on the business, properties, assets, liabilities, results of operations or
financial condition of such party and its Subsidiaries, taken as a whole, or which would materially impair the ability of
such party to perform its obligations under this Agreement or otherwise materially impairs the ability of such party to
timely consummate the transactions contemplated hereby; provided, however, that “Material Adverse
Effect” shall not be deemed to include the impact of (A) changes, after the date hereof, in U.S. generally accepted
accounting principles (“GAAP”) or applicable regulatory accounting requirements, (B) changes, after the
date hereof, in laws, rules or regulations of general applicability to companies in the industries in which such party and
its Subsidiaries operate, or interpretations thereof by courts or Governmental Entities, (C) changes, after the date hereof,
in global, national or regional political conditions (including the outbreak of war or acts of terrorism) or in economic or
market (including equity, credit and debt markets, as well as changes in interest rates) conditions affecting the financial
services industry generally and not specifically relating to such party or its Subsidiaries, (D) public disclosure of the
transactions contemplated hereby or actions or omissions expressly required by this Agreement or that are taken with the
prior written consent of the other party, including expenses incurred by the parties, in contemplation of the transactions
contemplated hereby, (E) a decline in the trading or market prices of Seller Common Stock or the failure, in and of itself,
to meet earnings projections or internal financial forecasts, but not, in either case, including any underlying causes
thereof or (F) natural disaster or other force majeure event; except, with respect to subclause (A), (B), (C) or (F), to the
extent that the effects of such change are materially disproportionately adverse to the business, properties, assets,
liabilities, results of operations or financial condition of such party and its Subsidiaries, taken as a whole, as
compared to other companies in the industry in which such party and its Subsidiaries operate.
(ii)
“Subsidiary” when used with respect to any person, means any corporation, partnership, limited liability
company, bank or other organization, whether incorporated or unincorporated, or person of which (x) such first person directly
or indirectly owns or controls at least a majority of the securities or other interests having by their terms ordinary voting power
to elect a majority of the board of directors or others performing similar functions or (y) such first person is or directly or
indirectly has the power to appoint a general partner, manager or managing member or others performing similar functions.
3.2
Corporate Organization.
(a)
Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland and
is a savings and loan holding company duly registered under the Home Owners Loan Act of 1933, as amended, and the rules and regulations
promulgated thereunder. Seller has the corporate power and authority to own, lease or operate all of its properties and assets
and to carry on its business as it is now being conducted. Seller is duly licensed or qualified to do business and in good standing
in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets
owned, leased or operated by it makes such licensing, qualification or standing necessary, except where the failure to be so licensed
or qualified or to be in good standing would not, either individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Seller. True and complete copies of the Articles of Incorporation of Seller (the “Seller Articles”)
and the Bylaws of Seller (the “Seller Bylaws”), in each case as in effect as of the date of this Agreement,
have previously been made available by Seller to Buyer.
(b)
Seller Bank is a bank that is a member of the Federal Reserve System duly organized, validly existing, and in good standing
under the laws of the State of Connecticut. The deposit accounts of Seller Bank are insured by the Federal Deposit Insurance Corporation
(the “FDIC”) through the Deposit Insurance Fund (as defined in Section 3(y) of the Federal Deposit Insurance
Act of 1950 (the “FDIA”)) to the fullest extent permitted by law. All premiums and assessments required to be
paid in connection therewith have been paid when due, and no proceedings for the termination of such insurance are pending or,
to the knowledge of Seller Bank, threatened. Seller Bank is a member in good standing of the Federal Home Loan Bank of Boston (the “FHLB”)
and owns the requisite amount of stock therein. Seller Bank engages only in activities (and holds properties only of the types)
permitted by the Federal Reserve Act and Connecticut law and the rules and regulations of the Federal Reserve Board and Connecticut
Department of Banking promulgated thereunder.
(c)
Each Subsidiary of Seller (i) is duly organized and validly existing under the laws of its jurisdiction of organization,
(ii) is duly licensed or qualified to do business and, where such concept is recognized under applicable law, in good standing
in all jurisdictions (whether federal, state or local) where its ownership, leasing or operation of property or the conduct of
its business requires it to be so licensed or qualified or in good standing, except where the failure to be so licensed or qualified
or to be in good standing would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse
Effect on Seller and (iii) has all requisite corporate power and authority to own, lease or operate its properties and assets and
to carry on its business as now conducted. There are no restrictions on the ability of Seller or any Subsidiary of Seller to pay
dividends or distributions except, in the case of Seller or a Subsidiary that is a regulated entity, for restrictions on dividends
or distributions generally applicable to all similarly regulated entities. Section 3.2(c) of the Seller Disclosure Letter
sets forth a true and complete list of all Subsidiaries of Seller that would constitute “significant subsidiaries”
within the meaning of Rule 1-02 of Regulation S-X of the Securities and Exchange Commission (the “SEC”) as of
the date hereof. There is no person whose results of operations, cash flows, changes in shareholders’ equity or financial
position are consolidated in the financial statements of Seller other than the Subsidiaries of Seller.
3.3
Capitalization.
(a)
The authorized capital stock of Seller consists of 100,000,000 Shares of Seller Common Stock, par value $0.01 per share,
and 50,000,000 shares of preferred stock, par value $0.01 per share (“Seller Preferred Stock”), of which no
shares of Seller Preferred Stock are issued or outstanding. As of the date hereof, there are (i) 7,447,204 Shares of Seller Common
Stock issued and outstanding, including 147,750 shares of Seller Common Stock granted in respect of outstanding restricted stock
awards, (ii) no shares of Seller Common Stock held in treasury; (iii) 382,330 shares of Seller Common Stock reserved for issuance
upon the exercise of outstanding options, (iv) 104,493 shares of Seller Common Stock reserved for issuance under the Seller Stock
Plan, and (v) no shares of Seller Common Stock reserved for issuance upon the settlement of outstanding restricted stock unit awards.
As of the date of this Agreement, except as set forth in the immediately preceding sentence, there are no shares of capital stock
or other voting securities or equity interests of Seller issued, reserved for issuance or outstanding. All of the issued and outstanding
shares of Seller Common Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of any preemptive
rights, with no personal liability attaching to the ownership thereof. There are no bonds, debentures, notes or other indebtedness
that have the right to vote on any matters on which shareholders of Seller may vote. Except as set forth above, as of the date
of this Agreement, there are no outstanding subscriptions, options, warrants, puts, calls, rights, exchangeable or convertible
securities or other commitments or agreements obligating Seller to issue, transfer, sell, purchase, redeem or otherwise acquire,
any such securities. Except with respect to the Seller Bank Employee Stock Ownership Plan (the “ESOP”), there
are no voting trusts, shareholder agreements, proxies or other agreements in effect to which Seller or any of its Subsidiaries
is a party with respect to the voting or transfer of Seller Common Stock, capital stock or other voting or equity securities or
ownership interests of Seller or granting any shareholder or other person any registration rights.
(b) Seller
owns, directly or indirectly, all of the issued and outstanding shares of capital stock or other equity ownership interests
of each of its Subsidiaries, free and clear of any liens, claims, title defects, mortgages, pledges, charges,
encumbrances and security interests whatsoever (“Liens”), and all of such shares or equity ownership
interests are duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. No Subsidiary has or is bound by any outstanding subscriptions,
options, warrants, calls, rights, commitments or agreements of any character calling for the purchase or issuance of any
shares of capital stock or any other equity security of such Subsidiary or any securities representing the right to purchase
or otherwise receive any shares of capital stock or any other equity security of such Subsidiary.
(c)
Except as set forth in Section 3.3(c) of the Seller Disclosure Letter or in the Seller Reports, since January 1,
2016, Seller has not repurchased any shares of Seller Common Stock.
(d)
Section 3.3(d) of the Seller Disclosure Letter sets forth a true, correct and complete list and description of each
offering of equity securities (or securities convertible or exchangeable into, or exercisable for, equity securities) of Seller
made by Seller within the past five years (all such offerings, whether or not listed in Section 3.3(d) of the Seller Disclosure
Letter, a “Seller Offering”), including a description of the securities issued, the date of issuance, the amount
of shares issued, and the offering price. Seller has, in connection with each Seller Offering, complied in all material respects
with all laws with respect thereto, including all federal and state securities laws.
3.4
Authority; No Violation.
(a)
Seller and Seller Bank have full corporate power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the Merger have been duly
and validly approved by the Boards of Directors of Seller and Seller Bank. The Board of Directors of Seller has determined that
the Merger, on the terms and conditions set forth in this Agreement, is advisable and in the best interests of Seller and its shareholders,
has unanimously adopted and approved this Agreement and the transactions contemplated hereby (including the Merger, Bank Combination
and Dissolution), and has directed that this Agreement be submitted to Seller’s shareholders for approval at a meeting of
such shareholders and has adopted a resolution to the foregoing effect. Except for the approval of this Agreement by the affirmative
vote of the holders of a majority of the outstanding shares of Seller Common Stock (the “Requisite Seller Vote”),
no other corporate proceedings on the part of Seller or Seller Bank are necessary to approve this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Seller and Seller Bank and
(assuming due authorization, execution and delivery by Buyer) constitutes a valid and binding obligation of Seller and Seller Bank,
enforceable against Seller and Seller Bank in accordance with its terms (except in all cases as such enforceability may be limited
by bankruptcy, insolvency, moratorium, reorganization or similar laws of general applicability affecting the rights of creditors
generally and the availability of equitable remedies (the “Enforceability Exceptions”)).
(b) Neither
the execution and delivery of this Agreement by Seller and Seller Bank nor the consummation by Seller and Seller Bank of the
transactions contemplated hereby (including the Merger, Bank Combination and Dissolution), nor compliance by Seller and
Seller Bank with any of the terms or provisions hereof, will (i) violate any provision of the Seller Articles or the
Seller Bylaws or the equivalent organizational documents of any of its Subsidiaries, and (ii) assuming that the consents and
approvals referred to in Section 3.5 are duly obtained, (x) violate any law, statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to Seller or any of its Subsidiaries or any of their
respective properties or assets or (y) except as set forth in Section 3.4(b) of the Seller Disclosure Letter, violate,
conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of
the respective properties or assets of Seller or any of its Subsidiaries under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which
Seller or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound,
except (in the case of clauses (x) and (y) above) for such violations, conflicts, breaches or defaults that, either
individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Seller.
3.5
Consents and Approvals. Except for (a) the filing of any required applications, filings, and notices, as applicable,
with the FDIC in connection with the Merger and Bank Combination, and approval of or non-objection to such applications, filings
and notices, (b) the filing of any required applications, filings and notices, as applicable, with the Director of the Rhode Island
Department of Business Regulation, Division of Banks and the Commissioner of the Connecticut Banking Department in connection with
the Merger and approval of such applications, filings and notices, (c) the filing of any required applications, filings and notices,
as applicable, with the Director of the Rhode Island Department of Business Regulation, Division of Banks and the Commissioner
of the Connecticut Banking Department in connection with the Bank Combination and approval of such applications, filings and notices,
(d) the filing of any required applications, filings or notices with the Financial Industry Regulatory Authority (“FINRA”)
and approval of such applications, filings and notices, (e) the filing with the SEC of a proxy statement in definitive form (including
any amendments or supplements thereto, the “Proxy Statement”), (f) the filing of the Articles of Merger with
the SDAT pursuant to the MGCL, (g) the filing of any required applications, filings and notices, as applicable, with the Board
of Governors of the Federal Reserve System (the “Federal Reserve Board”) and approval or waiver or non-objection
of such applications, filings and notices, (h) the receipt by Seller of the Requisite Seller Vote and (i) the approval, effective
as of the Effective Time, by the Board of Directors of the Surviving Corporation and the Board of Trustees of Buyer of the Dissolution,
no consents or approvals of or filings or registrations with any self-regulatory organization (an “SRO”),
court, administrative agency or commission or other governmental or regulatory authority or instrumentality (each a “Governmental
Entity”) are necessary in connection with (i) the execution and delivery by Seller and Seller Bank of this Agreement
or (ii) the consummation by Seller and Seller Bank of the transactions contemplated hereby (including the Merger, Bank Combination
and Dissolution). As of the date hereof, neither Seller nor Seller Bank is aware of any reason why the necessary regulatory approvals
and consents will not be received by Seller and Seller Bank to permit consummation of the Merger on a timely basis.
3.6
Reports. Seller and each of its Subsidiaries have timely filed (or furnished) all reports, forms, correspondence,
registrations and statements, together with any amendments required to be made with respect thereto, that they were required to
file (or furnish, as applicable) since January 1, 2016 with (i) any state regulatory authority, including the Connecticut Banking
Department, (ii) the SEC, (iii) the Federal Reserve Board, (iv) the FDIC, (v) and any SRO (clauses (i) – (v), collectively
“Regulatory Agencies”), and have paid all fees and assessments due and payable in connection therewith, except
where the failure to file (or furnish, as applicable) such report, form, correspondence, registration or statement or to pay such
fees and assessments, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect
on Seller. Subject to Section 9.14, except for normal examinations conducted by a Regulatory Agency in the ordinary course
of business of Seller and its Subsidiaries, no Regulatory Agency has initiated or has pending any proceeding or, to the knowledge
of Seller or Seller Bank, investigation into the business or operations of Seller or any of its Subsidiaries since January 1, 2016,
except where such proceedings or investigations would not reasonably be expected to have, either individually or in the aggregate,
a Material Adverse Effect on Seller. Subject to Section 9.14, there (i) is no unresolved violation, criticism, or exception
by any Regulatory Agency with respect to any report or statement relating to any examinations or inspections of Seller or any of
its Subsidiaries and (ii) has been no formal or informal inquiries by, or disagreements or disputes with, any Regulatory Agency
with respect to the business, operations, policies or procedures of Seller or any of its Subsidiaries since January 1, 2016,
in each case, which would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on
Seller.
3.7
Financial Statements.
(a)
Seller has previously made available to Buyer a true, correct and complete copy of the audited consolidated balance sheets
of Seller and its Subsidiaries as of June 30, 2019 (the “Most Recent Balance Sheet”) and June 30, 2018, and
the related audited consolidated statements of net income, comprehensive income, changes in stockholders’ equity and cash
flows of Seller and its Subsidiaries for each of the years then ended, together with all related notes and schedules thereto, accompanied
by the report thereon of Seller’s independent auditors (collectively referred to as the “Audited Financial Statements”
and, together with the Most Recent Balance Sheet, the “Financial Statements”). The Financial Statements (i)
were prepared from, and are in accordance with, the books and records of Seller and its Subsidiaries, (ii) fairly present in all
material respects the consolidated results of operations, cash flows, changes in shareholders’ equity and consolidated financial
position of Seller and its Subsidiaries for the respective fiscal periods and as of the respective dates therein set forth and
(iii) were prepared in accordance with GAAP consistently applied during the periods involved, except, in each case, as indicated
in such Financial Statements or in the notes thereto. The books and records of Seller and its Subsidiaries have been, and are being,
maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect
only actual transactions. Wolf & Company, P.C., Seller’s independent auditor, has not resigned (or informed Seller that
it intends to resign) or been dismissed as independent public accountants of Seller as a result of or in connection with any disagreements
with Seller on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.
(b)
Except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on
Seller, neither Seller nor any of its Subsidiaries has any liability of any nature whatsoever (whether absolute, accrued, contingent
or otherwise and whether due or to become due), except for those liabilities that are reflected or reserved against on the Most
Recent Balance Sheet (including any notes thereto) and for liabilities incurred in the ordinary course of business since the date
of the Most Recent Balance Sheet or in connection with this Agreement and the transactions contemplated hereby.
(c)
The records, systems, controls, data and information of Seller and its Subsidiaries are recorded, stored, maintained and
operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under
the exclusive ownership of Seller or its Subsidiaries or accountants (including all means of access thereto and therefrom), except
for any non-exclusive ownership and non-direct control that would not reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect on Seller. Seller (x) has implemented and maintains disclosure controls and procedures
(as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”))
to ensure that material information relating to Seller, including its Subsidiaries, is made known to the chief executive officer
and the chief financial officer of Seller by others within those entities as appropriate to allow timely decisions regarding required
disclosures and to make the certifications required by the Exchange Act and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002
(the “Sarbanes-Oxley Act”), and (y) has disclosed, based on its most recent evaluation prior to the date hereof,
in writing to Seller’s outside auditors and the audit committee of Seller’s Board of Directors (i) any significant
deficiencies and material weaknesses in the design or operation of internal control over financial reporting (as defined in Rule
13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect Seller’s ability to record, process, summarize
and report financial information, and (ii) any fraud, whether or not material, that involves management or other employees who
have a significant role in Seller’s internal controls over financial reporting. There is no reason to believe that Seller’s
chief executive officer and chief financial officer will not be able to give the certifications required pursuant to the rules
and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act, without qualification, when next due.
(d)
Since January 1, 2016, (i) neither Seller nor any of its Subsidiaries, nor, to the knowledge of Seller, any director, officer,
auditor, accountant or representative of Seller or any of its Subsidiaries, has received or otherwise had or obtained knowledge
of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices,
procedures, methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of Seller
or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion
or claim that Seller or any of its Subsidiaries has engaged in questionable accounting or auditing practices, and (ii) no attorney
representing Seller or any of its Subsidiaries, whether or not employed by Seller or any of its Subsidiaries, has reported evidence
of a material violation of securities laws, breach of fiduciary duty or similar violation by Seller or any of its Subsidiaries
or any of their respective officers, directors, employees or agents to the Board of Directors of Seller or any committee thereof
or the Board of Directors or similar governing body of any Subsidiary or any committee thereof, or to the knowledge of Seller,
to any director or officer of Seller or any of its Subsidiaries.
3.8
Broker’s Fees. With the exception of the engagement of Keefe, Bruyette & Woods, Inc., neither Seller nor
any of its Subsidiaries nor any of their respective officers or directors has employed any broker, finder or financial advisor
or incurred any liability for any broker’s fees, commissions or finder’s fees in connection with the Merger or the
other transactions contemplated hereby. Seller has disclosed to Buyer as of the date hereof the aggregate fees provided for in
connection with the engagement by Seller of Keefe, Bruyette & Woods, Inc. related to the Merger and the other transactions
contemplated hereby.
3.9
Absence of Certain Changes or Events.
(a)
Since June 30, 2019, (i) no event or events have occurred that have had or would reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect on Seller and (ii) there has not been any Tax election made or changed,
any annual accounting period changed, any adjustment of any Tax attribute agreed to or any right to claim a refund of Taxes surrendered.
(b)
Since June 30, 2019, except with respect to the transactions contemplated hereby, Seller and its Subsidiaries have carried
on their respective businesses in all material respects in the ordinary course of business.
(c)
Since June 30, 2019, except with respect to matters set forth in Section 3.9(c) of the Seller Disclosure Letter,
neither Seller nor its Subsidiaries have taken any action or failed to take any action that would have resulted in a breach of
Section 5.2 of this Agreement had such act or omission occurred during the period from the date hereof to the Effective
Time.
3.10
Legal and Regulatory Proceedings.
(a)
Except as filed with any Seller Reports, neither Seller nor any of its Subsidiaries is a party to any, and there are no
outstanding or pending or, to the knowledge of Seller, threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against Seller or any of its Subsidiaries or any of their current
or former directors or executive officers, (i) which would reasonably be expected to have, either individually or in the aggregate,
a Material Adverse Effect on Seller or (ii) challenging the validity or propriety of the transactions contemplated by this Agreement.
(b)
There is no injunction, order, judgment, decree, or regulatory restriction imposed upon Seller, any of its Subsidiaries
or the assets of Seller or any of its Subsidiaries (or that, upon consummation of the Merger, would apply to Buyer or any of its
affiliates) that that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect
on Seller.
3.11
Taxes and Tax Returns.
(a) Each
of Seller and its Subsidiaries has (i) duly and timely filed or caused to be filed (giving effect to all
applicable extensions) with the appropriate Governmental Entities all material Tax Returns required to be filed by any of
them, and all such Tax Returns are true, correct in all material respects and complete, and (ii) timely paid in full all
Taxes required to have been paid by it (whether or not shown on any Tax Return).
(b)
The unpaid Taxes of Seller and its Subsidiaries (i) did not, as of June 30, 2019, exceed the reserve for Tax liability (other
than any deferred income Tax liability established to reflect timing differences between book and Tax income) included in Seller’s
consolidated balance sheet in the Financial Statements as of June 30, 2019 and (ii) will not exceed that reserve as adjusted for
the passage of time through the Closing Date in accordance with the past custom and practice of Seller and its Subsidiaries in
filing their Tax Returns.
(c)
Each of Seller and its Subsidiaries has withheld and paid to the relevant Governmental Entity on a timely basis all Taxes
required to have been withheld and paid in connection with amounts paid or owing to any person. All deficiencies asserted or assessments
made as a result of any audit, assessment, claim, examination, investigation or other inquiry relating to Taxes by any Governmental
Entity of the Tax Returns of Seller or its Subsidiaries have been fully paid or are being contested in good faith through appropriate
proceedings and have been adequately reserved for in accordance with GAAP in the Financial Statements.
(d)
Neither Seller nor any of its Subsidiaries has incurred any material liability for Taxes since the date of the latest Financial
Statements outside of the ordinary course of business.
(e)
Neither Seller nor any of its Subsidiaries has a nexus or Tax presence in any jurisdiction in which it is not currently
filing Tax Returns. No claim has been made or, to the knowledge of either Seller or its Subsidiaries, threatened in writing by
any Governmental Entity in a jurisdiction where Seller or any of its Subsidiaries does not file Tax Returns that Seller or such
Subsidiary is or may be subject to taxation by that jurisdiction.
(f)
Neither Seller nor any of its Subsidiaries has requested or received any extension of time within which to file any material
Tax Return, which Tax Return has not since been filed. No extension or waiver of the limitation period applicable to any material
Tax Return of Seller or any of its Subsidiaries has been granted by or requested from Seller or any of its Subsidiaries that is
still outstanding.
(g)
Seller and each of its Subsidiaries is, and has been since its respective date of formation, organized or incorporated under
the laws of a state or political subdivision of the United States. Neither Seller nor any of its Subsidiaries is or has been subject
to Tax in any jurisdiction outside of the United States. Neither Seller nor any Subsidiary of Seller conducts or has conducted
any business or other operations outside of the United States.
(h)
There are no material Liens for Taxes on any properties or assets of Seller or any of its Subsidiaries other than Liens
for current Taxes not yet due and payable.
(i) Neither
Seller nor any of its Subsidiaries has received written notice of assessment or proposed assessment in connection with any
Taxes, and there are no threatened in writing or pending disputes, claims, audits, examinations, investigations, or
other proceedings regarding any Taxes of Seller and its Subsidiaries or the assets of Seller and its Subsidiaries which have
not been paid, settled or withdrawn or for which adequate reserves have not been established in accordance with GAAP in the
Financial Statements. Seller has provided or made available to Buyer true, correct, and complete copies of all Tax Returns,
examination reports, and statements of deficiencies filed, assessed against, or agreed to by Seller or any of its
Subsidiaries within the past three (3) years.
(j)
Neither Seller nor any of its Subsidiaries is required to include any item of income in, or exclude any item of deduction
from, taxable income for any taxable year (or portion thereof) ending after the Closing Date as a result of any (i) change
in method of accounting for a taxable period ending on or prior to the Closing Date; (ii) use of an improper method of accounting
for a taxable period ending on or prior to the Closing Date; (iii) “closing agreement” as described in Section 7121
of the Internal Revenue Code of 1986, as amended (the “Code”) (or any corresponding or similar provision
of state, local or foreign law) executed on or prior to the Closing Date; (iv) intercompany transaction or any excess loss
account in respect of taxable periods ending on or prior to the Closing Date described in Treasury Regulations promulgated under
Section 1502 of the Code (or any corresponding or similar provision of state, local or foreign law); (v) installment sale
or open transaction made on or prior to the Closing Date; (vi) prepaid amount received on or prior to the Closing Date; (vii) election
made under Section 108(i) of the Code prior to the Closing Date; (viii) application of Section 965 of the Code,
including any election made under Section 965(h) of the Code; or (ix) any similar election, action, or agreement that
would have the effect of deferring any liability for Taxes of Seller from any period ending on or before the Closing Date to any
period ending after such date.
(k)
Neither Seller nor any of its Subsidiaries is a party to or is bound by any Tax sharing, allocation or indemnification agreement
or arrangement (other than such an agreement or arrangement exclusively between or among Seller and its Subsidiaries). Neither
Seller nor any of its Subsidiaries (i) has been a member of an affiliated group filing a consolidated federal income Tax Return
(other than a group of which Seller was the common parent) or (ii) has any liability for the Taxes of any person (other than
Seller or any of its Subsidiaries) arising from the application of Treasury Regulation Section 1.1502-6, or any similar
provision of state, local or foreign law, as a transferee or successor, by contract or otherwise.
(l)
Neither Seller nor any of its Subsidiaries is, or has been since the date of its formation, a party to or a member of any
joint venture, partnership, limited liability company, trust or other arrangement or contract which could be treated as a partnership
for Tax purposes.
(m)
There is no power of attorney given by or binding upon Seller or any of its Subsidiaries with respect to Taxes for any period
for which the statute of limitations (including any waivers or extensions) has not yet expired that is currently in effect.
(n)
Neither Seller nor any of its Subsidiaries has constituted either a “distributing corporation” or a “controlled
corporation” in a distribution of stock intended to qualify for tax-free treatment under Section 355 of the
Code in the two years prior to the date of this Agreement.
(o)
Each of Seller and its Subsidiaries currently computes its taxable income exclusively using the accrual method of accounting
and, since December 31, 2012, has exclusively used the accrual method of accounting to compute its taxable income. None of Seller
or any of its Subsidiaries has agreed, or is required, to make any adjustment under Section 481 of the Code affecting any
taxable year ended or ending after June 30, 2019, and the IRS has not initiated or proposed any such adjustment. None of Seller
or its Subsidiaries will be required to include amounts in income, or to exclude items of deduction, in a taxable period beginning
after the Closing Date as a result of a change in method of accounting occurring prior to the Closing Date.
(p)
Seller is not and has not been, during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code, a “United
States real property holding corporation” within the meaning of Section 897(c)(2) of the Code.
(q)
Seller and each of its Subsidiaries have disclosed on their respective federal income Tax Returns all positions taken therein
that could give rise to a substantial understatement of Tax within the meaning of Section 6662 of the Code. Neither Seller
nor any of its Subsidiaries has engaged in any “reportable transaction” within the meaning of Treasury Regulation Section
1.6011-4(b)(1) or any similar provision of state, local or foreign law.
(r)
Neither Seller nor any of its Subsidiaries has undergone an “ownership change” within the meaning of Section 382(g)
of the Code within the past five (5) years.
(s)
As used herein, “Tax” or “Taxes” means (i) any and all taxes, charges, fees, levies,
or other assessments, including, without limitation, all federal, state, local, or foreign income, gross income, gross receipts,
license, payroll, employment, escheat, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs
duties, capital stock, ad valorem, value added, inventory, franchise, profits, license, withholding, payroll, social security (or
similar, including FICA), unemployment, employment, employer health, disability, real property, personal property, sales, use,
goods and services, transfer, registration, alternative or add-on minimum, estimated or other taxes, custom duties, or
charges of any kind whatsoever, and including any interest, penalty, or addition thereto, whether disputed or not, and (ii) any
amounts described in clause (i) of this definition (x) as a result of being prior to the Closing a member of an
affiliated, consolidated, combined, unitary or other similar group for any period, (y) as a result of being prior to the Closing
a party to any Tax sharing or Tax allocation agreement or other similar arrangement (other than customary commercial contracts
not primarily related to Taxes) or (z) as a result of being liable for another person’s Taxes as a transferee or successor,
by contract or otherwise.
(t)
As used in this Agreement, the term “Tax Return” means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment
thereof.
3.12
Employees.
(a) Section
3.12(a) of the Seller Disclosure Letter sets forth a true, correct and complete list of all Seller Benefit Plans. For
purposes of this Agreement, “Seller Benefit Plans” mean all employee benefit plans (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)), whether or not subject
to ERISA, whether funded or unfunded, and all pension, benefit, retirement, bonus, stock option, stock purchase,
employee stock ownership, restricted stock, stock-based, performance award, phantom equity, incentive, deferred compensation,
retiree medical or life insurance, supplemental retirement, severance, retention, employment, consulting, termination, change
in control, salary continuation, accrued leave, sick leave, vacation, paid time off, health, medical, disability, life,
accidental death and dismemberment, insurance, welfare, fringe benefit and other similar plans, programs, policies, practices
or arrangements or other contracts or agreements (and any amendments thereto) to or with respect to which Seller or any
Subsidiary is a party or has or could reasonably be expected to have any current or future obligation or that are sponsored,
maintained, contributed to or required to be contributed to by Seller or any of its Subsidiaries for the benefit of any
current or former employee, officer, director, consultant or independent contractor (or any spouse or dependent of such
individual) of Seller or any of its Subsidiaries.
(b)
Seller has made available to Buyer true, correct and complete copies of the following documents with respect to each of
the Seller Benefit Plans, to the extent applicable: (i) the plan document (including all amendments thereto) governing such Seller
Benefit Plan or, if such Seller Benefit Plan is not in writing, a written description of all the material terms of such Seller
Benefit Plan, (ii) if the Seller Benefit Plan is funded through a trust or any other funding arrangement, a copy of such trust
of other funding arrangement, (iii) each ERISA summary plan description and summary of material modifications, (iv) the annual
report (Form 5500), if any, filed with the Internal Revenue Service (the “IRS”) for the last three (3) plan
years and summary annual reports, with schedules and financial statements attached, (v) the most recently received IRS determination
or opinion letter, if any, relating to any Seller Benefit Plan, (vi) the most recently prepared actuarial report for each Seller
Benefit Plan (if applicable) for each of the last three (3) years and (vii) copies of all material non-routine correspondence to
and from the IRS, U.S. Department of Labor (the “DOL”) or Pension Benefit Guarantee Corporation (the “PBGC”).
(c)
Each Seller Benefit Plan has been established, operated and administered in all material respects in accordance with its
terms and the requirements of all laws, including ERISA and the Code. Neither Seller nor any of its Subsidiaries has taken any
action to take corrective action or made a filing under any voluntary correction program of the IRS, the DOL or any other Governmental
Entity with respect to any Seller Benefit Plan, and neither Seller nor any of its Subsidiaries has any knowledge of any plan defect
that would qualify for correction under any such program.
(d)
Section 3.12(d) of the Seller Disclosure Letter sets forth a true, correct and complete list of each Seller Benefit
Plan that is intended to be qualified under Section 401(a) of the Code (the “Seller Qualified Plans”). The IRS
has issued a favorable determination or opinion letter with respect to each Seller Qualified Plan and the related trust, which
letter has not been revoked (nor has revocation been threatened), and, to the knowledge of Seller, there are no existing circumstances
and no events have occurred that could adversely affect the qualified status of any Seller Qualified Plan or the exempt status
of the related trust or increase the costs relating thereto. No trust funding any Seller Benefit Plan is intended to meet the requirements
of Section 501(c)(9) of the Code.
(e)
Each Seller Benefit Plan that is subject to Section 409A of the Code has been administered and documented in compliance
with the requirements of Section 409A of the Code, except where any non-compliance has not and cannot reasonably be expected to
result in material liability to Seller or any of its Subsidiaries or any employee of Seller or any of its Subsidiaries.
(f)
No Seller Benefit Plan is, and none of Seller, its Subsidiaries nor any Seller ERISA Affiliate has at any time during the
last six (6) years sponsored, maintained, contributed to or been obligated to contribute to any plan that is, subject to Title
IV or Section 302 of ERISA or Sections 412, 430 or 4971 of the Code. For purposes of this Agreement, “Seller ERISA
Affiliate” means any trade or business, whether or not incorporated, that together with Seller would be deemed a “single
employer” within the meaning of Section 4001 of ERISA.
(g)
None of Seller, its Subsidiaries nor any Seller ERISA Affiliate has, at any time during the last six (6) years, contributed
to or been obligated to contribute to any plan that is a “multiemployer plan” within the meaning of Section 4001(a)(3)
of ERISA (a “Multiemployer Plan”) or a plan that has two or more contributing sponsors at least two of whom
are not under common control, within the meaning of Section 4063 of ERISA (a “Multiple Employer Plan”), and
none of Seller and its Subsidiaries nor any Seller ERISA Affiliate has incurred any liability to a Multiemployer Plan or Multiple
Employer Plan as a result of a complete or partial withdrawal (as those terms are defined in Part 1 of Subtitle E of Title IV of
ERISA) from a Multiemployer Plan or Multiple Employer Plan.
(h)
Neither Seller nor any of its Subsidiaries sponsors, has sponsored or has any obligation with respect to any employee benefit
plan that provides for any post-employment or post-retirement health or medical or life insurance benefits for retired, former
or current employees or beneficiaries or dependents thereof, except as required by Section 4980B of the Code, and Seller has complied
in all material respects with such section of the Code and with applicable state health care continuation coverage laws.
(i)
All contributions required to be made to any Seller Benefit Plan by applicable law or by any plan document or other contractual
undertaking, and all premiums due or payable with respect to insurance policies funding any Seller Benefit Plan, in each case,
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 Seller to the extent required by GAAP.
(j)
There are no pending or, to the knowledge of Seller, threatened claims (other than claims for benefits in the ordinary course
of business), lawsuits or arbitrations that have been asserted or instituted, and, to the knowledge of Seller, no set of circumstances
exists that may reasonably be expected to give rise to a claim, lawsuit or arbitration, against the Seller Benefit Plans, any fiduciaries
thereof with respect to their duties to the Seller Benefit Plans or the assets of any of the trusts under any of the Seller Benefit
Plans, in each case that could reasonably be expected to result in any material liability of Seller or any of its Subsidiaries
to the PBGC, the IRS, the DOL, any Multiemployer Plan, a Multiple Employer Plan, any participant in any Seller Benefit Plan, or
any other party.
(k)
None of Seller and its Subsidiaries nor any Seller ERISA Affiliate nor any other person, including any fiduciary, has engaged
in any “prohibited transaction” (as defined in Section 4975 of the Code or Section 406 of ERISA), which could subject
any of the Seller Benefit Plans or their related trusts, Seller, any of its Subsidiaries, any Seller ERISA Affiliate or any person
that Seller or any of its Subsidiaries has an obligation to indemnify, to any material tax or penalty imposed under Section 4975
of the Code or Section 502 of ERISA.
(l)
Except as set forth in Section 3.12(l) of the Seller Disclosure Letter, 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, delivery or funding of, or increase in the amount or value of, any payment,
compensation (including stock or stock-based), right or other benefit to any employee, officer, director, independent contractor,
consultant or other service provider of Seller or any of its Subsidiaries, or result in any limitation on the right of Seller or
any of its Subsidiaries to amend, merge, terminate or receive a reversion of assets from any Seller 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 Seller or any of its Subsidiaries 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 Code. Seller has made available to Buyer true, correct and complete copies of Section 280G calculations
(whether or not final) with respect to any disqualified individual in connection with the transactions contemplated hereby.
(m)
No Seller Benefit Plan provides for the gross-up or reimbursement of Taxes under Section 409A or 4999 of the Code, or otherwise.
Neither Seller nor any of its Subsidiaries remain subject to any compensation-related limitations or restrictions imposed by or
related to Section 111 of the Emergency Economic Stabilization Act of 2008, as amended.
(n)
There are no pending or, to the knowledge of Seller, threatened material labor grievances or material unfair labor practice
claims or charges against Seller or any of its Subsidiaries, or any strikes or other material labor disputes against Seller or
any of its Subsidiaries. Neither Seller nor any of its Subsidiaries are party to or bound by any collective bargaining or similar
agreement with any labor organization, or work rules or practices agreed to with any labor organization or employee association
applicable to employees of Seller or any of its Subsidiaries and, to the knowledge of Seller, there are no organizing efforts by
any union or other group seeking to represent any employees of Seller or any of its Subsidiaries and no employees of Seller or
any of its Subsidiaries are represented by any labor organization.
(o)
To the knowledge of Seller, no current or former employee or independent contractor of Seller or any of its Subsidiaries
is in violation in any material respect of any term of any restrictive covenant obligation, including any non-compete, non-solicit,
non-interference, non-disparagement or confidentiality obligation (“Restrictive Covenant”) or any employment
or consulting contract, common law nondisclosure obligation, fiduciary duty, or other obligation: (i) to Seller or any of its Subsidiaries
or (ii) to a former employer of any such individual relating (A) to the right of any such individual to work for Seller or any
of its Subsidiaries or (B) to the knowledge or use of trade secrets or proprietary information.
(p)
The ESOP was validly authorized and established in accordance with applicable laws. The trust under the ESOP (the “Trust”)
is a trust established in accordance with Section 501(a) of the Code and is administered and interpreted in all material respects
in accordance with the laws of the State of Connecticut. The trustee of the Trust (the “Trustee”) has the requisite
power and authority to carry out its duties under the Trust and the transactions contemplated by this Agreement. The ESOP has received
a determination from the IRS that the ESOP meets the applicable qualification requirements of Section 401(a) of Code and, to the
knowledge of Seller, since the date of such determination (i) such qualified status has not been revoked and (ii) nothing has occurred
that would reasonably be expected to cause revocation of such qualified status. The shares of Seller Common Stock held by the Trust
constitute “employer securities” as defined in Section 409(l) of the Code and “qualifying employer securities”
as defined in Section 407(d)(5) of ERISA. Other than the outstanding indebtedness (as of the Closing Date) owed to Seller by the
ESOP pursuant to the Term Loan Agreement, dated as of January 1, 2016, by and between Seller and the Trustee (the “ESOP
Loan”) and outstanding invoices from service providers, there is no existing indebtedness of the ESOP.
3.13
SEC Reports. Seller has previously made available to Buyer an accurate and complete copy of each (a) final registration
statement, prospectus, report, schedule and definitive proxy statement filed with or furnished to the SEC since January 1, 2016
by Seller pursuant to the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act (the
“Seller Reports”) and (b) communication mailed by Seller to its shareholders since January 1, 2016 and prior
to the date hereof, and no such Seller Report or communication, as of the date thereof (and, in the case of registration statements
and proxy statements, on the dates of effectiveness and the dates of the relevant meetings, respectively), contained any untrue
statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances in which they were made, not misleading, except that information filed or
furnished as of a later date (but before the date of this Agreement) shall be deemed to modify information as of an earlier date.
Since January 1, 2016, as of their respective dates, all Seller Reports filed or furnished under the Securities Act and the Exchange
Act complied in all material respects with the published rules and regulations of the SEC with respect thereto. No executive officer
of Seller has failed in any respect to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley
Act.
3.14
Compliance with Applicable Law.
(a)
Seller and each of its Subsidiaries hold, and have at all times since January 1, 2016, held, all licenses, registrations,
franchises, certificates, variances, permits, charters and authorizations necessary for the lawful conduct of their respective
businesses and ownership of their respective properties, rights and assets under and pursuant to each (and have paid all fees and
assessments due and payable in connection therewith), except where neither the cost or failure to hold such licenses, registrations,
franchises, certificates, variances, permits, charters and authorizations (nor the failure to pay any such fee or assessment) would,
either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Seller and, to the knowledge
of Seller, no suspension or cancellation of any such necessary license, registration, franchise, certificate, variance, permit,
charter or authorization is threatened.
(b)
Seller and each of its Subsidiaries have complied with and are not in default or violation under any applicable law, statute,
order, rule, regulation, policy and/or guideline of any Governmental Entity relating to Seller or any of its Subsidiaries, including
all laws related to data protection or privacy (including laws relating to the privacy and security of data or information that
constitutes personal data or personal information under applicable law (“Personal Data”)), the USA PATRIOT Act,
the Bank Secrecy Act, the Equal Credit Opportunity Act and Regulation B, the Fair Housing Act, the Community Reinvestment Act,
the Fair Credit Reporting Act, the Truth in Lending Act and Regulation Z, the Home Mortgage Disclosure Act, the Fair Debt Collection
Practices Act, the Electronic Fund Transfer Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, any regulations
promulgated by the Consumer Financial Protection Bureau, the SAFE Mortgage Licensing Act of 2008, the Real Estate Settlement Procedures
Act and Regulation X, Title V of the Gramm-Leach-Bliley Act, any and all sanctions or regulations enforced by the Office of Foreign
Assets Control of the United States Department of Treasury and any other law, policy or guideline relating to bank secrecy, discriminatory
lending, financing or leasing practices, consumer protection, money laundering prevention, foreign assets control, U.S. sanctions
laws and regulations, Sections 23A and 23B of the Federal Reserve Act, the Sarbanes-Oxley Act, and all agency requirements relating
to the origination, sale and servicing of mortgage and consumer loans, except for non-compliance, defaults or violations that would
not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Seller. Seller Bank has
a Community Reinvestment Act rating of “satisfactory” or better.
(c)
Seller Bank maintains a written information privacy and security program that maintains reasonable measures to protect the
privacy, confidentiality and security of all Personal Data against any (i) loss or misuse of Personal Data, (ii) unauthorized or
unlawful operations performed upon Personal Data, or (iii) other act or omission that compromises the security or confidentiality
of Personal Data (clauses (i) through (iii), a “Security Breach”). To the knowledge of Seller, since January
1, 2016, neither Seller nor Seller Bank has experienced any Security Breach. To the knowledge of Seller, there are no data security
or other technological vulnerabilities with respect to Seller’s and Seller Bank’s information technology systems or
networks.
(d)
As of the date hereof, each of Seller and Seller Bank is “well capitalized” (as such term is defined in the
relevant regulation of the institution’s primary bank regulator).
(e)
(i) Seller and each of its Subsidiaries have properly administered in all material respects all accounts for which it acts
as a fiduciary, including accounts for which it serves as a trustee, agent, custodian, personal representative, guardian, conservator
or investment advisor, in accordance with the terms of the governing documents and applicable state and federal law; and (ii) none
of Seller, any of its Subsidiaries, or any of its or its Subsidiaries’ directors, officers or employees, has committed any
breach of trust or fiduciary duty with respect to any such fiduciary account, and the accountings for each such fiduciary account
are true and correct and accurately reflect the assets and results of such fiduciary account.
3.15
Certain Contracts.
(a)
Except as set forth in Section 3.15(a) of the Seller Disclosure Letter or as filed with any Seller Reports,
as of the date hereof, neither Seller nor any of its Subsidiaries is a party to or bound by any contract, arrangement, commitment
or understanding (whether written or oral), but excluding any Seller Benefit Plan:
(i)
which is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC);
(ii)
with respect to the employment or service of any independent contractor or consultant involving the payment by Seller of
fees to such independent contractor or consultant of fees in excess of $50,000 annually;
(iii)
that, upon the execution or delivery of this Agreement, shareholder adoption of this Agreement or the consummation of the
transactions contemplated hereby, will (either alone or upon the occurrence of any additional acts or events) result in (A) any
payment (whether of severance pay or otherwise) becoming due from Buyer, Seller, Seller Bank, or any of their respective Subsidiaries
to any director, officer, employee or consultant thereof, or (B) any of the benefits thereunder being increased, the vesting of
the benefits thereunder being accelerated, or the value of any of the benefits thereunder being calculated on the basis of any
of the transactions contemplated by this Agreement;
(iv)
that contains a non-compete or client or customer non-solicit requirement or any other provision that materially restricts
the conduct of any line of business by Seller or any of its affiliates or upon consummation of the Merger will materially restrict
the ability of Buyer or any of its affiliates to engage in any line of business;
(v)
that obligates Seller or its Subsidiaries (or, following the consummation of the transactions contemplated hereby, Buyer
or its Subsidiaries) to conduct business with any third party on an exclusive or preferential basis, or that grants any person
other than Seller or any of its Subsidiaries “most favored nation” status or similar rights;
(vi)
to which any affiliate, officer, director or employee of Seller or any of its Subsidiaries is a party or beneficiary (except
with respect to loans to, or deposits from, directors, officers and employees entered into in the ordinary course of business,
on commercially reasonable terms and in accordance with all applicable regulatory requirements);
(vii)
that is a material Intellectual Property license or under which Seller or any of its Subsidiaries has licensed to others
the right to use any Intellectual Property owned by Seller or any of its Subsidiaries, other than licenses for commercial “off-the-shelf”
or “shrink-wrap” software that have not been modified or customized for Seller or its Subsidiaries other than through
customization tools made available by the applicable licensor;
(viii)
with or to a labor union or guild (including any collective bargaining agreement);
(ix)
that relates to the incurrence of indebtedness by Seller or any of its Subsidiaries (other than deposit liabilities, trade
payables, federal funds purchased, advances and loans from the FHLB and securities sold under agreements to repurchase, in each
case incurred in the ordinary course of business) in the principal amount of $100,000 or more, including any sale and leaseback
transactions, capitalized leases or other similar financing transactions;
(x)
that grants any right of first refusal, right of first offer or similar right with respect to any material assets, rights
or properties of Seller or its Subsidiaries;
(xi)
that provides any rights to shareholders of Seller, including registration, preemptive or anti-dilution rights or rights
to designate members of or observers to Seller’s or any of its Subsidiary’s Board of Directors;
(xii)
that is a consulting agreement or data processing, software programming or licensing contract (other than any such contracts,
arrangements, commitments or understandings, which are terminable by Seller or any of its Subsidiaries on sixty (60) days or less
notice without any required payment or other conditions, other than the condition of notice);
(xiii)
that includes an indemnification obligation of Seller or any of its Subsidiaries with a maximum potential liability in excess
of $50,000;
(xiv)
with respect to any partnership or joint venture;
(xv)
that limits the payment of dividends by Seller or any of its Subsidiaries;
(xvi)
relating to the acquisition or disposition of any branch or business (whether by merger, sale of stock, sale of assets or
otherwise) or any material amount of assets, in each case, (A) entered into within the last three (3) years or (B) under
which Seller or any of its Subsidiaries has any outstanding material obligation or right; or
(xvii)
any agreement that obligates Seller or Seller Bank for the payment of more than $50,000 annually or for the payment of more
than $100,000 over its remaining term, which is not terminable without cause on sixty (60) days’ or less notice without penalty
or payment.
Each contract, arrangement, commitment or
understanding of the type described in this Section 3.15(a), whether or not set forth in the Seller Disclosure Letter,
is referred to herein as a “Seller Contract.”
(b)
Seller has made available to Buyer a true, correct and complete copy of each written Seller Contract and each written amendment
to any Seller Contract. Section 3.15(b) of the Seller Disclosure Letter sets forth a true, correct and complete description
of any oral Seller Contract and any oral amendment to any Seller Contract.
(c)
(i) Each Seller Contract is valid and binding on Seller or one of its Subsidiaries, as applicable, and in full force and
effect, except as, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect
on Seller, (ii) Seller and each of its Subsidiaries have in all material respects complied with and performed all obligations required
to be complied with or performed by any of them to date under each Seller Contract, (iii) to the knowledge of Seller, each third-party
counterparty to each Seller Contract has in all material respects complied with and performed all obligations required to be complied
with and performed by it to date under such Seller Contract, (iv) neither Seller nor any of its Subsidiaries has knowledge of,
or has received notice of, any violation of any Seller Contract by any of the other parties thereto and (v) no event or condition
exists which constitutes or, after notice or lapse of time or both, will constitute, a material breach or default on the part of
Seller or any of its Subsidiaries, or to the knowledge of Seller, any other party thereto, of or under any such Seller Contract.
3.16
Agreements with Regulatory Agencies. Subject to Section 9.14, neither Seller nor any of its Subsidiaries is
subject to any cease-and-desist or other order or enforcement action issued by, or is a party to any written agreement, consent
agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject
to any order or directive by, or has been ordered to pay any civil money penalty by, or has been since January 1, 2016, a recipient
of any supervisory letter from, or since January 1, 2016, has adopted any policies, procedures or board resolutions at the request
or suggestion of, any Regulatory Agency or other Governmental Entity that currently restricts in any material respect or would
reasonably be expected to restrict in any material respect the conduct of its business or that in any material manner relates to
its capital adequacy, its ability to pay dividends, its credit or risk management policies, its management or its business (each,
whether or not set forth in the Seller Disclosure Letter, a “Seller Regulatory Agreement”), nor has Seller or
any of its Subsidiaries been advised since January 1, 2016, by any Regulatory Agency or other Governmental Entity that it is considering
issuing, initiating, ordering, or requesting any such Seller Regulatory Agreement.
3.17 Risk
Management Instruments. All interest rate swaps, caps, floors, option agreements, futures and forward contracts and other
similar derivative transactions and risk management arrangements (each, a “Derivative Contract”), whether
entered into for the account of Seller, any of its Subsidiaries or for the account of a customer of Seller or any of
its Subsidiaries, were entered into in the ordinary course of business and in accordance with applicable rules, regulations
and policies of any Governmental Entity and with counterparties believed to be financially responsible at the time and are
legal, valid and binding obligations of Seller or one of its Subsidiaries enforceable against Seller or its applicable
Subsidiary and, to the knowledge of Seller, the counterparty thereto, in accordance with their terms (except as may be
limited by the Enforceability Exceptions), and are in full force and effect. Seller and each of its Subsidiaries have duly
performed in all material respects all of their material obligations under each Derivative Contract to the extent that such
obligations to perform have accrued, and, to the knowledge of Seller, there are no material breaches, violations or defaults
or allegations or assertions of such by any party thereunder. Each such Derivative Contract has been reflected in the books
and records of Seller and such Subsidiaries in accordance with GAAP consistently applied. Each Derivative Contract is
evidenced by customary and appropriate documentation (including an ISDA master agreement and long-form confirmation).
3.18
Environmental Matters.
(a)
Except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on
Seller, each of Seller and its Subsidiaries and the Owned Real Property, Leased Real Property and Loan Properties are in compliance
with all Environmental Laws, and Seller and its Subsidiaries have not received any written notice, report or other information
regarding, and Seller and Seller Bank have no knowledge of, any actual or alleged violation of Environmental Laws relating to Seller,
its Subsidiaries, the Owned Real Property, Leased Real Property or any Loan Property.
(b)
There is no suit, claim, action or proceeding pending or, to Seller’s knowledge, threatened before any Governmental
Authority or other forum in which Seller or any of its Subsidiaries has been named as a defendant, responsible party or potentially
responsible party (i) for alleged noncompliance with any Environmental Law or (ii) relating to the release or presence of any Hazardous
Material (as defined below) at, in, to, on, from or affecting Owned Real Property, Leased Real Property, a Loan Property, or any
property previously owned, operated or leased by Seller or any of its Subsidiaries.
(c)
During the period of (i) Seller’s or any of its Subsidiaries’ ownership, tenancy or operation of any Owned Real
Property or Leased Real Property or (ii) Seller’s or any of its Subsidiaries’ holding of a security interest in any
Loan Property, there has been no release of Hazardous Material at, in, to, on, from or affecting such Owned Real Property, Leased
Real Property or Loan Property that could reasonably be expected to result in any liabilities or obligation to such parties pursuant
to any Environmental Law, which liability or obligation would reasonably be expected to have, either individually or in the aggregate,
a Material Adverse Effect on Seller. To Seller’s knowledge, prior to the period of (x) Seller’s or any of its Subsidiaries’
ownership, tenancy or operation of any Owned Real Property or Leased Real Property, or (y) Seller’s or any of its Subsidiaries’
holding of a security interest in a Loan Property, there was no release or presence of Hazardous Material at, in, to, on, from
or affecting any such property that could result in any liabilities or obligations to such parties pursuant to Environmental Law,
which liability or obligation would reasonably be expected to have, either individually or in the aggregate, a Material Adverse
Effect on Seller.
(d)
To Seller’s knowledge, there have been and are no (i) active or abandoned underground storage tanks, (ii) gasoline
or service stations, or (iii) dry-cleaning facilities or operations at, on, in, under or immediately adjacent to any Owned Real
Property or Leased Real Property.
(e) Neither
Seller nor any of its Subsidiaries has any outstanding or continuing liabilities or obligations with respect to any violation
of any Environmental Law, including without limitation to conduct environmental investigation, remediation or
response actions, or to pay for such investigation, remediation or response actions.
(f)
For purposes of this Agreement:
(i)
“Loan Property” means any property in which Seller or any of its Subsidiaries holds a security interest,
and, where required by the context (including as a result of foreclosure or receipt of a deed in lieu of foreclosure), said term
includes any property owned or operated by Seller or any of its Subsidiaries.
(ii)
“Hazardous Material” means any compound, chemical, pollutant, contaminant, toxic substance, hazardous
waste, hazardous material, or hazardous substance, as any of the foregoing may be defined, identified or regulated under or pursuant
to any Environmental Laws, and including without limitation, Oil, asbestos, asbestos-containing materials, polychlorinated biphenyls,
toxic mold, or fungi, or any other material that may pose a threat to the Environment or to human health and safety but excludes
substances in kind and amounts typically used or stored for cleaning purposes or other routine maintenance or operation of motor
vehicles used by tenants (if applicable) or guests and otherwise in compliance with Environmental Laws.
(iii)
“Oil” means oil or petroleum of any kind or origin or in any form, as defined in or regulated pursuant
to the Federal Clean Water Act, 33 U.S.C. § 1251 et seq., or any other Environmental Law.
(iv)
“Environment” means any air (including indoor air), soil vapor, surface water, groundwater, drinking
water supply, surface soil, subsurface soil, sediment, surface or subsurface strata, plant and animal life, and any other environmental
medium or natural resource.
(v) “Environmental
Laws” means any federal, state or local law, statute, ordinance, rule, regulation, code, license, permit, approval,
consent, order, judgment, decree, injunction or agreement with any Governmental Authority relating to (A) the protection,
preservation or restoration of the Environment, (B) the protection of human health and safety as relating to Hazardous
Materials, and/or (C) the use, storage, recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Material. The term Environmental Law includes without limitation (x)
the Comprehensive Environmental Response, Compensation, and Liability Act, as amended, 42 U.S.C. § 9601 et seq.
(“CERCLA”); the Resource Conservation and Recovery Act, as amended, 42 U.S.C. § 6901 et seq.; the
Clean Air Act, as amended, 42 U.S.C. § 7401 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
§ 1251 et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. § 2601 et seq.; the Emergency Planning and
Community Right to Know Act, 42 U.S.C. § 11001 et seq.; the Safe Drinking Water Act, 42 U.S.C. § 300f et seq.; and
all comparable state and local laws, and (y) any common law (including, without limitation, common law that may impose strict
liability) that may impose liability or obligations for injuries or damages due to the presence of or exposure to any
Hazardous Material as in effect on or prior to the date of this Agreement.
3.19
Investment Securities and Commodities. Each of Seller and its Subsidiaries has good title to all securities and commodities
owned by it (except those sold under repurchase agreements as reflected in the Financial Statements), free and clear of any Lien,
except to the extent such securities or commodities are pledged in the ordinary course of business to secure obligations of Seller
or its Subsidiaries. Such securities and commodities are valued on the books of Seller in accordance with GAAP in all material
respects. Seller and its Subsidiaries and their respective businesses employ investment, securities, commodities, risk management
and other policies, practices and procedures that Seller believes in good faith are prudent and reasonable in the context of such
businesses. Prior to the date of this Agreement, Seller has made available to Buyer the terms of such policies, practices and procedures.
3.20
Real Property.
(a)
Section 3.20(a) of the Seller Disclosure Letter sets forth, as of the date hereof, a true, correct and complete list
of all of the real property owned by Seller and its Subsidiaries (collectively, the “Owned Real Property”).
Seller or its respective Subsidiary has good and marketable title to all the Owned Real Property (except properties sold or otherwise
disposed of in accordance with Sections 5.1 and 5.2), free and clear of all Liens (except statutory Liens securing
payments not yet due, Liens for real property Taxes not yet due and payable, easements, rights of way, and other similar encumbrances
that do not materially affect the value or use of the properties or assets subject thereto or affected thereby or otherwise materially
impair business operations at such properties and such imperfections or irregularities of title or Liens as do not materially affect
the value or use of the properties or assets subject thereto or affected thereby or otherwise materially impair business operations
at such properties (collectively, “Permitted Encumbrances”).
(b) Section
3.20(b) of the Seller Disclosure Letter sets forth, as of the date hereof, a true, correct and complete list of all of
the real estate leases, subleases, licenses and occupancy agreements (together with any amendments,
modifications, supplements, replacements, restatements and guarantees thereof or thereto, including any oral amendments) to
which Seller or any of its Subsidiaries is a party with respect to all real property leased, subleased, licensed or otherwise
used or occupied by Seller or any of its Subsidiaries on the date hereof (collectively, the “Leased Real
Property”), whether in Seller’s or any of its Subsidiaries’ capacity as lessee, sublessee, licensee,
lessor, sublessor, or licensor, as the case may be (the “Real Estate Leases”). Seller or its
Subsidiaries has valid leasehold interests in the Leased Real Property, free and clear of all Liens, except Permitted
Encumbrances. Each Real Estate Lease is (i) valid, binding and in full force and effect without material default thereunder
by the lessee or, to the knowledge of Seller, the lessor, and (ii) enforceable against Seller or the applicable Subsidiary
and, to the knowledge of Seller, the counterparty thereto (except as may be limited by the Enforceability Exceptions). Seller
and each of its Subsidiaries has in all material respects performed all obligations required to be performed by it under each
Real Estate Lease, and to the knowledge of Seller, each counterparty to each Real Estate Lease has in all material respects
performed all obligations required to be performed by it under such Real Estate Lease, and no event or condition exists which
constitutes or, after notice or lapse of time or both, will constitute, a material default on the part of Seller or any of
its Subsidiaries under any such Real Estate Lease. No event has occurred which, with notice or lapse of time, would permit
termination or acceleration under the Real Estate Leases. Seller has made available to Buyer a true, correct and complete
copy of each written Real Estate Lease and each written amendment to any Real Estate Lease.
(c)
Neither Seller nor Seller Bank has received a written notice from any Governmental Authority to indicate that any of the
Owned Real Property or Leased Real Property is not in compliance with any zoning, building, environmental, ecology, health and
public safety, subdivision, land sales or similar law, rule, ordinance or regulation, including, without limitation, the American
With Disabilities Act of 1990 all as the same are amended from time to time and all orders and regulations promulgated thereto
and no such noncompliance exists.
(d)
Neither Seller nor any of its Subsidiaries has leased, subleased, licensed or otherwise granted any person a right to use
or occupy all or any portion of any Owned Real Property or Leased Real Property. There are no pending or, to the knowledge of Seller,
threatened condemnation proceedings against the Owned Real Property or Leased Real Property.
(e)
True and complete copies of the most recent real estate tax bills for the Owned Real Property and the Leased Real Property
received by Seller have been made available to Buyer. Seller has not filed, and has not retained anyone to file, notices of protests
against, or to commence action to review, real property tax assessments against the Owned Real Property and the Leased Real Property.
3.21
Intellectual Property; Seller Systems; Cybersecurity.
(a)
To Seller’s knowledge, Seller and each of its Subsidiaries owns, or is licensed to use (in each case, free and clear
of any material Liens), all Intellectual Property necessary for the conduct of its business as currently conducted. Section
3.21(a) of the Seller Disclosure Letter sets forth a complete and correct list of all such Intellectual Property. Except as
would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Seller: (i)(A) to the
knowledge of Seller, the use of any Intellectual Property by Seller and its Subsidiaries does not infringe, misappropriate or
otherwise violate the rights of any person and is in accordance with any applicable license pursuant to which Seller or any Subsidiary
of Seller acquired the right to use any Intellectual Property, and (B) no person has asserted in writing to Seller that Seller
or any of its Subsidiaries has infringed, misappropriated or otherwise violated the Intellectual Property rights of such person,
(ii) to the knowledge of Seller, no person is challenging, infringing on or otherwise violating any right of Seller or any of
its Subsidiaries with respect to any Intellectual Property owned by and/or licensed to Seller or its Subsidiaries, (iii) neither
Seller nor any Subsidiary of Seller has received any written notice of any pending claim with respect to any Intellectual Property
owned by Seller or any Subsidiary of Seller, and (iv) Seller and its Subsidiaries have taken commercially reasonable actions to
avoid the abandonment, cancellation or unenforceability of all Intellectual Property owned or licensed, respectively, by Seller
and its Subsidiaries. For purposes of this Agreement, “Intellectual Property” means trademarks, service marks,
brand names, internet domain names, logos, symbols, certification marks, trade dress and other indications of origin, the goodwill
associated with the foregoing and registrations in any jurisdiction of, and applications in any jurisdiction to register, the
foregoing, including any extension, modification or renewal of any such registration or application; inventions, discoveries and
ideas, whether patentable or not, in any jurisdiction; patents, applications for patents (including divisions, continuations,
continuations in part and renewal applications), all improvements thereto, and any renewals, extensions or reissues thereof, in
any jurisdiction; nonpublic information, trade secrets and know-how, including processes, technologies, protocols, formulae, prototypes
and confidential information and rights in any jurisdiction to limit the use or disclosure thereof by any person; writings and
other works, whether copyrightable or not and whether in published or unpublished works, in any jurisdiction; and registrations
or applications for registration of copyrights in any jurisdiction, and any renewals or extensions thereof; and any similar intellectual
property or proprietary rights.
(b)
The computer, information technology and data processing systems, facilities and services used by Seller or any of its Subsidiaries,
including all software, hardware, networks, communications facilities, platforms and related systems and services (collectively,
the “Seller Systems”), are reasonably sufficient for the conduct of the respective businesses of Seller
and its Subsidiaries as currently conducted and the Seller Systems are in sufficiently good working condition to effectively perform
all computing, information technology and data processing operations reasonably necessary for the operation of the respective businesses
of Seller and its Subsidiaries as currently conducted, in each case, except for such failures to be reasonably sufficient or in
sufficiently good working condition that would not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Seller. Except as would not reasonably be expected to have, either individually or in the aggregate, a Material
Adverse Effect on Seller, to the knowledge of Seller, since January 1, 2016, no third party has gained unauthorized access to any
Seller Systems owned or controlled by Seller or any of its Subsidiaries. Seller and its Subsidiaries have taken commercially reasonable
steps and implemented commercially reasonable safeguards (i) to protect the Seller Systems from unauthorized access and from disabling
codes or instructions, spyware, Trojan horses, worms, viruses or other software routines that permit or cause unauthorized access
to, or disruption, impairment, disablement, or destruction of, software, data or other materials and (ii) that are designed for
the purpose of reasonably mitigating the risks of cybersecurity breaches and attacks. Each of Seller and its Subsidiaries has in
all material respects implemented reasonably appropriate backup and disaster recovery policies, procedures and systems consistent
with generally accepted industry standards and sufficient to reasonably mitigate the risk of a material disruption to the operation
of the respective businesses of Seller and its Subsidiaries.
(c)
Each of Seller and its Subsidiaries has (i) complied in all material respects with all of its published privacy and data
security policies and internal privacy and data security policies and guidelines, including with respect to the collection, storage,
transmission, transfer, disclosure, destruction and use of personally identifiable information and (ii) taken commercially reasonable
measures to ensure that all personally identifiable information in its possession or control is protected against loss, damage,
and unauthorized access, use, modification, or other misuse. To the knowledge of Seller, since January 1, 2016, there has been
no material loss, damage, or unauthorized access, use, modification, or other misuse of any such information by Seller or any of
its Subsidiaries.
(d)
To the knowledge of Seller, since January 1, 2016, there has not been and/or are not present in the Seller Systems: unauthorized
access, disabling codes or instructions, spyware, Trojan horses, worms, viruses or other software routines that permit or cause
unauthorized access to, or disruption, impairment, disablement, or destruction of, software, data or other materials.
3.22
Related Party Transactions. As of the date hereof, except as filed with any Seller Reports, there are no transactions
or series of related transactions, agreements, arrangements or understandings, nor are there any currently proposed transactions
or series of related transactions, between Seller or any of its Subsidiaries, on the one hand, and any current or former director
or “executive officer” (as defined in Rule 3b-7 under the Exchange Act) of Seller or any of its Subsidiaries or any
person who beneficially owns (as defined in Rules 13d-3 and 13d-5 of the Exchange Act) five percent (5%) or more of the outstanding
Seller Common Stock (or any of such person’s immediate family members or affiliates) (other than Subsidiaries of Seller)
on the other hand, of the type required to be reported in any Seller Reports pursuant to Item 404 of Regulation S-K promulgated
under the Exchange Act. All agreements between Seller or any of its Subsidiaries and any of their affiliates comply, to the extent
applicable, with Regulation W of the Federal Reserve Board.
3.23
State Takeover Laws. Seller and its Subsidiaries have taken all actions required to be taken by it in order to exempt
Buyer, this Agreement, the Voting Agreements and the Merger from, and Buyer, this Agreement, the Voting Agreements and the Merger
are exempt from, the requirements of any “moratorium,” “business combination,” “control share,”
“fair price” or other takeover defense laws and regulations of any state (collectively, “Takeover Laws”).
3.24
Charitable Organizations. Except as set forth in Section 3.24 of the Seller Disclosure Letter, neither Seller
nor any of its Subsidiaries direct the operations of any organization qualified as tax-exempt under Section 501(c)(3) of the Code.
3.25
Opinion. Prior to the execution of this Agreement, the Board of Directors of Seller has received an opinion (which
if initially rendered orally, has been or will be confirmed by written opinion of the same date) from Keefe, Bruyette & Woods,
Inc. to the effect that as of the date of such opinion and subject to the factors, assumptions, limitations and qualifications
in the written opinion, the Merger Consideration to be received by the common shareholders of Seller pursuant to this Agreement
is fair from a financial point of view to such shareholders. Such opinion has not been amended or rescinded as of the date of this
Agreement.
3.26
Seller Information. The information relating to Seller and its Subsidiaries or that is provided by Seller or its
Subsidiaries or their respective representatives for inclusion in the Proxy Statement, or in any other document filed with any
Regulatory Agency or Governmental Entity in connection herewith, will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading.
The Proxy Statement (except for such portions thereof that relate only to Buyer or any of its Subsidiaries) will comply in all
material respects with the provisions of the Exchange Act and the rules and regulations thereunder.
3.27
Loan Portfolio.
(a)
As of the date hereof, except as set forth in Section 3.27(a) of the Seller Disclosure Letter, neither Seller nor
any of its Subsidiaries is a party to any written or oral (i) loan, loan agreement, note or borrowing arrangement (including leases,
credit enhancements, commitments, guarantees and interest-bearing assets) (collectively, “Loans”) in which Seller
or any of its Subsidiaries is a creditor and that, as of June 30, 2019, had an outstanding balance of $100,000 or more and under
the terms of which the obligor was, as of June 30, 2019, more than sixty (60) days or more delinquent in payment of principal or
interest, or (ii) Loans with any director, executive officer or 5% or greater shareholder of Seller or any of its Subsidiaries,
or to the knowledge of Seller, any affiliate of any of the foregoing. Set forth in Section 3.27(a) of the Seller Disclosure
Letter is a true, correct and complete list of (A) all of the Loans of Seller and its Subsidiaries that, as of June 30, 2019, were
classified by Seller as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,”
“Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,”
“Concerned Loans,” “Watch List” or words of similar import, together with the principal amount of and accrued
and unpaid interest on each such Loan and the identity of the borrower thereunder, together with the aggregate principal amount
of and accrued and unpaid interest on such Loans, by category of Loan (e.g., commercial, consumer, etc.), together with the aggregate
principal amount of such Loans by category (the “Classified Loans”) and (B) each asset of Seller or any of its
Subsidiaries that, as of June 30, 2019, is classified as “Other Real Estate Owned” and the book value thereof.
(b)
Set forth in Section 3.27(b) of the Seller Disclosure Letter is a true, correct and complete list, as of June 30,
2019, of each Loan of Seller or any of its Subsidiaries that is structured as a participation interest in a Loan originated by
another person (each, a “Loan Participation”), including with respect to each such Loan Participation, the originating
lender of the related Loan, the outstanding principal balance of the related Loan, the amount of the outstanding principal balance
represented by the Loan Participation and the identity of the borrower of the related Loan.
(c)
Except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on
Seller, each Loan of Seller and its Subsidiaries (i) is evidenced by notes, agreements or other evidences of indebtedness
that are true, genuine and what they purport to be, (ii) to the extent carried on the books and records of Seller and its
Subsidiaries as secured Loans, has been secured by valid charges, mortgages, pledges, security interests, restrictions, claims,
liens or encumbrances, as applicable, which have been perfected and (iii) is the legal, valid and binding obligation of the
obligor named therein, enforceable in accordance with its terms, (except as may be limited by the Enforceability Exceptions).
(d)
Except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on
Seller, each outstanding Loan of Seller and its Subsidiaries (including Loans held for resale to investors) was solicited and originated,
and is and has been administered and, where applicable, serviced, and the relevant Loan files are being maintained, in all material
respects in accordance with the relevant notes and other credit and security documents, the written underwriting standards of Seller
and its Subsidiaries (and, in the case of Loans held for resale to investors, the underwriting standards, if any, of the applicable
investors) and with all applicable laws.
(e)
None of the agreements pursuant to which Seller or any of its Subsidiaries has sold Loans or pools of Loans or participations
in Loans or pools of Loans contains any obligation to repurchase such Loans or interests therein solely on account of a payment
default by the obligor on any such Loan.
(f)
There are no outstanding Loans made by Seller or any of its Subsidiaries to any “executive officer” or other
“insider” (as each such term is defined in Regulation O promulgated by the Federal Reserve Board) of Seller or its
Subsidiaries.
(g)
Neither Seller nor any of its Subsidiaries is now nor has it ever been since January 1, 2016, subject to any fine,
suspension, settlement or other contract or other administrative agreement or sanction by, or any reduction in any loan purchase
commitment from, any Governmental Entity relating to the origination, sale or servicing of mortgage or consumer Loans.
(h)
Seller’s allowance for loan losses as reflected in Seller’s Audited Financial Statements was, and the allowance
shown on the balance sheets in financial statements for periods ending after such date, in the reasonable judgment of management,
was as of their dates, in compliance with Seller’s existing methodology for determining the adequacy of its allowance for
loan losses as well as the standards established by applicable Governmental Authority, the Financial Accounting Standards Board
and GAAP, and is adequate under all such standards.
(i)
Seller has previously made available to Buyer complete and correct copies of its and its applicable Subsidiaries’
lending and servicing policies and procedures as in effect as of the date of this Agreement.
3.28 Insurance.
(a) Except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on
Seller, Seller and its Subsidiaries are insured with reputable insurers against such risks and in such amounts as the
management of Seller reasonably has determined to be prudent and consistent with industry practice, and Seller and
its Subsidiaries are in compliance in all material respects with their insurance policies and are not in default under any of
the terms thereof, (b) each such policy is outstanding and in full force and effect and, except for policies insuring against
potential liabilities of officers, directors and employees of Seller and its Subsidiaries, Seller or the relevant Subsidiary
thereof is the sole beneficiary of such policies, (c) all premiums and other payments due under any such policy have been
paid, and all claims thereunder have been filed in due and timely fashion, (d) since January 1, 2016, there is no claim for
coverage by Seller or any of its Subsidiaries pending under any insurance policy as to which coverage has been questioned,
denied or disputed by the underwriters of such insurance policy and (e) since January 1, 2016, neither Seller nor any of its
Subsidiaries has received written notice of any termination of, material premium increase with respect to, or material
alteration of coverage under, any insurance policies. Section 3.28 of the Seller Disclosure Letter lists all insurance
policies maintained by Seller and each of its Subsidiaries as of the date hereof, including any bank-owned life insurance
(“BOLI”) policies. The BOLI reflected on the Most Recent Balance Sheet is, and will at the Effective Time
be, owned by Seller or such Subsidiary, as the case may be, free and clear of any claims thereon by the officers, directors
or members of their families. Seller and its Subsidiaries have obtained the informed, written consent of each employee on
whose behalf BOLI has been purchased. Seller and its Subsidiaries have taken all actions necessary to comply with applicable
law in connection with its purchase of BOLI. A breakdown of the estimated cash surrender values for each policy, the purpose
for which each policy was purchased, the beneficiaries under each policy and a list of the lives insured thereunder has been
made available to Buyer.
3.29
Deposits.
(a)
The deposits of Seller Bank have been solicited, originated and administered by Seller Bank in all material respects in
accordance with the terms of their governing documents in effect from time to time and with applicable law.
(b)
Each of the agreements relating to the deposits of Seller Bank is valid, binding, and enforceable upon its respective parties
in accordance with its terms, except as may be limited by the Enforceability Exceptions.
(c)
Seller Bank has complied in all material respects with applicable law relating to overdrafts, overdraft protection and payment
for overdrafts.
(d)
Any debit cards issued by Seller Bank with respect to the deposits of Seller Bank have been issued and administered in all
material respects in accordance with applicable law, including the Electronic Fund Transfer Act of 1978, as amended, and Regulation E
promulgated thereunder.
ARTICLE
IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1
Making of Representations and Warranties.
(a)
On or prior to the date hereof, Buyer has delivered to Seller and Seller Bank a letter that will be treated confidentially
(the “Buyer Disclosure Letter”) listing, among other things, items the disclosure of which is necessary or appropriate
either in response to an express disclosure requirement contained in a provision of this Agreement or as an exception to one or
more representations or warranties contained in Article IV; provided, however, that (i) the mere inclusion
of an item in the Buyer Disclosure Letter as an exception to a representation or warranty shall not be deemed an admission by Buyer
that such item represents a material exception or fact, event or circumstance or that such item is or would reasonably be expected
to have a Material Adverse Effect with respect to Buyer, and (ii) any disclosure made with respect to a section of this Article
IV shall be deemed to qualify any other section of this Article IV (A) specifically referenced or cross-referenced in
such disclosure or (B) to the extent it is reasonably apparent on its face (notwithstanding the absence of a specific cross-reference)
from a reading of the disclosure that such disclosure applies to such other sections of this Article IV.
(b) Except
as set forth in the Buyer Disclosure Letter, Buyer represents and warrants to Seller and Seller Bank that the
statements contained in this Article IV are correct as of the date of this Agreement and will be correct as of
the Closing Date (as though made on and as of the Closing Date), except as to any representation or warranty which
specifically speaks as of an earlier date (including without limitation representations made as of “the date of this
Agreement”), which only need be correct as of the specified earlier date. No representation or warranty of Buyer
contained in this Article IV shall be deemed untrue or incorrect, and Buyer shall not be deemed to have breached a
representation or warranty, as a consequence of the existence of any fact, circumstance or event unless such fact,
circumstance, or event, individually or taken together with all other facts, circumstances or events inconsistent with any
section of this Article IV, has had or would reasonably be expected to have a Material Adverse Effect with respect to
Buyer, disregarding for the purposes of this Section 4.1(b) any materiality or Material Adverse Effect qualification
contained in any representation or warranty; provided, however, that the foregoing standard shall not apply to
the representations and warranties contained in (a) Sections 4.7 and 4.8, which shall be deemed untrue and
incorrect if not true and correct, and (b) Sections 4.2, 4.3(a) and 4.3(b)(i), which shall be deemed
untrue and incorrect if not true and correct in all material respects.
4.2
Corporate Organization. Buyer is a non-member savings bank duly organized, validly existing, and in good standing
under the laws of the State of Rhode Island. The deposit accounts of Buyer are insured by the FDIC through the Deposit Insurance
Fund (as defined in Section 3(y) of the FDIA) to the fullest extent permitted by law. All premiums and assessments required to
be paid in connection therewith have been paid when due, and no proceedings for the termination of such insurance are pending or,
to the knowledge of Buyer, threatened. Buyer is a member in good standing of the FHLB and owns the requisite amount of stock therein.
Buyer engages only in activities (and holds properties only of the types) permitted by the FDIA and Rhode Island law and the rules
and regulations of the FDIC and the Rhode Island Department of Business Regulation promulgated thereunder. Buyer has no Subsidiaries.
4.3
Authority; No Violation.
(a)
Buyer has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby (including the
Merger, Bank Combination and Dissolution) have been duly and validly approved by the Board of Trustees of Buyer. No other corporate
proceedings or approvals on the part of Buyer are necessary to approve this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by Buyer and (assuming due authorization, execution and
delivery by Seller and Seller Bank) constitutes a valid and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms (except in all cases as may be limited by the Enforceability Exceptions).
(b) Neither
the execution and delivery of this Agreement by Buyer, nor the consummation by Buyer of the transactions contemplated hereby
(including the Merger, Bank Combination and Dissolution), nor compliance by Buyer with any of the terms or provisions
hereof, will (i) violate any provision of the articles of association or bylaws of Buyer or (ii) assuming that the consents
and approvals referred to in Section 4.4 are duly obtained, (x) violate any law, statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to Buyer or any of its properties or assets or (y)
violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a
right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien
upon any of the respective properties or assets of Buyer under, any of the terms, conditions or provisions of any contract,
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Buyer is
a party, or by which it or any of its properties or assets may be bound, except (in the case of this clause (y)) for such
violations, conflicts, breaches or defaults which, either individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect on Buyer.
4.4
Consents and Approvals. Except for (a) the filing of any required applications, filings, and notices, as applicable,
with the FDIC in connection with the Merger and Bank Combination, and approval of or non-objection to such applications, filings
and notices, (b) the filing of any required applications, filings and notices, as applicable, with the Director of the Rhode Island
Department of Business Regulation, Division of Banks and the Commissioner of the Connecticut Banking Department in connection with
the Merger and approval of such applications, filings and notices, (c) the filing of any required applications, filings and notices,
as applicable, with the Director of the Rhode Island Department of Business Regulation, Division of Banks and the Commissioner
of the Connecticut Banking Department in connection with the Bank Combination and approval of such applications, filings and notices,
(d) the filing of any required applications, filings or notices with FINRA and approval of such applications, filings and notices,
(e) the filing with the SEC of the Proxy Statement, (f) the filing of the Articles of Merger with the SDAT pursuant to the MGCL,
(g) the filing of any required applications, filings and notices, as applicable, with the Federal Reserve Board and approval or
waiver or non-objection of such applications, filings and notices, (h) the receipt by Seller of the Requisite Seller Vote and (i)
the approval, effective as of the Effective Time, by the Board of Directors of the Surviving Corporation and the Board of Trustees
of Buyer of the Dissolution, no consents or approvals of or filings or registrations with any Governmental Entity are necessary
in connection with (i) the execution and delivery by Buyer of this Agreement or (ii) the consummation by Buyer of the transactions
contemplated hereby (including the Merger, Bank Combination and Dissolution). As of the date hereof, Buyer is not aware of any
reason why the necessary regulatory approvals and consents will not be received by Buyer to permit consummation of the Merger on
a timely basis.
4.5 Reports.
Buyer has timely filed all reports, forms, correspondence, registrations and statements, together with any amendments
required to be made with respect thereto, that it was required to file since January 1, 2016 with any Regulatory Agency, and
has paid in full all fees and assessments due and payable in connection therewith, except where the failure to file such
report, forms, correspondence, registration or statement or to pay such fees and assessments, either individually or in
the aggregate, would not reasonably be expected to have a Material Adverse Effect on Buyer. Subject to Section 9.14,
except for normal examinations or inspections conducted by a Regulatory Agency in the ordinary course of business of Buyer,
no Regulatory Agency has initiated or has pending any proceeding or, to the knowledge of Buyer, investigation into the
business or operations of Buyer since January 1, 2016, except where such proceedings or investigation would not reasonably be
expected to be, either individually or in the aggregate, have a Material Adverse Effect on Buyer. Subject to Section
9.14, there (i) is no unresolved violation, criticism or exception by any Regulatory Agency with respect to any report or
statement relating to any examinations or inspections of Buyer and (ii) there have been no formal or informal inquiries by,
or disagreements or disputes with, any Regulatory Agency with respect to the business, operations, policies or procedures of
Buyer since January 1, 2016, in each case, which would reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect on Buyer.
4.6
Financial Statements.
(a)
Buyer has delivered to Seller and Seller Bank true, correct and complete copies of the consolidated balance sheets of Buyer
as of December 31, 2018 and 2017 and the related consolidated statements of net income, comprehensive income (less), changes in
retained earnings and cash flows for each of the years in the two-year period ended December 31, 2018, accompanied by the audit
report of Buyer’s independent registered public accounting firm (the “Buyer Financial Statements”).
The Buyer Financial Statements (i) were prepared from, and are in accordance with, the books and records of Buyer, (ii) fairly
present in all material respects the results of operations, cash flows, changes in retained earnings and financial position of
Buyer for the respective fiscal periods and as of the respective dates therein set forth and (iii) were prepared in accordance
with GAAP consistently applied during the periods involved, except, in each case, as indicated in such Buyer Financial Statements
or in the notes thereto. The books and records of Buyer have been, and are being, maintained in all material respects in accordance
with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions.
(b)
Since January 1, 2016, Buyer has duly filed with the FDIC and any other applicable Regulatory Agency, in correct form, the
reports required to be filed under applicable laws and regulations and such reports were in all respects complete and accurate
and in compliance with the requirements of applicable laws and regulations.
4.7
Broker’s Fees. With the exception of the engagement of Boenning & Scattergood, Inc., neither Buyer nor
any of its respective officers or directors has employed any broker, finder or financial advisor or incurred any liability for
any broker’s fees, commissions or finder’s fees in connection with the transactions contemplated hereby.
4.8
Absence of Certain Changes or Events. Since December 31, 2018, no event or events have occurred that have had or
would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Buyer.
4.9
Legal and Regulatory Proceedings.
(a)
Buyer is not a party to any, and there are no outstanding or pending or, to the knowledge of Buyer, threatened, legal, administrative,
arbitral or other proceedings, claims, actions or governmental or regulatory investigations (i) of any nature against Buyer or
any of its current directors or executive officers which would reasonably be expected to have, either individually or in the aggregate,
a Material Adverse Effect on Buyer or (ii) challenging the validity or propriety of the transactions contemplated by this Agreement.
(b)
There is no injunction, order, judgment, decree or regulatory restriction imposed upon Buyer or the assets, rights or properties
of Buyer (or that, upon consummation of the Merger, would apply to Buyer or any of its affiliates), which would reasonably be expected
to have, either individually or in the aggregate, a Material Adverse Effect on Buyer.
4.10
Employees.
(a)
For purposes of this Agreement, “Buyer Benefit Plans” mean all employee benefit plans (as defined in
Section 3(3) of ERISA), whether or not subject to ERISA, whether funded or unfunded, and all pension, benefit, retirement, bonus,
stock option, stock purchase, employee stock ownership, restricted stock, stock-based, performance award, phantom equity, incentive,
deferred compensation, retiree medical or life insurance, supplemental retirement, severance, retention, employment, consulting,
termination, change in control, salary continuation, accrued leave, sick leave, vacation, paid time off, health, medical, disability,
life, accidental death and dismemberment, insurance, welfare, fringe benefit and other similar plans, programs, policies, practices
or arrangements or other contracts or agreements (and any amendments thereto) to or with respect to which Buyer is a party or has
or could reasonably be expected to have any current or future obligation or that are sponsored, maintained, contributed to or required
to be contributed to by Buyer for the benefit of any current or former employee, officer, director, consultant or independent contractor
(or any spouse or dependent of such individual) of Buyer.
(b)
Each Buyer Benefit Plan has been established, operated and administered in all material respects in accordance with its
terms and the requirements of all laws, including ERISA and the Code.
4.11 Compliance
with Applicable Law. Buyer holds, and has at all times since January 1, 2016 held, all licenses, registrations
franchises, certificates, variances, permits, charters and authorizations necessary for the lawful conduct of its business
and ownership of its business and properties, rights and assets under and pursuant to each (and has paid in full all fees and
assessments due and payable in connection therewith), except where neither the failure to hold nor the cost of obtaining and
holding any such license, franchise, permit or authorization (nor the failure to pay any such fees or assessments) would
not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Buyer, and, to the
knowledge of Buyer, no suspension or cancellation of any such license, registration, franchise, certificate, variance,
permit, charter or authorization is threatened. Buyer has complied in all material respects with, and is not in material
default or violation under, any laws, statutes, rules, regulations, policies, order and/or guideline or any Governmental
Entity relating to Buyer, including all laws related to data protection or privacy (including laws related to Personal Data),
the USA PATRIOT Act, the Bank Secrecy Act, the Equal Credit Opportunity Act and Regulation B, the Fair Housing Act, the
Community Reinvestment Act, the Fair Credit Reporting Act, the Truth in Lending Act and Regulation Z, the Home Mortgage
Disclosure Act, the Fair Debt Collection Practices Act, the Electronic Fund Transfer Act, the Dodd-Frank Wall Street Reform
and Consumer Protection Act, any regulations promulgated by the Consumer Financial Protection Bureau, the Interagency Policy
Statement on Retail Sales of Nondeposit Investment Products, the SAFE Mortgage Licensing Act of 2008, the Real Estate
Settlement Procedures Act and Regulation X, Title V of the Gramm-Leach-Bliley Act and any other law relating to bank secrecy,
discriminatory lending, financing or leasing practices, consumer protection, money laundering prevention, foreign assets
control, U.S. sanctions laws and regulations, Sections 23A and 23B of the Federal Reserve Act, the Sarbanes-Oxley Act, the
Federal Deposit Insurance Corporation Improvement Act and all agency requirements relating to the origination, sale and
servicing of mortgage and consumer loans. Buyer has a Community Reinvestment Act rating of “satisfactory” or
better.
4.12
Regulatory Capitalization. As of the date of this Agreement, (i) Buyer is “well capitalized” as such
term is defined in the rules and regulations promulgated by the FDIC, as applicable and as amended from time to time, and (ii)
Buyer has no reason to believe that Buyer will not be so “well capitalized” immediately after the Effective Time.
4.13
Agreements with Regulatory Agencies. Subject to Section 9.14, Buyer is not subject to any cease-and-desist
or other order or enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding
with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or has been
ordered to pay any civil money penalty by, or has been since January 1, 2016, a recipient of any supervisory letter from, or since
January 1, 2016, has adopted any policies, procedures or board resolutions at the request or suggestion of, any Regulatory Agency
or other Governmental Entity that currently restricts in any material respect or would reasonably be expected to restrict in any
material respect the conduct of its business or that in any material manner relates to its capital adequacy, its credit or risk
management policies, its management or its business (each, a “Buyer Regulatory Agreement”), nor has Buyer been
advised since January 1, 2016, by any Regulatory Agency or other Governmental Entity that it is considering issuing, initiating,
ordering, or requesting any such Buyer Regulatory Agreement.
4.14
Sufficient Funds. Buyer will have available to it sources of funds sufficient to pay the aggregate Merger Consideration
and any other amounts payable pursuant to this Agreement and to effect the Transactions.
4.15
Insurance. Buyer is insured for reasonable amounts with reputable and, to the knowledge of Buyer, financially sound
insurance companies against such risks as companies engaged in a similar business would, in accordance with good business practice
customarily be insured, and maintain all insurance required by applicable laws and regulations. Buyer is in compliance in all material
respects with its insurance policies and is not in default under any of the terms thereof.
4.16
Buyer Information. The information that is provided by Buyer or its representatives for inclusion in the Proxy Statement,
or in any other document filed with any Regulatory Agency or Governmental Entity in connection herewith, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances
in which they are made, not misleading.
ARTICLE
V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Conduct
of Business of Seller Prior to the Effective Time. During the period from the date of this Agreement to the Effective
Time or the earlier termination of this Agreement in accordance with its terms, except as expressly contemplated by this
Agreement (including as set forth in the Seller Disclosure Letter), required by law or as consented to in writing by
Buyer, Seller shall, and shall cause each of its Subsidiaries to, (a) conduct its business in the ordinary course in all
material respects, (b) use reasonable best efforts to maintain and preserve intact its business organization, employees,
independent contractors and advantageous customer and other business relationships and (c) take no action that would
reasonably be expected to prevent or adversely affect or delay (x) the parties’ ability to obtain any necessary
approvals of any Governmental Entity required for the transactions contemplated hereby or to consummate the transactions
contemplated hereby on a timely basis or (y) performance by Seller or its Subsidiaries of its and their covenants and
agreements hereunder.
5.2
Seller Forbearances. During the period from the date of this Agreement to the Effective Time or the earlier termination
of this Agreement in accordance with its terms, except as expressly contemplated by this Agreement (including as set forth in the
Seller Disclosure Letter), as required by law or as consented to in writing by Buyer, which consent shall not unreasonably be withheld,
conditioned or delayed, Seller shall not, and shall not permit any of its Subsidiaries to:
(a)
other than in the ordinary course of business (including deposits, federal funds borrowings and advances from the FHLB),
incur any indebtedness for borrowed money (other than indebtedness of Seller or any of its wholly owned Subsidiaries to Seller
or any of its other Subsidiaries), assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations
of any other individual, corporation or other entity;
(b)
(i)
adjust, split, combine or reclassify any capital stock;
(ii)
make, declare or pay any dividend, or make any other distribution on, or directly or indirectly redeem, purchase or otherwise
acquire, any shares of its capital stock or any securities or obligations convertible (whether currently convertible or convertible
only after the passage of time or the occurrence of certain events) into or exchangeable for any shares of its capital stock (except
(A) regular quarterly cash dividends at a rate not in excess of $0.07 per share of Seller Common Stock and with record and payment
dates as set forth in Section 5.2(b)(ii) of the Seller Disclosure Letter, (B) dividends paid by any of the Subsidiaries
of Seller to Seller or any of its other wholly owned Subsidiaries and (C) the acceptance of shares of Seller Common Stock as payment
for the exercise price of Seller Stock Options) or for withholding of taxes incurred in connection with the exercise of Seller
Stock Options or the vesting or settlement of shares of Seller restricted stock;
(iii)
grant any stock options, stock appreciation rights, performance shares, restricted stock units, deferred stock units, shares
of restricted stock or other equity or equity-based awards or interests or grant any individual, corporation or other entity any
right to acquire any shares of its capital stock; or
(iv) issue,
sell or otherwise permit to become outstanding (including by issuing any shares of Seller Common Stock that are held as
“treasury shares” as of the date of this Agreement) any additional shares of capital stock or securities
(except in the event vested stock options are exercised) convertible or exchangeable into, or exercisable for, any shares of
its capital stock or any options, warrants or other rights of any kind to acquire any shares of capital stock, except
pursuant to the exercise, vesting or settlement of Seller Stock Options outstanding as of the date hereof;
(c)
sell, transfer, mortgage, encumber or otherwise dispose of any of its material properties or assets or any business to any
individual, corporation or other entity other than a wholly owned Subsidiary of Seller, or cancel, release or assign any indebtedness
to any such person or any claims held by any such person, in each case, other than in the ordinary course of business;
(d)
except for transactions in the ordinary course of business, make any material investment either by purchase of stock or
securities, contributions to capital, property transfers or purchase of any property or assets of any other individual, corporation
or other entity other than a wholly owned Subsidiary of Seller;
(e)
purchase any bank owned life insurance;
(f)
terminate, materially amend, or waive any material provision of, any Seller Contract, or make any change in any instrument
or agreement governing the terms of any of its securities, or any material lease or contract, other than normal renewals of contracts
and leases in the ordinary course of business and without material adverse changes of terms with respect to Seller, or enter into
any contract that would constitute a Seller Contract if it were in effect on the date of this Agreement;
(g) except
as required under the terms of any Seller Benefit Plan existing as of the date hereof and set forth in Section 3.12(a)
of the Seller Disclosure Letter, or as set forth in Section 5.2(g) of the Seller Disclosure Letter, (i) enter into,
adopt or terminate any employee benefit or compensation plan, program, practice, policy, contract or arrangement for
the benefit or welfare of any current or former employee, officer, director, independent contractor or consultant (or any
spouse or dependent of such individual), (ii) amend (whether in writing or through the interpretation of) any Seller Benefit
Plan, (iii) increase the compensation or benefits payable to any current or former employee, officer, director, independent
contractor or consultant (or any spouse or dependent of such individual), except for annual base salary or wage increases in
the ordinary course of business to which Buyer consents in writing, which consent shall not unreasonably be withheld,
conditioned or delayed, (iv) pay or award, or commit to pay or award, any bonuses or incentive compensation, except for
bonuses earned in 2019 under the Seller Bank Senior Management Short Term Incentive Plan and as determined in the ordinary
course of business and consistent with past practice, (v) grant any equity or equity-based awards or other compensation, (vi)
negotiate or enter into any new, or amend any existing, employment, severance, change in control, retention, bonus guarantee,
collective bargaining agreement or similar agreement or arrangement, (vii) fund any rabbi trust or similar arrangement,
(viii) terminate the employment or services of any officer or any employee whose annual base salary (or annual base
compensation, in the case of any independent contractor or consultant) is equal to or greater than $50,000, other than for
cause (as determined in the ordinary course of business), (ix) hire or promote any officer or any employee, independent
contractor or consultant whose annual base salary (or annual base compensation, in the case of any independent contractor or
consultant) is equal to or greater than $50,000 other than in connection with the replacement of such an officer, employee,
independent contractor or consultant, and as consented to in writing by Buyer, which consent shall not unreasonably be
withheld, conditioned or delayed, or (x) waive, release or limit any Restrictive Covenant obligation of any current or former
officer, employee, independent contractor or consultant of Seller or any of its Subsidiaries;
(h)
settle any material claim, suit, action or proceeding, except in the ordinary course of business in an amount and for consideration
not in excess of $50,000, individually or in the aggregate, and that would not impose any material restriction on the business
of Seller, Seller Bank or their respective Subsidiaries (or, following the consummation of the transactions contemplated hereby,
Buyer);
(i)
amend the Seller Certificate, Seller Bylaws or comparable governing or organizational document of any of its Subsidiaries;
(j)
merge or consolidate itself or any of its Subsidiaries with any other person, or restructure, reorganize or completely or
partially liquidate or dissolve itself or any of its Subsidiaries;
(k)
materially restructure or materially change its investment securities or derivatives portfolio or its interest rate exposure,
through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported or purchase any security
rated below investment grade;
(l)
take any action that is intended or expected to result in any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect, or in any of the conditions to the Merger set forth in Article VII not
being satisfied, or in a violation of any provision of this Agreement;
(m)
implement or adopt any material change in its accounting principles, practices or methods, other than as may be required
by GAAP;
(n)
enter into any new line of business;
(o) except
as set forth in Section 5.2(o) of the Seller Disclosure Letter or as consented to by Buyer (which consent shall not be
unreasonably withheld, conditioned or delayed and which consent will be deemed to have been granted if not denied within
three (3) business days), make, renegotiate, renew, increase, extend, modify or purchase any loan, loan commitment, letter of
credit or other extension of credit other than in the ordinary course of business consistent with recent past practice in
amounts not to exceed (i) $750,000 in the case of residential loans, (ii) $750,000 in the case of non-residential real
estate loans and (iii) $500,000 in the case of non-real estate loans; provided, however, that with respect
to any new loan, loan commitment, letter of credit or other extension of credit in excess of $2,000,000, Seller will consult
with Buyer on terms and conditions of such new loan, loan commitment, letter of credit or other extension of credit prior to
sharing such terms and conditions, including, without limitation, any term sheet, on a non-binding basis with a proposed
borrower; provided, further, that with respect to Classified Loans, the loan thresholds referenced herein shall
be $250,000; provided, further, that all loan thresholds referenced in this Section 5.2(o) shall
refer to the amount of all loans to any one borrower and related interests;
(p)
make any material changes in its policies and practices with respect to (i) underwriting, pricing, originating, acquiring,
selling, servicing, buying or selling rights to service Loans, (ii) investment, deposit pricing, risk and asset liability
management or other banking and operating matters (including any change in the maximum ratio or similar limits as a percentage
of its capital exposure applicable with respect to its loan portfolio or any segment thereof) or (iii) hedging, in each case,
except as required by Law or requested by a Governmental Entity;
(q)
make, or commit to make, any capital expenditures, except for capital expenditures in the ordinary course of business in
amounts not exceeding $25,000 individually or $50,000 in the aggregate;
(r)
make any investment or commitment to invest in or acquire real estate or in any real estate development project (other than
by way of foreclosure or acquisitions in a bona fide fiduciary capacity or in satisfaction of a debt previously contracted
in good faith, in each case in the ordinary course of business consistent with recent past practice); or foreclose on or take a
deed or title to any real estate other than single-family residential properties in connection with loans or loan commitments in
excess of $250,000 without first conducting a Phase I environmental assessment (a “Phase I Assessment”) of the
property that satisfies the requirements of the all appropriate inquiries standard of CERCLA, or foreclose or take a deed or title
to any real estate if such environmental assessment indicates the presence of Hazardous Material; or enter into any new contracts,
leases, licenses or other agreements respecting or place or create any Liens on any Owned Real Property or Leased Real Property
or amend any Leases, or consent to any sublease, assignment or amendment of any agreement affecting any Leased Real Property in
each case without prior written notice to and consultation with Buyer;
(s)
make, change or revoke any Tax election, change an annual accounting period, adopt or change any Tax accounting method,
file any amended Tax Return, fail to timely file any Tax Return, settle or compromise any Tax Liability, claim or assessment, agree
to any adjustment of any Tax attribute, or agree to an extension or waiver of the limitation period to any Tax claim or assessment,
grant any power of attorney with respect to Taxes, surrender any right to claim a refund of Taxes or enter into any closing agreement
with respect to any Tax or refund or amend any Tax Return;
(t)
make contributions to organizations qualified as tax-exempt under Section 501(c)(3) of the Code other than in the ordinary
course of business consistent with recent past practice;
(u)
make 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 of it or its Subsidiaries;
(v)
materially reduce the amount of insurance coverage or fail to renew any material existing insurance policy, in each case,
with respect to the key employees, properties or assets of Seller or any of its Subsidiaries; or
(w)
agree to take, make any commitment to take, or adopt any resolutions of its Board of Directors or similar governing body
in support of, any of the actions prohibited by this Section 5.2.
ARTICLE
VI
ADDITIONAL AGREEMENTS
6.1
Regulatory Matters.
(a)
The parties hereto shall cooperate with each other and use their reasonable best efforts to promptly prepare and file all
necessary documentation, to effect all applications, notices, petitions and filings (and in the case of the applications, notices,
petitions and filings in respect of the Requisite Regulatory Approvals, within forty-five (45) days of the date of this Agreement),
to obtain as promptly as practicable all permits, consents, approvals and authorizations of all third parties and Governmental
Entities which are necessary or advisable to consummate the transactions contemplated hereby (including the Merger, Bank Combination
and Dissolution), and to comply with the terms and conditions of all such permits, consents, approvals and authorizations of all
such Governmental Entities. Buyer and Seller shall have the right to review in advance, and, to the extent practicable, each will
consult the other on, in each case subject to applicable laws relating to the exchange of information, all the information relating
to Seller or Buyer, as the case may be, and any of Seller’s Subsidiaries, which appears in any filing made with, or written
materials submitted to, any third party or any Governmental Entity in connection with the transactions contemplated hereby. In
exercising the foregoing right, each of the parties hereto shall act reasonably and as promptly as practicable. The parties hereto
agree that they will consult with each other with respect to the obtaining of all permits, consents, approvals and authorizations
of all third parties and Governmental Entities necessary or advisable to consummate the transactions contemplated by this Agreement
and each party will keep the other apprised of the status of matters relating to completion of the transactions contemplated hereby,
and each party shall consult with the other in advance of any meeting or conference with any Governmental Entity in connection
with the transactions contemplated hereby and, to the extent permitted by such Governmental Entity, give the other party and/or
its counsel the opportunity to attend and participate in such meetings and conferences, in each case subject to applicable law.
As used in this Agreement, “Requisite Regulatory Approvals” means (i) all regulatory authorizations, consents,
permits, orders, approvals, waivers or non-objections from the FDIC, the Director of the Rhode Island Department of Business Regulation,
Division of Banks, the Commissioner of the Connecticut Banking Department and the Federal Reserve Board and (ii) any other approvals
set forth in Sections 3.5 and 4.4, in each case (x) that are necessary to consummate the transactions contemplated
hereby (including the Merger, Bank Combination and Dissolution) or (y) the failure of which to be obtained would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on Buyer.
(b) Each
party shall use its reasonable best efforts to resolve any objection that may be asserted by any Governmental Entity with
respect to this Agreement or the transactions contemplated hereby. Notwithstanding the foregoing or anything to the
contrary in this Agreement, nothing contained herein shall be deemed to require Buyer or Seller or any of Seller’s
Subsidiaries, and neither Buyer nor Seller nor any of Seller’s Subsidiaries shall be permitted (without the written
consent of the other party), to take any action, or commit to take any action, or agree to any condition or restriction, in
connection with obtaining the foregoing regulatory authorizations, consents, permits, orders, approvals, waivers or
non-objections of Governmental Entities that would reasonably be expected to have a Material Adverse Effect on Buyer, after
giving effect to the Merger, Bank Combination or Dissolution (a “Materially Burdensome Regulatory
Condition”).
(c)
Buyer and Seller shall, upon request, furnish each other with all information concerning themselves, affiliates, subsidiaries,
directors, officers, depositors and shareholders and such other matters as may be reasonably necessary or advisable in connection
with the Proxy Statement or any other statement, filing, notice or application made by or on behalf of parties to any Governmental
Entity in connection with the Merger and the other transactions contemplated by this Agreement.
(d)
Buyer and Seller shall promptly advise each other upon receiving any communication from any Governmental Entity whose consent
or approval is required for consummation of the transactions contemplated by this Agreement that causes such party to believe that
there is a reasonable likelihood that any Requisite Regulatory Approval will not be obtained, will be obtained subject to a Materially
Burdensome Regulatory Condition or that the receipt of any such approval will be materially delayed.
6.2
Access to Information; Confidentiality.
(a) Upon
reasonable notice and subject to applicable laws, Seller, for the purposes of enabling Buyer to verify the
representations and warranties of Seller and to prepare for the Merger and the other matters contemplated by this Agreement,
shall, and shall cause each of its Subsidiaries to, subject to Section 9.14, afford to the officers, employees,
accountants, counsel, advisors and other representatives of Buyer, access, during normal business hours during the period
from the date of this Agreement to the Effective Time, to all of Seller’s properties, books, contracts, commitments,
personnel, information technology systems, Tax Returns and related work papers and records reasonably requested by Buyer.
Seller shall cooperate with Buyer in preparing to execute after the Effective Time the conversion or consolidation of
systems, including, but not limited to, the conversion of Seller Bank’s data processing and related electronic
informational systems to those used by Buyer, and business operations generally, and, during such period, Seller shall, and
shall cause its Subsidiaries to, promptly make available to Buyer (i) a copy of each report, schedule, registration statement
and other document filed or received by Buyer during such period pursuant to the requirements of federal securities laws or
federal or state banking laws (other than reports or documents which Seller is not permitted to disclose under applicable
law) and (ii) all other information concerning Seller’s business, properties and personnel as Buyer may reasonably
request. Neither Seller nor any of its Subsidiaries shall be required to provide access to or to disclose information where
such access or disclosure would violate or prejudice the rights of Seller’s customers, jeopardize the attorney-client
privilege of the institution in possession or control of such information (after giving due consideration to the existence of
any common interest, joint defense or similar agreement between the parties) or contravene any law, rule, regulation, order,
judgment, decree, fiduciary duty or binding agreement entered into prior to the date of this Agreement. Seller will
make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence
apply.
(b)
Seller shall promptly (and in any event, not later than two (2) business days after first delivered or made available to
the Boards of Directors of Seller and Seller Bank) provide (or cause to be provided) to Buyer copies of any regularly prepared
materials for the Boards of Directors of Seller and Seller Bank, including monthly financial statements and other regular monthly
reports so provided to the Boards of Directors of Seller and Seller Bank; provided that the Seller and Seller Bank may redact (i)
board and committee minutes that discuss the Merger or the other matters contemplated by this Agreement or any other subject matter
Seller reasonably determines should be treated as confidential, (ii) any information prior to providing such materials to Buyer
to the extent that any such information is subject to the attorney-client privilege or work product doctrine and (iii) any non-confidential
supervisory information.
(c)
Buyer shall hold all information furnished by or on behalf of Seller or its representatives pursuant to Sections 6.2(a)
and 6.2(b) in confidence to the extent required by, and in accordance with, the provisions of the confidentiality agreement,
dated August 29, 2019, between Buyer and Seller and the confidentiality agreement, dated September 23, 2019, between Buyer and
Seller (collectively, the “Confidentiality Agreement”).
(d)
In addition to all documents referenced in this Section 6.2, Seller agrees to maintain, in the ordinary course of
business consistent with recent past practice, all electronic records (including e-mails) of Seller and its Subsidiaries and their
respective directors, officers and employees in effect as of the date of this Agreement.
(e)
No investigation (or discovery or receipt of information) by any party hereto or their respective representatives shall
affect or be deemed to modify or waive any representation, warranty, covenant or other agreement of the other parties set forth
herein or the conditions to any party’s obligation to consummate the transactions contemplated hereby. Nothing contained
in this Agreement shall give any party hereto, directly or indirectly, the right to control or direct the operations of the other
party prior to the Effective Time. Prior to the Effective Time, each party shall exercise, consistent with the terms and conditions
of this Agreement, complete control and supervision over its and its affiliates’ and subsidiaries’ respective operations.
6.3
Seller Shareholders’ Approval.
(a)
Following the execution of this Agreement, Seller shall take, in accordance with applicable law and the Seller Articles
and the Seller Bylaws, all action necessary to convene an annual or special meeting of its shareholders as promptly as practicable
for the purpose of obtaining (i) the Requisite Seller Vote required in connection with this Agreement and the Merger and (ii)
if so desired and mutually agreed by the parties, the approval of other matters of the type customarily brought before an annual
or special meeting of shareholders to approve a merger agreement or otherwise approve the transactions contemplated hereby (such
meeting, including any adjournment or postponement thereof, the “Meeting”). In furtherance and without limitation
of the foregoing, Seller, at its expense, shall promptly mail (or cause to be mailed) the Proxy Statement of Seller relating to
the Meeting. Without limiting the scope of this Section 6.3(a), Seller shall use commercially reasonable efforts to mail
the Proxy Statement to Seller’s shareholders as soon as practicable following the date of this Agreement, but in no event
later than sixty (60) days of the date of this Agreement. If at any time prior to the Meeting there shall occur any event that
is required to be set forth in an amendment or supplement to the Proxy Statement, Seller shall promptly prepare and, after consultation
with Buyer, mail to the holders of Shares such an amendment or supplement. Buyer shall cooperate with Seller in the preparation
of the Proxy Statement, any amendment or supplement thereto, and any other communication that could reasonably be deemed to be
proxy solicitation materials relating to the Merger (collectively, the “Proxy Materials”) and shall furnish
Seller with all information relating to Buyer that Seller reasonably determines in necessary to be included in, or otherwise in
respect of, the Proxy Materials. Buyer and its counsel shall be given a reasonable opportunity to review any Proxy Material prior
to its dissemination to the holders of the Shares, and Seller shall give appropriate consideration to making any change to the
Proxy Material reasonably requested by Buyer.
(b)
Seller may engage a proxy solicitor on terms and conditions acceptable to both Seller and Buyer. Seller shall keep Buyer
updated with respect to the proxy solicitation results in connection with the Meeting as reasonably requested by Buyer.
(c)
Subject to Section 6.3(d), the Board of Directors of Seller shall (i) recommend to its shareholders the adoption
of this Agreement, the Merger and the other transactions contemplated hereby (the “Recommendation”), (ii) include
the Recommendation in the Proxy Statement, (iii) use its reasonable best efforts to obtain from the shareholders of Seller the
Requisite Seller Vote, including by communicating to its shareholders the Recommendation and (iv) not withhold, withdraw, qualify
or modify, or propose publicly to withhold, withdraw, qualify or modify, in a manner adverse to Buyer, the Recommendation or take
any action, or make any public statement, filing or release inconsistent with the Recommendation, or submit this Agreement to Seller’s
shareholders for a vote without the Recommendation.
(d) Subject
to Section 8.1 and Section 8.2, if the Board of Directors of Seller, after receiving the advice of its outside
counsel and, with respect to financial matters, its financial advisor, determines in good faith that it would be a violation
of its fiduciary duties under applicable law to continue to recommend this Agreement, then in submitting this Agreement to
Seller’s shareholders, the Board of Directors of Seller may (but shall not be required to) submit this Agreement to
Seller’s shareholders without, or with a recommendation adverse to, the Recommendation (an “Adverse
Recommendation Change”) (although the resolutions approving this Agreement as of the date hereof may not be
rescinded or amended), in which event the Board of Directors of Seller may communicate the basis for the Adverse
Recommendation Change to its shareholders in the Proxy Statement or an appropriate amendment or supplement thereto to the
extent required by applicable law; provided that the Board of Directors of Seller may not take any action under this Section
6.3(d) unless (i) such action is taken in response to an Acquisition Proposal and such Acquisition Proposal (x) did not
result from a breach by Seller of Section 6.13 and (y) constitutes a Superior Proposal; (ii) Seller gives Buyer at
least three (3) business days’ prior written notice of its intention to take such action and a reasonable description
of the events or circumstances giving rise to its determination to take such action (including its basis for determining that
such Acquisition Proposal constitutes a Superior Proposal (including the latest material terms and conditions of, and the
identity of the third party making, the Acquisition Proposal, or any amendment or modification thereof)); (iii) during such
three (3) business day period, Seller has considered and negotiated (and has caused its representatives to consider and
negotiate) with Buyer in good faith (to the extent Buyer desires to so negotiate) regarding any adjustments or modifications
to the terms and conditions of this Agreement proposed by Buyer; and (iv) at the end of such notice period, the Board of
Directors of Seller takes into account any amendment or modification to this Agreement proposed by Buyer (it being
understood that Buyer shall not have any obligation to propose any adjustments, modifications or amendments to the terms and
conditions of this Agreement), and after receiving the advice of its outside counsel and, with respect to financial matters,
its financial advisor, again determines in good faith that it would nevertheless result in a violation of its fiduciary
duties under applicable law to continue to recommend this Agreement and that such Acquisition Proposal constitutes a Superior
Proposal. Any material amendment to any Acquisition Proposal will be deemed to be a new Acquisition Proposal for purposes of
this Section 6.3(d) and will require a new determination and notice period as referred to in this Section
6.3(d).
(e)
Seller shall adjourn or postpone the Meeting if, (i) as of the time for which such meeting is originally scheduled, there
are insufficient shares of Seller Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct
the business of the Meeting or (ii) on the date of the Meeting, Seller has not received proxies representing a sufficient number
of shares necessary to obtain the Requisite Seller Vote; provided that, from and after such time, if any, that (in response to
an Acquisition Proposal that has been received by Seller and that has been publicly disclosed or otherwise become public) Seller
makes an Adverse Recommendation Change that is permitted by Section 6.3(d), Seller thereafter shall not be so required to
adjourn or postpone the Meeting. Notwithstanding anything to the contrary herein, unless this Agreement has been terminated in
accordance with its terms, the Meeting shall be convened and this Agreement shall be submitted to the shareholders of Seller at
the Meeting for the purpose of voting on the adoption of this Agreement and the other matters contemplated hereby, and nothing
contained herein shall be deemed to relieve Seller of such obligation, including if Seller makes an Adverse Recommendation Change.
6.4
Legal Conditions to Merger. Subject in all respects to Section 6.1 of this Agreement, each of Buyer and Seller
shall, and Seller shall cause its Subsidiaries to, use their reasonable best efforts (a) to take, or cause to be taken, all actions
necessary, proper or advisable to comply promptly with all legal requirements that may be imposed on such party or its Subsidiaries
with respect to the Merger and, subject to the conditions set forth in Article VII, to consummate the transactions contemplated
by this Agreement (including the Merger, Bank Combination and Dissolution) and (b) to obtain (and to cooperate with the other party
to obtain) any material consent, authorization, permit, order or approval of, or any exemption by, any Governmental Entity and
any other third party that is required to be obtained by Buyer or Seller or any of Seller’s Subsidiaries in connection with
the Merger or any other transaction contemplated by this Agreement.
6.5
Exchange Act Deregistration. Prior to the Closing Date, Seller shall cooperate with Buyer and use 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 SEC rules to enable the deregistration of the Seller Common Stock under the Exchange Act as promptly
as practicable after the Effective Time.
6.6
Employee Matters.
(a)
Buyer shall endeavor to retain as many of Seller’s and Seller Bank’s employees as it deems reasonably practical
in its sole discretion. Buyer shall use its reasonable efforts to provide employees of Seller and its Subsidiaries with meaningful
career opportunities at Buyer following the Merger and Bank Combination. Notwithstanding the foregoing, this Agreement is not intended
to provide to any employee a legally enforceable right to continuing employment after the Effective Time, and any employees of
Seller or any of its Subsidiaries that continue employment with Buyer following the Effective Time shall become employees at will
of Buyer.
(b)
At and after the Effective Time, and except as set forth in Section 6.6(b) of the Seller Disclosure Letter, Buyer
will provide any employee of Seller and Seller Bank who is not otherwise covered by an individual severance or change in control
agreement and whose employment is involuntarily terminated by Buyer without Cause (as defined below) or voluntarily terminates
employment as a result of not being offered substantially similar employment, determined in the good faith judgment of Buyer (for
purposes of clarity, reporting to a different supervisor or having a different title shall not entitle an employee to severance
under this Section 6.6(b)) or as a result of a relocation of his or her principal place of employment by more than thirty
(30) miles from the location of his or her principal place of employment on the date of this Agreement within twelve (12) months
following the Effective Time with a lump sum cash severance payment equal to two (2) weeks of pay for each full year of service
with Seller or Seller Bank, with a minimum benefit of four (4) weeks and a maximum benefit of twenty-six (26) weeks, with such
payment made within ten (10) business days of the date of termination and subject to such person’s execution of a customary
release in the form attached hereto as Exhibit B. For purposes of this Section 6.6(b), the following, as
determined by Buyer in its reasonable judgment, shall constitute “Cause” for termination: (i) conviction of
or plea of nolo contendere to a felony or other crime involving dishonesty or theft, or likely to result in imprisonment;
(ii) fraud, theft, embezzlement, other material dishonesty or any material breach of a fiduciary duty owed to Buyer, Seller or
any of its Subsidiaries; (iii) material failure to perform, or gross neglect or recklessness in the performance of, duties and
responsibilities to Buyer, Seller or any of its Subsidiaries; (iv) willful failure or willful refusal to follow the directions
or instructions of Buyer; or (v) material violation of any of Buyer’s applicable employment policies.
(c) Prior
to the Effective Time, Buyer shall take all reasonable action so that employees of Seller or Seller Bank who are employed by
Buyer at or after the Effective Time (i) shall receive employee benefits which are at a level comparable in the aggregate to
similarly-situated employees of Buyer and (ii) shall be entitled to participate in the Buyer Benefit Plans at a level
comparable to similarly-situated employees of Buyer (it being understood that inclusion of the employees of Seller and its
Subsidiaries in the Buyer Benefit Plans may occur at different times with respect to different Buyer Benefit Plans) to the
extent that such participation does not result in a duplication of benefits. Unless an employee of Seller affirmatively
terminates coverage under any medical, dental, vision, health or disability plan of Seller (the “Seller Health
Plan”) prior to the time that such employee becomes eligible to participate in the Health Plan, no coverage of any
of Seller employees or their dependents shall terminate under any of the Seller Health Plans prior to the time such employees
and their dependents become covered under the health plans, programs and benefits provided to similarly-situated employees of
Buyer and their dependents. Buyer shall cause each Buyer Benefit Plan in which employees of Seller or Seller Bank are
eligible to participate to recognize the service of such employees with Seller or Seller Bank, as applicable (to the same
extent as such service was credited for such purpose immediately prior to the Effective Time), for purposes of determining
eligibility to participate in such Buyer Benefit Plan and the vesting of benefits, but not for purposes of accrual of
benefits under any defined benefit pension plan or to the extent that recognizing the service of such employees would result
in a duplication of benefits.
(d)
Effective as of the day immediately preceding the Closing Date, Seller and Seller Bank shall adopt resolutions to terminate
any Seller Benefit Plan intended to qualify as a Code Section 401(k) arrangement (the “Seller 401(k) Plan”)
and shall provide Buyer with evidence that the Seller 401(k) Plan has been terminated (effective no later than the day immediately
preceding the Closing Date) pursuant to resolutions of the Board of Directors of Seller. The form and substance of such resolutions
shall be subject to Buyer’s review and approval (which approval shall not be unreasonably withheld, conditioned or delayed).
Seller and its Subsidiaries, as applicable, shall also take such other actions in furtherance of terminating the Seller 401(k)
Plan as Buyer may reasonably request prior to the Closing Date, including the adoption of amendments to the Seller 401(k) Plan.
The accounts of all participants and beneficiaries in the Seller 401(k) Plan shall become fully vested upon termination of such
plan. As soon as practicable following termination of such plan, the account balances in the Seller 401(k) Plan shall be distributed
as a participant or beneficiary may direct, consistent with applicable laws and regulations. Any participant that continues employment
with Buyer and who elects to participate in any Buyer Benefit Plan intended to qualify as a Code Section 401(k) arrangement (the
“Buyer 401(k) Plan”) may elect to have his or her account balance rolled over into the Buyer 401(k) Plan.
(e)
From and after the Effective Time, Buyer shall have sole discretion with respect to the determination as to whether or when
to terminate, merge or continue any employee benefit plans and programs of Seller or its Subsidiaries.
(f) In
the event of any termination of any Seller or Seller Bank medical, dental, vision, health or disability plan
(collectively, “Health Plan”), Buyer shall make available to the former Seller and Seller Bank employees
(and their dependents) that continue employment with Buyer, Health Plan coverage on the same basis as it provides such
coverage to similarly-situated Buyer employees, provided that Buyer shall cause each such Health Plan to (i) waive any
preexisting condition limitations to the extent such conditions are covered under the applicable Health Plans of Buyer, (ii)
waive any waiting period limitation or evidence of insurability requirement which would otherwise be applicable to such
employee on or after the Effective Time to the extent such employee had satisfied any similar limitation or requirement under
an analogous Health Plan prior to the Effective Time and (iii) provide credit towards the deductible and out-of-pocket
maximum for eligible expenses incurred by the employees of Seller or Seller Bank under the Seller Health Plans for the plan
year in which coverage commences under the Buyer Health Plan.
(g)
Buyer agrees to assume and honor the terms of each of the change in control agreements with the employees of Seller as set
forth in Section 6.6(g) of the Seller Disclosure Letter, except to the extent any such agreement is superseded or terminated
as of, or following, the Effective Time. Concurrently with the execution of this Agreement, Buyer shall obtain from Thomas Borner,
Robert Halloran, Kim Bushey, Lori Bannister and Robert Trivella, in the form included in Section 6.6(g) of the Seller Disclosure
Letter, an executed settlement agreement to accept in full settlement of his or her rights under his or her change in control agreement,
and an executed consulting and release agreement with Thomas Borner in the form included in Section 6.6(g) of the Seller
Disclosure Letter, to be effective as of the Effective Time.
(h)
Buyer agrees to honor and maintain the Seller Bank Amended and Restated Deferred Compensation Retirement Plan (“Deferred
Plan”) as set forth in Section 6.6(h) of the Seller Disclosure Letter, and, unless otherwise agreed to in writing,
Buyer agrees that the timing and amount of the payments thereunder will not be accelerated and will continue to be made in accordance
with the terms of such plan. Concurrently with the execution of this Agreement, Buyer shall provide each participant in the Deferred
Plan a signed letter in the form included in Section 6.6(h) of the Seller Disclosure Letter.
(i)
Neither Seller, any of its Subsidiaries, nor any officer, director, manager, employee, agent or representative of Seller
or its Subsidiaries shall make any communication to service providers of Seller or its Subsidiaries regarding any Buyer Benefit
Plan or any compensation or benefits to be provided after the Effective Time without the advance approval of Buyer.
(j)
No provision in this Agreement shall modify or amend any other agreement, plan, program, or document relating to a Seller
Benefit Plan unless this Agreement explicitly states that the provision “amends” that other agreement, plan, program,
or document. This shall not prevent the parties entitled to enforce this Agreement from enforcing any provision in this Agreement,
but no other party shall be entitled to enforce any provision in this Agreement on the grounds that it is an amendment to another
agreement, plan, program, or document relating to a Seller Benefit Plan, unless the provision is explicitly designated as such
in this Agreement, and the person is otherwise entitled to enforce the other agreement, plan, program, or document. If a party
not entitled to enforce this Agreement brings a lawsuit or other action to enforce any provision in this Agreement as an amendment
to another agreement, plan, program, or document, and that provision is construed to be such an amendment despite not being explicitly
designated as one in this Agreement, that provision shall lapse retroactively as of its inception, thereby precluding it from having
any amendatory effect.
6.7
Indemnification; Directors’ and Officers’ Insurance.
(a) From
and after the Effective Time, to the fullest extent permitted by applicable law, Buyer shall indemnify and hold harmless and
shall advance expenses as incurred, in each case to the extent such persons are indemnified as of the date of this
Agreement by Seller pursuant to the Seller Articles, the Seller Bylaws, the governing or organizational documents of any
Subsidiary of Seller and any indemnification agreements in existence as of the date hereof and disclosed in Section
6.7(a) of the Seller Disclosure Letter, each present and former director, officer or employee of Seller and its
Subsidiaries (in each case, when acting in such capacity) (collectively, the “Indemnified Parties”)
against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, amounts paid in
settlement, damages or liabilities incurred in connection with any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, whether arising before or after the Effective Time,
arising out of the fact that such person is or was a director, officer or employee of Seller or any of its Subsidiaries and
pertaining to matters existing or occurring at or prior to the Effective Time, including the transactions contemplated by
this Agreement; provided, that in the case of advancement of expenses, any Indemnified Party to whom expenses are advanced
provides an undertaking to repay such advances if it is ultimately determined that such Indemnified Party is not entitled to
indemnification. An Indemnified Party shall be entitled to the reimbursement of reasonable legal expenses incurred in any
successful claim hereunder to enforce its rights to indemnification and advancement.
(b)
For a period of six (6) years after the Effective Time, Buyer shall cause to be maintained in effect the current policies
of directors’ and officers’ liability insurance maintained by Seller (provided that Buyer may substitute therefor policies
with a substantially comparable insurer of at least the same coverage and amounts containing terms and conditions that are no less
advantageous to the insured) with respect to claims arising from facts or events that occurred at or before the Effective Time;
provided, however, that Buyer shall not be obligated to expend, on an annual basis, an amount that, in the aggregate,
exceeds 175% of the current annual premium paid as of the date hereof by Seller for such insurance (the “Premium Cap”),
and if such premiums for such insurance would at any time exceed the Premium Cap, then Buyer shall cause to be maintained policies
of insurance that, in Buyer’s good faith determination, provide the maximum coverage available for an aggregate cost equal
to the Premium Cap. In lieu of the foregoing, Seller, in consultation with Buyer, but only upon the prior written consent of Buyer,
which consent may not be unreasonably withheld, conditioned or delayed, may (and at the request of Buyer, Seller shall use its
reasonable best efforts to) obtain at or prior to the Effective Time a six-year prepaid “tail” policy under Seller’s
existing directors and officers insurance policy providing equivalent coverage to that described in the preceding sentence if and
to the extent that the same may be obtained for an amount that, in the aggregate, does not exceed the Premium Cap and, in such
case, Buyer shall not have any further obligations under this Section 6.7(b), other than to maintain such prepaid “tail”
policy.
(c) The
provisions of this Section 6.7 shall survive the Effective Time and are intended to be for the benefit of, and shall
be enforceable by, each Indemnified Party and his or her heirs and representatives. If Buyer or any of its successors
or assigns will consolidate with or merge into any other entity and not be the continuing or surviving entity of such
consolidation or merger, transfer all or substantially all of its assets or deposits to any other entity or engage in any
similar transaction, then in each case, Buyer will cause proper provision to be made so that the successors and assigns of
Buyer will expressly assume the obligations set forth in this Section 6.7. The obligations of Buyer and Seller under
this Section 6.7 shall not be terminated or modified in a manner so as to adversely affect the Indemnified Party or
any other person entitled to the benefit of this Section 6.7 without the prior written consent of the affected
Indemnified Party or affected person.
(d)
Any indemnification payments made pursuant to this Section 6.7 are subject to and conditioned upon their compliance
with Section 18(k) of the FDIA (12 U.S.C. § 1828(k)) and the regulations promulgated thereunder by the FDIC (12 C.F.R. Part
359).
6.8
Additional Agreements. In case at any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement or to vest Buyer with full title to all properties, assets, rights, approvals, immunities
and franchises of any of the parties to the Merger, the proper officers and directors of each party to this Agreement and their
respective Subsidiaries shall take all such necessary action as may be reasonably requested by Buyer.
6.9
Advice of Changes. Buyer and Seller shall each promptly (but in no event more than twenty-four (24) hours) advise
the other party of any change or event (i) that has had or is reasonably likely to have a Material Adverse Effect on it or (ii)
which it believes would or would be reasonably likely to cause or constitute a material breach of any of its representations, warranties
or covenants contained herein or that reasonably could be expected to give rise, individually or in the aggregate, to the failure
of any condition in Article VII; provided, that any failure to give notice in accordance with the foregoing with respect
to any breach shall not be deemed to constitute a violation of this Section 6.9 or the failure of any condition set forth
in Section 7.2 or 7.3 to be satisfied, or otherwise constitute a breach of this Agreement by the party failing to
give such notice, in each case unless the underlying breach would independently result in a failure of the conditions set forth
in Sections 7.2 or 7.3 to be satisfied.
6.10
Litigation and Claims. Each of Seller and Buyer shall promptly notify the other party in writing of any action, arbitration,
audit, hearing, investigation, litigation, suit, dispute, proceeding, subpoena or summons issued, commenced, brought, conducted
or heard by or before, or otherwise involving, any Governmental Entity or arbitrator pending or, to the knowledge of either such
party, threatened against Seller, Buyer or any of their respective Subsidiaries, in each case that (a) questions or would reasonably
be expected to question the validity of this Agreement, the Merger or the other transactions contemplated hereby or any actions
taken or to be taken by Buyer, Seller or their respective Subsidiaries with respect to this Agreement, the Merger or the other
transactions contemplated hereby or (b) seeks to enjoin, restrain or prohibit the transactions contemplated hereby. Seller shall
give Buyer the opportunity to consult on the defense or settlement of any shareholder litigation against Seller and/or its directors,
officers or affiliates relating to the transactions contemplated by this Agreement (and Seller will in good faith take any comments
of Buyer into account), and Seller shall not agree to any such settlement of any such litigation without Buyer’s prior written
consent which shall not unreasonably be withheld, conditioned or delayed.
6.11
Dividends. After the date of this Agreement, Seller will provide Buyer with five (5) business days or more notice
of any declaration of dividend in respect of Seller Common Stock or the setting of a record date therefor.
6.12
Corporate Governance. Buyer shall take all action necessary to appoint one member of the Board of Directors of Seller
(the “Designated Seller Director”) to the Board of Trustees of Buyer, effective as of and conditioned upon the
Closing. Prior to the Closing, Buyer shall offer each member of the Boards of Directors of Seller and Seller Bank who is not appointed
a trustee of Buyer pursuant to this Section 6.12 the opportunity to serve as a corporator of Buyer, and Buyer’s Board
of Trustees shall recommend that Buyer’s corporators elect as corporators of Buyer, as of the annual meeting of corporators
next following the receipt of the Requisite Seller Vote, the Designated Seller Director and each other member of the Boards of
Directors of Seller and Seller Bank who expresses an interest in serving as a corporator of Buyer and who, in Buyer’s good
faith judgment, satisfies Buyer’s selection criteria for its corporators generally, effective as of and conditioned upon
the occurrence of the Effective Time.
6.13
Acquisition Proposals.
(a)
Seller agrees that it will not, and will cause its Subsidiaries and its and their officers, directors, agents, advisors
and representatives not to, directly or indirectly, (i) initiate, solicit, knowingly encourage or knowingly facilitate any inquiries
or proposals with respect to any Acquisition Proposal, (ii) engage or participate in any negotiations with any person concerning
any Acquisition Proposal, (iii) provide any confidential or nonpublic information or data to any person (other than Buyer and its
representatives in their capacity as such) concerning any Acquisition Proposal or (iv) have or participate in any discussions with
any person (other than Buyer and its representatives in their capacity as such) relating to any Acquisition Proposal, except, for
purposes of this clause (iv), to notify such person of the existence of the provisions of this Section 6.13(a); provided
that prior to the date of the Meeting, in the event Seller receives from any person other than Buyer or its representatives an
unsolicited bona fide written Acquisition Proposal that did not result from a breach of this Section 6.13, it may,
and may permit its Subsidiaries and its and its Subsidiaries’ representatives to, furnish or cause to be furnished nonpublic
information or data to, and participate in, discussions with such person with respect to such Acquisition Proposal but only to
the extent that, prior to doing so, its Board of Directors concludes in good faith (after receiving the advice of its outside counsel,
and with respect to financial matters, its financial advisor) that (A) such Acquisition Proposal constitutes or is reasonably likely
to lead to a Superior Proposal and (B) failure to take such actions would result in a violation of its fiduciary duties under applicable
law; provided, further, that, prior to providing any nonpublic information or data or participating in any discussions, in each
case, permitted pursuant to the foregoing proviso, Seller shall have provided such information or data to Buyer and shall have
entered into a confidentiality agreement with such person on terms no less stringent to such person than the terms of the Confidentiality
Agreement, which confidentiality agreement shall not provide such person with any exclusive right to negotiate with Seller or its
representatives. Without limiting the foregoing, it is agreed that any violation of the restrictions set forth in this Section
6.13 by any Subsidiary or representative of Seller shall constitute a breach of this Section 6.13 by Seller.
(b) Seller
will, and will cause its representatives to, immediately cease and cause to be terminated any activities, discussions or
negotiations conducted before the execution of this Agreement with any person (other than Buyer and its representatives
in their capacity as such) with respect to any Acquisition Proposal and will use its reasonable best efforts, subject to
applicable law, to enforce any confidentiality, standstill or similar agreement relating to an Acquisition Proposal.
(c)
Promptly (and in any event within twenty-four (24) hours) following receipt of any Acquisition Proposal or any inquiry that
could reasonably be expected to lead to an Acquisition Proposal, Seller shall advise Buyer of such Acquisition Proposal or inquiry
and the substance thereof (including the terms and conditions of and the identity of the person making such inquiry or Acquisition
Proposal, copies of any written Acquisition Proposal and written summaries of any material oral communications relating to an Acquisition
Proposal), and will keep Buyer apprised of any related developments, discussions and negotiations on a current basis, including
any amendments to or revisions of the terms of such inquiry or Acquisition Proposal.
(d)
As used herein,
(i)
“Acquisition Proposal” means, other than the transactions contemplated by this Agreement, any offer,
proposal or inquiry relating to, or any third party indication of interest in, (A) any acquisition or purchase, direct or indirect,
of 25% or more of the consolidated assets of Seller and its Subsidiaries or 25% or more of any class of equity or voting securities
of Seller or its Subsidiaries whose assets, individually or in the aggregate, constitute more than 25% of the consolidated assets
of Seller; (B) any tender offer (including a self-tender offer) or exchange offer that, if consummated, would result in any person
(other than Buyer) beneficially owning 25% or more of any class of equity or voting securities of Seller or its Subsidiaries whose
assets, individually or in the aggregate, constitute more than 25% of the consolidated assets of Seller; or (C) a merger, consolidation,
share exchange, business combination, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving
Seller and/or its Subsidiaries whose assets, individually or in the aggregate, constitute more than 25% of the consolidated assets
of Seller; and
(ii) “Superior
Proposal” means any unsolicited bona fide written offer or proposal made by a third party to consummate an
Acquisition Proposal that Seller’s Board of Directors determines in good faith (after receiving the advice of its
outside counsel and, with respect to financial matters, its financial advisor) (A) would, if consummated, result in the
acquisition of all, but not less than all, of the issued and outstanding shares of Seller Common Stock or all, or
substantially all, of the assets of Seller; (B) would result in a transaction that (1) involves consideration to the holders
of the shares of Seller Common Stock that is more favorable, from a financial point of view, than the consideration to be
paid to the shareholders of Seller pursuant to this Agreement, considering, among other things, the nature of the
consideration being offered and which proposal is not conditioned upon obtaining financing and (2) is, in light of the other
terms of such proposal, more favorable to the shareholders of Seller than the Merger and the other transactions contemplated
by this Agreement considering, among other things, and any material regulatory approvals or other risks associated with the
timing of the proposed transaction beyond, or in addition to, those specifically contemplated hereby; and (C) is reasonably
likely to be completed on the terms proposed, in each case, taking into account all legal, financial, regulatory and other
aspects of the Acquisition Proposal.
6.14
Board and Committee Meetings. Following the receipt of the Requisite Regulatory Approvals, Seller shall permit representatives
of Buyer (no more than two (2)) to attend any meeting of the Boards of Directors of Seller or Seller Bank or the executive and
loan committees thereof as an observer, subject to the Confidentiality Agreement; provided that Seller shall not be required to
permit such representatives to remain present during any confidential discussions of this Agreement or the transactions contemplated
by this Agreement or any Acquisition Proposal or during any other matter (a) that the Board of Directors of Seller or Seller Bank
has reasonably determined to be confidential with respect to the participation of Buyer or (b) that Seller or Seller Bank would
not be required to disclose under Section 6.2 of this Agreement.
6.15
Public Announcements. Seller and Buyer shall each use their reasonable best efforts to (a) develop a joint communications
plan and ensure that all press releases and other public disclosure (including communications to employees, agents and contractors)
with respect to this Agreement or the transactions contemplated hereby are consistent with such joint communications plan and (b)
consult with each other before issuing any press release or, to the extent practicable, otherwise making any public disclosure
with respect to this Agreement or the transactions contemplated hereby, except in respect of any press release or public disclosure
the content and messaging of which is substantially similar to public disclosure previously made by Buyer or Seller either on the
date of this Agreement or following the date of this Agreement and in accordance with this Section 6.15.
6.16
Operating Functions. To the extent permitted by applicable law and upon Buyer’s request, Seller shall regularly
discuss and reasonably cooperate with Buyer in connection with (a) planning for the efficient and orderly combination of Seller,
Seller Bank and Buyer and the operation of Buyer, (b) preparing for the consolidation of appropriate operating functions to be
effective at the Effective Time or such later date as Buyer may decide, (c) planning for the tax-efficient operation of Buyer and
(d) providing such information, as may be reasonably requested by Buyer from time to time, to assist Buyer in the calculation of
any potential termination penalties of the Seller Contracts referred to in Section 3.15(a)(xvii) and set forth in Section 3.15(a)
of the Seller Disclosure Letter. Each party shall cooperate with the other party in preparing to execute conversion or consolidation
of systems and business operations generally (including by entering into customary confidentiality, non-disclosure and similar
agreements with related service providers and other parties). Prior to the Effective Time, each party shall exercise, consistent
with the terms and conditions of this Agreement, including this Article VI, complete control and supervision over its and
its Subsidiaries’ respective operations.
6.17 Restructuring
Efforts. If Seller shall have failed to obtain the Requisite Seller Vote at the duly convened Meeting or any adjournment
or postponement thereof, then, unless this Agreement has been terminated in accordance with its terms, each of the parties
shall in good faith use its reasonable best efforts to negotiate a restructuring of the transaction provided for herein (it
being understood that neither party shall have any obligation to alter or change any material terms, including the amount or
kind of the consideration to be issued to holders of Seller Common Stock as provided for in this Agreement, in a
manner adverse to such party) and/or resubmit this Agreement or the transactions contemplated hereby (or as restructured
pursuant to this Section 6.17) to Seller’s shareholders for approval.
6.18
Takeover Laws. No party shall take any action that would cause this Agreement, the Merger or any of the other transactions
contemplated hereby to be subject to requirements imposed by any Takeover Laws, as applicable, and each party shall take all necessary
steps within its control to exempt (or ensure the continued exemption of) this Agreement, the Merger or any of the other transactions
contemplated hereby from any applicable Takeover Laws, as now or hereafter in effect, that purports to apply to this Agreement
or the transactions contemplated hereby.
6.19
Section 16b-3. Prior to the Effective Time, Seller shall take such steps as may be reasonably necessary or advisable
to cause dispositions of Seller equity securities (including derivative securities) pursuant to the transactions contemplated
by this Agreement by each individual who is a director or officer of Seller to be exempt under Rule 16b-3 promulgated under the
Exchange Act.
6.20
Classified Loans. Seller shall within twenty (20) days after the end of each quarter after the date hereof and not
later than two (2) business days prior to the Closing Date provide Buyer with a complete and accurate list, including the amount,
of all Loans subject to each type of classification of the Classified Loans.
6.21 ESOP
Matters. Seller and Seller Bank shall take or cause to be taken all such actions as may be necessary to effect the
actions set forth below relating to the ESOP prior to or simultaneous with the Closing, as applicable. Effective at
least five (5) business days before the Closing, the ESOP shall be terminated (the “ESOP Termination
Date”). No new participants shall be admitted on or after the ESOP Termination Date and all existing ESOP
participants’ accounts shall become fully vested and 100% non-forfeitable. Seller Bank shall direct the Trustee to
remit a sufficient number of the shares of Seller Common Stock allocated to the suspense account pursuant to the ESOP (the
“Suspense Shares”) back to Seller to repay the outstanding ESOP Loan in full, with each remitted share to
be valued equal to the Merger Consideration. All remaining shares of Seller Common Stock held by the ESOP as of the Effective
Time shall be exchanged for the Merger Consideration. After repayment of the outstanding ESOP Loan and the exchange of the
shares of Seller Common Stock for the Merger Consideration, the cash received upon conversion of the remaining Suspense
Shares shall be deemed to be earnings and shall be allocated as earnings to the accounts of the ESOP participants who are
employed as of the ESOP Termination Date based on their account balances under the ESOP as of the ESOP Termination Date and
distributed to ESOP participants after the receipt of a favorable determination letter from the IRS. No benefit distributions
shall be made from the ESOP without the prior written consent of Buyer before the IRS issues a favorable determination letter
with respect to the tax-qualified status of the ESOP on termination, except that distributions from the ESOP may be made
earlier if required by law or upon the occurrence of the ESOP participant’s retirement, death, disability or
termination of employment or any other event, other than plan termination, that requires a distribution from the ESOP. Prior
to the Effective Time, Seller Bank shall take all such actions as are necessary (determined in consultation with Buyer) to
submit the application for favorable determination letter in advance of the Closing, and following the Closing, Buyer
shall use its best efforts in good faith to obtain such favorable determination letter as promptly as possible (including,
but not limited to, making such changes to the ESOP as may be required by the IRS as a condition to its issuance of a
favorable determination letter). Seller Bank, and following the Effective Time, Buyer, will adopt such amendments to the ESOP
to effect the provisions of this Section 6.21. Promptly following the receipt of a favorable determination letter
from the IRS regarding the qualified status of the ESOP upon its termination, the account balances in the ESOP shall either
be distributed to participants and beneficiaries or transferred to an eligible tax-qualified retirement plan or individual
retirement account as a participant or beneficiary may direct.
6.22
Coordination.
(a)
Buyer and Seller agree that as promptly as practicable following the execution of this Agreement, meetings with employees
of Seller Bank shall be held at such locations as Buyer and Seller shall mutually agree; provided that representatives of Seller
shall be permitted to attend such meetings. Buyer and Seller shall mutually agree as to the scope and content of all communications
from Buyer to the employees of Seller and Seller Bank. At mutually agreed upon times following execution of this Agreement, representatives
of Buyer shall be permitted to meet with the employees of Seller and Seller Bank to discuss employment opportunities with Buyer.
Notwithstanding the foregoing, Buyer in this process shall have no right to exercise any management authority over employees of
Seller and Seller Bank.
(b)
From and after the first date on which both the Requisite Seller Vote and Requisite Regulatory Approvals required under
Section 7.1 (and without having to allow any waiting period under such approvals to expire) have been obtained, Buyer shall
be permitted to conduct training sessions outside of normal business hours or at other times as Seller may agree with the employees
of Seller and Seller Bank and may conduct such training seminars at such locations as Buyer and Seller may mutually agree; provided
that such meetings or trainings will be at no cost to Seller and that Buyer will not schedule such training sessions in a manner
which interferes with Seller’s and Seller Bank’s normal business operations.
(c)
Upon Buyer’s reasonable request, and with Buyer’s indemnification, prior to the Closing Date and following receipt
of both the Requisite Seller Vote and Requisite Regulatory Approvals required under Section 7.1 (and without having to allow
any waiting period under such approvals to expire), and consistent with GAAP and applicable banking laws and regulations, each
of Seller and its Subsidiaries shall give due consideration to Buyer’s request to (i) modify or change its loan, OREO, accrual,
reserve, tax, litigation and real estate valuation policies and practices (including loan classifications and levels of reserves)
so as to be applied on a basis that is consistent with that of Buyer and (ii) make such accruals under the Seller Benefit Plans
as Buyer may reasonably request to reflect the benefits payable under such Seller Benefit Plans upon the completion of the Merger;
provided, however, that at Seller’s reasonable request no such changes need be made earlier than one (1) business
day prior to the Closing Date.
(d) Upon
Buyer’s reasonable request, and with Buyer’s indemnification, prior to the Closing Date and following receipt of
both the Requisite Seller Vote and Requisite Regulatory Approvals required under Section 7.1 (and without having to
allow any waiting period under such approvals to expire), and consistent with GAAP and subject to applicable banking laws
and regulations, Seller and its Subsidiaries shall give due consideration to Buyer’s request that Seller or any of its
Subsidiaries divest itself prior to the Effective Time of such investment securities and loans as are identified by Buyer in
writing from time to time prior to the Closing Date; provided, however, that no such divestitures need
be made prior to the Closing Date.
(e)
No accrual or reserve or change in policy or procedure, or any divestiture of investment securities or loans, made by Seller
or any of its Subsidiaries at the request of Buyer pursuant to this Section 6.22 shall constitute or be deemed to be
a breach, violation of or failure to satisfy any representation, warranty, covenant, agreement, condition or other provision of
this Agreement or otherwise be considered in determining whether any such breach, violation or failure to satisfy shall have occurred.
The recording of any such adjustment shall not be deemed to imply any misstatement of previously furnished financial statements
or information and shall not be construed as concurrence of Seller or its management with any such adjustments. In the event the
Merger is not consummated, Buyer shall indemnify Seller for such actions within thirty (30) days.
6.23
Environmental Assessments.
(a)
Seller shall cooperate with and grant access to an environmental consulting firm selected by Buyer and reasonably acceptable
to Seller, during normal business hours (and at such other times as may be agreed), to any real property (including buildings or
other structures) currently owned or operated by Seller or any of its Subsidiaries or any Seller Loan Property for the purpose
of conducting (i) Phase I Assessments (which also may include an evaluation of asbestos containing materials, polychlorinated biphenyls,
lead based paint, lead in drinking water, mold, and radon) and (ii) Phase II Environmental Assessments, including subsurface investigation
of soil, soil vapor, and groundwater (“Phase II Assessment”). Buyer and its environmental consulting firm shall
conduct all environmental assessments pursuant to this Section 6.24(a) at mutually agreeable times and so as to eliminate
or minimize to the greatest extent possible interference with Seller’s operation of its business, and Buyer shall maintain
or cause to be maintained reasonably adequate insurance with respect to any assessment conducted. Buyer shall be required to restore
each property to substantially its pre-assessment condition. All costs and expenses incurred in connection with any Phase I or
Phase II Assessment and any restoration and clean up shall be borne solely by Buyer.
(b)
To the extent requested by Buyer, each environmental assessment shall include an estimate by the environmental consulting
firm preparing such environmental assessment of the costs of investigation, monitoring, personal injury, property damage, clean
up, remediation, penalties, fines or other liabilities, as the case may be, relating to the “potential environmental condition(s)”
or “recognized environmental condition(s)” or other conditions which are the subject of the environmental assessment.
6.24
Certain Tax Matters. During the period from the date of this Agreement to the Effective Time, Seller shall, and
shall cause each of its Subsidiaries to: (a) timely file (taking into account any extensions of time within which to file) all
Tax Returns required to be filed by it and timely pay all Taxes shown as due and payable on such Tax Returns that are so filed;
(b) establish an accrual in its books and records and financial statements in accordance with recent past practice for all Taxes
payable by it for which a Tax Return is due prior to the Effective Time; (c) terminate all Tax sharing or similar agreements (other
than such an arrangement or agreement exclusively between or among Seller and its Subsidiaries) and all powers of attorney with
respect to or involving Seller or any of its Subsidiaries (such that after the Closing, Buyer shall not be bound thereby or have
any liability thereunder); and (d) promptly notify Buyer of any suit, claim, action, investigation, proceeding or audit pending
or threatened against or with respect to Seller or any of its Subsidiaries in respect of any Tax matter, including, without limitation,
Tax liabilities and refund claims.
6.25
Formation of Merger Sub; Accession. As promptly as reasonably practicable after the date of this Agreement, Buyer
shall organize Merger Sub as a wholly owned Subsidiary of Buyer. Promptly after organizing Merger Sub, (a) Buyer, as the sole
shareholder of Merger Sub, shall approve and adopt this Agreement and (b) Buyer shall cause Merger Sub to accede to this Agreement
by executing a signature page to this Agreement. Before the Effective Time, Buyer shall take such actions as are reasonably necessary
to cause the Board of Directors of Merger Sub to unanimously approve this Agreement and authorize Merger Sub to enter into this
Agreement.
6.26
Other Actions. Prior to Closing, Seller and its Subsidiaries shall take any and all action necessary, desirable or
advisable to consummate the Transactions as promptly as practicable and otherwise to enable consummation of such Transactions.
ARTICLE
VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.1
Conditions to Each Party’s Obligations to Effect the Merger. The respective obligations of the parties to effect
the Merger shall be subject to the satisfaction or, where legally permissible, waiver by all parties hereto at or prior to the
Effective Time of the following conditions:
(a)
Shareholder Approval. The Requisite Seller Vote shall have been obtained.
(b)
Requisite Regulatory Approvals. All Requisite Regulatory Approvals shall have been obtained and shall remain in full
force and effect and all statutory waiting periods in respect thereof shall have expired.
(c)
No Injunctions or Restraints; Illegality. No order, injunction or decree issued by any court or Governmental Entity
of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Merger or any of the other
transactions contemplated by this Agreement shall be in effect. No law, statute, rule, regulation, order, injunction or decree
shall have been enacted, entered, promulgated or enforced by any Governmental Entity which prohibits or makes illegal consummation
of the Merger or any of the other transactions contemplated by this Agreement.
7.2
Conditions to the Obligations of Buyer. The obligation of Buyer to consummate the Merger is also conditioned upon
the satisfaction or waiver by Buyer, at or prior to the Effective Time, of each of the following conditions:
(a)
Representations, Warranties and Covenants of Seller and Seller Bank. (i) Each of the representations and warranties
of Seller and Seller Bank contained herein shall be true and correct as of the date hereof and as of the Closing Date with the
same effect as though all such representations and warranties had been made on the Closing Date, except for any such representations
and warranties made as of a specified date, which shall be true and correct as of such date, in any case subject to the standard
set forth in Section 3.1(b), and (ii) each and all of the agreements and covenants of Seller and Seller Bank to be
performed and complied with pursuant to this Agreement on or prior to the Closing Date shall have been duly performed and complied
with in all material respects. Buyer shall have received a certificate, dated the Closing Date, signed by the President and Chief
Executive Officer of each of Seller and Seller Bank, to the effect that the conditions set forth in this Section 7.2(a)
have been satisfied.
(b)
No Materially Burdensome Regulatory Condition. No Requisite Regulatory Approval shall include or contain, nor shall
any Governmental Entity have indicated in writing that it will impose, any Materially Burdensome Regulatory Condition.
(c)
Third Party Consents. All consents or approvals of all persons (other than Governmental Authorities) required for
the consummation of the Merger or the continued use and occupation of any Leased Real Property, or that are required in order to
prevent a breach of or a default under or a termination of, or any right of acceleration of any liability under any of the Leases
shall have been obtained and shall be in full force and effect, unless the failure to obtain any such consent or approval would
not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Seller.
(d)
Other Actions. Seller shall have furnished Buyer with such certificates of its officers or others and such other
documents to evidence fulfillment of the conditions set forth in Sections 7.1 and 7.2 as Buyer may reasonably request.
7.3 Conditions
to the Obligations of Seller and Seller Bank. The obligation of Seller and Seller Bank to consummate the Merger is also
conditioned upon the satisfaction or waiver by Buyer, at or prior to the Effective Time, of each of the following conditions:
(a) each of the representations and warranties of Buyer contained herein shall be true and correct as of the date hereof
and as of the Closing Date with the same effect as though all such representations and warranties had been made on the
Closing Date, except for any such representations and warranties made as of a specified date, which shall be true and
correct as of such date, in any case subject to the standard set forth in Section 4.1(b); (b) each and all of the
agreements and covenants of Buyer to be performed and complied with pursuant to this Agreement on or prior to the Closing
Date shall have been duly performed and complied with in all material respects. Seller shall have received a certificate,
dated the Closing Date, signed by the President and Chief Executive Officer of Buyer, to the effect that the conditions set
forth in this Section 7.3 have been satisfied; (c) Buyer shall have delivered the Merger Consideration to the
Paying Agent not less than one (1) business day prior to the Closing Date and the Paying Agent shall provide Seller with a
certificate evidencing such delivery; and (d) Buyer shall have furnished to Seller with such certificates of its officers or
others and such other documents to evidence fulfillment of the conditions set forth in this Section 7.3 as Seller may
reasonably request.
7.4
Frustration of Closing Conditions. Neither Buyer nor Seller may rely on the failure of any condition set forth in
Sections 7.1, 7.2, or 7.3, to be satisfied if such failure was caused by such party’s failure to use
reasonable best efforts to consummate the Merger, as required by and subject to conditions of this Agreement.
ARTICLE
VIII
TERMINATION
8.1
Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after the
receipt of the Requisite Seller Vote:
(a)
by mutual written consent of Seller and Buyer;
(b)
by either Buyer or Seller if any Governmental Entity that must grant a Requisite Regulatory Approval has denied approval
of the Merger or the other transactions contemplated by this Agreement and such denial has become final and nonappealable or any
Governmental Entity of competent jurisdiction shall have issued a final and nonappealable order, injunction, decree or other legal
restraint or prohibition permanently enjoining or otherwise prohibiting or making illegal the consummation of the Merger or the
other transactions contemplated by this Agreement, unless the failure to obtain a Requisite Regulatory Approval shall be due to
the failure of the party seeking to terminate this Agreement to perform or observe the obligations, covenants and agreements of
such party set forth herein;
(c)
by either Buyer or Seller if the Merger shall not have been consummated on or before July 31, 2020 (the “Termination
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 obligations, covenants and agreements of such party set forth herein;
(d)
by either Buyer or Seller (provided, that the terminating party is not then in material breach of any representation, warranty,
obligation, covenant or other agreement contained herein) if there shall have been a breach of any of the obligations, covenants
or agreements or any of the representations or warranties (or any such representation or warranty shall cease to be true) set forth
in this Agreement on the part of Seller, in the case of a termination by Buyer, or Buyer, in the case of a termination by Seller,
which breach or failure to be true, either individually or in the aggregate with all other breaches by such party (or failures
of such representations or warranties to be true), would constitute, if occurring or continuing on the Closing Date, the failure
of a condition set forth in Section 7.2, in the case of a termination by Buyer, or Section 7.3, in the case of a
termination by Seller, and which is not cured within forty-five (45) days following written notice to Seller, in the case of a
termination by Buyer, or Buyer, in the case of a termination by Seller, or by its nature or timing cannot be cured during such
period (or such fewer days as remain prior to the Termination Date);
(e) by
Buyer or Seller, if the Requisite Seller Vote shall not have been obtained, except to the extent that the failure to obtain
the Requisite Seller Vote shall be due to Seller’s or any of its Subsidiaries’ material breach of any
representation, warranty, covenant or other agreement contained herein (which has not been cured) relating to the Meeting or
the receipt of the Requisite Seller Vote;
(f)
by Buyer, prior to the time the Requisite Seller Vote is obtained, if Seller or the Board of Directors of Seller shall have
(i) failed to make the Recommendation or failed to include the Recommendation in the Proxy Statement, or withdrawn, modified or
qualified the Recommendation in a manner adverse to Buyer, or resolved to do so or failed to reaffirm such recommendation within
two (2) business days after Buyer requests in writing that such action be taken, (ii) failed to recommend against acceptance of
any publicly disclosed tender offer or exchange offer for outstanding shares of Seller Common Stock by any person (other than Buyer
or any affiliate of Buyer), within the ten (10) business day period commencing on the date such tender offer or exchange offer
is first publicly disclosed, in any such case whether or not permitted by the terms hereof, (iii) recommended or endorsed an Acquisition
Proposal, or (iv) breached any of its obligations under Sections 6.3 or 6.13 in any material respect
(g)
by Seller, if at any time after the date of this Agreement and prior to obtaining the Requisite Seller Vote, Seller receives
an Acquisition Proposal; provided, however, that Seller may not terminate this Agreement pursuant to this Section 8.1(g)
unless it satisfies each of the following conditions:
(i)
Seller shall have complied with Section 6.13 of this Agreement, including the conclusion by the Board of Directors
of Seller in good faith that the Acquisition Proposal is a Superior Proposal; and
(ii)
the Board of Directors of Seller has adopted the definitive agreement with respect to the Superior Proposal and has authorized
and directed Seller and Seller Bank to enter into that agreement; and
(iii)
Seller concurrently pays the Termination Fee payable pursuant to Section 8.2(b).
8.2
Effect of Termination and Abandonment.
(a)
In the event of termination of this Agreement by either Buyer or Seller as provided in Section 8.1, this Agreement
shall forthwith become void and have no effect, and none of Buyer, Seller, any of their respective affiliates or any of their respective
employees, officers, directors or representatives shall have any liability of any nature whatsoever hereunder, or in connection
with the transactions contemplated hereby, except that (i) Section 6.2(c) and this Section 8.2 and Article IX
shall survive any termination of this Agreement, and (ii) notwithstanding anything to the contrary contained in this Agreement,
neither Buyer nor Seller shall be relieved or released from any liabilities or damages arising out of its fraud or any knowing,
intentional and material breach of any of its representations, warranties, covenants or agreements set forth in this Agreement.
(b) In
the event that after the execution of this Agreement (i) prior to the termination of this Agreement, a bona
fide Acquisition Proposal shall have been made known to senior management or the Board of Directors of Seller or shall
have been made directly to its shareholders generally or any person shall have publicly announced an Acquisition Proposal or
the intention to make an Acquisition Proposal (whether or not conditional) with respect to Seller, (ii) thereafter this
Agreement is terminated by (A) either Buyer or Seller pursuant to Section 8.1(c) and the Requisite Seller Vote
has not been obtained, or (B) Buyer pursuant to Section 8.1(d) solely in the case of a willful breach by Seller, or
(C) Buyer or Seller pursuant to Section 8.1(e), and (iii) on or prior to the date that is twelve (12) months
after the date of such termination, Seller enters into a definitive agreement (regardless of whether a transaction is
consummated) or consummates a transaction with respect to an Acquisition Proposal (whether or not the same Acquisition
Proposal as that referred to in clause (b)(i) above), then Seller shall, on the earlier of the date it enters into such
definitive agreement or the date of consummation of such transaction, pay Buyer, by wire transfer of same day funds, an
amount in cash equal to $4,440,000 (the “Termination Fee”).
(c)
In the event that this Agreement is terminated by Buyer pursuant to Section 8.1(f) or by Seller pursuant to Section
8.1(g), then Seller shall pay Buyer, by wire transfer of same day funds, an amount in cash equal to the Termination Fee on
the date of such termination.
(d)
(i)
In the event that (A) this Agreement is terminated by Seller pursuant to Section 8.1(g) and (B) Seller made an Adverse
Recommendation Change prior to such termination, then Seller shall, on the date of termination, pay Buyer, by wire transfer of
same day funds, an amount in cash equal to the Termination Fee; or
(ii)
In the event that (A) this Agreement is terminated by Seller pursuant to Section 8.1(g), (B) Seller did not make
an Adverse Recommendation Change prior to such termination and (C) on or prior to the date that is twelve (12) months after the
date of such termination, Seller enters into a definitive agreement (regardless of whether a transaction is consummated) or consummates
a transaction with respect to an Acquisition Proposal (whether or not the same Acquisition Proposal as that referred to in Section
8.1(g) above), then Seller shall, on the earlier of the date it enters into such definitive agreement or the date of consummation
of such transaction, pay Buyer, by wire transfer of same day funds, an amount in cash equal to the Termination Fee.
(e)
Any payment of the Termination Fee required to be made pursuant to this Section 8.2 shall be made not more than
two (2) business days after the date of the event giving rise to the obligation to make such payment. All payments under this Section 8.2(e)
shall be made by wire transfer of immediately available funds to an account designated by Buyer. The payment of the Termination
Fee by Seller pursuant to Section 8.2(b), (c), and (d) shall be the sole and exclusive remedy of Seller, Seller
Bank, Buyer and Merger Sub in connection with the termination of this Agreement under the circumstances described thereunder. However,
nothing in this Agreement shall in any way limit the right of Buyer or Seller to seek damages, specific performance, or any remedy
at law or in equity arising out of a willful or material breach of, or fraud in connection with, this Agreement by the other party
hereto.
(f)
Each of Buyer, Seller and Seller Bank acknowledges that (i) the agreements contained in this Section 8.2 are an integral
part of this Agreement, (ii) without these agreements, Buyer would not enter into this Agreement and (iii) the Termination Fee
constitutes liquidated damages and not a penalty. Accordingly, if Seller fails promptly to pay the amount due pursuant to this
Section 8.2, and, in order to obtain such payment, Buyer commences a suit which results in a judgment against Seller for
the Termination Fee, as applicable, Seller shall pay the costs and expenses of Buyer (including reasonable attorneys’ fees
and expenses) in connection with such suit. In addition, if Seller fails to pay the amounts payable pursuant to this Section
8.2 when due, then Seller shall pay interest on such overdue amounts at a rate per annum equal to the “prime rate”
(as reported in The Wall Street Journal or, if not reported therein, in another authoritative source) in effect on the date
on which such payment was required to be made for the period commencing as of the date that such overdue amount was originally
required to be paid.
ARTICLE
IX
MISCELLANEOUS
9.1
Amendment. Subject to compliance with applicable law, this Agreement may be amended by the parties hereto at any
time before or after the receipt of the Requisite Seller Vote; provided, however, that after the receipt of the Requisite
Seller Vote, there may not be, without further approval of the shareholders of Seller, any amendment of this Agreement that requires
such further approval under applicable law. This Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
9.2
Extension; Waiver. At any time prior to the Effective Time, each of the parties hereto may, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other party contained herein or in any document delivered by such other
party pursuant hereto, and (c) waive compliance with any of the agreements or satisfaction of any conditions for its benefit contained
herein; provided, however, that after the receipt of the Requisite Seller Vote, there may not be, without further
approval of the shareholders of Seller, any extension or waiver of this Agreement or any portion thereof that requires such further
approval under applicable law. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only
if set forth in a written instrument signed on behalf of such party, but such extension or waiver or failure to insist on strict
compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to,
any subsequent or other failure.
9.3
Nonsurvival of Representations, Warranties and Agreements. None of the representations, warranties, obligations,
covenants and agreements in this Agreement (or in any certificate delivered pursuant to this Agreement) shall survive the Effective
Time, except for Sections 2.2, 6.2(c), 6.6 and 6.7 and for those other obligations, covenants and agreements
contained herein which by their terms apply in whole or in part after the Effective Time.
9.4
Expenses. Except as otherwise provided herein, each party hereto will bear all expenses incurred by it in connection
with this Agreement and the Transactions.
9.5
Notices. All notices, requests and other communications hereunder to a party shall be sent and directed to the addresses
below and be deemed given (a) upon personal delivery to the party to be notified, (b) when sent by properly addressed electronic
mail delivery, (c) when sent by facsimile (with confirmation) if sent during normal business hours of the recipient, and if
not so confirmed, then on the next business day, (d) five (5) business days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) business day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt.
If to Seller or Seller Bank:
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PB Bancorp, Inc.
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Putnam Bank
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40 Main Street
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Putnam, CT 06260
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Attention:
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Thomas A. Borner
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Facsimile:
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(860) 928-2147
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Email:
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tborner@putnambank.com
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With a copy to (which shall not constitute
notice):
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Luse Gorman, PC
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5335 Wisconsin Avenue, Suite 780
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Washington, DC 20015
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Attention:
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Scott A. Brown, Esq.
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Facsimile:
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(202) 362-2902
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Email:
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sbrown@luselaw.com
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If to Buyer:
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Centreville Bank
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1218 Main Street
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West Warwick, RI 02893
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Attention:
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Harold M. Horvat
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Facsimile:
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(401) 823-6081
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Email:
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hhorvat@centrevillebank.com
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With a copy to (which shall not constitute
notice):
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Nutter McClennen & Fish LLP
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Seaport West
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155 Seaport Boulevard
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Boston, MA 02210
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Attention:
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Michael K. Krebs, Esq.
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Facsimile:
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(617) 310-9288
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Email:
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mkrebs@nutter.com
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9.6
Interpretation. The parties have participated jointly in negotiating and drafting this Agreement. 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. When a reference is made in this Agreement to Articles, Sections, Exhibits or Schedules, such reference shall
be to an Article or Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement,
they shall be deemed to be followed by the words “without limitation.” The word “or” shall not be exclusive.
References to “business day” means any day other than a Saturday, a Sunday or a day on which banks in the State
of Rhode Island are authorized or obligated by law to close. References to “the date hereof” shall mean the
date of this Agreement. As used in this Agreement, the “knowledge” of Seller or Seller Bank means the actual
knowledge of any of the officers of Seller or Seller Bank, as applicable, listed in Section 9.6 of the Seller Disclosure
Letter, and the “knowledge” of Buyer means the actual knowledge of any of the officers of Buyer listed in Section
9.6 of the Buyer Disclosure Letter. As used herein, (i) the term “person” means any individual, corporation
(including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, trust, association,
organization, Governmental Entity or other entity of any kind or nature, (ii) an “affiliate” of a specified
person is any person that directly or indirectly controls, is controlled by, or is under common control with, such specified person
and (iii) the term “made available” means any document or other information that was (a) provided by one party
or its representatives to the other party and its representatives at least one (1) day prior to the date hereof, (b) included in
the virtual data room of a party at least one (1) day prior to the date hereof or (c) filed by a party with the SEC and publicly
available on EDGAR at least one (1) day prior to the date hereof. The Seller Disclosure Letter and the Buyer Disclosure Letter,
as well as all other schedules and all exhibits hereto, shall be deemed part of this Agreement and included in any reference to
this Agreement. Nothing contained herein shall require any party or person to take any action in violation of applicable law.
9.7
Counterparts. This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
9.8
Entire Agreement. This Agreement (including the documents and instruments referred to herein) together with the Confidentiality
Agreement constitutes the entire agreement among the parties and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof.
9.9
Governing Law; Consent to Jurisdiction. This Agreement shall be governed by, and interpreted in accordance with,
the laws of the State of Rhode Island, without regard to the conflict of law principles thereof (except that matters under the
Agreement relating to fiduciary duties of the Board of Directors of Seller shall be determined in accordance with the laws of the
State of Maryland). Each of the parties hereto (a) consents to and submits itself to the exclusive jurisdiction of the United States
District Court for the District of Rhode Island or any state court sitting in the State of Rhode Island in any action or proceeding
arising out of or relating to this Agreement or any of the transactions contemplated hereby, (b) agrees that all claims in respect
of such action or proceeding may be heard and determined in any such court, and (c) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any such court. Each of the parties hereto waives any
defense or inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security
that might be required of any other party with respect thereto. To the extent permitted by applicable law, any party hereto may
make service on another party by sending or delivering a copy of the process to the party to be served at the address and in the
manner provided for the giving of notices in Section 9.5. Nothing in this Section 9.9, however, shall affect
the right of any party to serve legal process in any other manner permitted by law.
9.10
Waiver of Jury Trial. 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 EXTENT PERMITTED BY LAW AT THE TIME OF INSTITUTION OF THE APPLICABLE LITIGATION, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION 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 LITIGATION, 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 9.10.
9.11 Assignment;
Third-Party Beneficiaries. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the
other party. Any purported assignment in contravention hereof shall be null and void. 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. Except as otherwise specifically provided in Section 6.7, this Agreement (including the
documents and instruments referred to herein) is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder, including the right to rely upon the representations and warranties set forth herein. The
representations and warranties in this Agreement are the product of negotiations among the parties hereto and are for the
sole benefit of the parties. Any inaccuracies in such representations and warranties are subject to waiver by the parties
hereto in accordance herewith without notice or liability to any other person. In some instances, the representations and
warranties in this Agreement may represent an allocation among the parties hereto of risks associated with particular matters
regardless of the knowledge of any of the parties hereto. Consequently, persons other than the parties may not rely upon the
representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this
Agreement or as of any other date.
9.12
Specific Performance. The parties agree that irreparable damage would occur for which there is no adequate remedy
at law in the event that any of the provisions of this Agreement were not performed in accordance with its specific terms or were
otherwise breached. Each party agrees that, in the event of any breach or threatened breach by any other party of any covenant
or obligation contained in this Agreement, the non-breaching party shall be entitled to seek (a) a decree or order of specific
performance to enforce the observance and performance of such covenant or obligation, and (b) an injunction restraining such breach
or threatened breach. 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 or bond as a prerequisite to obtaining equity level.
9.13
Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any provision or portion of any provision of this Agreement
is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this
Agreement shall be reformed, construed and enforced in such jurisdiction such that the invalid, illegal or unenforceable provision
or portion thereof shall be interpreted to be only so broad as is enforceable.
9.14
Confidential Supervisory Information. Notwithstanding any other provision of this Agreement, no disclosure, representation
or warranty shall be made (or other action taken) pursuant to this Agreement that would involve the disclosure of confidential
supervisory information (including confidential supervisory information as defined in 12 C.F.R. § 261.2(c) and as identified
in 12 C.F.R. § 309.5(g)(8)) of a Governmental Entity by any party to this Agreement to the extent prohibited by applicable
law. To the extent legally permissible, appropriate substitute disclosures or actions shall be made or taken under circumstances
in which the limitations of the preceding sentence apply.
9.15 Delivery
by Facsimile or Electronic Transmission. This Agreement and any signed agreement or instrument entered into in connection
with this Agreement, and any amendments or waivers hereto or thereto, to the extent signed and delivered by means of a
facsimile machine or by e-mail delivery of a “.pdf” format data file, shall be treated in all manner and respects
as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were
the original signed version thereof delivered in person. No party hereto or to any such agreement or instrument shall raise
the use of a facsimile machine or e-mail delivery of a “.pdf” format data file to deliver a signature to this
Agreement or any amendment hereto or the fact that any signature or agreement or instrument was transmitted or communicated
through the use of a facsimile machine or e-mail delivery of a “.pdf” format data file as a defense to the
formation of a contract and each party hereto forever waives any such defense.
[remainder of page intentionally blank;
signature page follows]
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed in counterparts by their duly authorized officers, all as of the day and year first above
written.
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CENTREVILLE BANK
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By:
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/s/ Harold M. Horvat
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Name:
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Harold M. Horvat
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Title:
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President and Chief Executive Officer
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PB BANCORP, INC.
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By:
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/s/ Thomas A. Borner
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Name:
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Thomas A. Borner
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Title:
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President and Chief Executive Officer
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PUTNAM BANK
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By:
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/s/ Thomas A. Borner
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Name:
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Thomas A. Borner
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Title:
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President and Chief Executive Officer
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Appendix
B
October 22,
2019
The Board of Directors
PB Bancorp, Inc.
40 Main Street
Putnam, CT 06260
Members of the Board:
You have requested
the opinion of Keefe, Bruyette & Woods, Inc. (“KBW” or “we”) as investment bankers as to the fairness,
from a financial point of view, to the common shareholders of PB Bancorp, Inc. (“PB”) of the Merger Consideration (as
defined below) to be received by such shareholders in the proposed acquisition of PB by Centreville Bank (“Centreville”),
through the proposed merger of a to-be-formed wholly-owned subsidiary (“Merger Sub”) of Centreville with and into PB
(the “Merger”), pursuant to the Agreement and Plan of Merger to be entered into by and among Centreville, PB and Putnam
Bank, a wholly-owned subsidiary of PB (the “Agreement”). Pursuant to the Agreement and subject to the terms, conditions
and limitations set forth therein, at the Effective Time (as defined in the Agreement), by virtue of the Merger and without any
action on the part of Centreville, PB, Putnam Bank or any holder of any securities of PB, each share of common stock, par value
$0.01 per share, of PB (“PB Common Stock”) issued and outstanding immediately prior to the Effective Time (other than
the Exception Shares and Suspense Shares (each as defined in the Agreement)) shall become and be converted into the right to receive
$15.25 in cash (the “Merger Consideration”). The terms and conditions of the Merger are more fully set forth in the
Agreement.
KBW has acted as financial
advisor to PB and not as an advisor to or agent of any other person. As part of our investment banking business, we are continually
engaged in the valuation of bank and bank holding company securities in connection with acquisitions, negotiated underwritings,
secondary distributions of listed and unlisted securities, private placements and valuations for various other purposes. As specialists
in the securities of banking companies, we have experience in, and knowledge of, the valuation of banking enterprises. In the ordinary
course of our and their broker-dealer businesses (and in the case of PB, further to an existing sales and trading relationship
with KBW), we and our affiliates may from time to time purchase securities from, and sell securities to, PB and Centreville. In
addition, as market makers in securities, we and our affiliates may from time to time have a long or short position in, and buy
or sell, debt or equity securities of PB. We have acted exclusively for the board of directors of PB (the “Board”)
in rendering this opinion and will receive a fee from PB for our services. A portion of our fee is payable upon the rendering of
this opinion and a significant portion is contingent upon the successful completion of the Merger. In addition, PB has agreed to
indemnify us for certain liabilities arising out of our engagement.
Other than in connection
with this present engagement, KBW has not provided investment banking or financial advisory services to PB during the past two
years. In the past two years, KBW has not provided investment banking or financial advisory services to Centreville. We may in
the future provide investment banking and financial advisory services to PB or Centreville and receive compensation for such services.
The
Board of Directors – PB Bancorp, Inc.
October 22, 2019
Page
2 of 4
In connection
with this opinion, we have reviewed, analyzed and relied upon material bearing upon the financial and operating condition of
PB and bearing upon the Merger, including among other things, the following: (i) a draft of the Agreement dated October 11,
2019 (the most recent draft made available to us); (ii) the audited financial statements and the Annual Reports on Form 10-K
for the three fiscal years ended June 30, 2019 of PB; (iii) certain regulatory filings of PB and its subsidiaries, including
the quarterly reports on Form FR Y-9SP and quarterly call reports required to be filed with respect to each quarter during
the three fiscal year period ended June 30, 2019; (v) certain other interim reports and other communications of PB to its
shareholders; and (vi) other financial information concerning the businesses and operations of PB that was furnished to us by
PB or that we were otherwise directed to use for purposes of our analyses. Our consideration of financial information and
other factors that we deemed appropriate under the circumstances or relevant to our analyses included, among others, the
following: (i) the historical and current financial position and results of operations of PB; (ii) the assets and liabilities
of PB; (iii) the nature and terms of certain other merger transactions and business combinations in the banking industry;
(iv) a comparison of certain financial and stock market information for PB with similar information for certain other
companies the securities of which are publicly traded; and (v) financial and operating forecasts and projections of PB that
were prepared by, and provided to us and discussed with us by, PB management and that were used and relied upon by us at the
direction of such management and with the consent of the Board. We have also performed such other studies and analyses as we
considered appropriate and have taken into account our assessment of general economic, market and financial conditions and
our experience in other transactions, as well as our experience in securities valuation and knowledge of the banking industry
generally. We have also participated in discussions that were held with the management of PB regarding the past and current
business operations, regulatory relations, financial condition and future prospects of PB and such other matters as we have
deemed relevant to our inquiry. In addition, we have considered the results of the efforts undertaken by PB, with our
assistance, to solicit indications of interest from third parties regarding a potential transaction with PB.
In conducting our review
and arriving at our opinion, we have relied upon and assumed the accuracy and completeness of all of the financial and other information
that was provided to us or that was publicly available and we have not independently verified the accuracy or completeness of any
such information or assumed any responsibility or liability for such verification, accuracy or completeness. We have relied upon
the management of PB as to the reasonableness and achievability of the financial and operating forecasts and projections of PB
referred to above (and the assumptions and bases therefor), and we have assumed that such forecasts and projections have been reasonably
prepared and represent the best currently available estimates and judgments of such management.
It is understood that
the forecasts and projections provided to us and used and relied upon by us were not prepared with the expectation of public disclosure
and that such information is based on numerous variables and assumptions that are inherently uncertain (including, without limitation,
factors related to general economic and competitive conditions) and, accordingly, actual results could vary significantly from
those set forth in such forecasts and projections. We have assumed, based on discussions with PB management and with the consent
of the Board, that the forecasts and projections of PB that were prepared and provided to us by PB management provide a reasonable
basis upon which we could form our opinion and we express no view as to any such information or the assumptions or bases therefor.
We have relied on all such information without independent verification or analysis and do not in any respect assume any responsibility
or liability for the accuracy or completeness thereof.
We also assumed
that there were no material changes in the assets, liabilities, financial condition, results of operations, business or
prospects of PB since the date of the last financial statements that were made available to us. We are not experts in the
independent verification of the adequacy of allowances for loan and lease losses and we have assumed, without independent
verification and with your consent, that the aggregate allowances for loan and lease losses for PB are adequate to cover such
losses. In rendering our opinion, we have not made or obtained any evaluations or appraisals or physical inspection of the
property, assets or liabilities (contingent or otherwise) of PB, the collateral securing any of such assets or liabilities,
or the collectability of any such assets, nor have we examined any individual loan or credit files, nor did we evaluate the
solvency, financial capability or fair value of PB or Centreville under any state or federal laws, including those relating
to bankruptcy, insolvency or other matters. Estimates of values of companies and assets do not purport to be appraisals or
necessarily reflect the prices at which companies or assets may actually be sold. Because such estimates are inherently
subject to uncertainty, we assume no responsibility or liability for their accuracy.
The
Board of Directors – PB Bancorp, Inc.
October 22, 2019
Page
3 of 4
We have assumed, in
all respects material to our analyses, the following: (i) that the Merger and any related transaction will be completed substantially
in accordance with the terms set forth in the Agreement (the final terms of which we have assumed will not differ in any respect
material to our analyses from the draft reviewed by us referred to above) with no adjustments to the Merger Consideration and with
no other payments in respect of PB Common Stock; (ii) that the representations and warranties of each party in the Agreement and
in all related documents and instruments referred to in the Agreement are true and correct; (iii) that each party to the Agreement
and all related documents will perform all of the covenants and agreements required to be performed by such party under such documents;
(iv) that there are no factors that would delay or subject to any adverse conditions, any necessary regulatory or governmental
approval for the Merger or any related transaction and that all conditions to the completion of the Merger and any related transaction
will be satisfied without any waivers or modifications to the Agreement or any of the related documents; and (v) that in the course
of obtaining the necessary regulatory, contractual, or other consents or approvals for the Merger and any related transaction,
no restrictions, including any divestiture requirements, termination or other payments or amendments or modifications, will be
imposed that will have a material adverse effect on the future results of operations or financial condition of PB. We have assumed
that the Merger will be consummated in a manner that complies with all applicable federal and state statutes, rules and regulations.
We have further been advised by PB that PB has relied upon advice from its advisors (other than KBW) or other appropriate sources
as to all legal, financial reporting, tax, accounting and regulatory matters with respect to PB, the Merger and any related transaction,
and the Agreement. KBW has not provided advice with respect to any such matters.
This opinion
addresses only the fairness, from a financial point of view, as of the date hereof, to the holders of PB Common Stock of the
Merger Consideration to be received by such shareholders in the Merger. We express no view or opinion as to any other terms
or aspects of the Merger or any term or aspect of any related transaction (including the termination of the Putnam Bank
Employee Stock Ownership Plan prior to the consummation of the Merger), including without limitation, the form or structure
of the Merger or any such related transaction, any consequences of the Merger or any such related transaction to PB, its
shareholders, creditors or otherwise, or any terms, aspects, merits or implications of any employment, consulting, voting,
support, shareholder or other agreements, arrangements or understandings contemplated or entered into in connection with the
Merger, any such related transaction, or otherwise. Our opinion is necessarily based upon conditions as they exist and can be
evaluated on the date hereof and the information made available to us through the date hereof. It is understood that
subsequent developments may affect the conclusion reached in this opinion and that KBW does not have an obligation to update,
revise or reaffirm this opinion. Our opinion does not address, and we express no view or opinion with respect to, (i) the
underlying business decision of PB to engage in the Merger or enter into the Agreement, (ii) the relative merits of the
Merger as compared to any strategic alternatives that are, have been or may be available to or contemplated by PB or the
Board, (iii) the fairness of the amount or nature of the compensation to any of PB’s officers, directors or employees,
or any class of such persons, relative to the compensation to the holders of PB Common Stock, (iv) the effect of the Merger
or any related transaction on, or the fairness of any consideration to be received by, holders of any class of securities of
PB (other than the holders of PB Common Stock (solely with respect to the Merger Consideration, as described herein and not
relative to any consideration to be received by holders of any other class of securities)) or any other party to any
transaction contemplated by the Agreement, (v) whether Centreville has sufficient cash, available lines of credit or
other sources of funds to enable the aggregate Merger Consideration to be paid to the holders of PB Common Stock at the
closing of the Merger, (vi) any advice or opinions provided by any other advisor to any of the parties to the Merger or any
other transaction contemplated by the Agreement, or (vii) any legal, regulatory, accounting, tax or similar matters relating
to PB or its shareholders, or relating to or arising out of or as a consequence of the Merger or any related transaction.
The
Board of Directors – PB Bancorp, Inc.
October 22, 2019
Page
4 of 4
This opinion is for
the information of, and is directed to, the Board (in its capacity as such) in connection with its consideration of the financial
terms of the Merger. This opinion does not constitute a recommendation to the Board as to how it should vote on the Merger, or
to any holder of PB Common Stock as to how to vote in connection with the Merger or any other matter, nor does it constitute a
recommendation regarding whether or not any such shareholder should enter into a voting, shareholders’, or affiliates’
or similar agreement with respect to the Merger or exercise any dissenters’ or appraisal rights that may be available to
such shareholder.
This opinion has been
reviewed and approved by our Fairness Opinion Committee in conformity with our policies and procedures established under the requirements
of Rule 5150 of the Financial Industry Regulatory Authority.
Based upon and subject
to the foregoing, it is our opinion that, as of the date hereof, the Merger Consideration to be received by the holders of PB Common
Stock in the Merger is fair, from a financial point of view, to such holders.
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Keefe, Bruyette & Woods, Inc.
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0 PB BANCORP, INC. ANNUAL MEETING OF STOCKHOLDERS February 7, 2020 The undersigned hereby appoints the official proxy committee,
consisting of the Board of Directors, with full powers of substitution, to act as attorneys and proxies for the undersigned to
vote all shares of common stock of the Company that the undersigned is entitled to vote at the Annual Meeting of Stockholders
("Annual Meeting") to be held at the Crossings Restaurant located at 45 Main Street, Putnam, Connecticut at 9:00 a.m.,
Connecticut time, on Friday, February 7, 2020. The official proxy committee is authorized to cast all votes to which the undersigned
is entitled as indicated on the reverse side. (Continued and to be signed on the reverse side) 14475 1.1
ANNUAL
MEETING OF STOCKHOLDERS OF PB BANCORP, February 7, 2020 INC. INTERNET - Access “www.voteproxy.com” and follow the
on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web page.
TELEPHONE - Call toll-free 1-800-PROXIES (1-800-776-9437) in the United States or 1-718-921-8500 from foreign countries from any
touch-tone telephone and follow the instructions. Have your proxy card available when you call. Vote online/phone until 11:59
PM EST the day before the meeting. MAIL - Sign, date and mail your proxy card in the envelope provided as soon as possible. IN
PERSON - You may vote your shares in person by attending the Annual Meeting. GO GREEN - e-Consent makes it easy to go paperless.
With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs,
clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access. Please detach along perforated line and
mail in the envelope provided IF you are not voting via telephone or the Internet. 20330333300000001000 0 020720 2. To consider
and vote upon a proposal to approve the Agreement and Plan advisory basis, the compensation to be paid to the Named Executive
compensation described in the Proxy Statement. PRESENTED AT SUCH ANNUAL MEETING, THIS PROXY WILL BE VOTED AS DIRECTED BY A MAJORITY
changes to the registered name(s) on the account may not be submitted via Note: Please sign exactly as your name or names appear
on this Proxy. When shares are held jointly, each holder should sign, but only one signature is required. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name
by authorized person. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS, AND "FOR"
PROPOSALS 2, 3, 4, 5 AND 6. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK
INK AS SHOWN HERE x 1. The election as directors of all nominees listed below, each to serve for the term specified after his
or her name: NOMINEES: FOR ALL NOMINEESO Charles W. Bentley, Jr. (three-year term) O Paul M. Kelly (three-year term) WITHHOLD
AUTHORITYO Charles H. Puffer (three-year term) FOR ALL NOMINEES FOR ALL EXCEPT (See instructions below) INSTRUCTIONS: To withhold
authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee
you wish to withhold, as shown here: FOR AGAINST ABSTAIN of Merger, dated as of October 22, 2019, by and among Centreville Bank,
PB Bancorp, Inc. and Putnam Bank (the “Merger Agreement”), as well as the merger, as more fully described in the accompanying
proxy statement. 3. To consider and vote upon a proposal to approve, on a non-binding, Officers of PB Bancorp in connection with
the merger. 4. An advisory, non-binding resolution to approve the executive 5. The ratification of Wolf & Company, P.C. as
the Company's independent registered public accounting firm for the fiscal year ending June 30, 2020. 6. To consider and vote
upon a proposal to approve the adjournment of the annual meeting of stockholders, if necessary or appropriate, to solicit additional
proxies if there are not sufficient votes at the time of the annual meeting to approve the Merger Agreement and the merger. THIS
PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY, IF SIGNED, WILL BE VOTED "FOR" FOR
THE UNVOTED PROPOSALS. IF ANY OTHER BUSINESS IS OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF
NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING. Should the undersigned be present and elect to vote at the Annual Meeting
or at any adjournment thereof and after notification to the Secretary of the Company at the Annual Meeting of the stockholder’s
decision to terminate this proxy, then the power of said attorneys and proxies shall be deemed terminated and of no further force
and effect. This proxy may also be revoked by sending written notice to the Secretary of the Company at the address set forth
on the Notice of Annual Meeting of Stockholders, or by the filing of a later proxy prior to a vote being taken on a particular
proposal at the Annual Meeting. The undersigned acknowledges receipt from the Company prior to the execution of this proxy of
notice of the Annual Meeting, a Proxy Statement dated December 20, 2019, and audited financial statements. MARK “X”
HERE IF YOU PLAN TO ATTEND THE MEETING. Please complete and date this proxy and return it promptly in the enclosed postage-prepaid
envelope. To change the address on your account, please check the box at right and indicate your new address in the address space
above. Please note that this method. Signature of Stockholder Date: Signature of StockholderDate: IMPORTANT NOTICE REGARDING THE
AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON FEBRUARY 7, 2020: The Company's proxy statement,
including the Notice of Annual Meeting of Stockholders, and 2019 Annual Report To Stockholders On Form 10-K are each available
on the Internet at http://www.astproxyportal.com/ast/20878 If you need directions to attend the annual meeting and to vote in
person, please call us at (860) 928-6501 ext. 3025. COMPANY NUMBER ACCOUNT NUMBER PROXY VOTING INSTRUCTIONS