Exhibit 10(a)(21)

 

 

Execution Version

 

 

 

 

AGREEMENT AND PLAN OF MERGER

 

 

by and among

 

PATRIOT NATIONAL BANCORP, INC.,

 

PATRIOT BANK, National association,

PRIME BANK

 

and

 

JASPER J. JASER, AS STOCKHOLDERS’ REPRESENTATIVE

 

Dated as of

August 1, 2017

 

 

 
 

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TABLE OF CONTENTS

 

ARTICLE I.

THE MERGER

1

       

1.1.

Effective Time of the Merger

1

 

1.2.

Closing

2

 

1.3.

Effects of the Merger

2

 

1.4.

Directors and Officers of the Surviving Corporation

2

       

ARTICLE II.

EFFECT OF THE MERGER ON PRIME CAPITAL STOCK

2

       

2.1.

Effect of the Merger on Prime Capital Stock

2

 

2.2.

Surrender and Payment

6

 

2.3

Dissenting Shares

8

 

2.4

Withholding Rights

8

       

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF PRIME

8

       

3.1.

Organization, Standing and Power

9

 

3.2.

Capitalization

10

 

3.3.

Subsidiaries

11

 

3.4.

Authority; No Conflict; Required Filings and Consents

11

 

3.5.

Financial Statements

13

 

3.6.

No Undisclosed Liabilities

13

 

3.7.

Absence of Certain Changes or Events

14

 

3.8.

Taxes

14

 

3.9.

Owned and Leased Properties

17

 

3.10.

Intellectual Property

18

 

3.11.

Contracts

19

 

3.12.

Litigation

21

 

3.13.

Environmental Matters

21

 

3.14.

Employee Benefit Plans

23

 

3.15.

Compliance With Laws

25

 

3.16.

Permits

25

 

3.17.

Labor Matters

25

 

3.18.

Insurance

26

 

3.19.

Affiliate Transactions

26

 

3.20.

Brokers

26

 

3.21.

Books and Records

26

 

3.22.

Proxy Statement

27

 

3.23.

Anti-Corruption Matters

27

 

3.24.

Fairness Opinion

27

 

3.25.

Regulatory Issues

27

 

3.26.

Investment Securities

28

 

3.27.

Derivative Transactions

28

 

3.28.

Loans; Nonperforming and Classified Assets

28

 

3.29.

Allowance for Loan and Lease Losses

29

 

3.31.

Deposit Insurance

30

 

3.32.

Community Reinvestment Act, Anti-money Laundering and Customer Information
Security

30

 

 
 

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3.33.

Disclosure

31

       

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF PATRIOT AND THE BANK

31

       

4.1.

Organization, Standing and Power

31

 

4.2.

Authority; No Conflict; Required Filings and Consents

32

 

4.3.

Litigation

33

 

4.4.

Taxes

33

 

4.5.

Compliance With Laws

33

 

4.6.

Brokers

33

 

4.7.

Statements True and Correct

33

 

4.8.

Regulatory Issues

34

 

4.9.

Community Reinvestment Act, Anti-money Laundering and Customer Information
Security

35

 

4.10.

Financing

35

       

ARTICLE IV.

CONDUCT OF BUSINESS

35

       

5.1.

Covenants of Prime

35

 

5.2.

Reasonable Best Efforts

39

 

5.3.

Confidentiality

39

       

ARTICLE VI.

ADDITIONAL AGREEMENTS

39

       

6.1.

No Solicitation

39

 

6.2.

Access to Information

42

 

6.3.

Shareholders Meeting; Proxy Statement

43

 

6.4.

Legal Conditions to the Merger

44

 

6.5.

Public Disclosure

44

 

6.6.

Indemnification of Prime Directors and Officers

45

 

6.7.

Notification of Certain Matters

46

 

6.8.

Shareholder Litigation

46

 

6.9.

Board of Directors and Loan Committee of Prime

46

 

6.10.

Financial Statements

46

 

6.11.

Liens

46

 

6.12.

Employees of Prime

47

 

6.13.

Life Insurance Policies

47

 

6.14.

No Survival of Representations and Warranties

47

       

ARTICLE VII.

CONDITIONS TO MERGER

47

       

7.1.

Conditions to Each Party’s Obligation to Effect the Merger

47

 

7.2.

Additional Conditions to Obligations of Patriot and the Bank

48

 

7.3.

Additional Conditions to Obligations of Prime

50

       

ARTICLE VIII.

TERMINATION AND AMENDMENT

51

       

8.1.

Termination

51

 

8.2.

Effect of Termination

52

 

8.3.

Amendment

52

 

8.4.

Extension; Waiver

52

 

 
 

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ARTICLE IX.

MISCELLANEOUS

53

       

9.1.

Notices

53

 

9.2.

Entire Agreement

54

 

9.3.

No Third Party Beneficiaries

54

 

9.4.

Assignment

54

 

9.5.

Severability

55

 

9.6.

Counterparts and Signature

55

 

9.7.

Interpretation

55

 

9.8.

Governing Law

55

 

9.9.

Remedies

56

 

9.10.

Submission to Jurisdiction

56

 

9.11.

WAIVER OF JURY TRIAL

56

 

9.12.

Disclosure Schedule

56

 

 

TABLE OF EXHIBITS

 

 

 

Exhibit A

Voting Agreement

       

Exhibit B

Bank Merger Agreement

       

Exhibit C

Option Cancellation Agreement

       

Exhibit D

Definitions

       

Exhibit E

Consents and Approvals

 

 
 

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AGREEMENT AND PLAN OF MERGER

 

This AGREEMENT AND PLAN OF MERGER (this “Agreement”) is entered into as of
August 1, 2017, by and among Patriot National Bancorp, Inc., a Connecticut
corporation (“Patriot”), Patriot Bank, National Association, a federally
chartered national banking association and a wholly owned subsidiary of Patriot
(the “Bank” and together with Patriot, the “Companies”), Prime Bank, a
Connecticut bank (“Prime”) and Jasper J. Jaser, as representative of the
Stockholders (as defined below) (the “Stockholders’ Representative”)

 

WHEREAS, the parties desire to enter into a transaction whereby Prime will merge
with and into the Bank (the “Merger”) in accordance with the terms of this
Agreement, the Connecticut Business Corporation Act (the “CBCA”), the Banking
Law of Connecticut (the “BLC”) and the federal Bank Merger Act (“BMA”), as a
result of which the Bank shall be the surviving corporation;

 

WHEREAS, the Board of Directors of Prime (the “Prime Board”) and the Board of
Directors of Patriot and the Bank have each unanimously (a) determined that the
Merger is in the best interests of their respective entities and stockholders,
(b) approved the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including the Merger, and
(c) in the case of Prime, has resolved to recommend approval of this Agreement
to the stockholders of Prime (the “Stockholders”);

 

WHEREAS, as a material inducement to the Companies entering into this Agreement,
each of the directors and executive officers of Prime has entered into a voting
agreement with the Companies dated as of the date hereof (“the Voting
Agreement”), substantially in the form attached hereto as Exhibit A pursuant to
which each such director or executive officer has agreed, among other things, to
vote all shares of Prime Common Stock owned by such person in favor of the
approval of this Agreement and the transactions contemplated hereby, upon the
terms and subject to the conditions set forth in such agreement; and

 

WHEREAS, the parties desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and the transactions
contemplated by this Agreement and also to prescribe certain conditions to the
Merger.

 

NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Patriot, the Bank, and Prime agree as follows:

 

ARTICLE I.
THE MERGER

 

1.1.         Effective Time of the Merger. Subject to the provisions of this
Agreement, prior to the Closing, the Bank and Prime shall enter into a bank
merger agreement, substantially in the form attached as Exhibit B (the “Bank
Merger Agreement”) and shall, concurrently with the Closing, cause the Bank
Merger Agreement to be filed with the Office of the Comptroller of the Currency
(“OCC”) in accordance with the relevant provisions of the BMA and shall make all
other filings or recordings required under the CBCA and the BMA. The Merger
shall become effective as provided in 12 C.F.R. Section 5.33 and Conn. Gen.
Stat. Section 36a-126 (the “Effective Time”).

 

 
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1.2.         Closing. The closing of the Merger (the “Closing”) shall take place
at 10:00 a.m., Eastern Time, on a date to be specified by the Companies and
Prime (the “Closing Date”), which shall be no later than the third Business Day
after satisfaction or waiver of the conditions set forth in Article VII (other
than delivery of items to be delivered at the Closing and other than
satisfaction of those conditions that by their nature are to be satisfied at the
Closing, it being understood that the occurrence of the Closing shall remain
subject to the delivery of such items and the satisfaction or waiver of such
conditions at the Closing), at the offices of Blank Rome LLP, One Logan Square,
130 North 18th Street, Philadelphia, Pennsylvania, unless another date, place or
time is agreed to in writing by the Companies and Prime. For purposes of this
Agreement, a “Business Day” shall be any day other than (a) a Saturday or
Sunday, (b) a legal holiday recognized as such by the U.S. Government, or (c) a
day on which banking institutions located in the State of Connecticut are
permitted or required by Law, executive order or governmental decree to remain
closed.

 

1.3.        Effects of the Merger. The Merger shall have the effects set forth
in this Agreement and 12 U.S.C. § 215a. Without limiting the generality of the
foregoing, at the Effective Time, the separate existence of Prime shall cease
and Prime shall be merged with and into the Bank with the Bank being the
surviving corporation (following the Effective Time, the Bank is sometimes
referred to herein as the “Surviving Corporation”). The Charter and By-laws of
the Bank, as in effect immediately prior to the Effective Time, shall be the
Charter and the By-laws of the Surviving Corporation, until the same may be
amended as provided therein and in accordance with applicable Law.

 

1.4.        Directors and Officers of the Surviving Corporation. The directors
of the Bank immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation, each to hold office in accordance with
the Charter and By-laws of the Bank, and the officers of the Bank immediately
prior to the Effective Time shall be the initial officers of the Surviving
Corporation, in each case until the earlier of their resignation or removal or
until their respective successors are duly elected or appointed in accordance
with the Charter and By-laws of the Bank and applicable Law.

 

ARTICLE II.
EFFECT OF THE MERGER ON PRIME CAPITAL STOCK

 

2.1.          Effect of the Merger on Prime Capital Stock. As of the Effective
Time, by virtue of the Merger and without any action on the part of the Bank and
Prime, nor any holder of any shares of Prime Common Stock:

 

 

(a)          Cancellation of Certain Capital Stock of Prime. Each share of Prime
Common Stock that is owned by Prime (as treasury stock or otherwise) will
automatically be cancelled and retired and will cease to exist, and no
consideration will be delivered in exchange therefor.

 

(b)         Conversion of Capital Stock of Prime. Prime Common Stock issued and
outstanding immediately prior to the Effective Time (other than (i) shares owned
by Prime to be cancelled and retired in accordance with Section 2.1(a), and (ii)
Dissenting Shares) will be converted into the right to receive the Merger
Consideration as defined in Section 2.1(d), without interest, at the time and
subject to the contingencies, adjustments and other terms specified herein.

 

 
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(c)          Prime Common Stock. As of the Effective Time, all shares of Prime
Common Stock shall no longer be outstanding and shall automatically be cancelled
and shall cease to exist, and each holder of a certificate that immediately
prior to the Effective Time represented any such shares of Prime Common Stock
(each, a “Certificate”) shall cease to have any rights with respect thereto,
except as set forth above in Section 2.1(b).

 

(d)          Merger Consideration. Subject to and in accordance with Section
2.2:

 

(i)       Each share of Prime Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares to be cancelled as provided in
Section 2.1(a) and other than any Dissenting Shares (as defined herein)),
totaling 563,527 shares, shall, by virtue of the Merger, be converted into the
right to receive, in cash, an amount equaling (A) one hundred fifteen percent
(115%) of the tangible book value as of the Closing Date (“TBV”), as determined
pursuant to and subject to any adjustment as provided in Section 2.1(e)(i)
divided by (B) the total number of shares of Prime Common Stock issued and
outstanding immediately prior to the Effective Time, adjusted to reflect the
payment to Prime Stock Option holders described in the next sub-paragraph (the
“Merger Consideration Per Share”). An example of this calculation is included
and incorporated herein by reference to Schedule 2.1(d).

 

(ii)      The Merger Consideration also includes the settlement of all of the
101,000 outstanding Prime Stock Options by payment of an amount, in cash, equal
to the amount by which the Merger Consideration Per Share exceeds each such
option’s exercise price, if any (the “Per Option Consideration”, the aggregate
amount of which, along with the aggregate amount of Merger Consideration Per
Share, represents the “Merger Consideration”). An example of this calculation is
included and incorporated herein by reference to Schedule 2.1(d).

 

(iii)     Prime shall take all action necessary such that each Prime Stock
Option outstanding immediately prior to the Closing Date shall, at the Closing
Date be cancelled and converted at the Closing Date into the right to receive
the Per Option Consideration. In the event that the Per Option Consideration for
any Prime Stock Option is equal to or less than $0, such Prime Stock Option
shall be cancelled as of the Closing Date without payment of consideration
therefore. Prime shall cause each holder of a Prime Stock Option to execute and
deliver to Prime at least one (1) Business Day prior to the Closing Date an
option cancellation agreement substantially in the form attached hereto as
Exhibit C (each, an “Option Cancellation Agreement”). Patriot or Bank shall pay
to Prime or the Surviving Corporation an amount equal to the aggregate amount by
which the Closing Consideration Per Share (as defined below) exceeds each
option’s exercise price, if any, and Prime or the Surviving Corporation shall
further allocate and pay such amount through its payroll system to the holders
of Prime Stock Options in accordance with this Section 2.1(d)(iii).

 

 
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(e)          Adjustments to TBV.

 

(i)      Prior to the Closing Date, at a time mutually agreeable to Patriot and
Prime, Prime shall prepare and deliver to Patriot and Bank a written notice
containing its good faith estimate (along with reasonable support therefor) of
the Estimated Adjusted TBV (except that the Estimated Adjusted TBV for purposes
of such calculation will be calculated as of the date of such notice) (the
“Sample Adjusted TBV”) in accordance with the adjustment and methodology set
forth in subsection (ii) below. The Companies shall work in good faith with
Prime to provide the Companies’ objections to the Sample Adjusted TBV and
reconcile their differences in writing. For the avoidance of doubt, the parties
acknowledge and agree that Sample Adjusted TBV shall be for advisory purposes
only and shall have no binding effect.

 

(ii)     Within ten (10) Business Days following the last day of the month
immediately preceding the month in which the Closing occurs, Prime shall prepare
and deliver to Patriot and Bank a written notice containing its good faith
estimate (along with reasonable support therefor) of the TBV adjusted both (i)
upward to account for (A) any unaccrued recoveries, net of any costs and
liabilities associated with such recoveries, and (B) any increases to the fair
market valuation of Prime’s securities portfolio, provided such increase is not
already marked and reflected in Prime’s TBV; and (ii) downward to account for
(A) unreserved contingent liabilities; (B) unaccrued costs and liabilities
associated with any known or threatened litigation, operating costs or costs
associated with the Merger, including any severance related to any employee
retirements or resignations associated with the Merger (unless agreed to by
Patriot for retention purposes); (C) decrease in the fair market valuation of
the securities portfolio, provided such decrease is not already marked and
reflected in Prime’s TBV; (D) obligations or liabilities, contractual or
otherwise, that are triggered by a change of control; (E) Deficiencies (as
defined below) in the allowance for loan losses; (F) the amount of the employer
portion of payroll taxes due in connection with the settlement of the Prime
Employee Stock Options; (G) fifty percent (50%) of the termination fee payable
to Connecticut Online Computer Center, Inc. (“COCC”) pursuant to that certain
Agreement for Data Processing Services dated September 9, 2014 between COCC and
Prime, as if such contract was terminated as of the Closing Date; and (H) any
other relevant items or factors deemed mutually reasonable by the parties and
(such adjusted TBV, the “Adjusted TBV” and Prime’s good faith estimate of the
Adjusted TBV, the “Estimated Adjusted TBV”). “Deficiencies” shall mean an amount
not conforming with U.S. GAAP, Connecticut Department of Banking (“DOB”), FDIC
or OCC regulatory standards.

 

(iii)     Within thirty (30) calendar days after the Closing Date, the Companies
shall prepare and deliver to the Stockholders’ Representative a written
statement (the “Closing Statement”) setting forth the Companies’ calculation of
the Adjusted TBV.

 

 
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(iv)     On or prior to the fifteenth (15th) calendar day following the
Companies’ delivery of the Closing Statement, the Stockholders’ Representative
may give the Companies a written notice stating in reasonable detail any and all
of the Stockholders’ non-duplicative objections (an “Objection Notice”) to the
Closing Statement or the determination of the Adjusted TBV as determined by the
Companies. During such fifteen (15) calendar day period, the Companies shall
provide the Stockholders’ Representative and one independent accountant acting
on behalf of the Stockholders’ Representative, if so used, and at the sole
expense of the Stockholders, with access, at reasonable times and upon
reasonable prior notice, to the Surviving Corporation’s books and records and
the Surviving Corporation’s personnel and accountants. To be in proper form, any
Objection Notice shall specify in reasonable detail the nature and dollar amount
of any specific item of objection and the reasonable basis or bases therefor
(and shall include necessary supporting documentation). Any determination set
forth on the Closing Statement to which the Stockholders’ Representative does
not specifically object in the Objection Notice shall be deemed acceptable and
shall be final and binding upon the Parties upon delivery of the Objection
Notice. The failure by the Stockholders’ Representative to deliver an Objection
Notice within such fifteen (15) day period shall constitute the Stockholders’
acceptance of all of the items set forth in the Closing Statement, which shall
be final and binding on the Stockholders and the Stockholders’ Representative
for all purposes of this Agreement.

 

(v)     Following the Companies’ receipt of any Objection Notice, the
Stockholders’ Representative and the Companies shall attempt to negotiate in
good faith to resolve such dispute. In the event that the Stockholders’
Representative and the Companies fail to agree on any of the Stockholders’
Representative’s proposed adjustments set forth in the Objection Notice, within
fifteen (15) days after the Companies receive the Objection Notice, the
Stockholders’ Representative and the Companies agree that the items in dispute
shall be submitted to a mutually acceptable independent national accounting firm
(the “Accounting Arbitrator”) for final determination, and the calculations
shall be deemed adjusted in accordance with the determination of the Accounting
Arbitrator and shall become binding, final and conclusive upon all parties
hereto as of the review date. The Accounting Arbitrator shall consider only the
items in dispute and shall be instructed to act within five (5) Business Days
(or such longer period as the parties may agree) to resolve all items in
dispute. Prime, on one hand, and Patriot and Bank, on the other hand, shall
share equally the payment of reasonable fees and expenses of the independent
accounting firm. For purposes of this agreement, “Final Adjusted TBV” means an
amount equal to (i) the Adjusted TBV provided in the Closing Statement if the
Companies do not receive an Objection Notice pursuant to and in accordance with
Section 2.1(e)(iii) or otherwise, (ii) (A) the Adjusted TBV as calculated by the
Accounting Arbitrator in accordance with this Section 2.1(e)(iv).

 

 
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(vi)     If the Estimated Adjusted TBV exceeds the Final Adjusted TBV after
final determination pursuant to this Section 2.1(e), then the Companies and the
Stockholders’ Representative shall, within three (3) Business Days after the
final determination of such excess amount pursuant to this Section 2.1(e),
jointly instruct the Escrow Agent (as defined below) to disburse from the Escrow
Amount (as defined below) by wire transfer of immediately available funds to
Patriot, such excess amount. If the Final Adjusted TBV exceeds the Estimated
Adjusted TBV, then (1) the Companies shall pay to the Exchange Agent such amount
for distribution to the Stockholders in accordance with the Exchange Agent
Agreement and (2) the Companies and the Stockholders’ Representative shall
jointly instruct the Escrow Agent to release the remaining Escrow Amount to the
Exchange Agent for distribution to the Stockholders in accordance with the
Exchange Agent Agreement. Any amount due under this Section 2.1(e)(vi) shall be
paid within ten (10) Business Days after the date of final determination
pursuant to this Section 2.1(e). For purposes of clarity, if the Estimated
Adjusted TBV is equal to the Final Adjusted TBV, then (X) no additional payment
shall be made by any Person pursuant to this Section 2.1(e)(vi) and (Y) the
Companies and the Stockholders’ Representative shall jointly instruct the Escrow
Agent to release the Escrow Amount to the Exchange Agent for distribution to the
Stockholders in accordance with the Exchange Agent Agreement. The Merger
Consideration shall be deemed to be increased or decreased, as applicable, by
any payments made pursuant to this Section 2.1(e)(vi).

 

2.2.         Surrender and Payment.

 

(a)     Prior to the Effective Time, Patriot or Bank shall appoint an agent (the
“Exchange Agent”), who shall be reasonably acceptable to Prime to act as the
agent, in accordance with the terms of an Exchange Agent Agreement (“Exchange
Agent Agreement”), in form and substance mutually agreed upon by the parties,
for the purpose of exchanging the Merger Consideration for the Certificates
representing the shares of Prime Common Stock. At the Closing, Patriot or Bank
shall (i) deposit with the Exchange Agent, sufficient cash to pay the Closing
Payment (as defined below) and (ii) deposit with the Escrow Agent (as defined
below) the Escrow Amount. If for any reason the Payment Fund is inadequate to
pay the amounts to which holders of shares shall be entitled under Section
2.1(d), Patriot and Bank shall take all steps necessary to deposit in trust
additional cash with the Exchange Agent sufficient to make all payments in
respect of the Prime Common Stock required under this Agreement, and Patriot and
the Surviving Corporation shall in any event be liable for the payment thereof.
The Payment Fund shall not be used for any other purpose. The Surviving
Corporation shall pay all charges and expenses, including those of the Exchange
Agent, in connection with the exchange of shares of Prime Common Stock for the
Merger Consideration. Promptly after the Effective Time, Patriot shall send, or
shall cause the Exchange Agent to send, to each record holder of shares of Prime
Common Stock at the Effective Time, a letter of transmittal and instructions
(which shall specify that the delivery shall be effected, and risk of loss and
title shall pass, only upon proper delivery of the Certificates to the Exchange
Agent) for use in such exchange.

 

(b)     Each holder of shares of Prime Common Stock that have been converted
into the right to receive the Merger Consideration shall be entitled to receive
the Closing Consideration Per Share, upon surrender to the Exchange Agent of a
Certificate, together with a duly completed and validly executed letter of
transmittal and such other documents as may reasonably be requested by the
Exchange Agent. Until so surrendered or transferred, as the case may be, and
subject to the terms set forth in this Section 2.2, each such Certificate shall
represent after the Effective Time for all purposes only the right to receive
the Closing Consideration Per Share payable in respect thereof. No interest
shall be paid or accrued on the cash payable upon the surrender or transfer of
any Certificate. Upon payment of the Closing Consideration Per Share pursuant to
the provisions of this Article II, each Certificate or Certificates so
surrendered shall immediately be cancelled.

 

 
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(c)         All Closing Consideration Per Share paid upon the surrender of
Certificates in accordance with the terms hereof shall be deemed to have been
paid in full satisfaction of all rights pertaining to the shares of Prime Common
Stock formerly represented by such Certificate, and from and after the Effective
Time, there shall be no further registration or transfers of shares of Prime
Common Stock on the stock transfer books of the Surviving Corporation. If, after
the Effective Time, Certificates are presented to the Surviving Corporation,
they shall be cancelled and exchanged for the Closing Consideration Per Share
provided for, and in accordance with the procedures set forth, in this Article
II.

 

(d)        Any portion of the Payment Fund that remains unclaimed by the holders
of shares of Prime Common Stock twelve (12) months after the Effective Time
shall be returned to Patriot, upon demand, and any such holder who has not
exchanged shares of Prime Common Stock for the Merger Consideration Per Share in
accordance with this Section 2.2 prior to that time shall thereafter look only
to Patriot or the Surviving Corporation for payment of the Merger Consideration.
Notwithstanding the foregoing, Patriot shall not be liable to any holder of
shares of Prime Common Stock for any amounts paid to a public official pursuant
to applicable abandoned property, escheat or similar Laws.

 

(e)         Any portion of the Merger Consideration made available to the
Exchange Agent in respect of any Dissenting Shares shall be returned to Patriot
or the Surviving Corporation, upon demand.

 

(f)         Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration deliverable in respect thereof pursuant to this Agreement.

 

(g)         Definitions.

 

(i)       “Escrow Agent” means an agent reasonably acceptable to the Companies
and Prime to act as escrow agent in accordance with the terms of an Escrow
Agreement (the “Escrow Agreement”), in form and substance mutually agreed upon
by the parties.

 

(ii)      “Escrow Amount” means One Million Dollars ($1,000,000).

 

(iii)     “Closing Payment” means the Merger Consideration less (1) the Escrow
Amount, less (2) fifty percent (50%) of the fees payable to Escrow Agent under
the Escrow Agreement.

 

(iv)     “Payment Fund” means the Merger Consideration that is payable in
respect of all of the shares of Prime Common Stock represented by the
Certificates.

 

 
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(v)      “Closing Consideration Per Share” means the Closing Payment divided by
the total number of shares of Prime Common Stock issued and outstanding
immediately prior to the Effective Time, adjusted to reflect the payment to
Prime Stock Option holders described in Section 2.1(d)(ii).

 

 

2.3

Dissenting Shares.

 

(a)     Notwithstanding any provision of this Agreement to the contrary and in
accordance with Section 33-856 of the CBCA, the outstanding shares of Prime
Common Stock, the holders of which have timely filed written notices of an
intention to demand payment of fair value for their shares (“Dissenting Shares”)
pursuant to the CBCA and have not effectively withdrawn or lost their dissenters
rights under the CBCA, shall not be converted into a right to receive the Merger
Consideration, and the holders thereof shall be entitled only to such rights as
are granted by Section 33-856 of the CBCA.

 

(b)     If any such holder of Prime Common Stock shall have failed to perfect or
effectively shall have withdrawn or lost such right, the Dissenting Shares held
by such holder shall be converted into a right to receive the Merger
Consideration Per Share in accordance with Section 2.1 of this Agreement, upon
surrender by such holder of Certificates formerly representing such holders’
shares of Prime Common Stock and delivery of a properly completed letter of
transmittal to the Exchange Agent in accordance with Section 2.2(b) of this
Agreement.

 

(c)     Prime will give the Bank (i) prompt written notice of any written
demands for payment of fair value for any Dissenting Shares and any other
instruments received by Prime relating to dissenters rights, (ii) the
opportunity to participate in all negotiations and proceedings with respect to
demands for payment of fair value for any Dissenting Shares under the CBCA, and
(iii) the right to approve any settlement of any such demand.

 

 

2.4

Withholding Rights. Patriot, the Bank, the Surviving Corporation (and, if
applicable, Prime) will be entitled to deduct and withhold from any amount
payable pursuant to this Agreement (including payments of the Merger
Consideration Per Share and the Per Option Consideration) such amount as such
party is required to deduct and withhold with respect to the making of such
payment under the Code or any other provision of applicable Law. To the extent
that amounts are so withheld by Patriot, the Bank, the Surviving Corporation or
Prime and remitted to the appropriate Governmental Entity, such withheld amounts
will be treated for all purposes of this Agreement as having been paid to the
person in respect of whom such deduction and withholding were made.

 

 

ARTICLE III.
representations and warranties of prime

 

Prime represents and warrants to the Companies that the statements contained in
this Article III are true and correct as of the date hereof and as of the
Closing Date, except as set forth herein or in the disclosure schedule delivered
by Prime to the Companies concurrently with the execution of this Agreement and
dated as of the date of this Agreement (the “Prime Disclosure Schedule”). For
purposes of this Agreement, “Prime’s Knowledge” or the “Knowledge of Prime”
shall mean the actual knowledge of those individuals listed on Section 3.0 of
the Prime Disclosure Schedule (or any successor with similar authority and
responsibilities) (the “Relevant Prime Persons”). For the avoidance of doubt,
Prime’s Knowledge shall be deemed to exist also with respect to any fact or
circumstance that the Relevant Prime Persons would have been aware of if they
had discussed the subject matter of such representations and warranties with
their staff members in the Ordinary Course of Business.

 

 
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3.1.         Organization, Standing and Power.

 

(a)     Prime is a bank duly organized and validly existing under the Laws of
the State of Connecticut, has all requisite corporate power and authority to
own, lease and operate its properties and assets and to carry on its business as
now being conducted and is duly qualified and licensed to do business and, where
applicable as a legal concept, is in good standing as a foreign corporation in
each jurisdiction in which the character of the properties it owns, operates or
leases or the nature of its activities makes such qualification necessary,
except for such failures to be so organized, qualified, licensed or in good
standing, individually or in the aggregate, that are not reasonably likely to
have a Prime Material Adverse Effect.

 

For purposes of this Agreement, the term “Prime Material Adverse Effect” means
any adverse change, event, effect, circumstance or development with respect to,
or, that, individually or together with any other change, event, effect,
circumstance or development, on long term basis, materially diminishes Prime’s
financial position, the ability of Prime to perform its obligations under any
Transaction Documents, or the validity or enforceability of any of the
Transaction Documents or the rights and remedies of the Bank (except as a result
of any act or failure to act by the Bank or Patriot) under any of the
Transaction Documents; provided, however, that none of the following shall
constitute, or shall be considered in determining whether there has occurred, a
Prime Material Adverse Effect: (i) changes that are the result of economic or
political factors affecting the national, regional or world economy or acts of
war or terrorism; (ii) changes in Generally Accepted Accounting Principles
(“GAAP”) or regulatory accounting requirements applicable to banks generally;
(iii) any modifications or changes to valuation policies and practices in
connection with the transactions contemplated by this Agreement, in each case in
accordance with GAAP; (iv) changes that are the result of factors generally
affecting the banking industry and (v) changes in Law, rules or regulations or
generally accepted accounting principles or the interpretation thereof;
provided, further, that any change, event, effect, circumstance or development
referred to in clauses (i) through (vi) immediately above shall be taken into
account in determining whether a Prime Material Adverse Effect has occurred or
could reasonably be expected to occur to the extent that such change, event,
effect, circumstance or development has a disproportionate effect on Prime
compared to other participants in the community banking industry in which Prime
conducts its business.

 

For purposes of this Agreement, “Transaction Documents” means this Agreement,
the Voting Agreements, the Bank Merger Agreement, and the Exchange Agent
Agreement and each other certificate, document, instrument or agreement executed
in connection herewith or therewith.

 

(b)     Charter Documents. Prime has delivered or made available to Patriot and
Bank a true and correct copy of the certificate of incorporation (including any
certificate of designations), by-laws, or like organizational documents, each as
amended to date, of Prime. Prime is not in violation of any of the provisions of
its organizational documents.

 

 
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3.2.         Capitalization.

 

(a)     The authorized capital stock of Prime as of the date of this Agreement
consists of 5,000,000 shares, par value of $2.00, of common stock (the “Prime
Common Stock”) and 101,000 outstanding options to purchase Prime Common Stock
(the “Prime Stock Options”). As of the date hereof, 563,527 shares of Prime
Common Stock were issued and outstanding and no shares of Prime Common Stock
were held as treasury shares.

 

(b)     Except as set forth in Section 3.2 of the Prime Disclosure Schedule, as
of the date of this Agreement (A) there are no equity securities of any class of
Prime, or any security convertible or exchangeable into or exercisable for any
equity securities (including Prime Common Stock), issued, reserved for issuance
or outstanding and (B) there are no options, warrants, equity securities, calls,
rights, commitments or agreements of any character to which Prime is a party or
by which Prime is bound obligating Prime to issue, exchange, transfer, deliver
or sell, or cause to be issued, exchanged, transferred, delivered or sold,
additional shares of capital stock or other equity interests of Prime or any
security or rights convertible into or exchangeable or exercisable for any such
shares or other equity interests, or obligating Prime to grant, extend,
accelerate the vesting of, otherwise modify or amend or enter into any such
option, warrant, equity security, call, right, commitment or agreement. Prime is
not a party to nor is bound by any agreements or understandings with respect to
the voting (including voting trusts and proxies) or sale or transfer (including
agreements imposing transfer restrictions) of any shares of capital stock or
other equity interests of Prime. There are no registration rights, and there is
no rights agreement, “poison pill,” anti-takeover plan or other similar
agreement or understanding to which Prime is a party or by which it is bound
with respect to any equity security of any class of Prime. None of the Prime
Common Stock or Prime Stock Options have been issued in violation of any rights
of any person or in violation of the registration requirements of any applicable
jurisdiction’s Laws. Section 3.2 of the Prime Disclosure Schedule also sets
forth a true, correct and complete list of all outstanding Prime Stock Options
and the following with respect to each such option: (i) the number of shares of
Prime Common Stock subject thereto, (ii) the vested status (assuming
consummation of the transactions contemplated by this Agreement), (iii) the
grant and expiration dates; and (iv) the exercise price, if applicable. Each
Prime Stock Option was granted with an exercise price not less than the fair
market value of a share of Prime Common Stock on the date of grant.

 

(c)     All outstanding shares of Prime Common Stock are, and all shares of
Prime Common Stock subject to issuance as specified in Section 3.2(b) above,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, will be, duly authorized, validly issued, fully paid
and nonassessable and (other than the Prime Stock Options) not subject to or
issued in violation of any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any provision of
the CBCA, the BLC, Prime’s Certificate of Incorporation or By-laws or any
agreement to which Prime is a party or is otherwise bound.

 

 
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(d)     There are no obligations, contingent or otherwise, of Prime to
repurchase, redeem or otherwise acquire any shares of Prime Common Stock or the
capital stock of Prime.

 

(e)     Any Contract relating to any matters described in this Section 3.2 shall
be deemed a Prime Material Contract.

 

3.3.         Subsidiaries.

 

(a)     Except for securities and other interests held in a fiduciary capacity
and beneficially owned by third parties or taken in consideration of debts
previously contracted, Prime does not own beneficially, directly or indirectly,
any equity securities or similar interests of any person or any interest in a
partnership or joint venture of any kind.

 

(b)     There is no corporation, partnership, trust, limited liability company
or other non-corporate business enterprise in which Prime holds stock or other
ownership interests representing (A) more than 50% of the voting power of all
stock or other ownership interests of such entity or (B) the right to receive
more than 50% of the net assets of such entity available for distribution to the
holder of outstanding stock or other ownership interests upon a liquidation or
dissolution of such entity. Prime does not control directly or indirectly or
have any direct or indirect equity participation or similar interest in any
corporation, partnership, limited liability company, joint venture, trust or
other business association or entity.

 

3.4.         Authority; No Conflict; Required Filings and Consents.

 

(a)     Prime has all requisite corporate power and authority to enter into this
Agreement and, subject to the approval of this Agreement (the “Prime Voting
Proposal”) by the Stockholders (the “Prime Shareholder Approval”) and the
consents and approvals set forth on Exhibit E hereto, to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the other Transaction Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby by Prime have
been duly authorized by all necessary corporate action on the part of Prime,
subject only to the required receipt of Prime Shareholder Approval. This
Agreement and each other Transaction Document to which it is a party has been
duly executed and delivered by Prime and constitutes the valid and binding
obligation of Prime, enforceable against Prime in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors’ rights and to general equity principles (the “Bankruptcy and Equity
Exception”).

 

 
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(b)     The execution and delivery of this Agreement and each of the other
Transaction Documents by Prime do not, and the consummation by Prime of the
transactions contemplated hereby and thereby will not, (i) conflict with, or
result in any violation or breach of, any provision of the Certificate of
Incorporation or By-laws of Prime, (ii) conflict with, or result in any
violation or breach of, or constitute (with or without notice or lapse of time,
or both) a default (or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any material benefit) under,
constitute a change in control under, or result in the imposition of any
mortgage, deed of trust, security interest, pledge, lien, charge or encumbrance,
lease, license, encroachment, conditional sale agreement or other title
retention agreement, option, covenant, right of way, easement, restriction or
covenant (“Liens”) on the assets of Prime under, any of the terms, conditions or
provisions of any lease, license, contract or other agreement, instrument or
obligation, written or oral, to which Prime is a party or by which any of them
or any of their properties or assets may be bound (a “Contract”), or (iii)
subject to compliance with the requirements specified in clauses (i) and (ii) of
Section 3.4(c), conflict with or violate any permit, franchise, license,
judgment, injunction, order, decree, statute, law, ordinance, rule or regulation
applicable to Prime or any of its properties or assets, except in the case of
clause (ii) of this Section 3.4(b) for any such conflicts, violations, breaches,
defaults, terminations, cancellations, accelerations, losses, penalties or
Liens, and for any consents or waivers not obtained, that, individually or in
the aggregate, are not reasonably likely to have a Prime Material Adverse Effect
or prevent or materially delay or impair the performance of this Agreement or
any of the Transaction Documents to which it is a party or the consummation of
the transactions contemplated hereby or thereby.

 

(c)     No consent, approval, license, permit, order or authorization of, or
registration, declaration, notice or filing with, any international, national,
federal, state, provincial or local governmental, regulatory or administrative
authority, agency, commission, board, court, tribunal, arbitral body,
self-regulated entity or similar body, whether domestic or foreign and
specifically including, without limitation, the Connecticut Department of
Banking, the OCC and the Federal Deposit Insurance Corporation (“FDIC” and
collectively with the Connecticut Department of Banking and the OCC, a
“Governmental Entity”) is required by or with respect to Prime in connection
with the execution and delivery of this Agreement by Prime or the consummation
by Prime of the transactions contemplated by this Agreement, except for (i) the
filing of the Bank Merger Agreement with the Secretary of the State of the State
of Connecticut; (ii) the filings required to be made and the approvals or
non-objection status required to be obtained from the OCC and the FDIC and (iii)
expiration of applicable waiting periods.

 

(d)     The Prime Board, by resolutions duly adopted by a unanimous vote at a
meeting of all directors of Prime duly called and held and, not subsequently
rescinded or modified in any way, has: (i) determined that this Agreement and
the transactions contemplated hereby, including the Merger, upon the terms and
subject to the conditions set forth herein, are fair to, and in the best
interests of, Prime and the Stockholders; (ii) approved and declared advisable
this Agreement, including the execution, delivery, and performance thereof, and
the consummation of the transactions contemplated by this Agreement, including
the Merger, upon the terms and subject to the conditions set forth herein; (iii)
directed that this Agreement be submitted to a vote of the Stockholders for
adoption at the Prime Meeting; and (iv) resolved to recommend that the
Stockholders vote in favor of adoption of this Agreement.

 

(e)     No “fair price,” “moratorium,” “control share acquisition,”
“supermajority,” “affiliate transactions,” “business combination,” or other
similar anti-takeover statute or regulation enacted under any federal, state,
local, or foreign laws applicable to Prime is applicable to this Agreement, the
Merger, or any of the other transactions contemplated by this Agreement.

 

 
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3.5.         Financial Statements      

 

(a)     Prime has provided to the Companies the audited annual financial
statements of Prime for the fiscal year ended December 31, 2016 (the “Prime
Financial Statements”) and will, prior to Closing, provide to the Companies
intervening quarterly unaudited financial statements (the “Prime Quarterly
Statements”), including a balance sheet and profit and loss statement.

 

(b)     The Prime Financial Statements are, and the Prime Quarterly Statements
will be, derived from the books and records of Prime, and are and will be true
and complete in all material respects, prepared in accordance with GAAP in
accordance with historical practices on a consistent basis, and fairly present
the financial condition, results of operations and, with respect to the audited
financial statements only, cash flows, of Prime as of the date thereof and for
the period referred to therein and are consistent with the books and records of
Prime. No circumstances existed on the relevant balance sheet dates of the Prime
Financial Statements or the Prime Quarterly Statements which render any items in
the Prime Financial Statements or the Prime Quarterly Statements incorrect or
incomplete in any material respect. The statements of operations included in the
Prime Financial Statements or the Prime Quarterly Statements do not include any
item of special or non-recurring revenue, except as specifically identified
therein.

 

(c)     The books of account and other financial records of Prime have been
maintained with reasonable detail and accurately reflect Prime’s business
transactions, including its assets, liabilities, revenue and expenses and have
been maintained in accordance with good business and accounting principles and
are in all material respects complete and correct and do not contain or reflect
any material inaccuracies or discrepancies.

 

(d)     The allowance for loan losses reflected in Prime’s Financial Statements
was, and the allowance for loan losses shown on the Prime Quarterly Statements
for periods ending after December 31, 2016 was, adequate, as of the date
thereof, under GAAP. Prime’s allowance for loan losses is, and shall be as of
the Closing Date, in compliance with its existing methodology for determining
the adequacy of its allowance for loan losses as well as the standards
established by GAAP and is and shall be adequate under all such standards. Prime
complied with all orders, written comments and directives provided to it by any
Governmental Entities relating to its allowance for loan losses since the date
of its Financial Statements.

 

3.6.         No Undisclosed Liabilities.

 

(a)     Prime has no liability, whether asserted or unasserted, absolute,
accrued or unaccrued, contingent, whether liquidated or unliquidated, whether
due or to become due, or otherwise, that would be required by GAAP to be
reflected on a balance sheet of Prime, except (i) as disclosed in the Prime
Quarterly Statements including footnotes thereto, (ii) for liabilities incurred
in the Ordinary Course of Business consistent with past practice after the date
of the Prime Financial Statements (none of which results from, arises out of,
relates to or is in the nature of, or was caused by any breach of Contract,
breach of warranty, tort, infringement, or violation of Law), or (iii) for other
liabilities that are not in excess of $10,000 individually, or $25,000 in the
aggregate.

 

 
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(b)     Other than deferred tax liabilities and except as disclosed in Section
3.6(b) of the Prime Disclosure Schedule, since the date of Prime Quarterly
Statements Prime has not incurred any liability other than in the ordinary
course of business consistent with past practice (the “Ordinary Course of
Business”).

 

3.7.         Absence of Certain Changes or Events. Since the date of the Prime
Financial Statements, except in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby, the
business of Prime has been conducted in the Ordinary Course of Business
consistent with past practice and there has not been or occurred:

 

(a)     any Prime Material Adverse Effect or any event, condition, change, or
effect that could reasonably be expected to have, individually or in the
aggregate, a Prime Material Adverse Effect; or

 

(b)     any event, condition, action, or effect that, if taken during the period
from the date of this Agreement through the Effective Time, would constitute a
breach of Section 5.1.

 

3.8.         Taxes. Except as set forth in Section 3.8 of the Prime Disclosure
Schedule,

 

(a)     All Tax Returns of Prime have been timely filed or extended in
accordance with applicable Laws, and each such Tax Return is true, correct and
complete. Prime has timely paid all Taxes due with respect to the taxable
periods covered by such Tax Returns and all other Taxes (whether or not shown on
any Tax Return). Prime has not requested an extension of time within which to
file any Tax Return which has not since been filed. Prime has delivered to the
Companies true, correct and complete copies of all federal and state income Tax
Returns of Prime for the prior five (5) Tax years.

 

(b)     Prime has complied with the provisions of the Code relating to the
withholding and payment of Taxes, including the withholding and reporting
requirements under Code Sections 1441 through 1464, 3401 through 3406, and 6041
through 6049, as well as similar provisions under any other Laws, and has,
within the time and in the manner prescribed by Law, withheld from employee
wages and paid over to the proper Tax authorities all amounts required. Prime
and its subsidiaries have accurately classified all service providers as either
employees or independent contractors for all Tax purposes. Prime (i) has
collected and remitted all applicable sales, use or value-added Taxes to the
appropriate Tax authority, or (ii) has obtained, in good faith, any applicable
sales, use or value-added Tax exemption certificates.

 

(c)     There is no claim against Prime for any Taxes which are owed by Prime
and due under applicable Law, but have not been paid in full, and no assessment,
deficiency, or adjustment has been asserted, proposed, or threatened with
respect to any Tax Return of or with respect to Prime. No written claim has ever
been received by Prime from any Tax authority in a jurisdiction where Prime does
not file Tax Returns that it is or may be subject to taxation in the
jurisdiction. No (i) audit of Prime by any Tax authority has ever been
conducted, is currently pending or is threatened, and (ii) no notice of any
proposed Tax audit, or of any Tax deficiency or adjustment, has been received by
Prime, and there is no reasonable basis for any Tax deficiency or adjustment to
be assessed against Prime.

 

 
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(d)     All Tax deficiencies that have been claimed, proposed, or asserted
against Prime have been fully paid or finally settled, and no issue has been
raised in any examination which, by application of similar principles, could be
expected to result in the proposal or assertion of a Tax deficiency for any
other year not so examined.

 

(e)     No position has been taken on any Tax Return with respect to the
business or operations of Prime for a taxable period for which the statute of
limitations for the assessment of any Taxes with respect thereto has not expired
that is substantially similar to any position which a Tax authority has
successfully challenged in the course of an examination of a Tax Return of
Prime. Prime has not participated in a “reportable transaction” within the
meaning of Treasury Regulation Section 1.6011-4(b)(1) (other than such
transactions that have been properly reported), or transactions that constitute
“listed transactions” as such term is defined in Treasury Regulation Section
1.6011-4(b)(2).

 

(f)     Prime is not a party to or bound by any Tax sharing agreement, Tax
indemnity obligation or similar contract or practice with respect to Taxes
(including any advance pricing agreement, Tax closing agreement or other
agreement relating to Taxes with any Governmental Entity).

 

(g)     Prime has not been a member of an Affiliated Group, other than an
Affiliated Group of which Prime is the common parent, and Prime does not have
any liability for Taxes of any other person under Section 1.1502-6 of the
Treasury Regulations (or any similar provision of Law), as a transferee or
successor, by contract or otherwise.

 

(h)     Prime is not a United States Real Property Holding Corporation as such
term is defined in Section 897 of the Code.

 

(i)     There are no Liens upon any properties or assets of Prime arising from
any failure or alleged failure to pay any Tax (other than Liens relating to
Taxes for which adequate reserves have been recorded in line items on the most
recent Prime Financial Statements).

 

(j)     Prime will not be required to include any item of income in, or exclude
any material item of deduction from, taxable income for any period (or any
portion thereof) ending after the Closing Date as a result of any (i)
installment sale or other transaction on or prior to the Closing Date, (ii) Tax
closing agreement pursuant to Section 7121 of the Code or any corresponding
provision of state, local or foreign Tax Law, (iii) accounting method change or
agreement with any Tax authority, (iv) prepaid amount received on or prior to
the Closing Date, or (v) income from discharge of indebtedness deferred pursuant
to Section 108(i) of the Code or any corresponding provision of state, local or
foreign Tax Law.

 

(k)     Section 3.8 of the Prime Disclosure Schedule sets forth a list of the
entity classification of Prime for U.S. Federal income tax purposes, and, unless
otherwise noted on Section 3.8 of the Prime Disclosure Schedule, each entity has
had such classification at all times since its incorporation or formation, as
applicable.

 

 
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(l)     Section 3.8 of the Prime Disclosure Schedule sets forth a true, correct
and complete list of all Tax Returns filed by Prime with respect to its last
five (5) fiscal years.

 

(m)    Prime has not constituted either a “distributing corporation” or a
“controlled corporation” in a distribution of stock intended to qualify for
tax-free treatment under Section 355 of the Code (i) in the two (2) years prior
to the date of this Agreement or (ii) in a distribution which could otherwise
constitute part of a “plan” or “series of related transactions” (within the
meaning of Section 355(e) of the Code) in conjunction with the transactions
subject to this Agreement.

 

(n)     The most recent Prime Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with GAAP, and, for all periods after the date of the most
recent Prime Financial Statements, Prime has not incurred any liabilities for
Taxes except in the Ordinary Course of Business.

 

 

For purposes of this Agreement:

 

“Affiliated Group” means any affiliated group within the meaning of Section
1504(a) of the Code, or any similar group defined under a similar provision of
Law.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Tax” (and, with correlative meaning, “Taxes” and “Taxable”) means any income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, property, environmental, windfall profit, customs, vehicle,
airplane, boat, vessel or other title or registration, capital stock, franchise,
employees’ income withholding, foreign or domestic withholding, social security,
unemployment, disability, real property, personal property, sales, use,
transfer, value added, alternative, add-on minimum, escheat, unclaimed property
and other tax, fee, assessment, levy, tariff, charge or duty of any kind
whatsoever and any interest, penalty (including a penalty for failing to file a
Tax Return or a true, complete and/or accurate Tax Return), addition or
additional amount thereon imposed, assessed or collected by or under the
authority of any Governmental Entity; and,

 

“Tax Returns” means all returns and reports (including Report of Foreign Bank
and Financial Accounts (FBAR)), amended returns, information returns (including
IRS Form 5741s and IRS Form 5472s), statements, declarations, estimates,
schedules, notices, notifications, forms, elections, certificates or other
documents required to be filed or submitted to any Tax authority with respect to
the determination, assessment, collection or payment of any Tax or in connection
with the administration, implementation or enforcement of, or compliance with,
any Tax.

 

 
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3.9.         Owned and Leased Properties.

 

(a)         Except as set forth in Section 3.9(a) of the Prime Disclosure
Schedules, Prime does not and has not owned any real property.

 

(b)         Section 3.9(b) of the Prime Disclosure Schedule sets forth a
complete and accurate list as of the date of this Agreement of all real property
leased by Prime (including, without limitation, any and all oral leases) (the
“Leased Real Property”), which list shall include addresses, acreage (or a
reasonable estimation thereof to the extent Prime does not have a real estate
survey for such parcel of real property) and a description of the improvements
located thereon. Prime has a valid leasehold interest in all of its Leased Real
Property, free and clear of all Liens (other than Permitted Liens). All leases
associated with Leased Real Property are assignable without any required prior
consents. Prime has delivered to the Companies a true and complete copy of each
such lease.

 

(i)       With respect to each of such lease: (A) such lease is legal, valid,
binding, enforceable, and in full force and effect; (B) neither Prime nor, to
the Knowledge of Prime, any other party to such lease, is in breach or default
under such lease, and no event has occurred or circumstance exists which, with
or without notice, lapse of time, or both, would constitute a breach or default
under such lease; (C) Prime’s possession and quiet enjoyment of the Leased Real
Property under such lease has not been disturbed, and, to the Knowledge of
Prime, there are no disputes with respect to such lease; and (D) there are no
Liens on the estate created by such lease other than Permitted Liens.

 

(ii)      The Leased Real Property constitutes all the real estate and buildings
used by Prime in the conduct of its business. To Prime’s Knowledge, there are no
structural defects or material defects in the mechanical or building systems in
any facility located on any Leased Real Property.

 

(iii)     Except as set forth in Section 3.9(b) of the Prime Disclosure
Schedule, there is no pending, and Prime has not received written notice of any
threatened condemnation, expropriation, eminent domain, environmental, land use,
or special assessment regulatory proceeding or investigation affecting the
Leased Real Property. Prime has not received written notice of any fire, health,
safety, building, hazardous substances, pollution control, zoning, or other
regulatory proceedings, either instituted or planned to be instituted, which
would have a Prime Material Adverse Effect.

 

(iv)     Except as set forth in Section 3.9(b) of the Prime Disclosure Schedule,
no person leases, occupies or is in possession of, or has any rights to lease,
occupy or possess any of the Leased Real Property other than Prime. Except as
set forth in Section 3.9(b) of the Prime Disclosure Schedule, there are no
current options or other Contracts pursuant to which Prime has granted to any
person the option to sublease the Leased Real Property or any interests therein.

 

(v)      Prime will make available to the Bank complete and correct copies of
any and all title policies and underlying title documents, surveys, engineering
and geologic reports, maintenance reports and environmental reports in its
possession with respect to the Leased Real Property.

 

 
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(c)     Prime has good title to, or a valid leasehold interest in, all of its
tangible personal property assets, and except for Taxes not yet due and payable
that are payable without penalty or that are being contested in good faith and
for which adequate reserves have been recorded. All such tangible personal
property assets are free and clear of all Liens, except for (i) Liens for Taxes
not yet due and payable or that are being contested in good faith in appropriate
proceedings and for which appropriate reserves have been established on the most
recent Prime Financial Statements, (ii) Liens for assessments and other
governmental charges or Liens of carriers and warehousemen incurred in the
Ordinary Course of Business, in each case for sums not yet due and payable or
due but not delinquent or being contested in good faith by appropriate
proceedings and as to which appropriate reserves have been established on the
most recent Prime Financial Statements, (iv) Liens set forth on Section 3.9(b)
of the Prime Disclosure Schedule and (v) Liens arising solely due to Prime’s
leasehold interest therein (collectively, “Permitted Liens”).

 

3.10.       Intellectual Property.

 

(a)     For purposes of this Agreement, the term “Intellectual Property” means
all U.S. and foreign (i) inventions (whether patentable or unpatentable and
whether or not reduced to practice), improvements, and U.S. and foreign patents,
patent applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, divisionals, continuations-in-part,
revisions, extensions and reexaminations, (ii) U.S. and foreign trademarks,
service marks, trade dress, logos, trade names and corporate names, and
including all associated goodwill, and all applications, registrations and
renewals, (iii) copyrightable works, copyrights and all applications,
registrations and renewals (iv) trade secrets and confidential business
information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques, technical
data, patterns, industrial designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (v) domain names and computer software (including data and
related documentation) and (vi) proprietary or confidential information and all
documentation materials related thereto.

 

(b)     Except as set forth in Section 3.10 of the Prime Disclosure Schedule,
Prime owns all right, title and interest in and to the Intellectual Property
identified in Section 3.10 free and clear of any and all Liens. Prime otherwise
possesses licenses to use Prime Intellectual Property (as defined below). Prime
hereby represents that it shall, after the execution and delivery of this
Agreement by Prime and consummation of the transactions contemplated hereunder,
continue to own, license, sublicense or otherwise possess, legally enforceable
rights to use all Intellectual Property necessary to conduct the business of
Prime as currently conducted (the “Prime Intellectual Property”).

 

(c)     (i) The conduct of the businesses of Prime has not infringed,
misappropriated, or otherwise violated, and is not infringing, misappropriating,
or otherwise violating, any Intellectual Property of any other person; and (ii)
to the Knowledge of Prime, no third party is infringing upon, violating, or
misappropriating any Prime Intellectual Property.

 

 
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(d)         There are no Actions pending or, to the Knowledge of Prime,
threatened: (i) alleging any infringement, misappropriation, or violation of the
Intellectual Property of any person by Prime; or (ii) challenging the validity,
enforceability, or ownership of any Prime Intellectual Property or Prime’s
rights with respect to any Prime Intellectual Property. Prime is not subject to
any outstanding order that restricts or impairs the use of any Prime
Intellectual Property.

 

3.11.        Contracts

 

(a)          For purposes of this Agreement, “Prime Material Contract” shall
mean:

 

(i)       each employment or other similar Contract providing for compensation,
severance or a fixed term of employment in respect of services performed by any
employees of Prime;

 

(ii)      each management, consulting, subcontractor, retainer or other similar
type of agreement under which services are provided by any person to Prime in
excess of $10,000 per annum or $25,000 in the aggregate;

 

(iii)     each other agreement or commitment for services and supplies provided
by any other person to Prime with a term of more than one (1) year or requiring
payments of more than $10,000 per annum or $25,000 in the aggregate;

 

(iv)     any Contract providing for indemnification or any guaranty by Prime;

 

(v)      any Contract limiting the right of Prime to engage in any line of
business or compete with any person in any line of business or to compete with
any party, otherwise prohibiting or limiting the right of Prime to solicit
customers, employees or other service providers;

 

(vi)     any Contract relating to the disposition or acquisition by Prime after
the date of this Agreement of a material amount of assets or pursuant to which
Prime has any material ownership interest in any other person or other business
enterprise or to which will otherwise constitute a capital expenditure in excess
of $10,000;

 

(vii)     any mortgages, notes, bonds, indentures, guarantees, loans or credit
agreements, security agreements, deeds of trust, purchase money agreements,
conditional sales contracts, capital leases or other contracts or instruments
evidencing indebtedness or extension of credit, and each guaranty of any
indebtedness or other obligation, or the net worth of any person, other than
loans and instruments in the Ordinary Course of Business;

 

(viii)     any Contract under which Prime has licensed, sublicensed or otherwise
granted or transferred any Intellectual Property to a third party, involving or
having the potential to enable either party to generate sales in an amount in
excess of $10,000;

 

 
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(ix)     any Contract by Prime with any Governmental Entity;

 

(x)      any Contract that requires a consent to or otherwise contains a
provision relating to a “change of control,” or that would prohibit or delay the
consummation of the transactions contemplated by this Agreement;

 

(xi)     any Contract that grants any right of first refusal, right of first
offer, or similar right with respect to any material assets, rights, or
properties of Prime;

 

(xii)     any Contract that obligates Prime to conduct business on an exclusive
or preferential basis or that contains a “most favored nation” or similar
covenant with any third party or upon consummation of the Merger will obligate
Patriot or the Surviving Corporation to conduct business on an exclusive or
preferential basis or that contains a “most favored nation” or similar covenant
with any third party;

 

(xiii)    any Contract under which Prime has received a license to or otherwise
received any rights under any Intellectual Property that is material to the
business of Prime taken as a whole;

 

(xiv)    any Contract with an Affiliate, or, to Prime’s Knowledge, with any
entity which an officer or director of Prime holds an interest;

 

(xv)     any Contract affecting or governing ownership, development or use of
any Intellectual Property of Prime;

 

(xvi)    any partnership, joint venture or similar Contract;

 

(xvii)   any Contract or instrument (other than purchase orders and similar
agreements entered into in the Ordinary Course of Business) having an indefinite
term or a fixed term of more than one (1) year (other than those that are
terminable by Prime, on no more than thirty (30) Business Days’ notice without
liability or financial obligation to Prime) that requires an expenditure by
Prime of more than $10,000 on an annual basis or in excess of $25,000 over the
current Contract term or the loss of which could reasonably be expected to have,
directly or indirectly, individually or in the aggregate, a Prime Material
Adverse Effect; or

 

(xviii)  any Contract which is not otherwise described in clauses (i)-(xviii)
above that is material to Prime.

 

(b)     Section 3.11 of the Prime Disclosure Schedule sets forth a list of all
Prime Material Contracts to which Prime is a party as of the date hereof. Prime
has made available to the Companies correct and complete copies of all Prime
Material Contracts, including any amendments thereto. Except as specifically set
forth on Section 3.11 of the Prime Disclosure Schedule, Prime is not (with or
without the lapse of time or the giving of notice, or both) and, to the
Knowledge of Prime, no third party is in breach of or in default under any of
Prime Material Contracts.

 

 
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(c)     All Prime Material Contracts are valid and in full force and effect
except to the extent they have previously expired in accordance with their
terms.

 

3.12.       Litigation. Except as set forth in Section 3.12 of the Prime
Disclosure Schedule, there is no action, suit, proceeding, claim, arbitration or
investigation (each, an “Action”) pending or threatened in writing (nor to
Prime’s Knowledge, are there any facts which could lead to such an Action), in
each case against, affecting or in any way related to Prime or its business at
law or in equity, before any Governmental Entity. There are no judgments,
orders, rulings, charges, injunctions, notices of violations, decrees or other
mandates against Prime. There is no Action pending or threatened in writing (nor
to Prime’s Knowledge, are there any facts which could lead to such an Action),
in each case, as of the date of this Agreement against Prime or, to Prime’s
Knowledge, any of its directors or executive officers, alleging a violation of
federal or state securities laws that relates to Prime. Nothing set forth in
Section 3.12 of the Prime Disclosure Schedule, either individually or when
aggregated with other items set forth on such Schedule, could reasonably be
expected to have a Prime Material Adverse Effect.

 

 

3.13.        Environmental Matters.

 

(a)          Except as set forth in Section 3.13 of the Prime Disclosure
Schedule:

 

(i)       Prime has not received any written notice, written report or other
written information regarding any actual or alleged, or, to Prime’s Knowledge,
threatened, violation or liability under Environmental Laws, including any
investigatory, remedial or corrective obligations, arising under any
Environmental Laws at any property or site currently or formerly owned,
operated, leased or occupied by Prime;

 

(ii)      Prime has obtained, maintained and is in compliance with, all permits,
licenses and other authorizations necessary under Environmental Laws
(collectively “Environmental Permits”) for the occupation of its facilities and
the operation of its businesses and Prime has not received written notice
regarding any proposed, or to Prime’s Knowledge, threatened, action to revoke,
cancel, terminate, or limit or modify the terms of any Environmental Permits;

 

(iii)     Prime is not subject to any orders, decrees or injunctions issued by
any Governmental Entity relating to Environmental Laws, Hazardous Substances or
Contamination;

 

(iv)     Prime is, and during the term of applicable statutes of limitation at
all prior times has been, in material compliance with all applicable
Environmental Laws and all Environmental Permits; and

 

(v)      Prime either expressly, by operation of Law, or otherwise, has not
assumed or undertaken any liability of any other person under any Environmental
Law, including without limitation, any obligation for investigation or
corrective or remedial action under any Environmental Law.

 

 
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(b)         Prime has provided to the Bank, prior to the execution of this
Agreement, complete and correct copies of any environmental investigations,
studies, audits, tests, reviews or other analyses that are in the possession or
control of Prime, in relation to any property, site or facility now or
previously owned, operated, leased or occupied by Prime excluding the drafts of
such documents and any documents subject to the attorney-client privilege or
attorney work product doctrine.

 

(c)     For purposes of this Agreement, the term “Environmental Law” means any
law, statute, regulation, order, decree or permit or other legally binding
requirement of any local, state, federal or foreign governmental jurisdiction
relating to: (i) the protection, investigation or restoration of the indoor or
outdoor environment, human health or safety, or natural resources, (ii) the
handling, use, storage, treatment, transport, remediation, investigation,
disposal, release or threatened release of any Hazardous Substances or (iii)
noise, odor or wetlands protection.

 

(d)     For purposes of this Agreement, the term “Hazardous Substance” means:
(i) any substance that is regulated or that falls within the definition of a
“hazardous substance,” “solid waste,” “hazardous waste,” “toxic waste” or
“hazardous material” pursuant to any Environmental Law; (ii) any petroleum,
petroleum product or by-product, asbestos or asbestos-containing material,
polychlorinated biphenyls, radioactive materials or radon; or (iii) any
substance the release of which could reasonably be expected to result in
liability under any Environmental Law.

 

(e)     For purposes of this Agreement, the term “Contamination” means the
presence of Hazardous Substances in, on or under the soil, ambient air,
groundwater, surface water or other environmental media or within occupied
structures requiring investigation, remediation, removal, reporting or other
response action under any Environmental Law or that could otherwise reasonably
be expected to result in liability under any Environmental Law.

 

(f)     None of the Leased Real Property qualifies as an “establishment” as
defined by the Connecticut Transfer Act, Conn. Gen. Stat. §§ 22a-134 et seq.,
(the “Transfer Act”; for purposes of this Section 3.13, terms in quotations
herein are defined by the Transfer Act) and therefore that the Merger does not
qualify as a “transfer” under the Transfer Act. The provisions of this Section
3.13(f) shall survive the Closing.

 

 
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3.14.     Employee Benefit Plans.

 

(a)     Section 3.14(a) of the Prime Disclosure Schedule sets forth a complete
and accurate list as of the date of this Agreement of all Employee Benefit Plans
maintained, sponsored or contributed to or required to be contributed to, by
Prime, or any of its ERISA Affiliates, or with respect to which Prime or any of
its ERISA Affiliates has or may have any material liability, contingent or
otherwise (together, the “Prime Employee Plans”). For purposes of this
Agreement, the following terms shall have the following meanings: (i) “Employee
Benefit Plan” means any “employee pension benefit plan” (as defined in Section
3(2) of ERISA), any “employee welfare benefit plan” (as defined in Section 3(1)
of ERISA), and any other written or oral plan, agreement, policy or arrangement
involving direct or indirect compensation involving one or more persons,
including, without limitation, insurance coverage, severance benefits,
disability benefits, retiree medical benefits, pension, deferred compensation,
bonuses, stock options, stock purchase, phantom stock, stock appreciation or
other forms of incentive compensation or post-retirement compensation and all
unexpired severance agreements, for the benefit of, or relating to, any current
or former employee or director of Prime or an ERISA Affiliate; (ii) “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended; and (iii)
“ERISA Affiliate” means any entity, trade or business that is a member of (A) a
controlled group of corporations (as defined in Section 414(b) of the Code), (B)
a group of trades or businesses under common control (as defined in Section
414(c) of the Code) or (C) an affiliated service group (as defined under Section
414(m) of the Code), which includes Prime.

 

(b)     With respect to each Prime Employee Plan, Prime has made available to
the Bank a complete and accurate copy of (as applicable) (i) the plan document
or other governing contract for such Prime Employee Plan, including all
amendments and supplements thereto, and a summary of any unwritten Prime
Employee Plan, (ii) the last three (3) annual reports (Form 5500, including
schedules and attachments) filed with the Internal Revenue Service or Department
of Labor; (iii) each trust agreement, group annuity contract, or other funding
agreement or contract for Prime Employee Plan; (iv) the most recently
distributed summary plan description, any summaries of material modification,
and any similar descriptions prepared or required for any Prime Employee Plan
relating to such Prime Employee Plan; and (v) the most recently received
determination letter and/or opinion letter issued by the Internal Revenue
Service for any Prime Employee Plan.

 

(c)     Each Prime Employee Plan is being operated and administered in all
material respects in accordance with ERISA, the Code and all other applicable
laws and the regulations thereunder and in accordance with its terms. None of
Prime, or their ERISA Affiliates, any officer or employee of Prime or such ERISA
Affiliate, or any Prime Employee Plans which are subject to ERISA, including any
trusts created thereunder, or any trustee, administrator, or fiduciary thereof,
has engaged in a non-exempt prohibited transaction (as defined in Section 406 of
ERISA or Section 4975 of the Code) that could result in material liability to
Prime. All contributions and all payments and premiums required to have been
made to or under any Prime Employee Plan have been made (or otherwise accrued to
the extent required by GAAP if not yet due). Nothing has occurred with respect
to the operation of Prime Employee Plans that would reasonably be expected to
cause the imposition of a material liability, penalty or tax on Prime under
ERISA, the Code or other applicable Law. No Prime Employee Plans have been
terminated, nor has there been any reportable event (as defined in Section 4043
of ERISA) with respect to any Prime Employee Plan within the last three (3)
years.

 

(d)     The assets of each Prime Employee Plan that is funded are reported at
their fair market value on the books and records of such Prime Employee Plan.

 

 
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(e)     All Prime Employee Plans that are intended to be qualified under Section
401(a) of the Code are so qualified and, if they are not maintained pursuant to
a prototype plan have received determination letters from the Internal Revenue
Service to the effect that such Prime Employee Plans are qualified and the plans
and trusts related thereto are exempt from federal income taxes under Sections
401(a) and 501(a), respectively, of the Code. No such determination letter has
been revoked and revocation has not been threatened and no act or omission has
occurred, that would materially and adversely affect its qualification or
materially increase its cost. Any voluntary employee benefit association that
provides benefits to current or former employees of Prime, or any of its ERISA
Affiliates, or their beneficiaries, is and has been qualified under Section
501(c)(9) of the Code.

 

(f)     Neither Prime, nor any of its ERISA Affiliates (i) maintains a Prime
Employee Plan that was ever subject to Section 412 of the Code or Title IV of
ERISA or (ii) has ever been obligated to contribute to, or ever incurred any
liability (contingent or otherwise) with respect to, an employee benefit plan
that is subject to Section 412 of the Code or Title IV of ERISA, or a
“multiemployer plan” (as defined in Section 4001(a)(3) of ERISA).

 

(g)     Except as set forth in Section 3.14(g) of the Prime Disclosure Schedule,
neither Prime nor any of its ERISA Affiliates is a party to any oral or written
agreement with any shareholder, director, executive officer or other employee of
Prime, the benefits of which are contingent or accelerated, or the terms of
which are materially altered, upon the occurrence of a transaction involving
Prime of the nature of any of the transactions contemplated by this Agreement.

 

(h)     Except as set forth in Section 3.14(h) of the Prime Disclosure Schedule,
there are no pending or, to Prime’s Knowledge, threatened suits, audits,
examinations, actions, litigation or claims (excluding claims for benefits
incurred in the ordinary course) with respect to any Prime Employee Plans that,
individually or in the aggregate, are reasonably likely to result in any
material liability to Prime.

 

(i)      Except as set forth in Section 3.14(i) of the Prime Disclosure
Schedule, Prime has not maintained and has no obligation to contribute to, or
provide coverage under, any retiree life or retiree health plans or arrangements
which provide for continuing benefits or coverage for current or former
officers, directors or employees of Prime, except as may be required under part
6 of Subtitle B of Title I of ERISA and at the sole expense of the participant
or the participant’s beneficiary.

 

(j)      Each Prime Employee Plan that is a nonqualified deferred compensation
plan (as defined under Code Section 409A) satisfies the applicable requirements
of Sections 409A(a)(2),(3) and (4) of the Code, and has been operated and
maintained, in accordance with Section 409A of the Code and the Treasury
Regulations Promulgated thereunder, subject to applicable guidance of the United
States Department of Treasury and the Internal Revenue Service.

 

(k)     Except as set forth in Section 3.14(k) of the Prime Disclosure Schedule,
no payment, accrual of additional benefits, acceleration of payments or vesting
in any benefit under any Prime Employee Plan or other agreement or arrangement
will be caused by Prime’s entering into this Agreement or by the consummation of
the transactions contemplated hereby (either alone or in combination with any
other event). There is no contract, agreement, plan or arrangement covering any
employee or former employee of Prime or any of its Affiliates that, individually
or collectively, in connection with the transactions contemplated by this
Agreement (either alone or in combination with any other event) will give rise
to the payment to any person of a “parachute payment” within the meaning of
Section 280G of the Code.

 

 
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(l)      The transactions contemplated by this Agreement do not and will not
individually or collectively constitute a “prohibited transaction” under the
Code or ERISA for which no statutory or administrative exemption is available.

 

(m)     Notwithstanding anything to the contrary in this Agreement, neither this
Section 3.14 nor any provision of this Agreement is intended to, or does,
constitute the establishment of, or an amendment to, any Prime Employee Plan.

 

3.15.       Compliance With Laws. Prime is and has been in compliance in all
material respects with, is not in violation of, and, has not received any
written notice alleging any violation with respect to, any Law with respect to
the conduct of its businesses, or the ownership or operation of its respective
properties or assets, except for failures or violations that would not have a
Prime Material Adverse Effect.

 

For purposes of this Agreement, “Law” means any law in any jurisdiction
(including common law), statute, code, ordinance, rule, regulation, permit,
order, decree or other requirement or guideline.

 

3.16.       Permits. All material governmental licenses, approvals,
authorizations, registrations, consents, orders, certificates, decrees,
franchises and permits (collectively, “Permits”) of Prime, are set forth on
Section 3.16 of the Prime Disclosure Schedule. Such Permits are all of the
material Permits necessary for the services provided by Prime and the conduct
and operation of its business. All such Permits are in full force and effect;
and no proceeding is pending or, to Prime’s Knowledge, threatened, seeking the
revocation or limitation of any such Permit. To Prime’s Knowledge, there exists
no state of facts which could cause any Governmental Entity to limit, revoke or
fail to renew any Permit related to or in connection with any business as
currently conducted or operated by Prime.

 

3.17.       Labor Matters.

 

(a)     Section 3.17(a) of the Prime Disclosure Schedule contains a list as of
the date of this Agreement of all employees of Prime, along with the position
and the annual rate of base compensation and date of hire of each such person.

 

(b)     No employee or former employee of Prime is subject to any collective
bargaining agreement relating to their employment with Prime and there is no
union or other labor organization which, pursuant to applicable Law, must be
notified or consulted or with which negotiations need to be conducted by
operation of law in connection with the Merger.

 

(c)     Except as set forth in Section 3.17(c) of the Prime Disclosure Schedule,
Prime is not the subject of any proceeding asserting that Prime has committed an
unfair labor practice or is seeking to compel it to bargain with any labor union
or other labor organization, and there is not pending or, to Prime’s Knowledge,
threatened, any labor strike, dispute, walkout, work stoppage, slow-down or
lockout involving Prime that individually or in the aggregate, is reasonably
likely to have a Prime Material Adverse Effect, and there has not been any such
action.

 

 
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(d)     Except as set forth in Section 3.17(d) of the Prime Disclosure Schedule,
Prime is not the subject of any proceeding pending or, to Prime’s Knowledge,
threatened before the Equal Employment Opportunity Commission or any other
similar state or local agency responsible for the prevention of unlawful
employment practices.

 

3.18.       Insurance. Prime has made available to the Bank copies of all
current insurance policies and binders (the “Insurance Policies”) (i) insuring
the business or properties of Prime or (ii) which provide insurance for any
director, officer, employee, fiduciary or agent of Prime that is held by or on
behalf of Prime. All material Insurance Policies are in full force and effect
(to Prime’s Knowledge, free from any presently exercisable right of termination
on the part of the insurance company issuing such policy prior to the expiration
of the terms of such policy) and all premiums due and payable in respect thereof
have been paid. Except as set forth in Section 3.18 of the Prime Disclosure
Schedule, there are no outstanding claims under any Insurance Policy nor have
there been any claims which have been denied or disputed by the insurer. Prime
has not received written or, to Prime’s Knowledge, oral notice of cancellation
or termination with respect to any Insurance Policy that has not been replaced
on substantially similar terms prior to the date of such cancellation. The
transactions contemplated by this Agreement shall not give rise to a right of
termination of any such policy by the insurance company issuing the same prior
to the expiration of one term of such policy.

 

3.19.      Affiliate Transactions. Except as disclosed in Section 3.19 of the
Prime Disclosure Schedule, no officer, director, employee, equity holder, or
Affiliate of Prime is or was a party to any Contract or transaction or loan to,
from or with Prime or has any interest in any property, real or personal or
mixed, tangible or intangible, of Prime. For purposes of this Agreement,
“Affiliate” means, with respect to any person, any person that, directly or
indirectly, controls, is controlled by, or is under common control with, such
person in question. For the purposes of this definition, “control” (including,
with correlative meaning, the terms “controlled by” and “under common control
with”) as used with respect to any person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such person, whether through the ownership of voting securities
or by contract or otherwise.

 

3.20.      Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Prime.

 

3.21.      Books and Records. The books and records of Prime and its operations,
employees and properties, have been maintained in the usual, regular and
ordinary manner, all entries with respect thereto have been accurately made in
all material respects.

 

 
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3.22.     Proxy Statement. None of the information included or incorporated by
reference in the Proxy Statement will, at the date it is first mailed to the
Stockholders or at the time of the Prime Meeting or at the time of any amendment
or supplement thereof, contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, no representation or warranty is made
by Prime with respect to statements made or incorporated by reference therein
based on information supplied by the Companies expressly for inclusion or
incorporation by reference in the Proxy Statement.

 

3.23.      Anti-Corruption Matters. None of Prime or any director, officer or,
to the Knowledge of Prime, employee or agent of Prime has: (a) used any funds
for unlawful contributions, gifts, entertainment, or other unlawful payments
relating to an act by any Governmental Entity; (b) made any unlawful payment to
any foreign or domestic government official or employee or to any foreign or
domestic political party or campaign or violated any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (c) made any other
unlawful payment under any applicable Law relating to anti-corruption, bribery,
or similar matters. Prime has not disclosed to any Governmental Entity that it
violated or may have violated any Law relating to anti-corruption, bribery, or
similar matters. To the Knowledge of Prime, no Governmental Entity is
investigating, examining, or reviewing Prime’s compliance with any applicable
provisions of any Law relating to anti-corruption, bribery, or similar matters.

 

3.24.      Fairness Opinion. Prime has received the written opinion of Prime’s
financial advisor (and has provided a copy of such opinion to the Companies) to
the effect that, as of such date and based upon and subject to the
qualifications and assumptions set forth therein, the Merger Consideration Per
Share is fair, from a financial point of view, to the holders of shares of Prime
Common Stock, and, as of the date of this Agreement, such opinion has not been
withdrawn, revoked, or modified.

 

3.25.       Regulatory Issues.

 

(a)     Prime and each of its officers and directors are in compliance in all
material respects with, and have complied in all material respects, with (i) the
applicable provisions of the Sarbanes-Oxley Act and the related rules and
regulations promulgated under such act and (ii) the Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010.

 

(b)     Neither Prime nor, to Prime’s Knowledge, any director, officer,
employee, auditor, accountant or representative of Prime has received or
otherwise had or obtained Knowledge of any material complaint, allegation,
assertion or claim, whether written or oral, regarding the accounting or
auditing practices, procedures, methodologies or methods of Prime or its
respective internal accounting controls, including any material complaint,
allegation, assertion or claim that Prime has engaged in questionable accounting
or auditing practices.

 

(c)     Prime has duly filed with the Secretary of State of the State of
Connecticut, the DOB, the FDIC, and any other applicable Governmental Entity, in
correct form, the reports and other documents required to be filed under
applicable Laws and regulations and has paid all fees and assessments due and
payable in connection therewith, and such reports were, in all material
respects, complete and accurate and in compliance with the requirements of
applicable Laws and regulations. Other than normal examinations conducted by a
Governmental Entity in the Ordinary Course of Business of Prime, no Governmental
Entity has notified Prime that it has initiated any proceeding or, to Prime’s
Knowledge, threatened an investigation into the business or operations of Prime.
There is no material unresolved violation, criticism, or exception by any
Governmental Entity with respect to any report or statement relating to any
examinations or inspections of Prime. There have been no material formal or
informal inquiries by, or disagreements or disputes with, any Governmental
Entity with respect to the business, operations, policies or procedures of
Prime.

 

 
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(d)     Prime is “well-capitalized,” as such term is defined in the rules and
regulations promulgated by the FDIC and the DOB.

 

3.26.       Investment Securities. Section 3.26 of the Prime Disclosure Schedule
sets forth the investment securities of Prime (the “Prime Investment
Securities”), as well as any purchases or sales of Prime Investment Securities
between September 30, 2015 to and including the date hereof reflecting with
respect to all such securities, whenever purchased or sold, descriptions
thereof, CUSIP numbers, designations as securities “available for sale” or
securities “held to maturity” (as those terms are used in ASC 320), book values
and coupon rates, and any gain or loss with respect to any Prime Investment
Securities sold during such time period after September 30, 2015. Prime does not
own any of the outstanding equity of any savings bank, savings and loan
association, savings and loan holding company, credit union, bank or bank
holding company, insurance company, mortgage or loan broker or any other
financial institution other than Prime.

 

3.27.       Derivative Transactions. Prime has not entered into any swap
transaction, option, warrant, forward purchase or sale transaction, futures
transaction, cap transaction, floor transaction or collar transaction, in each
case, relating to one or more currencies, commodities, bonds, equity securities,
loans, interest rates, catastrophe events, weather-related events,
credit-related events or conditions or any indexes, or any other similar
transaction (including any option with respect to any of these transactions) or
combination of any of these transactions, including collateralized mortgage
obligations or other similar instruments or any debt or equity instruments
evidencing or embedding any such types of transactions, and any related credit
support, collateral or other similar arrangements related to any such
transaction or transactions.

 

3.28.       Loans; Nonperforming and Classified Assets.

 

(a)     Section 3.28(a) of the Prime Disclosure Schedule identifies any written
or oral loan, loan agreement, note or borrowing arrangement and other extensions
of credit (including, without limitation, leases, credit enhancements,
commitments, guarantees and interest-bearing assets) to which Prime is a party
as obligee (collectively, “Loans”), under the terms of which the obligor was
over sixty (60) days delinquent in payment of principal or interest as of such
date.

 

(b)     Section 3.28(b) of the Prime Disclosure Schedule identifies each Loan
that was classified as “Special Mention,” “Substandard,” “Doubtful,” “Loss,”
“Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch
List” or words of similar import by Prime or any bank examiner, together with
the principal amount of and accrued and unpaid interest on each such Loan and
the identity of the borrower thereunder as of such date.

 

 
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(c)     Section 3.28(c) of the Prime Disclosure Schedule identifies each asset
of Prime that was classified as other real estate owned (“OREO”) and the book
value thereof as of the date of this Agreement as well as any assets classified
as OREO since September 30, 2015 and any sales of OREO between September 30,
2015 and the date hereof, reflecting any gain or loss with respect to any OREO
sold.

 

(d)     Except as would not reasonably be expected to be material, each Loan
held in Prime’s loan portfolio (each a “Prime Loan”) (i) is evidenced by notes,
agreements or other evidences of indebtedness that are true, genuine and what
they purport to be, (ii) to the extent secured, is and has been secured by valid
Liens which have been perfected and (iii) to Prime’s Knowledge, is a legal,
valid and binding obligation of the obligor named therein, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
conveyance and other Laws of general applicability relating to or affecting
creditors’ rights and to general equity principles.

 

(e)     All currently outstanding Prime Loans were solicited, originated and
currently exist in material compliance with all applicable requirements of Law
and Prime’s lending policies at the time of origination of such Prime Loans, and
the notes or other credit or security documents with respect to each such
outstanding Prime Loan are complete and correct in all material respects. There
are no oral modifications or amendments or additional agreements related to the
Prime Loans that are not reflected in the written records of Prime. All such
Prime Loans are owned by Prime free and clear of any Liens (other than blanket
Liens by the Federal Home Loan Bank of Boston). No claims of defense as to the
enforcement of any Prime Loan have been asserted in writing against Prime for
which there is a reasonable probability of an adverse determination, and Prime
has no Knowledge of any acts or omissions which would give rise to any claim or
right of rescission, set-off, counterclaim or defense for which there is a
reasonable probability of an adverse determination to Prime. Except as set forth
in Section 3.28(e) of the Prime Disclosure Schedule, no Prime Loans are
presently serviced by third parties, and there is no obligation which could
result in any Prime Loan becoming subject to any third party servicing.

 

(f)     Except as would not reasonably be expected to be material, Prime is not
a party to any agreement or arrangement with (or otherwise obligated to) any
person which obligates Prime to repurchase from any such person any Loan or
other asset of Prime, unless there is a material breach of a representation or
covenant by Prime, and none of the agreements pursuant to which Prime has sold
Loans or pools of Loans or participations in Loans or pools of Loans contain any
obligation to repurchase such Loans or interests therein solely on account of a
payment default by the obligor on any such Loan.

 

(g)     Prime is not now nor has it ever been since January 1, 2012, subject to
any fine, suspension, settlement or other contract or other administrative
agreement or sanction by, or any reduction in any loan purchase commitment from,
any Governmental Entity relating to the origination, sale or servicing of
mortgage or consumer Loans.

 

3.29.       Allowance for Loan and Lease Losses. Prime’s allowance for loan and
lease losses as reflected in the latest balance sheet was, in the opinion of
management, as of the applicable date thereof, in compliance with Prime’s
existing methodology for determining the adequacy of its allowance for loan and
lease losses as well as the standards established by applicable Governmental
Entities, the Financial Accounting Standards Board and GAAP.

 

 
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3.30.     Trust Business; Administration of Fiduciary Accounts. Prime has not
offered or engaged in providing any individual or corporate trust services or
administers any accounts for which it acts as a fiduciary, including, but not
limited to, any accounts in which it serves as a trustee, agent, custodian,
personal representative, guardian, conservator or investment advisor.

 

3.30.     Investment Management and Related Activities. None of Prime or any of
its directors, officers or employees is required to be registered, licensed or
authorized under the Laws of any Governmental Entity as an investment adviser, a
broker or dealer, an insurance agency or company, a commodity trading adviser, a
commodity pool operator, a futures commission merchant, an introducing broker, a
registered representative or associated person, investment adviser,
representative or solicitor, a counseling officer, an insurance agent, a sales
person or in any similar capacity with a Governmental Entity.

 

3.32.     Repurchase Agreements. Prime has not entered into any agreements
pursuant to which Prime has purchased securities subject to an agreement to
resell.

 

3.31.     Deposit Insurance. The deposits of Prime are insured by the FDIC in
accordance with the Federal Deposit Insurance Act (“FDIA”) to the full extent
permitted by Law, and Prime has paid all premiums and assessments and filed all
reports required by the FDIA. No proceedings for the revocation or termination
of such deposit insurance are pending or, to Prime’s Knowledge, threatened.

 

3.32.     Community Reinvestment Act, Anti-money Laundering and Customer
Information Security. Except as has not been and would not reasonably be
expected to materially and adversely impact or interfere with Prime’s
operations, Prime is not a party to any agreement with any individual or group
regarding Community Reinvestment Act matters and Prime does not have Knowledge
of any facts or circumstances that would cause Prime: (a) to be deemed not to be
in compliance with the Community Reinvestment Act, and the regulations
promulgated thereunder, or to be assigned a rating for Community Reinvestment
Act purposes by federal or state bank regulators of lower than “satisfactory”;
(b) to be deemed to be operating in violation of the Bank Secrecy Act and its
implementing regulations (31 C.F.R. Part 103), the USA PATRIOT Act, any order
issued with respect to anti-money laundering by the U.S. Department of the
Treasury’s Office of Foreign Assets Control, or any other applicable anti-money
laundering statute, rule or regulation; or (c) to be deemed not to be in
compliance with the applicable privacy of customer information requirements
contained in any federal and state privacy Laws and regulations, including,
without limitation, in Title V of the Gramm-Leach-Bliley Act of 1999 and
regulations promulgated thereunder, as well as the provisions of the information
security program adopted by Prime pursuant to 12 C.F.R. Part 364. Furthermore,
the Prime Board has adopted and Prime has implemented an anti-money laundering
program that contains adequate and appropriate customer identification
verification procedures that meets the requirements of Sections 352 and 326 of
the USA PATRIOT Act.

 

 
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3.33.       Disclosure. No representation or warranty by Prime contained in this
Agreement or any other Transaction Document or any statement or certificate
furnished by Prime to the Bank or its representatives in connection herewith or
therewith or pursuant hereto or thereto contains any untrue statement of a
material fact, or omits to state any material fact required to make the
statements herein or therein contained not misleading. There is no fact known to
Prime which might reasonably be expected to have a Prime Material Adverse
Effect.

 

ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PATRIOT AND THE BANK

 

Patriot and the Bank represent and warrant to Prime as of the date hereof and as
of the Closing Date that the statements contained in this Article IV are true
and correct, except as set forth herein. For purposes of this Agreement, “Bank’s
Knowledge” or the “Knowledge of Bank” shall mean the actual knowledge of Michael
A. Carrazza, Richard Muskus, Sam Davis, Joseph Perillo and Frederick Staudmyer
(the “Relevant Persons”). For the avoidance of doubt, Bank’s Knowledge shall be
deemed to exist also with respect to any fact or circumstance that the Relevant
Persons would have been aware of if they had discussed the subject matter of
such representations and warranties with their staff members in the Ordinary
Course of Business.

 

4.1.        Organization, Standing and Power. Each of Patriot and the Bank is a
corporation and bank, respectively, duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation or chartering,
has all requisite corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as now being conducted, and
is duly qualified and licensed to do business and, where applicable as a legal
concept, is in good standing as a foreign corporation in each jurisdiction in
which the character of the properties it owns, operates or leases or the nature
of its activities makes such qualification necessary, except for such failures
to be so organized, qualified, licensed or in good standing, individually or in
the aggregate, that are not reasonably likely to have a Bank Material Adverse
Effect.

 

For purposes of this Agreement, the term “Bank Material Adverse Effect” means
any adverse change, event, effect, circumstance or development with respect to,
or, that, individually or together with any other change, event, effect,
circumstance or development, on a long term basis, materially diminishes the
financial position of Bank or Patriot, the ability of Bank or Patriot to perform
their obligations under any Transaction Documents, or the validity or
enforceability of any of the Transaction Documents or the rights and remedies of
the Bank or Patriot (except as a result of any act or failure to act by the Bank
or Patriot) under any of the Transaction Documents; provided, however, that none
of the following shall constitute, or shall be considered in determining whether
there has occurred, a Bank Material Adverse Effect: (i) changes that are the
result of economic or political factors affecting the national, regional or
world economy or acts of war or terrorism; (ii) changes in GAAP or regulatory
accounting requirements applicable to banks generally; (iii) any modifications
or changes to valuation policies and practices in connection with the
transactions contemplated by this Agreement, in each case in accordance with
GAAP; (iv) changes that are the result of factors generally affecting the
banking industry and (v) changes in Law, rules or regulations or generally
accepted accounting principles or the interpretation thereof; provided, further,
that any change, event, effect, circumstance or development referred to in
clauses (i) through (v) immediately above shall be taken into account in
determining whether a Bank Material Adverse Effect has occurred or could
reasonably be expected to occur to the extent that such change, event, effect,
circumstance or development has a disproportionate effect on Bank compared to
other participants in the industries in which Bank conducts its businesses.

 

 
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4.2.         Authority; No Conflict; Required Filings and Consents.

 

(a)     Each of Patriot and the Bank has all requisite corporate power and
authority to enter into this Agreement and each other Transaction Document to
which it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and each other Transaction
Document to which it is a party and the consummation of the transactions
contemplated hereby and thereby by Patriot and the Bank have been duly
authorized by all necessary corporate action on the part of each of Patriot and
the Bank. This Agreement has been duly executed and delivered by each of Patriot
and the Bank and constitutes the valid and binding obligation of each of Patriot
and the Bank, enforceable against each of them in accordance with its terms,
subject to the Bankruptcy and Equity Exception.

 

(b)     The execution and delivery of this Agreement and each of the other
Transaction Documents to which each of Patriot and the Bank are a party do not,
and the consummation by Patriot and the Bank of the transactions contemplated
hereby and thereby shall not, (i) conflict with, or result in any violation or
breach of, any provision of the Articles of Association or By-laws of Patriot or
the Certificate of Incorporation or By-laws of the Bank, (ii) conflict with, or
result in any violation or breach of, or constitute (with or without notice or
lapse of time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any material benefit)
under, require a consent or waiver under, constitute a change in control under,
require the payment of a penalty under or result in the imposition of any Lien
on Patriot’s or the Bank’s assets under, any of the terms, conditions or
provisions of any lease, license, contract or other agreement, instrument or
obligation to which Patriot or the Bank is a party or by which any of them or
any of their properties or assets may be bound, or (iii) subject to compliance
with the requirements specified in clauses (i), (ii), and (iii) of Section
4.2(c), conflict with or violate any permit, franchise, license, judgment,
injunction, order, decree, statute, law, ordinance, rule or regulation
applicable to Patriot or the Bank or any of its or their respective properties
or assets, except in the case of clauses (ii) and (iii) of this Section 4.2(b)
for any such conflicts, violations, breaches, defaults, terminations,
cancellations, accelerations, losses, penalties or Liens, and for any consents
or waivers not obtained, that, individually or in the aggregate, are not
reasonably likely to have an Bank Material Adverse Effect.

 

(c)     No consent, approval, license, permit, order or authorization of, or
registration, declaration, notice or filing with, any international, national,
federal, state, provincial or local governmental, regulatory or administrative
authority, agency, commission, board, court, tribunal, arbitral body,
self-regulated entity or similar body, whether domestic or foreign and
specifically including, without limitation, the OCC and the FDIC is required by
or with respect to Bank or Patriot in connection with the execution and delivery
of this Agreement by Bank and Patriot or the consummation by Bank or Patriot of
the transactions contemplated by this Agreement, except for (i) the filing of
the Bank Merger Agreement with the Secretary of the State of the State of
Connecticut; (ii) the filings required to be made and the approvals or
non-objection status required to be obtained from the OCC and the FDIC and (iii)
expiration of applicable waiting periods.

 

 
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(d)     No vote of the holders of any class or series of Patriot’s capital stock
or other securities is necessary for the consummation by Patriot or the Bank of
the transactions contemplated by this Agreement.

 

(e)     Neither of Patriot and the Bank is an “interested shareholder” of Prime,
and neither of Patriot and the Bank is, or after consummation of the
transactions contemplated by this Agreement would be, an affiliate or associate
of an “interested shareholder” pursuant to Sections 33-840 to 33-845 of the
CBCA.

 

4.3.     Litigation. There is no Action pending or, to the knowledge of Patriot
and the Bank, threatened in writing (nor to the knowledge of Patriot and the
Bank, are there any facts which could lead to such an Action) against Patriot or
the Bank, at law or in equity, before any Governmental Entity that challenges
the Merger or the validity of this Agreement, or the right of Patriot or the
Bank to enter into this Agreement, or to consummate the transactions
contemplated hereby.

 

4.4.     Taxes. Patriot and the Bank have filed all foreign and federal, and all
material state and local Tax Returns and other reports, each is required by law
to file and has paid all Taxes, assessments, fees and other governmental charges
that are due and payable (except those which are being properly contested in
good faith). The provision for Taxes on the books of Patriot and the Bank is, in
the reasonable business judgment of Patriot and the Bank, adequate for all years
not closed by Law, and for its current fiscal year, and Patriot and the Bank do
not have any knowledge of any material deficiency or additional material
assessment in connection therewith not provided for on their books.

 

4.5.     Compliance With Laws. Bank and Patriot are and have been in compliance
in all material respects with, are not in violation of, and, have not received
any written notice alleging any violation with respect to, any Law with respect
to the conduct of their businesses, or the ownership or operation of their
respective properties or assets, except for failures or violations that would
not have a Bank Material Adverse Effect.

 

4.6.     Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Patriot or the Bank.

 

4.7.     Statements True and Correct. None of the information supplied or to be
supplied by Patriot or the Bank for inclusion in (i) the Proxy Statement (as
defined herein), and (ii) any other documents to be filed with any banking or
other regulatory authority in connection with the transactions contemplated
hereby, will, at the respective times such documents are filed, and with respect
to the Proxy Statement, when first mailed to the Stockholders and at the time of
the Prime Meeting (as defined herein), contain any untrue statement of a
material fact, or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not misleading. All documents that Patriot or the Bank is responsible for
filing with any other regulatory authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable law.

 

 
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4.8.         Regulatory Issues.

 

(a)     Patriot, the Bank, and each of their officers and directors are in
compliance in all material respects with, and have complied in all material
respects, with (i) the applicable provisions of the Sarbanes-Oxley Act and the
related rules and regulations promulgated under such act and (ii) the Dodd-Frank
Wall Street Reform and Consumer Protection Act of 2010.

 

(b)     Neither Patriot, the Bank nor, to the Bank’s Knowledge, any director,
officer, employee, auditor, accountant or representative of Patriot or the Bank
has received or otherwise had or obtained Knowledge of any material complaint,
allegation, assertion or claim, whether written or oral, regarding the
accounting or auditing practices, procedures, methodologies or methods of
Patriot or the Bank or their respective internal accounting controls, including
any material complaint, allegation, assertion or claim that Patriot or the Bank
has engaged in questionable accounting or auditing practices.

 

(c)     Neither Patriot nor the Bank is subject to, or has received any notice
that it may become subject to, any cease-and-desist or other order issued by,
consent or other agreement or memorandum of understanding with, or commitment
letter or similar undertaking to, or is a recipient of any extraordinary
supervisory letter from, or is subject to any order or directive by, or has
adopted any board resolutions at the request of, any federal or state agency
charged with the supervision or regulation of financial institutions or their
holding companies or engaged in the insurance of financial institution deposits
or any other Governmental Entity having supervisory or regulatory authority with
respect to Patriot or the Bank. Neither Patriot nor the Bank is aware of any
fact, circumstance or consideration that would impair the obtaining of
regulatory approvals required to approve the Merger.

 

(d)     Patriot and the Bank have duly filed with the Secretary of State of the
State of Connecticut, the OCC, and any other applicable Governmental Entity, in
correct form, the reports and other documents required to be filed under
applicable Laws and regulations and have paid all fees and assessments due and
payable in connection therewith, and such reports were, in all material
respects, complete and accurate and in compliance with the requirements of
applicable Laws and regulations. Other than normal examinations conducted by a
Governmental Entity in the Ordinary Course of Business of Patriot and the Bank,
no Governmental Entity has notified Patriot or the Bank that it has initiated
any proceeding or, to the Bank’s Knowledge, threatened an investigation into the
business or operations of Patriot or the Bank. There is no material unresolved
violation, criticism, or exception by any Governmental Entity with respect to
any report or statement relating to any examinations or inspections of Patriot
or the Bank. There have been no material formal or informal inquiries by, or
disagreements or disputes with, any Governmental Entity with respect to the
business, operations, policies or procedures of Patriot or the Bank.

 

 
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(e)     Patriot and the Bank are “well-capitalized,” as such term is defined in
the rules and regulations promulgated by the OCC.

 

4.9.         Community Reinvestment Act, Anti-money Laundering and Customer
Information Security. Except as has not been and would not reasonably be
expected to materially and adversely impact or interfere with Patriot’s or the
Bank’s operations, neither Patriot nor the Bank are a party to any agreement
with any individual or group regarding Community Reinvestment Act matters and
Patriot or the Bank do not have Knowledge of any facts or circumstances that
would cause Patriot or the Bank: (a) to be deemed not to be in compliance with
the Community Reinvestment Act, and the regulations promulgated thereunder, or
to be assigned a rating for Community Reinvestment Act purposes by federal or
state bank regulators of lower than “satisfactory”; (b) to be deemed to be
operating in violation of the Bank Secrecy Act and its implementing regulations
(31 C.F.R. Part 103), the USA PATRIOT Act, any order issued with respect to
anti-money laundering by the U.S. Department of the Treasury’s Office of Foreign
Assets Control, or any other applicable anti-money laundering statute, rule or
regulation; or (c) to be deemed not to be in compliance with the applicable
privacy of customer information requirements contained in any federal and state
privacy Laws and regulations, including, without limitation, in Title V of the
Gramm-Leach-Bliley Act of 1999 and regulations promulgated thereunder, as well
as the provisions of the information security program adopted by Prime pursuant
to 12 C.F.R. Part 364. Furthermore, Patriot’s and the Bank’s boards of directors
have adopted and Patriot and the Bank have implemented anti-money laundering
programs that contain adequate and appropriate customer identification
verification procedures that meet the requirements of Sections 352 and 326 of
the USA PATRIOT Act.Financing. As of the date of this Agreement, Patriot and the
Bank have the financial ability and on the Effective Date of the Merger and
through the date of payment of the aggregate amount of cash payable pursuant to
this Agreement, Patriot and the Bank shall have the funds necessary to
consummate the Merger and pay the aggregate amount of cash to be paid to holders
of Prime Common Stock and Prime Stock Options.

 

ARTICLE V
CONDUCT OF BUSINESS

 

5.1.         Covenants of Prime. Except as expressly provided or permitted
herein, set forth in Section 5.1 of the Prime Disclosure Schedule or as
consented to in writing by the Bank, during the period commencing on the date of
this Agreement and ending at the Effective Time or such earlier date as this
Agreement may be terminated in accordance with its terms (the “Pre-Closing
Period”), Prime shall (i) maintain its existence in good standing, (ii) maintain
in effect all of its presently existing insurance coverage (or substantially
equivalent insurance coverage), preserve its business organization and keep
substantially intact its assets and properties, (iii) use reasonable best
efforts to keep the services of its present principal employees and preserve its
business relationships with its customers, strategic partners and others having
business dealings with it, (iv) maintain the business of Prime and (iv) in all
respects conduct its business in the Ordinary Course of Business, without a
material change in current operational policies. Prime shall use its reasonable
best efforts to perform and fulfill all conditions and obligations on its part
to be performed or fulfilled under this Agreement and to cause the consummation
of the transactions contemplated hereby in accordance with the terms and
conditions of this Agreement. Without limiting the generality of the foregoing,
during the Pre-Closing Period Prime shall not, directly or indirectly, do any of
the following without the prior written consent of the Bank:

 

 
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(a)     (i) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, securities or other property) in respect of, any
of its capital stock other than consistent with past practice; (ii) split,
combine, alter the terms of or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or any of its other securities; or
(iii) purchase, redeem or otherwise acquire any shares of its capital stock or
any other of its securities or any rights, warrants or options to acquire any
such shares or other securities;

 

(b)     except as permitted by Section 5.1(i), issue, deliver, sell, grant,
pledge or otherwise dispose of or encumber any shares of its capital stock, any
other voting securities or any securities convertible into or exchangeable for,
or any rights, warrants or options to acquire, any such shares, voting
securities or convertible or exchangeable securities (other than the issuance of
shares of Prime Common Stock upon the exercise of Prime Stock Options
outstanding on the date of this Agreement pursuant to the terms herein);

 

(c)     amend its Certificate of Incorporation, By-laws or other comparable
charter or organizational documents or alter, through merger, liquidation,
reorganization, restructuring, or in any other fashion, its structure or
ownership;

 

(d)     acquire (i) by merging or consolidating with, or by purchasing all or a
substantial portion of the assets or any stock of, or by any other manner, any
business or any corporation, partnership, joint venture, limited liability
company, association or other business organization or division thereof or (ii)
any assets that are material, in the aggregate, to Prime, except in the Ordinary
Course of Business;

 

(e)     transfer, mortgage, sell, lease, license, pledge, grant a security
interest in or otherwise dispose of or encumber (whether by way of merger,
consolidation, sale of stock or assets, or otherwise) any properties or assets,
other than in the Ordinary Course of Business;

 

(f)     other than in the Ordinary Course of Business, (i) incur any
indebtedness for borrowed money or guarantee any such indebtedness of another
Person, (ii) issue, sell or amend any debt securities or warrants or other
rights to acquire any debt securities, or guarantee any debt securities of
another Person, (iii) make any loans, advances or capital contributions to, or
investment in, any other Person, other than Prime, or (iv) enter into any
hedging agreement or other financial agreement or arrangement designed to
protect Prime against fluctuations in interest rates;

 

(g)     make any capital expenditures or other expenditures with respect to
property, plant or equipment in excess of $10,000, individually, or $25,000, in
the aggregate, other than the specific capital expenditures disclosed in Section
5.1 of the Prime Disclosure Schedule;

 

(h)     make any material changes in accounting methods, principles or
practices, except insofar as may have been required by a change in GAAP;

 

 
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(i)     except as required to comply with applicable Law or agreements, plans or
arrangements existing on the date hereof, (i) adopt, enter into, terminate,
amend or enhance any employment, severance or similar agreement or Prime
Employee Plan (including, but not limited to, granting any additional awards
under any stock option or plan or modifying any existing award thereunder) for
the benefit or welfare of any current or former director, officer, employee or
consultant or any collective bargaining agreement (except in the Ordinary Course
of Business), (ii) increase in the compensation or fringe benefits of, or pay
any bonus to, any director, officer, employee or consultant (except for annual
increases (not to exceed 3% for any person) of salaries), (iii) promote any
officers or employees, except in connection with the Company’s annual
compensation review cycle in the Ordinary Course of Business or as the result of
the termination, retirement or resignation of any officer or employee, (iv)
amend or accelerate the payment, right to payment or vesting of any compensation
or benefits, including any outstanding options or restricted stock awards, or
(v) pay any material benefit not provided for as of the date of this Agreement
under any Prime Employee Plan.

 

(j)     (A) change any of its accounting (financial or Tax) policies, practices
or procedures, except as required by GAAP or under applicable Law, (B) make or
change any election in respect of Taxes, (C) adopt or change any method of
accounting or annual reporting, (D) settle or compromise any Tax liability,
claim or assessment, (E) file any amended Tax Return, (F) enter into any closing
agreement relating to any Tax, (G) agree to an extension or waiver of a statute
of limitations period applicable to any Tax claim or assessment, (H) fail to pay
any Tax when due and payable, (I) surrender any right to claim a Tax refund, or
(J) take any other similar action related to the filing of any Tax Return or the
payment of any Tax;

 

(k)     initiate, settle or compromise any Action or cancel, waive or compromise
any debt or claim in excess of $10,000;

 

(l)     open any new, or permanently close, any existing, facility or office;

 

(m)     extend, terminate, amend or modify any Prime Material Contract or permit
any renewal notice period or option period to lapse with respect to any Prime
Material Contract, except for terminations of Prime Material Contracts upon
their expiration during such period in accordance with their terms;

 

(n)     discharge or satisfy any Lien other than those which are required to be
discharged or satisfied during such period in accordance with their original
terms;

 

(o)     pay any material obligation or liability (absolute, accrued, contingent
or otherwise), whether due or to become due, except for any current liabilities,
and the current portion of any long term liabilities shown on Prime Financial
Statements or incurred since December 31, 2016 in the Ordinary Course of
Business, including payments on the Prime line of credit with the Federal Home
Loan Bank of Boston with a current balance outstanding of $7 million;

 

(p)     (i) enter into any lease or other Contract affecting the Leased Real
Property or the possession, use or control thereof; or (ii) create, permit or
suffer any Lien to attach to or affect the Leased Real Property, except for the
Lien of nondelinquent real estate Taxes;

 

 
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(q)     acquire (other than by way of foreclosures or acquisitions of control,
in each case in the Ordinary Course of Business consistent with past practice),
including without limitation, by merger or consolidation or by investment in a
partnership or joint venture, all or any portion of the assets, business,
securities, deposits or properties of any other Person.

 

(r)     change its material lending, investment, underwriting, pricing,
servicing, risk and asset liability management and other material banking and
operating policies, except as required by applicable law, regulation or policies
imposed by any Governmental Entity, or the manner in which its investment
securities or loan portfolio is classified or reported; or invest in any
mortgage-backed or mortgage-related security that would be considered “high
risk” under applicable regulatory guidance; or file any application or enter
into any contract with respect to the opening, relocation or closing of, or
open, relocate or close, any branch, office, service center or other facility;

 

(s)     repurchase, prepay or incur any indebtedness for borrowed money (other
than deposits, federal funds purchased, cash management accounts, Federal Home
Loan Bank or Federal Reserve borrowings that mature within one year and that
have no put or call features and securities sold under agreements to repurchase
that mature within 90 days, in each case in the Ordinary Course of Business); or
assume, guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of any other Person, issue any debt securities or options,
warrants, calls or other rights to acquire any debt securities of Prime, other
than with respect to the collection of checks and other negotiable instruments
in the Ordinary Course of Business;

 

(t)     except for government agency or government guaranteed mortgage-backed
securities portfolios in the Ordinary Course of Business, acquire (other than by
way of foreclosures or acquisitions in the Ordinary Course of Business) any debt
security or equity investment other than federal funds or United States
Government securities or United States Government agency securities, in each
case with a term of one year or less or (ii) dispose of any debt security or
equity investment;

 

(u)     enter into any material agreement, agreement in principle, letter of
intent, memorandum of understanding, or similar Contract with respect to any
joint venture, strategic partnership, or alliance;

 

(v)     abandon, allow to lapse, sell, assign, transfer, grant any security
interest in otherwise encumber or dispose of any Prime Intellectual Property, or
grant any right or license to any Prime Intellectual Property other than
pursuant to non-exclusive licenses entered into in the Ordinary Course of
Business consistent with past practice;

 

(w)     terminate or modify in any material respect, or fail to exercise renewal
rights with respect to, any material insurance policy; or

 

 
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(x)     authorize any of, or commit or agree, in writing or otherwise, to take
any of, the foregoing actions.

 

Notwithstanding anything to the contrary herein, (i) any loans in default may be
modified by Prime, (ii) any Lien may be discharged or satisfied by Prime, or
(iii) any assets, deposits, business or properties, including other real estate
owned, may be sold, transferred, mortgaged or encumbered by Prime, in each case
with the prior written consent of the Bank, not to be unreasonably withheld.
Prime shall provide the Bank with written notice of any such proposed action
which will be deemed approved within four Business Days of delivery to the Bank,
unless the Bank objects in writing within that timeframe. If a court or
arbitrator requires Prime to take any such action within a shorter period of
time, (i) Prime shall use its best efforts to extend the court or arbitrator
deadline and (ii) promptly notify the Bank of such deadline. If the deadline
cannot be extended, the Bank shall be deemed to approve of Prime’s proposed
action, unless the Bank objects in writing no later than the deadline.

 

5.2.        Reasonable Best Efforts. Subject to the terms and conditions herein
provided, the parties agree to use their reasonable best efforts in good faith
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
during the first calendar quarter of 2018 or as soon thereafter as practicable.
In the event that a party determines that a condition to obligation to complete
the Merger cannot be fulfilled and that it will not waive that condition, it
will immediately so notify the other party.

 

5.3.        Confidentiality. The parties acknowledge that Patriot, the Bank and
Prime have previously executed a bilateral confidentiality agreement, dated as
of April 28, 2017 (as amended to date, the “Confidentiality Agreement”), which
Confidentiality Agreement shall continue in full force and effect in accordance
with its terms, except as expressly modified herein.

 

ARTICLE VI.
ADDITIONAL AGREEMENTS

 

6.1.         No Solicitation.

 

(a)          No Solicitation or Negotiation.

(i)     Prime shall not, nor shall Prime authorize its directors, officers,
employees, investment bankers, attorneys, accountants and other advisors or
representatives (such directors, officers, employees, investment bankers,
attorneys, accountants, other advisors and representatives, collectively,
“Representatives”) to, directly or indirectly solicit, initiate or knowingly
take any action to facilitate or encourage the submission of any Acquisition
Proposal or the making of any proposal that could reasonably be expected to lead
to any Acquisition Proposal, or, subject to Section 6.1(a)(ii), (i) conduct or
engage in any discussions or negotiations with, disclose any non-public
information relating to Prime to, afford access to the business, properties,
assets, books or records of Prime to, or knowingly assist, participate in,
facilitate or encourage any effort by, any third party that is seeking to make,
or has made, any Acquisition Proposal, (ii) (A) amend or grant any waiver or
release under any standstill or similar agreement with respect to any class of
equity securities of Prime or (B) approve any transaction under, or any third
party becoming an “interested stockholder“ under Section 33-844 of the CBCA, or
(iii) enter into any agreement in principle, letter of intent, term sheet,
acquisition agreement, merger agreement, option agreement, joint venture
agreement, partnership agreement or other contract, agreement, arrangement,
instrument or understanding relating to any Acquisition Proposal (each, a “Prime
Acquisition Agreement”). Subject to Section 6.1(a)(ii), neither the Prime Board
nor any committee thereof shall fail to make, withdraw, amend, modify or
materially qualify, in a manner adverse to the Bank, the Prime Voting Proposal,
or recommend an Acquisition Proposal, or fail to recommend against acceptance of
any tender offer or exchange offer for Prime Common Shares within ten (10)
Business Days after the commencement of such offer, or make any public statement
inconsistent with the Prime Voting Proposal, or resolve or agree to take any of
the foregoing actions (any of the foregoing, a “Prime Adverse Recommendation
Change”).

 

 
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(ii)     Notwithstanding Section 6.1(a)(i), prior to the approval of the Prime
Voting Proposal at the meeting of the Stockholders (the “Prime Meeting”) to
consider the Prime Voting Proposal, the Prime Board, directly or indirectly
through any Representative, may, subject to Section 6.1(a)(iii) (i) participate
in negotiations or discussions with any third party that has made (and not
withdrawn) a bona fide, unsolicited Acquisition Proposal in writing that the
Prime Board believes in good faith, after consultation with outside legal
counsel and its financial advisor, constitutes or would reasonably be expected
to result in a Superior Proposal, (ii) thereafter furnish to such third party
non-public information relating to Prime pursuant to an executed confidentiality
agreement not, in the aggregate, less restrictive of the other party than the
Confidentiality Agreement, and/or (iii) take any action that any court of
competent jurisdiction orders Prime to take (which order remains unstayed), but
in each case referred to in the foregoing clauses (i) through (ii), only if the
Prime Board determines in good faith, after consultation with outside legal
counsel, that the failure to take such action would reasonably be expected to
cause the Prime Board to be in breach of its fiduciary duties under applicable
Law.

 

(iii)     The Prime Board shall not take any of the actions referred to in
clauses (i) through (iii) of Section 6.1(a)(ii) unless Prime shall have first
delivered to the Companies a prior written notice advising the Companies that it
intends to take such action. Prime shall notify the Companies promptly (but in
no event later than twenty-four (24) hours) after it obtains knowledge of the
receipt by Prime (or any of its Representatives) of any Acquisition Proposal,
any inquiry that would reasonably be expected to lead to an Acquisition
Proposal, any request for non-public information relating to Prime or for access
to the business, properties, assets, books or records of Prime by any third
party. In such notice, Prime shall identify the third party making, and details
of the material terms and conditions of, any such Acquisition Proposal,
indication or request. Prime shall keep the Bank informed, on a current basis,
of the status and material terms of any such Acquisition Proposal, indication or
request, including any material amendments or proposed amendments as to price
and other material terms thereof. Prime shall provide the Bank with at least
forty-eight (48) hours’ prior notice of any meeting of the Prime Board (or such
lesser notice as is provided to the members of the Prime Board) at which the
Prime Board is reasonably expected to consider any Acquisition Proposal. Prime
shall promptly provide the Bank with a list of any non-public information
concerning Prime’s business, present or future performance, financial condition
or results of operations, provided to any third party, and, to the extent such
information has not been previously provided to the Bank, copies of such
information.

 

 
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(b)        No Change in Recommendation or Alternative Acquisition Agreement.
Except as set forth in this Section 6.1, the Prime Board shall not make any
Prime Adverse Recommendation Change or enter into a Prime Acquisition Agreement.
Notwithstanding anything to the contrary set forth in the Agreement, the Prime
Board may make a Prime Adverse Recommendation Change or enter into a Prime
Acquisition Agreement, if: (i) Prime promptly notifies the Bank, in writing, at
least five (5) Business Days (the “Notice Period“) before making a Prime Adverse
Recommendation Change or entering into a Prime Acquisition Agreement, of its
intention to take such action with respect to a Superior Proposal, which notice
shall state expressly that Prime has received an Acquisition Proposal that the
Prime Board intends to declare a Superior Proposal and that the Prime Board
intends to make a Prime Adverse Recommendation Change and/or Prime intends to
enter into a Prime Acquisition Agreement; (ii) Prime attaches to such notice the
most current version of the proposed agreement (which version shall be updated
on a prompt basis) and the identity of the third party making such Superior
Proposal; (iii) Prime shall, and shall use its reasonable best efforts to cause
its Representatives to, during the Notice Period, negotiate with the Bank in
good faith to make such adjustments in the terms and conditions of this
Agreement so that such Acquisition Proposal ceases to constitute a Superior
Proposal, if the Bank, in its discretion, proposes to make such adjustments (it
being agreed that in the event that, after commencement of the Notice Period,
there is any material revision to the terms of a Superior Proposal, including,
any revision in price, the Notice Period shall be extended, if applicable, to
ensure that at least five (5) Business Days remain in the Notice Period
subsequent to the time Prime notifies the Bank of any such material revision (it
being understood that there may be multiple extensions)); and (iv) the Prime
Board determines in good faith, after consulting with outside legal counsel and
its financial advisor, that such Acquisition Proposal continues to constitute a
Superior Proposal after taking into account any adjustments made by the Bank
during the Notice Period in the terms and conditions of this Agreement. For the
avoidance of doubt, except as set forth in this paragraph, the Prime Board shall
not make any Prime Adverse Recommendation Change or enter into a Prime
Acquisition Agreement.

 

(c)        Break-Up Fee. In the event the Prime Board makes a Prime Adverse
Recommendation Change and accepts a Superior Proposal, Prime shall be required
to pay to Bank a fee in the amount equal to the sum of (i) 3% of the Merger
Consideration (assuming for purposes of such calculation, that the TBV is to be
calculated as of the date of such termination) and (ii) reimbursement of all
reasonable expenses incurred by the Companies in connection with the
transactions contemplated by this Agreement (such sum, the “Break-Up Fee”);
provided, however, that the reimbursement of such expenses shall be no higher
than $200,000; provided, further, that the Break-Up Fee shall not exceed 5% of
the Merger Consideration (assuming for purposes of such calculation, that the
TBV is to be calculated as of the date of such termination).

 

(d)        Cessation of Ongoing Discussions. Prime shall, and shall direct its
Representatives to, cease immediately all discussions and negotiations that
commenced prior to the date of this Agreement regarding any proposal that
constitutes, or could reasonably be expected to lead to, an Acquisition
Proposal. Prime shall use its reasonable best efforts to cause any third party
(or its agents or advisors) in possession of non-public information in
connection with any such Acquisition Proposal in respect of Prime that was
furnished by or on behalf of Prime to return or destroy (and confirm destruction
of) all such information.

 

 
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(e)          Definitions. For purposes of this Agreement:

 

(i)       “Acquisition Proposal” means any proposal or offer from, or indication
of interest in making a proposal or offer by, any Person (other than the
Companies) relating to any (a) direct or indirect acquisition of assets of Prime
(but excluding sales of assets in the Ordinary Course of Business) equal to
fifteen percent (15%) or more of the fair market value of Prime’s consolidated
assets or to which fifteen percent (15%) or more of Prime’s net revenues or net
income on a consolidated basis are attributable, (b) direct or indirect
acquisition of fifteen percent (15%) or more of the voting equity interests of
Prime, (c) tender offer or exchange offer that if consummated would result in
any Person beneficially owning (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) fifteen
percent (15%) or more of the voting equity interests of Prime, (d) merger,
consolidation, other business combination or similar transaction involving
Prime, pursuant to which such Person would own fifteen percent (15%) or more of
the consolidated assets, net revenues or net income of Prime, taken as a whole,
or (e) liquidation or dissolution (or the adoption of a plan of liquidation or
dissolution) of Prime or the declaration or payment of an extraordinary dividend
(whether in cash or other property) by Prime.

 

(ii)      “Superior Proposal” means a bona fide written Acquisition Proposal
that the Prime Board determines in its good faith business judgment (after
consultation with outside legal counsel and its financial advisor) is more
favorable from a financial point of view to the holders of Prime Common Stock
than the transactions contemplated by this Agreement, taking into account (a)
all financial considerations, (b) the identity of the third party making such
Acquisition Proposal, (c) the anticipated timing, conditions (including any
financing condition or the reliability of any debt or equity funding
commitments) and prospects for completion of such Acquisition Proposal, (d) the
other terms and conditions of such Acquisition Proposal and the implications
thereof on Prime, including relevant legal, regulatory and other aspects of such
Acquisition Proposal deemed relevant by the Prime Board and (e) any revisions to
the terms of this Agreement and the Merger proposed by the Bank during the
Notice Period set forth in Section 6.1(b).

 

6.2.         Access to Information.

 

(a)     During the Pre-Closing Period, Prime shall afford the Companies and the
Companies’ officers, employees, accountants, counsel and other representatives,
reasonable access, upon reasonable notice, during normal business hours and in a
manner that does not disrupt or interfere with business operations, to such of
their properties, books, contracts, commitments, personnel and records as the
requesting party shall reasonably request, and, during such period, Prime shall
furnish promptly to the Companies (i) a copy of each report, schedule,
registration statement and other document filed or received by the disclosing
party during such period pursuant to the requirements of federal or state
securities laws, and (ii) all other information concerning Prime’s business,
properties, assets and personnel as the requesting party may reasonably request.
In addition, during the Pre-Closing Period, Prime shall also provide the
Companies’ officers and employees reasonable access to its customers and
suppliers, provided that such access shall at all times be granted only if such
access is scheduled in advance with Prime and only with the direct supervision
or participation of one of Prime’s officers, employees or Representatives (who
shall make all reasonable efforts to be available). The Companies shall hold all
such information that is non-public in confidence in accordance with the
Confidentiality Agreement.

 

 
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6.3.         Shareholders Meeting; Proxy Statement.

 

(a)     Prime, acting through the Prime Board, shall take all actions in
accordance with applicable Law, its Certificate of Incorporation and By-laws
necessary to promptly and duly call, give proper notice of, convene and hold as
promptly as practicable the Prime Meeting for the purpose of considering and
voting upon the Prime Voting Proposal. As soon as practicable after execution of
this Agreement, Prime shall prepare a proxy statement to solicit from the
Stockholders proxies in favor of the Prime Voting Proposal (the “Proxy
Statement”). Subject to Section 6.1, the Prime Board shall recommend approval of
the Prime Voting Proposal by the Stockholders and include such recommendation in
the materials delivered to the Stockholders , and shall use reasonable best
efforts to (i) solicit from the Stockholders proxies in favor of the Prime
Voting Proposal and (ii) take all other actions necessary or advisable to secure
the vote or consent of the Stockholders required by applicable Law to obtain
such approval. Prime shall not submit any other proposals for approval at the
Prime Meeting other than a Superior Proposal without the prior written consent
of the Companies. Prime shall keep the Companies updated with respect to proxy
solicitation results as requested by the Companies. Notwithstanding anything to
the contrary contained in this Agreement, Prime may not adjourn or postpone the
Prime Meeting once the Prime Meeting has been called and noticed without the
prior written consent of the Companies other than to the extent necessary to
ensure that any required supplement or amendment to the materials delivered to
the Stockholders (including the Proxy Statement) is provided to the Stockholders
or, if as of the time for which the Prime Meeting is originally scheduled (x)
there are insufficient shares of Prime Common Stock represented (either in
person or by proxy) to constitute a quorum necessary to conduct the business of
the Prime Meeting or (y) there are insufficient votes in favor of the Prime
Voting Proposal and Prime believes in good faith that it can procure sufficient
votes in favor of the Prime Voting Proposal by adjourning the meeting to a date
not more than thirty (30) calendar days from the scheduled date of the Prime
Meeting; provided, however, that Prime shall provide prompt written notice to
Patriot and Bank of any such adjournment or postponement. If the Prime Board
recommends a Super Proposal, it will not alter the obligation of Prime to submit
the adoption of this Agreement and the approval of the Merger to the
Stockholders at the Prime Meeting to consider and vote upon, unless this
Agreement shall have been terminated in accordance with its terms prior to the
Prime Meeting.

 

(b)     Promptly following the Prime Meeting, Prime shall cause to be delivered
to the Bank in writing results of the vote on the Prime Voting Proposal.

 

 
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6.4.         Legal Conditions to the Merger.

 

(a)     Subject to the terms hereof, including Section 6.1 and Section 6.4(b),
Prime and the Bank shall each use their reasonable best efforts to (i) take, or
cause to be taken, all actions, and do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated hereby
as promptly as practicable, (ii) as promptly as practicable, obtain from any
Governmental Entity or any other third party any consents, licenses, permits,
waivers, approvals, authorizations, or orders required to be obtained or made by
Prime or the Bank in connection with the authorization, execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby,
(iii) as promptly as practicable, make all necessary filings, and thereafter
make any other required submissions, with respect to this Agreement and the
Merger, any related governmental request thereunder and any other applicable
Law, and (iv) execute or deliver any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the purposes
of, this Agreement. Prime and the Bank shall cooperate with each other in
connection with the making of all such filings, including providing copies,
(i.e., complete copies or non-confidential versions, as applicable), of all such
documents to the non-filing party, or if more appropriate, to its advisors prior
to the submission of correspondence, filings or communications to any
Governmental Entity, and, if requested, accepting reasonable additions,
deletions or changes suggested by the other party in connection therewith. Prime
and the Bank shall each use its reasonable best efforts to furnish to each
other, or, if more appropriate, to their advisors, all information required for
any application or other filing to be made pursuant to any applicable Law
(including all information required to be included in the Proxy Statement) in
connection with the transactions contemplated by this Agreement. For the
avoidance of doubt, the Bank and Prime agree that nothing contained in this
Section 6.4(a) shall modify or affect their respective rights and
responsibilities under Section 6.4(b).

 

(b)     Each of Prime and the Bank shall give any notices to third parties, and
use reasonable best efforts to obtain any third party consents required in
connection with the Merger that are (i) necessary to consummate the transactions
contemplated hereby, (ii) disclosed or required to be disclosed in the Prime
Disclosure Schedule, or (iii) required to prevent the occurrence of an event
that is reasonably likely to have a Prime Material Adverse Effect or a Bank
Material Adverse Effect prior to or after the Effective Time.

 

6.5.        Public Disclosure. Patriot and the Bank and Prime shall consult with
each other before issuing any public disclosures or a press release with respect
to this Agreement or the transactions contemplated hereby and shall not issue
any such press release or make any such public statements without the prior
consent of the other parties, which shall not be unreasonably withheld.

 

 
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6.6.        Indemnification of Prime Directors and Officers.

 

(a)     From the Effective Time through the sixth anniversary of the date on
which the Effective Time occurs, the Bank and the Surviving Corporation shall
jointly and severally indemnify and hold harmless each person who is now, or has
been at any time prior to the date hereof, or who becomes prior to the Effective
Time, a director or officer of Prime (the “Prime Indemnified Parties”), against
all claims, losses, liabilities, damages, judgments, fines and reasonable fees,
costs and expenses, including reasonable attorneys’ fees and disbursements,
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to the fact that a Prime Indemnified Party is or was an
officer or director of Prime, whether asserted or claimed prior to, at or after
the Effective Time, to the fullest extent provided under the BLC or Prime’s
current Certificate of Incorporation, By-laws or agreements with those persons.
Each Prime Indemnified Party shall be entitled, subject to applicable Law, to
advancement of expenses incurred in the defense of any such claim, action, suit,
proceeding or investigation from the Surviving Corporation within ten (10)
Business Days of receipt by the Surviving Corporation from Prime Indemnified
Party of a request therefor; in all cases subject to the Surviving Corporation’s
receipt of an undertaking by such Prime Indemnified Party to repay such expenses
and fees paid in advance if it is ultimately determined in a final
non-appealable judgment of a court of competent jurisdiction that such Prime
Indemnified Party is not entitled to be indemnified under applicable Law. In
addition, the Surviving Corporation shall not be liable for any settlement
effected without its prior written consent (which such consent shall not be
unreasonably withheld or delayed).

 

(b)     On or before the Closing, the Surviving Corporation shall, at the
Surviving Corporation’s sole cost and expense and at no expense to the
beneficiaries, obtain and shall thereafter maintain in effect for six (6) years
from the Effective Time directors’ and officers’ liability insurance with
respect to matters existing or occurring at or prior to the Effective Time
(including the transactions contemplated by this Agreement and the Exchange
Agent Agreement); provided that the insurance policies obtained by the Surviving
Corporation shall provide for at least the same coverage and amounts and
containing terms and conditions no less advantageous to Prime Indemnified
Parties when compared to the insurance policies maintained by Prime on the date
hereof. Prime or the Bank may also satisfy the obligations of the Bank under
this Section 6.6(b) by purchasing “tail” insurance policies with a claims period
of six (6) years from the Effective Time with at least the same coverage and
amounts and containing terms and conditions that were not less advantageous to
Prime Indemnified Parties with respect to claims arising out of or relating to
events which occurred before or at the Effective Time.

 

(c)     The Surviving Corporation shall pay all expenses, including attorneys’
reasonable fees and costs, that may be incurred by the persons referenced in
this Section 6.6 in connection with their enforcement of their rights provided
in this Section 6.6.

 

(d)     The provisions of this Section 6.6 are intended to be in addition to the
rights otherwise available to the current officers and directors of Prime by
Law, charter, statute, by-law or agreement, and shall operate for the benefit
of, and shall be enforceable by, each of Prime Indemnified Parties, their heirs
and their representatives.

 

 
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6.7.         Notification of Certain Matters.

 

(a)     During the Pre-Closing Period, the Bank shall give prompt written notice
to Prime, and Prime shall give prompt written notice to the Bank, of: (i) the
occurrence, or failure to occur, of any factor or event, which occurrence or
failure to occur is reasonably likely to cause (A) any representation or
warranty of such party contained in this Agreement to be untrue or inaccurate in
any material respect, in each case at any time from and after the date of this
Agreement until the Effective Time, or (B) any covenant, condition or agreement
of such party not to be satisfied in any material respect; (ii) any material
failure of the Bank or Prime, as the case may be, or of any officer, director,
employee or agent thereof, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement or (iii)
the occurrence of any change, condition or event that has had or is reasonably
likely to have a Prime Material Adverse Effect or a Bank Material Adverse
Effect, as applicable. Notwithstanding the above, the delivery of any notice
pursuant to this Section shall not (x) affect the representations and warranties
of the Bank or Prime, as the case may be, or the right of the party receiving
such notice to rely on such representations and warranties (as unmodified by
such notice), and (y) will not limit or otherwise affect the remedies available
hereunder to the party receiving such notice or the conditions to such party’s
obligation to consummate the Merger.

 

(b)     Prime shall supplement the information set forth on the Prime Disclosure
Schedule, as applicable, with respect to any matter now existing or hereafter
arising that, if existing or occurring at or prior to the date of this
Agreement, would have been required to be set forth or described in the Prime
Disclosure Schedule or that is necessary to correct any information in the or
Prime Disclosure Schedule or in any representation or warranty of Patriot, the
Bank, or Prime, as applicable which has been rendered inaccurate thereby
promptly following discovery thereof. No such supplement shall be deemed to cure
any breach of any representation or warranty made in this Agreement, have any
effect for purposes of determining the satisfaction of the conditions set forth
in Article VII, or have any effect for the purpose of determining the compliance
by either party with any covenant set forth herein.

 

6.8.         Shareholder Litigation. Each of Prime and the Bank shall keep the
other reasonably informed of any shareholder litigation or claim pending against
Prime or the Bank, as applicable, and its directors or officers, relating to the
Merger or the other transactions contemplated by this Agreement; provided,
however, that all obligations of Prime and the Bank in this Section 6.8 shall be
subject to the ability of such party under applicable Laws to preserve
attorney-client communication and privilege.

 

6.9.         Board of Directors and Loan Committee of Prime. The Bank shall
receive at least three (3) days’ advance written notice of each meeting of the
Board of Directors or Loan Committee of Prime to be held after the date hereof.
The Bank shall be entitled to send a representative to attend any such meeting.
The Confidentiality Agreement shall apply to any and all information obtained by
the Bank or Patriot pursuant to this Section 6.9.

 

6.10.       Financial Statements. As soon as available and in any event within
ten (10) Business Days after the end of each month prior to the Closing Date,
Prime shall deliver to the Bank such of its balance sheets and statements of
operations with respect to Prime as are internally prepared by it in the
Ordinary Course of Business.

 

6.11.       Liens. Prime shall obtain releases of all Liens on the assets of
Prime or the shares of Prime Common Stock (other than those set forth on
Schedule 6.11 hereto).

 

 
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6.12.     Employees of Prime. With the exception of Prime’s Chief Executive
Officer and Chief Financial Officer, each of whom will be either retiring or
resigning upon the Merger, the Bank expects to retain most of the existing
branch employees of Prime and other employees, including Paul Lutsky, who have
primary responsibility for customer relationships, and will provide them with
benefits substantially similar to those offered to Bank employees. Certain other
employees may not be offered employment with the Bank. Each employee of Prime
hired by the Bank shall be credited with service as a Prime employee for
purposes of determining his or her status under the Bank’s policies.

 

6.13.     Life Insurance Policies. Insurance policies with respect to Jasper J.
Jaser and Marion M. Violano have been issued by Northwestern Mutual, are in
effect and are further described on Schedule 6.13 of the Prime Disclosure
Schedules (along with a description of those certain Assignment Agreements dated
March 1, 1996 related thereto).

 

6.14.     No Survival of Representations and Warranties. The representations and
warranties of the parties set forth in Article III and Article IV hereof shall
not survive the Closing and shall be of no further force and effect following
the Closing.

 

6.15.     The Stockholders’ Representative. Each of the Stockholders makes,
constitutes and appoints the Stockholders’ Representative, with full power of
substitution and re-substitution, as its true and lawful attorney-in-fact for
him, her or it and in his, her or its name, place, and stead to sign, execute,
deliver and perform any agreement, instrument, certificate or document required
to be executed by the Stockholders or otherwise contemplated hereby, to make and
authorize amendments to, or waivers of, this Agreement or any other agreement,
instrument, certificate and document contemplated hereby, to enforce the
obligations of the Companies or Prime under this Agreement or any other
agreement, instrument, certificate and document contemplated hereby, to give and
receive all notices required or permitted by the Stockholders’ Representative
under this Agreement or any other agreement, instrument, certificate and
document contemplated hereby. This power of attorney is a special power of
attorney coupled with an interest and is irrevocable, and shall survive the
Closing and death, disability, legal incapacity, bankruptcy, insolvency,
dissolution, or cessation of existence of any Stockholder. This power of
attorney may be exercised by the Stockholders’ Representative by listing the
Stockholder executing any agreement, instrument, certificate and document
contemplated hereby with the single signature of the Stockholders’
Representative acting as attorney-in-fact for such Stockholder. Each Party shall
be entitled to rely exclusively upon any communication given or other action
taken by the Stockholders’ Representative on behalf of the Stockholders pursuant
to this Agreement or the other agreement, instrument, certificate and document
contemplated hereby.

 

 

ARTICLE VII.
CONDITIONS TO MERGER

 

7.1.        Conditions to Each Party’s Obligation to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction on or prior to the Closing Date, of the
following conditions, any of which may, to the extent permitted by applicable
Law, be waived in writing by any party in its sole discretion (provided that
such waiver shall only be effective as to the obligations of such party):

 

 
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(a)     Shareholder Approval. The Prime Voting Proposal shall have been approved
at the Prime Meeting, at which a quorum is present, by two-thirds or greater of
the Prime shares issued and outstanding (the “Required Prime Shareholder Vote”);
and Prime shall have caused the certified vote tabulation(s) required by Section
6.3(b) of this Agreement to be delivered to the Bank.

 

(b)     Governmental Approvals. Other than the filing of the Bank Merger
Agreement, all authorizations, consents, orders or approvals of, or declarations
or filings with, or expirations of waiting periods imposed by, any Governmental
Entity in connection with the Merger and the consummation of the other
transactions contemplated by this Agreement, shall have been filed, been
obtained or occurred on terms and conditions that would not reasonably be likely
to have a Bank Material Adverse Effect or a Prime Material Adverse Effect.

 

(c)     No Injunctions. No Governmental Entity of competent jurisdiction shall
have obtained, enacted, issued, promulgated, enforced or entered any law, order,
executive order, stay, decree, judgment or injunction (whether preliminary,
temporary or permanent) or statute, rule or regulation that is in effect and
that has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger or the other transactions contemplated by this
Agreement.

 

7.2.        Additional Conditions to Obligations of Patriot and the Bank. The
obligations of Patriot and the Bank to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of each of the following additional
conditions, any of which may be waived, in writing, exclusively by Patriot and
the Bank:

 

(a)     Representations and Warranties. The representations and warranties of
Prime set forth in this Agreement (other than in Section 3.1, Section 3.2,
Section 3.3 and Section 3.4), and any schedule or any certificate delivered
pursuant hereto, (i) if qualified by materiality (or any variation of such
term), shall be true, complete and accurate (without giving effect to such
materiality qualification set forth therein) when made and as of the Closing
Date, except that any such representation or warranty that is made as of a
specified date shall only be required to be true, complete and accurate as of
that date, and (ii) if not qualified by materiality (or any variation of such
term), shall be true, complete and accurate in all material respects when made
and as of the Closing Date, except that any such representation or warranty that
is made as of a specified date shall only be required to be true, complete and
accurate in all material respects as of that date. The representations and
warranties of Prime set forth in Section 3.1, Section 3.2, Section 3.3 and
Section 3.4, and any schedule or any certificate delivered pursuant thereto,
shall be true, complete and accurate when made and as of the Closing Date,
except that any such representation or warranty that is made as of a specified
date shall only be required to be true, complete and accurate as of that date.

 

(b)     Performance of Obligations of Prime. Prime shall have performed all
obligations required to be performed by it under this Agreement on or prior to
the Closing Date; and the Companies shall have received a certificate signed on
behalf of Prime by the chief executive officer or the chief financial officer of
Prime to such effect.

 

 
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(c)     No Material Adverse Effect. On or prior to the Closing Date, there shall
have been no occurrence (including, without limitation, a breach of the
representations and warranties or covenants of Prime contained in this Agreement
(including the schedules hereto)) that has resulted in or is reasonably likely
to result in a Prime Material Adverse Effect or a Bank Material Adverse Effect.

 

(d)     Prime Certificate. The Bank shall have received a favorable certificate,
dated as of the Effective Time, signed by chief executive officer or the chief
financial officer of Prime as to the matters set forth in Sections 7.2(a),
7.2(b) and 7.2(c), which certificate shall also certify (x) the incumbency and
genuineness of signatures of all officers of Prime executing this Agreement or
any other Transaction Document, (y) the truth and correctness of corporate
resolutions authorizing the entry by Prime into this Agreement and the
transactions contemplated hereby and (z) the truth, correctness and completeness
of the organizational documents of Prime.

 

(e)     Consents and Approvals. All third party consents with respect to the
consummation of the transactions contemplated by this Agreement set forth on
Exhibit F shall have been received and shall be reasonably satisfactory in form
and substance to the Bank in its sole discretion.

 

(f)     No Litigation. No preliminary or permanent injunction or other order
shall have been issued by any Governmental Entity, nor any statute, rule,
regulation, decree or executive order promulgated or enacted by any Governmental
Entity, that (a) declares this Agreement invalid or unenforceable in any
material respect, (b) prevents or significantly delays the consummation of the
transactions contemplated hereby, or (c) imposes or will impose restrictions on
Patriot, the Bank or any of their Affiliates to sell, to hold separate or
otherwise dispose of any material assets, or to materially alter the conduct or
operations, or to materially restrict, or otherwise change in any material
respect, the assets or business of Patriot, the Bank, or any of their Affiliates
(including without limitation Prime from and after the Effective Time); and (d)
no action or proceeding before any Governmental Entity shall have been
instituted by any Governmental Entity, or by any other Person (other than an
Affiliate of the Bank), which (i) seeks to prevent or delay the consummation of
the transactions contemplated by this Agreement, (ii) challenges the validity or
enforceability of this Agreement, (iii) seeks to impose restrictions on Patriot,
the Bank or any of their Affiliates to sell, to hold separate or otherwise
dispose of any material assets, or to materially alter the conduct or
operations, or to materially restrict, or otherwise change in any material
respect, the assets or business of Patriot, the Bank or any of their Affiliates
(including without limitation Prime from and after the Effective Time).

 

(g)    Resignations. The Bank shall have received letters of resignation from
the directors and officers of Prime reasonably satisfactory in form and
substance to the Bank.

 

(h)    Voting Agreements. The Voting Agreements shall have been executed and
delivered by each director and executive officer of Prime concurrently with
Prime’s execution and delivery of this Agreement.

 

 
49

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(i)      Exchange Agent Agreement. Other than the Bank and Patriot, all parties
to the Exchange Agent Agreement shall have entered into such agreement and there
shall have been no notice that any such other parties do not intend to honor
such agreement.

 

(j)      Escrow Agreement. Other than the Bank and Patriot, all parties to the
Escrow Agreement shall have entered into such agreement and there shall have
been no notice that any such other parties do not intend to honor such
agreement.

 

(k)     Certificate of Good Standing. The Bank shall have received a certificate
of corporate good standing or legal existence of Prime as of a recent date.

 

(l)      Transaction Documents. Prime shall have entered into each of the other
Transaction Documents to which it is a party.

 

(m)    Other Closing Matters. The Bank shall have received such other supporting
information in confirmation of the representations, warranties, covenants and
agreements of Prime and the satisfaction of the conditions to the Bank’s
obligation to close hereunder as the Bank or its counsel may reasonably request.

 

7.3.        Additional Conditions to Obligations of Prime. The obligation of
Prime to effect the Merger shall be subject to the satisfaction on or prior to
the Closing Date of each of the following additional conditions, either of which
may be waived, in writing, exclusively by Prime:

 

(a)     Representations and Warranties. The representations and warranties of
Patriot and Bank set forth in this Agreement, and any schedule or any
certificate delivered pursuant hereto, (i) if qualified by materiality (or any
variation of such term), shall be true, complete and accurate (without giving
effect to such materiality qualification set forth therein) when made and as of
the Closing Date, except that any such representation or warranty that is made
as of a specified date shall only be required to be true, complete and accurate
as of that date, and (ii) if not qualified by materiality (or any variation of
such term), shall be true, complete and accurate in all material respects when
made and as of the Closing Date, except that any such representation or warranty
that is made as of a specified date shall only be required to be true, complete
and accurate in all material respects as of that date.

 

(b)     Performance of Obligations of the Bank. The Bank shall have performed in
all material respects all obligations required to be performed by them under
this Agreement on or prior to the Closing Date; and Prime shall have received a
certificate signed on behalf of the Bank by the chief executive officer or the
chief financial officer of the Bank to such effect.

 

(c)     Bank Certificate. Prime shall have received a favorable certificate,
dated as of the Effective Time, signed by the chief executive officer or the
chief financial officer of the Bank as to the matters set forth in Section
7.3(a), which certificate shall also certify (x) the incumbency and genuineness
of signatures of all officers of the Bank executing this Agreement or any other
Transaction Document, (y) the truth and correctness of corporate resolutions
authorizing the entry by the Bank into this Agreement and the transactions
contemplated hereby and (z) the truth, correctness and completeness of the
organizational documents of the Bank.

 

 
50

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(d)     Certificates of Good Standing. Prime shall have received certificates of
corporate good standing or legal existence of the Bank as of a recent date.

 

(e)     Exchange Agent Agreement. Other than Prime, all parties to the Exchange
Agent Agreement shall have entered into such agreement and there shall have been
no notice that any such other parties do not intend to honor such agreement.

 

(f)     Funding of Exchange Account. The Bank shall have delivered or caused to
be delivered the Merger Consideration to the Exchange Agent.

 

ARTICLE VIII.
TERMINATION AND AMENDMENT

 

8.1.         Termination. This Agreement may be terminated at any time prior to
the Effective Time (with respect to Sections 8.1(b) through 8.1(h), by written
notice by the terminating party to the other party), whether before or, subject
to the terms hereof; after the receipt of Prime Shareholder Approval:

 

(a)     by mutual written consent of Patriot, the Bank and Prime;

 

(b)     by either the Bank or Prime if the Merger shall not have been
consummated by March 31, 2018 (the “Outside Date”) (provided that the right to
terminate this Agreement under this Section 8.1(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before the
Outside Date);

 

(c)     by either the Bank or Prime if a Governmental Entity of competent
jurisdiction shall have issued a nonappealable final order, decree or ruling or
taken any other nonappealable final action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger;

 

(d)     by either the Bank or Prime if at the Prime Meeting at which a vote on
the Prime Voting Proposal is taken, the Required Prime Shareholder Vote in favor
of the Prime Voting Proposal shall not have been obtained;

 

(e)     by the Bank, if, prior to the approval of the Prime Voting Proposal by
the Stockholders at the Prime Meeting: (i) a Prime Adverse Recommendation Change
shall have occurred, (ii) Prime shall have entered into, or publicly announced
its intention to enter into, a Prime Acquisition Agreement (other than a
confidentiality agreement), (iii) Prime shall have breached or failed to perform
in any material respect any of the covenants and agreements set forth in Section
6.1, or (iv) the Prime Board fails to reaffirm (publicly, if so requested by the
Bank) the Prime Voting Proposal within ten (10) Business Days after the date any
Acquisition Proposal (or material modification thereto) is first publicly
disclosed by Prime or the Person making such Acquisition Proposal;

 

 
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(f)     by Prime, if, prior to the approval of the Prime Voting Proposal by the
Stockholders at the Prime Meeting, the Prime Board authorizes Prime, in full
compliance with the terms of this Agreement, including Section 6.1(a)(ii)
hereof, to enter into a Prime Acquisition Agreement (other than a
confidentiality agreement) in respect of a Superior Proposal; provided that
Prime shall have paid any amounts due pursuant to Section 6.1(c) hereof in
accordance with the terms, and at the times, specified therein;

 

(g)     by the Bank, if there has been a material breach of any representation
or warranty, or any failure to perform any covenant or agreement on the part of
Prime set forth in this Agreement, which breach or failure to perform (i) would
cause the conditions set forth in Section 7.2 not to be satisfied, and (ii)
shall not have been cured within twenty (20) days following receipt by Prime of
written notice of such breach or failure to perform from the Bank; or

 

(h)     by Prime, if there has been a material breach of any representation or
warranty, or any failure to perform any covenant or agreement on the part of the
Bank set forth in this Agreement, which breach or failure to perform (i) would
cause the conditions set forth in Section 7.3 not to be satisfied, and (ii)
shall not have been cured within twenty (20) days following receipt by the Bank
of written notice of such breach or failure to perform from Prime.

 

8.2.       Effect of Termination. In the event of termination of this Agreement
as provided in Section 8.1, this Agreement shall immediately become void and
there shall be no liability or obligation on the part of Patriot, the Bank or
Prime, or their respective officers, directors, shareholders or Affiliates;
provided that (a) any such termination shall not relieve any party from
liability for any willful breach of this Agreement, (b) a termination by Prime
under Section 8.1(f) shall not relieve Prime of its obligation under Section
6.1(c), and (c) the provisions of Sections 5.3 (Confidentiality), this Section
8.2 (Effect of Termination) and Article IX (Miscellaneous) of this Agreement and
the Confidentiality Agreement shall remain in full force and effect and survive
any termination of this Agreement.

 

8.3.        Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.

 

8.4.        Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, may, (a) by action taken or authorized by the Prime Board and
approved by the Bank, extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party. Such extension or waiver
shall not be deemed to apply to any time for performance, inaccuracy in any
representation or warranty, or noncompliance with any agreement or condition, as
the case may be, other than that which is specified in the extension or waiver.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of such rights, nor
shall any single or partial exercise of any such right, or any abandonment or
discontinuance of steps to enforce such right, or any course of conduct,
preclude any other or further exercise thereof or the exercise of any other
right. The rights and remedies of the parties hereunder are cumulative and are
not exclusive of any rights or remedies which they would otherwise have
hereunder.

 

 
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ARTICLE IX.
MISCELLANEOUS

 

9.1.          Notices. All notices and other communications hereunder shall be
in writing and shall be deemed duly delivered (a) one (1) Business Day after
being sent for next Business Day delivery, fees prepaid, via a reputable
nationwide overnight courier service, or (b) on the date of confirmation of
receipt of transmission by facsimile or other electronic means (or, the first
Business Day following such receipt if the date of such receipt is not a
Business Day), in each case to the intended recipient as set forth below:

 

(a)           if to Patriot or the Bank, to

 

Patriot National Bancorp, Inc.

900 Bedford Street, 3rd Floor

Stamford, CT 06901

Attn: Michael Carrazza, Chairman

e-mail: mc@solaiacapital.com

 

with a copy (which shall not constitute notice) to:

 

Alan L. Zeiger, Esq.

Blank Rome LLP

One Logan Square

130 North 18th Street

Philadelphia, PA 19103

Fax: (212) 832-5754

e-mail: Zeiger@BlankRome.com

 

(b)           if to Prime, to

 

Prime Bank

7 Old Tavern Road

Orange, CT 06477

Attn: Jasper J. Jaser, Chairman and Chief Executive Officer

e-mail: jjaser@primebankct.com

 

with a copy (which shall not constitute notice) to:

 

William W. Bouton III

Hinckley Allen

20 Church Street

Hartford, CT. 06103-1221

Fax: (860) 331-2627

e-mail: wbouton@hinckleyallen.com

 

 
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(c)           if to the Stockholders’ Representative, to

 

Jasper J. Jaser

PO Box 1066

Orange, CT 06477

Telephone: (203) 530-9547

 

with a copy (which shall not constitute notice) to:

 

William W. Bouton III

Hinckley Allen

20 Church Street

Hartford, CT. 06103-1221

Fax: (860) 331-2627

e-mail: wbouton@hinckleyallen.com

 

Any party to this Agreement may give any notice or other communication hereunder
using any other means (including personal delivery, messenger service, telex,
ordinary mail or electronic mail), but no such notice or other communication
shall be deemed to have been duly given unless and until it actually is received
by the party for whom it is intended. Any party to this Agreement may change the
address to which notices and other communications hereunder are to be delivered
by giving the other parties to this Agreement notice in the manner herein set
forth.

 

9.2.     Entire Agreement. This Agreement (including the Schedules and Exhibits
hereto and the documents and instruments referred to herein that are to be
delivered at the Closing) constitutes the entire agreement among the parties to
this Agreement and supersedes any prior understandings, agreements or
representations by or among the parties hereto, or any of them, written or oral,
with respect to the subject matter hereof, including, but not limited to, that
certain letter dated April 28, 2017, from Patriot to Prime, indicating interest
in a merger transaction; provided that the Confidentiality Agreement shall
remain in effect in accordance with its terms.

 

9.3.     No Third Party Beneficiaries. Except as provided in Section 6.6 with
respect to Prime Indemnified Parties, which shall be third party beneficiaries
of the provisions set forth in Section 6.6, nothing in this Agreement is
intended, and shall not be deemed, to confer any rights or remedies upon any
Person other than the parties hereto and their respective successors and
permitted assigns, to create any agreement of employment with any person or to
otherwise create any third-party beneficiary hereto.

 

9.4.     Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned or delegated, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties, and any such assignment without such
prior written consent shall be null and void. Subject to the preceding sentence,
this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and permitted
assigns.

 

 
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9.5.     Severability. Whenever possible, each term or provision of this
Agreement that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction. If the final
judgment of a court of competent jurisdiction declares that any term or
provision hereof is invalid or unenforceable, the parties hereto agree that the
court making such determination shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified. In the event such court does not exercise the power granted to it in
the prior sentence, the parties hereto agree to replace such invalid or
unenforceable term or provision with a valid and enforceable term or provision
that will achieve, to the extent possible, the economic, business and other
purposes of such invalid or unenforceable term.

 

9.6.     Counterparts and Signature. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties hereto and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart. This Agreement may be executed and delivered by
electronic .pdf delivery or facsimile transmission.

 

9.7.     Interpretation. When reference is made in this Agreement to an Article
or a Section, such reference shall be to an Article or Section of this
Agreement, unless otherwise indicated. The table of contents, table of defined
terms and headings contained in this Agreement are for convenience of reference
only and shall not affect in any way the meaning or interpretation of this
Agreement. The language used in this Agreement shall be deemed to be the
language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction shall be applied against any party. Whenever the
context may require, any pronouns used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural, and vice versa. Any reference to
any federal, state, local or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The terms “material,” “materially” or “materiality” as used
in this Agreement with an initial lower case “m” are agreed to have their
respective customary and ordinary meanings, without regard to the meanings
ascribed to Prime Material Adverse Effect in Section 3.1 or the Bank Material
Adverse Effect in Section 4.1. Whenever the words “include,” “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
the words “without limitation.” No summary of this Agreement prepared by any
party shall affect the meaning or interpretation of this Agreement.

 

 
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9.8.     Governing Law. This Agreement, and all disputes or controversies
arising out of or relating to this Agreement or the transactions contemplated
hereby, shall be governed by, and construed in accordance with, the laws of the
State of Connecticut, without regard to the laws of any other jurisdiction that
might be applied because of the conflicts of laws principles of the State of
Connecticut.

 

9.9.     Remedies. Except as otherwise provided herein, any and all remedies
herein expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity.

 

9.10.    Submission to Jurisdiction. .In the event of any controversy or claim
arising out of or relating to this Agreement or the breach or alleged breach
hereof, each of the parties hereto irrevocably (a) submits to the non-exclusive
jurisdiction of the United States District Court for the District of
Connecticut, or if such court does not have jurisdiction, the appropriate State
Court of the State of Connecticut, (b) waives any objection which it may have at
any time to the laying of venue of any action or proceeding brought in any such
court and (c) waives any claim that such action or proceeding has been brought
in an inconvenient forum.

 

9.11.    WAIVER OF JURY TRIAL. EACH OF PATRIOT, THE BANK AND PRIME HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR THE ACTIONS OF PATRIOT, THE BANK
AND PRIME IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF
THIS AGREEMENT.

 

9.12.    Disclosure Schedule. The Prime Disclosure Schedule shall be arranged in
Sections corresponding to the numbered Sections contained in Article III, and
the disclosure in any Section shall qualify (a) the corresponding Section in
Article III, and (b) the other Sections in Article III to the extent that the
disclosures therein specifically reference such other Sections. The inclusion of
any information in the Prime Disclosure Schedule shall not be deemed to be an
admission or acknowledgment, in and of itself, that such information is required
by the terms hereof to be disclosed, is material, has resulted in or would
result in a Prime Material Adverse Effect or the Bank Material Adverse Effect,
or is outside the Ordinary Course of Business.

 

[next page is the signature page]

 

 
56

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IN WITNESS WHEREOF, Patriot, the Bank and Prime have caused this Agreement and
Plan of Merger to be signed by their respective officers thereunto duly
authorized as of the date first written above.

 

 

PATRIOT:

 

PATRIOT NATIONAL BANCORP, INC.

 

By:                                                          

       Michael Carrazza

       Chairman

 

 

 

BANK:

 

PATRIOT BANK, NATIONAL

ASSOCIATION

 

 

By:                                                          

       Michael Carrazza

       Chairman

 

[signatures continue on the following page]

 

 

 

 

[Signature Page to the Merger Agreement]

 

 

--------------------------------------------------------------------------------

 

 

PRIME:

 

PRIME BANK

 

By:                                                            

       Jasper J. Jaser

       Chairman and Chief Executive Officer

 

STOCKHOLDERS’

REPRESENTATIVE:

 

 

_____________________________

Jasper J. Jaser

 

 

 

 

[Signature Page to the Merger Agreement]

 

 

--------------------------------------------------------------------------------

 

 

EXHIBIT A

 

 

VOTING AGREEMENT

 

 

--------------------------------------------------------------------------------

 

 

EXHIBIT B

 

 

MERGER AGREEMENT

 

 

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EXHIBIT C

 

OPTION CANCELLATION AGREEMENT

 

 

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EXHIBIT D

 

TABLE OF DEFINED TERMS

 

Terms

Reference in Agreement

Acquisition Proposal

Section 6.1(e)(i)

Action

Section 3.12

Adjusted TBV

Section 2.1(e)

Affiliate

Section 3.19

Affiliated Group

Section 3.8

Agreement

Preamble to Article I

Bank

Preamble to Article I

Bank Material Adverse Effect

Section 4.1

Bank Merger Agreement

Section 1.1

Bank’s Knowledge

Preamble to Article IV

Bankruptcy and Equity Exception

Section 3.4(a)

BLC

Preamble to Article I

BMA

Preamble to Article I

Break-Up Fee

Section 6.1(c)

Business Day

Section 1.2

CBCA

Preamble to Article I

Certificate

Section 2.1(c)

Closing

Section 1.2

Closing Consideration

Section 2.2(g)

Closing Date

Section 1.2

Closing Payment

Section 2.2(g)

COCC

Section 2.1(e)

Code

Section 3.8

Companies

Preamble to Article I

Confidentiality Agreement

Section 5.3

Contamination

Section 3.13(e)

Contract

Section 3.4(b)

Deficiencies

Section 2.1(e)

Dissenting Shares

Section 2.3(a)

DOB

Section 2.1(e)

Effective Time

Section 1.1

Employee Benefit Plan

Section 3.14(a)

Environmental Law

Section 3.13(c)

Environmental Permits

Section 3.13(a)(ii)

ERISA

Section 3.14(a)

ERISA Affiliate

Section 3.14(a)

Escrow Agent

Section 2.2(g)

Escrow Amount

Section 2.2(g)

Exchange Act

Section 6.1(e)(i)

Exchange Agent

Section 2.2(a)

Exchange Agent Agreement

Section 2.2(a)

 

 

--------------------------------------------------------------------------------

 

 

FDIA

Section 3.29

FDIC

Section 3.4(c)

Fully Diluted Shares Outstanding

Section 2.1(d)(i)

GAAP

Section 3.1(b)

Governmental Entity

Section 3.4(c)

Hazardous Substance

Section 3.13(d)

Insurance Policies

Section 3.18

Intellectual Property

Section 3.10(a)

Law

Section 3.15

Leased Real Property

Section 3.9(a)

Liens

Section 3.4(b)

Loans

Section 3.27(a)

Merger

Preamble to Article I

Merger Consideration

Section 2.1(d)

Merger Consideration Per Share

Section 2.1(d)(i)

Notice Period

Section 6.1(b)

OCC

Section 1.1

Ordinary Course of Business

Section 3.6(b)

OREO

Section 3.27(c)

Outside Date

Section 8.1(b)

Patriot Common Stock

Section 2.1(d)(ii)

Patriot Financial Statements

Section 4.4(a)

Patriot Quarterly Statements

Section 4.4(a)

Payment Fund

Section 2.2(g)

Permits

Section 3.17

Permitted Liens

Section 3.9(b)

Pre-Closing Period

Section 5.1

Prime

Preamble to Article I

Prime Acquisition Agreement

Section 6.1(a)(i)

Prime Adverse Recommendation Change

Section 6.1(a)(i)

Prime Board

Preamble to Article I

Prime Common Stock

Section 3.2(a)

Prime Disclosure Schedule

Preamble to Article III

Prime Employee Plans

Section 3.14(a)

Prime Employee Stock Options

Section 2.1(d)(ii)

Prime Financial Statements

Section 3.5(a)

Prime Indemnified Parties

Section 6.6(a)

Prime Intellectual Property

Section 3.10(b)

Prime Investment Securities

Section 3.26

Prime Loan

Section 3.27(d)

Prime Material Adverse Effect

Section 3.1

Prime Material Contract

Section 3.11(a)

Prime Meeting

Section 6.1(a)(ii)

Prime Quarterly Statements

Section 3.5(a)

Prime Shareholder Approval

Section 3.4(a)

Prime Stock Options

Section 3.2(a)

 

 

--------------------------------------------------------------------------------

 

 

Prime Voting Proposal

Section 3.4(a)

Prime’s Knowledge

Preamble to Article III

Proxy Statement

Section 6.3(a)

Relevant Prime Persons

Preamble to Article III

Relevant Bank Persons

Preamble to Article IV

Representatives

Section 6.1(a)(i)

Required Prime Shareholder Vote

Section 7.1(a)

Superior Proposal

Section 6.1(e)(ii)

Surviving Corporation

Section 1.3

Tax

Section 3.8

Tax Returns

Section 3.8

Taxes

Section 3.8

TBV

Section 2.1(d)

Transaction Documents

Section 3.1

Transfer Act Section 3.13(f)

Voting Agreement

Preamble to Article I

 

 

--------------------------------------------------------------------------------

 

 

EXHIBIT E

 

CONSENTS AND APPROVALS

 

 

Federal Deposit Insurance Corporation

Office of the Comptroller of the Currency

Connecticut Department of Banking

Federal Reserve Bank of New York

 

 

--------------------------------------------------------------------------------

 

 

Schedule 2.1(d)

 

Merger Consideration Calculation Example

 

Assume (which for the avoidance of doubt, is meant to be an illustrative example
only):

 

 

●

563,527 shares outstanding

 

 

●

All options are exercised (e.g., all 101,000 options are exercised or cashed out
at Closing) and are in the money.

 

 

●

There are 664,527 total shares outstanding on a fully-diluted basis (563,527 +
101,000)

 

 

●

Weighted average exercise price of outstanding options is $10 per share (option
holders will receive actual difference between their actual exercise price and
the deal price)

 

 

●

TBV is $8,758,3091

 

 

●

115% of TBV is $10,072,055.35 (this is the Merger Consideration)

 

First, multiply the average exercise price of outstanding options ($10) by the
number of total options being exercised (101,000). This is the aggregate option
exercise price and is equal to $1,010,000.

 

Second, (i) add the aggregate option exercise price ($1,010,000) to the Merger
Consideration ($10,072,055.35), and (ii) divide such number ($11,082,055.35) by
the total shares outstanding on a fully-diluted basis (664,527). This is the
Merger Consideration Per Share and is equal to $16.68.

 

Third, subtract the average option exercise price ($10) from the Merger
Consideration Per Share ($16.68). This is the Merger Consideration given to each
Optionholder for each option share and is equal to $6.68.

 

 

 

--------------------------------------------------------------------------------

1 Note: Such number to be updated pursuant to Section 2.1(d) of the Merger
Agreement.