AGREEMENT AND PLAN OF MERGER

12 Months Ended

Dec. 31, 2016

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER

18.AGREEMENT AND PLAN OF MERGER

On October 5, 2016, Salem Five Bancorp, a Massachusetts mutual holding company, Bright Star, Inc., a Maryland corporation and wholly-owned subsidiary of Salem Five Bancorp, and the Company entered into the Merger Agreement, pursuant to which Bright Star, Inc. will merge with and into the Company.  Immediately following this, the Bank will merge with and into Salem Five Bancorp’s wholly-owned subsidiary, Salem Five Bank.  Immediately following the merger of the two banks, the Company shall dissolve and liquidate into Salem Five Bancorp.

Under the terms of the Merger Agreement, Salem Five Bancorp will acquire all of the Company’s outstanding common stock at a price of $26.00 per share in cash. In addition, each outstanding option to acquire shares of the Company’s common stock will be canceled in exchange for a cash payment equal to the difference, if any, between $26.00 and the exercise price of the option.

Consummation of the merger is subject to certain conditions, including, among others, approval of the merger by the Company’s stockholders, the receipt of all required regulatory approvals and expiration of applicable waiting periods, accuracy of specified representations and warranties of each party, the performance in all material respects by each party of its obligations under the Merger Agreement, and the absence of any injunctions or other legal restraints.  The stockholders of the Company approved the merger on February 13, 2017.  The merger is expected to close in the second quarter of 2017.

The Merger Agreement provides that upon termination of the Merger Agreement under certain circumstances, the Company will be obligated to pay Salem Five Bancorp a termination fee of $2.0 million.