Item 1.01
Entry
Into a Material Definitive Agreement
.
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 Georgetown Bancorp, Inc., a Maryland corporation (“Georgetown Bancorp”), entered into an
Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which Salem Five Bancorp will acquire Georgetown
Bancorp, and Salem Five Bancorp’s wholly-owned subsidiary, Salem Five Cents Savings Bank (“Salem Five Bank”),
will acquire Georgetown Bank, the wholly-owned subsidiary of Georgetown Bancorp.
Under the terms of
the Merger Agreement, Salem Five Bancorp will acquire all of Georgetown Bancorp’s outstanding common stock at a price of
$26.00 per share in cash. In addition, each outstanding option to acquire shares of Georgetown Bancorp 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, resulting
in a valuation of the acquisition of approximately $49.2 million.
Following the acquisition
of Georgetown Bancorp by Salem Five Bancorp, Georgetown Bank will merge with and into Salem Five Bank pursuant to a bank merger
agreement, with Salem Five Bank being the surviving institution.
The Merger Agreement
contains customary representations and warranties from Georgetown Bancorp and Salem Five Bancorp, and each party has agreed to
customary covenants, including, among others, covenants relating to (1) the conduct of Georgetown Bancorp’s businesses during
the interim period between the execution of the Merger Agreement and the closing of the merger, (2) Georgetown Bancorp’s
obligations to facilitate its stockholders’ consideration of, and voting upon, the Merger Agreement and the merger, (3) the
recommendation by the board of directors of Georgetown Bancorp in favor of approval of the Merger Agreement and the merger by its
stockholders, and (4) Georgetown Bancorp’s non-solicitation obligations relating to alternative business combination transactions.
Consummation of the
merger is subject to certain conditions, including, among others, approval of the merger by Georgetown Bancorp’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 Merger Agreement
provides certain termination rights for both Salem Five Bancorp and Georgetown Bancorp, and further provides that upon termination
of the Merger Agreement under certain circumstances, Georgetown Bancorp will be obligated to pay Salem Five Bancorp a termination
fee of $2.0 million.
In connection with
the execution of the Merger Agreement, all of the directors of Georgetown Bancorp entered into voting agreements with Salem Five
Bancorp pursuant to
which such individuals, in their capacities
as stockholders, have agreed, among other things, to vote their respective shares of Georgetown Bancorp common stock in favor of
the approval of the Merger Agreement and the transactions contemplated thereby. The form of voting agreement is filed as Exhibit 10.1
and is incorporated herein by reference.
The foregoing summary
of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of such
document, which is attached hereto as Exhibit 2.1 and is incorporated herein by reference.
