Forward-Looking Statements
This prospectus and joint proxy statement and the documents incorporated in
this prospectus and joint proxy statement by reference contain forward-looking
statements that are based on management's beliefs, assumptions, current
expectations, estimates, and projections about the financial services industry,
the economy, and about Macatawa and Grand themselves. Words such as
"anticipates," "believes," "estimates," "expects," "forecasts," "intends," "is
likely," "plans," "projects," variations of such words and similar expressions
are intended to identify such forward-looking statements. These statements are
not guarantees of future performance and involve certain risks, uncertainties
and assumptions that are difficult to predict with regard to timing, extent,
likelihood, and degree of occurrence. Therefore, actual results and outcomes may
materially differ from what may be expressed, implied, or forecasted in such
forward-looking statements.
Future factors that could cause a difference between an ultimate actual
outcome and a preceding forward-looking statement include changes in interest
rates and interest rate relationships; demand for products and services; the
degree of competition by traditional and non-traditional competitors; changes in
banking regulations; changes in tax laws; changes in prices, levies, and
assessments; the impact of technological advances; governmental and regulatory
policy changes; the outcomes of pending and future litigation and contingencies;
trends in customer behaviors as well as their ability to repay loans; changes in
the national economy; and the possibility that expected efficiencies and cost
savings from the Merger of Grand with Macatawa and other mergers and
acquisitions in which Macatawa may be involved might not be fully realized
within the expected time frame. Neither Macatawa nor Grand undertakes any
obligation to update, amend or clarify forward-looking statements, whether as a
result of new information, future events, or otherwise.
92
Appendix A
Agreement and Plan of Merger
AGREEMENT AND PLAN OF MERGER
Between
GRAND BANK FINANCIAL CORPORATION
and
MACATAWA BANK CORPORATION
Dated as of November 20, 2001
A-1
TABLE OF CONTENTS
Page
ARTICLE I THE TRANSACTION.............................................A - 6
1.1 Approval of Plan of Merger.............................A - 6
1.2 The Closing............................................A - 6
1.3 Effective Time of the Merger...........................A - 6
1.4 Merger of Grand with and into Macatawa.................A - 6
1.5 Effect of the Merger...................................A - 6
1.6 Additional Actions.....................................A - 6
1.7 Surviving Corporation..................................A - 6
ARTICLE II MERGER CONSIDERATION; EXCHANGE PROCEDURE....................A - 7
2.1 Conversion of Outstanding Grand Common Stock...........A - 7
2.2 Conversion of Grand Stock Options......................A - 7
2.3 No Fractional Securities...............................A - 7
2.4 Exchange Procedures....................................A - 8
2.5 Macatawa Common Stock..................................A - 8
2.6 Anti-Dilution Adjustments..............................A - 8
2.7 Grand Common Stock No Longer Outstanding...............A - 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF MACATAWA..................A - 9
3.1 Authorization, No Conflicts, Etc.......................A - 9
3.2 Organization and Good Standing........................A - 10
3.3 Subsidiaries..........................................A - 10
3.4 Capital Stock.........................................A - 10
3.5 Registration Statement, Etc...........................A - 10
3.6 Financial Statements..................................A - 11
3.7 Absence of Undisclosed Liabilities....................A - 11
3.8 Absence of Material Adverse Change....................A - 11
3.9 Absence of Litigation.................................A - 11
3.10 Conduct of Business...................................A - 11
3.11 Absence of Defaults Under Contracts...................A - 12
3.12 Regulatory Filings....................................A - 12
3.13 Licenses, Permits, Etc................................A - 12
3.14 Environmental Matters.................................A - 12
3.15 Allowance for Loan Losses.............................A - 12
3.16 Agreements With Bank Regulators.......................A - 12
3.17 True and Complete Information.........................A - 12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF GRAND....................A - 12
4.1 Authorization, No Conflicts, Etc......................A - 13
4.2 Organization and Good Standing........................A - 13
4.3 Subsidiaries..........................................A - 13
4.4 Capital Stock and Stock Options.......................A - 14
4.5 Financial Statements..................................A - 14
4.6 Absence of Undisclosed Liabilities....................A - 15
4.7 Absence of Material Adverse Change....................A - 15
4.8 Absence of Litigation.................................A - 15
4.9 Conduct of Business...................................A - 15
4.10 Absence of Defaults Under Contracts...................A - 15
4.11 Regulatory Filings....................................A - 15
4.12 Registration Statement, Etc...........................A - 16
4.13 Tax Matters...........................................A - 16
|
A-2
4.14 Title to Properties...................................A - 16
4.15 Condition of Property.................................A - 17
4.16 Leases................................................A - 17
4.17 Ownership of Real Property............................A - 17
4.18 Licenses, Permits, Etc................................A - 17
4.19 Certain Employment Matters............................A - 17
4.20 Employee Benefit Plans................................A - 18
4.21 Environmental Matters.................................A - 19
4.22 Duties as Fiduciary...................................A - 20
4.23 Investment Bankers and Brokers........................A - 21
4.24 Change in Business Relationships......................A - 21
4.25 Related Persons.......................................A - 21
4.26 Insurance.............................................A - 21
4.27 Books and Records.....................................A - 21
4.28 Loan Guarantees.......................................A - 21
4.29 Events Since December 31, 2000........................A - 21
4.30 Allowance for Loan Losses.............................A - 22
4.31 Agreements With Bank Regulators.......................A - 22
4.32 True and Complete Information.........................A - 22
ARTICLE V CERTAIN COVENANTS..........................................A - 22
5.1 Disclosure Statement..................................A - 22
5.2 Changes Affecting Representations.....................A - 22
5.3 Conduct of Business Pending the Effective Time
of the Merger......................................A - 22
5.4 Accrual of Transaction Expenses.......................A - 24
5.5 Termination of Phantom Stock Plan.....................A - 24
5.6 Regular Dividends.....................................A - 24
5.7 Affiliates............................................A - 25
5.8 Approval of Plan of Merger by Macatawa Shareholders...A - 25
5.9 Approval of Plan of Merger by Grand Shareholders......A - 25
5.10 Competing Proposals...................................A - 26
5.11 Indemnification.......................................A - 26
5.12 Insurance.............................................A - 26
5.13 Name..................................................A - 27
5.14 Charitable Giving.....................................A - 27
ARTICLE VI ADDITIONAL AGREEMENTS......................................A - 27
6.1 Registration Statement................................A - 27
6.2 Other Filings.........................................A - 27
6.3 Press Releases........................................A - 27
6.4 Miscellaneous Agreements and Consents.................A - 27
6.5 Grand Financial Information...........................A - 27
6.6 Investigation.........................................A - 28
6.7 Environmental Investigation...........................A - 29
6.8 Employee Benefit Plans................................A - 29
ARTICLE VII CONDITIONS PRECEDENT TO MACATAWA'S OBLIGATIONS.............A - 29
7.1 Renewal of Representations and Warranties, Etc........A - 30
7.2 Opinion of Legal Counsel..............................A - 30
7.3 Required Approvals....................................A - 30
7.4 Order, Decree, Etc....................................A - 30
7.5 Proceedings...........................................A - 30
7.6 Tax Matters...........................................A - 30
7.7 Registration Statement................................A - 31
7.8 Certificate as to Outstanding Shares..................A - 31
A-3
|
7.9 Change of Control Waivers.............................A - 31
7.10 Employment Agreements.................................A - 31
7.11 Grand Stock Options...................................A - 31
7.12 Amendment of Grand Stock Options......................A - 31
7.13 Fairness Opinion......................................A - 31
ARTICLE VIII CONDITIONS PRECEDENT TO GRAND'S OBLIGATIONS................A - 31
8.1 Renewal of Representations and Warranties, Etc........A - 31
8.2 Opinions of Legal Counsel.............................A - 32
8.3 Required Approvals....................................A - 32
8.4 Order, Decree, Etc....................................A - 32
8.5 Proceedings...........................................A - 32
8.6 Tax Matters...........................................A - 32
8.7 Registration Statement................................A - 32
8.8 Listing of Shares.....................................A - 32
8.9 Certificate as to Outstanding Shares..................A - 32
8.10 Fairness Opinion......................................A - 32
ARTICLE IX ABANDONMENT OF MERGER......................................A - 33
9.1 Mutual Abandonment....................................A - 33
9.2 Upset Date............................................A - 33
9.3 Macatawa's Rights to Terminate........................A - 33
9.4 Grand's Rights to Terminate...........................A - 33
9.5 Effect of Termination.................................A - 33
ARTICLE X MISCELLANEOUS..............................................A - 34
10.1 "Material Adverse Effect" Defined.....................A - 34
10.2 "Knowledge" Defined...................................A - 34
10.3 Nonsurvival of Representations, Warranties,
and Agreements.....................................A - 34
10.4 Amendment.............................................A - 34
10.5 Expenses..............................................A - 34
10.6 Specific Enforcement..................................A - 34
10.7 Jurisdiction; Jury....................................A - 34
10.8 Waiver................................................A - 34
10.9 Notices...............................................A - 35
10.10 Governing Law.........................................A - 35
10.11 Entire Agreement......................................A - 35
10.12 Third Party Beneficiaries.............................A - 35
10.13 Counterparts..........................................A - 35
10.14 Further Assurances; Privileges........................A - 35
10.15 Headings, Etc.........................................A - 36
10.16 Calculation of Dates and Deadlines....................A - 36
10.17 Severability..........................................A - 36
|
A-4
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Plan of Merger") is made as of
November 20, 2001, between GRAND BANK FINANCIAL CORPORATION, a Michigan
corporation ("Grand"), and MACATAWA BANK CORPORATION, a Michigan corporation
("Macatawa").
Macatawa and Grand (sometimes individually referred to as a "Corporation"
or collectively as the "Corporations") have agreed to merge Grand with and into
Macatawa in accordance with this Plan of Merger and in accordance with the
Business Corporation Act of the State of Michigan, as amended (the "Michigan
Act"). The transactions contemplated by and described in this Plan of Merger are
referred to as the "Merger."
Macatawa is a bank holding company registered as such with the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board") under the
Bank Holding Company Act of 1956, as amended (the "Federal Bank Holding Company
Act"). Macatawa has authorized capital stock consisting of 9,500,000 shares of
common stock, no par value ("Macatawa Common Stock"). Each share of Macatawa
Common Stock is entitled to one vote on all matters submitted for a vote of the
shareholders. As of the date of this Plan of Merger, there were 5,307,201 shares
of Macatawa Common Stock issued and outstanding.
Grand is a bank holding company registered as such with the Federal Reserve
Board under the Federal Bank Holding Company Act. Grand has authorized capital
stock consisting of 250,000 shares of common stock, no par value ("Grand Common
Stock"). Each share of Grand Common Stock is entitled to one vote on all matters
submitted for a vote of the shareholders. As of the date of this Plan of Merger,
there were 134,959 shares of Grand Common Stock issued and outstanding, and
Grand had options outstanding to purchase an additional 4,825 shares of Grand
Common Stock ("Grand Stock Options"). Grand owns all of the issued and
outstanding shares of capital stock of Grand, a Michigan banking corporation
(the "Bank").
The boards of directors of Grand and Macatawa each deems the Merger
advisable and in the best interests of their respective Corporations and
shareholders. Grand and Macatawa have each adopted this Plan of Merger by
resolutions duly adopted by their respective boards of directors. The boards of
directors of Grand and Macatawa have directed that this Plan of Merger be
submitted to the respective shareholders of each Corporation for approval.
In consideration of the promises and the representations, warranties, and
covenants contained in this Plan of Merger, the parties agree:
A-5
ARTICLE I
THE TRANSACTION
Subject to the terms and conditions of this Plan of Merger, the Merger of
Grand with and into Macatawa shall be carried out in the following manner:
1.1 Approval of Plan of Merger. As soon as practicable after this Plan of
Merger has been executed and delivered and the Registration Statement (as
described in Section 3.5.1 (Document)) has become effective, Grand shall submit
this Plan of Merger and Macatawa shall submit this Plan of Merger and the
issuance of shares of Macatawa Common Stock pursuant to the Merger, to their
respective shareholders for approval at a meeting properly called, noticed, and
held for that purpose.
1.2 The Closing. The Merger shall be consummated as promptly as possible
after a closing (the "Closing"). The Closing shall be held at the offices of
Varnum, Riddering, Schmidt & Howlett LLP, Bridgewater Place, 333 Bridge Street,
N.W., Grand Rapids, Michigan 49504 on such date and at such time as may be
mutually agreed by the parties, or in the absence of such agreement, on a date
specified by either party upon 5 business days' written notice after the last to
occur of the following events: (i) the receipt of all consents and approvals of
government regulatory authorities as legally required to consummate the Merger
and the expiration of all statutory waiting periods; and (ii) the requisite
approval of this Plan of Merger by the shareholders of Grand and Macatawa.
Scheduling or commencing the Closing shall not, however, constitute a waiver of
the conditions precedent as set forth in this Plan of Merger. Upon completion of
the Closing, Grand and Macatawa shall each promptly execute and file an
appropriate certificate of merger in the form and as required by the Michigan
Act to effect the Merger (the "Certificate of Merger.")
1.3 Effective Time of the Merger. Subject to the terms and conditions of
this Plan of Merger, the Merger shall be consummated as promptly as possible
following the Closing by filing the Certificate of Merger in the manner required
by law. The "Effective Time of the Merger" shall be a date and time to be
specified in the Certificate of Merger, which shall be as soon as practicable,
but not later than 3 business days, after the Closing.
1.4 Merger of Grand with and into Macatawa. Grand shall be merged with and
into Macatawa (each sometimes being referred to as a "Constituent Corporation"
prior to the Merger) by the filing of the Certificate of Merger with the
Michigan Department of Consumer and Industry Services, Bureau of Commercial
Services Corporations Division as provided by the Michigan Act. At the Effective
Time of the Merger, the Constituent Corporations shall become a single
corporation, which shall be Macatawa (the "Surviving Corporation").
1.5 Effect of the Merger. From and after the Effective Time of the Merger,
the effect of the Merger upon each of the Constituent Corporations and the
Surviving Corporation shall be as provided in Chapter Seven of the Michigan Act
with respect to the merger of domestic corporations.
1.6 Additional Actions. If, at any time after the Effective Time of the
Merger, the Surviving Corporation shall determine that any further assignments
or assurances or any other acts are necessary or desirable to vest, perfect, or
confirm, of record or otherwise, in the Surviving Corporation its right, title,
or interest in, to, or under any of the rights, properties, or assets of Grand
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger, or to otherwise carry out the purposes of this Plan
of Merger, then Grand and its directors and officers shall be deemed to have
granted to the Surviving Corporation an irrevocable power of attorney to execute
and deliver all such proper deeds, assignments, and assurances in law and to do
all acts necessary or proper to vest, perfect, or confirm title to and
possession of such rights, properties, or assets in the Surviving Corporation
and to otherwise carry out the purposes of this Plan of Merger. After the
Effective Time of the Merger, the directors and officers of the Surviving
Corporation are fully authorized in the name of Grand to take any and all such
action as may be contemplated by this Article I (The Transaction).
1.7 Surviving Corporation. As of and immediately after the Effective Time
of the Merger, the Surviving Corporation shall have the following attributes
until they are subsequently changed in the manner provided by law:
1.7.1 Name. The name of the Surviving Corporation shall be "Macatawa
Bank Corporation."
1.7.2 Articles of Incorporation. The Articles of Incorporation of the
Surviving Corporation shall be the Articles of Incorporation of Macatawa as
in effect immediately prior to the Effective Time of the Merger.
1.7.3 Bylaws. The Bylaws of the Surviving Corporation shall be the
Bylaws of Macatawa as in effect immediately prior to the Effective Time of
the Merger.
A-6
1.7.4 Directors. From and after the Effective Time of the Merger,
until duly changed in compliance with applicable law and the Articles of
Incorporation of the Surviving Corporation, the Board of Directors of the
Surviving Corporation shall consist of the persons who are serving as
directors of Macatawa immediately prior to the Effective Time of the Merger
plus one additional person who is a member of the Grand Board of Directors
immediately prior to the Effective Time of the Merger and who is selected
by Grand, with such selection to be subject to the approval by the Board of
Directors of Macatawa.
1.7.5 Officers. The officers of the Surviving Corporation shall be the
persons who were officers of Macatawa immediately prior to the Effective
Time of the Merger.
ARTICLE II
MERGER CONSIDERATION; EXCHANGE PROCEDURE
2.1 Conversion of Outstanding Grand Common Stock. Subject to the provisions
of this Plan of Merger, each share of Grand Common Stock outstanding immediately
prior to the Effective Time of the Merger shall become and be converted into the
right to receive that number of shares of Macatawa Common Stock equal to the
Stock Exchange Ratio (as defined below) (the "Per Share Stock Consideration"),
provided that no fractional shares of Macatawa Common Stock will be issued. Each
share of Grand Common Stock (i) held by Macatawa or any of its subsidiaries for
its own account and not in a fiduciary or representative capacity for a person
other than Macatawa or any of its subsidiaries or (ii) held by Grand as an
authorized but unissued share, if any, shall be cancelled and no consideration
shall be issuable and payable with respect to any such share. For purposes of
this Plan of Merger, the "Stock Exchange Ratio" will be 17.5979.
2.2 Conversion of Grand Stock Options. Subject to the provisions of this
Plan of Merger:
2.2.1 Definition of Grand Stock Options. For purposes of this Plan of
Merger, "Grand Stock Options" shall mean all outstanding options to
purchase shares of Grand Common Stock which were granted pursuant to the
Grand Bank Financial Corporation 1988 Stock Option Plan or the Grand Bank
Financial Corporation Stock Option Plan of 1997.
2.2.2 Conversion of Outstanding Grand Stock Options. Subject to the
provisions of this Plan of Merger, each Grand Stock Option which is
outstanding immediately prior to the Effective Time of the Merger shall at
the Effective Time of the Merger become and be converted into an option to
purchase shares of Macatawa Common Stock ("Converted Macatawa Stock
Options") in an amount equal to the product (rounded to the fourth decimal
place) of (a) the number of shares of Grand Common Stock then subject to
the Grand Stock Option, multiplied by (b) the Stock Exchange Ratio,
provided that any fractional shares of Macatawa Common Stock resulting from
such multiplication shall be rounded to the nearest whole share. The
exercise price per share of Macatawa Common Stock under the Converted
Macatawa Stock Option shall be equal to the then applicable exercise price
per share of Grand Common Stock under the Grand Stock Option divided by the
Stock Exchange Ratio, provided that such exercise price shall be rounded to
the nearest whole cent.
2.2.3 Registration of Underlying Shares of Macatawa Common Stock.
Macatawa shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of Macatawa Common Stock for delivery upon
the exercise of all Converted Macatawa Stock Options. As soon as
practicable after the Effective Time of the Merger, Macatawa shall file a
registration statement on form S-8 (or any successor or other appropriate
form), with respect to the Macatawa Common Stock subject to such options
and shall use its reasonable best efforts to maintain the effectiveness of
such registration statement or statements (and maintain the current status
of the prospectus or prospectuses contained therein) for so long as all the
Converted Macatawa Stock Options remain outstanding.
2.3 No Fractional Securities. Notwithstanding any other provision hereof,
no fractional shares of Macatawa Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the Merger;
instead, Macatawa shall pay to each holder of Grand Common Stock (after taking
into account all Old Certificates (as defined in Section 2.4.1 (New Certificates
and Exchange Fund) delivered by such holder) an amount in cash (without
interest) determined by multiplying such fraction by the Market Price. For
purposes of this Plan of Merger, the "Market Price" shall be the average of the
last-reported sale price per share of Macatawa Common Stock for the five (5)
consecutive trading days ending on the business day prior to Closing, as
reported on The NASDAQ Stock Market.
A-7
2.4 Exchange Procedures.
2.4.1 New Certificates and Exchange Fund. At or prior to the Effective
Time of the Merger, Macatawa shall deliver, or shall cause to be delivered,
to Registrar and Transfer Company or such other bank or trust company as
Macatawa may designate (the "Exchange Agent"), for the benefit of the
holders of certificates formerly representing shares of Grand Common Stock
("Old Certificates") for exchange in accordance with this Article II
(Merger Consideration; Exchange Procedure), certificates representing the
shares of Macatawa Common Stock ("New Certificates") and an estimated
amount of cash (such cash and New Certificates, together with any dividends
or distributions with respect thereto (without any interest thereon), being
hereinafter referred to as the "Exchange Fund" to be issued and paid
pursuant to this Article II in exchange for outstanding shares of Grand
Common Stock.
2.4.2 Transmittal Materials. As promptly as practicable after the
Effective Time of the Merger, Macatawa shall send or cause to be sent to
each former holder of record of shares of Grand Common Stock immediately
prior to the Effective Time of the Merger, transmittal materials for use in
exchanging such holder's Old Certificates for the consideration set forth
in this Article II (Merger Consideration; Exchange Procedure). Macatawa
shall cause the New Certificates into which shares of a shareholder's Grand
Common Stock are converted on the Effective Time of the Merger and/or any
check in respect of any fractional share interests or dividends or
distributions which such person shall be entitled to receive to be
delivered to such holder upon delivery to the Exchange Agent of Old
Certificates representing such shares of Grand Common Stock (or indemnity
reasonably satisfactory to Macatawa and the Exchange Agent, if any of such
certificates are lost, stolen or destroyed) owned by such holder. No
interest will be paid on any such cash to be paid pursuant to this Article
II upon such delivery.
2.4.3 Delivery to Public Officials. Notwithstanding the foregoing,
neither the Exchange Agent nor any party hereto shall be liable to any
former holder of Grand Common Stock for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat or
similar laws.
2.4.4 Dividends and Distributions. No dividends or other distributions
with respect to Macatawa Common Stock with a record date occurring after
the Effective Time of the Merger shall be paid to the holder of any
unsurrendered Old Certificate representing shares of Grand Common Stock
converted in the Merger into shares of such Macatawa Common Stock until the
holder thereof shall surrender such Old Certificate in accordance with this
Article II (Merger Consideration; Exchange Procedure). After the surrender
of an Old Certificate in accordance with this Article II, the record holder
thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of Macatawa Common Stock represented by such
Old Certificate.
2.4.5 Unclaimed Funds. Any portion of the Exchange Fund that remains
unclaimed by the shareholders of Grand for twelve months after the
Effective Time of the Merger shall be paid to Macatawa. Any shareholders of
Grand who have not theretofore complied with this Article II (Merger
Consideration; Exchange Procedure) shall thereafter look only to Macatawa
for payment of the shares of Macatawa Common Stock, cash in lieu of any
fractional shares and unpaid dividends and distributions on the shares of
Macatawa Common Stock deliverable in respect of each share of Grand Common
Stock such shareholder holds as determined pursuant to this Plan of Merger,
in each case, without any interest thereon.
2.4.6 Grand Stock Options. In addition to the foregoing, Macatawa may
require any procedures reasonably deemed necessary to effectuate the
conversion of Grand Stock Options as contemplated by Section 2.2
(Conversion of Grand Stock Options).
2.5 Macatawa Common Stock. Each share of Macatawa Common Stock outstanding
immediately prior to the Effective Time of the Merger shall continue to be
outstanding without any change. Each shareholder of Macatawa whose shares were
outstanding immediately before the Effective Time of the Merger will hold the
same number of shares, with identical designations, preferences, limitations and
relative rights, immediately after the Effective Time of the Merger.
2.6 Anti-Dilution Adjustments. This Plan of Merger shall not limit or
restrict in any manner Macatawa's right to effect a consolidation or merger of
Macatawa with or into another corporation or to effect a stock split, stock
dividend or similar transaction with respect to the outstanding Macatawa Common
Stock. In the event that Macatawa changes (or establishes a record date for
changing) the number of shares of Macatawa Common Stock issued and outstanding
prior to the Effective Time of the Merger as a result of a stock split, stock
dividend or similar transaction with respect to the outstanding Macatawa Common
Stock and the record date therefore shall be prior to the Effective Time of the
Merger, the Stock Exchange Ratio shall be adjusted by multiplying it by that
ratio (i) the numerator of which shall be the total number of shares of
A-8
Macatawa Common Stock that are outstanding as of the record date for such
adjustment plus the additional number of shares (including the aggregate of all
possible fractional shares) to be issued in such adjustment computed as of that
record date; and (ii) the denominator of which shall be the total number of
shares of Macatawa Common Stock outstanding as of the record date for such
adjustment. In the event of a recapitalization or reclassification of
outstanding shares of Macatawa Common Stock or a consolidation or merger of
Macatawa with or into another corporation, other than a merger in which Macatawa
is the surviving corporation and which does not result in any reclassification
of Macatawa Common Stock, holders of Grand Common Stock would receive, in lieu
of each share of Macatawa Common Stock to be issued in exchange for Grand Common
Stock, the kind and amount of shares of Macatawa stock, other securities, money,
and property receivable upon such reclassification, consolidation, or merger by
holders of Macatawa Common Stock with respect to shares of Macatawa Common Stock
outstanding immediately prior to such reclassification, consolidation or merger.
2.7 Grand Common Stock No Longer Outstanding. Each share of Grand Common
Stock outstanding immediately prior to the Effective Time of the Merger shall be
considered to be no longer outstanding and to represent solely the right to
receive shares of Macatawa Common Stock as provided in Section 2.1 (Conversion
of Outstanding Grand Common Stock), together with any other distributions
payable as provided in Section 2.6 (Anti-Dilution Adjustments), but subject to
the payment of cash in lieu of fractional shares as provided in Section 2.3 (No
Fractional Securities).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MACATAWA
Except as otherwise set forth in the Macatawa disclosure statement
("Macatawa Disclosure Statement") previously delivered to Grand, Macatawa
represents and warrants to Grand that:
3.1 Authorization, No Conflicts, Etc.
3.1.1 Authorization of Agreement. The execution, delivery, and
performance of this Plan of Merger by Macatawa have been duly authorized
and approved by all necessary corporate action, except that this Plan of
Merger and the issuance of shares of Macatawa Common Stock pursuant to the
Merger, is subject to the approval of Macatawa's shareholders as described
in Section 1.1 (Approval of Plan of Merger) and, except for such
shareholder approval, when executed and delivered, this Plan of Merger will
be legally binding on and enforceable against Macatawa in accordance with
its terms.
3.1.2 No Conflict, Breach, Violation, Etc. The execution, delivery,
and performance of this Plan of Merger by Macatawa, and the consummation of
the Merger, do not and will not violate, conflict with, or result in a
breach of:
(a) Articles or Bylaws. Any provision of Macatawa's Articles of
Incorporation or Bylaws; or
(b) Statutes, Judgments, Etc. Any statute, code, ordinance, rule,
regulation, judgment, order, writ, arbitration award, decree, or
injunction applicable to Macatawa or its subsidiaries, assuming the
timely receipt of each of the approvals referred to in Section 3.1.4
(Required Approvals).
3.1.3 No Contractual Breach, Default, Liability, Etc. The execution,
delivery, and performance of this Plan of Merger by Macatawa, and the
consummation of the Merger, do not and will not:
(a) Agreements, Etc. Violate, conflict with, result in a breach
of, constitute a default under, require any consent, approval, waiver,
extension, amendment, authorization, notice or filing under, or
extinguish any material contract right of Macatawa or any of its
subsidiaries under any agreement, mortgage, lease, commitment,
indenture, other instrument, or obligation to which Macatawa or any of
its subsidiaries is a party or by which they are bound or affected:
(1) which is material to the business, income, or financial condition
of Macatawa on a consolidated basis; or (2) the violation or breach of
which could prevent Macatawa from consummating the Merger;
(b) Regulatory Restrictions. Violate, conflict with, result in a
breach of, constitute a default under, require any consent, approval,
waiver, extension, amendment, authorization, notice, or filing under
any memorandum of understanding or similar regulatory consent
agreement to which Macatawa or any of its subsidiaries is a party or
subject, or by which it is bound or affected; or
A-9
(c) Tortious Interference. Subject Grand, its subsidiaries,
or their respective directors or officers to liability for
tortious interference with contractual rights.
3.1.4 Required Approvals. No notice to, filing with, authorization of,
exemption by, or consent or approval of, any public body or authority is
necessary for the consummation of the Merger by Macatawa other than filing
the Certificate of Merger in compliance with the provisions of the Michigan
Act, compliance with federal and state securities laws, and the consents,
authorizations, approvals, or exemptions required under the Federal Bank
Holding Company Act. As of the date of this Plan of Merger, Macatawa knows
of no reason why the regulatory approvals referred to in this Section 3.1.4
(Required Approvals) cannot be obtained or why this process could be
materially impeded.
3.2 Organization and Good Standing. Macatawa and its subsidiaries are
corporations duly organized, validly existing, and in good standing under the
laws of the State of Michigan. Macatawa and its subsidiaries possess all
requisite corporate power and authority to own, operate, and lease its
properties and to carry on its business substantially as it is now being
conducted in all material respects. Macatawa is a bank holding company duly
registered and in good standing with the Federal Reserve Board under the Federal
Bank Holding Company Act. Macatawa and its subsidiaries are not required to be
qualified or admitted to conduct business as a foreign corporation in any other
state.
3.3 Subsidiaries. Macatawa owns all of the issued and outstanding shares of
capital stock of Macatawa Bank, which owns all of the issued and outstanding
shares of capital stock of Macatawa Bank Mortgage Company, in each case free and
clear of all claims, security interests, pledges, or liens of any kind. Each of
Macatawa's subsidiaries has full corporate power and authority to carry on its
business substantially as and where now being conducted.
3.4 Capital Stock.
3.4.1 Classes and Shares. The authorized capital stock of Macatawa
consists of 500,000 shares of preferred stock, no par value, none of which
have been issued, and 9,500,000 shares of common stock, no par value, of
which, as of the date and time of the execution of this Plan of Merger,
5,307,201 shares were issued and outstanding.
3.4.2 No Other Capital Stock. There is no security or class of
securities authorized or issued which represents or is convertible into
capital stock of Macatawa except as described in this Section 3.4 (Capital
Stock). As of the date of the execution of this Plan of Merger, there are
no outstanding subscriptions, options, warrants, or rights to acquire any
capital stock of Macatawa, or agreements to which Macatawa is a party or by
which it is bound to issue capital stock, except for the stock options
disclosed in Macatawa's Annual Report to shareholders for the year ended
December 31, 2000 (the "Macatawa Annual Report") and its Quarterly Report
on Form 10-Q for the quarter ended September 30, 2001.
3.4.3 Voting Rights. Other than the shares of Macatawa's common stock
described in this Section 3.4 (Capital Stock), neither Macatawa nor any of
its subsidiaries have outstanding any security:
(a) The holder or holders of which have the right to vote on the
approval of the Merger or this Plan of Merger; or
(b) Which entitles the holder or holders to consent to, or
withhold consent on, the Merger or this Plan of Merger.
3.4.4 Macatawa Common Stock. The shares of Macatawa Common Stock to be
issued in the Merger, when issued in accordance with this Plan of Merger,
will be duly authorized and, when issued as contemplated by this Plan of
Merger, will be validly issued, fully paid, and nonassessable shares.
3.5 Registration Statement, Etc.
3.5.1 Document. The term "Document," when capitalized in this Plan of
Merger, shall collectively mean: (i) the registration statement to be filed
by Macatawa with the Securities and Exchange Commission (the "SEC") in
connection with the Macatawa Common Stock to be issued in the Merger (the
"Registration Statement"); (ii) the prospectus and proxy statement (the
"Prospectus and Proxy Statement") to be mailed to the shareholders of the
Corporations in connection with their respective shareholders' meetings
regarding this Plan of Merger; and (iii) any
A-10
other documents to be filed with the SEC, the Federal Reserve Board, the
State of Michigan, or any other regulatory agency in connection with the
transactions contemplated by this Plan of Merger.
3.5.2 Accurate Information. None of the information to be supplied by
Macatawa for inclusion, or included, in any Document will:
(a) Be false or misleading with respect to any material fact, or
omit to state any material fact necessary to make the statements
therein not misleading (i) at the respective times such Documents are
filed; (ii) with respect to the Registration Statement, when it
becomes effective; and (iii) with respect to the Prospectus and Proxy
Statement, when it is mailed.
(b) With respect to the Registration Statement and the Prospectus
and Proxy Statement, as either may be amended or supplemented, at the
time of either Corporation's shareholders meeting with respect to this
Plan of Merger, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the
solicitation of any proxy for either Corporation's shareholders
meeting.
3.5.3 Compliance of Filings. All Documents that Macatawa is
responsible for filing with any regulatory agency in connection with the
Merger will comply in all material respects with the provisions of
applicable law.
3.6 Financial Statements. The consolidated financial statements of Macatawa
and its subsidiaries as of and for each of the three years ended December 31,
2000, 1999 and 1998, as reported on by Macatawa's independent accountants, and
the unaudited consolidated financial statements of Macatawa and its subsidiaries
as of and for the quarter ended March 31, 2001, June 30, 2001, and September 30,
2001, including all schedules and notes relating to such statements
(collectively, "Macatawa's Financial Statements"), fairly present, and the
unaudited consolidated financial statements of Macatawa and its subsidiaries as
of and for each quarter and year ending after the date of this Plan of Merger
until the Effective Time of the Merger, including all schedules and notes
relating to such statements, will fairly present, the financial condition and
the results of operations, changes in shareholders' equity, and cash flows of
Macatawa as of the respective dates of and for the periods referred to in such
financial statements, all in accordance with generally accepted United States
accounting principles ("GAAP") consistently applied, subject, in the case of
unaudited interim financial statements, to normal, recurring year-end
adjustments (the effect of which would not, individually or in the aggregate,
have a Material Adverse Effect on Macatawa) and the absence of notes (that, if
presented, would not differ materially from those included in Macatawa's
Financial Statements).
3.7 Absence of Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the consolidated balance sheet of Macatawa and
its subsidiaries as of September 30, 2001, and the notes thereto, neither
Macatawa nor any subsidiary had, as of such date, liabilities or obligations,
secured or unsecured (whether accrued, absolute, or contingent) which are, or as
to which there is a reasonable probability that they could be, materially
adverse to the income or financial condition of Macatawa and its subsidiaries on
a consolidated basis.
3.8 Absence of Material Adverse Change. Since September 30, 2001, there has
been no material adverse change in the business, income, or financial condition
of Macatawa and its subsidiaries on a consolidated basis. No facts or
circumstances have been discovered from which it reasonably appears that there
is a significant risk and reasonable probability that there will occur a
material adverse change in the business, income, or financial condition of
Macatawa and its subsidiaries on a consolidated basis.
3.9 Absence of Litigation. There is no action, suit, proceeding, claim,
arbitration, or investigation pending or threatened by any person, including
without limitation any governmental or regulatory agency, against Macatawa, any
of its subsidiaries, or the assets or business of Macatawa or any of its
subsidiaries, any of which has or may have a Material Adverse Effect on the
business, income, or financial condition of Macatawa and its subsidiaries on a
consolidated basis. There is no factual basis known to Macatawa or its
subsidiaries which presents a reasonable potential for any such action, suit,
proceeding, claim, arbitration, or investigation.
3.10 Conduct of Business. Macatawa and its subsidiaries have conducted
their respective businesses and used their respective properties substantially
in compliance with all federal, state, and local laws, civil or common,
ordinances and regulations, including without limitation applicable federal and
state laws and regulations concerning banking, securities, truth-in-lending,
truth-in-savings, mortgage origination and servicing, usury, fair credit
reporting, consumer protection, occupational safety, civil rights, employee
protection, fair employment practices, fair labor standards, and insurance; and
Environmental Laws (as defined in Section 4.21.3(b) (Environmental Laws)),
except for violations which would not have a Material Adverse Effect on the
business, income or financial condition of Macatawa and its subsidiaries on a
consolidated basis.
A-11
3.11 Absence of Defaults Under Contracts. There is no existing default by
Macatawa or any of its subsidiaries, or any other party, under any contract,
mortgage, lease, indenture or agreement to which Macatawa or a subsidiary of
Macatawa is a party, or by which any of them is bound, which could subject
Macatawa or a subsidiary of Macatawa to a risk that would have a Material
Adverse Effect on Macatawa and its subsidiaries on a consolidated basis.
3.12 Regulatory Filings. In the last five years:
3.12.1 Filings. Macatawa and its subsidiaries have filed in a timely
manner all material filings with regulatory bodies for which filings are
required;
3.12.2 Complete and Accurate. All such filings, as amended, were
complete and accurate in all material respects as of the dates of such
filings, and there were no misstatements or omissions therein which, as of
the making of this representation and warranty, would be material to the
business, income, or financial condition of Macatawa and its subsidiaries
on a consolidated basis; and
3.12.3 Compliance with Regulations. All such filings complied in all
material respects with all regulations, forms, and guidelines applicable to
such filings.
3.13 Licenses, Permits, Etc. Macatawa and its subsidiaries hold all
licenses, certificates, permits, franchises, and rights from all appropriate
federal, state, and other public authorities necessary for the conduct of their
businesses as presently conducted, the lack of which would have a Material
Adverse Effect on the business, income, or financial condition of Macatawa and
its subsidiaries on a consolidated basis.
3.14 Environmental Matters. There are no actions, suits, investigations,
liabilities, inquiries or other proceedings, rules, orders or citations
involving Macatawa or its subsidiaries pending, or to the knowledge of Macatawa,
threatened as a result of any failure of Macatawa or any of its subsidiaries, to
comply with any requirement of Environmental Laws (as defined in Section
4.21.3(b) (Environmental Laws)) that is material to the operations or assets of
Macatawa and its subsidiaries on a consolidated basis. To the knowledge of
Macatawa, there is no factual basis for any of the foregoing.
3.15 Allowance for Loan Losses. The allowance for loan losses reflected in
Macatawa's audited consolidated financial statements and Call Reports for the
fiscal year ended December 31, 2000, and for the fiscal quarter ended September
30, 2001, and the audited consolidated financial statements and unaudited Call
Reports for any subsequent quarter or year, was or will be (as applicable) in
the reasonable opinion of management of Macatawa (a) adequate to meet all
reasonably anticipated loan losses, net of recoveries related to loans
previously charged off as of those dates, and (b) consistent with GAAP
consistently applied and safe and sound banking practices.
3.16 Agreements With Bank Regulators. Neither Macatawa nor any of
Macatawa's subsidiaries is a party to any agreement or memorandum of
understanding with, or a party to any commitment letter, board resolution or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, any governmental
authority that restricts materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit or reserve policies or its
management, nor has Macatawa been advised by any governmental authority that it
is contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, agreement, memorandum of
understanding, extraordinary supervisory letter, commitment letter or similar
submission. As of the date of this Plan of Merger, Macatawa knows of no reason
why the regulatory approvals referred to in Section 3.1.4 (Required Approvals)
cannot be obtained or why this process would be materially impeded.
3.17 True and Complete Information. No schedule, statement, list,
certificate, or other information furnished or to be furnished by Macatawa in
connection with this Plan of Merger, including the Macatawa Disclosure
Statement, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances in which they are made, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GRAND
Except as otherwise set forth in the Grand disclosure statement ("Grand
Disclosure Statement") previously delivered to Macatawa, Grand represents and
warrants to Macatawa that:
A-12
4.1 Authorization, No Conflicts, Etc.
4.1.1 Authorization of Agreement. The execution, delivery, and
performance of this Plan of Merger by Grand have been duly authorized and
approved by all necessary corporate action except that this Plan of Merger
is subject to the approval of Grand's shareholders as described in Section
1.1 (Approval of Plan of Merger) and, except for such shareholder approval,
when executed and delivered, this Plan of Merger will be legally binding on
and enforceable against Grand in accordance with its terms.
4.1.2 No Conflict, Breach, Violation, Etc. The execution, delivery,
and performance of this Plan of Merger by Grand, and the consummation of
the Merger, do not and will not violate, conflict with, or result in a
breach of:
(a) Articles or Bylaws. Any provision of Grand's Articles of
Incorporation or Bylaws; or
(b) Statutes, Judgments, Etc. Any statute, code, ordinance, rule,
regulation, judgment, order, writ, arbitral award, decree, or
injunction applicable to Grand or its subsidiaries, assuming the
timely receipt of each of the approvals referred to in Section 4.1.4
(Required Approvals).
4.1.3 No Contractual Breach, Default, Liability, Etc. The execution,
delivery, and performance of this Plan of Merger by Grand, and the
consummation of the Merger, do not and will not:
(a) Agreements, Etc. Violate, conflict with, result in a breach of,
constitute a default under, require any consent, approval, waiver,
extension, amendment, authorization, notice or filing under, or extinguish
any material contract right of Grand or any of its subsidiaries under any
agreement, mortgage, lease, commitment, indenture, other instrument, or
obligation to which Grand or its subsidiaries is a party or by which they
are bound or affected: (1) which is material to the business, income, or
financial condition of Grand, the Bank or any other subsidiary of Grand on
a consolidated basis; or (2) the violation or breach of which could prevent
Grand from consummating the Merger;
(b) Regulatory Restrictions. Violate, conflict with, result in a
breach of, constitute a default under, require any consent, approval,
waiver, extension, amendment, authorization, notice, or filing under any
memorandum of understanding or similar regulatory consent agreement to
which Grand, the Bank or any other subsidiary of Grand is a party or
subject, or by which it is bound or affected; or
(c) Tortious Interference. Subject Macatawa or any of its subsidiaries
or their respective directors or officers to liability for tortious
interference with contractual rights.
4.1.4 Required Approvals. No notice to, filing with, authorization of,
exemption by, or consent or approval of, any public body or authority is
necessary for the consummation of the Merger by Grand other than filing the
Certificate of Merger in compliance with the provisions of the Michigan
Act, compliance with federal and state securities laws, and the consents,
authorizations, approvals, or exemptions required under the Federal Bank
Holding Company Act. As of the date of this Plan of Merger, Grand knows of
no reason why the regulatory approvals referred to in this Section 4.1.4
(Required Approvals) cannot be obtained or why this process could be
materially impeded.
4.2 Organization and Good Standing. Grand and its subsidiaries are
corporations duly organized, validly existing, and in good standing under the
laws of the State of Michigan. Grand and its subsidiaries each possess all
requisite corporate power and authority to own, operate, and lease its
properties and to carry on its business substantially as it is now being
conducted in all material respects. Grand is a bank holding company duly
registered and in good standing with the Federal Reserve Board under the Federal
Bank Holding Company Act. Grand and its subsidiaries are not required to be
qualified or admitted to conduct business as a foreign corporation in any other
state.
4.3 Subsidiaries.
4.3.1 Ownership of Subsidiaries. Grand owns all of the issued and
outstanding shares of capital stock of the Bank which owns all of the
issued and outstanding shares of capital stock of the Grand Mortgage
Company (the "Mortgage Company"), in each case free and clear of all
claims, security interests, pledges, or liens of any kind. Grand does not
have "Control" (as defined in Section 2(a)(2) of the Federal Bank Holding
Company Act, using 5 percent rather than 25 percent), either directly or
indirectly, of any corporation engaged in an active trade or business or
which holds any significant assets other than as stated in this Section 4.3
(Subsidiaries).
A-13
4.3.2 Rights to Capital Stock. There are no outstanding
subscriptions, options, warrants, rights to acquire, or any other
similar agreements pertaining to the capital stock of the Bank or the
Mortgage Company.
4.3.3 Qualification and Power. The Bank and the Mortgage Company:
(a) Foreign Qualification. Are not, and are not required to
be, qualified or admitted to conduct business in any other state
except where the lack of such qualification or admission would
not have a Material Adverse Effect on Grand and its subsidiaries
on a consolidated basis; and
(b) Corporate Power. Have full corporate power and authority
to carry on their business substantially as and where now being
conducted.
4.3.4 FDIC; Insurance Assessments. The Bank maintains in full force
and effect deposit insurance through the Bank Insurance Fund of the Federal
Deposit Insurance Corporation ("FDIC"). The Bank has fully paid to the FDIC
as and when due all assessments with respect to its deposits as are
required to maintain such deposit insurance in full force and effect.
4.3.5 Regulatory Fees and Charges. The Bank and the Mortgage Company
have paid as and when due all material fees, charges, assessments, and the
like to each and every governmental or regulatory agency having
jurisdiction as required by law, regulation, or rule.
4.4 Capital Stock and Stock Options.
4.4.1 Classes and Shares. The authorized capital stock of Grand
consists of 250,000 shares of common stock, no par value, of which, as of
the date and time of the execution of this Plan of Merger, 134,959 shares
were issued and outstanding and each of such outstanding shares are legally
and validly issued, fully paid and nonassessable.
4.4.2 No Other Capital Stock. There is no security or class of
securities authorized or issued which represents or is convertible into
capital stock of Grand except as described in this Section 4.4 (Capital
Stock and Stock Options). As of the date of the execution of this Plan of
Merger, there are no outstanding subscriptions, options, warrants, or
rights to acquire any capital stock of Grand, or agreements to which Grand
is a party or by which it is bound to issue capital stock, except for Grand
Stock Options disclosed pursuant to Section 4.4.4 (Stock Options).
4.4.3 Voting Rights. Other than the shares of Grand Common Stock
described in this Section 4.4 (Capital Stock and Stock Options), neither
Grand nor any of its subsidiaries have outstanding any security:
(a) The holder or holders of which have the right to vote on the
approval of the Merger or this Plan of Merger; or
(b) Which entitles the holder or holders to consent to, or
withhold consent on, the Merger or this Plan of Merger.
4.4.4 Stock Options. The Grand Disclosure Statement contains a true,
accurate and complete list of all stock option plans and outstanding
options and other rights to purchase shares of Grand Common Stock or any
other securities of Grand. Each such stock option plan was duly authorized
and approved by the Board of Directors of Grand and complies with the
provisions of any and all applicable laws. Each grant of an outstanding
Grand Stock Option was duly authorized and approved by the Board of
Directors of Grand and was issued in material compliance with the terms of
the applicable stock option plan and applicable laws.
4.5 Financial Statements.
4.5.1 Financial Statements. The audited consolidated financial
statements of Grand and its subsidiaries, as reported on by Grand's
independent accountants, as of and for (i) each of the three years ended
December 31, 2000, 1999 and 1998 and (ii) the year ended December 31, 2001,
if such is prepared and audited prior to the Effective Time of the Merger
(collectively, "Grand's Financial Statements"), including all schedules and
notes relating to such statements, do or will (as applicable) fairly
present, the financial condition and the results of operations, changes in
shareholders' equity, and cash flows of Grand as of the respective dates of
and for the periods referred to in such
A-14
financial statements, all in accordance with GAAP consistently applied. The
unaudited consolidated financial statements of Grand and its subsidiaries
as of and for the quarters ended March 31, 2001, June 30, 2001, and
September 30, 2001, contained in Grand's quarterly reports on Form FRY-9C
filed with the Federal Reserve, and the unaudited consolidated financial
statements of Grand to be filed on Form FRY-9C prior to the Effective Time
of the Merger, including all schedules and notes relating to such
statements and included in such reports (collectively the "FRY-9Cs"), are
and will be correct and complete in all material respects. The FRY-9Cs,
which have been filed, were prepared, and the FRY-9Cs to be filed will be
prepared, in conformity with applicable regulatory accounting principles
("RAP") applied consistently throughout the periods indicated (except as
otherwise noted in such FRY-9Cs).
4.5.2 Call Reports. The reports of condition and income of the Bank as
of and for each of the years ended December 31, 1998, 1999 and 2000, and as
of and for each of the quarters ended March 31, 2001, June 30, 2001, and
September 30, 2001, and the reports of condition and income of the Bank to
be filed with the FDIC prior to the Effective Time of the Merger, including
all schedules, and notes relating to such reports (collectively, the "Call
Reports"), are and will be correct and complete in all material respects.
The Call Reports, which have been filed, were prepared, and the Call
Reports to be filed will be prepared, in conformity with applicable RAP
applied consistently throughout the periods indicated (except as otherwise
noted in such reports).
4.6 Absence of Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the consolidated balance sheet of Grand and its
subsidiaries as of December 31, 2000, and the notes thereto, neither Grand, the
Bank nor any other subsidiary of Grand had, as of such date, liabilities or
obligations, secured or unsecured (whether accrued, absolute, or contingent)
which are, or as to which there is a reasonable probability that they could be,
materially adverse to the income or financial condition of Grand and
subsidiaries on a consolidated basis.
4.7 Absence of Material Adverse Change. Since December 31, 2000, there has
been no material adverse change in the business, income, or financial condition
of Grand, the Bank and any other subsidiary of Grand on a consolidated basis. No
facts or circumstances have been discovered from which it reasonably appears
that there is a significant risk and reasonable probability that there will
occur a material adverse change in the business, income, or financial condition
of Grand and its subsidiaries on a consolidated basis.
4.8 Absence of Litigation. There is no action, suit, proceeding, claim,
arbitration, or investigation pending or threatened by any person, including
without limitation any governmental or regulatory agency, against Grand or its
subsidiaries, or the assets or business of Grand or its subsidiaries, any of
which has or may have a Material Adverse Effect on the business, income, or
financial condition of Grand and its subsidiaries on a consolidated basis. There
is no factual basis known to Grand or its subsidiaries, which presents a
reasonable potential for any such action, suit, proceeding, claim, arbitration,
or investigation.
4.9 Conduct of Business. Grand and its subsidiaries have conducted their
respective businesses and used their respective properties substantially in
compliance with all federal, state, and local laws, civil or common, ordinances
and regulations, including without limitation applicable federal and state laws
and regulations concerning banking, securities, truth-in-lending,
truth-in-savings, mortgage origination and servicing, usury, fair credit
reporting, consumer protection, occupational safety, civil rights, employee
protection, fair employment practices, fair labor standards, and insurance; and
the Environmental Laws (as defined in Section 4.21.3(b) (Environmental Laws)),
except for violations which would not have a Material Adverse Effect on the
business, income or financial condition of Grand and its subsidiaries on a
consolidated basis.
4.10 Absence of Defaults Under Contracts. There is no existing default by
Grand, the Bank, or any other subsidiary of Grand or any other party, under any
contract, mortgage, lease, indenture or agreement to which Grand, the Bank or
any other subsidiary of Grand is a party, or by which any of them is bound,
which could subject Grand, the Bank or any other subsidiary of Grand to a risk
that would have a Material Adverse Effect on Grand and its subsidiaries on a
consolidated basis.
4.11 Regulatory Filings. In the last five years:
4.11.1 Filings. Grand and its subsidiaries have filed in a timely
manner all filings with regulatory bodies for which filings are required;
4.11.2 Complete and Accurate. All such filings, as amended, were
complete and accurate in all material respects as of the dates of such
filings, and there were no misstatements or omissions therein which, as of
the making
A-15
of this representation and warranty, would be material to the business,
income, or financial condition of Grand and its subsidiaries on a
consolidated basis; and
4.11.3 Compliance with Regulations. All such filings complied in all
material respects with all regulations, forms, and guidelines applicable to
such filings.
4.12 Registration Statement, Etc.
4.12.1 Accurate Information. None of the information to be supplied by
Grand for inclusion, or included, in any Document will:
(a) Be false or misleading with respect to any material fact, or omit
to state any material fact necessary to make the statements therein not
misleading (i) at the respective times such Documents are filed; (ii) with
respect to the Registration Statement, when it becomes effective; and (iii)
with respect to the Prospectus and Proxy Statement, when it is mailed.
(b) With respect to the Registration Statement and the Prospectus
and Proxy Statement, as either may be amended or supplemented, at the
time of either Corporation's shareholders meeting with respect to this
Plan of Merger, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the
solicitation of any proxy for either Corporation's shareholders
meeting.
4.12.2 Compliance of Filings. All Documents that Grand is responsible
for filing with any regulatory agency in connection with the Merger will
comply in all material respects with the provisions of applicable law.
4.13 Tax Matters.
4.13.1 Tax Returns. Grand and its current subsidiaries and any and all
prior subsidiaries of any of them have duly and timely filed all material
tax returns that they have by law been required to file, including without
limitation those with respect to income, withholding, social security,
unemployment, franchise, real property, personal property, intangibles, and
single business taxes. Each such tax return, report, and statement, as
amended, is correct and complies in all material respects with all
applicable laws and regulations.
4.13.2 Tax Assessments and Payments. All material taxes and
assessments, including any penalties, interest, and deficiencies relating
to those taxes and assessments, due and payable by Grand, its current
subsidiaries and any prior subsidiaries (while owned by Grand or any of its
subsidiaries) have been paid in full as and when due including applicable
extension periods. The provisions made for taxes on the consolidated
balance sheet of Grand and its subsidiaries as of December 31, 2000, are
sufficient for the payment of all federal, state, county, and local taxes
of Grand, and all of its subsidiaries accrued but unpaid as of the date
indicated, whether or not disputed, with respect to all periods through
December 31, 2000.
4.13.3 Tax Audits The federal consolidated income tax returns of Grand
and the Bank and any other prior or current subsidiary of Grand, have not
been audited by the Internal Revenue Service ("IRS") within the last 10
years. There is no tax audit or legal or administrative proceeding for
assessment or collection of taxes pending or, to Grand's knowledge,
threatened with respect to Grand or the Bank or any other prior or current
subsidiary of Grand. No claim for assessment or collection of taxes has
been asserted with respect to Grand, the Bank or any other prior or current
subsidiary of Grand. No waiver of any limitations statute or extension of
any assessment or collection period is in effect with respect to Taxes of
Grand, the Bank or any other prior or current subsidiary of Grand.
4.14 Title to Properties. Grand and its subsidiaries have good, sufficient,
and marketable title to all of their properties and assets, whether real,
personal, or a combination thereof, reflected in their books and records as
being owned (including those reflected in the consolidated balance sheet of
Grand and its subsidiaries as of December 31, 2000, except as since disposed of
in the ordinary course of business), free and clear of all liens and
encumbrances, except:
4.14.1 Reflected on Balance Sheet. As reflected on the consolidated
balance sheet of Grand and its subsidiaries as of December 31, 2000, and
the notes thereto;
4.14.2 Normal to Business. Liens for current taxes not yet delinquent
and liens or encumbrances which are normal to the business of Grand and its
subsidiaries and which are not material in relation to the business,
income, or financial condition of Grand or its subsidiaries; and
A-16
4.14.3 Immaterial Imperfections. Such imperfections of title,
easements, and encumbrances, if any, as are not material in character,
amount, or extent, and do not materially detract from the value, or
materially interfere with the present use, of the properties subject
thereto or affected thereby, or which would not otherwise be material to
the business, income, or financial condition of Grand or its subsidiaries.
4.15 Condition of Property. The nonfinancial assets owned or leased by
Grand and its subsidiaries constitute all of the assets held for use or used in
connection with the business of Grand and its subsidiaries and are generally
adequate to carry on their respective businesses as presently conducted. All
material nonfinancial assets and properties that Grand or its subsidiaries own,
lease, or use are in good operating condition (normal wear and tear excepted)
are in a good state of maintenance and repair, are reasonably fit for their
intended purposes, are adequately serviced by all utilities reasonably necessary
for the effective operation of Grand's business and also that of its
subsidiaries substantially as presently conducted, and are in the possession of
Grand or its subsidiaries. None of the real property leased or used by Grand or
its subsidiaries is the subject of any condemnation action and there is, to the
best of Grand's knowledge, no proposal under consideration by any public or
governmental authority or entity to use any of the real property leased or used
by Grand or its subsidiaries for some other purpose.
4.16 Leases. All leases pursuant to which Grand or its subsidiaries, as
lessee, lease real property which is material to the business of Grand and its
subsidiaries or personal property having an initial value in excess of $25,000
per lease (a "Material Lease") are valid, effective, and enforceable against the
lessor in accordance with their respective terms. There is no existing default
under any Material Lease, or any event which with notice or lapse of time, or
both, would constitute a default with respect to Grand or its subsidiaries or,
to the best knowledge of Grand, any other party which would be reasonably
expected to have a Material Adverse Effect on Grand and its subsidiaries on a
consolidated basis. No Material Lease contains a prohibition against assignment
by Grand or its subsidiaries, by operation of law or otherwise, or any other
provision which would preclude Grand or its subsidiaries from possessing and
using the leased premises for the same purposes and upon the same rental and
other terms upon consummation of the Merger as are applicable to the possession
and use by Grand or its subsidiaries as of the date of this Plan of Merger.
4.17 Ownership of Real Property. Neither Grand nor its subsidiaries own any
of the real property used in connection with their business.
4.18 Licenses, Permits, Etc. Grand and its subsidiaries hold all licenses,
certificates, permits, franchises, and rights from all appropriate federal,
state, and other public authorities necessary for the conduct of their
businesses as presently conducted, the lack of which would have a Material
Adverse Effect on the business, income, or financial condition of Grand and its
subsidiaries on a consolidated basis.
4.19 Certain Employment Matters.
4.19.1 Employment Policies, Programs, and Procedures. The policies,
programs and practices of Grand and its subsidiaries relating to wages,
hours of work, and other terms and conditions of employment are in
compliance in all material respects with applicable laws, orders,
regulations and ordinances governing employment and terms and conditions of
employment.
4.19.2 Record of Payments. There is no existing or outstanding
material obligation of Grand or its subsidiaries, whether arising by
operation of law, civil or common, by contract, or by past custom, for
Employment-Related Payments (as defined in Section 4.19.3
(Employment-Related Payments) to any trust, fund, company, governmental
agency, present or former director, officer, employee, agent (or his or her
heirs, survivors, legatees, or legal representatives), or person that has
not been duly recorded on the books and records of Grand or its
subsidiaries and paid when due or duly accrued as a liability, in the
ordinary course of business in accordance with GAAP consistently applied.
4.19.3 Employment-Related Payments. For purposes of this Plan of
Merger, "Employment-Related Payments" include any payment to be made with
respect to any contract for employment, unemployment compensation benefits,
profit sharing, pension or retirement benefits or social security benefits,
or for fringe benefits, including vacation or holiday pay, bonuses and
other forms of compensation, or for medical insurance or medical expenses,
which are payable to present or former directors, officers, employees, or
agents of Grand or its subsidiaries, or their respective survivors, heirs,
legatees, or legal representatives.
A-17
4.19.4 Employment Claims. There are no disputes, claims, or charges,
pending or to Grand's knowledge threatened, alleging breach by Grand or any
of its subsidiaries of any express or implied employment contract or
commitment, or breach of any applicable law, order, regulation or ordinance
relating to employment or terms and conditions of employment, and to
Grand's knowledge there is no factual basis for any valid claim or charge
with regard to such matters which could have a Material Adverse Effect on
Grand's business, income or financial condition on a consolidated basis.
4.19.5 Disclosure of Agreements. Grand and its subsidiaries are not
parties to any written or oral, express or implied:
(a) Employment contract or agreement, or guarantee of job
security, made with or to any past or present employee of Grand or any
of its subsidiaries which is not terminable by Grand or such
subsidiary of Grand upon 30 days or less notice without penalty or
obligation;
(b) Plan, contract or arrangement providing for bonuses,
pensions, options, stock purchases, deferred compensation, retirement
payments, retirement benefits of the type described in Statement of
Financial Accounting Standard No. 106, or profit sharing; or
(c) Plan, agreement or arrangement with respect to payment of
medical expenses, insurance (except insurance continuation limited to
that required under provisions of the Consolidated Omnibus Budget
Reconciliation Act), or other benefits for any former employee of
Grand or its subsidiaries or any spouse, child, member of the same
household, estate, or survivor of any such employee.
4.20 Employee Benefit Plans. With respect to any "employee welfare benefit
plan," any "employee pension benefit plan", or any employee benefit plan within
the respective meanings of Sections 3(1), 3(2), and 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (each referred to
as an "Employee Benefit Plan"), maintained by or for the benefit of Grand or its
subsidiaries or to which Grand or its subsidiaries have made payments or
contributions on behalf of its employees:
4.20.1 ERISA Compliance. Grand and its subsidiaries, each Employee
Benefit Plan, and all trusts created thereunder are in substantial
compliance with ERISA and all other applicable laws and regulations
applicable to such plans and trusts.
4.20.2 Internal Revenue Code Compliance. Grand and its subsidiaries,
each Employee Benefit Plan which is intended to be a qualified plan under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), and all trusts created thereunder are in
compliance in all material respects with the applicable provisions of the
Internal Revenue Code.
4.20.3 Prohibited Transactions. No Employee Benefit Plan and no trust
created thereunder has been involved in any nonexempt "prohibited
transaction" as defined in Section 4975 of the Internal Revenue Code and in
Sections 406, 407, and 408 of ERISA.
4.20.4 Plan Termination. No Employee Benefit Plan which is a qualified
plan under Section 401(a) of the Internal Revenue Code and no trust created
thereunder has been terminated, partially terminated, curtailed,
discontinued, or merged into another plan or trust after June 30, 1974,
except in compliance with notice and disclosure to the IRS and the Pension
Benefit Guaranty Corporation (the "PBGC"), where applicable, as required by
the Internal Revenue Code and ERISA. With respect to each such termination,
all termination procedures have been completed and there are no pending or
potential liabilities to PBGC, to the plans, or to participants under such
terminated plans. Each such termination, partial termination, curtailment,
discontinuance, or consolidation has been accompanied by the issuance of a
current favorable determination letter by the IRS and, where applicable,
has been accompanied by plan termination proceedings with and through the
PBGC.
4.20.5 Multiemployer Plan. No Employee Benefit Plan is a
"multiemployer plan" within the meaning of Section 3(37)(A) of ERISA.
4.20.6 Defined Benefit Plan. Except for the Grand Pension Plan (the
"Grand Pension Plan") no Employee Benefit Plan in effect as of the date of
this Plan of Merger is a "defined benefit plan" within the meaning of
Section 3(35)of ERISA.
A-18
4.20.7 Reportable Events. There has been no "reportable event" as
defined in Section 4043 of ERISA, after September 1, 1974, with respect to
any Employee Benefit Plan or any trust created thereunder.
4.20.8 Payment of Contributions. Grand and its subsidiaries have made
when due all contributions required under any Employee Benefit Plan and
under applicable laws and regulations.
4.20.9 Payment of Benefits. There are no payments which have become
due from any Employee Benefit Plan, the trusts created thereunder, or from
Grand or its subsidiaries with respect to any Employee Benefit Plan, that
have not been paid through normal administrative procedures to the plan
participants or beneficiaries entitled thereto, except for claims for
benefits for which administrative claims procedures under such plan have
not been exhausted.
4.20.10 Accumulated Funding Deficiency. No Employee Benefit Plan which
is intended to be a qualified plan under Section 401(a) of the Internal
Revenue Code and no trust created thereunder has incurred, after June 30,
1974, an "accumulated funding deficiency" as defined in Section 412(a) of
the Internal Revenue Code and Section 302 of ERISA (whether or not waived).
4.20.11 Funding. Neither Grand nor any subsidiary of Grand owes
premiums to the PBGC that are due but unpaid or has been determined by the
PBGC to be liable for a funding deficiency with respect to a plan
termination under Title IV of ERISA.
4.20.12 No Liability. There has been no amendment of the Grand Pension
Plan or related trust or other occurrence subsequent to the date of the
latest actuarial valuation that could result in any liability for further
contributions or other payments with respect thereto (whether direct
liability to the plan, the trust, the participants and beneficiaries of the
Grand Pension Plan, or liability to the PBGC).
4.20.13 Condition of Plan. With respect to the Grand Pension Plan,
there has been no amendment of such plan or other occurrence subsequent to
the date of the latest actuarial reports prepared with respect to such plan
that has materially changed the financial and/or funding condition of the
plan.
4.20.14 Filing of Reports. Grand and its subsidiaries have filed or
caused to be filed, and will continue to file or cause to be filed, in a
timely manner, all filings pertaining to each Employee Benefit Plan with
the IRS, the United States Department of Labor, and the PBGC as prescribed
by the Internal Revenue Code or ERISA, or regulations issued thereunder.
All such filings, as amended, were complete and accurate in all material
respects as of the dates of such filings, and there were no misstatements
or omissions in any such filing which, as the making of this representation
and warranty, would be material to the financial condition, net income or
business of Grand and its subsidiaries on a consolidated basis.
4.21 Environmental Matters.
4.21.1 Owned or Operated Property. With respect to: (i) the real
estate owned or leased by Grand or its subsidiaries or used in the conduct
of their businesses; (ii) other real estate owned by the Bank or the
Mortgage Company (other than real estate held in trust), (iii) to Grand's
knowledge, any real estate held and administered in trust by the Bank or
the Mortgage Company; and (iv) to Grand's knowledge, any real estate
formerly owned or leased by Grand or any subsidiary of Grand (for purposes
of this section, properties described in any of (i) through (iv) are
collectively referred to as "Premises"):
(a) Construction and Content. To the knowledge of Grand, none of
the Premises is constructed of, or contains as a component part, any
material which releases or may release any substance that is a
Hazardous Substance (as defined in Section 4.21.3(a) (Hazardous
Substances)) in a quantity or concentration that would give rise to a
claim of liability under Environmental Laws) or is known to be (either
by single exposure or by repeated or prolonged exposure) injurious or
hazardous to the health of persons occupying the Premises.
(b) Uses of Premises. No part of the Premises has been used by
Grand or its subsidiaries for the generation, manufacture, handling,
storage, disposal, or management of Hazardous Substances (as defined
in Section 4.21.3(a) (Hazardous Substances)), except for the storage
of normal quantities of office supplies and office cleaning and
maintenance products.
A-19
(c) Underground Storage Tanks. To the knowledge of Grand, the
Premises do not contain, and have never contained, any underground
storage tanks. With respect to any underground storage tank listed in
the Grand Disclosure Statement as an exception to the foregoing, to
the knowledge of Grand, each such underground storage tank presently
or previously located on Premises is or has been maintained or
removed, as applicable, in compliance with all applicable
Environmental Laws (as defined in Section 4.21.3(b) (Environmental
Laws)), and has not been the source of any release of a Hazardous
Substance (as defined in Section 4.21.3(a) (Hazardous Substances)) to
the environment.
(d) Absence of Contamination. To the knowledge of Grand, the
Premises do not contain and are not contaminated by any quantity of a
Hazardous Substance (as defined in Section 4.21.3(a) (Hazardous
Substances)) from any source in excess of applicable cleanup criteria.
(e) Environmental Suits and Proceedings. There is no action,
suit, investigation, liability, inquiry, or other proceeding, ruling,
order, notice of potential liability, or citation involving Grand or
its subsidiaries pending or to Grand's knowledge threatened or
previously asserted under, or as a result of any, or alleged, failure
to comply with any requirement of, any Environmental Law (as defined
in Section 4.21.3(b) (Environmental Laws)). To the knowledge of Grand,
there is no factual basis for any of the foregoing.
4.21.2 Loan Portfolio. With respect to any real estate securing any
outstanding loan of Grand or its subsidiaries or related security interest
and any real estate owned by Grand or its subsidiaries that was acquired in
full or partial satisfaction of a debt previously contracted:
(a) Investigation. Grand and its subsidiaries have complied in
all material respects with their policies (as such policies may have
been in effect from time to time and as disclosed in the Grand
Disclosure Statement), and all applicable laws and regulations,
concerning the investigation of each such property to determine
whether or not there exists or is reasonably likely to exist any
Hazardous Substance (as defined in Section 4.21.3(a) (Hazardous
Substances)) on, in, or under such property at a level giving rise to
material liability of Grand and whether or not a release of a
Hazardous Substance has occurred at or from such property.
(b) No Known Contamination. No such property is known to Grand to
contain or be contaminated by any quantity of any Hazardous Substance
(as defined in Section 4.21.3(a) (Hazardous Substances)) from any
source at a level giving rise to material liability of Grand.
4.21.3 Definitions.
(a) Hazardous Substances. For purposes of this Plan of Merger,
"Hazardous Substance" has the meaning set forth in Section 9601 of the
Comprehensive Environmental Response Compensation and Liability Act of
1980, as amended, 42 U.S.C.A. ss. 9601 et seq. ("CERCLA"), and also
includes any substance now regulated by or subject to any
Environmental Law (as defined below) and any other pollutant,
contaminant or waste, including without limitation, petroleum,
asbestos, radon and polychlorinated biphenyls.
(b) Environmental Laws. For purposes of this Plan of Merger,
"Environmental Laws" means all laws (civil or common), ordinances,
rules, regulations, and orders that: (i) regulate air, water, soil, or
solid waste management, including the generation, release,
containment, storage, handling, transportation, disposal, or
management of Hazardous Substances; (ii) regulate or prescribe
requirements for air, water, or soil quality; (iii) are intended to
protect the public health or the environment; or (iv) establish
liability for the investigation, removal, or cleanup of, or damage
caused by, any Hazardous Substance.
4.22 Duties as Fiduciary. To the knowledge of Grand, the Bank and the
Mortgage Company have performed all of their duties in any capacity as trustee,
executor, administrator, registrar, guardian, custodian, escrow agent, receiver,
or other fiduciary in a fashion that complies in all material respects with all
applicable laws, regulations, orders, agreement, wills, instruments, and common
law standards. Neither the Bank nor the Mortgage Company has received notice of
any claim, allegation, or complaint from any person that either the Bank or the
Mortgage Company failed to perform these fiduciary duties in a manner that
complies in all material respects with all applicable laws, regulations, orders,
agreements, wills, instruments, and common law standards, except for notices
involving matters that have been resolved and any cost of such resolution is
reflected in Grand's Financial Statements.
A-20
4.23 Investment Bankers and Brokers. Grand has not employed any broker,
finder, or investment banker in connection with the Merger, except for the
engagement of Austin Associates, LLC ("Austin Associates"). Except with respect
to Austin Associates, Grand has no express or implied agreement with any person
or company relative to any commission or finder's fee payable with respect to
the Merger.
4.24 Change in Business Relationships. Neither Grand nor its subsidiaries
have notice that any customer, agent, representative, or supplier of Grand or
its subsidiaries intends to discontinue, diminish, or adversely change their
relationship with Grand or its subsidiaries on account of the Merger or
otherwise, the effect of which would be a Material Adverse Effect on the
business of Grand and its subsidiaries on a consolidated basis. Additionally,
neither Grand nor any of its subsidiaries has been advised as of the date of
this Plan of Merger that any executive officer of Grand or of any of its
subsidiaries intendeds to terminate his or her employment on account of the
Merger or otherwise.
4.25 Related Persons. For purposes of this Plan of Merger, the term "Grand
Related Person" shall mean any director or executive officer of Grand or any
subsidiary of Grand, their spouses and children, and any person who is a member
of the same household as such persons, and any corporation, limited liability
company, partnership, proprietorship, trust, or other entity of which any such
persons, alone or together, has Control (as defined in Section 4.3.1 (Ownership
of Subsidiaries)).
4.25.1 Control of Material Assets. Other than in a capacity as a
shareholder, director, or executive officer of Grand or a subsidiary of
Grand, no Grand Related Person owns or controls any material assets or
properties that are used in the business of Grand or any subsidiary of
Grand.
4.25.2 Contractual Relationships. Other than ordinary and customary
banking, directorship, and employment relationships, no Grand Related
Person has any material contractual relationship with Grand or any
subsidiary of Grand.
4.25.3 Loan Relationships. No Grand Related Person has any outstanding
loan or loan commitment from, or on whose behalf an irrevocable letter of
credit has been issued, by Grand or any subsidiary of Grand, in a principal
amount of $175,000 or more.
4.26 Insurance. Grand and its subsidiaries maintain in full force and
effect insurance on their assets, properties, premises, operations, and
personnel in such amounts and against such risks and losses as are customary and
adequate for comparable entities engaged in the same business and industry.
During the last five years, no insurance company has canceled or refused to
renew a policy of insurance covering Grand's or any of its subsidiaries'
material assets, properties, premises, operations, or personnel.
4.27 Books and Records. The minutes contained in corporate minute books and
files of Grand and its subsidiaries properly and accurately record in all
material respects all actions actually taken by their shareholders, directors,
and committees of directors. The books, accounts, and records of Grand and its
subsidiaries reflect only actual transactions and have been maintained in all
material respects in the usual and regular manner, in accordance with GAAP
consistently applied, and in compliance with all applicable laws and
regulations.
4.28 Loan Guarantees. All guarantees of indebtedness owed to Grand or any
subsidiary of Grand, including without limitation those of the Federal Housing
Administration, the Small Business Administration, and other state and federal
agencies, are valid and enforceable, except where a failure to enforce would not
have a Material Adverse Effect on Grand.
4.29 Events Since December 31, 2000. Except as contemplated by the Plan of
Merger, neither Grand nor its subsidiaries have, since December 31, 2000:
4.29.1 Business in Ordinary Course. Conducted its business other than
in the ordinary course, or incurred or become subject to any material
liability or obligation, except liabilities incurred in the ordinary course
of business, except for any single liability that does not exceed $25,000,
or the aggregate of such liabilities that do not exceed $75,000.
4.29.2 Strikes or Labor Trouble. Experienced or, to the best knowledge
of Grand, been threatened by any strike, work stoppage, organizational
effort, or other labor trouble, or any other event or condition of any
similar character which has been or could reasonably be expected to be
materially adverse to the business, income, or financial condition of Grand
or any of its subsidiaries.
A-21
4.29.3 Mortgage of Assets. Mortgaged, pledged, or subjected to lien,
charge, or other encumbrance any of its assets, or sold or transferred any
such assets, except in the ordinary course of business, except for such
mortgages, pledges, liens, charges, and encumbrances for indebtedness that
does not individually exceed $25,000, or do not collectively exceed
$75,000.
4.29.4 Contract Amendment or Termination. Made or permitted any
amendment or termination of any contract to which it is a party and which
is material to the business, income, or financial condition of Grand and
its subsidiaries.
4.30 Allowance for Loan Losses. The allowance for loan losses reflected in
Grand's audited consolidated financial statements and Call Reports for the
fiscal year ended December 31, 2000, and for the fiscal quarter ended September
30, 2001 (as applicable) and any audited consolidated financial statements and
unaudited Call Reports for any subsequent year or quarter, was or will be (as
applicable) in the reasonable opinion of management of Grand (a) adequate to
meet all reasonably anticipated loan losses, net of recoveries related to loans
previously charged off as of those dates, and (b) consistent with GAAP or RAP
(as applicable) consistently applied and safe and sound banking practices.
4.31 Agreements With Bank Regulators. Neither Grand nor any of Grand's
subsidiaries is a party to any agreement or memorandum of understanding with, or
a party to any commitment letter, board resolution or similar undertaking to, or
is subject to any order or directive by, or is a recipient of any extraordinary
supervisory letter from, any governmental authority that restricts materially
the conduct of its business, or in any manner relates to its capital adequacy,
its credit or reserve policies or its management, nor has Grand been advised by
any governmental authority that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum of understanding, extraordinary supervisory
letter, commitment letter or similar submission. As of the date of this Plan of
Merger, Grand knows of no reason why the regulatory approvals referred to in
Section 4.1.4 (Required Approvals) cannot be obtained or why this process would
be materially impeded.
4.32 True and Complete Information. No schedule, statement, list,
certificate, or other information furnished or to be furnished by Grand in
connection with this Plan of Merger, including the Grand Disclosure Statement,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements contained
therein, in light of the circumstances in which they are made, not misleading.
ARTICLE V
CERTAIN COVENANTS
5.1 Disclosure Statement. The Grand Disclosure Statement and the Macatawa
Disclosure Statement (collectively the "Disclosure Statements" or individually a
"Disclosure Statement") shall contain appropriate references and cross
references with respect to each of the disclosures, and appropriate identifying
markings with respect to each of the documents, that pertain to one or more
sections or articles of this Plan of Merger. Grand and Macatawa have each
prepared and delivered a copy of its Disclosure Statement to the other party.
Not less than 5 days prior to the Closing, each party shall deliver to the other
an update to its Disclosure Statement describing any material changes and
containing any new or amended documents, as specified below, which are not
contained in its Disclosure Statement as initially delivered. Such update shall
not cure any breach of a representation or warranty occurring on the date of
this Plan of Merger. Each of Grand's and Macatawa's Disclosure Statement and its
respective update shall be certified on its behalf by appropriate executive
officers that such Disclosure Statement contains no untrue statement of a
material fact, or fails to omit to state a material fact necessary to make the
statements contained therein, in light of the circumstances in which they are
made, not misleading.
5.2 Changes Affecting Representations. While this Plan of Merger is in
effect, if either Macatawa or Grand becomes aware of any facts or of the
occurrence of impending occurrence of any event that (a) would cause one or more
of the representations and warranties it has given in this Plan of Merger,
subject to the exceptions contained in the Macatawa Disclosure Statement or the
Grand Disclosure Statement, respectively, to become untrue or incomplete in any
material respect; or (b) would have caused one or more of such representations
and warranties to be untrue or incomplete in any material respect had such facts
been known or had such event occurred prior to the date of this Plan of Merger,
then such party shall immediately give detailed written notice of such discovery
or change, including a detailed description of the underlying facts or events,
together with all pertinent documents, to the other party.
5.3 Conduct of Business Pending the Effective Time of the Merger. From the
date of the execution of this Plan of Merger until the Effective Time of the
Merger, Grand agrees that, except as consented to in writing by Macatawa or as
otherwise provided in this Plan of Merger, it shall, and it shall cause all of
its subsidiaries to:
A-22
5.3.1 Ordinary Course. Conduct their business and manage their
property only in the usual, regular, and ordinary course and not otherwise,
in substantially the same manner as prior to the date of the execution of
this Plan of Merger, and not make any substantial change to their methods
of management or operation in respect of such business or property.
5.3.2 No Inconsistent Actions. Take no action which would be
inconsistent with or contrary to the representations, warranties, and
covenants made by Grand in this Plan of Merger, and take no action which
would cause Grand's representations and warranties to become untrue or
incomplete except as and to the extent required by applicable laws and
regulations or regulatory agencies having jurisdiction.
5.3.3 Compliance. Comply in all material respects with all laws,
regulations, agreements, court orders, and administrative orders applicable
to the conduct of their business unless the application of such laws,
regulations, or orders is being contested in good faith and the other party
has been notified of such contest.
5.3.4 No Amendments. Make no change in their Articles of Incorporation
or their Bylaws, except as effected by this Plan of Merger and the Merger.
5.3.5 Books and Records. Maintain their books, accounts, and records
in the usual and regular manner, and in material compliance with all
applicable laws and accounting standards.
5.3.6 No Change in Stock. Make no change in the number of shares of
their capital stock issued and outstanding other than upon exercise of
Grand Stock Options; grant no warrant, option, or commitment relating to
their capital stock; enter into no agreement relating to their capital
stock; and issue no securities convertible into their capital stock.
5.3.7 Maintenance. Use all reasonable efforts to maintain their
property and assets in their present state of repair, order and condition,
reasonable wear and tear and damage by fire or other casualty excepted.
5.3.8 Preservation of Goodwill. Use all reasonable efforts to preserve
their business organization intact, to keep available the services of their
present officers and employees, and to preserve the goodwill of their
customers and others having business relations with it.
5.3.9 Insurance Policies. Use all reasonable efforts to maintain and
keep in full force and effect insurance coverage, so long as such insurance
is reasonably available, on their assets, properties, premises, operations,
and personnel in such amounts, against such risks and losses, and with such
self-insurance requirements as are presently in force.
5.3.10 Charge-Offs. Charge off loans and maintain their reserve for
loan losses, in each case in a manner in conformity with the prior
practices of Grand and its subsidiaries and applicable industry, regulator,
and accounting standards; provided, however, that in addition to the prior
practices of Grand and its subsidiaries, immediately prior to the Effective
Time of the Merger, the Bank will charge against its earnings an addition
to its loan loss reserve in an amount necessary to bring the Bank's loan
loss reserve up to a level comparable with the loan loss reserve level of
1.42% maintained by Macatawa at its subsidiary bank; and provided further
that such action by the Bank to increase its loan loss reserve to a level
of at least 1.42% irrespective of the Bank's prior practices, shall not
result in any breach of any representation, warranty or covenant in this
Plan of Merger.
5.3.11 Policies and Procedures. Make no material change in any
policies and procedures applicable to the conduct of their business,
including without limitation any loan and underwriting policies, loan loss
and charge-off policies, investment policies, and employment policies,
except as and to the extent required by law or regulatory agencies having
jurisdiction.
5.3.12 New Directors or Officers. Except to reelect persons who are
then incumbent directors and officers at annual meetings, not:
(a) Increase the number of directors or fill any vacancy on the
boards of directors; or
(b) Elect or appoint any person to an executive office without
first consulting Macatawa.
A-23
5.3.13 Compensation and Benefits.
(a) Not increase, or agree to increase, the salary or other
compensation payable to, or fringe benefits of, or pay or agree to pay
any bonus to, any director or officer, or any other class or group of
employees as a class or group, except for increases, agreements or
payments which are reasonable in amount and consistent with the prior
year, annual salary increases as described in the Grand Disclosure
Statement and the payment of bonuses that have previously been
approved by the Board of Directors of Grand as described in the Grand
Disclosure Statement; and
(b) Not introduce, change, or agree to introduce or change, any
pension, profit sharing, or employee benefit plan, fringe benefit
program, or other plan or program of any kind for the benefit of their
employees unless required by law or this Plan of Merger, or necessary
or advisable, in the opinion of counsel, to maintain any tax qualified
status, except as provided in Section 6.8 (Employee Benefit Plans).
5.3.14 New Employment Agreements. Not enter into any employment
agreement which is not terminable by Grand or its subsidiaries without cost
or penalty upon notice of 30 days or less, except any such agreement which
may be approved by Macatawa in writing.
5.3.15 Borrowing. Not borrow money except in the ordinary course of
business.
5.3.16 Mortgaging Assets. Not sell, mortgage, pledge, encumber, or
otherwise dispose of, or agree to sell, mortgage, pledge, encumber, or
otherwise dispose of, any of their property or assets, except in the
ordinary course of business and except for property or assets, or any group
of related properties or assets, that individually has a fair market value
of less than $25,000, or that collectively have an aggregate fair market
value of less than $75,000.
5.3.17 Notice of Actions. Notify the other party of the threat or
commencement of any material action, suit, proceeding, claim, arbitration,
or investigation against or relating to: (i) Grand, the Bank or any other
subsidiary of Grand; (ii) Grand's, the Bank's or any other subsidiary of
Grand's directors, officers, or employees in their capacities as such;
(iii) Grand's, the Bank's or any other subsidiary of Grand's assets,
liabilities, businesses, or operations; or (iv) the Merger or this Plan of
Merger.
5.3.18 New Service Arrangements. Not enter into, or commit to enter
into, any agreement for trust, consulting, professional, data processing,
or other services to Grand or its subsidiaries which is not terminable by
Grand or its subsidiaries without penalty upon notice of 30 days or less,
except for renewal of contracts for data processing and other services
reasonably believed to be necessary for the conduct of business in the
ordinary course and contracts under which the aggregate required payments
do not exceed $25,000, in each case only after consultation with Macatawa.
5.3.19 Capital Improvements. Not open, enlarge, or materially remodel
any bank or other facility, and not lease, purchase, or otherwise acquire
any real property for use as a branch bank or office, or apply for
regulatory approval of any new branch bank, excepting pursuant to prior
commitments made by Grand or its subsidiaries that are disclosed in the
Grand Disclosure Statement.
5.4 Accrual of Transaction Expenses. Grand and its subsidiaries shall
immediately prior to the Effective Time of the Merger accrue and charge against
its earnings all transaction expenses which Grand has incurred or will incur as
a result of the transactions contemplated by this Plan of Merger (including,
without limitation, any retention or change of control payments approved by
Macatawa and its legal, accounting, actuarial, tax services, and investment
banker's fees). Such accrual and charge shall not constitute a result in a
breach of any representation, warranty or covenant in this Plan of Merger.
5.5 Termination of Phantom Stock Plan. Prior to the Effective Time of the
Merger, Grand shall terminate the Grand Bank Financial Phantom Stock Plan (the
"Phantom Plan") and pay out all benefits earned under that plan, whether or not
then vested, according to the terms of that plan. All expenses related to or
caused by the termination of the Phantom Plan, will be accrued and charged
against Grand's earnings prior to the Effective Time of the Merger. Such accrual
and charge shall not constitute a result in a breach of any representation,
warranty or covenant in this Plan of Merger.
5.6 Regular Dividends. Grand shall not declare, set aside, pay or make any
dividend or other distribution or payment (whether in cash, stock or property)
with respect to, or purchase or redeem, any shares of Grand Common Stock other
than regular quarterly cash dividends on Grand Common Stock in an amount not to
exceed $.50 per share per quarter, in each case payable on the regular
historical payment dates and in a manner consistent with Grand's past dividend
practice. Macatawa
A-24
and Grand agree that they will cooperate to assure that, during any calendar
quarter, there shall not be either a duplication or an omission of payment of
dividends to the holders of Grand Common Stock.
5.7 Affiliates. The Grand Disclosure Statement and the update to the Grand
Disclosure Statement shall identify every person who may, to Grand's reasonable
knowledge, be deemed to be an "affiliate" of Grand for purposes of Rule 145
under the Securities Act of 1933, as amended (the "Securities Act"). Grand shall
cause its counsel to deliver to each person who is identified as an affiliate,
on or prior to the Effective Time of the Merger, advice with respect to such
person's obligations under the Securities Act and the regulations issued
thereunder with respect to disposition of securities of Macatawa. Further, Grand
shall use all reasonable efforts to cause each person who is identified as an
affiliate to deliver to Macatawa on or prior to the Effective Time of the Merger
a written agreement, reasonably satisfactory to Macatawa, that such person shall
not offer to sell or otherwise dispose of any shares of Macatawa Common Stock
beneficially owned by or issued to such person pursuant to the Merger in
violation of the Securities Act or the regulations thereunder.
5.8 Approval of Plan of Merger by Macatawa Shareholders. Macatawa, acting
through its Board of Directors, shall, in accordance with the Michigan Act and
its Articles of Incorporation and Bylaws, promptly and duly call, give notice
of, convene, and hold as soon as practicable following the date upon which the
Registration Statement becomes effective, a shareholders meeting for the purpose
of adopting this Plan of Merger and the issuance of the shares of Macatawa
Common Stock pursuant to the Merger (the "Macatawa Shareholders' Meeting"). At
such meeting, the Board of Directors of Macatawa shall unanimously recommend
that its shareholders vote for approval of this Plan of Merger and the issuance
of the shares of Macatawa Common Stock pursuant to the Merger and use all
reasonable efforts to solicit from its shareholders proxies to vote on the
proposal to approve this Plan of Merger and the issuance of such shares and to
secure a quorum at such meeting.
5.9 Approval of Plan of Merger by Grand Shareholders. Grand, acting through
its Board of Directors, or a duly authorized committee shall, in accordance with
the Michigan Act and its Articles of Incorporation and Bylaws, promptly and duly
call, give notice of, convene, and hold as soon as practicable following the
date upon which the Registration Statement becomes effective, a shareholders
meeting for the purpose of adopting this Plan of Merger (the "Grand
Shareholders' Meeting").
5.9.1 Board Recommendation. Except while Grand has received in writing
a Superior Proposal (as defined in Section 5.9.4 (Superior Proposal)),
which proposal is still pending, at the Grand Shareholders' Meeting and in
any proxy materials used in connection with the Grand Shareholders'
Meeting, the Board of Directors of Grand shall recommend that its
shareholders vote for approval of this Plan of Merger.
5.9.2 Solicitation of Proxies. Except after the occurrence of a
Fiduciary Event and while such event continues:
(a) Grand shall use all reasonable efforts to solicit from its
shareholders proxies to vote on the proposal to approve this Plan of
Merger and to secure a quorum at the Grand Shareholders' Meeting.
(b) Except while Grand has received in writing a Superior
Proposal that is still pending, Grand shall use all reasonable efforts
to secure the vote of shareholders required by the Michigan Act and
Grand's Articles of Incorporation and Bylaws to approve this Plan of
Merger.
5.9.3 Fiduciary Event. A "Fiduciary Event" shall have occurred when
the Board of Directors of Grand has (a) received in writing a Superior
Proposal (as defined in Section 5.9.4 (Superior Proposal)) that is then
pending, (b) determined in good faith (having considered the advice of
legal counsel) that its fiduciary duties to Grand's shareholders under
applicable law would require the Board of Directors to so withdraw, modify,
or change its recommendation, and (c) determined to accept and recommend
the Superior Proposal to the shareholders of Grand.
5.9.4 Superior Proposal. A "Superior Proposal" means any bona fide
unsolicited Acquisition Proposal (as defined in Section 5.10.1 (No
Solicitation)) made by a third party on terms that the Board of Directors
of Grand determines in its good faith judgment, (having considered the
written advice of Austin Associates or another financial advisor of
recognized reputation) to be materially more favorable to Grand's
shareholders than this Plan of Merger from a financial point of view.
5.9.5 Notice. Grand shall notify Macatawa at least ten business days
prior to taking any action with respect to such Superior Proposal or taking
any action with respect to the withdrawal, modification, or change of its
recommendation to its shareholders for adoption of this Plan of Merger.
A-25
5.10 Competing Proposals. Except as provided below, neither Grand nor
its subsidiaries, nor any of their respective directors, officers, employees,
investment bankers, representatives, or agents, shall take any action
inconsistent with the intent to consummate the Merger upon the terms and
conditions of this Plan of Merger. Without limiting the foregoing:
5.10.1 No Solicitation. Neither Grand nor its subsidiaries, nor any of
their respective directors, officers, employees, attorneys, investment
bankers, representatives, or agents, shall, directly or indirectly, (i)
invite, initiate, solicit, or encourage an Acquisition Proposal or (ii)
participate in any discussions or negotiations regarding an Acquisition
Proposal unless a Fiduciary Event has occurred and continues or such
discussions or negotiations are likely to lead to a Superior Proposal. A
proposal, offer, or other expression of interest concerning any tender
offer, exchange offer, merger, consolidation, sale of shares, sale of
assets, or assumption of liabilities not in the ordinary course, or other
business combination involving Grand or its subsidiaries, or substantially
all of their respective assets or properties, other than the Merger shall
be referred to as an "Acquisition Proposal".
5.10.2 Communication of Other Proposals. Grand shall cause written
notice to be delivered to Macatawa promptly upon receipt of any Acquisition
Proposal. Such notice shall contain the material terms and conditions of
the Acquisition Proposal to which such notice relates. Within ten business
days after Grand's receipt of an Acquisition Proposal, Grand shall give
notice to Macatawa whether or not a Fiduciary Event has occurred or a
Superior Proposal is reasonably likely to result, and if not, Grand's
notice shall include a copy of Grand's unequivocal rejection of the
Acquisition Proposal in the form actually delivered to the person from whom
the Acquisition Proposal was received. Thereafter, Grand shall promptly
notify Macatawa of any material changes in the terms, conditions, and
status of such Acquisition Proposal.
5.10.3 Furnishing Information. Unless a Fiduciary Event has occurred
and continues or there is reasonable likelihood that a Superior Proposal
would result, neither Grand nor its subsidiaries, nor any of their
respective directors, officers, employees, attorneys, investment bankers,
representatives, or agents, shall furnish any nonpublic information
concerning Grand or its subsidiaries to any person who is not affiliated or
under contract with Grand or Macatawa, except as required by applicable law
or regulations. Prior to furnishing such information to any person who is
not affiliated or under contract with Grand or Macatawa, Grand shall
receive from such person an executed confidentiality agreement with terms
no less favorable to Grand than those contained in its confidentiality
agreement with Macatawa, and Grand shall then provide only such information
as has been furnished previously to Macatawa.
5.10.4 Payment after Certain Events. If, after this Plan of Merger is
executed, the Board of Directors of Grand or the shareholders of Grand
accept or approve any Acquisition Proposal or Superior Proposal, which
competes or is otherwise inconsistent with the transactions contemplated by
this Plan of Merger or terminates this Plan of Merger due to a Fiduciary
Event, then Grand shall promptly pay to Macatawa a fee of $2,000,000.
5.10.5 Corporate Liability for Individual's Breach. For the purposes
of this Section 5.10 (Competing Proposals), any breach of this Section 5.10
(Competing Proposals) or of any subsection hereof by an executive officer,
director, attorney or financial advisor of Grand, in his or her individual
capacity, shall be deemed to be a breach by Grand. Notwithstanding the
above, no provision of this Plan of Merger shall be construed to require
either party or their directors to take any action that would violate
applicable law (whether statutory or common law), rule, or regulation.
5.11 Indemnification. Macatawa shall honor any and all rights to
indemnification and advancement of expenses now existing in favor of the present
and former directors and officers of Grand, the Bank, or the Mortgage Company
under their Articles of Incorporation or Bylaws included in the Grand Disclosure
Statement, which shall survive the Merger as enforceable contractual rights, and
shall, as contractual rights, continue with respect to acts or omissions
occurring before the Effective Time of the Merger with the same force and effect
as prior to the Effective Time of the Merger. This Section 5.11
(Indemnification) is for the benefit of persons who are or have been directors
or officers of Grand and shall be enforceable by and only by such persons and
their estates and personal representatives.
5.12 Insurance. Macatawa shall use all reasonable efforts to cause the
persons currently serving or having served as officers and directors of Grand
immediately prior to the Effective Time of the Merger to be covered for a period
of at least six years from the Effective Time of the Merger by the directors'
and officers' liability insurance policy ("D&O Policy") maintained by Grand
(provided that Macatawa may substitute for such Grand D&O Policy a substitute
D&O Policy of at least the same coverage and amounts as Macatawa provides to its
own officers and directors) with respect to acts or omissions occurring prior to
the Effective Time of the Merger that were committed by such officers and
directors in their capacity as such. In no event shall Macatawa be required to
spend, directly or indirectly, more than $96,000 in the aggregate to either
A-26
maintain or provide insurance coverage pursuant to this Plan of Merger. If
Macatawa does not advise Grand in writing prior to the Grand Shareholders'
Meeting that it has procured such coverage, Grand shall be permitted (after
giving Macatawa three business days prior written notice and an additional two
business day period to purchase such coverage), in lieu of receiving the
foregoing insurance coverage, to procure tail coverage for past acts and
omissions for a single premium amount not in excess of $96,000. This Section
5.12 (Insurance) is for the benefit of persons who are or have been directors or
officers of Grand and shall be enforceable by and only by such persons and their
estates and personal representatives.
5.13 Name. After the Effective Time of the Merger, Macatawa agrees that it
shall retain and use the "Grand" name and charter for a period of at least two
(2) years from the Effective Time of the Merger, unless the Board of Directors
of the Bank agrees otherwise.
5.14 Charitable Giving. Notwithstanding Section 5.3 (Conduct of Business
Pending the Effective Time of the Merger) Grand and Bank shall be permitted to
make charitable contributions, authorized by their respective boards of
directors, with respect to Grand's 2001 fiscal year (some of which will be
payable in 2002) in an amount equal to 10% of pretax profits for 2001, provided
such charitable contributions are properly accrued as an expense for the year
ended on or before December 31, 2001. Macatawa agrees to work with the Board of
Directors of the Bank to develop an appropriate community-giving plan for the
Bank to be implemented after the Effective Time of the Merger.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Registration Statement. As soon as is reasonably practical, Macatawa
agrees to prepare and file with the SEC under the Securities Act the
Registration Statement and the related Prospectus and Proxy Statement included
as a part thereof covering the issuance by Macatawa of the shares of Macatawa
Common Stock as contemplated by this Plan of Merger, together with such
amendments as may reasonably be required for the Registration Statement to
become effective. Macatawa agrees to provide Grand with the opportunity to
review and comment upon the Registration Statement, each amendment to the
Registration Statement, and each form of the Prospectus and Proxy Statement
before filing. Macatawa agrees to provide Grand with copies of all
correspondence received from the SEC with respect to the Registration Statement
and its amendments and with all responsive correspondence to the SEC. Macatawa
agrees to notify Grand of any stop orders or threatened stop orders with respect
to the Registration Statement. Grand agrees to provide all necessary information
pertaining to Grand and its subsidiaries promptly upon request, and to use all
reasonable efforts to obtain the cooperation of Grand's independent accountants
and attorneys, in connection with the preparation of the Registration Statement.
6.2 Other Filings. Macatawa agrees to prepare and file, as soon as is
reasonably practical, with the Federal Reserve Board, the State of Michigan, and
any other appropriate regulatory agencies all documents in connection with the
transactions contemplated by this Plan of Merger. Macatawa agrees to provide
Grand with the opportunity to review and comment upon such documents before
filing, to make such amendment and file such supplements thereto as Macatawa may
reasonably request, and to provide Grand with copies of all correspondence
received from these agencies and all responsive correspondence sent to these
agencies.
6.3 Press Releases. Grand and Macatawa shall cooperate with each other in
the development and distribution of all news releases and other public
information disclosures with respect to this Plan of Merger, except as may be
otherwise required by law. Neither Grand nor Macatawa shall issue any news
releases with respect to this Plan of Merger or the Merger unless such news
releases have been mutually agreed upon by the parties, except as required by
law.
6.4 Miscellaneous Agreements and Consents. Subject to the terms and
conditions of this Plan of Merger, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper, or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Plan of Merger. Macatawa and Grand will use reasonable
efforts to obtain consents of all third parties and governmental bodies
necessary or desirable for the consummation of the Merger.
6.5 Financial Information. Subject to Section 6.6 (Investigation), after
the date of the execution of this Plan of Merger until the Effective Time of the
Merger, each party shall promptly deliver to the other party copies of:
(a) Each monthly internal financial report (if any) prepared with
respect to Grand or Macatawa, as applicable, and its subsidiaries on a
consolidated or unconsolidated basis; and
(b) Each financial report or statement submitted to regulatory
authorities for Grand or Macatawa, as applicable, and/or any
subsidiary.
A-27
6.6 Investigation.
6.6.1 Access to Information by Macatawa. For the purpose of permitting
an examination of Grand by such of Macatawa's officers, attorneys,
accountants, and representatives for the purposes of Macatawa's evaluation
of the Merger, Grand shall:
(a) Permit, and shall cause the Bank and all other subsidiaries
of Grand to permit, full access to their respective properties, books,
and records at reasonable times;
(b) Use reasonable efforts to cause its and the Bank's directors,
officers, employees, accountants, and attorneys and those of all
subsidiaries of Grand to cooperate fully, for the purpose of
permitting a complete and detailed examination of such matters by
Macatawa's officers, attorneys, accountants, and representatives;
(c) Furnish to Macatawa, upon request, any information reasonably
requested respecting Grand's and any of its subsidiaries' properties,
assets, business, and affairs; and
(d) Permit representatives of Macatawa to attend meetings of the
Board of Directors and committees of the boards of directors of Grand
and its subsidiaries; provided, however, that representatives of
Macatawa will excuse themselves during discussion of this Plan of
Merger and the transactions contemplated hereby and during discussion
of matters that the Board of Directors of Grand reasonably believes to
be of competitive significance.
6.6.2 Access to Information by Grand. For the purposes of permitting
an examination of Macatawa by such of Grand's officers, attorneys,
accountants, and representatives for the purposes of Grand's evaluation of
the Merger, Macatawa shall permit access to such of Macatawa's and its
subsidiaries books and records and at such times as reasonably and mutually
agreed between the President of each of Macatawa and Grand.
6.6.3 Consent to Disclose. Macatawa and Grand each acknowledge that
certain information may not be disclosed by Macatawa or Grand or their
subsidiaries without the prior written consent of persons not affiliated
with Macatawa or Grand. If such information is requested by Macatawa or
Grand, then the other party shall use, or cause its subsidiaries to use,
reasonable efforts to obtain such prior consent and shall not be required
to disclose such information unless and until such prior consent has been
obtained.
6.6.4 Confidentiality. Except as provided in Section 6.6.6 (Other
Information), while this Plan of Merger is in effect and at all times
thereafter, Macatawa and Grand each agree to treat as strictly confidential
and agree not to divulge to any other person, natural or corporate (other
than employees of, and attorneys, accountants, and financial advisers for,
such party who are reasonably believed to have a need for such information
in connection with the Merger), and not to make any business use not
related to the Merger of, any financial statements, schedules, contracts,
agreements, instruments, papers, documents, or other information relating
to the other party and the other party's subsidiary(ies) which it may come
to know as a direct result of a disclosure by the other party or the other
party's subsidiary(ies), or which may come into its possession directly as
a result of and during the course of such investigation. Macatawa and Grand
recognize and understand the close proximity of their respective markets
and agree that the fact that a party to this Plan of Merger is or begins
doing business with a customer of the other party will not be presumed to
be a breach of the provisions of this Section 6.6.4 (Confidentiality).
6.6.5 Return of Materials. Upon the termination of this Plan of
Merger, Macatawa and Grand each agree to promptly return to the other party
or to destroy all written materials furnished to it by the other party and
the other party's subsidiary(ies), and all notes and summaries of such
written materials, in connection with such investigation, including any and
all copies of any of the foregoing. Macatawa and Grand each agree to
preserve intact all such materials which are returned to them and to make
such materials reasonably available upon request or subpoena for a period
of not less than five years from the termination of this Plan of Merger or
such longer or shorter period of time as they may mutually agree.
6.6.6 Other Information. The provisions of this Section 6.6
(Investigation) shall not preclude Macatawa or Grand, or their respective
subsidiaries, from using or disclosing information which is: (i) readily
ascertainable from public information or trade sources; (ii) known by it
before the commencement of discussions between the parties or subsequently
developed by it or its subsidiaries independent of any investigation under
this Plan of Merger or received
A-28
from a third party not under any obligation to Grand or Macatawa, or their
respective subsidiaries, to keep such information confidential; or (iii)
reasonably required to be included in any filing or application required by
any governmental or regulatory agency, including without limitation
Macatawa's application or applications to the Federal Reserve Board, and
Macatawa's or Grand's annual report and proxy statement. Macatawa shall
permit Grand to review Macatawa's application or applications to the
Federal Reserve Board prior to filing and Grand may reasonably request that
sensitive or competitive information be separately filed as confidential in
accordance with instructions, rules, and regulations issued by such agency.
6.6.7 Insider Trading. Grand and Macatawa shall take responsible steps
to assure that any person who receives nonpublic information concerning
Macatawa or Grand pursuant to this Plan of Merger will not buy or sell, or
advise other persons to buy or sell, Macatawa Common Stock or Grand Common
Stock until such information is disclosed to the public.
6.7 Environmental Investigation. Macatawa may, at its own option and
expense, engage environmental consultants to conduct a preliminary ("Phase I")
environmental assessment of any parcel of real estate owned and used in the
operation of Grand's or its subsidiaries' businesses and any other real estate
owned. Grand and its subsidiaries shall provide reasonable assistance, including
site access, to such a consultant for purposes of conducting the Phase I
assessments. The fees and expenses of a consultant with respect to the Phase I
assessments shall be paid by Macatawa, subject to the provisions of Section 10.5
(Expenses). If any environmental conditions are found, reasonably suspected, or
would tend to be indicated by the report of the consultant which may be contrary
to the representations and warranties set forth in Section 4.21 (Environmental
Matters), without regard to any exceptions that may be contained in the Grand
Disclosure Statement, then Macatawa shall obtain from one or more mutually
acceptable consultants or contractors, as appropriate, an estimate of the cost
of any further environmental investigation, sampling, analysis, remediation, or
other follow-up work that may be necessary to address those conditions in
accordance with applicable Environmental Laws. Macatawa shall forward copies of
any such estimates to Grand upon receipt.
6.7.1 Mutual Agreement. Upon receipt of the estimate of the costs of
all follow-up work to the Phase I assessments or any subsequent
investigation phases that may be conducted, the parties shall attempt to
agree upon a course of action for further investigation and remediation of
any environmental condition suspected, found to exist, or that would tend
to be indicated by the report of the consultant. All work plans for any
post-Phase I assessment activities, or any removal or remediation actions
that may be performed, shall be mutually satisfactory to Macatawa and
Grand. If the work plans or removal or remediation actions would entail a
material cost to complete, Macatawa and Grand shall discuss a mutually
acceptable modification to this Plan of Merger. Macatawa and Grand shall
cooperate in the review, approval, and implementation of all work plans.
6.7.2 Right to Abandon. If the parties are unable to agree upon a
course of action for further investigation and remediation of an
environmental condition or issue raised by an environmental assessment
and/or a mutually acceptable modification to this Plan of Merger, and the
condition or issue is not one for which it can be determined to a
reasonable degree of certainty that the risk and expense to which Macatawa
and its subsidiaries (after the Merger) would be subject as owner or
operator of the property involved can be quantified and limited to an
amount which would not have a Material Adverse Effect on the business or
financial condition of Grand and its subsidiaries on a consolidated basis ,
then Macatawa may abandon this Plan of Merger pursuant to Section 9.3.3
(Environmental Risk).
6.8 Employee Benefit Plans. The Grand Pension Plan will be frozen as of the
Effective Time of the Merger, so that there shall be no further accrual of
benefits under the Grand Pension Plan after such time. Simultaneously with or in
anticipation of freezing of the Grand Pension Plan, Grand will amend the Grand
Benefit Restoration Plan to provide that the restored benefit under that plan
includes the portion of any accrued benefit under the Grand Pension Plan that is
not vested when benefit accruals are frozen and does not later vest due to
termination of the Grand Pension Plan. Macatawa expressly reserves the right to
terminate the Grand Pension Plan at any time it so chooses after the Effective
Time of the Merger. The Grand 401(k) Plan will be merged into or combined with
the Macatawa Bank 401(k) Plan at such time after the Effective Time of the
Merger and in such manner as determined by Macatawa.
ARTICLE VII
CONDITIONS PRECEDENT TO MACATAWA'S OBLIGATIONS
All obligations of Macatawa under this Plan of Merger are subject to the
fulfillment (or waiver in writing by a duly authorized officer of Macatawa),
prior to or at the Closing, of each of the following conditions:
A-29
7.1 Renewal of Representations and Warranties, Etc.
7.1.1 Representations and Warranties. Grand's representations and
warranties shall then be true in all material respects or, if one or more
representations or warranties shall then be untrue or incomplete, the
cumulative effect of all untrue or incomplete representations and
warranties shall not then be materially adverse relative to the business,
income, financial condition or prospects of Grand and its subsidiaries on a
consolidated basis. For purposes of this Section 7.1.1 (Representations and
Warranties), representations and warranties made with respect to specified
dates or events need only to have been true in all material respects as of
such dates or events. Any representation or warranty which becomes untrue
because of any change intended by this Plan of Merger shall not be
considered to be a breach of this Plan of Merger because of such change.
7.1.2 Compliance with Agreements. Grand and its subsidiaries shall
have performed and complied with all agreements, conditions, and covenants
required by this Plan of Merger to be performed or complied with by Grand
or its subsidiaries prior to or at the Closing in all material respects.
7.1.3 Certificates. Compliance with Sections 7.1.1 (Representations
and Warranties) and 7.1.2 (Compliance with Agreements) shall be evidenced
by one or more certificates signed on behalf of Grand by appropriate
officers of Grand and, with respect to agreements, conditions, and
covenants pertaining to its subsidiaries, by appropriate officers of its
subsidiaries, dated as of the date of the Closing, certifying the foregoing
in such detail as Macatawa may reasonably request, and describing any
exceptions to such compliance in such certificates.
7.2 Opinion of Legal Counsel. Grand shall have delivered to Macatawa an
opinion of its counsel consistent with Appendix A, dated as of the date of the
Closing and reasonably satisfactory to counsel for Macatawa.
7.3 Required Approvals. Macatawa shall have received:
7.3.1 Regulatory. All such approvals, consents, authorizations, and
licenses of all regulatory and other governmental authorities having
jurisdiction as may be required to permit the performance by Grand and
Macatawa of their respective obligations under this Plan of Merger and the
consummation of the Merger.
7.3.2 Shareholder. The requisite approval of the Macatawa shareholders
of this Plan of Merger and the Merger and evidence reasonably satisfactory
to Macatawa of the requisite approval of Grand's shareholders of this Plan
of Merger and the Merger.
7.4 Order, Decree, Etc. Neither Macatawa nor Grand shall be subject to any
order, decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of the Merger.
7.5 Proceedings. There shall not be any action, suit, proceeding, claim,
arbitration, or investigation pending or threatened: (i) against Grand or its
subsidiaries or their respective properties or businesses which may result in
any liability to either of them or its subsidiaries which could have a Material
Adverse Effect on the financial condition, net income, business, or properties
of Grand and its subsidiaries on a consolidated basis; or (ii) which challenges
the Merger or this Plan of Merger.
7.6 Tax Matters. Macatawa shall have received an opinion of Varnum,
Riddering, Schmidt & Howlett LLP, reasonably satisfactory in form and substance,
substantially to the effect that:
7.6.1 Reorganization. The Merger of Grand with and into Macatawa will
constitute a reorganization within the meaning of Section 368(a)(1)(A) of
the Internal Revenue Code, and Macatawa and Grand will each be a "party to
a reorganization" within the meaning of Section 368(b) of the Internal
Revenue Code.
7.6.2 Assets' Tax Basis. The basis of the Grand assets in the hands of
Macatawa immediately after the Merger will be the same as the basis of
those assets in the hands of Grand immediately prior to the Merger.
7.6.3 No Gain or Loss. No gain or loss will be recognized to Macatawa
on the receipt by Macatawa of the assets of Grand in exchange for Macatawa
Common Stock and the assumption by Macatawa of the liabilities of Grand.
7.6.4 Holding Period. The holding period of the assets of Grand in the
hands of Macatawa will include the holding period during which Grand held
such assets.
A-30
The tax opinion shall be supported by one or more fact certificates or
affidavits in such form and content as may be reasonably requested by
Macatawa's counsel from Grand and its subsidiaries and Macatawa and its
subsidiaries.
7.7 Registration Statement. The Registration Statement shall have been
declared effective by the SEC and shall not be subject to a stop order or any
threatened stop order.
7.8 Certificate as to Outstanding Shares. Macatawa shall have received one
or more certificates signed by the secretary of Grand on behalf of Grand,
certifying the total number of shares of capital stock of Grand issued and
outstanding as of the close of business on the day immediately preceding the
Closing, all in such form as Macatawa may reasonably request.
7.9 Change of Control Waivers. Macatawa shall have received evidence of the
waiver of any material rights and the waiver of the loss of any material rights
which may be triggered by the change of control of Grand upon consummation of
the Merger under any agreements, contracts, mortgages, deeds of trust, leases,
commitments, indentures, notes, or other instruments, all in form and substance
reasonably satisfactory to Macatawa.
7.10 Employment Agreements. The Amended and Restated Employment Agreements
described in the Grand Disclosure Statement shall have been executed and shall
not have been terminated, cancelled or amended.
7.11 Grand Stock Options. There shall not have been any issuances of Grand
Stock Options since the date of this Plan of Merger.
7.12 Amendment of Grand Stock Options. Grand shall have amended its stock
option plans or caused the written amendment of each outstanding Grand Stock
Option grant prior to the Closing if and to the extent necessary to permit the
conversion of the outstanding Grand Stock Options as contemplated by Section 2.2
(Conversion of Grand Stock Options).
7.13 Fairness Opinion. Macatawa shall have received an opinion reasonably
acceptable to Macatawa, dated as of the date of this Plan of Merger and renewed
as of a date approximately the date of the Prospectus and Proxy Statement, that
the terms of the Merger are fair to Macatawa's shareholders from a financial
standpoint as of that date and such opinion shall not have been subsequently
withdrawn; provided, that Macatawa shall have used all reasonable efforts to
obtain such a fairness opinion.
ARTICLE VIII
CONDITIONS PRECEDENT TO GRAND'S OBLIGATIONS
All obligations of Grand under this Plan of Merger are subject to the
fulfillment (or waiver in writing by a duly authorized officer), prior to or at
the Closing, of each of the following conditions:
8.1 Renewal of Representations and Warranties, Etc.
8.1.1 Representations and Warranties. Macatawa's representations and
warranties shall then be true in all material respects or, if one or more
representations or warranties shall then be untrue, the cumulative effect
of all untrue representations and warranties shall not then be materially
adverse relative to the business, income, or financial condition of
Macatawa and its subsidiaries on a consolidated basis. For purposes of this
Section 8.1.1 (Representations and Warranties), representations and
warranties made with respect to specified dates or events need only to have
been true in all material respects as of such dates or events. Any
representation or warranty which becomes untrue because of any change
intended by this Plan of Merger shall not be considered to be a breach of
this Plan of Merger because of such change.
8.1.2 Compliance with Agreements. Macatawa and its subsidiaries shall
have performed and complied with all agreements, conditions, and covenants
required by this Plan of Merger to be performed or complied with by
Macatawa and its subsidiaries prior to or at the Closing in all material
respects.
8.1.3 Certificates. Compliance with Sections 8.1.1 (Representations
and Warranties) and 8.1.2 (Compliance with Agreements) shall be evidenced
by one or more certificates signed on behalf of Macatawa by the appropriate
officers of Macatawa and, with respect to agreements, conditions, and
covenants pertaining to its subsidiaries, by appropriate officers of its
subsidiaries, dated as of the date of the Closing, certifying the foregoing
in such detail as Grand may reasonably request, and describing any
exceptions to such compliance in such certificates.
A-31
8.2 Opinions of Legal Counsel. Macatawa shall have delivered to Grand an
opinion of its counsel consistent with Appendix B, dated as of the date of the
Closing and reasonably satisfactory to counsel for Grand.
8.3 Required Approvals. Grand shall have received:
8.3.1 Regulatory. Grand and Macatawa shall have received all such
approvals, consents, authorizations, and licenses of all regulatory and
other governmental authorities having jurisdiction as may be required to
permit the performance by Grand and Macatawa, or their subsidiaries, of
their respective obligations under this Plan of Merger and the consummation
of the Merger.
8.3.2 Shareholder. The Grand shareholders shall have approved this
Plan of Merger and Grand shall have received evidence reasonably
satisfactory to Grand of the requisite approval of the Macatawa
shareholders of this Plan of Merger and the Merger.
8.4 Order, Decree, Etc. Neither Macatawa nor Grand shall be subject to any
order, decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of the Merger.
8.5 Proceedings. There shall not be any action, suit, proceeding, claim,
arbitration, or investigation pending or threatened: (i) against or relating to
either Grand or Macatawa or their respective subsidiaries or their respective
properties or businesses which may result in any liability to either of them or
its subsidiaries which could have a Material Adverse Effect on the financial
condition, net income, business, properties, operations, or prospects of either
of them and its subsidiaries on a consolidated basis; or (ii) which challenges
the Merger or this Plan of Merger.
8.6 Tax Matters. Grand shall have received an opinion from Varnum,
Riddering Schmidt & Howlett LLP, reasonably satisfactory in form and substance,
substantially to the effect that:
8.6.1 Reorganization. The Merger of Grand with and into Macatawa will
constitute a reorganization within the meaning of Section 368(a)(1)(A) of
the Internal Revenue Code, and Macatawa and Grand will each be a "party to
a reorganization" within the meaning of Section 368(b) of the Internal
Revenue Code.
8.6.2 No Gain or Loss. No gain or loss will be recognized by the
shareholders of Grand who receive shares of Macatawa Common Stock in
exchange for all of their shares of Grand Common Stock, except to the
extent of any cash received in lieu of a fractional share of Macatawa
Common Stock.
8.6.3 Stock Tax Basis. The basis of the Macatawa Common Stock to be
received by shareholders of Grand will, in each instance, be the same as
the basis of the respective shares of Grand Common Stock surrendered in
exchange therefor.
8.6.4 Holding Period. The holding period of the Macatawa Common Stock
received by shareholders of Grand will, in each instance, include the
period during which the Grand Common Stock surrendered in exchange therefor
was held, provided that the Grand Common Stock was, in each instance, held
as a capital asset in the hands of the shareholder of Grand at the
Effective Time of the Merger.
8.7 Registration Statement. The Registration Statement shall have been
declared effective by the SEC and shall not be subject to a stop order or any
threatened stop order.
8.8 Listing of Shares. The shares of Macatawa Common Stock that shall be
issued to the shareholders of Grand upon consummation of the Merger shall have
been authorized for listing on The NASDAQ Stock Market upon official notice of
issuance.
8.9 Certificate as to Outstanding Shares. Grand shall have received one or
more certificates signed by Macatawa's transfer agent and the secretary of
Macatawa on behalf of Macatawa, certifying the total number of shares of capital
stock of Macatawa issued and outstanding as of the close of business on the day
immediately preceding the Closing, all in such form as Grand may reasonably
request.
8.10 Fairness Opinion. Grand shall have received an opinion acceptable to
Grand, dated as of the date of this Plan of Merger and renewed as of a date
approximately the date of the Prospectus and Proxy Statement, that the financial
terms of the Merger are fair to Grand's shareholders from a financial standpoint
as of that date and such opinion shall not have been subsequently withdrawn;
provided, that Grand shall have used all reasonable efforts to obtain such a
fairness opinion.
A-32
ARTICLE IX
ABANDONMENT OF MERGER
This Plan of Merger may be terminated and the Merger abandoned at any time
prior to the Effective Time of the Merger (notwithstanding that approval of this
Plan of Merger by the shareholders of Grand and Macatawa may have previously
been obtained) as follows:
9.1 Mutual Abandonment. By mutual consent of the boards of directors, or
duly authorized committees thereof, of Macatawa and Grand.
9.2 Upset Date. By either Macatawa or Grand if the Merger shall not have
been consummated on or before June 30, 2002 and such failure to consummate the
Merger is not caused by a breach of this Plan of Merger by the terminating
party.
9.3 Macatawa's Rights to Terminate. By Macatawa under any of the following
circumstances:
9.3.1 Failure to Satisfy Closing Conditions. If any of the conditions
specified in Article VII have not been met or waived by Macatawa, at such
time as such condition can no longer be satisfied notwithstanding Grand's
reasonable efforts to comply with those covenants and satisfy those
conditions by Grand in this Plan of Merger.
9.3.2 Shareholder Approval. This Plan of Merger is not approved by the
requisite vote of the shareholders of Grand or Macatawa at a meeting duly
called and held for that purpose at which a quorum is present and voted in
person or by proxy and such meeting has been finally adjourned.
9.3.3 Environmental Risks. If Macatawa has given Grand notice of
termination based on an unacceptable Environmental Risk, as provided in
Section 6.7.2 (Right to Abandon).
9.3.4 Occurrence of a Fiduciary Event. At any time after there has
occurred a Fiduciary Event.
9.3.5 Material Adverse Event. If there shall have occurred one or more
events that shall have caused or are reasonably likely to cause a Material
Adverse Effect on Grand.
9.3.6 Community Reinvestment Act Rating. If, prior to the Closing, the
Bank is examined for compliance with the Community Reinvestment Act and
receives a rating lower than "Satisfactory" or, if the report of
examination is still pending on the date of the Closing, Macatawa is unable
to satisfy itself that the Bank will receive a rating of Satisfactory or
better.
9.4 Grand's Rights to Terminate. By the Board of Directors, or a duly
authorized committee thereof, of Grand under any of the following circumstances:
9.4.1 Failure to Satisfy Closing Conditions. If any of the conditions
specified in Article VIII have not been met or waived by Grand at such time as
such condition can no longer be satisfied notwithstanding Macatawa's reasonable
efforts to comply with those covenants given by Macatawa in this Plan of Merger.
9.4.2 Shareholder Approval. This Plan of Merger is not approved by the
requisite vote of the shareholders of Grand or Macatawa at a meeting duly called
and held for that purpose at which a quorum is present and voted in person or by
proxy and such meeting has been finally adjourned.
9.4.3 Community Reinvestment Act Rating. If, prior to the Closing, any of
the banking subsidiaries of Macatawa is examined for compliance with the
Community Reinvestment Act and receives a rating lower than "Satisfactory" or,
if the report of examination is still pending on the date of the Closing, Grand
is unable to satisfy itself that such bank or banks will receive a rating of
Satisfactory or better.
9.4.4 Material Adverse Event. If there shall have occurred one or more
events that shall have caused or are reasonably likely to cause a Material
Adverse Effect on Macatawa.
9.5 Effect of Termination. In the event of termination of this Plan of
Merger by either Grand or Macatawa as provided in this Article IV (Abandonment
of Merger), this Plan of Merger shall forthwith have no effect, and none of
Grand,
A-33
Macatawa, any of their respective subsidiaries, or any of their respective
directors, officers, or employees shall have any liability of any nature
whatsoever under this Plan of Merger, or in connection with the transactions
contemplated by this Plan of Merger, except that (a) Sections 5.10.4 (Payment
after Certain Events), 6.6.4 (Confidentiality), 6.6.5 (Return of Materials),
10.3 (Nonsurvival of Representations, Warranties, and Agreements), and 10.5
(Expenses) shall survive any termination of this Plan of Merger, and (b)
notwithstanding anything to the contrary contained in this Plan of Merger,
neither Grand nor Macatawa shall be relieved or released from any of its
liabilities or damages arising out of a knowing or intentional breach of a
representation and warranty or a breach of any other provision of this Plan of
Merger.
ARTICLE X
MISCELLANEOUS
Subject to the terms and conditions of this Plan of Merger, Macatawa and
Grand further agree as follows:
10.1 "Material Adverse Effect" Defined. As used in this Plan of Merger, the
term "Material Adverse Effect" means any change or effect that, individually or
when taken together with all other such changes or effects that have occurred
prior to the date of determination of the occurrence of the Material Adverse
Effect, has had or could have a material negative impact on (a) the business,
assets, financial condition, results of operations, or value of Macatawa and its
subsidiaries, taken as a whole, or Grand and its subsidiaries, taken as a whole,
as the case may be; or (b) the ability of Macatawa or Grand, as the case may be,
to satisfy the applicable closing conditions or consummate the Merger.
Notwithstanding the above, the impact of the following shall not be included in
any determination of a Material Adverse Effect: (a) changes in GAAP, generally
applicable to financial institutions and their holding companies; (b) actions
and omissions of a party (or any of its subsidiaries) taken with the prior
written consent of the other party; (c) changes in economic conditions
(including changes in the level of interest rates) generally affecting financial
institutions; and (d) fees and expenses reasonably related to this transaction
(such as any additional insurance coverages, employment and consulting services,
legal, accounting, and investment banking fees and expenses, and severance and
retention provisions) incurred or paid without violation of the representations,
warranties or covenants contained in this Plan of Merger.
10.2 "Knowledge" Defined. As used in this Plan of Merger, the term
"knowledge" means the actual knowledge of any director or officer (as that term
is defined in Rule 16a-1 of the Exchange Act) of Grand or Macatawa, as the case
may be.
10.3 Nonsurvival of Representations, Warranties, and Agreements. None of
the representations, warranties, covenants, and agreements in this Plan of
Merger or in any other agreement or instrument delivered pursuant to this Plan
of Merger, including any rights arising out of any breach of such
representations, warranties, covenants, and agreements, shall survive the
Effective Time of the Merger, except for those covenants and agreements
contained herein that, by the terms hereof, apply or are to be performed in
whole or in part after the Effective Time of the Merger.
10.4 Amendment. Subject to applicable law, this Plan of Merger may be
amended, modified, or supplemented by, and only by, written agreement of
Macatawa and Grand, executed by the respective officers thereunto duly
authorized, at any time prior to the Effective Time of the Merger.
10.5 Expenses. Except as otherwise provided in this Plan of Merger, Grand
and Macatawa shall each pay its own expenses incident to preparing for, entering
into, and carrying out this Plan of Merger, and incident to the consummation of
the Merger. Each party shall pay the fees and expenses of any investment banker
engaged by that party. The costs of all filing fees pertaining to the
Registration Statement shall be paid by Macatawa. The costs of printing and
mailing the Prospectus and Proxy Statement to their respective shareholders
shall be borne by Macatawa and by Grand respectively.
10.6 Specific Enforcement. The parties each agree that, consistent with the
terms and conditions of this Plan of Merger, in the event of a breach by a party
to this Plan of Merger, money damages will be inadequate and not susceptible of
computation because of the unique nature of Grand, the subsidiaries of Grand,
and the Merger. Therefore, the parties each agree that a federal or state court
of competent jurisdiction shall have authority, subject to the rules of law and
equity, to specifically enforce the provisions of this Plan of Merger by
injunctive order or such other equitable means as may be determined in the
court's discretion.
10.7 Jurisdiction; Jury. The parties acknowledge that jurisdiction and
venue may be permissible in more than one jurisdiction or court district.
Macatawa and Grand each hereby agree not to assert any defense of improper
jurisdiction or venue and each waive their right to a trial by jury.
10.8 Waiver. Any of the terms or conditions of this Plan of Merger may be
waived in writing at any time by action taken by the Board of Directors of a
party, a duly authorized committee thereof, or a duly authorized officer of such
A-34
party. The failure of any party at any time or times to require performance of
any provision of this Plan of Merger shall in no manner affect such party's
right at a later time to enforce the same provision. No waiver by any party of
any condition, or of the breach of any term, covenant, representation, or
warranty contained in this Plan of Merger, whether by conduct or otherwise, in
any one or more instances shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach, or as a waiver of any other
condition or of the breach of any other term, covenant, representation, or
warranty.
10.9 Notices. All notices, requests, demands, and other communications
under this Plan of Merger shall be in writing and shall be deemed to have been
duly given and effective immediately if delivered or sent and received by a fax
transmission (if receipt by the intended recipient is confirmed by telephone and
if hard copy is delivered by overnight delivery service the next day), a hand
delivery, or a nationwide overnight delivery service (all fees prepaid) to the
following addresses:
If to Grand: With a copy to:
Grand Bank Financial Corporation Warner Norcross & Judd LLP
Attention: Charles C. Stoddard, CEO Attention: Gordon R. Lewis
126 Ottawa Avenue, NW, Suite 100 900 Fifth Third Center
P.O. Box 3580 111 Lyon Street, NW
Grand Rapids, Michigan 49503-2867 Grand Rapids, Michigan 49503-2487
Telephone: 616-235-7000 Telephone: 616-752-2000
Fax: 616-235-2160 Fax: 616-222-2752
If to Macatawa: With a copy to:
Macatawa Bank Corporation Varnum, Riddering Schmidt & Howlett LLP
Attention: Benj. A. Smith, III, Attention: Donald L. Johnson
Chairman and CEO Bridgewater Place
c/o Smith & Associates P.O. Box 352
106 East 8th Street 333 Bridge Street, NW
Holland, Michigan 49423 Grand Rapids, Michigan 49501-0352
Telephone: 616-396-0199 (49504 for deliveries)
Fax: 616-396-2381 Telephone: 616-336-6000
Fax: 616-336-7000
|
10.10 Governing Law. This Plan of Merger shall be governed, construed, and
enforced in accordance with the laws of the State of Michigan, without regard to
principles of conflicts of laws.
10.11 Entire Agreement. This Plan of Merger (including all exhibits and
ancillary agreements described in this Plan of Merger) supersedes all prior
agreements between the parties with respect to its subject matter and
constitutes (along with the agreements and documents referred to in this Plan of
Merger) a complete and exclusive statement of the terms of the agreement between
the parties with respect to its subject matter; except for matters set forth in
any written instrument concurrently or contemporaneously executed by the
parties. No party may assign any of its rights or obligations under this Plan of
Merger to any other person.
10.12 Third Party Beneficiaries. The terms and conditions of this Plan of
Merger shall inure to the benefit of and be binding upon Macatawa and Grand and
their respective successors. Except to the extent provided in Sections 5.11
(Indemnification) and 5.12 (Insurance), nothing in this Plan of Merger, express
or implied, is intended to confer upon any person other than Macatawa and Grand
any rights, remedies, obligations, or liabilities under or by reason of this
Plan of Merger.
10.13 Counterparts. This Plan of Merger may be executed in one or more
counterparts, which taken together shall constitute one and the same instrument.
Executed counterparts of this Plan of Merger shall be deemed to have been fully
delivered and shall become legally binding if and when executed signature pages
are received by facsimile transmission from a party. If so delivered by
facsimile transmission, the parties agree to promptly send original, manually
executed copies by nationwide overnight delivery service.
10.14 Further Assurances; Privileges. Macatawa and Grand each shall, at the
request of the other, execute and deliver such additional documents and
instruments and take such other actions as may be reasonably requested to carry
out the terms and provisions of this Plan of Merger.
A-35
10.15 Headings, Etc. The article headings and section headings contained in
this Plan of Merger are inserted for convenience only and shall not affect in
any way the meaning or interpretation of this Plan of Merger. With respect to
any term, references to the singular form of the word include its plural form
and references to the plural form of the word include its singular form.
10.16 Calculation of Dates and Deadlines. Unless otherwise specified, any
period of time to be determined under this Plan of Merger shall be deemed to
commence at 12:01 a.m. on the first full day after the specified starting date,
event, or occurrence. Any deadline, due date, expiration date, or period-end to
be calculated under this Plan of Merger shall be deemed to end at 5 p.m. on the
last day of the specified period. The time of day shall be determined with
reference to the then current local time in Holland, Michigan.
10.17 Severability. If any term, provision, covenant, or restriction
contained in this Plan of Merger is held by a final and unappealable order of a
court of competent jurisdiction to be invalid, void, or unenforceable, then the
remainder of the terms, provisions, covenants, and restrictions contained in
this Plan of Merger shall remain in full force and effect, and shall in no way
be affected, impaired, or invalidated unless the effect would be to cause this
Plan of Merger to not achieve its essential purposes.
The undersigned have duly executed and acknowledged this Plan of Merger as
of the date first written above.
GRAND BANK FINANCIAL CORPORATION
By: /s/ Charles C. Stoddard
Charles C. Stoddard
Its Chairman and CEO
|
MACATAWA BANK CORPORATION
By: /s/ Benj. A. Smith III
Benj. A. Smith III
Its Chairman and CEO
|
A-36
Appendix B
November 20, 2001
CONFIDENTIAL
Board of Directors
Grand Bank Financial Corporation
126 Ottawa Avenue NW, Ste 100
Grand Rapids, Michigan 49503
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to Grand Bank Financial Corporation, Grand Rapids, Michigan ("Grand") and
its shareholders, of the terms of the Agreement and Plan of Merger dated as of
November 20, 2001 (the "Agreement") between Grand and Macatawa Bank Corporation,
Holland, Michigan ("Macatawa"). The Agreement provides for the Merger of Grand
with and into Macatawa (the "Merger"), with Macatawa being the surviving
company.
The terms of the Agreement provide for a fixed exchange ratio in which each
common share of Grand will be exchanged for 17.5979 shares of Macatawa
common stock. Based on Grand's current common shares outstanding, Macatawa
will issue approximately 2,375,000 shares of common stock to Grand common
stockholders. The Agreement further provides that stock options previously
granted by Grand be converted into and become options to purchase Macatawa
common stock.
Austin Associates, LLC ("Austin Associates"), as part of its investment banking
practice, is customarily engaged in the valuation of businesses and securities
in connection with mergers and acquisitions, and valuations for estate,
corporate and other purposes. Austin Associates acted as Grand's financial
advisor in connection with, and has participated in negotiations leading to, the
Agreement. In connection with rendering our opinion set forth herein, we have
among other things:
(i) Reviewed the audited financial statements of Grand for each of the
years ending 1996 through 2000, and the audited financial statements
of Macatawa for each of the years ending 1998-2000;
(ii) Reviewed unaudited financial statements of Grand and Macatawa for the
quarters ended March 31, 2001, June 30, 2001 and September 30, 2001;
(iii) Reviewed certain other internal information, primarily financial in
nature, relating to the respective businesses, earnings, assets and
prospects of Grand and Macatawa provided to us or publicly available
for purposes of our analysis;
(iv) Participated in meetings and telephone conferences with
representatives of Grand and Macatawa concerning the financial
condition, business, assets, financial forecasts and prospects of the
companies, as well as other matters we believed relevant to our
inquiry;
(v) Compared the results of operations and financial condition of Grand
with that of certain companies, which we deemed to be relevant for
purposes of this opinion;
(vi) Reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions, which we deemed to be relevant for
purposes of this opinion;
(vii) Reviewed the Agreement and certain related documents; and
(viii) Performed such other reviews and analyses as we have deemed
appropriate.
B-1
In our review and analysis, we relied upon and assumed the accuracy and
completeness of the financial and other information provided to us or publicly
available, and have not attempted to verify the same. We have made no
independent verification as to the status and value of Grand or Macatawa's
assets, and have instead relied upon representations and information concerning
assets of both companies in the aggregate. In rendering our opinion, we have
assumed that the transaction will be a tax-free reorganization with no material
adverse tax consequences to Grand or Macatawa, or to Grand shareholders
receiving Macatawa stock. In addition, we have assumed in the course of
obtaining the necessary approvals for the transaction, no condition will be
imposed that will have a material adverse effect on the contemplated benefits of
the transaction to Grand and its shareholders.
This opinion is based on economic and market conditions and other circumstances
existing on, and information made available as of, the date hereof. This opinion
is limited to the fairness, from a financial point of view, of the terms of the
Agreement, and does not address the underlying business decision by Grand's
Board of Directors to effect the Merger and does not constitute a recommendation
to any Grand shareholder as to how such shareholder should vote with respect to
the Merger.
Austin Associates reserves the right to review all disclosures in the proxy
materials and consent to the characterization of our fairness opinion. For our
services in rendering this opinion, Grand will pay us a fee, a significant
portion of which is contingent upon the consummation of the Merger. Grand has
also agreed to indemnify us against certain liabilities.
Based upon our analysis and subject to the qualifications described herein, we
believe that as of the date of this letter, the terms of the Agreement are fair,
from a financial point of view, to Grand and its shareholders.
Respectfully,
/s/ Austin Associates, LLC
Austin Associates, LLC
|
B-2
Appendix C
[To be filed by Amendment]
C-1
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Macatawa Bank Corporation ("Macatawa") is obligated under its Restated
Articles of Incorporation to indemnify its directors and executive officers who
serve or have served at the request of Macatawa as directors, officers,
employees, agents or fiduciaries of Macatawa or another corporation or other
enterprise to the fullest extent permitted under the Michigan Business
Corporation Act. Persons who are not directors or executive officers may be
similarly indemnified in respect of such services to the extent authorized by
Macatawa's Board of Directors.
Sections 561 through 571 of the Michigan Business Corporation Act contain
provisions governing the indemnification of directors and officers by Michigan
corporations. That statute provides that a corporation has the power to
indemnify a person who was or is a party or is threatened to be made a party to
a threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether formal or informal (other
than an action by or in the right of the corporation) by reason of the fact that
he or she is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
partner, trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, whether for profit or
not, against expenses (including attorneys' fees), judgments, penalties, fines
and amounts paid in settlement actually and reasonably incurred by him or her in
connection with the action, suit or proceeding, if the person acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation or its shareholders, and with respect to a
criminal action or proceeding, if the person had no reasonable cause to believe
his or her conduct was unlawful. The termination of an action, suit or
proceeding by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, does not, of itself, create a presumption that the
person did not act in good faith and in a manner that he or she reasonably
believed to be in or not opposed to the best interests of the corporation or its
shareholders, and, with respect to a criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
Indemnification of expenses (including attorneys' fees) and amounts paid in
settlement is permitted in derivative actions, except that indemnification is
not allowed for any claim, issue or matter in which such person has been found
liable to the corporation unless and to the extent that a court decides
indemnification is proper. To the extent that any director or officer has been
successful on the merits or otherwise in defense of an action, suit or
proceeding, or in defense of a claim, issue or matter in the action, suit or
proceeding, he or she shall be indemnified against actual and reasonable
expenses (including attorneys' fees) incurred by him or her in connection with
the action, suit or proceeding, and any action, suit or proceeding brought to
enforce the mandatory indemnification provided under the Michigan Business
Corporation Act. The Michigan Business Corporation Act permits partial
indemnification for a portion of expenses (including reasonable attorneys'
fees), judgments, penalties, fines and amounts paid in settlement to the extent
the person is entitled to indemnification for less than the total amount.
A determination that the person to be indemnified meets the applicable
standard of conduct and an evaluation of the reasonableness of the expenses
incurred and amounts paid in settlement shall be made by a majority vote of a
quorum of the Board of Directors who are not parties or threatened to be made
parties to the action, suit or proceeding, by a majority vote of a committee of
not less than two disinterested directors, by independent legal counsel, by all
"independent directors" not parties or threatened to be made parties to the
action, suit or proceeding, or by the shareholders. An authorization for payment
of indemnification may be made by: (1) the Board of Directors by (a) a majority
vote of two or more directors who are not parties or threatened to be made
parties to the action, suit or proceeding, (b) a majority vote of a committee of
two or more directors who are not parties or threatened to be made parties to
the action, suit or proceeding, (c) a majority vote of one or more "independent
directors" who are not parties or threatened to be made parties to the action,
suit or proceeding, or (d) if the corporation lacks the appropriate persons for
alternatives (a) through (c), by a majority vote of the entire Board of
Directors; or (2) the shareholders. Under the Michigan Business Corporation Act,
Macatawa may indemnify a director without a determination that the director has
met the applicable standard of conduct unless the director received a financial
benefit to which he or she was not entitled, intentionally inflicted harm on the
corporation or its shareholders, violated Section 551 of the Michigan Business
Corporation Act (which prohibits certain dividends, distributions to
shareholders and certain loans to insiders of the corporation), or intentionally
committed a criminal act. A director may file for a court determination of the
propriety of indemnification in any of the situations set forth in the preceding
sentence.
Under the Michigan Business Corporation Act, Macatawa may pay or reimburse
the reasonable expenses incurred by a director, officer, employee or agent who
is a party or threatened to be made a party to an action, suit or proceeding in
advance of final disposition of the proceeding if the person furnishes the
corporation a written undertaking to repay the
Next Section
Previous Section