REORGANIZATION AND MERGER AGREEMENT
By and Between
THE PATAPSCO BANK
and
PARKVILLE FEDERAL SAVINGS BANK
Dated as of November 12, 2003
THIS REORGANIZATION AND MERGER AGREEMENT ("Agreement") is dated as of
November 12, 2003, by and between The Patapsco Bank, a Maryland-chartered bank
("Patapsco"), on the one hand, and Parkville Federal Savings Bank, a federal
savings bank ("Parkville"), on the other hand.
BACKGROUND
The parties have determined that it would be desirable and in their
respective best interests, including the best interests of their respective
stockholders for (i) Patapsco to form Patapsco Acquisition Bank ("NewSub") to
become a wholly owned subsidiary of Patapsco, and to merge NewSub with and into
Parkville (the "Merger"), in accordance with the Plan of Merger (the "Plan of
Merger") attached as Exhibit A hereto, pursuant to which each of the issued and
outstanding shares of Parkville common stock, $1.00 par value per share
("Parkville Common Stock"), shall be automatically by operation of law converted
into the right to receive the Per Share Purchase Price (referred in Section 1.3
below) and the issued and outstanding shares of NewSub common stock shall be
converted by operation of law into an equal number of newly issued shares of
Parkville Common Stock all of which shall be owned by Patapsco, and (ii)
immediately following the Merger, Parkville shall be liquidated into Patapsco
(the "Liquidation").
NOW THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth, and of other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
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ARTICLE I
THE MERGER AND RELATED MATTERS
1.1 The Merger; Surviving Institution. Subject to the terms and conditions
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of this Agreement, and pursuant to the provisions of the Home Owners' Loan Act,
as amended ("HOLA"), the regulations of the Office of Thrift Supervision (the
"OTS Regulations"), the Federal Deposit Insurance Act, as amended ("FDIA"), and
the Bank Holding Company Act of 1956, as amended ("BHCA"), at the Merger
Effective Time (as hereinafter defined), NewSub shall be merged with and into
Parkville pursuant to the terms and conditions set forth herein and in the Plan
of Merger. The Merger shall have the effects specified in Section 552.13(l) of
the OTS Regulations, Section 1.4(e) hereof and the Plan of Merger. Upon
consummation of the Merger, the separate corporate existence of NewSub shall
cease and Parkville shall continue as the surviving institution (sometimes
referred to herein as the "Surviving Institution"). Patapsco may at any time
change the method of effecting the Merger if and to the extent it deems such
change to be desirable, provided, however, that no such change shall (i) alter
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or change the amount or kind of consideration to be paid to holders of Parkville
Common Stock as provided for in this Agreement, or (ii) materially impede or
delay the consummation of the transactions contemplated by this Agreement.
1.2 Effective Time of the Merger. Immediately following the Closing (as
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defined in Section 2.1 herein), Parkville and NewSub will each file, or cause to
be filed, articles of combination with the Office of Thrift Supervision ("OTS")
for the Merger in the form required by and executed in accordance with Section
552.13(j) of the OTS Regulations. The Merger shall become effective at the time
and date at which the OTS endorses the articles of combination (or such other
later time and date as are specified in the articles of combination) (the
"Merger Effective Time"), which shall be immediately following the Closing and
on the same day as the Closing if practicable.
1.3 Conversion of Shares. The manner and basis of the conversion of the
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respective outstanding shares of capital stock of Parkville and NewSub and the
consideration which the respective record holders thereof shall be entitled to
receive pursuant to the Merger shall be as follows:
(a) At the Merger Effective Time, by virtue of the Merger and without any
action on the part of NewSub or Parkville or the holders of shares of common
stock of NewSub or Parkville each outstanding share of Parkville Common Stock
issued and outstanding at the Merger Effective Time (except for Dissenting
Shares as defined in Section 1.6 hereof and shares referred to in paragraph (b)
of this Section 1.3) shall be cancelled and converted into the right to receive
cash in the amount of $62.51 "Per Share Purchase Price" (for all holders, the
"Aggregate Purchase Price").
(b) Any shares of Parkville Common Stock that are owned or held by
Parkville or any of its subsidiaries (except shares held in any 401(k) plan of
Parkville or any Parkville subsidiary or held in a fiduciary capacity) or by
Patapsco or any of Patapsco's subsidiaries (other than in a fiduciary capacity)
at the Merger Effective Time shall cease to exist, and the certificates for such
shares shall as promptly as practicable be canceled.
(c) Each exercisable stock option for shares of Parkville Common Stock held
by Xxxxx X. Xxxxxx shall be canceled and he shall be entitled to receive, in
lieu of each share of Parkville Common Stock that would otherwise have been
issuable upon the exercise thereof, a cash payment equal to $489,000. The cash
payment to Xx. Xxxxxx for the stock options shall be paid by Patapsco to Xx.
Xxxxxx at or prior to the Closing and shall be subject to all applicable federal
and state tax withholding obligations. The outstanding stock options to be
canceled in exchange for payment pursuant to the immediately preceding sentence
shall not be deemed to be stock options issued and outstanding immediately prior
to the Effective Time.
(d) Each share of common stock of NewSub issued and outstanding immediately
prior to the Merger Effective Time shall, automatically by virtue of the
effectiveness of the Merger and without necessity of any action on the part of
the holder thereof, be canceled and converted into an equal number of shares of
common stock of the Surviving Institution.
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(e) At the Merger Effective Time, the holders of certificates representing
shares of Parkville Common Stock shall cease to have any rights as stockholders
of Parkville, except the right to receive such holders' pro rata share of the
Aggregate Purchase Price as provided herein.
1.4 Surviving Institution in the Merger.
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(a) The name of the Surviving Institution in the Merger shall be "Parkville
Federal Savings Bank."
(b) The Charter of Parkville as in effect on the Merger Effective Time
shall be the Charter of the Surviving Institution.
(c) The bylaws of Parkville, together with all amendments thereto, if any,
as in effect immediately prior to the Merger Effective Time, shall thereafter be
the bylaws of the Surviving Institution, until amended as provided therein or by
law.
(d) The directors of the Surviving Institution after the Merger Effective
Time, who shall hold office until their resignation or removal or until their
successors have been elected and qualified in accordance with law and the
Surviving Institution's Charter and bylaws shall be those persons designated by
Patapsco.
(e) From and after the Merger Effective Time:
(i) The Surviving Institution shall possess all the rights,
privileges, immunities, and franchises, of a public or a private nature, of
each of Parkville and NewSub, and all property, real, personal and mixed,
and all debts due on whatever account, including subscriptions to shares,
and all other chooses in action, and all and every other interest, of or
belonging to or due to each of Parkville and NewSub, shall be taken and
deemed to be transferred to and vested in the Surviving Institution without
further act or deed; and the title to any real estate, or any interest
therein, vested in either Parkville or NewSub shall not revert or be in any
way impaired by reason of the Merger.
(ii) The Surviving Institution shall be responsible and liable for all
the liabilities and obligations of each of Parkville and NewSub. Any claim
existing, or action or proceeding pending by or against Parkville or NewSub
may be prosecuted to judgment as if the Merger had not taken place, or the
Surviving Institution may be substituted in its place. Neither the rights
of creditors nor any liens upon the property of either Parkville or NewSub
shall be impaired by the Merger.
1.5 Exchange of Shares for Cash.
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(a) Patapsco shall act as exchange agent ("Agent"), for the benefit of the
holders of Parkville Common Stock. Immediately prior to the Merger Effective
Time, the Patapsco shall deposit into a segregated account at Patapsco, such
funds as may be payable in connection with the Aggregate Purchase Price.
(b) Each holder of a certificate or certificates theretofore evidencing
outstanding shares of Parkville Common Stock (other than as provided in Section
1.3(b)), upon surrender of such certificate or certificates and an executed
letter of transmittal to the Agent, shall be entitled to receive the product of
(i) the Per Share Purchase Price and (ii) the number of shares of Parkville
Common Stock represented by such certificate or certificates (such product being
referred to herein as the "Merger Consideration"). At the Closing (as defined in
Section 2.1 herein), Parkville shall provide the Patapsco with mailing labels
for its stockholders of record as of the Merger Effective Time, and within five
business days after the Merger Effective Time, the Agent will send to each
Parkville stockholder of record at the Merger Effective Time a letter of
transmittal and instructions for surrendering to the Agent outstanding
certificates formerly evidencing Parkville Common Stock in exchange for the
Merger Consideration. Upon surrender, each certificate evidencing Parkville
Common Stock shall be canceled.
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(c) Until surrendered as provided in this Section 1.5, each outstanding
certificate which, prior to the Merger Effective Time, represented Parkville
Common Stock (other than shares canceled at the Merger Effective Time pursuant
to Section 1.3(b) hereof) will be deemed for all purposes to evidence ownership
of the right to receive cash payable for the Merger Consideration. After the
Merger Effective Time, there shall be no further registration of transfers on
the records of Parkville of outstanding certificates formerly representing
shares of Parkville Common Stock and, if a certificate formerly representing
such shares is presented to the Patapsco, it shall be forwarded to the Agent for
cancellation and exchange for cash representing the Merger Consideration as
herein provided.
(d) All cash paid upon the surrender for exchange of Parkville Common Stock
as provided herein shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Parkville Common Stock.
(e) In the event any certificate for Parkville Common Stock shall have been
lost, stolen or destroyed, the Agent shall issue in exchange for such lost,
stolen or destroyed certificate, upon the making of an affidavit of that fact by
the holder thereof, cash for the Merger Consideration, as may be required
pursuant hereto; provided, however, that Patapsco may, in its reasonable
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate to deliver a bond in such
sum as it may direct as indemnity against any claim that may be made against
Patapsco, Parkville, the Agent or any other party with respect to the
certificate alleged to have been lost, stolen or destroyed.
(f) Any portion of the Merger Consideration which remains undistributed by
the Agent to the holders of Parkville Common Stock six months after the
Effective Time shall be deemed property of Patapsco and any holders of Parkville
Common Stock who have not theretofore complied with Section 1.5(b) shall
thereafter look only to Patapsco as creditors with respect to the Merger
Consideration with respect to which their shares of Parkville Common Stock was
formerly represented and to which such holders are entitled pursuant to Section
1.3 of this Agreement. Any such portion of the Merger Consideration remaining
unclaimed by holders of Parkville Common Stock five years after the Effective
Time (or such earlier date immediately prior to such time as such amounts would
otherwise escheat to or become subject to the abandoned property law of any
jurisdiction) shall, to the extent permitted by law, become the property of
Patapsco free and clear of any claims or interest of any person previously
entitled thereto.
1.6 Dissenting Shares. Except for purposes of determining the total number
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of shares of Parkville Common Stock issued and outstanding immediately prior to
the Merger Effective Time, the provisions of Sections 1.3 and 1.5 hereof shall
not apply to any shares of Parkville Common Stock that shall be held by holders
who properly demand the relief to which dissenting stockholders are entitled
under Section 552.14 of the OTS Regulations ("Dissenting Shares"), it being
intended that any holder of Dissenting Shares shall have in consideration for
the cancellation of such Dissenting Shares only such rights as may be given to
such holder under the OTS Regulations, including the right to require that such
holder's Dissenting Shares be purchased at their fair value, in the manner and
subject to the procedures and conditions therein provided, unless and until the
holder shall have failed to perfect, or shall have effectively withdrawn or
lost, such holder's right to receive such payment for such holder's shares of
Parkville Common Stock under the OTS Regulations, at which time such shares
shall be canceled and converted into the right to receive the Merger
Consideration only, and no other consideration.
1.7 Stockholders' Meeting. Parkville shall, at the earliest practicable
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date, hold a meeting of its stockholders to submit for stockholder approval this
Agreement and the Plan of Merger. The affirmative vote of the holders of at
least two-thirds of the issued and outstanding shares of Parkville Common Stock
shall be required for such approval.
1.8 Deposit/Downpayment. Parkville acknowledges the receipt of the payment
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of $100,000.00 (the "Downpayment") from Patapsco that will apply toward the
payment of the Merger Consideration. If Parkville fails to satisfy any of the
conditions set forth in Section 6.2 or if this Agreement is terminated following
a Termination Event as set forth in Section 7.2(b) and (c), under this
Agreement, Parkville agrees to refund the Downpayment in
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full to Patapsco within one business day following such events. If this
Agreement is terminated for any other reason, the Downpayment shall be forfeited
by Patapsco and retained by Parkville.
ARTICLE II
CLOSING
2.1 The Closing. The closing of the transactions provided for in this
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Agreement (the "Closing") shall take place at the home office of Patapsco or at
a place mutually agreed upon by the parties, no later than thirty days after the
satisfaction or waiver of all conditions and obligations contained in Article VI
of this Agreement (the date of the closing is sometimes referred to in this
Agreement as the "Closing Date"). On the Closing Date, all documents required to
be delivered hereunder by the parties shall be so delivered.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARKVILLE
Parkville represents and warrants to Patapsco that, except as disclosed in
Schedule I delivered by Parkville to Patapsco concurrently with or prior to the
date of execution of this Agreement:
3.1 Organization, Good Standing, Authority, Insurance, Etc. Parkville is a
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savings bank duly organized and validly existing under the laws of the United
States. Schedule I lists each "subsidiary" of Parkville (individually a
"Parkville Subsidiary"). Each of the Parkville Subsidiaries is duly organized,
validly existing and in good standing under the laws of the respective
jurisdiction under which it is organized. Each of Parkville and each Parkville
Subsidiary has all requisite power and authority and is duly qualified and
licensed to own, lease and operate its properties and conduct its business as it
is now being conducted. Parkville has delivered to Patapsco a true, complete and
correct copy of the charter, articles of incorporation, or other organizing
document and the bylaws of Parkville and each Parkville Subsidiary. Parkville
and each Parkville Subsidiary is qualified to do business as a corporation and
is in good standing in each jurisdiction in which qualification is necessary
under applicable law, except to the extent that any failure to so qualify would
not, in the aggregate, have a material adverse effect on the business, financial
condition or results of operations of Parkville and the Parkville Subsidiaries,
taken as a whole. All eligible accounts issued by Parkville are insured by the
Savings Association Insurance Fund ("SAIF") of the Federal Deposit Insurance
Corporation ("FDIC") to the maximum extent permitted under applicable law.
Parkville has delivered to Patapsco copies of the minute books of Parkville
and the Parkville Subsidiaries which contain complete and accurate records of
all meetings and other corporate actions held or taken of their respective
stockholders or stockholders, as the case may be, and Boards of Directors
(including the committees of such Boards).
3.2 Capitalization. The authorized capital stock of Parkville consists of
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1,000,000 shares of Parkville Common Stock, of which 67,073 shares were issued
and outstanding as of the date of this Agreement. All outstanding shares of
Parkville Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. Except as disclosed in Schedule I,
there are no options, convertible securities, warrants or other rights
(preemptive or otherwise) to purchase or acquire any of Parkville's capital
stock from Parkville and no oral or written agreement, contract, arrangement,
understanding, plan or instrument of any kind (collectively, "Contract") to
which Parkville or any of its affiliates is subject with respect to the
issuance, voting or sale of issued or unissued shares of Parkville's capital
stock.
3.3 Ownership of Subsidiaries. All the outstanding shares of the capital
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stock of the Parkville Subsidiaries are validly issued, fully paid,
nonassessable and owned beneficially and of record by Parkville or an
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Parkville Subsidiary free and clear of any lien, claim, charge, restriction or
encumbrance (collectively, an "Encumbrance"). There are no options, convertible
securities, warrants or other rights (preemptive or otherwise) to purchase or
acquire any capital stock of any Parkville Subsidiary and no Contracts to which
Parkville or any of its affiliates is subject with respect to the issuance,
voting or sale of issued or unissued shares of the capital stock of any of the
Parkville Subsidiaries.
3.4 Parkville Statements. (a) Parkville has delivered to Patapsco a Balance
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Sheet, Statement of Income, Statement of Changes in Stockholders' Equity and
Statement of Cash Flows as of and for the year ended December 31, 2002,
certified by Xxxxxxxx Associates, LLP. Each of the foregoing financial
statements fairly presents the financial condition, assets, liabilities and
results of operations of Parkville as of December 31, 2002, and for the twelve
months ended December 31, 2002.
(b) Parkville has previously delivered, Parkville's regulatory reports,
consisting of the financial reports, consolidated reports of condition and
income, and accompanying schedules, filed by Parkville with all applicable
federal regulatory authorities since December 31, 2002 ("Regulatory Reports") to
the date hereof. The Regulatory Reports have been, or will be, prepared in
accordance with applicable regulatory accounting principles and practices.
(c) Since January 1, 2001, each of Parkville and the Parkville Subsidiaries
has filed all material reports, registrations and statements, together with any
required amendments thereto, that it was required to file with any federal,
state, municipal or local government, securities, banking, savings and loan,
insurance and other governmental or regulatory authority, and the agencies and
staffs thereof.
3.5 Absence of Undisclosed Liabilities. Except (i) as disclosed in Schedule
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I, (ii) as reflected, noted or adequately reserved against in the financial
statements referred to in Section 3.4(a) herein or the Regulatory Reports, (iii)
for deposits and loan commitments incurred in the ordinary course of business
consistent with past practice, and (iv) expenses incurred in connection with the
transaction contemplated by this Agreement, Parkville and the Parkville
Subsidiaries do not have any material liabilities (whether accrued, absolute,
contingent or otherwise) of specific application to Parkville or the Parkville
Subsidiaries. There exists no set of circumstances that could reasonably be
expected to result in any liability or obligation material to Parkville and the
Parkville Subsidiaries, taken as a whole, except for transactions effected or
actions occurring or omitted to be taken after the date of this Agreement (i) in
the ordinary course of business, or (ii) as permitted by this Agreement.
3.6 Absence of Changes. Since January 1, 2003, Parkville and the Parkville
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Subsidiaries have conducted their respective businesses in the ordinary course
of business and, except as disclosed in Section 3.6 of Schedule I, Parkville and
the Parkville Subsidiaries have not undergone any change in condition (financial
or otherwise), assets, liabilities, business or operations, other than changes
in the ordinary course of business which have not been, either in any case or in
the aggregate, materially adverse on a consolidated basis. Without limiting the
foregoing, except as disclosed in Schedule I, since January 1, 2003 to the date
hereof;
(i) Parkville has not issued, sold, granted, conferred or awarded any of
its equity securities or options to acquire its equity securities, or any
corporate debt securities which would be classified under generally
accepted accounting principles as long-term debt on the consolidated
balance sheets of Parkville; (ii) Parkville has not effected any stock
split or adjusted, combined, reclassified or otherwise changed its
capitalization; (iii) neither Parkville nor any Parkville Subsidiary has
discharged or satisfied any material lien or paid any material obligation
or liability (absolute or contingent), other than in the ordinary course of
business; (iv) neither Parkville nor any Parkville Subsidiary has sold,
assigned, transferred, leased, exchanged or otherwise disposed of any of
its material properties or assets except for sales in the ordinary course
of properties acquired upon foreclosure; (v) except as required by contract
or law, neither Parkville nor any Parkville Subsidiary has (A) increased by
more than 5% the rate of compensation of, or paid any bonus to, any of its
directors, officers or other employees except for non-management employees,
(B) entered into any new, or amended or supplemented any existing,
employment, management, consulting, deferred compensation, severance, or
other similar contract, (C) entered into, terminated, or substantially
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modified any of the Employee Plans (as defined in Section 3.15 hereafter)
or (D) agreed to do any of the foregoing; (vi) neither Parkville nor any
Parkville Subsidiary has suffered any material damage, destruction or loss,
whether as a result of fire, explosion, earthquake, accident, casualty,
labor trouble, requisition or taking of property by any regulatory
authority, flood, windstorm, embargo, riot, act of God or the enemy, or
other casualty or event, and whether or not covered by insurance; and (vii)
neither Parkville nor any Parkville Subsidiary has canceled or compromised
any debt owed by Parkville or any Parkville Subsidiary.
3.7 Dividends, Distributions and Stock Purchases and Sales. Since January
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1, 2003 and except as disclosed in Schedule I, Parkville has not declared, set
aside, made or paid any dividend or other distribution in respect of Parkville
Common Stock, or purchased, issued or sold any shares of Parkville Common Stock.
3.8 No Broker's or Finder's Fees. No agent, broker, investment banker,
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person or firm acting on behalf or under authority of Parkville or any of the
Parkville Subsidiaries is or will be entitled to any broker's or finder's fee or
any other commission or similar fee directly or indirectly in connection with
the Merger or any other transaction contemplated hereby.
3.9 Contracts. Each written or oral contract entered into by Parkville or
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any Parkville Subsidiary (other than deposit and loan contracts with customers
entered into by Parkville or any Parkville Subsidiary in the ordinary course of
business) that involves aggregate payments or receipts in excess of $10,000 per
year, including, without limitation, every agreement, lease, license, indenture,
mortgage and other commitment to which Parkville or any Parkville Subsidiary is
a party or by which they or any of their properties may be bound (all such
contracts involving annual payments in excess of $10,000 being collectively
referred to herein as "Material Contracts") is identified in Schedule I. Except
as disclosed in Schedule I, all Material Contracts are valid and in full force
and effect.
3.10 Litigation. Except as disclosed in Schedule I: (i) there is no
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litigation, investigation or proceeding pending, or, to the knowledge of the
senior officers of Parkville, threatened, that involves Parkville or any
Parkville Subsidiary or any of their respective properties; and (ii) there are
no outstanding orders, writs, injunctions, judgments, decrees, regulations,
directives, consent agreements or memoranda of understanding issued by any
federal, state or local court or governmental authority or arbitration tribunal
issued against or with the consent of Parkville or any Parkville Subsidiary.
3.11 Compliance with Law. Parkville and the Parkville Subsidiaries are in
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compliance in all material respects with all laws and regulations applicable to
their respective operations or with respect to which compliance is a condition
of engaging in the business thereof, except for failures to comply, which, in
the aggregate, would not have a material adverse effect on the business,
financial condition or results of operations of Parkville and the Parkville
Subsidiaries, taken as a whole. Neither Parkville nor any of the Parkville
Subsidiaries has received notice from any federal, state or local government or
governmental agency of any material violation of any of the above.
3.12 Corporate Actions. The Board of Directors of Parkville, by at least a
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two-thirds vote has duly authorized its officers to execute and deliver this
Agreement and the Plan of Merger and to take all action necessary to consummate
the Merger and the other transactions contemplated hereby and thereby.
3.13 Authority. Except as set forth in Schedule I, the execution, delivery
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and performance of this Agreement and the Plan of Merger by Parkville does not
violate any of the provisions of, or constitute a breach or default under or
give any person the right to terminate or accelerate payment or performance
under (i) the Charter or bylaws of Parkville or the articles of incorporation,
charter or bylaws of any Parkville Subsidiary, (ii) any regulatory restraint on
the acquisition of Parkville or control thereof (subject to receipt of all
required regulatory approvals), (iii) any law, rule, ordinance or regulation or
judgment, order, decree, award or governmental or non-governmental permit or
license to which Parkville or any of the Parkville Subsidiaries is subject, or
(iv) any contract, agreement, lease, note, bond, mortgage, indenture, deed,
license or other instrument or obligation (the "Obligations") to which Parkville
or any of the Parkville Subsidiaries is a party or is subject or by which any of
their properties or assets is bound. Parkville has all requisite corporate power
and authority to enter into this Agreement and the Plan of Merger
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and to perform their respective obligations hereunder and thereunder. Other than
the receipt of the Governmental Approvals (as defined in Section 6.1(c)),
stockholder approval and the consents specified in Schedule I, with respect to
the Obligations, no consents or approvals are required on behalf of Parkville or
any of the Parkville Subsidiaries in connection with consummation of the
transactions contemplated by this Agreement or the Plan of Merger. This
Agreement constitutes the valid and binding obligation of Parkville and is
enforceable in accordance with its terms, except as enforceability may be
limited by applicable laws relating to bankruptcy, insolvency or creditors'
rights generally and general principles of equity.
3.14 Labor Relations and Employment Agreements. Neither Parkville nor any
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Parkville Subsidiary is a party to or bound by any collective bargaining
agreement. Parkville and each Parkville Subsidiary enjoy good working
relationships with their employees and there are no labor disputes pending, or,
to the knowledge of the senior officers of Parkville or threatened, that might
materially and adversely affect the condition (financial or otherwise), assets,
liabilities, business or operations of Parkville and the Parkville Subsidiaries,
taken as a whole. Except as disclosed in Schedule I, neither Parkville nor any
Parkville Subsidiary has any employment contract, severance agreement, deferred
compensation agreement, consulting agreement or similar obligation ("Employment
Obligation") with any director, officer, employee, consultant, stockholder or
agent. Neither Parkville nor any Parkville Subsidiary has any contract, plan or
arrangement that provides for payments or benefits in certain circumstances
which, together with other payments or benefits payable to any participant
therein or party thereto, might render any portion of any such payments or
benefits subject to disallowance of deduction therefor as a result of the
application of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code").
3.15 Employee Benefits. (a) Neither Parkville nor any of the Parkville
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Subsidiaries maintains any funded deferred compensation plans (including profit
sharing, pension, savings or stock bonus plans), unfunded deferred compensation
arrangements or employee benefit plans as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), other
than any plans ("Parkville Employee Plans") set forth in Schedule I (true and
correct copies of which have been delivered to Patapsco). None of Parkville or
any of the Parkville Subsidiaries has incurred or reasonably expects to incur
any liability to the Pension Benefit Guaranty Corporation except for required
premium payments which, to the extent due and payable, have been paid. The
Parkville Employee Plans intended to be qualified under Section 401(a) of the
Code are so qualified, and Parkville is not aware of any fact which would
adversely affect the qualified status of such plans. Except as set forth in
Schedule I, neither Parkville nor any of the Parkville Subsidiaries (a) provides
health, medical, death or survivor benefits to any former employee or
beneficiary thereof, or (b) maintains any form of current (exclusive of base
salary and base wages) or deferred compensation, bonus, stock option, stock
appreciation right, benefit, severance pay, retirement, incentive, group or
individual health insurance, welfare or similar plan or arrangement for the
benefit of any single or class of directors, officers or employees, whether
active or retired (collectively "Benefit Arrangements").
(b) To the knowledge of Parkville: (i) no condition exists that could
constitute grounds for the termination of any Employee Plan under Section 4042
of ERISA; (ii) no "prohibited transaction," as defined in Section 406 of ERISA
and Section 4975 of the Code, has occurred with respect to any Parkville
Employee Plan, or any other employee benefit plan maintained by Parkville or any
Parkville Subsidiary; and (iii) neither Parkville nor any Parkville Subsidiary
has incurred or expects to incur, directly or indirectly, any liability under
Title IV of ERISA arising in connection with the termination of, or a complete
or partial withdrawal from, any plan covered or previously covered by Title IV
of ERISA.
(c) Each Parkville Employee Plan and Benefit Arrangement (i) has been
administered to date, and will be administered until the Closing, in accordance
with their terms and in compliance with the Code, ERISA, and all other
applicable rules and regulations, (ii) has, in a timely, accurate, and proper
manner, both filed all required government reports and made all required
employee communications, and (iii) between the date of this Agreement and the
Closing, will complete and file all such required reports.
3.16 Property and Assets. Parkville and the Parkville Subsidiaries have
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good and marketable title to all of their real property reflected in the
financial statements and Regulatory Reports referred to in Section 3.4(a) and
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(b) herein and as reflected in Schedule I, or acquired subsequent thereto, free
and clear of all Encumbrances, except for (a) such items shown in such financial
statements, (b) liens for current real estate taxes not yet delinquent, (c)
customary title exceptions that have no material adverse effect upon the value
of such property, (d) property sold or transferred in the ordinary course of
business since the date of such financial statements, (e) pledges or liens
incurred in the ordinary course of business and (f) as otherwise specifically
indicated in Schedule I. Except as set forth in Schedule I, Parkville and the
Parkville Subsidiaries enjoy peaceful and undisturbed possession under all
material leases for the use of real property under which they are the lessee;
all of such leases are valid and binding and in full force and effect, and
neither Parkville nor any Parkville Subsidiary is in default in any material
respect under any such lease. All property and assets material to their business
and currently used by Parkville and the Parkville Subsidiaries are, in all
material respects, in good operating condition and repair, normal wear and tear
excepted.
3.17 Tax Matters. (a) Except as set forth in Schedule I, Parkville and each
-----------
of the Parkville Subsidiaries have duly and properly filed all material federal,
state, local and other tax returns required to be filed by them and have made
timely payments of all taxes due and payable, whether disputed or not; the
current status of audits of such returns by the Internal Revenue Service ("IRS")
and other applicable agencies is as set forth in Schedule I; and, except as set
forth in Schedule I, there is no agreement by Parkville or any Parkville
Subsidiary for the extension of time or for the assessment or payment of any
taxes payable. Except as set forth in Schedule I, neither the IRS nor any other
taxing authority is now asserting or, to the best knowledge of Parkville,
threatening to assert, any deficiency or claim for additional taxes (or interest
thereon or penalties in connection therewith), nor is Parkville aware of any
basis for any such assertion or claim.
(b) Adequate provision for any federal, state, local, or foreign taxes due
or to become due for Parkville or any of the Parkville Subsidiaries for all
periods through and including September 30, 2003, has been made, and has been or
will be made with respect to periods ending after September 30, 2003.
3.18 Environmental Matters. Except as set forth in Schedule I, to the best
---------------------
knowledge of Parkville, none of the assets of Parkville and the Parkville
Subsidiaries (defined for purposes of this subsection as the real property and
tangible personal property owned or leased by Parkville or any Parkville
Subsidiary as of the date of this Agreement and as of the Closing Date) contain
any hazardous materials (defined as any substance whose nature and/or quantity
or existence, use, manufacture or effect render it subject to federal, state or
local regulation as potentially injurious to public health or welfare,
including, without limitation, friable asbestos or PCBs ("Hazardous Materials")
other than in such quantities which are incidental and customary for the
maintenance and operation of such assets (e.g., cleaning fluids) or not
otherwise likely, in the aggregate, to have a material adverse effect on the
financial condition, business or operations of Parkville and the Parkville
Subsidiaries, taken as a whole ("Incidental Quantities"). Except as set forth in
Schedule I, to Parkville's best knowledge without inquiry, no collateral
securing any loan made by Parkville or any Parkville Subsidiary contains any
Hazardous Materials, other than in Incidental Quantities. Neither of Parkville
nor any Parkville Subsidiary is aware of, nor has Parkville or any Parkville
Subsidiary received written notice from any governmental or regulatory body of
any past, present or future conditions, activities, practices or incidents which
may interfere with or prevent compliance or continued compliance with hazardous
substance laws or any regulation, order, decree, judgment or injunction, issued,
entered, promulgated or approved thereunder, or which may give rise to any
common law or legal liability, or otherwise form the basis of any claim, action,
suit, proceeding, hearing or investigation, with respect of any of them, based
on or related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling, or the emission, discharge, release
or threatened release into the environment, of any pollutant, contaminant or
chemical, or industrial, toxic or hazardous substance or waste. There is no
civil, criminal or administrative claim, action, suit, proceeding, hearing or
investigation pending or, to the knowledge of Parkville, threatened against
Parkville or any Parkville Subsidiary relating in any way to such hazardous
substance laws or any regulation, order, decree, judgment or injunction issued,
entered, promulgated or approved thereunder.
3.19 Governmental Approvals and Other Conditions. Parkville is not aware of
-------------------------------------------
any reason why (i) the regulatory approvals that are required to be obtained by
Patapsco in connection with the transactions contemplated herein and in the Plan
of Merger should not be granted, (ii) such regulatory approvals should be
conditioned on any
9
requirement that would present a significant impediment to Patapsco's future
ability to carry on the current businesses of Parkville upon consummation of the
Merger, or (iii) any of the conditions precedent as specified in Article VI to
the obligation of either Patapsco and NewSub or Parkville to consummate the
transactions contemplated herein are unlikely to be fulfilled within the
applicable time period or periods required for satisfaction of such condition or
conditions.
3.20 Asset Classification. Schedule I sets forth a list, accurate and
---------------------
complete in all material respects, of each loan, extension of credit and other
asset of Parkville that has been and remained through September 30, 2003,
adversely designated or classified by the Bank or any regulatory authority,
separated by category of classification or criticism (the "Asset
Classification"); and no amounts of loans, extensions of credit or other assets
that have been adversely designated or classified through the date hereof by any
representative of any government entity as "Special Mention," "Substandard,"
"Doubtful," "Loss" or words of similar import are excluded from the amounts
disclosed in the Asset Classification, other than amounts of loans, extensions
of credit or other assets that were charged off by Parkville before the date
hereof.
3.21 Community Reinvestment Act. Parkville's rating pursuant to its most
---------------------------
recent examination by regulatory authorities pursuant to the provisions of the
Community Reinvestment Act was a "satisfactory" or better. Parkville has not
received any comment letters relating to its Community Reinvestment Act
Statement or is otherwise aware of any adverse reaction to such statement.
3.22 Loan Portfolio. The allowance for loan losses reflected and shown on
--------------
Parkville's June 30, 2003 Call Report is, and will be with respect to Call
Reports dated after the date hereof, in the opinion of management of Parkville,
adequate to provide for all known and reasonably anticipated possible losses,
net of recoveries relating to loans previously charged off, on loans and leases
outstanding and accrued interest receivable on non-performing loans as of the
date of such Call Report, in accordance with the requirements of regulatory
accounting principles. No regulatory authority has requested, in writing for
Parkville to increase the allowance for loan losses during fiscal years 2001,
2002 or 2003 that has not been responded to, to the best of Parkville's
knowledge, in a manner satisfactory to such regulatory authority.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PATAPSCO
Patapsco represents and warrants to Parkville that, except as disclosed in
Schedule II delivered by Patapsco to Parkville concurrently with or prior to the
date of execution of this Agreement:
4.1 Organization, Good Standing, Authority, Insurance, Etc. Patapsco is a
---------------------------------------------------------
commercial bank duly organized, validly existing and in good standing under the
laws of the State of Maryland. NewSub, when formed by Patapsco, will be a
savings bank which will be duly organized and validly existing under the laws of
the United States. Patapsco has delivered to Parkville true, complete and
correct copies of their articles of incorporation and bylaws.
4.2 Litigation. Except as disclosed in Section 4.4 of Schedule II: (i)
----------
there is no litigation, investigation or proceeding pending, or to the knowledge
of the senior officers of Patapsco, threatened, that involves Patapsco or any
subsidiary or any of their respective properties and that, if determined
adversely, would materially and adversely affect the condition (financial or
otherwise), assets, liabilities, business or operations of Patapsco and its
subsidiaries, taken as a whole; (ii) there are no outstanding orders, writs,
injunctions, decrees, consent agreements, memoranda of understanding or other
directives of any federal, state or local court or governmental authority or of
any arbitration tribunal against or with the consent of Patapsco or any
subsidiary that would materially and adversely affect the condition (financial
or otherwise), assets, liabilities, business or operations of Patapsco and its
subsidiaries, taken as a whole, or restrict in any material manner the right of
Patapsco or any subsidiary to conduct its business as presently conducted.
10
4.3 Corporate Actions. The Board of Directors of Patapsco has duly
------------------
authorized their officers to execute and deliver this Agreement and the Plan of
Merger, as the case may be, and to take all action necessary to consummate the
Merger and the other transactions contemplated hereby and thereby. The
stockholders of Patapsco are not required to approve either the Merger or any of
the other transactions contemplated by this Agreement or the Plan of Merger.
4.4 Authority. The execution, delivery and performance of this Agreement by
---------
Patapsco and the Plan of Merger by NewSub does not violate any of the provisions
of, or constitute a breach or default under or give any person the right to
accelerate payment or performance under (i) the articles of incorporation,
charter or bylaws of Patapsco or NewSub (when NewSub is formed), (ii) any
regulatory restraint on the acquisition by Patapsco of Parkville or control
thereof (subject to the receipt of all required regulatory approvals), (iii) any
law, rule, ordinance or regulation or judgment, order, decree, award or
governmental or non-governmental permit or license to which Patapsco or any
subsidiary is subject, or (iv) any contract, agreement, lease, note, bond,
mortgage, indenture, deed, license or other instrument or obligation to which
Patapsco or any subsidiary is a party or is subject or by which any of their
properties or assets is bound. Patapsco has all requisite corporate power and
authority to enter into this Agreement and, with respect to NewSub, the Plan of
Merger, and to perform their obligations hereunder and thereunder subject to
receipt of all required regulatory approvals. Other than the receipt of the
Governmental Approvals (as defined in Section 6.1(c)), no consents or approvals
are required on behalf of Patapsco or NewSub in connection with consummation of
the transactions contemplated by this Agreement. This Agreement constitutes the
valid and binding obligation of Patapsco and is enforceable in accordance with
its terms, except as enforceability may be limited by applicable laws relating
to bankruptcy, insolvency or creditors' rights generally and general principles
of equity.
4.5 Consideration. At the Closing, Patapsco will have sufficient cash on
-------------
hand to pay the Aggregate Purchase Price.
4.6 Governmental Approvals and Other Conditions. Patapsco is unaware of any
-------------------------------------------
reason why (i) the regulatory approvals that are required to be obtained by it
in connection with the transactions contemplated herein should not be granted,
or (ii) such regulatory approvals should be conditioned on any requirement that
would present a significant impediment to its future ability to carry on
business, or (iii) any of the conditions precedent as specified in Article VI to
its obligations to consummate the transactions contemplated herein are unlikely
to be fulfilled within the applicable time period or periods required for
satisfaction of such condition or conditions.
4.7 Community Reinvestment Act. The rating of Patapsco pursuant to its most
--------------------------
recent examination by regulatory authorities pursuant to the provisions of the
Community Reinvestment Act, were "satisfactory" or better. To Patapsco's
knowledge, it has not received any comment letters relating to its Community
Reinvestment Act Statement or is otherwise aware of any adverse reaction to such
statement.
4.8 Patapsco Statements. (a) Patapsco has delivered to Parkville a
--------------------
consolidated Balance Sheet, Statement of Income, Statement of Changes in
Stockholders' Equity and Statement of Cash Flows as of and for the year ended
June 30, 2003, of Patapsco Bancorp, Inc. certified by Xxxxxxxx Associates, LLP.
To Patapsco's knowledge, each of the foregoing financial statements fairly
presents the financial condition, assets, liabilities and results of operations
of Patapsco Bancorp, Inc. as of June 30, 2003.
(b) Patapsco has previously delivered, Patapsco's regulatory reports,
consisting of the financial reports, consolidated reports of condition and
income, and accompanying schedules, filed by Patapsco with all applicable
federal regulatory authorities since December 31, 2002 ("Regulatory Reports") to
the date hereof. The Regulatory Reports have been, or will be, prepared in
accordance with applicable regulatory accounting principles and practices.
(c) Since January 1, 2001, each of Patapsco and the subsidiaries has filed
all material reports, registrations and statements, together with any required
amendments thereto, that they were required to file with any
11
federal, state, municipal or local government, securities, banking, savings and
loan, insurance and other governmental or regulatory authority, and the agencies
and staffs thereof.
ARTICLE V
COVENANTS
5.1 Investigations; Access and Copies. Between the date of this Agreement
----------------------------------
and the Closing, Parkville agrees to give to Patapsco and its representatives
and agents full access (to the extent lawful) to all of the premises, books,
records and employees of Parkville and the Parkville Subsidiaries at all
reasonable times, and to furnish and cause Parkville and the Parkville
Subsidiaries to furnish to Patapsco and its agents or representatives access to
and true and complete copies of such financial and operating data, all documents
with respect to matters to which reference is made in Article III of this
Agreement or on any list, schedule or certificate delivered or to be delivered
in connection therewith, and such other documents, records, or information with
respect to the business and properties of it and the Parkville Subsidiaries as
Patapsco or its agents or representatives shall from time to time reasonably
request (other than documents or other materials relating to the transactions
contemplated herein); provided, however, that any such inspection (a) shall be
conducted in such manner as not to interfere unreasonably with the operation of
the business of the entity inspected and (b) shall not affect any of the
representations and warranties hereunder and provided further that Parkville
shall not be required to provide access to its minutes of meetings or records to
the extent that they involve a board or management evaluation of whether
Patapsco has complied with this Agreement. Patapsco, on one hand, and Parkville,
on the other hand, will give prompt written notice to the other party of any
event or development (x) which, had it existed or been known on the date of this
Agreement, would have been required to be disclosed under this Agreement, (y)
which would cause any of their representations and warranties contained herein
to be inaccurate or otherwise materially misleading, or (z) which materially
relate to the satisfaction of the conditions set forth in Article VI of this
Agreement.
5.2 Conduct of Business of Parkville. Between the date of this Agreement
---------------------------------
and the Closing, Parkville agrees:
(a) That, except as otherwise set forth in Section 5.2 hereof, Parkville
and the Parkville Subsidiaries shall conduct their businesses only in the
ordinary course, and maintain their books and records in accordance with past
practices;
(b) That Parkville or any Parkville Subsidiaries shall not, without the
prior written consent of Patapsco: (i) declare, set aside or pay any dividend or
make any other distribution with respect to the capital stock of Parkville or
any of the Parkville Subsidiaries or reacquire any of the outstanding shares of
Parkville other than any dividend already declared as of the date hereof; (ii)
issue or sell or buy any shares of capital stock of Parkville or any Parkville
Subsidiary; (iii) effect any stock split, stock dividend or other
reclassification of Parkville Common Stock; or (iv) except as required under the
terms of Xxxxx X. Xxxxxx'x employment agreement as of the date hereof and
disclosed in Schedule I, grant any options or issue any warrants exercisable for
or securities convertible or exchangeable into capital stock of Parkville or any
Parkville Subsidiary or grant any stock appreciation or other rights with
respect to shares of capital stock of Parkville or of any Parkville Subsidiary;
(c) That Parkville and the Parkville Subsidiaries shall not, without the
prior written consent of Patapsco (which consent shall not be unreasonably
withheld): (i) sell or dispose of any assets of Parkville or of any Parkville
Subsidiary other than the sale of property foreclosed upon or taken at
repossession in the ordinary course; (ii) change the charter, charter documents
or other governing instruments of Parkville or any Parkville Subsidiary; (iii)
other than as required under Xx. Xxxxxx'x employment agreement as of the date
hereof and except for normal salary increases and holiday bonuses consistent
with past practice (with no salary increases for officers exceeding 5%) grant to
any employee of Parkville or any Parkville Subsidiary an increase in
compensation or benefits or pay any bonus; (iv) adopt any new or amend or
terminate any existing Employee Plans, Employment Obligations or Benefit
Arrangements of any type, except as contemplated herein and in compliance with
applicable law; provided, however, that prior to the Closing, Parkville and the
Parkville Subsidiaries shall be permitted,
12
consistent with past practices, to make contributions to the Employee Plans and
Benefit Arrangements and to renew employee insurance policies; (v) amend or
extend the term of any employment agreement disclosed in Schedule I; (vi)
authorize severance pay or other benefits for any employee of Parkville or any
Parkville Subsidiary except and in accordance with existing agreements; (vii)
incur any material obligation or enter into or extend any contract which
involves aggregate payments or receipts in excess of $20,000 or which is to be
performed over a period of time exceeding one year; (viii) engage in any lending
activities, provided, however, that Parkville or any Parkville Subsidiary may,
without the prior approval of Patapsco, originate in the ordinary course
consistent with past practices, (A) single-family residential loans in amounts
of up to $322,000 or less per loan, with loan-to-value ratios of up to 80% or
with loan-to-value ratios of over 80% and up to 95% where the loan is covered by
private mortgage insurance, (B) other loans in amount of $25,000 or less per
loan, or (C) loans pursuant to binding commitments made as of the date hereof;
(ix) originate any loan which, after making such loan, would result in aggregate
loans to that borrower exceeding $500,000; (x) form any new subsidiary or cause
or permit a material change in the activities presently conducted by any
Parkville Subsidiary or make additional investments in subsidiaries; (xi)
purchase any equity securities; (xii) make any new investment or renew any
investment other than U.S. government and agency securities with maturities of
less than three years; (xiii) borrow or agree to borrow any amount of funds,
excluding for these purposes borrowings incurred in the ordinary course
consistent with past practices and the acceptance of deposits in the ordinary
course of business; (xiv) hire any new permanent employees, except that
Parkville or any Parkville subsidiary may, without Patapsco's prior approval,
hire on market terms any employee to replace a current non-officer employee who
terminates employment; (xv) make any capital expenditures exceeding $10,000 in
the aggregate; or (xvi) establish new interest and fee schedules related to
deposit products or lending products which materially differ from the average
interest and fees charged for similar products by financial institutions
conducting business in Parkville's primary market area, which, for purposes of
this Agreement shall be deemed to be the Parkville's local community as
delineated by the Bank pursuant to regulations adopted under the Community
Reinvestment Act of 1977.
5.3 No Solicitation. Parkville will not authorize or permit any officer,
----------------
director, employee, investment banker, financial consultant, attorney,
accountant or other representative of Parkville or any Parkville Subsidiary,
("Representatives") directly or indirectly, to, initiate, solicit or encourage
any "Takeover Proposal" (as such term is defined below). Parkville shall direct
and use its best efforts to cause its Representatives to immediately cease any
existing discussions or negotiations with any parties conducted heretofore with
respect to a Takeover Proposal. Except as the fiduciary duties of Parkville's
Board of Directors may otherwise require, Parkville will not authorize or permit
its Representatives directly or indirectly to: (A) cooperate with, or furnish or
cause to be furnished any non-public information concerning its business,
properties or assets to, any person or entity in connection with any Takeover
Proposal; (B) negotiate any Takeover Proposal with any person or entity; or (C)
enter into any agreement, letter of intent or agreement in principle as to any
Takeover Proposal. As used in this Agreement with respect to Parkville,
"Takeover Proposal" shall mean any proposal, other than as contemplated by this
Agreement, for a merger, purchase of Parkville stock or other business
combination involving Parkville or for the acquisition of a ten percent (10%) or
greater equity interest in Parkville, or for the acquisition of a substantial
portion of the assets of Parkville. Parkville shall notify Patapsco promptly
upon it or any Representatives of Parkville or any Parkville Subsidiary becoming
aware of the possibility of a Takeover Proposal or having contact initiated with
any of them by any party other than Patapsco regarding a significant corporate
event.
5.4 Filing of Regulatory Applications. Patapsco shall form NewSub and
-----------------------------------
prepare and file as soon as practicable after the date hereof all required
applications for regulatory approval of the Merger and the other transactions
contemplated herein and in the Plan of Merger. Patapsco shall use all reasonable
efforts to obtain prompt approval of each required application.
5.5 Publicity. Neither Patapsco, Parkville nor any of their subsidiaries
---------
shall, without the prior approval of the other, issue or make, or permit any of
its directors, employees, officers or agents to issue or make, any press
release, disclosure or statement to the press or any third party with respect to
the Merger or the other transactions contemplated hereby or by the Plan of
Merger, except as required by law. The parties shall cooperate when issuing or
making any press release, disclosure or statement with respect to the Merger or
the other transactions contemplated hereby.
13
5.6 Cooperation Generally. Between the date of this Agreement and the
----------------------
Closing, Patapsco and Parkville and the Parkville Subsidiaries shall use their
best efforts, and take all actions necessary or appropriate (including their
joint cooperation and assistance, as necessary, in preparing the regulatory
applications), to consummate the Merger and the other transactions contemplated
by this Agreement at the earliest practicable date.
5.7 Additional Parkville Statements and Reports. As soon as reasonably
----------------------------------------------
practicable after they become available, Parkville shall furnish to Patapsco
copies of all Regulatory Reports filed by Parkville and, to the extent such
documents are prepared by Parkville and/or any Parkville Subsidiary in the
ordinary course, a balance sheet and related statement of income, cash flows and
changes in stockholders' equity for all periods prior to the Closing. Such
financial information will fairly present the financial condition, results of
operations and cash flows of Parkville, subject to normal year-end audit
adjustments, and any other adjustments described therein, which are not material
in any case or in the aggregate.
5.8 Forbearance of Patapsco. Between the date of this Agreement and the
------------------------
Closing, Patapsco shall not, and shall not permit any of its subsidiaries to,
without the prior written consent of Parkville, take any action that would
materially adversely affect or delay the ability of either Patapsco or NewSub,
on one hand, or Parkville, on the other hand, to obtain the Governmental
Approvals (as defined in Section 6.1(c) hereof) required for the transactions
contemplated by this Agreement or to perform its covenants and agreements under
this Agreement.
5.9 Stockholder Approvals and Voting Agreement. Parkville shall call a
--------------------------------------------
meeting of its stockholders to be held for the purpose of voting upon the
Merger, the Plan of Merger and related matters, as referred to in Section 1.7
hereof, as soon as practicable, but in no event later than 60 days after the
date hereof. In connection with such meeting, the Board of Directors of
Parkville shall recommend approval of the Merger, except as the fiduciary duties
of Parkville's Board of Directors may otherwise require as determined in
consultation with legal counsel. Parkville shall use its best efforts to solicit
from its stockholders votes in favor of approval and to take all other action
necessary to secure a vote of the holders of the shares of Parkville Common
Stock in favor of the Merger.
To induce Patapsco to enter into this Agreement, Parkville has delivered a
letter agreement, in the form attached hereto as Exhibit B (the "Voting
----------
Agreement"), entered into by at least two-thirds of the members of Parkville's
Board of Directors representing at least 90% of the outstanding Parkville Common
Stock (solely in their capacity as stockholders of Parkville) committing these
individuals to support the transactions contemplated by this Agreement and the
Plan of Merger by, among other things, voting in favor of such transactions at
the meeting of Parkville's stockholders to be held for the purpose of voting
upon the Merger and related matters and not disposing of any Parkville Common
Stock prior to such meeting.
ARTICLE VI
CONDITIONS OF THE MERGER;
TERMINATION OF AGREEMENT
6.1 General Conditions. The obligations of the parties to effect the Merger
------------------
shall be subject to the following conditions:
(a) Stockholder Approval. The holders of the outstanding shares of
---------------------
Parkville Common Stock shall have approved this Agreement, the Plan of Merger
and the Merger by the requisite vote as specified by the OTS Regulations.
(b) No Proceedings. No order shall have been entered and remain in force
---------------
restraining or prohibiting the Merger in any legal, administrative, arbitration,
investigatory or other proceedings (collectively, "Proceedings") by any
governmental or judicial or other authority.
14
(c) Government Approvals. To the extent required by applicable law or
---------------------
regulation, all approvals of or filings with any governmental authority
(collectively, "Governmental Approvals"), including, without limitation, those
of the OTS, the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), and the U.S. Department of Justice shall have been obtained or
made and any waiting periods shall have expired in connection with the
consummation of the Merger. All other statutory or regulatory requirements for
the valid consummation of the Merger and related transactions shall have been
satisfied.
6.2 Conditions to Obligations of Patapsco. The obligations of Patapsco to
-------------------------------------
effect the Merger and the other transactions contemplated herein shall be
subject to the following additional conditions:
(a) Opinion of Counsel for Parkville. Patapsco shall have received from
---------------------------------
counsel to Parkville an opinion dated as of the Closing Date covering the
following matters:
(i) Parkville is a savings bank duly organized and validly existing
under the laws of the United States;
(ii) This Agreement has been duly and validly authorized, executed and
delivered by Parkville and the Plan of Merger has been duly and validly
authorized, executed and delivered by Parkville, and (assuming that this
Agreement is a binding obligation of Patapsco and NewSub and that the Plan
of Merger is a binding obligation of NewSub) constitute valid and binding
obligations of Parkville, enforceable in accordance with their terms,
subject as to enforceability to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and to the application of equitable principles
and judicial discretion;
(iii) To the knowledge of such counsel, no consent or approval, which
has not already been obtained, from any governmental authority is required
for execution and delivery by Parkville of the Agreement or the Plan of
Merger or any of the documents to be executed and delivered by Parkville in
connection therewith; and
Such opinion may expressly rely as to matters of fact upon certificates
furnished by appropriate officers of Parkville or the Bank or appropriate
government officials.
(b) No Material Adverse Change. Between the date of this Agreement and the
--------------------------
Closing Date, there shall not have occurred any material adverse change in the
financial condition, business or results of operations of Parkville and the
Parkville Subsidiaries, taken as a whole.
(c) Representations and Warranties to be True; Fulfillment of Covenants and
-----------------------------------------------------------------------
Conditions. The representations and warranties of Parkville shall be true in all
----------
material respects at the Closing with the same effect as though made at the
Closing (or on the date when made in the case of any representation or warranty
which specifically relates to an earlier date); except (1) as contemplated by
this Agreement, (2) as consented to in writing by Patapsco or (3) for breaches
of representations and warranties which would not have, or would not reasonably
be expected to have, a material adverse effect on the financial condition,
business or operations of Parkville and the Parkville Subsidiaries, taken as a
whole; Parkville shall have performed all obligations and complied with each
covenant, in all material respects, under this Agreement on their parts to be
performed or complied with at or prior to the Closing except for failures to
perform or comply with such obligations and covenants which would not have, or
would not reasonably be expected to have, any material adverse effect on the
financial condition, business or operations of Parkville and the Parkville
Subsidiaries, taken as a whole; and Parkville shall have delivered to Patapsco a
certificate, dated the Closing Date and signed by its chief executive officer
and chief financial officer, to such effect.
(d) For purposes of this Agreement, the terms "material adverse change" and
"material adverse effect" shall exclude any change resulting from (i) changes in
laws, regulations, accounting principles and regulatory interpretations
applicable to financial institutions generally, (ii) changes in economic
conditions including
15
changes in interest rates to the extent that such a change does not affect
Parkville to a materially different extent than other similarly situated banking
organizations, and (iii) actions taken by Parkville with the consent of Patapsco
or pursuant to this Agreement.
(e) Acceptance of Legal Matters. The form and substance of all legal
matters contemplated hereby and all papers delivered hereunder shall be
reasonably acceptable to counsel to Patapsco.
(f) Consents Under Agreements. Parkville shall have obtained the consent or
approval of each person (other than the Governmental Approvals) whose consent or
approval shall be required in order to permit the change in ownership of
Parkville pursuant to the Merger under any loan or credit agreement, note,
mortgage, indenture, lease, license or other agreement or instrument, except
those for which failure to obtain such consents and approvals would not,
individually or in the aggregate, have a material adverse effect on Patapsco and
its subsidiaries taken as a whole or upon the consummation of the transactions
contemplated hereby.
(g) Dissenters Rights. No greater than 5% of the outstanding Parkville
Common Stock entitled to vote at the meeting of Parkville's stockholders to be
held for the purpose of voting upon the Merger and related matters shall have
delivered the written notice of intent to demand payment pursuant to the
applicable provisions of the regulations of the OTS.
6.3 Conditions to Obligations of Parkville. The obligations of Parkville to
--------------------------------------
effect the Merger and the other transactions contemplated herein shall be
subject to the following additional conditions:
(a) Opinion of Counsel for Patapsco. Parkville shall have received from
--------------------------------
counsel to Patapsco an opinion dated as of the Closing Date covering the
following matters:
(i) Patapsco is duly organized, validly existing and in good standing
under the laws of the State of Maryland and NewSub is duly organized and
validly existing under the laws of the United States;
(ii) This Agreement has been duly and validly authorized, executed and
delivered by Patapsco and the Plan of Merger has been duly and validly
authorized, executed and delivered by NewSub and (assuming this Agreement
and the Plan of Merger are binding obligations of Parkville) constitute
valid and binding obligations of Patapsco and NewSub, as the case may be,
enforceable in accordance with their terms, subject as to enforceability to
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and to the
application of equitable principles and judicial discretion; and
(iii) To the knowledge of such counsel, no consent or approval, which
has not already been obtained from any governmental authority, is required
for execution and delivery by Patapsco and NewSub of this Agreement or the
Plan of Merger or any of the documents to be executed and delivered by
Patapsco or NewSub in connection therewith.
Such opinion may expressly rely as to matters of fact upon certificates
furnished by appropriate officers of Patapsco or NewSub or appropriate
government officials.
(b) Representations and Warranties to be True; Fulfillment of Covenants and
-----------------------------------------------------------------------
Conditions. The representations and warranties of Patapsco shall be true in all
----------
material respects at the Closing with the same effect as though made at the
Closing (or on the date when made in the case of any representation or warranty
which specifically relates to an earlier date) except (i) as contemplated by
this Agreement, (2) as consented to in writing by Parkville or (3) for breaches
of representations and warranties which would not have, or would not reasonably
be expected to have, a material adverse effect on the financial condition,
business or operations of Patapsco and its subsidiaries, taken as a whole;
Patapsco shall have performed all obligations and complied with each covenant,
in all material respects, and all conditions under this Agreement on its part to
be performed or complied with at or prior to the Closing except for failure to
perform or comply with such obligations and covenants which would not have, or
would not reasonably be expected to have, any material adverse effect on the
financial condition, business or
16
operations of Patapsco and its subsidiaries, taken as a whole; and Patapsco
shall have delivered to Parkville a certificate, dated the Closing Date and
signed by its chief executive officer and chief financial officer, to such
effect.
(c) Acceptance of Legal Matters. The form and substance of all legal
-----------------------------
matters contemplated hereby and all papers delivered hereunder shall be
reasonably acceptable to counsel to Parkville.
(d) Receipt of Consideration. The Agent shall have acknowledged in writing
------------------------
receipt of the Aggregate Purchase Price for all shares of Parkville Common Stock
to be acquired hereunder.
6.4 Termination of Agreement and Abandonment of Merger. This Agreement may
--------------------------------------------------
be terminated at any time before the Closing as provided below:
(a) Mutual Consent. By mutual consent of the parties, evidenced by their
---------------
written agreement.
(b) Closing Delay. At the election of either party, evidenced by written
--------------
notice, if the Closing Date shall not have occurred on or before September 30,
2004, or such later date as shall have been agreed to in writing by the parties;
provided, however, that the right to terminate under this Section 6.4(b) shall
not be available to any party whose failure to perform an obligation hereunder
has been the cause of, or has resulted in, the failure of the Closing to occur
on or before the date of such written notice.
(c) Conditions to Patapsco's Performance Not Met. By Patapsco upon delivery
--------------------------------------------
of written notice of termination to Parkville if any event occurs which renders
impossible satisfaction in any material respect one or more of the conditions to
the obligations of Patapsco and NewSub to effect the Merger set forth in
Sections 6.1 and 6.2 and noncompliance is not waived by Patapsco; provided,
however, that the right to terminate under this paragraph shall not be available
to Patapsco where it is in material breach of any of its representations,
warranties or obligations under this Agreement as of the date of such written
notice.
(d) Conditions to Parkville's Performance Not Met. By Parkville upon
-------------------------------------------------
delivery of written notice of termination to Patapsco if any event occurs which
renders impossible of satisfaction in any material respect one or more of the
conditions to the obligations of Parkville to effect the Merger set forth in
Sections 6.1 and 6.3 and noncompliance is not waived by Parkville; provided,
however, that the right to terminate under this paragraph shall not be available
to Parkville where either of their failure to perform an obligation hereunder
has been the cause of, or has resulted in, the failure of the Closing to occur
on or before such date.
ARTICLE VII
TERMINATION OF OBLIGATIONS; PAYMENT OF EXPENSES
7.1 Termination; Survival of Representations and Warranties. In the event
--------------------------------------------------------
of the termination and abandonment of this Agreement pursuant to Section 6.4 of
this Agreement, this Agreement shall become void and have no effect, except that
(i) the provisions of Sections 5.5 (Publicity), 7.2 (Expenses) and 9.2
(Confidentiality) of this Agreement shall survive any such termination and
abandonment, and (ii) a termination pursuant to Sections 6.4(c) or 6.4(d) of
this Agreement shall not relieve the breaching party from liability for an
uncured willful breach of a representation, warranty, covenant or agreement
giving rise to such termination.
The representations, warranties and agreements of the parties set forth in
this Agreement shall not survive the Merger Effective Time, and shall be
terminated and extinguished at the Merger Effective Time, and from and after the
Merger Effective Time none of the parties hereto shall have any liability to any
other party on account of any breach or failure of any of those representations,
warranties and agreements; provided, however, that the foregoing clause (i)
-------- -------
shall not apply to agreements of the parties which by their terms are intended
to be performed after the Merger Effective Time, and (ii) shall not relieve any
person for liability for fraud, or willful breach.
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7.2 Payment of Expenses.
-------------------
(a) Except to the extent provided in Section 1.8 hereof, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder.
(b) Notwithstanding any provision in this Agreement to the contrary, in
order to induce Patapsco to enter into this Agreement and as a means of
compensating Patapsco for the substantial direct and indirect monetary and other
costs incurred and to be incurred in connection with this Agreement and the
transactions contemplated hereby, Parkville agrees that if this Agreement is
terminated by Patapsco pursuant to the terms of this Agreement as a result of a
willful breach by Parkville of any of the representations, warranties,
agreements or covenants of Parkville set forth herein (and such breach would
otherwise have entitled Patapsco to terminate this Agreement as a result
thereof), and prior to such termination a Termination Event, as defined in
paragraph (c) of this Section 7.2, shall have occurred, Parkville will upon
demand pay to Patapsco in immediately available funds $100,000. In addition, the
parties agree that Patapsco shall have the right to pursue any and all of its
rights and remedies in law or in equity resulting from a termination under this
Section 7.2(b).
(c) For purposes of this Agreement, a Termination Event shall mean either
of the following:
(i) Parkville or any Parkville Subsidiary, without having received
Patapsco's prior written consent, shall have entered into an agreement to
engage in an Acquisition Transaction (as defined below) with any person
(the term "person" for purposes of this Agreement having the meaning
assigned thereto in Sections 3(a)((9) and 13(d)(3) of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder)
other than Patapsco or any affiliate of Patapsco (the term "affiliate" for
purposes of this Agreement having the meaning assigned thereto in Rule 405
under the Securities Act of 1933) or the Board of Directors of Parkville
shall have recommended that the stockholders of Parkville approve or accept
any Acquisition Transaction with any person other than Patapsco or any
affiliate of Patapsco. For purposes of this Agreement "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving Parkville, (y) a purchase, lease or other
acquisition of all or substantially all of the assets of Parkville or (z) a
purchase or other acquisition (including by way of merger, consolidation,
share exchange or otherwise) of securities representing 25% or more of the
equity securities of Parkville; or
(ii) After a bona fide proposal is made by any person other than
Patapsco or any affiliate of Patapsco to Parkville or its stockholders to
engage in an Acquisition Transaction, either (A) Parkville shall have
breached any covenant or obligation contained in this Agreement and such
breach would entitle Patapsco to terminate this Agreement, (B) more than
sixty days have passed since the date hereof and the holders of Parkville
Common Stock shall not have approved this Agreement at the meeting of such
stockholders held for the purpose of voting on this Agreement or such
meeting shall have been cancelled within 60 days of the date hereof, or (C)
Parkville's Board of Directors shall have withdrawn or modified in a manner
adverse to Patapsco the recommendation of Parkville's Board of Directors
with respect to this Agreement.
7.3 Non-Enforceability. This Agreement is not intended to confer nor does
------------------
it confer upon any person other than the parties hereto any rights or remedies
hereunder, except with respect to the Merger Consideration and except as
contemplated in Sections 8.1 (each of which shall be enforceable by the party
intended to be benefited thereby).
18
ARTICLE VIII
CERTAIN FURTHER AGREEMENTS
8.1 Employees and Benefits.
----------------------
(a) Prior to the Merger Effective Time, and only if requested in writing by
Patapsco, Parkville's Board of Directors shall adopt resolutions authorizing and
approving the termination of the Parkville's 401K Plan effective on a date prior
to the Closing Date, subject to the receipt of all applicable regulatory or
governmental approvals necessary or desirable in connection therewith.
(b) As soon as practicable after the Merger Effective Time subject to the
terms of the applicable plans, Parkville employees shall be entitled to
participate in all retirement and pension plans sponsored by Patapsco to the
extent that Patapsco's current employees are eligible to participate under such
plans with past service with Parkville being counted for Parkville employees who
become employees of Patapsco ("Transferred Employees") for purposes of
eligibility, waiting period and vesting.
(c) Except as otherwise specifically provided in this Section 8.1,
Parkville employees will continue to be eligible to participate in the Parkville
health, life and disability plans on substantially the same basis as immediately
prior to the Merger Effective Time, until the Transferred Employees become
eligible to participate in plans provided by the Patapsco for similarly situated
employees. Patapsco will use its best efforts subject to the terms of the
applicable plans, to ensure that (i) health, life and disability insurance
coverage is maintained for the Transferred Employees during the transition to
the Patapsco employee benefit plans on substantially the same basis as
immediately prior to the Merger Effective time, and (ii) there are no
pre-existing condition limitations as to benefit payments or eligibility to
participate in a Patapsco group health plan.
(d) Patapsco currently intends to offer each of the Parkville employees,
other than Xxxxx X. Xxxxxx, employment with Patapsco and Patapsco intends to
offer each such employee the same salary as they were paid by Parkville on the
Merger Effective Time. Except to the extent of commitments herein or other
contractual commitments, if any, specifically made or assumed by Patapsco
hereunder or by operation of law, Patapsco shall not have any obligation arising
from the Merger to continue any Parkville employees in its employ or in any
specific job or to provide to any employee any specified level of compensation
or any incentive payments, benefits or perquisites. Notwithstanding the
preceding sentence, Patapsco shall provide to any Parkville employee who is
employed by Parkville at the Merger Effective Time and is subsequently
terminated not for cause within one year of the Merger Effective Time, or is not
offered a position with Patapsco at a salary at least as high as his or her
salary at Parkville on the Merger Effective Time, a severance payment in an
amount equal to two weeks salary for every year of service with Parkville and
Patapsco with a minimum of ten weeks and a maximum of 26 weeks.
(e) On the Closing Date Patapsco agrees to pay Xxxxx X. Xxxxxx $271,800 in
exchange for Xx. Xxxxxx'x agreement to voluntarily terminate his employment
pursuant to Section 8(f) of the employment agreement between Parkville and Xx.
Xxxxxx as of the Closing Date. In no event shall Parkville or any Parkville
subsidiary take any action or make any payments that could result, in the
reasonable opinion of Patapsco or its professional advisors, either individually
or in the aggregate, in the payment of an "excess parachute payment" within the
meaning of Section 280G or the Internal Revenue Code of 1986 (the "Code") or
that could result, in the reasonable opinion of Patapsco or its professional
advisors, either individually or in the aggregate, in payments that would be
nondeductible pursuant to Section 162(m) of the Code.
(f) Except as otherwise provided in this Section 8.1, the employee benefit
plans of Parkville shall, in the sole discretion of Patapsco be frozen,
terminated or merged into comparable plans provided by Patapsco, effective as
Patapsco shall determine in its sole discretion but not before the Merger
Effective Time.
8.2 Indemnification and Insurance. Subject to availability and a cost not
------------------------------
the exceed $20,000, Patapsco shall permit Parkville to purchase and keep in
force for a period of up to five (5) years following the Merger
19
Effective Date, directors' and officers liability insurance to provide coverage
for acts or omissions of the type and in the amount covered by Parkville's
existing directors' and officers' liability insurance for acts or omissions
occurring on or prior to the Merger Effective Date. Notwithstanding the
foregoing, Patapsco further agrees to indemnify all current and former directors
and executive officers from any acts or omissions in such capacities prior to
the Effective Time, to the extent that such indemnification is provided pursuant
to the Charter or Bylaws of Parkville on the date hereof and is permitted under
OTS Regulations or by the FDIC.
ARTICLE IX
GENERAL
9.1 Amendments. Subject to applicable law, this Agreement may be amended by
----------
an agreement in writing executed in the same manner as this Agreement and
authorized or ratified by the Boards of Directors of the parties hereto,
provided that, after the adoption of the Agreement by the stockholders of
--------------
Parkville, no such amendment without further stockholder approval may change the
amount or form of the consideration to be received by Parkville stockholders in
the Merger.
9.2 Confidentiality. All information disclosed hereafter by any party to
---------------
this Agreement to any other party to this Agreement, including, without
limitation, any information obtained pursuant to Section 5.1 hereof, shall be
kept confidential by such other party and shall not be used by such other party
otherwise than as herein contemplated except to the extent that (i) it was known
by such other party on a non-confidential basis when received, (ii) it is or
hereafter becomes lawfully obtainable from other sources, (iii) it is necessary
or appropriate to disclose to the OTS, the Federal Reserve Board, the Maryland
Office of Regulation or any other applicable regulatory authority having
jurisdiction over the parties or their subsidiaries or as may otherwise be
required by law, or (iv) to the extent such duty as to confidentiality is waived
by the other party. In the event of the termination of this Agreement, each
party shall return to the other party all documents (and reproductions thereof)
received from such other party (and, in the case of reproductions, all such
reproductions made by the receiving party) that include information not within
the exceptions contained in the first sentence of this Section 9.2.
9.3 Governing Law. This Agreement and the legal relations between the
--------------
parties shall be governed by and construed in accordance with the laws of the
State of Maryland, except to the extent certain matters may be governed by
federal law by reason of preemption.
9.4 Notices. Any notices or other communications required or permitted
-------
hereunder shall be sufficiently given if sent by registered mail or certified
mail, postage prepaid, addressed, if to Patapsco, to
The Patapsco Bank
0000 Xxxxxxx Xxxxxxxxx
Xxxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxxxxx, President
with copy to: Xxxxxxxx Ronon Xxxxxxx & Xxxxx, LLP
Suite 600
0000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: Xxxx X. Xxxxxxxxx, Esq.
20
or if to Parkville, to:
Parkville Federal Savings Bank
0000 Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx, Chairman
with copy to: Jenkens & Xxxxxxxxx
Suite 900
901 - 15th Street, N.W.
Washington, D.C. 20005
Attn: Xxx X. Xxxxxxxx, Esq.
or such other address as shall be furnished in writing by any such party, and
any such notice or communication shall be deemed to have been given two business
days after the date of such mailing (except that the notice of change of address
shall not be deemed to have been given until received by the addressee). Notices
may also be sent by telegram, telex, facsimile transmission or hand delivery and
in such event shall be deemed to have been given as of the date received.
9.5 No Assignment. This Agreement may not be assigned by any of the parties
-------------
hereto, by operation of law or otherwise, except as contemplated hereby.
9.6 Headings. The description heading of the several Articles and Sections
--------
of this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
9.7 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties hereto and delivered to each of the other parties hereto.
9.8 Construction and Interpretation. Except as the context otherwise
---------------------------------
requires, (a) all references herein to any state or federal regulatory agency
shall also be deemed to refer to any predecessor or successor agency, and (b)
all references to state and federal statutes or regulations shall also be deemed
to refer to any successor statute or regulation.
9.9 Entire Agreement. This Agreement, together with the schedules, lists,
----------------
exhibits and certificates required to be delivered hereunder, and any amendment
hereafter executed and delivered in accordance with Section 9.1, constitutes the
entire agreement of the parties, and supersedes any prior written or oral
agreement or understanding among any of the parties hereto pertaining to the
Merger. This Agreement is not intended to confer upon any other persons any
rights or remedies hereunder except as expressly set forth herein.
9.10 Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of the Agreement.
21
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunder duly authorized, or in his own
name, all as of the date set forth above.
THE PATAPSCO BANK
By:/s/ Xxxxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
PARKVILLE FEDERAL SAVINGS BANK
By:/s/ Xxxxx Xxxxxx
------------------------------------------
Name: Xxxxx Xxxxxx
Title: Chairman
22
