EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
By and Among
CITIZENS BANK OF PENNSYLVANIA
CITIZENS FINANCIAL GROUP, INC.
and
COMMONWEALTH BANCORP, INC.
Dated as of September 30, 2002
TABLE OF CONTENTS
ARTICLE I - THE MERGER..........................................................................1
1.1 The Merger.................................................................1
1.2 Effective Time.............................................................2
1.3 Effects of the Merger......................................................2
1.4 Conversion of Seller Common Stock..........................................2
1.5 Merger Sub Common Stock....................................................3
1.6 Employee Stock Options; Restricted Shares..................................3
1.7 Articles of Incorporation..................................................4
1.8 By-Laws....................................................................4
1.9 Directors and Officers.....................................................4
ARTICLE II - EXCHANGE OF SHARES.................................................................4
2.1 Buyer to Deposit Aggregate Merger Consideration............................4
2.2 Exchange of Shares.........................................................4
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE BUYER.......................................5
3.1 Corporate Organization.....................................................6
3.2 Authority; No Violation....................................................6
3.3 Consents and Approvals.....................................................7
3.4 Financial Statements.......................................................7
3.5 Broker's Fees..............................................................7
3.6 Legal Proceedings..........................................................8
3.7 Capital; Availability of Funds.............................................8
3.8 Buyer Information..........................................................8
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE SELLER.......................................8
4.1 Corporate Organization.....................................................8
4.2 Capitalization............................................................10
4.3 Authority; No Violation...................................................12
4.4 Consents and Approvals....................................................13
4.5 Financial Statements......................................................13
4.6 Broker's Fees.............................................................14
4.7 Absence of Certain Changes or Events......................................14
4.8 Legal Proceedings.........................................................15
4.9 Reports...................................................................16
4.10 Agreements with Governmental Authorities..................................16
4.11 Absence of Undisclosed Liabilities........................................17
4.12 Compliance with Applicable Law............................................17
4.13 Taxes and Tax Returns.....................................................17
(i)
4.14 Labor.....................................................................19
4.15 Employees.................................................................19
4.16 Capitalization............................................................21
4.17 CRA, Anti-Money Laundering and Customer Information Security..............21
4.18 Material Agreements.......................................................21
4.19 Property and Leases.......................................................23
4.20 Loan Portfolio............................................................24
4.21 Investment Securities.....................................................24
4.22 Derivative Transactions...................................................25
4.23 Insurance.................................................................25
4.24 Environmental Matters.....................................................25
4.25 Administration of Accounts................................................27
4.26 Investment Management and Related Activities..............................27
4.27 State Takeover Laws.......................................................27
4.28 Proxy Statement; Seller Information.......................................28
4.29 Deposit/Loan Agreements...................................................28
4.30 Disciplinary Proceedings..................................................28
4.31 Intellectual Property.....................................................28
4.32 Disclosure................................................................28
ARTICLE V - COVENANTS RELATING TO CONDUCT OF BUSINESS..........................................28
5.1 Conduct of Businesses Prior to the Effective Time.........................28
5.2 Seller Forbearances.......................................................29
5.3 Buyer Forbearances........................................................33
5.4 System Conversions........................................................33
5.5 Certain Changes and Adjustments...........................................34
5.6 Branches..................................................................34
5.7 Servicing.................................................................34
5.8 Purchaser Products and Services...........................................34
5.9 ALCO Management...........................................................35
5.10 Deposit Incentive Plan....................................................35
ARTICLE VI - ADDITIONAL AGREEMENTS.............................................................35
6.1 Regulatory Matters; Consents..............................................35
6.2 No Solicitation...........................................................37
6.3 Access to Information.....................................................39
6.4 Legal Conditions to Merger................................................40
6.5 Employment and Benefit Matters............................................40
6.6 Directors' and Officers' Indemnification and Insurance....................43
6.7 Additional Agreements.....................................................45
6.8 Advice of Changes.........................................................45
6.9 Update of Disclosure Schedules............................................45
(ii)
6.10 Current Information.......................................................45
6.11 Transition Committee......................................................46
6.12 Bank Merger...............................................................46
6.13 Organization of the Merger Sub............................................47
6.14 Community Commitments.....................................................47
6.15 Citizens Financial Group, Inc.............................................47
6.16 Section 16 Matters........................................................48
6.17 Consolidation of Corporate Structure......................................48
ARTICLE VII - CONDITIONS PRECEDENT.............................................................48
7.1 Conditions to Each Party's Obligations To Effect the Merger...............48
7.2 Conditions to the Obligations of the Buyer................................49
7.3 Conditions to the Obligations of the Seller...............................50
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER...............................................50
8.1 Termination...............................................................50
8.2 Effect of Termination.....................................................51
8.3 Amendment.................................................................53
8.4 Extension; Waiver.........................................................53
ARTICLE IX - MISCELLANEOUS.....................................................................53
9.1 Closing...................................................................53
9.2 Nonsurvival of Representations, Warranties and Agreements.................53
9.3 Expenses..................................................................54
9.4 Notices...................................................................54
9.5 Interpretation............................................................55
9.6 Counterparts..............................................................55
9.7 Entire Agreement..........................................................55
9.8 Governing Law.............................................................56
9.9 Severability..............................................................56
9.10 Publicity.................................................................56
9.11 Assignment; Reliance of Other Parties.....................................56
9.12 Specific Performance......................................................56
9.13 Alternative Structure.....................................................56
9.14 Definitions...............................................................57
EXHIBITS
--------
Exhibit I Form of Bank Merger Agreement
Exhibit II Form of Stockholder Agreement
(iii)
SCHEDULES
---------
4.1(c) Subsidiaries and Joint Ventures
4.2(a) Capitalization
4.2(c) Seller Subsidiaries and Joint Ventures
4.3(c) Violations, Conflicts, Breaches or Defaults
4.7 Certain Changes or Events
4.8 Legal Proceedings
4.9 Seller Reports
4.10 Agreements with Governmental Authorities
4.13 Taxes and Tax Returns
4.15(a) Seller Pension Plans, Seller Benefit Plans and Seller Other
Plans Contributions
4.15(c) Value of Assets of Seller Pension Plans
4.15(d) Administration of Seller Pension Plans, Seller Benefit Plans and
Seller Other Plans
4.15(h) Post-employment Benefits
4.15(i) Post-termination Benefits
4.18 Seller Contracts
4.20(b) Criticized Assets
4.23(a) Insurance Policies
4.23(b) O&D Life Insurance Policies
4.24(d) Environmental Matters
4.26(a) Investment Management and Related Activities
5.2 Seller Forbearances
5.6 Branches
6.5(d) Compensation Agreements
6.5(e) Parachute Payouts
7.2(e) Stockholder Agreements
(iv)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of September
30, 2002, by and among, CITIZENS BANK OF PENNSYLVANIA, a Pennsylvania chartered
savings bank ("Buyer"), COMMONWEALTH BANCORP, INC., a Pennsylvania corporation
("Seller"), and for the purpose of Article III and Section 6.15, CITIZENS
FINANCIAL GROUP, INC., a Delaware corporation and the parent company of the
Buyer ("Parent"). The capitalized terms used in this Agreement are defined in
Section 9.14 hereof.
WHEREAS, the Board of Trustees of the Buyer and the Board of Directors
of the Seller have determined that it is in the best interests of their
respective stockholders and other constituencies, as well as the communities
they serve, to consummate, and have approved, the business combination
transactions provided for herein, in which the Buyer will, subject to the terms
and conditions set forth herein, acquire the Seller;
WHEREAS, following the execution and delivery of this Agreement, the
Buyer shall take such action as is appropriate to form a subsidiary to be
organized as a corporation (the "Merger Sub") under the PBCL, and to cause the
Merger Sub to become a party to this Agreement, pursuant to which the Merger Sub
shall merge (the "Merger") with and into the Seller, upon the terms and subject
to the conditions set forth herein (the Seller and the Merger Sub being the
constituent corporations of the Merger);
WHEREAS, following the execution and delivery of this Agreement, Buyer
(sometimes referred to herein as the "Surviving Bank"), shall enter into an
Agreement and Plan of Merger (the "Bank Merger Agreement") with Commonwealth
Bank, a Pennsylvania chartered savings bank and subsidiary of the Seller (the
"Seller Bank"), substantially in the form of Exhibit I hereto, providing for the
merger of the Seller Bank with and into the Buyer (the "Bank Merger") under the
Pennsylvania Banking Code of 1965, as amended, promptly following the
consummation of the Merger; and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and to prescribe certain conditions
to the Merger;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I - THE MERGER
1.1 THE MERGER. Subject to the terms and conditions of this
Agreement, in accordance with the PBCL, at the Effective Time, the Merger Sub
shall merge with and into the Seller. The Seller shall be the surviving
corporation (hereinafter sometimes called the "Surviving Corporation") in the
Merger, and shall continue its corporate existence under the laws of the
Commonwealth of Pennsylvania as a subsidiary of the Buyer. Upon consummation of
the Merger, the separate corporate existence of the Merger Sub shall terminate.
1.2 EFFECTIVE TIME. The Merger shall become effective when Articles
of Merger ("Articles of Merger"), executed in accordance with the relevant
provisions of the PBCL, are filed with the Pennsylvania Secretary; provided,
however, that upon the mutual written consent of each of the Buyer and the
Seller, the Articles of Merger may provide for a later time or date of
effectiveness of the Merger not more than thirty (30) days after the date the
Articles of Merger are filed with the Pennsylvania Secretary. When used in this
Agreement, the term "Effective Time" shall mean the date and time at which the
Articles of Merger are filed with the Pennsylvania Secretary or such later time
established by the Articles of Merger. The filing of the Articles of Merger with
the Pennsylvania Secretary shall be made on the Closing Date.
1.3 EFFECTS OF THE MERGER. At and after the Effective Time, the
Merger shall have the effects set forth in this Agreement and in Section 1929 of
the PBCL.
1.4 CONVERSION OF SELLER COMMON STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of the Merger Sub, the
Seller or the holder of any of the shares of the Seller Common Stock:
(a) Each share of the common stock, par value $0.10 per
share, of the Seller ("Seller Common Stock") issued and outstanding immediately
prior to the Effective Time (collectively, "Shares") (other than Shares held (i)
in the Seller's treasury or (ii) directly or indirectly by the Buyer or the
Seller or any of their respective subsidiaries (except for Trust Account Shares
or DPC Shares)) shall become and be converted automatically into the right to
receive in cash from the Buyer an amount equal to $46.50 ("Merger
Consideration").
(b) All of the Shares converted into the Merger
Consideration pursuant to this Article I shall no longer be outstanding and
shall automatically be canceled and shall cease to exist as of the Effective
Time, and each certificate (each, a "Certificate") previously representing any
such Shares shall thereafter represent the right to receive the Merger
Consideration. Certificates previously representing Shares shall be exchanged
for the Merger Consideration upon the surrender of such Certificates in
accordance with Section 2.2 hereof, without any interest thereon.
(c) At the Effective Time, all Shares that are owned by the
Seller as treasury stock, all shares that are held in trust under the Seller
Restricted Share Plans that have not been allocated to any individual
participant, and all Shares that are owned directly or indirectly by the Buyer
or the Seller or any of their respective subsidiaries (other than Shares held
directly or indirectly in trust accounts, managed accounts and the like or
otherwise held in a fiduciary capacity that are beneficially owned by third
parties (any such Shares, whether held directly or indirectly by the Buyer or
the Seller, as the case may be, being referred to herein as "Trust Account
Shares") and other than any Shares held by the Buyer or the Seller or any of
their respective subsidiaries in respect of a debt previously contracted (any
such Shares, whether held directly or indirectly by the Buyer or the Seller or
any of their respective subsidiaries, being
(2)
referred to herein as "DPC Shares")) shall be canceled and shall cease to exist
and no consideration shall be delivered in exchange therefor.
1.5 MERGER SUB COMMON STOCK. At and after the Effective Time, each
share of common stock, par value $1.00 per share, of the Merger Sub issued and
outstanding immediately prior to the Effective Time shall become and be
converted automatically into one share of common stock of the Surviving
Corporation.
1.6 EMPLOYEE STOCK OPTIONS; RESTRICTED SHARES. (a) Prior to and
effective as of the Effective Time, the Seller shall take all such action as is
necessary to terminate, subject to compliance with this Section 1.6, the Seller
1993 Amended Stock Incentive Plan, the Seller 1993 Amended Directors' Stock
Option Plan, the Seller 1996 Amended Stock Option Plan and the Seller 2000
Incentive Stock Option Plan (collectively, the "Seller Stock Option Plans"), and
shall provide written notice to each holder of a then outstanding stock option
to purchase shares of Seller Common Stock pursuant to the Seller Stock Option
Plans (whether or not such stock option is then vested or exercisable), that
such stock option shall be, as at the date of such notice, exercisable in full
and that such stock option shall terminate at the Effective Time and that, if
such stock option is not exercised or otherwise terminated on or before the
Effective Time, such holder shall be entitled to receive in cancellation of such
option a cash payment from the Seller at the Closing in an amount equal to the
excess of the Merger Consideration over the per share exercise price of such
stock option, multiplied by the number of shares of Seller Common Stock covered
by such stock option, subject to any required withholding of taxes. The Seller
shall use its reasonable best efforts to obtain the written acknowledgement of
each holder of a then-outstanding stock option to purchase shares of Seller
Common Stock pursuant to the Seller Stock Option Plans with regard to the
cancellation of such stock option and the payment therefor in accordance with
the terms of this Agreement. Subject to the foregoing, the Seller Stock Option
Plans and all options issued thereunder shall terminate at the Effective Time.
The Seller hereby represents and warrants to the Buyer that the maximum number
of shares of Seller Common Stock subject to issuance pursuant to the exercise of
stock options issued and outstanding under the Seller Stock Option Plans is not
and shall not be at or prior to the Effective Time more than 1,516,786.
(b) At the Effective Time, each unvested restricted share of
Seller Common Stock (collectively, the "Seller Restricted Shares") granted under
Seller's 1993 Amended Management Recognition Plan for Officers, 1993 Amended
Management Recognition Plan for Directors and 1996 Amended Recognition and
Retention Plan (collectively, the "Seller Restricted Share Plans") which is
outstanding immediately prior to the Effective Time shall vest and become free
of any restrictions to which they are subject under the Seller Restricted Share
Plans. Each holder of a Seller Restricted Share shall have the same rights to
receive the Merger Consideration as are provided to other holders of shares of
Seller Common Stock pursuant to Section 1.4 and Article II hereof.
(3)
1.7 ARTICLES OF INCORPORATION. Unless otherwise provided by the
Buyer, at the Effective Time, the Articles of Incorporation of the Seller, as in
effect at the Effective Time, shall be the Articles of Incorporation of the
Surviving Corporation until thereafter amended as provided therein and in
accordance with applicable law.
1.8 BY-LAWS. At the Effective Time, the By-Laws of the Seller, as in
effect immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Corporation until thereafter amended in accordance with applicable
law, the Articles of Incorporation of the Surviving Corporation and such
By-Laws.
1.9 DIRECTORS AND OFFICERS. The directors of Merger Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
Merger Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
ARTICLE II - EXCHANGE OF SHARES
2.1 BUYER TO DEPOSIT AGGREGATE MERGER CONSIDERATION. At or prior to
the Effective Time, the Buyer shall pay, or shall cause to be paid, to a bank or
trust company selected by the Buyer and reasonably acceptable to the Seller
(which may be a subsidiary or other Affiliate of the Buyer) (the "Exchange
Agent"), for the benefit of the holders of Certificates, for exchange in
accordance with this Article II, such amount of cash as is sufficient to pay the
aggregate Merger Consideration which holders of Shares are entitled to receive
pursuant to Section 1.4 hereof.
2.2 EXCHANGE OF SHARES.
(a) As soon as practicable after the Effective Time, and in
no event later than three (3) business days thereafter, the Buyer shall cause
the Exchange Agent to mail to each holder of record of a Certificate or
Certificates a form letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent) and instructions
for use in effecting the surrender of the Certificates in exchange for the
Merger Consideration into which each share of Seller Common Stock represented by
such Certificate or Certificates shall have been converted pursuant to this
Agreement. Upon proper surrender of a Certificate for exchange and cancellation
to the Exchange Agent, together with such properly completed letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange for each share represented thereby, the Merger
Consideration, and the Certificate so surrendered shall forthwith be canceled.
No interest shall accrue or be paid on the Merger Consideration payable upon the
surrender of any Certificate for the benefit of the holder of such Certificate.
If payment of the Merger Consideration is to be made to a person other than the
person in whose name the
(4)
surrendered Certificate is registered on the stock transfer books of the Seller,
it shall be a condition of payment that the Certificate so surrendered shall be
endorsed properly or otherwise be in proper form for transfer and that the
person requesting such payment shall have paid all transfer and other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation that such taxes
either have been paid or are not applicable.
(b) At any time following the expiration of the sixth (6th)
month after the Effective Time, the Buyer or the Surviving Corporation shall be
entitled to require the Exchange Agent to deliver to it any funds which had been
made available to the Exchange Agent and not disbursed to holders of Shares
(including, without limitation, all interest and other income received by the
Exchange Agent in respect of all funds made available to it), and thereafter
such holders shall be entitled to look to the Buyer and the Surviving
Corporation (subject to applicable abandoned property, escheat or similar laws)
only as general creditors thereof with respect to any Merger Consideration
payable upon due surrender of the Certificates held by them.
(c) After the Effective Time, there shall be no transfers on
the stock transfer books of the Seller of the shares of Seller Common Stock
which were issued and outstanding immediately prior to the Effective Time. From
and after the Effective Time, the holders of shares of Seller Common Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such shares except as otherwise provided herein or by
applicable law. If, after the Effective Time, Certificates representing such
shares are presented for transfer to the Exchange Agent, they shall be canceled
and exchanged for the Merger Consideration as provided in this Article II.
(d) Neither the Buyer nor the Seller nor any other Person
shall be liable to any former holder of Shares for any shares or any dividends
or distributions with respect thereto or any Merger Consideration delivered in
respect of any such Shares properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(e) In the event any Certificate shall have been lost,
stolen or destroyed, upon receipt of appropriate evidence as to such loss, theft
or destruction and to the ownership of such Certificate by the Person claiming
such Certificate to be lost, stolen or destroyed, and the receipt by the Buyer
of appropriate and customary indemnification, the Buyer will issue in exchange
for each Share represented by such lost, stolen or destroyed Certificate, the
Merger Consideration, as determined in accordance with this Article II.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as follows:
(5)
3.1 CORPORATE ORGANIZATION.
(a) The Buyer is a state chartered savings bank duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. The Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and owns directly all of the issued and outstanding equity securities of the
Buyer.
(b) Each of the Parent and the Buyer has all requisite
corporate power and authority to own, lease or operate all of its properties and
assets and to carry on its business as it is now being conducted. Each of the
Parent and the Buyer is duly licensed or qualified to do business and is in
corporate good standing in each jurisdiction in which the nature of the business
conducted by it or the character or location of the properties and assets owned,
leased or operated by it makes such licensing or qualification necessary, except
where the failure to be so licensed or qualified and in good standing would not
result in a Material Adverse Effect.
3.2 AUTHORITY; NO VIOLATION. (a) Each of the Parent and the Buyer
has all requisite corporate power and authority to execute and deliver this
Agreement and the other Transaction Documents to which it is a party and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the other Transaction Documents to which the
Buyer or the Parent, as applicable, is a party and the consummation of the
transactions contemplated hereby and thereby have been duly and validly approved
by each of the Board of Trustees of the Buyer and the Board of Directors of the
Parent, as applicable. Except for the adoption of the Bank Merger Agreement by
the Buyer's stockholder, no other corporate proceedings on the part of the
Parent or the Buyer are necessary to consummate the Merger. This Agreement and
the other Transaction Documents to which the Buyer or the Parent, as applicable,
is a party have been duly and validly executed and delivered by each of the
Parent and the Buyer, as applicable, and (assuming due authorization, execution
and delivery by the Seller and the Seller Bank), constitute the valid and
binding obligation of the Parent and the Buyer, as applicable, enforceable
against each of them in accordance with their respective terms. The Parent,
acting in its capacity as the sole stockholder of the Buyer, shall approve the
Bank Merger Agreement prior to the Effective Time.
(b) Neither the execution and delivery of this Agreement or
the other Transaction Documents to which the Buyer or the Parent, as applicable,
is a party by the Parent and the Buyer, as applicable, nor the consummation by
the Parent and the Buyer of the transactions contemplated hereby or thereby; nor
compliance by the Parent and the Buyer with any of the terms or provisions
hereof or thereof, will (i) assuming that the consents and approvals referred to
in Section 3.3 hereof are duly obtained, violate in any respect any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to the Parent or the Buyer, or (ii) violate, conflict with, or result
in a breach of, any provisions of, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, result in
the termination of, accelerate the performance required by, or result in a right
of termination or acceleration or the creation of any lien, security interest,
charge or other
(6)
encumbrance upon any of the properties or assets of the Parent or the Buyer
under any of the terms, conditions or provisions of (y) the Articles of
Incorporation or other charter document of like nature or By-Laws of the Parent
or the Buyer, or (z) any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which the Parent
or the Buyer is a party as issuer, guarantor or obligor, or by which it or any
of its properties or assets may be bound or affected, except, in the case of
clause (ii)(z) above, for such violations, conflicts, breaches or defaults which
either individually or in the aggregate will not have a Material Adverse Effect
on the Parent or the Buyer.
3.3 CONSENTS AND APPROVALS. Except for consents, waivers or
approvals of, or filings or registrations with, or notifications to, the FDIC,
the Federal Reserve Board, the Pennsylvania Commissioner, the Pennsylvania
Secretary, the MBBI, the MHPF, applicable state securities and insurance
commissioners, the SEC, the DOJ, the NASDAQ, the UK Listing Authority, and the
Financial Services Authority, no consents, waivers or approvals of or filings or
registrations with, or notifications to, any public body or authority are
necessary, and no consents or approvals of any third parties are necessary, in
connection with (a) the execution and delivery by the Parent and the Buyer of
this Agreement and by the Buyer of the Bank Merger Agreement or (b) the
consummation by the Parent and the Buyer of the Merger or by the Buyer of the
Bank Merger. Neither the Parent nor the Buyer has any knowledge of any fact or
circumstance relating to the Buyer or its subsidiaries or other Affiliates that
is reasonably likely to materially impede or delay receipt of any consents of
Governmental Authorities.
3.4 FINANCIAL STATEMENTS. The Buyer has made available to the Seller
copies of (a) the consolidated balance sheets of the Parent as of December 31
for the fiscal years 2000 and 2001, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for the fiscal years 1999
through 2001, inclusive, accompanied by the audit report of Deloitte & Touche
LLP, independent public accountants for the Parent, (b) the unaudited
consolidated balance sheet of the Parent as of June 30, 2002, and the related
unaudited consolidated statements of income for the six (6) months ended June
30, 2002 and June 30, 2001 and (c) Consolidated Reports of Condition and Income
of the Buyer dated as of June 30, 2002. The June 30, 2002 consolidated balance
sheet of the Parent (including the related notes, where applicable) and the
other financial statements referred to herein (including the related notes,
where applicable) fairly present the consolidated financial position and results
of the consolidated operations and cash flows and changes in stockholders'
equity of the Parent and its subsidiaries for the respective fiscal periods or
as of the respective dates therein set forth; and each of such statements
(including the related notes, where applicable) has been prepared in accordance
with GAAP, except as otherwise set forth in the notes thereto (subject, in the
case of unaudited interim statements, to normal year-end adjustments).
3.5 BROKER'S FEES. Neither the Buyer nor any of its officers,
trustees, employees, Affiliates or agents has employed any broker, finder or
financial advisor or incurred any liability for any fees or commissions in
connection with any of the transactions contemplated by this Agreement, except
for the fees and commissions incurred in connection with the engagement of
(7)
Xxxxxxx Xxxxx & Co., Inc. and for legal, accounting and other professional fees
payable in connection with the Merger and the other transactions contemplated
hereby. The Buyer will be responsible for the payment of all such fees.
3.6 LEGAL PROCEEDINGS. There is no claim, suit, action, proceeding
or investigation of any nature pending or, to the best knowledge of the Buyer,
threatened, against the Buyer or any subsidiary or other Affiliate of the Buyer
or challenging the validity or propriety of the transactions contemplated by
this Agreement, and which, if adversely determined, would, individually or in
the aggregate, materially adversely affect the Buyer's ability to perform its
respective obligations under this Agreement or the Bank Merger Agreement, nor is
there any judgment, decree, injunction, rule or order of any legal or
administrative body or arbitrator outstanding against the Buyer or any
subsidiary or other Affiliate of the Buyer having, or which insofar as
reasonably can be foreseen, in the future could have, any such effect.
3.7 CAPITAL; AVAILABILITY OF FUNDS. On the date hereof, the Buyer
is, and on the Closing Date, the Buyer will be, "adequately capitalized" as such
term is defined in the rules and regulations promulgated by the FDIC, and on the
date hereof, the Parent is, and on the Closing Date, the Parent will be,
"adequately capitalized" as such term is defined in the rules and regulations
promulgated by the Federal Reserve Board if the Parent were a state-chartered,
member bank. The Buyer will have available to it at the Effective Time sources
of capital and financing sufficient to pay the aggregate Merger Consideration
and to pay any other amounts payable pursuant to this Agreement and to effect
the transactions contemplated hereby.
3.8 BUYER INFORMATION. The information relating to the Parent,
Buyer, their respective subsidiaries and other Affiliates to be contained in the
proxy statement filed with the SEC under the Exchange Act (the "Seller Proxy
Statement"), as described in Section 6.1 hereof, and any other documents filed
with the SEC in connection herewith, to the extent such information is provided
in writing by the Buyer, will not, on the date the Seller Proxy Statement (or
any supplement or amendment thereto) is first mailed to stockholders of the
Seller or on the date of the Seller Stockholders Meeting, contain any untrue
statement of a material fact or omit to state a material fact necessary to make
such information not misleading at the time and in light of the circumstances
under which such statement is made.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Buyer as follows:
4.1 CORPORATE ORGANIZATION.
(a) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania. The Seller has all requisite corporate power and authority to own,
lease or operate all of its properties and assets and to carry on its business
as it is now being conducted. The Seller is duly licensed or qualified to do
(8)
business and is in corporate good standing in each jurisdiction in which the
nature of the business conducted by it or the character or location of the
properties and assets owned, leased or operated by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
and in corporate good standing would not, individually or in the aggregate,
result in any Material Adverse Effect on the Seller. The Seller is a savings and
loan holding company registered with the OTS under the Home Owners' Loan Act of
1933, as amended. The Articles of Incorporation and By-Laws of the Seller,
copies of which have previously been made available to the Buyer, are true,
complete and correct copies of such documents in effect as of the date of this
Agreement. The Seller is not in violation of any provision of its Articles of
Incorporation or By-Laws. The minute books of the Seller contain in all material
respects true and complete records of all meetings held and corporate actions
taken since January 1, 1999 of the Seller's stockholders and Board of Directors
(including committees of the Seller's Board of Directors) other than minutes
which have not been prepared as of the date hereof.
(b) Each Significant Subsidiary of the Seller is duly
organized, validly existing and in corporate good standing under the laws of the
jurisdiction of its incorporation. Each Significant Subsidiary of the Seller has
all requisite corporate power and authority to own, lease or operate all of its
properties and assets and to carry on its business as it is now being conducted.
Each Significant Subsidiary of the Seller is duly licensed or qualified to do
business in each jurisdiction in which the nature of the business conducted by
it or the character or location of the properties and assets owned, leased, or
operated by it makes such licensing or qualification necessary, except where the
failure to be so licensed or qualified and in good standing would not,
individually or in the aggregate, result in any Material Adverse Effect on the
Seller.
(c) Except as set forth in Section 4.1(c) of the Seller Disclosure
Schedule, the Seller has no subsidiaries and no Joint Ventures (other than
investments in such subsidiaries).
(d) The Articles of Incorporation and By-Laws or equivalent
organizational documents of each Significant Subsidiary, copies of which have
previously been made available to the Buyer, are true, correct and complete
copies of such documents in effect as of the date of this Agreement. Neither the
Seller nor any of its subsidiaries is in violation of any provision of its
Articles of Incorporation, By-Laws or equivalent organizational documents. The
minute books of each Significant Subsidiary contain in all material respects
true and complete records of all meetings held and corporate actions taken since
January 1, 1999 of its stockholders and board of directors (including committees
of its board of directors) other than minutes which have not been prepared as of
the date hereof.
(e) Neither the Articles of Incorporation and By-Laws or equivalent
organizational documents of the Seller or any of its subsidiaries nor any
resolutions adopted by the respective Boards of Directors of the Seller or any
of its subsidiaries grant any holder of shares of the capital stock of the
Seller or any of its subsidiaries any entitlement to dissenters
(9)
rights as provided in Section 1574 of the PBCL or any other applicable law or
regulation ("Dissenters Rights").
4.2 CAPITALIZATION.
(a) The authorized capital stock of the Seller consists of
30,000,000 shares of Seller Common Stock and 5,000,000 shares of preferred
stock, par value $0.10 per share ("Seller Preferred Stock"). As of the date
hereof, there are 9,665,846 shares of Seller Common Stock issued and outstanding
and no shares of Seller Preferred Stock issued and outstanding. As of the date
hereof, there are 8,402,281 shares of Seller Common Stock and no shares of
Seller Preferred Stock held in the treasury of the Seller. Except for Trust
Account Shares and DPC Shares, no shares of Seller Common Stock are held by the
Seller's subsidiaries. In addition, as of the date hereof, there are 1,516,786
shares of Seller Common Stock reserved for issuance upon exercise of outstanding
stock options. All issued and outstanding shares of Seller Common Stock have
been duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the ownership
thereof. Except (i) for the Seller Stock Option Plans (which includes director
and employee stock options) or (ii) as reflected in Section 4.2(a) of the Seller
Disclosure Schedule, the Seller does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments, rights
agreements or agreements of any character calling for the Seller to issue,
deliver or sell, or cause to be issued, delivered or sold any shares of Seller
Common Stock, Seller Preferred Stock or any other equity security of the Seller
or any subsidiary of the Seller or any securities convertible into, exchangeable
for or representing the right to subscribe for, purchase or otherwise receive
any shares of Seller Common Stock, Seller Preferred Stock or any other equity
security of the Seller or any subsidiary of the Seller or obligating the Seller
or any such subsidiary to grant, extend or enter into any such subscriptions,
options, warrants, calls, commitments, rights agreements or agreements. Except
as set forth in Section 4.2(a) of the Seller Disclosure Schedule, there are no
outstanding contractual obligations of the Seller to repurchase, redeem or
otherwise acquire any shares of capital stock of, or other equity interests in,
the Seller or to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any subsidiary of the Seller.
Section 4.2(a) of the Seller Disclosure Schedule sets forth as of the date
hereof (i) the names of the optionees, the date of each option to purchase
shares of Seller Common Stock granted, the number of shares subject to each such
option, the expiration date of each such option, and the price at which each
such option may be exercised under the Seller Stock Option Plans and (ii) with
respect to each outstanding Seller Restricted Share, the name of the grantee,
the date of grant and the applicable vesting schedule and terms. Except as noted
in the immediately preceding sentence, there are no Shares outstanding which are
subject to vesting over time or upon the satisfaction of any condition
precedent, or which are otherwise subject to any right or obligation of
repurchase or redemption on the part of the Seller.
(b) The authorized capital stock of the Seller Bank consists
of 20,000,000 shares of common stock, par value $0.10 per share ("Bank Common
Stock"), and 5,000,000 shares of preferred stock, par value $0.10 per share
("Bank Preferred Stock"). As of the date
(10)
hereof, (i) 100 shares of Bank Common Stock are issued and outstanding, all of
which are owned directly or indirectly by the Seller, all of which are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof, (ii) no
shares of Bank Common Stock are held in the treasury of the Seller Bank and
(iii) no shares of Bank Common Stock are held by any of Seller's subsidiaries.
Each share of Bank Common Stock owned by the Seller or any of its subsidiaries
is free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on the Seller's or any of its
subsidiaries' voting rights, charges and other encumbrances of any nature
whatsoever. No shares of Bank Preferred Stock have been issued.
(c) Section 4.2(c) of the Seller Disclosure Schedule lists
each of the subsidiaries of the Seller and each Joint Venture on the date of
this Agreement and indicates for each such subsidiary and Joint Venture as of
such date: (i) the percentage and type of equity securities owned or controlled
by the Seller; (ii) the jurisdiction of incorporation; and (iii) the federal
and/or state bank regulatory or other authority under which its shares are held
by Seller or by which the Joint Venture operates. The Seller (x) has made
available to the Buyer all of the organizational or similar documents regarding
the control, governance or voting power in respect of each Joint Venture, (y)
has no obligation to make any capital contributions, or otherwise provide assets
or cash, to any Joint Venture and (z) does not, directly or indirectly, control
any Joint Venture. The Seller Bank's deposits are insured by either the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC in
accordance with the FDIA to the fullest extent permitted by law, and the Seller
Bank has paid all premiums and assessments and filed all reports required by the
FDIA. As of the date hereof, no proceedings for the revocation or termination of
such deposit insurance are pending or, to the best knowledge of the Seller,
threatened. Except as set forth in Section 4.2(c) of the Seller Disclosure
Schedule, no subsidiary of the Seller has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments, rights agreements or
agreements of any character calling for a subsidiary of the Seller to issue,
deliver or sell, or cause to be issued, delivered or sold any equity security of
the Seller or of any subsidiary of the Seller or any securities convertible
into, exchangeable for or representing the right to subscribe for, purchase or
otherwise receive any such equity security or obligating a subsidiary of the
Seller to grant, extend or enter into any such subscriptions, options, warrants,
calls, commitments, rights agreements or agreements. There are no outstanding
contractual obligations of any subsidiary of the Seller to repurchase, redeem or
otherwise acquire any shares of capital stock of, or other equity interests in,
the Seller or any such subsidiary or to provide funds to, or make any investment
(in the form of a loan, capital contribution or otherwise) in, any such
subsidiary of the Seller. All of the shares of capital stock of each of the
subsidiaries of the Seller held by the Seller are fully paid and nonassessable
and, except for directors' qualifying shares, are owned by the Seller free and
clear of any claim, lien, encumbrance or agreement with respect thereto.
(11)
4.3 AUTHORITY; NO VIOLATION.
(a) The Seller has all requisite corporate power and
authority to execute and deliver this Agreement and the other Transaction
Documents and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the other Transaction
Documents, and the consummation of the transactions contemplated hereby and
thereby are duly and validly approved by the unanimous vote of, the Board of
Directors of the Seller. The Board of Directors of the Seller has directed that
this Agreement and the transactions contemplated hereby, including the Merger,
be submitted to the stockholders of the Seller for approval at a meeting of such
stockholders and, except for the adoption of this Agreement by the Seller's
stockholders, no other corporate action and no other corporate proceedings on
the part of the Seller are necessary to authorize this Agreement and the other
Transaction Documents or to consummate the Merger. This Agreement and the other
Transaction Documents have been duly and validly executed and delivered by the
Seller and (assuming due authorization, execution and delivery by the Buyer, the
Parent and the Merger Sub, as applicable) constitute the valid and binding
obligations of the Seller, enforceable against the Seller in accordance with
their respective terms.
(b) The Seller Bank has full corporate power and authority
to execute and deliver the Bank Merger Agreement, to perform its obligations
thereunder and to consummate the transactions contemplated thereby. The
execution and delivery of the Bank Merger Agreement, the performance of its
obligations thereunder and the consummation of the transactions contemplated
thereby have been duly and validly approved by the unanimous action of the Board
of Directors of the Seller Bank. The Seller, acting in its capacity as the sole
stockholder of the Seller Bank, has approved the Bank Merger Agreement. No other
corporate action and no other corporate proceedings on the part of the Seller
Bank are necessary to authorize the Bank Merger Agreement or the performance of
the Seller Bank's obligations thereunder or to consummate the transactions
contemplated thereby. The Bank Merger Agreement, upon execution and delivery by
the Seller Bank, will be duly and validly executed and delivered by the Seller
Bank and will constitute a legal, valid and binding obligation of the Seller
Bank, enforceable against the Seller Bank in accordance with its terms.
(c) Neither the execution and delivery of this Agreement or
the other Transaction Documents by the Seller nor the consummation by the Seller
of the transactions contemplated hereby or thereby; nor the execution and
delivery of the Bank Merger Agreement by the Seller Bank, nor the consummation
by the Seller Bank of the transactions contemplated thereby; nor compliance by
the Seller or the Seller Bank with any of the terms or provisions hereof or
thereof, will (i) assuming that the consents, waivers and approvals referred to
in Section 4.4 hereof are duly obtained, violate any statute, law, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to the Seller or any of its subsidiaries or by which any property or
asset of the Seller or any of its subsidiaries is bound or affected, or (ii)
violate, conflict with, result in a breach of any provisions of, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the
(12)
termination of, accelerate the performance required by, or result in a right of
termination or acceleration or the creation of any lien, security interest,
charge or other encumbrance upon any of the properties or assets of the Seller
or any of its subsidiaries under any of the terms, conditions or provisions of
(y) the Articles of Incorporation or other charter document of like nature or
By-Laws of the Seller or any of its subsidiaries, or (z) any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Seller is a party as issuer, guarantor or
obligor, or by which they or any of their respective properties or assets may be
bound or affected, except, in the case of clause (ii)(z) above, for such
violations, conflicts, breaches or defaults as set forth in Section 4.3(c) of
the Seller Disclosure Schedule or which either individually or in the aggregate
would not have a Material Adverse Effect on the Seller.
4.4 CONSENTS AND APPROVALS.
(a) Except for consents, waivers or approvals of, or filings
or registrations with, or notifications to, the FDIC, the Federal Reserve Board,
the Pennsylvania Commissioner, the Pennsylvania Secretary, the MBBI, the MHPF,
applicable state securities and insurance commissioners, the SEC, the DOJ, and
the NASDAQ, no consents, waivers or approvals of or filings or registrations
with, or notifications to, any public body or authority are necessary in
connection with (i) the execution and delivery by the Seller of this Agreement
and the execution and delivery of the Bank Merger Agreement by the Seller Bank,
or (ii) the consummation by the Seller of the Merger or by the Seller Bank of
the Bank Merger. The affirmative vote of a majority of the votes cast by all
holders of shares of Seller Common Stock is the only vote of the holders of any
shares or series of capital stock or other securities of the Seller necessary to
approve this Agreement and the Merger. The affirmative vote of at least
two-thirds (2/3rds) of the votes cast by all holders of shares of Bank Common
Stock is the only vote of the holders of any shares or series of capital stock
or other securities of the Seller Bank necessary to approve the Bank Merger
Agreement and the Bank Merger. The Seller has no knowledge of any fact or
circumstance relating to the Seller or its subsidiaries, that is reasonably
likely to materially impede or delay receipt of any consents of Governmental
Authorities.
(b) The execution and delivery of this Agreement by the
Seller, and the execution and delivery of the Bank Merger Agreement by the
Seller Bank, does not require any consent, approval, authorization or permit of,
or filing with or notification to, any third party (which term does not include
the Board of Directors or the stockholders of the Seller or the Seller Bank),
except where the failure to obtain any such consent, approval, authorization or
permit, or to make any such filing or notification, would not have a Material
Adverse Effect on the Seller or prevent or significantly delay consummation of
the Merger or the Bank Merger.
4.5 FINANCIAL STATEMENTS. The Seller has made available to the Buyer
copies of (a) the consolidated balance sheets of the Seller and its subsidiaries
as of December 31 for the fiscal years 2000 and 2001, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the fiscal years 1999 through 2001, inclusive, as reported
(13)
in the Annual Report of the Seller on Form 10-K for the fiscal year ended
December 31, 2001 filed with the SEC under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), accompanied by the audit report of Xxxxxx
Xxxxxxxx LLP, independent public accountants for the Seller, and (b) the
unaudited consolidated balance sheet of the Seller and its subsidiaries as of
June 30, 2002, the related unaudited consolidated statements of income and
changes in stockholders' equity for the six (6) months ended June 30, 2002 and
June 30, 2001 and the related unaudited consolidated statements of cash flows
for the six (6) months ended June 30, 2002 and June 30, 2001, all as reported in
the Seller's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002
filed with the SEC under the Exchange Act. The December 31, 2001 consolidated
balance sheet ("Seller Balance Sheet") of the Seller (including the related
notes, where applicable) and the other financial statements referred to herein
(including the related notes, where applicable) fairly present, and the
financial statements to be included in any reports or statements (including
reports on Forms 10-Q and 10-K) to be filed by the Seller with the SEC after the
date hereof will fairly present, the consolidated financial position and results
of the consolidated operations and cash flows and changes in stockholders'
equity of the Seller and its subsidiaries for the respective fiscal periods or
as of the respective dates therein set forth; and each of such statements
(including the related notes, where applicable) has been and will be prepared in
accordance with GAAP, except as otherwise set forth in the notes thereto
(subject, in the case of unaudited interim statements, to normal year-end
adjustments). Each of the consolidated financial statements of the Seller and
its subsidiaries, including, in each case, the notes thereto, made available to
the Buyer comply, and the financial statements to be filed with the SEC by the
Seller after the date hereof will comply, with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto. The books and records of the Seller and its subsidiaries have
been, and are being, maintained in accordance with GAAP and applicable legal and
regulatory requirements.
4.6 BROKER'S FEES. Neither the Seller nor any of its officers,
directors, employees, Affiliates or agents has employed any broker, finder or
financial advisor or incurred any liability for any fees or commissions in
connection with any of the transactions contemplated by this Agreement, except
for fees and commissions incurred in connection with the engagement of Xxxxx,
Xxxxxxxx & Xxxxx and for legal, accounting and other professional fees payable
in connection with the Merger and the other transactions contemplated hereby.
The Seller will be responsible for the payment of all such fees. The fee payable
to Xxxxx, Xxxxxxxx & Xxxxx in connection with the transactions contemplated by
this Agreement is as described in an engagement letter between the Seller and
Xxxxx, Xxxxxxxx & Xxxxx, a true and complete copy of which has heretofore been
furnished to the Buyer. The Seller has received the opinion of Xxxxx, Xxxxxxxx &
Xxxxx to the effect that, as of the date of such opinion, the Merger
Consideration to be received by the stockholders of the Seller pursuant to the
Merger is fair to such stockholders, and such opinion has not been amended or
rescinded and remains in full force and effect as of the date of this Agreement.
4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
Section 4.7 of the Seller Disclosure Schedule, the Seller's Quarterly Report on
Form 10-Q for the quarter ended
(14)
June 30, 2002, in any Current Reports of the Seller on Form 8-K filed prior to
the date of this Agreement, in the Seller's Proxy Statement filed with respect
to its 2002 Annual Meeting of stockholders, in the Seller's Annual Report on
Form 10-K for the year ended December 31, 2001, or as otherwise expressly
permitted or expressly contemplated by this Agreement, since December 31, 2001,
the Seller and its subsidiaries have not incurred any material liability or
obligation of any nature (whether accrued, absolute, contingent or otherwise and
whether due or to become due), except in the ordinary course of their business
consistent with their past practices or in connection with this Agreement and
the transactions contemplated hereby, nor has there been (a) any change in the
business, assets, financial condition or results of operations of the Seller or
any of its subsidiaries which has had, or is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on the Seller or any
of its subsidiaries, (b) any change by the Seller or any of its subsidiaries in
its accounting methods, principles or practices, other than changes required by
applicable law or GAAP or regulatory accounting as concurred in by the Seller's
independent accountants, (c) any entry by the Seller or any of its subsidiaries
into any contract or commitment of more than $200,000 or with a term of more
than one (1) year other than loans and loan commitments and borrowings in the
ordinary course of business, (d) any declaration, setting aside or payment of
any dividend or distribution in respect of any capital stock of the Seller or
any of its subsidiaries or any redemption, purchase or other acquisition of any
of its securities, other than in the ordinary course of business consistent with
past practice, (e) any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any directors, officers or
employees of the Seller or any of its subsidiaries, or any grant of severance or
termination pay, or any contract or arrangement entered into to make or grant
any severance or termination pay, any payment of any bonus, or the taking of any
action not in the ordinary course of business with respect to the compensation
or employment of directors, officers or employees of the Seller or any of its
subsidiaries, (f) any material election made by the Seller or any of its
subsidiaries for federal or state income tax purposes, (g) any material change
in the credit policies or procedures of the Seller or any of its subsidiaries,
the effect of which was or is to make any such policy or procedure less
restrictive in any material respect, (h) any material acquisition or disposition
of any assets or properties, or any contract for any such acquisition or
disposition entered into other than loans and loan commitments, or (i) any
material lease of real or personal property entered into, other than in
connection with foreclosed property or in the ordinary course of business
consistent with past practice.
4.8 LEGAL PROCEEDINGS. There is no claim, suit, action, proceeding
or investigation of any nature pending or, to the best knowledge of the Seller,
threatened, against the Seller or any subsidiary of the Seller or challenging
the validity or propriety of the transactions contemplated by this Agreement,
which, if adversely determined, would, individually or in the aggregate, have a
Material Adverse Effect on the Seller or otherwise materially adversely affect
the Seller's or the Seller Bank's ability to perform its obligations under this
Agreement or the Bank Merger
(15)
Agreement, nor is there any judgment, decree, injunction, rule, award or order
of any legal or administrative body or arbitrator outstanding against the Seller
or any subsidiary of the Seller having, or which insofar as reasonably can be
foreseen, in the future could have, any such effect. Section 4.8 of the Seller
Disclosure Schedule sets forth as of the date hereof all claims, suits, actions,
proceedings or investigations pending or, to the best knowledge of the Seller,
threatened against the Seller or any of its subsidiaries.
4.9 REPORTS. Since January 1, 1999, the Seller and its subsidiaries
have timely filed, and subsequent to the date hereof will timely file, all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that were and are required to be filed with (a)
the SEC, including, but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K, proxy
statements and all other communications mailed by the Seller to its stockholders
since January 1, 1999 (and copies of all such reports, registrations statements
and communications have been or will be delivered or otherwise made available by
the Seller to the Buyer), (b) the OTS, (c) the FDIC, (d) the NASDAQ, and (e) any
applicable state securities, insurance or banking authorities (except, in the
case of state securities or insurance authorities, no such representation is
made as to filings which are not material) (all such reports, registrations and
statements, together with any amendments thereto, are collectively referred to
herein as the "Seller Reports") and have paid all fees and assessments due and
payable in connection with any of the foregoing. As of their respective dates,
the Seller Reports complied and, with respect to filings made after the date of
this Agreement, will at the date of filing comply, in all material respects with
all of the statutes, rules and regulations enforced or promulgated by the
regulatory authority with which they were filed and did not contain and, with
respect to filings made after the date of this Agreement, will not at the date
of filing contain, any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except as set forth in Section 4.9 of the Seller Disclosure
Schedule, none of the Seller's subsidiaries is required to file any form, report
or other document with the SEC. The Seller has made available to the Buyer true
and complete copies of all amendments and modifications that have not been filed
by the Seller with the SEC to all agreements, documents and other instruments
that previously had been filed by the Seller with the SEC and are currently in
effect. Except for normal periodic examinations conducted by a Bank Regulator in
the regular course of the business of the Seller and its subsidiaries, since
January 1, 2001, no Bank Regulator has initiated any proceeding or, to the best
knowledge of the Seller, investigation into the business or operations of the
Seller or any of its subsidiaries. Except as set forth in Section 4.9 of the
Seller Disclosure Schedule, the Seller and its subsidiaries have resolved all
material violations, criticisms or exceptions by any Bank Regulator with respect
to any such normal periodic examination.
4.10 AGREEMENTS WITH GOVERNMENTAL AUTHORITIES. Neither the Seller nor
any of its subsidiaries is a party to any commitment, letter (other than letters
addressed to regulated depository institutions generally), written agreement,
memorandum of understanding, order to cease and desist with, is subject to any
order or directive specifically naming or referring to
(16)
Seller or any of its subsidiaries by, has been required to adopt any board
resolution by, any Governmental Authority which is currently in effect and
restricts materially the conduct of its business, or in any manner relates to
its capital adequacy, loan loss allowances or reserves, credit policies,
management or overall safety and soundness or such entity's ability to perform
its obligations hereunder, and neither the Seller nor any of its subsidiaries
has received written notification from any such Governmental Authority that any
such Person may be requested to enter into, or otherwise be subject to, any such
commitment, letter, written agreement, memorandum of understanding or cease and
desist order. Neither the Seller nor any of its subsidiaries has been informed
by any Governmental Authority that it is contemplating issuing or requesting any
such order, directive, agreement, memorandum of understanding, commitment letter
or similar submission. Except as set forth in Section 4.10 of the Seller
Disclosure Schedule, neither the Seller nor any of its subsidiaries is a party
to any agreement or arrangement entered into in connection with the consummation
of a federally assisted acquisition of a depository institution pursuant to
which the Seller or any of its subsidiaries is entitled to receive financial
assistance or indemnification from any Governmental Authority.
4.11 ABSENCE OF UNDISCLOSED LIABILITIES. Except for those liabilities
that are fully reflected or reserved against on the Seller Balance Sheet and for
liabilities incurred in the ordinary course of business consistent with past
practice or in connection with this Agreement and the transactions contemplated
hereby, since December 31, 2001, neither the Seller nor any of its subsidiaries
has incurred any obligation or liability (contingent or otherwise) that, either
alone or when combined with all similar liabilities, has had, or could
reasonably be expected to have, a Material Adverse Effect on the Seller.
4.12 COMPLIANCE WITH APPLICABLE LAW. Each of the Seller and each
Significant Subsidiary thereof holds all material licenses, franchises, permits
and authorizations necessary for the lawful conduct of its business, and each of
the Seller and each Significant Subsidiary thereof has complied with and is not
in violation of or default in any material respect under any, applicable law,
statute, order, rule, regulation or policy of, or agreement with, any federal,
state or local governmental agency or authority relating to the Seller or such
Significant Subsidiary, other than where such default or noncompliance will not
result in, or create the possibility of resulting in, any Material Adverse
Effect on the Seller or any Significant Subsidiary of the Seller, and neither
the Seller nor any Significant Subsidiary of the Seller has received any notice
of any violation of any such law, statute, order, rule, regulation, policy or
agreement, or commencement of any proceeding in connection with any such
violation, and does not know of any violation of, any such law, statute, order,
rule, regulation, policy or agreement which would have such a result.
4.13 TAXES AND TAX RETURNS. Except as set forth in Section 4.13 of
the Seller Disclosure Schedule:
(a) Except where the failure to do so would not have a
Material Adverse Effect on the Seller Companies as a whole, the Seller and each
of its subsidiaries (referred to for
(17)
purposes of this Section 4.13, collectively, as the "Seller Companies") have,
since December 31, 1995, timely filed in correct form all Tax Returns that were
required to be filed by any of them on or prior to the date hereof (the "Filed
Tax Returns"), and have paid all Taxes shown as being due thereon.
(b) No assessment that has not been settled or otherwise
resolved has been made with respect to Taxes not shown on the Filed Tax Returns,
other than such additional Taxes as are being contested in good faith or which
if determined adversely to the Seller Companies would not have a Material
Adverse Effect on the Seller Companies as a whole. The income Tax Returns of the
Seller Companies have been examined by the IRS or other taxing authority, as
applicable, for all years through 1999 and any liability with respect thereto
has been satisfied. There are no material disputes pending or written claims
asserted for Taxes or assessments upon any Seller Company, nor has any Seller
Company been requested to give any currently effective waivers extending the
statutory period of limitation applicable to any income Tax Return for any
period. No deficiency in Taxes or other proposed adjustment that has not been
settled or otherwise resolved has been asserted in writing by any taxing
authority against any of the Seller Companies, which if determined adversely to
the Seller Companies would have a Material Adverse Effect on the Seller
Companies as a whole. To the best knowledge of the Seller, no material Tax
Return of any of the Seller Companies is now under examination by any applicable
taxing authority. There are no material liens for Taxes (other than current
Taxes not yet due and payable) on any of the assets of any Seller Company,
except for such liens for Taxes that would not have a Material Adverse Effect on
the Seller Companies as a whole.
(c) Adequate provision has been made on the Seller Balance
Sheet for all Taxes of the Seller Companies in respect of all periods through
the date hereof. In addition, (i) proper and accurate amounts have been withheld
by each Seller Company from their respective employees for all prior periods in
compliance in all material respects with the tax withholding provisions of
applicable federal, state, county and local laws; (ii) federal, state, county
and local returns which are accurate and complete in all material respects have
been filed by the Seller Companies for all periods for which returns were due
with respect to income tax withholding, Social Security and unemployment taxes;
and (iii) the amounts shown on such returns to be due and payable have been paid
in full or adequate provision therefor has been included by the Seller in its
consolidated financial statements included in its Annual Report on Form 10-K for
the period ended December 31, 2001, or, with respect to returns filed after the
date hereof, will be so paid or provided for in the consolidated financial
statements of the Seller for the period covered by such returns.
(d) Except with respect to intra-Seller Company agreements
made or required under the federal consolidated tax return regulations, none of
the Seller Companies is a party to or bound by any Tax indemnification, Tax
allocation or Tax sharing agreement with any person or entity or has any current
or potential contractual obligation to indemnify any other person or entity with
respect to Taxes.
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(e) None of the Seller Companies has filed or been included
in a combined, consolidated or unitary income Tax Return (including any
consolidated federal income Tax Return) other than one of which one of the
Seller Companies was the parent.
(f) None of the Seller Companies has made any payment, is
obligated to make any payment, or is a party to any agreement that could
obligate it to make any payment that will not be deductible under Section 162(m)
of the Internal Revenue Code of 1986, as amended ("Code") or Code Section
280G(b)(2).
(g) No property of any Seller Company is property that is or
will be required to be treated as being owned by another person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code (as in effect prior
to its amendment by the Tax Reform Act of 1986) or is "tax exempt use property"
within the meaning of Code Section 168(h). None of the Seller Companies has been
required to include in income any adjustment pursuant to Section 481 of the Code
by reason of a voluntary change in accounting method initiated by any Seller
Company, and the IRS has not initiated or proposed any such adjustment or change
in accounting method.
4.14 LABOR. No work stoppage involving the Seller or any of its
subsidiaries is pending or, to the best knowledge of the Seller's management,
threatened. Neither the Seller nor any of its subsidiaries is involved in, or,
to the best knowledge of the Seller's management, threatened with or affected
by, any dispute, arbitration, lawsuit or administrative proceeding relating to
labor or employment matters which might reasonably be expected to interfere in
any material respect with the respective business activities of the Seller or
any of its subsidiaries. No employees of the Seller or any of its subsidiaries
are represented by any labor union, and, to the best knowledge of the Seller's
management, no labor union is attempting to organize employees of the Seller or
any of its subsidiaries.
4.15 EMPLOYEES.
(a) Except as set forth in Section 4.15(a) of the Seller
Disclosure Schedule, neither the Seller nor any of its subsidiaries maintains or
contributes to any "employee pension benefit plan" (the "Seller Pension Plans"),
as such term is defined in Section 3(2) of ERISA, "employee welfare benefit
plan" (the "Seller Benefit Plans"), as such term is defined in Section 3(1) of
ERISA, stock option plan, stock purchase plan, deferred compensation plan, other
employee benefit plan for employees of the Seller or any of its subsidiaries, or
any other plan, program or arrangement of the same or similar nature that
provides benefits to non-employee directors of the Seller or any of its
subsidiaries (collectively, the "Seller Other Plans").
(b) The Seller shall have made available to the Buyer
complete and accurate copies of each of the following with respect to each of
the Seller Pension Plans, the Seller Benefit Plans and the Seller Other Plans:
(i) plan document and any amendment thereto; (ii) trust agreement or insurance
contract (including any fiduciary liability policy or fidelity
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bond), if any; (iii) most recent IRS determination letter, if any; (iv) most
recent actuarial report, if any; (v) most recent annual report on Form 5500; and
(vi) summary plan description.
(c) Except as set forth in Section 4.15(c) of the Seller
Disclosure Schedule, the current value of the assets of each of the Seller
Pension Plans subject to Title IV of ERISA exceeds that plan's "Benefit
Liabilities" as that term is defined in Section 4001(a)(16) of ERISA, when
determined under actuarial factors that would apply if that plan terminated in
accordance with all applicable legal requirements.
(d) Except as set forth in Section 4.15(d) of the Seller
Disclosure Schedule, to the best knowledge of the Seller, each of the Seller
Pension Plans, each of the Seller Other Plans and each of the Seller Benefit
Plans, which are maintained or contributed to by the Seller, has been
administered in compliance with its terms in all material respects and is in
compliance in all material respects with the applicable provisions of ERISA
(including, but not limited to, the funding and prohibited transactions
provisions thereof), the Code and other applicable laws.
(e) To the best knowledge of the Seller, there has been no
reportable event within the meaning of Section 4043(b) of ERISA or any waived
funding deficiency within the meaning of Section 412(d)(3) (or any predecessor
section) of the Code with respect to any Seller Pension Plan.
(f) To the best knowledge of the Seller, each of the Seller
Pension Plans which is intended to be a qualified plan within the meaning of
Section 401(a) of the Code is so qualified and has received a favorable
determination letter from the IRS that such Plan meets the requirements of
Section 401(a) of the Code and that the trust associated with such Seller
Pension Plan is tax exempt under Section 501(a) of the Code, and the Seller is
not aware of any fact or circumstance which would adversely affect the qualified
status of any such plan.
(g) The Seller has made or provided for all contributions to
the Seller Pension Plans required thereunder.
(h) Except as set forth in Section 4.15(h) of the Seller
Disclosure Schedule, neither the Seller nor any of its subsidiaries is party to
or maintains any contract or other arrangement with any employee or group of
employees, providing severance payments, stock or stock-equivalent payments or
post-employment benefits of any kind or providing that any otherwise disclosed
plan, program or arrangement will irrevocably continue, with respect to any or
all of its participants, for any period of time.
(i) Except as set forth in Section 4.15(i) of the Seller
Disclosure Schedule, neither the Seller nor any of its subsidiaries has ever (i)
maintained any "multiemployer plan" within the meaning of Section 4001(a)(3) of
ERISA, or (ii) provided healthcare or any other non-pension benefits to any
employees after their employment is terminated (other than as required
(20)
by Part 6 of Subtitle B of Title I of ERISA or state health continuation laws)
or has ever promised to provide such post-termination benefits.
(j) No lawsuits, governmental administrative proceedings,
claims (other than routine claims for benefits) or complaints to, or by, any
person or governmental entity have been filed, are pending, or to the best
knowledge of the Seller, threatened with respect to any Seller Pension Plan,
Seller Benefit Plan or Seller Other Plan. There is no material correspondence
between the Seller and any Governmental Authority related to any other Seller
Pension Plan, Seller Benefit Plan or Seller Other Plan.
(k) The Seller has taken all action necessary to correct all
operational defects under its Employee Stock Ownership Plan to the extent
required by the closing agreement with the IRS under the IRS Voluntary
Correction Program.
4.16 CAPITALIZATION. The Seller Bank is "well capitalized" as such
term is defined in the rules and regulations promulgated by the FDIC, and the
Seller would be deemed "well capitalized" as such term is defined in the rules
and regulations promulgated by the Federal Reserve Board if the Seller were a
state-chartered, member bank.
4.17 CRA, ANTI-MONEY LAUNDERING AND CUSTOMER INFORMATION SECURITY.
Neither the Seller nor the Seller Bank is aware of, has been advised of, or has
reason to believe that any facts or circumstances exist which would cause the
Seller Bank: (i) to be deemed not to be in satisfactory compliance in any
material respect with the Community Reinvestment Act of 1977, as amended (the
"CRA"), and the regulations promulgated thereunder, or to be assigned a rating
for CRA purposes by federal or state bank regulators of lower than
"satisfactory;" or (ii) to be deemed to be operating in violation in any
material respect of the federal Bank Secrecy Act, as amended, and its
implementing regulations (31 C.F.R. Part 103), the USA PATRIOT Act of 2001,
Public Law 107-56 (the "USA PATRIOT Act"), and the regulations promulgated
thereunder, any order issued with respect to anti-money laundering by the U.S.
Treasury's Office of Foreign Assets Control, or any other applicable anti-money
laundering statute, rule or regulation; or (iii) to be deemed not to be in
satisfactory compliance in any material respect with the privacy of customer
information requirements contained in any federal and state privacy laws and
regulations, including without limitation, in Title V of the Xxxxx-Xxxxx-Xxxxxx
Act of 1999 and regulations promulgated thereunder, as well as the provisions of
the information security program adopted by the Seller Bank pursuant to 12
C.F.R. Part 364. Furthermore, the Board of Directors of the Seller Bank has
adopted and the Seller Bank has implemented an anti-money laundering program
that meets the requirements in all material respects of Sections 352 and 326 of
the USA PATRIOT Act and the regulations thereunder.
4.18 MATERIAL AGREEMENTS.
(a) Except as set forth in any of the Seller Disclosure
Schedules or the index of exhibits in the Seller's Annual Reports on Forms 10-K
for the years ended December 31,
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2001, 2000, and 1999, and except for this Agreement and the other Transaction
Documents, neither the Seller nor any of its subsidiaries is a party to or is
bound by (i) any agreement, arrangement, or commitment that is material to the
financial condition, results of operations or business of the Seller, except
those entered into in the ordinary course of business; (ii) any written (or
oral, if material) agreement, arrangement, or commitment relating to the
employment, including without limitation, employment as a consultant of any
person or the election or retention in office or severance of any present or
former director or officer of the Seller or any of its subsidiaries; (iii) any
contract, agreement, or understanding with any labor union; (iv) any agreement
by and among the Seller, any subsidiary of the Seller and/or any Affiliate
thereof; (v) any contract or agreement or amendment thereto that would be
required to be filed as an Exhibit to a Form 10-K filed by the Seller as of the
date hereof that has not been filed as an Exhibit to the Form 10-K filed by it
for 2001; (vi) any agreement, arrangement, or commitment (whether written or
oral) which, upon the consummation of the transactions contemplated by this
Agreement or the Bank Merger Agreement, will result in any payment (whether of
severance pay or otherwise) becoming due from the Seller or any of its
subsidiaries to any officer or employee thereof; (vii) any agreement,
arrangement or commitment (whether written or oral) which is a consulting or
other agreement (including agreements entered into in the ordinary course and
data processing, software programming and licensing contracts) not terminable on
sixty (60) days or less notice involving the payment of more than $100,000 per
annum; (viii) any agreement, arrangement or commitment (whether written or oral)
which materially restricts or prohibits the alteration of the conduct of any
line of business by the Seller or any of its subsidiaries or which otherwise
requires that a particular line of business be maintained for purposes of
determining compensation, payment of additional purchase price, and/or the
vesting or issuance of any options, equity or other benefits to any directors,
officers or employees of Seller or other Person; (ix) except for the Seller
Stock Option Plans and the Seller Restricted Share Plans, any agreement,
arrangement or commitment (whether written or oral) (including any stock option
plan, stock appreciation rights plan, restricted stock plan or stock purchase
plan) any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement, or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement; (x) any non-competition agreement or any other agreement or
obligation which purports to limit in any respect, the ability of the Seller or
its businesses to solicit customers or the manner in which, or the localities in
which, all or any substantial portion of the business of the Seller and its
subsidiaries, taken as a whole, or, following consummation of the transactions
contemplated by this Agreement, the Buyer and its subsidiaries, is or would be
conducted; (xi) any agreement providing for the indemnification by the Seller or
a subsidiary of the Seller of any person, other than customary agreements
relating to the indemnity of directors, officers and employees of the Seller or
its subsidiaries; (xii) any agreement that grants any right of first refusal or
right of first offer or similar right or that limits (or purports to limit) the
ability of the Seller or any of its subsidiaries to own, operate, sell,
transfer, pledge or otherwise dispose of any material amount of assets or
business (other than in connection with securitization or financing transactions
or contracts entered into in the ordinary course of business that require that
the
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particular transactions that are the subject thereof to be conducted with the
counterparty or counterparties to the contract); (xiii) any contract or
agreement providing for any material future payments that are conditioned, in
whole or in part, on a change of control of the Seller or any of its
subsidiaries; (xiv) any material agreement pertaining to the use of or granting
any right to use or practice any rights under any Seller Intellectual Property
Assets, whether the Seller or any of its subsidiaries is the licensee or
licensor thereunder; (xv) any investment management or investment advisory or
sub-advisory or any other contract for the provision of financial planning,
brokerage or similar services not terminable on sixty (60) days or less notice;
or (xvi) any obligation, liability, contract or other commitment with respect to
IFG Network Securities, Inc. and/or IFG Advisory Services, Inc. Each contract,
arrangement, commitment or understanding of the type described in this Section
4.18, whether or not set forth in Section 4.18 of the Seller Disclosure
Schedule, is referred to herein as a "Seller Contract." The Seller has
previously delivered to the Buyer true and complete copies of all employment,
consulting and deferred compensation agreements which are in writing and to
which the Seller or any of its subsidiaries is a party, and has made available
to the Buyer true and complete copies of all other Seller Contracts. Except as
set forth on Section 4.18 of the Seller Disclosure Schedule, there are no
provisions in any Seller Contract that provide any restrictions on, or that
require that any financial payment (other than payment of outstanding principal
and accrued principal) be made in the event of, the repayment of the outstanding
indebtedness thereunder prior to its term.
(b) (i) To the best knowledge of the Seller, each Seller
Contract listed on such Seller Disclosure Schedule is legal, valid and binding
upon the Seller or Seller subsidiary, as the case may be, and in full force and
effect, (ii) the Seller and each Seller subsidiary has in all material respects
performed all obligations required to be performed by it to date under each such
Seller Contract, and (iii) no event or condition exists which constitutes or,
after notice or lapse of time or both, would constitute, a material default on
the part of the Seller or any Seller subsidiary under any such Seller Contract.
4.19 PROPERTY AND LEASES.
(a) Each of the Seller and each Seller subsidiary has good
and marketable title to all the real property and all other property owned by it
and included in the Seller Balance Sheet, free and clear of all mortgages,
pledges, liens, security interests, conditional and installment sale agreements,
encumbrances, charges or other claims of third parties of any kind
(collectively, "Liens"), other than (i) Liens that secure liabilities that are
reflected in the Seller Balance Sheet or incurred in the ordinary course of
business after the date of the Seller Balance Sheet, (ii) Liens for current
taxes and assessments not yet past due or which are being contested in good
faith, (iii) inchoate mechanics' and materialmen's Liens for construction in
progress, (iv) workmen's, repairmen's, warehousemen's and carriers' Liens
arising in the ordinary course of business of the Seller or any of its
subsidiaries consistent with past practice, (v) all matters of record, Liens and
other imperfections of title and encumbrances which, either individually or in
the aggregate, would not be material, and (vi) those items that secure public or
statutory obligations or any discount with, borrowing from, or obligations to
any Federal Reserve Bank or
(23)
Federal Home Loan Bank, interbank credit facilities, or any transaction by any
Seller subsidiary acting in a fiduciary capacity.
(b) Each lease of real property leased for the use or
benefit of the Seller or any of its subsidiaries to which any of the foregoing
is a party requiring rental payments in excess of $1,000,000 during the period
of the lease, and all amendments and modifications thereto, is in full force and
effect, and there exists no material default under any such lease by the Seller
or any of its subsidiaries nor, to the best knowledge of the Seller, any event
which with notice or lapse of time or both would constitute a material default
thereunder by the Seller or any other Seller subsidiaries, except for such
defaults which, individually, or in the aggregate, would not result in the
forfeiture of the use or occupancy of the property covered by such lease or in a
material liability to the Seller.
4.20 LOAN PORTFOLIO.
(a) To the best knowledge of the Seller, all of the written
or oral loan agreements, notes or borrowing arrangements (including without
limitation leases, credit enhancements, commitments, guarantees and
interest-bearing assets) with respect to loans in excess of $500,000 in original
principal amount (collectively, "Loans") originated and held currently and at
the Effective Time by the Seller or any of its subsidiaries, and any other Loans
purchased and held currently and at the Effective Time by the Seller or any of
its subsidiaries, were solicited, originated and exist, and will exist at the
Effective Time, in material compliance with all applicable loan policies and
procedures of the Seller or such subsidiary. The information (including
electronic information and information contained on tapes and computer disks)
with respect to all loans of the Seller and its subsidiaries furnished to the
Buyer by the Seller is, as of the respective dates indicated therein, true and
complete in all material respects. To the best knowledge of the Seller, all
loans originated, directly or through third party mortgage brokers, have been
originated in material compliance with all federal, state and local laws,
including without limitation, the Real Estate Settlement Procedures Act of 1974,
as amended.
(b) Section 4.20(b) of the Seller Disclosure Schedule sets
forth the aggregate outstanding principal amount, as of August 31, 2002, of all
non-accrual Loans. As of August 31, 2002, the Seller and its subsidiaries, taken
as a whole, did not have outstanding Loans and assets classified as OREO with an
aggregate then outstanding, fully committed principal amount in excess of
$500,000, net of specific reserves with respect to such Loans and assets, that
were designated by the Seller as "special mention," "substandard," "doubtful,"
"loss" or words of similar import ("Criticized Assets"). Section 4.20(b) of the
Seller Disclosure Schedule sets forth (y) a summary of Criticized Assets as of
August 31, 2002, by category of Loan (e.g., commercial and consumer), together
with the aggregate principal amount of such Loans by category and (z) each asset
of the Seller that, as of August 31, 2002, is classified.
4.21 INVESTMENT SECURITIES. Except for pledges to secure public and
trust deposits, borrowings, including without limitation, repurchase agreements
and reverse repurchase
(24)
agreements, entered into in arms'-length transactions pursuant to normal
commercial terms and conditions and other pledges required by law, none of the
investments reflected in the consolidated balance sheet of the Seller and its
subsidiaries included in its Annual Report on Form 10-K for the period ended
December 31, 2001, and none of the material investments made by the Seller or
any of its subsidiaries since December 31, 2001, is subject to any restriction
(contractual, statutory or otherwise) that would materially impair the ability
of the entity holding such investment freely to dispose of such investment at
any time.
4.22 DERIVATIVE TRANSACTIONS. Neither the Seller nor any or its
subsidiaries is engaged in transactions in or involving forwards, futures,
options on futures, swaps or similar derivative instruments except as agent on
the order and for the account of others other than Federal Home Loan Bank
advances in the ordinary course of business consistent with the Seller Bank's
past practices.
4.23 INSURANCE. Section 4.23(a) of the Seller Disclosure Schedule
sets forth a summary of all material policies of insurance of the Seller and its
subsidiaries currently in effect, which summary is accurate and complete in all
material respects. All of the policies relating to insurance maintained by the
Seller or any of its subsidiaries with respect to its material properties and
the conduct of its business in any material respect (or any comparable policies
entered into as a replacement therefor) are in full force and effect and,
neither the Seller nor any of its subsidiaries has received any notice of
cancellation with respect thereto. Except as set forth in Section 4.23(b) of the
Seller Disclosure Schedule, all life insurance policies on the lives of any of
the current and former officers and directors of the Seller or any of its
subsidiaries which are maintained by the Seller or any such subsidiary which are
otherwise included as assets on the books of the Seller or such subsidiary (i)
are, or will at the Effective Time be, owned by the Seller or such subsidiary,
as the case may be, free and clear of any claims thereon by the officers or
members of their families, except with respect to the death benefits thereunder,
as to which the Seller or such subsidiary agree that there will not be an
amendment prior to the Effective Time without the consent of the Buyer, and (ii)
are accounted for properly as assets on the books of the Seller or such
subsidiary in accordance with GAAP in all material respects.
4.24 ENVIRONMENTAL MATTERS.
(a) Except as set forth in the Environment reports, each of
the Seller and its subsidiaries and each property owned by any of them (the
"Owned Property") and, to the best knowledge of the Seller, each Loan Property,
is, and has been, in material compliance with all applicable environmental laws
and with all rules, regulations, standards and requirements of the United States
Environmental Protection Agency and of state and local agencies with
jurisdiction over pollution or protection of the environment, except in each
case as have not been or would not be material.
(b) There is no suit, claim, action or proceeding pending
or, to the best knowledge of the Seller, threatened, before any Governmental
Authority or other forum in which
(25)
the Seller, any of its subsidiaries, or any Owned Property has been or, with
respect to threatened proceedings, may be, named as a defendant, responsible
party or potentially responsible party (i) for alleged noncompliance (including
by any predecessor), with any environmental law, rule, regulation, standard or
requirement or (ii) relating to the release into or presence in the Environment
of any Hazardous Materials or Oil occurring at or on a site owned, leased or
operated by the Seller or any of its subsidiaries, except in each case as have
not been or would not be material.
(c) To the best knowledge of Seller, there is no suit,
claim, action or proceeding pending or threatened, before any Governmental
Authority or other forum in which any Loan Property has been or, with respect to
threatened proceedings, may be, named as a defendant, responsible party or
potentially responsible party (i) for alleged noncompliance (including by any
predecessor) with any environmental law, rule, regulation, standard or
requirement or (ii) relating to the release into or presence in the Environment
of any Hazardous Material or Oil whether or not occurring at or on a site owned,
leased or operated by a Loan Property, except in each case as have not been or
would not be material.
(d) Except as set forth in Section 4.24(d) of the Seller
Disclosure Schedule, neither the Seller nor any of its subsidiaries, nor to
their best knowledge any Loan Property, has received any written notice
regarding a matter on which a suit, claim, action or proceeding as described in
subsection (b) or (c) of this Section 4.24 could reasonably be based, except in
each case as have not been or would not be material. No facts or circumstances
have come to the Seller's attention which have caused it to believe that a
material suit, claim, action or proceeding as described in subsection (b) or (c)
of this Section 4.24 could reasonably be expected to occur.
(e) During the period of (i) the Seller's or any of its
subsidiaries' ownership or operation of any of their respective current
properties or (ii) the Seller's or any of its subsidiaries' holding of a
security interest in a Loan Property, to the best knowledge of Seller, there has
been no release or presence of Hazardous Material or Oil in, on, under or
affecting such property or Loan Property, except where such release or presence
is not or would not, either individually or in the aggregate, be material. To
the best knowledge of the Seller, prior to the period of (y) the Seller's or any
of its subsidiaries' ownership or operation of any of their respective current
properties or any previously owned or operated properties, or (z) the Seller's
or any of its subsidiaries' holding of a security interest in a Loan Property,
there was no release or presence of Hazardous Material or Oil in, on, under or
affecting any such property or Loan Property, except where such release or
presence is not or would not, either individually or in the aggregate, be
material.
(f) Neither Seller nor any of its subsidiaries is an owner
or operator of any Loan Property and there are no facilities in which the Seller
or any of its subsidiaries participates or has participated in the management,
and to the extent applicable, the owner or operator of such property.
(26)
(g) The following definitions apply for purposes of this
Section 4.24: (i) "Loan Property" means any property in which the Seller or any
of its subsidiaries holds a security interest, and, where required by the
context (as a result of foreclosure), said term means the owner or operator of
such property; (ii) "Hazardous Material" means any pollutant, contaminant, or
hazardous substance or hazardous material as defined in or pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Section 9601 et seq., or any other federal, state, or local environmental law,
regulation, or requirement; (iii) "Oil" means oil or petroleum of any kind or
origin or in any form, as defined in or pursuant to the Federal Clean Water Act,
33 U.S.C. Section 1251 et seq., or any other federal, state, or local
environmental law, regulation, or requirement; and (iv) "Environment" means any
soil, surface waters, groundwaters, stream sediments, surface or subsurface
strata, and ambient air, and any other environmental medium.
4.25 ADMINISTRATION OF ACCOUNTS. Each of the Seller and any of its
subsidiaries has properly administered in all material respects all accounts for
which it acts as a fiduciary, including, but not limited to, accounts for which
it serves as a trustee, agent, custodian, personal representative, guardian,
conservator or investment adviser, in accordance with the terms of the governing
documents and applicable law. The accountings for each such fiduciary account
are true and correct in all material respects and accurately reflect the assets
of each such fiduciary account.
4.26 INVESTMENT MANAGEMENT AND RELATED ACTIVITIES. (a) Except as set
forth in Section 4.26(a) of the Seller Disclosure Schedule, none of the Seller,
any of its subsidiaries or the Seller's or its subsidiaries' directors, officers
or employees is required to be registered, licensed or authorized as an
investment adviser, a broker, dealer, an insurance agency or company, a
commodity trading adviser, a commodity pool operator, a futures commission
merchant, an introducing broker, a registered representative or associated
person, investment adviser, representative or solicitor, a counseling officer,
an insurance agent, a sales person or in any similar capacity with a
Governmental Authority.
(b) With respect to Tyler, Tyler, and each director, officer
and employee of Tyler, is duly registered, licensed and qualified as an
investment adviser or investment adviser representative or solicitor, as the
case may be, or has provided appropriate notice to the relevant Governmental
Authority, and is otherwise in material compliance with all applicable federal
and state securities laws, in all jurisdictions where such registration,
licensing, qualification or notice is required in order to conduct its business,
except in each case where the failure to be so registered, licensed or qualified
would not, individually or in the aggregate, result in a Material Adverse Effect
on Tyler.
4.27 STATE TAKEOVER LAWS. The Board of Directors of the Seller has
approved this Agreement and the Bank Merger Agreement and taken all other
requisite action such that the provisions of Sections 2561 through 2567,
inclusive, of the PBCL and the provisions of the Seller's Articles of
Incorporation relating to special voting requirements for certain business
(27)
combinations will not apply to this Agreement or any of the other Transaction
Documents or any of the other transactions contemplated hereby or thereby.
4.28 PROXY STATEMENT; SELLER INFORMATION. The information relating to
the Seller and its subsidiaries to be contained in the Seller Proxy Statement as
described in Section 6.1 hereof, and any other documents filed with the SEC in
connection herewith, will not, on the date the Seller Proxy Statement is first
mailed to stockholders of the Seller or at the time of the Seller Stockholders
Meeting, contain any statement which is false or misleading with respect to any
material fact, or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not false or misleading at
the time and in light of the circumstances under which such statement is made.
The Seller Proxy Statement will comply in all material respects as to form with
the requirements of the Exchange Act and the rules and regulations thereunder.
4.29 DEPOSIT/LOAN AGREEMENTS. The deposit and loan agreements of the
Seller Bank comply in all material respects with all applicable laws, rules and
regulations.
4.30 DISCIPLINARY PROCEEDINGS. Neither the Seller nor any of its
subsidiaries nor any of their respective current or former directors, officers
or employees has been the subject of any disciplinary proceedings or orders of
any Governmental Authority arising under applicable laws or regulations which
would be required to be disclosed in any regulatory report, schedule, form,
registration or other document, together with any amendments required to be made
with respect thereto, that it or any of them were required to file since January
1, 1999 with any Governmental Authority except as disclosed therein, and no such
disciplinary proceeding or order is pending, nor to the best knowledge of the
Seller, threatened.
4.31 INTELLECTUAL PROPERTY. The Seller and each subsidiary of the
Seller owns or possesses valid and binding licenses and other rights to use
without payment of any material amount all material patents, copyrights, trade
secrets, trade names, service marks and trademarks used in its businesses
("Seller Intellectual Property Assets"), and none of the Seller or any of its
subsidiaries has received any notice of conflict with respect thereto.
4.32 DISCLOSURE. No representation or warranty contained in this
Agreement, and no statement contained in any certificate, list or other writing,
including but not necessarily limited to the Seller Disclosure Schedule,
furnished to the Buyer pursuant to the provisions hereof, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements herein or therein not
misleading.
ARTICLE V - COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME. During the
period from the date of this Agreement to the Effective Time, except as
expressly contemplated or permitted by this Agreement or the Bank Merger
Agreement, the Seller shall, and shall cause each of its
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subsidiaries to, (a) conduct its business in the usual, regular and ordinary
course consistent with past practice, (b) use reasonable best efforts to
maintain and preserve intact its business organization, employees and
advantageous business relationships and retain the services of its officers and
key employees, including without limitation, implementing a retention program in
furtherance thereof, which program shall be proposed by the Buyer after
consultation with the Seller; provided, that if the Merger shall not be
consummated, the Buyer shall reimburse the Seller for the cost of any retention
bonuses paid to or earned by the employees prior thereto pursuant to such
program, and (c) take no action which would materially adversely affect or
materially delay the ability of the Seller to obtain any necessary approvals of
any Governmental Authority required for the transactions contemplated hereby or
to perform its covenants and agreements under this Agreement or the Bank Merger
Agreement.
5.2 SELLER FORBEARANCES. During the period from the date of this
Agreement to the Effective Time, except as set forth in Section 5.2 of the
Seller Disclosure Schedule and, except as expressly contemplated or permitted by
this Agreement or the Bank Merger Agreement (and the Buyer acknowledges that any
action taken by the Seller or any of its subsidiaries prior to the Effective
Time which is expressly permitted or required by this Agreement shall not be
deemed a breach of any representation, warranty, agreement or covenant herein),
the Seller shall not, and the Seller shall not permit any of its subsidiaries
to, without the prior written consent of the Buyer, which, except for Section
5.2(b) hereof, consent shall not be unreasonably withheld or delayed:
(a) other than in the ordinary course of business consistent
with past practice, issue any debt securities or otherwise incur any
indebtedness for borrowed money (other than short-term indebtedness incurred to
refinance short-term indebtedness and indebtedness of the Seller or any of its
subsidiaries to the Seller or any of its subsidiaries; it being understood and
agreed that incurrence of indebtedness in the ordinary course of business shall
include, without limitation, the creation of deposit liabilities, Federal Home
Loan Bank borrowings, purchases of federal funds, sales of certificates of
deposit and entering into repurchase agreements), assume, guarantee, endorse or
otherwise as an accommodation become responsible for the obligations of any
other individual, corporation or other entity, or make any loans, advances or
renewals thereof in excess of $500,000;
(b) adjust, split, combine or reclassify any shares of its
capital stock or issue any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, make, declare or pay any dividend
or make any other distribution on, whether payable in cash, stock, property or
otherwise, or directly or indirectly redeem, purchase or otherwise acquire, any
shares of its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, or grant any stock
appreciation rights, restricted stock, bonus stock or grant any individual,
corporation or other entity any right to acquire any shares or its capital stock
(except (i) Seller shall be entitled to pay the cash dividend of $0.17 per share
of Seller Common Stock previously declared on September 10, 2002 and to be paid
on October 11, 2002, (ii) in the event that the Closing has not occurred on or
prior to February 15, 2003, the Seller
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shall be entitled to declare one or more dividends prior to the Effective Time
to holders of record of Seller Common Stock in an amount equal to $0.17 per
share for each full calendar quarter after September 30, 2002 and prior to the
Effective Time and (iii) dividends paid by any of the wholly owned subsidiaries
of the Seller to the Seller or any of its wholly-owned subsidiaries); or issue,
sell pledge or encumber any additional shares of capital stock or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest, except up to a
maximum of 1,516,786 shares of Seller Common Stock pursuant to the exercise of
stock options outstanding as of the date of this Agreement;
(c) sell, transfer, mortgage, encumber or otherwise dispose
of any of its properties or assets to any individual, corporation or other
entity other than a direct or indirect wholly-owned subsidiary, or cancel,
release or assign any indebtedness to any such person or any claims held by any
such person, except in each case contemplated by this clause (c) in the ordinary
course of business consistent with past practice or pursuant to contracts or
agreements in force at the date of this Agreement;
(d) except for transactions in the ordinary course of
business consistent with past practice, including without limitation,
acquisitions in satisfaction of debts previously contracted, make any material
investment either by purchase of stock or securities, contributions to capital,
property transfers, or purchase of any property or assets of any other
individual, corporation or other entity other than a wholly-owned subsidiary
thereof, or commitment to make such an investment, and, in any event regardless
of whether consistent with past practice, make any such investment or commitment
to make such an investment which is in excess of $1,000,000; provided, however,
that the terms of this Section 5.2(d) shall not apply to the Seller's investment
securities portfolio or gap position, each of which is expressly covered by
Section 5.2(i) hereof;
(e) except for transactions in the ordinary course of
business consistent with past practice or as required by applicable law or
regulation, enter into, terminate or renew any material contract or agreement,
or make any change in any Seller Contract or of its other material contracts;
(f) (i) adopt, amend, renew or terminate any plan or any
agreement, arrangement or plan between the Seller or any of its subsidiaries and
one or more of its current or former directors, officers or employees; (ii)
enter into, modify or renew any employment, severance or other agreement with
any director, officer or employee of the Seller or any of its subsidiaries;
(iii) establish, adopt, enter into or amend any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund policy or arrangement providing for any benefit to
any director, officer or employee; or (iv) increase in any manner the
compensation or fringe benefits of any of its employees or pay any pension or
retirement allowance not required by any existing plan or agreement to any such
employees or become a party to, amend or commit itself to any pension,
retirement, profit-sharing or welfare
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benefit plan or agreement or employment agreement with or for the benefit of any
employee, in all cases contemplated by clauses (i), (ii), (iii) or (iv), other
than in the ordinary course of business consistent with past practice; provided,
that, notwithstanding anything to the contrary set forth in this Agreement,
prior to the Closing Date, the Seller (x) shall be permitted to grant salary
increases to any Seller Employee who has a title of Executive Vice President or
higher in an aggregate amount not to exceed three and one-half percent (3 1/2%)
of the current annualized base salaries of such Seller Employees or constitute
more than a ten percent (10%) increase with respect to any one such Seller
Employee, (y) shall not be permitted to grant salary increases to any other
Seller Employee, and (z) shall be permitted to pay bonuses to Seller Employees
(A) with respect to the year ended December 31, 2002 in the ordinary course of
business consistent with current accruals and past practices; provided that the
Seller may, in its discretion, pay such bonuses in December 2002, and (B) in the
event that the Closing has not occurred on or prior to March 31, 2003, shall be
permitted to pay bonuses to Seller Employees with respect to that portion of the
2003 calendar year completed consistent with the Seller's rates of accruals for
the 2002 calendar year; provided that the Seller fully accrues for such bonuses;
(g) settle any claim, action or proceeding, except in the
ordinary course of business consistent with past practice;
(h) amend its Articles of Incorporation, its By-Laws or
adopt any resolution granting Dissenters Rights;
(i) other than after prior consultation with the Buyer, or
in the ordinary course of business, restructure or materially change its
investment securities portfolio or its gap position, through purchases, sales or
otherwise, or the manner in which the portfolio is classified or reported;
(j) enter into any new line of business or file any
application to relocate or terminate the operations of any banking office of the
Seller or any of its subsidiaries or, other than after prior consultation with
Buyer, materially expand the business currently conducted by the Seller and its
subsidiaries;
(k) acquire or agree to acquire, by merging or consolidating
with, or by purchasing an equity interest in or a portion of the assets of, or
by any other manner, any business or any corporation, partnership, Joint
Venture, other business organization or any division thereof or any material
amount of assets other than OREO and other assets acquired in satisfaction of
debts previously contracted;
(l) incur or commit to any capital expenditures or any
obligations or liabilities in connection therewith other than in the ordinary
and usual course of business consistent with past practice, and in all cases the
Seller agrees to obtain the consent of the Buyer with respect to any capital
expenditures that individually exceed $50,000 or cumulatively exceed $250,000;
(31)
(m) make or change any material Tax election, file any
material amended Tax Return, enter into any material closing agreement, settle
or compromise any material liability with respect to Taxes, agree to any
material adjustment of any Tax attribute, file any claim for a material refund
of Taxes, or consent to any extension or waiver of the limitation period
applicable to any material Tax claim or assessment; provided, that, for purposes
of this subparagraph (m), "material" shall mean affecting or relating to
$5,000,000 of taxable income;
(n) take any action with respect to accounting methods,
principles or practices, other than changes required by applicable law or GAAP
or regulatory accounting as concurred in by the Seller's independent accountants
or make any tax election or settle or compromise any federal, state, local or
foreign tax liability;
(o) make any new or additional equity investment in real
estate or commitment to make any such an investment or in any real estate
development project, other than in connection with foreclosures, settlements in
lieu of foreclosure or troubled loan or debt restructurings in the ordinary
course of business consistent with past practice and as required by agreements
or instruments in effect as of the date hereof;
(p) change in any material respect its loan or investment
policies and procedures, except as required by regulatory authorities or
applicable law;
(q) enter into or renew, amend or terminate, or give notice
of a proposed renewal, amendment or termination of or make any commitment with
respect to, (i) any lease, contract, agreement or commitment for office space,
operations space or branch space, regardless of where located or to be located,
to which the Seller or any of its subsidiaries is, or may be, a party or by
which the Seller or any of its subsidiaries or their respective properties is
bound; or (ii) regardless of whether consistent with past practices, any lease,
contract, agreement or commitment involving an aggregate payment by or to the
Seller or any of its subsidiaries of more than $200,000 or having a term of one
(1) year or more from the date of execution;
(r) commit any act or omission which constitutes a material
breach or default by the Seller or any of its subsidiaries under any agreement
with any Governmental Authority or under any material contract or material
license to which any of them is a party or by which any of them or their
respective properties is bound;
(s) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, or in any of the conditions to the Merger set forth
in Article VII not being satisfied or in a violation of any provision of this
Agreement, except, in every case, as may be required by applicable law;
(t) foreclose on or take a deed or title to any commercial
real estate without first conducting a Phase I environmental assessment of the
property or foreclose on any
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commercial real estate if such environmental assessment indicates the presence
of Hazardous Material or Oil in amounts which, if such foreclosure were to
occur, would be material; or
(u) authorize or agree to, or make any commitment to, take
any of the actions prohibited by this Section 5.2.
5.3 BUYER FORBEARANCES. During the period from the date of this
Agreement to the Effective Time, except as expressly contemplated or permitted
by this Agreement, the Buyer and its Affiliates shall not, and the Buyer shall
not permit any of its subsidiaries to, without the prior written consent of the
Seller, which consent shall not be unreasonably withheld or delayed:
(a) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, or in any of the conditions of the Merger set forth
in Article VII of this Agreement not being satisfied or in a violation of any
provision of this Agreement;
(b) take any action that is intended or may reasonably be
expected to materially adversely affect or, materially delay its ability to
obtain any necessary approvals of any Governmental Authority required for the
transactions contemplated hereby or to perform its covenants and agreements
under this Agreement; or
(c) agree to, or make any commitment to, take any of the
actions prohibited by this Section 5.3.
5.4 SYSTEM CONVERSIONS. From and after the date hereof, the Buyer
and the Seller shall meet on a regular basis to discuss how to cooperate and
plan for the conversion of the Seller's and its subsidiaries' data processing
and related electronic informational systems to those used by the Buyer and its
subsidiaries. This planning shall include, but not be limited to, discussion of
Seller's third-party service provider arrangements, non-renewal of personal
property leases and software licenses used by the Seller or any of its
subsidiaries in connection with its systems operations, retention of outside
consultants and additional employees to assist with the conversion, and
outsourcing, as appropriate, of proprietary or self-provided system services, it
being understood that the Seller shall not be obligated to take any such action
prior to the Effective Time and, unless the Seller otherwise agrees, no
conversion shall take place prior to the Effective Time. In the event that the
Seller or any of its subsidiaries takes, at the request of the Buyer, any action
relative to third parties to facilitate the conversion that results in the
imposition of any termination fees, expenses or charges, the Buyer shall
indemnify the Seller and its subsidiaries for any such fees, expenses and
charges, and the cost of reversing the conversion process, if for any reason the
Merger is not consummated in accordance with the terms of this Agreement.
(33)
5.5 CERTAIN CHANGES AND ADJUSTMENTS. Prior to the Closing, the
Seller and its subsidiaries shall modify or change its loan, OREO, accrual,
reserve, tax, litigation and real estate valuation policies and practices
(including loan classifications and levels of reserves) so as to be applied on a
basis that is consistent with that of the Buyer; provided, however, that neither
the Seller nor any of its subsidiaries shall be obligated to take any action
pursuant to this Section 5.5 which is inconsistent with GAAP, the rules and
regulations of the SEC and applicable banking laws and regulations, or to which
the Seller's independent auditors object and, in any event, unless and until the
Buyer acknowledges, and the Seller and its subsidiaries are satisfied, that all
conditions to either party's obligation to consummate the Merger have been
satisfied and that the Buyer shall consummate the Merger in accordance with the
terms of this Agreement. No action taken by the Seller or any of its
subsidiaries pursuant to this Section 5.5 or the consequences resulting
therefrom shall be deemed to be a breach of any representation, warranty,
agreement or covenant herein or constitute a Material Adverse Effect. In the
event that the Seller or any of its subsidiaries takes, at the request of the
Buyer, any action pursuant to this Section 5.5, the Buyer shall indemnify the
Seller and its subsidiaries for any fees, expenses and charges, and the costs of
reversing the action taken, if for any reason the Merger is not consummated in
accordance with the terms of this Agreement.
5.6 BRANCHES. Except as set forth in Section 5.6 of the Seller
Disclosure Schedule, the Buyer and the Seller shall consult and cooperate with
each other concerning the alignment of the Buyer's and the Seller Bank's
branches following the Effective Time, and the Seller shall, if requested by the
Buyer, cooperate with the Buyer to cause the Seller Bank to prepare and file, or
to assist with the preparation and filing, of applications and other notices
with all appropriate Governmental Authorities that may be necessary to close or
consolidate such branches concurrently with or after the Merger; provided that
no such application or notice may be filed earlier than two (2) weeks prior to
the date of the Seller Stockholders Meeting. If for any reason the Merger is not
consummated in accordance with the terms of this Agreement, the Buyer shall
reimburse the Seller and its subsidiaries for any fees or expenses incurred in
connection with the preparation and filing of such applications at the request
of the Buyer.
5.7 SERVICING. If requested by the Buyer, the Seller shall, and
shall cause certain of its subsidiaries to, provide notices of termination with
respect to certain servicing arrangements of the Seller or its subsidiaries
existing as of the date hereof; provided, however, that, if for any reason the
Merger is not consummated in accordance with the terms of this Agreement, the
Buyer shall indemnify the Seller and its subsidiaries for any fees, expenses,
charges, and the costs of reversing the action taken or entering into a new
servicing agreement on terms substantially similar to the servicing arrangements
so terminated pursuant to this Section 5.7.
5.8 PURCHASER PRODUCTS AND SERVICES. From and after the date of this
Agreement, the Buyer and the Seller shall consult with each other on the
introduction of products and services not currently offered by the Seller Bank
which the Buyer would expect to make available to customers following the
Effective Time; provided, however, that nothing herein shall obligate the Seller
to offer any such products or services prior to the Effective Time.
(34)
5.9 ALCO MANAGEMENT. The Seller and the Seller Bank agree to manage
their assets and liabilities in accordance with Seller's asset and liability
management policy as in effect on the date hereof, unless otherwise agreed by
the parties. Neither the Seller nor the Seller Bank shall amend or modify such
policy without the express written consent of the Buyer. The Seller and the
Buyer agree to consult on investment programs to be administered by the Seller
Bank.
5.10 DEPOSIT INCENTIVE PLAN. The Seller agrees that it will consult
and cooperate with the Buyer in the development and implementation of policies
and programs to retain and grow deposits and, following the execution and
delivery of this Agreement, the Seller and the Buyer shall adopt and implement a
deposit incentive plan for management and branch staff of the Seller and the
Seller Bank ("Deposit Incentive Plan") on such terms and conditions as may be
mutually agreed upon by the Seller and the Buyer and set forth in the Deposit
Incentive Plan, it being understood that any payments to be made under the
Deposit Incentive Plan shall be paid by the Buyer and not until after the system
conversion. The Seller further agrees that the Deposit Incentive Plan shall
include, among other things, deposit pricing, product structure and other
initiatives designed to incent management and branch staff to increase the
deposits held by the Seller and the Seller Bank through the period of the system
conversion.
ARTICLE VI - ADDITIONAL AGREEMENTS
6.1 REGULATORY MATTERS; CONSENTS.
(a) The Seller will, as promptly as practicable, take all
steps necessary to duly call, give notice of, convene and hold a meeting of its
stockholders (the "Seller Stockholders Meeting") to be held as soon as possible
following clearance by the SEC of the Seller Proxy Statement, for the purpose of
approving this Agreement and the Merger.
(b) The Seller's Board of Directors has adopted a resolution
recommending approval and adoption of this Agreement and the Merger by the
Seller's stockholders, and except as provided in Section 6.2 hereof, the Board
of Directors of the Seller shall at all times recommend approval and adoption of
this Agreement and the Merger by the Seller's stockholders.
(c) As soon as practicable after the date hereof, and
(assuming compliance by the Buyer with the terms of this Agreement) in any event
within four (4) weeks after the date of this Agreement, the Seller shall prepare
and file the Seller Proxy Statement and shall use its reasonable best efforts to
have the Seller Proxy Statement cleared by the SEC. The Buyer and the Seller
shall cooperate with each other in the preparation of the Seller Proxy Statement
and the Seller shall notify the Buyer promptly of the receipt of any comments of
the SEC with respect to the Seller Proxy Statement and of any requests by the
SEC for any amendment or supplement thereto or for additional information and
shall provide to the Buyer promptly copies of all correspondence between the
Seller or any representative of the Seller and the SEC. The Seller
(35)
shall give the Buyer and its counsel the opportunity to review and discuss the
Seller Proxy Statement prior to its being filed with the SEC and shall give the
Buyer and its counsel the opportunity to review and discuss all amendments and
supplements to the Seller Proxy Statement and all responses to requests for
additional information and replies to comments prior to their being filed with,
or sent to, the SEC. Each of the Buyer and the Seller agrees to use its
reasonable best efforts, after consultation with the other party hereto, to
respond promptly to all such comments of and requests by the SEC and to cause
the Seller Proxy Statement and all required amendments and supplements thereto
to be mailed to the holders of Seller Common Stock entitled to vote at the
Seller Stockholders Meeting referred to in Section 6.1(a) hereof at the earliest
practicable time (but in no event later than two (2) weeks after clearance by
the SEC).
(d) The parties hereto shall cooperate with each other and
use their reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Authorities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including, without limitation, the Merger and the Bank Merger), and
to comply with the terms and conditions of all such permits, consents, approvals
and authorizations of all such Governmental Authorities. The Buyer and the
Seller shall have the right to review in advance, and, to the extent
practicable, each will consult the other on, in each case subject to applicable
laws relating to the exchange of information, all the information relating to
the Buyer or the Seller, as the case may be, and any of their respective
subsidiaries, which appear in any filing made with, or written materials
submitted to, any third party or any Governmental Authority in connection with
the transactions contemplated by this Agreement. In exercising the foregoing
right, each of the parties hereto shall act reasonably and as promptly as
practicable. The parties hereto agree that they will consult with each other
with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Authorities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein.
(e) The Buyer and the Seller shall, upon request, furnish
each other with all information concerning themselves, their subsidiaries,
directors or trustees, as applicable, officers and stockholders and such other
matters as may be reasonably necessary or advisable in connection with the
Seller Proxy Statement or any other statement, filing, notice or application
made by or on behalf of any Affiliate of the Buyer, the Buyer or the Seller or
any of their respective subsidiaries to any Governmental Authority in connection
with the Merger, the Bank Merger and the other transactions contemplated by this
Agreement.
(f) The Buyer and the Seller shall promptly advise each
other upon receiving (and the Buyer shall so advise with respect to
communications received by any Affiliate of the Buyer) any communication from
any Governmental Authority or third party whose consent or approval is required
for consummation of the transactions contemplated by this Agreement that causes
such party to believe that there is a reasonable likelihood that any Requisite
Regulatory
(36)
Approval or third party consent will not be obtained or that the receipt of any
such approval will be materially delayed.
6.2 NO SOLICITATION. Seller agrees that, during the term of this
Agreement, it shall not, and shall not authorize or permit any of its
subsidiaries or any of its or its subsidiaries' directors, officers, employees,
agents or representatives (collectively, its "Agents") to, directly or
indirectly, solicit, initiate, knowingly encourage or take any action to
facilitate, or furnish or disclose nonpublic information in furtherance of, any
inquiries or the making of any offer or proposal regarding, or participate in
any discussions or negotiations with, or provide any information to, any Person
(other than the Buyer and its Affiliates or representatives) concerning any
Acquisition Transaction or enter into any definitive agreement, arrangement or
understanding for any Acquisition Transaction or requiring it to abandon,
terminate or fail to consummate the Merger or any other transactions
contemplated by this Agreement; provided, that the Seller or its Agents may
furnish or cause to be furnished information to, and negotiate or otherwise
engage in discussions with, any individual or entity that delivers a written
proposal for an Acquisition Transaction that was not solicited, knowingly
encouraged or facilitated by the Seller or any of its Agents after the date of
this Agreement if and so long as (a) the Board of Directors of the Seller
determines (i) in good faith by a majority vote, after consultation with its
outside legal counsel, that failing to take such action would be inconsistent
with its fiduciary duties under applicable laws and (ii) that such a proposal is
or would be reasonably likely to result in a Superior Proposal and (b) prior to
furnishing any information to such individual or entity, Seller shall enter into
a confidentiality agreement with such individual or entity that is no less
restrictive, in any material respect, than the Confidentiality Agreement dated
September 16, 2002 by and between Parent and Seller ("Confidentiality
Agreement"), and Seller shall enforce, and shall not waive any of the provisions
of any such confidentiality agreement. The Board of Directors of the Seller
shall be permitted to withdraw, modify or change in a manner adverse to the
Buyer (or not to continue to make) its recommendation to the Seller's
stockholders required under Section 6.1(b) hereof and/or to comply with Rule
14e-2 under the Exchange Act with respect to an Acquisition Transaction if, but
only if, (x) after consultation with the Seller's outside legal counsel, the
Board of Directors of the Seller determines that failing to take such action, in
response to an unsolicited bona fide written Superior Proposal, would be
inconsistent with the fiduciary duties of the Board of Directors of the Seller
under applicable law, (y) the Seller has given the Buyer five (5) business days'
prior written notice of its intention to do so and the Seller's Board of
Directors has considered any changes to this Agreement (if any) proposed by the
Buyer and has determined, after consultation with the Seller's outside legal
counsel and after consultation with a financial advisor of nationally recognized
reputation, that such unsolicited proposal remains a Superior Proposal, and (z)
the Seller has complied in all material respects with this Section 6.2
(provided, that the foregoing shall in no way limit or otherwise affect Buyer's
right to terminate this Agreement pursuant to Section 8.1(f)) hereof. To the
extent permitted by applicable law, any such withdrawal, modification or change
of the recommendation of the Board of Directors of the Seller shall not change
the approval of the Board of Directors of the Seller for purposes of causing any
state takeover statute or other state
(37)
law to be inapplicable to the transactions contemplated by this Agreement,
including the Merger or the transactions contemplated by this Agreement.
Seller immediately will cease, and shall cause its Agents and subsidiaries and
its subsidiaries' Agents to cease, all existing activities, discussions and
negotiations with any individual or entity conducted heretofore with respect to
any proposal for an Acquisition Transaction and request the return or
destruction of all confidential information regarding Seller or its subsidiaries
provided to any such individual or entity prior to the date of this Agreement
pursuant to the terms of any confidentiality agreements and the Seller shall
enforce, and shall not waive, any of the provisions of any such confidentiality
agreement.
From and after the execution of this Agreement, Seller shall advise Buyer within
the Notice Period of the receipt, directly or indirectly, of any inquiries,
discussions, negotiations, or proposals relating to an Acquisition Transaction
(including a summary of material and significant terms thereof and the identity
of the other individual or entity or individuals or entities involved), or its
receipt of any request for information from the Federal Reserve Board, the OTS,
the DOJ, or any other Governmental Authority with respect to an Acquisition
Transaction, and promptly furnish to Buyer a copy of any such written proposal
in addition to a copy of any information provided to or by any third party
relating thereto. In addition, Seller shall immediately advise Buyer, in
writing, if the Board of Directors of the Seller shall make any determination as
to any Acquisition Transaction as contemplated by the proviso to the first
sentence of this Section 6.2. Nothing contained in this Section 6.2 shall
prohibit Seller from, at any time, taking and disclosing to the Seller's
stockholders a position contemplated by Rule 14d-9 or Rule 14e-2 under the
Exchange Act or making any disclosure required by Rule 14a-9 under the Exchange
Act so long as the requirements set forth in this Section 6.2 are satisfied. For
the purposes of this Agreement, "Superior Proposal" shall mean any bona fide
Acquisition Transaction on terms the Board of Directors of the Seller determines
in its good faith judgment and taking into account the advice of a financial
advisor of nationally recognized reputation (taking into account all the terms
and conditions of the Acquisition Transaction, including any break-up fees,
expense reimbursement provisions and conditions to consummation, the likelihood
and anticipated timing of consummation and all legal, financial, regulatory and
other aspects of the proposal and the individual or entity making the proposal)
are in the aggregate more favorable and provide greater value to all the
Seller's stockholders than this Agreement and the Merger taken as a whole. For
purposes of this Agreement, "Acquisition Transaction" means any offer or
proposal for, or any indication of interest in (a) a merger, tender offer,
recapitalization, or consolidation, or any similar transaction, involving the
Seller or any Significant Subsidiary of the Seller, (b) a purchase, lease or
other acquisition or assumption of all or a substantial portion of the assets or
deposits of the Seller or all or substantially all of the assets or deposits of
any Significant Subsidiary of the Seller, (c) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
beneficial ownership (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the Exchange
Act, and the rules and regulations thereunder) of securities representing ten
percent (10%) or more of the voting power of the Seller or any
(38)
Significant Subsidiary of the Seller, or (d) any substantially similar
transaction. For purposes of this Agreement, the term "Notice Period" shall mean
(i) with respect to written inquiries or proposals or other written materials,
written notice immediately and in no event later than twenty-four (24) hours
after receipt thereof and (y) with respect to oral inquires, discussions,
negotiations, or proposals, oral notice immediately and in no event later than
twenty-four (24) hours after receipt thereof, followed by written notice in no
event later than one (1) business day after receipt of such oral inquires,
discussions, negotiations, or proposals. Nothing in this Section 6.2 shall
affect Seller's obligation to hold the Seller Stockholders Meeting in accordance
with Section 6.1 hereof.
6.3 ACCESS TO INFORMATION.
(a) Upon reasonable notice and subject to applicable laws
relating to the exchange of information, each of the Buyer and the Seller, for
the purposes of verifying the representations and warranties of the other and
relating to the Merger and the other matters contemplated by this Agreement,
shall, and shall cause each of their respective subsidiaries to, afford to the
officers, employees, accountants, counsel and other representatives of the other
party, access, during normal business hours during the period prior to the
Effective Time, to all of its properties, books, contracts, commitments and
records, and, during such period, each of the Buyer and the Seller shall, and
shall cause their respective subsidiaries to, make available to the other party
(i) a copy of each report, schedule, registration statement and other document
filed or received by it during such period pursuant to the requirements of
federal securities laws or federal or state banking laws (other than reports or
documents which the Buyer or the Seller, as the case may be, is not permitted to
disclose under applicable law) and (ii) all other information concerning its
business, properties and personnel as such party may reasonably request. The
Seller also shall provide the Buyer with reasonable access to the Sellers
officers, employees and agents and with copies of all periodic reports to the
Seller's senior management. Neither the Buyer nor the Seller nor any of their
respective subsidiaries shall be required to provide access to or to disclose
information where such access or disclosure would violate or prejudice the
rights of the Buyer's or the Seller's, as the case may be, customers, jeopardize
the attorney-client privilege of the institution in possession or control of
such information or contravene any law, rule, regulation, order, judgment,
decree, fiduciary duty or binding agreement entered into prior to the date of
this Agreement. The parties hereto will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.
(b) All information furnished by any party hereto to the
other or its representatives pursuant hereto shall be treated as the sole
property of the party providing the information and, if the Merger shall not
occur, the party being furnished such information shall return to the other
party all of such written information and all documents, notes, summaries or
other materials containing, reflecting or referring to, or derived from, such
information. The parties hereto shall, and shall use their reasonable best
efforts to cause their representatives to, keep confidential all such
information, and shall not directly or indirectly use such information for any
competitive or other commercial purpose. The obligation to keep such information
(39)
confidential shall continue for five years from the date the proposed Merger is
abandoned and shall not apply to (i) any information which (x) was already in
the possession of the party being furnished such information prior to the
disclosure thereof by the other party, (y) was then generally known to the
public, or (z) was disclosed to the party being furnished such information by a
third party not bound by an obligation of confidentiality; or (ii) disclosures
made as required by law. In addition, in the event that the Seller terminates
this Agreement pursuant to Section 8.1(d) hereof, the restrictions contained in
the ninth (9th) paragraph of the Confidentiality Agreement shall survive the
termination of this Agreement in accordance with the terms thereof.
(c) No investigation by either of the parties or their
respective representatives shall affect the representations and warranties of
the other set forth herein.
6.4 LEGAL CONDITIONS TO MERGER. Each of the Buyer and its Affiliates
and the Seller shall, and the Seller shall cause its subsidiaries to, use their
reasonable best efforts (a) to take, or cause to be taken, all actions
necessary, proper or advisable to comply promptly with all legal requirements
that may be imposed on such party or its subsidiaries with respect to the Merger
and, subject to the conditions set forth in Article VII hereof, to consummate
the transactions contemplated by this Agreement, and (b) to obtain (and to
cooperate with the other party to obtain) any material consent, authorization,
order or approval of, or any exemption by, any Governmental Authority and any
other third party that is required to be obtained by the Buyer or the Seller or
any of their respective subsidiaries in connection with the Merger, the Bank
Merger and the other transactions contemplated by this Agreement.
6.5 EMPLOYMENT AND BENEFIT MATTERS.
(a) Provision of Benefits. From and after the Effective
Time, the Buyer agrees to provide the employees of the Seller and its
subsidiaries (the "Seller Employees") who remain employed after the Effective
Time with at least the types and levels of employee benefits (including employee
contribution levels) maintained by the Buyer or any Affiliate of the Buyer for
similarly-situated employees of the Buyer. The Buyer will treat, and cause the
applicable benefit plans to treat, the service of Seller Employees with Seller
or any subsidiary of Seller attributable to any period before the Effective Time
as service rendered to the Buyer or any Affiliate of Buyer for purposes of
eligibility to participate, vesting and for other appropriate benefits
including, but not limited to, applicability of minimum waiting periods for
participation, but not for benefit accrual (including minimum pension amount) or
eligibility for retiree welfare benefit plans, attributable to any period before
the Effective Time. Without limiting the foregoing, the Buyer shall not treat
any employee of the Seller or any of its subsidiaries as a "new" employee for
purposes of any exclusions under any health or similar plan of the Buyer or any
Affiliate of the Buyer for a pre-existing medical condition, and any deductibles
paid under any of Seller's or its subsidiaries health plans shall be credited
towards deductibles under the health plans of the Buyer or any Affiliate of the
Buyer upon delivery to the Buyer of appropriate documentation. The Buyer will
make appropriate arrangements with its insurance carrier(s) to ensure such
result.
(40)
(b) Continuation of Plans. Notwithstanding anything to the
contrary contained herein, the Buyer shall have sole discretion with respect to
the determination as to whether or when to terminate, merge or continue any
employee benefit plans and programs of the Seller, except with respect to the
Seller Bank employee stock ownership plan, which shall be terminated as of the
Effective Time, as provided in Section 6.6(h) hereof; provided, however, that
the Buyer shall continue to maintain the Seller plans (other than stock based or
incentive plans or stock funds in retirement plans) until the Seller Employees
are permitted to participate in the plans of the Buyer or any Affiliate of the
Buyer. Nothing in this Agreement shall alter or limit the Buyer's obligations,
if any, under ERISA, as amended by the Consolidated Omnibus Budget
Reconciliation Act of 1985 and/or the Health Insurance Portability and
Accountability Act of 1996 with respect to the rights of Seller Employees and
their qualified beneficiaries in connection with the group health plan
maintained by the Seller as of the Effective Time.
(c) Severance Pay. The Buyer shall pay any employee of the
Seller or any of its subsidiaries who is not otherwise covered by a specific
employment, termination, severance or change in control agreement and who is
terminated by the Buyer or its Affiliates for reasons other than cause (which
shall mean gross negligence or dereliction in the performance of such employee's
duties, dishonesty or commission of a crime) in the one (1) year period
immediately following the Effective Time, the severance and other benefits set
forth below:
(i) severance payable on an installment basis
pursuant to regular payroll of the Buyer in an amount equal to
two (2) weeks base salary multiplied by the number of full years
of service of such terminated Seller employee to the Seller or
any subsidiary of Seller, as recognized on the books of the
Seller; provided that all Seller Employees shall be subject to a
minimum severance payment limitation of four (4) weeks (except
that the minimum severance payment limitation for any Seller
employee who has a title of Vice President or higher shall be
eight (8) weeks) and a maximum severance payment limitation of
twenty-six (26) weeks base salary;
(ii) continuation of health benefits during the same
period of time that such terminated Seller employee is receiving
severance payments pursuant to clause (i) above after
termination on the same terms and conditions as though they had
remained active employees, and thereafter shall be entitled to
COBRA benefits for an additional period of time determined as
though their employment had terminated at the end of such
period; and
(iii) out-placement services to terminated Seller
employees consistent with the Buyer's past practices.
(d) Compensation Agreements. Following the Effective Time,
the Buyer and its Affiliates shall honor in accordance with their terms all
written employment, termination, severance, change in control, and other
compensation agreements all as disclosed in Section 6.5(d) of the Seller
Disclosure Schedule (each, a "Compensation Agreement"), and neither the
(41)
Buyer nor any Affiliate of Buyer will challenge the validity of any obligation
of the Seller or any subsidiary of the Seller under any Compensation Agreement.
(e) Parachute Payouts. Notwithstanding anything to the
contrary contained in this Agreement and except as set forth in Section 6.5(e)
of the Seller Disclosure Schedule, in no event shall the Seller, the Buyer, the
Surviving Corporation or the Surviving Bank or any of their respective
subsidiaries take any action or make any payments that would result, either
individually or in the aggregate, in the payment of an "parachute payment"
within the meaning of Code Section 280G(b)(2) or that would result, either
individually or in the aggregate, in payments that would be nondeductible
pursuant to Code Section 162(m). The Seller and the Buyer shall use commercially
reasonable efforts to resolve matters relating to any of the foregoing.
(f) Continuation of Employment. No provision of this Section
6.5 shall create any third party beneficiary rights in any employee or former
employee (including any beneficiary or dependent thereof) of the Seller in
respect of continued employment (or resumed employment) with the Buyer or any of
its Affiliates and no provision of this Section 6.5 shall create such rights in
any such persons in respect of any benefits that may be provided, directly or
indirectly, under any employee program or any plan or arrangement which may be
established by the Buyer or any of its Affiliates. No provision of this
Agreement shall constitute a limitation on the rights to amend, modify or
terminate after the Effective Time any such plans or arrangements of the Buyer
or any of its Affiliates.
(g) Welfare Benefit Plans. The Seller shall use its, and the
Seller shall cause its subsidiaries to use their, reasonable best efforts to
make the following changes with respect to the medical, dental and life
insurance programs maintained by the Seller and its subsidiaries for the Seller
Employees, effective promptly following the later of January 1, 2003 or the
receipt of all required stockholder and regulatory approvals (exclusive of any
applicable waiting period) (such time referred to for purposes of this Section
6.5(g) as the "Benefits Date"): (i) with respect to the medical insurance
program, the Seller shall enter into an agreement with Blue Cross Blue Shield of
Rhode Island to offer to the Seller Employees the Blue Card PPO product with the
same plan design and level of benefits as that being provided to the employees
of the Buyer or Affiliates of the Buyer as of the Benefits Date; (ii) with
respect to the dental insurance program, the Seller shall change its current
program for the Seller Employees to the extent necessary to cause the plan
design and level of benefits to be identical to that being provided to employees
of the Buyer or Affiliates of the Buyer as of the Benefits Date; and (iii) with
respect to the life insurance program, the Seller shall change its current
program for the Seller Employees to the extent necessary to cause the plan
design and level of benefits to be identical to that being provided to employees
of the Buyer or Affiliates of the Buyer as of the Benefits Date. In the event
that the Seller or any of its subsidiaries takes, at the request of the Buyer,
any of the foregoing actions that results in imposition of any fees, expenses or
charges, the Buyer shall indemnify the Seller and its subsidiaries for any such
fees, expenses and charges, if for any reason the Merger is not consummated in
accordance with the terms of this Agreement.
(42)
(h) Seller Bank Employee Stock Ownership Plan. As soon as
practicable following the date of this Agreement, the Seller shall cause the
Seller Bank to file or cause to be filed all necessary documents with the IRS,
for a determination letter for termination of the Seller Bank employee stock
ownership plan as of the Effective Time. As soon as practicable after the later
of (i) the Effective Time or (ii) the receipt of a favorable determination
letter for termination from the IRS, the account balances in the Seller Bank
employee stock ownership plan shall be distributed to participants and
beneficiaries in accordance with applicable law and the Seller Bank employee
stock ownership plan. Prior to the Effective Time, contributions to, and
payments on the loan of, the Seller Bank employee stock ownership plan shall be
made consistent with past practices on the regularly scheduled payment dates.
6.6 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) In the event of any threatened or actual claim, action,
suit, proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit, proceeding or
investigation in which any person who is now, or has been at any time prior to
the date of this Agreement, or who becomes prior to the Effective Time, a
director or officer or employee of Seller or any of its subsidiaries (the
"Indemnified Parties") is, or is threatened to be, made a party based in whole
or in part on, or arising in whole or in part out of, or pertaining to (i) the
fact that he is or was a director, officer or employee of the Seller, any of the
Seller's subsidiaries or any of their respective predecessors, or is or was
serving at the request of the Seller or the Seller Bank as a director, officer
or employee of an Affiliate or (ii) this Agreement or any of the transactions
contemplated hereby, whether in any case asserted or arising before or after the
Effective Time, the parties hereto agree to cooperate and use their best efforts
to defend against and respond thereto. It is understood and agreed that after
the Effective Time, the Buyer shall indemnify and hold harmless, as and to the
fullest extent permitted by law, each such Indemnified Party against any losses,
claims, damages, liabilities, costs, expenses (including reasonable attorney's
fees and expenses in advance of the final disposition of any claim, suit,
proceeding or investigation to each Indemnified Party to the fullest extent
permitted by law upon receipt of any undertaking required by applicable law),
judgments, fines and amounts paid in settlement in connection with any such
threatened or actual claim, action, suit, proceeding or investigation, and in
the event of any such threatened or actual claim, action, suit, proceeding or
investigation (whether asserted of arising before or after the Effective Time),
the Indemnified Parties may retain counsel reasonably satisfactory to them after
consultation with the Buyer; provided, however, that (w) the Buyer shall have
the right to assume the defense thereof and upon such assumption the Buyer or
the Surviving Bank shall not be liable to any Indemnified Party for any legal
expenses of other counsel or any other expenses subsequently incurred by any
Indemnified Party in connection with the defense thereof, except that if the
Buyer elects not to assume such defense or counsel for the Indemnified Parties
reasonably advises the Indemnified Parties that there are issues which raise
conflicts of interest between the Buyer and the Indemnified Parties, the
Indemnified Parties may retain counsel reasonably satisfactory to them after
consultation with the Buyer, and the Buyer shall pay the reasonable fees and
expenses of such counsel for the Indemnified Parties, (x) the Buyer shall be
obligated
(43)
pursuant to this paragraph to pay for only one firm of counsel for all
Indemnified Parties, unless the proposed counsel for the Indemnified Parties
reasonably advises the Indemnified Parties that there are issues which raise
conflicts of interest among such parties, in which case the Buyer shall pay the
reasonable fees and expenses of additional counsel to the extent necessary to
avoid such conflict, (y) the Buyer shall not be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld) and (z) the Buyer shall have no obligation hereunder to
any Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law. Any Indemnified Party
wishing to claim Indemnification under this Section 6.6, upon learning of any
such claim, action, suit, proceeding or investigation, shall notify the Buyer
thereof, provided, that the failure to so notify shall not affect the
obligations of the Buyer under this Section 6.6 except to the extent such
failure to notify materially prejudices the Buyer. The Buyer's obligations under
this Section 6.6 shall continue in full force and effect for a period of six (6)
years from the Effective Time; provided, however, that all rights to
indemnification in respect of any claim asserted or made within such period
shall continue until the final disposition of such claim.
(b) The Buyer shall maintain the Seller's (including its
subsidiaries') existing directors' and officers' liability insurance (the "D&O
Insurance") covering persons who are currently covered by the Seller's D&O
Insurance for a period of six (6) years after the Effective Time on terms no
less favorable than those in effect on the date hereof and shall at the
Effective Time provide evidence of such extension of coverage to the Seller;
provided, however, that the Buyer may substitute therefor policies providing
substantially comparable coverage and containing terms and conditions no less
favorable than those in effect on the date hereof. In connection with the
foregoing, the Seller agrees to provide such insurer or substitute insurer with
such representations as such insurer may reasonably request with respect to the
reporting of any prior claims.
(c) In the event the Buyer or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any Person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of the Buyer
assume the obligations set forth in this Section 6.6.
(d) The provisions of this Section 6.6 are intended to be
for the benefit of, and enforceable by, each Indemnified Party and his or her
heirs and representatives, and nothing herein shall affect any indemnification
rights that any Indemnified Party and his or her heirs and representatives may
have under the Articles of Incorporation or By-Laws of the Seller or the
equivalent documents of any of the Seller's subsidiaries, any contract or
applicable law.
(44)
6.7 ADDITIONAL AGREEMENTS. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement or to vest the Surviving Corporation or the Surviving Bank with
full title to all properties, assets, rights, approvals, immunities and
franchises of any of the parties to the Merger or the Bank Merger, the proper
officers and directors or trustees, as applicable, of each party to this
Agreement and their respective subsidiaries shall take all such necessary action
as may be reasonably requested by, and at the sole expense of, the Buyer.
6.8 ADVICE OF CHANGES. The Buyer and the Seller shall each promptly
notify the other party of any change or event having a Material Adverse Effect
on it or which it believes would or would be reasonably likely to cause or
constitute a material breach of any of its representations, warranties or
covenants contained herein; provided, however, that the delivery of any notice
pursuant to this Section 6.8 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
6.9 UPDATE OF DISCLOSURE SCHEDULES. From time to time prior to the
Effective Time, the Seller will promptly supplement or amend the Seller
Disclosure Schedule to reflect any matter which, if existing, occurring or known
at the date of this Agreement, would have been required to be set forth or
described in the Seller Disclosure Schedule or which is necessary to correct any
information in the Seller Disclosure Schedule which has been rendered inaccurate
thereby. No supplement or amendment to the Seller Disclosure Schedule shall have
any effect for the purpose of determining satisfaction of the conditions set
forth in Section 7.2(b) hereof or compliance by the Seller with the covenants
set forth in Article V hereof.
6.10 CURRENT INFORMATION.
(a) As soon as practicable, the Seller will furnish to the
Buyer copies of all such financial statements and reports as it or any of its
subsidiaries shall send to its stockholders, the SEC or any other Governmental
Authority, to the extent any such reports furnished to any such Governmental
Authority are not confidential and except as legally prohibited thereby, and
will furnish to the Buyer such additional financial data as the Buyer may
reasonably request.
(b) Promptly upon receipt thereof, the Seller will furnish
to the Buyer copies of all internal control reports submitted to the Seller and
its subsidiaries by independent auditors in connection with each annual, interim
or special audit of the books of the Seller and its subsidiaries made by such
auditors.
(c) The Seller will promptly notify the Buyer of any
material change in the normal course of business or in the operation of the
properties of the Seller or any of its subsidiaries and of any governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), or the institution or the threat of material
litigation involving the Seller or any of its subsidiaries, and will keep the
Buyer reasonably informed of such events.
(45)
6.11 TRANSITION COMMITTEE. Immediately upon the execution of this
Agreement, the Seller shall designate certain of its respective employees as
"Liaisons." During the period from the date of this Agreement to the Effective
Time, the Seller's Liaisons will (a) confer on a regular and continued basis
with representatives of the Buyer to report on (i) the general status of the
ongoing operations of the Seller and its subsidiaries, (ii) the status of, and
the action proposed to be taken with respect to, those loans held by the Seller
or any of its subsidiaries which, either individually or in combination with one
or more other loans to the same borrower thereunder, have an aggregate
outstanding principal amount of $1,000,000 or more and are classified or
non-performing assets, (iii) the status of, and the action proposed to be taken
with respect to, foreclosed property and OREO and (iv) the status of the
development and implementation of a system conversion plan, which shall begin
promptly after the date hereof, and (b) communicate with respect to the manner
in which the business of the Seller and its subsidiaries are conducted and the
disposition of certain assets after the Effective Time, the type and mix of
products and services, personnel matters, branch alignment, branch closings, the
granting of credit, and problem loan management, reserve adequacy and
accounting. In order to facilitate the foregoing, the Seller and the Buyer shall
promptly establish a transition committee, which will be led by a representative
of the Buyer and which will meet on a regular basis to discuss these matters and
may establish sub-committees from time-to-time to pursue various issues. In
addition, during the period from the date of this Agreement to the Effective
Time, within two (2) business days after the Seller Bank delivers to the members
of any of its credit committees applicable information and reports for the next
upcoming meeting of such committee, the Seller shall provide to a representative
designated by the Buyer access to the same information and reports as are
provided to the Seller Bank's credit committee members with respect to new loans
or renewals thereof and extensions of credit proposed to be made by the Seller
Bank in excess of $1,000,000. The representative designated by the Buyer shall
also be allowed to attend any of the Seller Bank's credit committee meetings for
all loans or loan renewals and be a non-voting observer thereof. The Seller, if
requested by the Buyer, will assist the Buyer to prepare to sell a portion of
its single family residential mortgage loans and mortgage loan servicing rights
following the Effective Time; provided, that Buyer shall indemnify the Seller
and its subsidiaries for any fees, expenses and charges incurred by Seller in
connection therewith if the Merger is not consummated in accordance with the
terms of this Agreement. Moreover, to facilitate the transactions contemplated
herein, immediately upon execution of this Agreement, the Seller will designate
a Senior Vice President to assist Buyer with interim operating and conversion
matters.
6.12 BANK MERGER. Unless otherwise determined by the Buyer prior to
the Closing, at the effective time of the Bank Merger the Articles of
Incorporation and By-Laws of the Buyer, as in effect immediately prior thereto,
shall be the Articles of Incorporation and By-Laws of the Surviving Bank until
thereafter amended as provided by law and such Articles of Incorporation and
By-Laws. The trustees and officers of the Buyer immediately prior to the
effective time of the Bank Merger shall be the trustees and officers of the
Surviving Bank, each to hold office in accordance with the Articles of
Incorporation and By-Laws of the Surviving Bank and until their respective
successors are duly elected or appointed and qualified.
(46)
6.13 ORGANIZATION OF THE MERGER SUB.
(a) Prior to the Effective Time, the Buyer will take any and
all necessary action to cause (i) the Merger Sub to be organized, (ii) the
Merger Sub to become a direct wholly owned subsidiary of the Buyer, (iii) the
directors and stockholders of the Merger Sub to approve the transactions
contemplated by this Agreement, (iv) the Merger Sub to execute one or more
counterparts to this Agreement and to deliver at least one such counterpart so
executed to the Seller, whereupon the Merger Sub shall become a party to and be
bound by this Agreement, and (v) the Merger Sub to take all necessary action to
complete the transactions contemplated hereby subject to the terms and
conditions hereof.
(b) On and as of the date the Merger Sub becomes a party to
this Agreement, the Buyer and the Merger Sub shall, jointly and severally,
represent and warrant to the Seller as follows:
(i) The Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and all of its outstanding capital
stock is owned, directly, by the Buyer. Since the date of its
organization, the Merger Sub has not engaged in any activities
other than in connection with or as contemplated by this
Agreement;
(ii) The Merger Sub has all necessary corporate power
and authority to enter into this Agreement and to carry on its
obligations hereunder. The execution and delivery of this
Agreement by the Merger Sub and the consummation of the
transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of the Merger Sub and
will not (y) conflict with or violate the Articles of
Organization or By-Laws of the Merger Sub or (z) conflict with
or violate any law, rule, regulation, order, judgment or decree
applicable to the Merger Sub or by which any of its properties
or assets is bound or affected; and
(iii) The Merger Sub has executed and delivered this
Agreement and this Agreement constitutes the legal, valid and
binding obligation of the Merger Sub enforceable against the
Merger Sub in accordance with its terms.
6.14 COMMUNITY COMMITMENTS. From and after the Effective Time, Buyer
shall use its reasonable efforts to continue the community commitments
undertaken by the Seller Bank prior to the date hereof in the communities
currently served by the Seller Bank.
6.15 CITIZENS FINANCIAL GROUP, INC. The Parent agrees to cause the
Buyer, its subsidiary, to perform its obligations hereunder, and the Parent and
the Buyer shall be jointly and severally obligated and liable for all of the
agreements and obligations of the Buyer hereunder. The Parent and the Buyer
hereby acknowledge and agree that the Seller, as well as any party
(47)
seeking to enforce rights under Section 6.5(d) or Section 6.6 hereof, may pursue
the Parent for the payment or enforcement of any obligation or liability of the
Buyer hereunder or thereunder without pursuing or exhausting remedies against
the Buyer or prior notification to the Buyer and without regard to any
regulatory restrictions which are applicable to the Buyer but not to the Parent.
(b) In the event that the Parent or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consideration or
merger or (ii) transfers or conveys all or substantially all of its properties
and assets to any Person, then, and in each case, to the extent necessary,
proper provision shall be made so that the successors and assigns of the Parent
assume the obligations set forth in this Section 6.15.
6.16 SECTION 16 MATTERS. Prior to the Effective Time, each of the
Board of Trustees of the Buyer and the Board of Directors of the Seller, or
appropriate committees of non-employee trustees and directors, as applicable,
thereof, shall adopt (if necessary) a resolution consistent with the
interpretive guidance of the SEC so that the disposition by any officer or
director of Seller or any Seller Subsidiary who is a covered person of Seller
for purposes of Section 16 under the Exchange Act (together with the rules and
regulations promulgated thereunder, "Section 16") of shares of Seller Common
Stock or Seller stock options pursuant to this Agreement and the Merger shall be
an exempt transaction for purposes of Section 16.
6.17 CONSOLIDATION OF CORPORATE STRUCTURE. On or before ten (10)
days prior to the Closing Date, the Seller shall, upon a written request of the
Buyer submitted to the Seller not less than thirty (30) days prior to the
Closing Date, and subject to the receipt of all required stockholder and
regulatory approvals (exclusive of any applicable waiting period) of the Merger
and the Bank Merger and all required regulatory approvals (inclusive of any
applicable waiting period) with respect to the transaction which is the subject
of any such request, cause each wholly-owned subsidiary of the Seller identified
by the Buyer prior to the Closing Date (other than the Seller Bank or Tyler) to
be liquidated or merged. In the event that the Merger is not consummated in
accordance with the terms hereof, the Buyer shall indemnify the Seller for any
and all costs and expenses incurred by the Seller with respect to the actions
taken pursuant to this Section 6.18.
ARTICLE VII - CONDITIONS PRECEDENT
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions:
(a) Stockholders' Approval. This Agreement and the
transactions contemplated hereby shall have been approved by the requisite
affirmative vote of the holders of
(48)
the shares of Seller Common Stock present and voting at the Seller Stockholders
Meeting in accordance with applicable law.
(b) Other Approvals. All regulatory approvals required to
consummate the transactions contemplated hereby shall have been obtained and
shall remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired (all such approvals and the expiration of all
such waiting periods being referred to herein as "Requisite Regulatory
Approvals").
(c) No Injunctions or Restraints; Illegality. No order,
injunction or decree issued by any court or agency of competent jurisdiction or
other legal restraint or prohibition preventing the consummation of the Merger,
the Bank Merger or any of the other transactions contemplated by this Agreement
shall be in effect. No statute, rule, regulation, order, injunction or decree
shall have been enacted, entered, promulgated or enforced by any Governmental
Authority which prohibits, materially restricts or makes illegal consummation of
the Merger or the Bank Merger.
7.2 CONDITIONS TO THE OBLIGATIONS OF THE BUYER. The obligation of
the Buyer to effect the Merger is also subject to the satisfaction or waiver by
the Buyer, at or prior to the Effective Time, of the following conditions:
(a) Absence of Material Adverse Changes. There shall not
have occurred any change in the business, assets, financial condition or results
of operations of the Seller or any of its subsidiaries which has had, or is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on the Seller and its subsidiaries taken as a whole.
(b) Representations and Warranties. The representations and
warranties of Seller contained in this Agreement that are qualified as to
materiality shall be true and correct and any such representations and
warranties that are not so qualified shall be true and correct in all material
respects, in each case, as of the date of this Agreement and as of the Effective
Time as though made as of the Effective Time except as otherwise specifically
contemplated by this Agreement and except as to any representation or warranty
which specifically relates to an earlier date. The Buyer shall have received a
certificate to the foregoing effect signed by the Chairman or President and the
Chief Financial Officer of the Seller.
(c) Performance of Obligations of the Seller. The Seller
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and the
Buyer shall have received a certificate signed on behalf of the Seller by the
Chairman or President and the Chief Financial Officer to such effect.
(d) Consents Under Agreements. All permits, consents,
waivers, clearances, approvals and authorizations of all third parties which are
necessary in connection with the consummation of the Merger, the Bank Merger and
the other transactions contemplated hereby
(49)
shall have been obtained, other than such permits, consents, waivers,
clearances, approvals or authorizations the failure of which to obtain would not
have a Material Adverse Effect on the Buyer after the Effective Time.
(e) Stockholder Agreements. Agreements, substantially in the
form attached as Exhibit II hereto, shall have been executed and delivered by
each member of the Seller's Board of Directors and each senior executive officer
of the Seller set forth in Section 7.2(e) of the Seller Disclosure Schedule.
(f) Consent of Option Holders. An acknowledgement of
cancellation of the options to purchase shares of Seller Common Stock to be
cancelled in accordance with Section 1.6(a) hereof and receipt of the payment to
be made by the Seller upon such cancellation in accordance with such Section
1.6(a), in a form which is reasonably acceptable to the Buyer, shall have been
executed and delivered by holders of at least ninety-five percent (95%) of such
options.
7.3 CONDITIONS TO THE OBLIGATIONS OF THE SELLER. The obligation of
the Seller to effect the Merger is also subject to the satisfaction or waiver by
the Seller, at or prior to the Effective Time, of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Buyer contained in this Agreement that are qualified as to
materiality shall be true and correct and any such representations and
warranties that are not so qualified shall be true and correct in all material
respects, in each case as of the date of this Agreement and as of the Effective
Time (or if made as of a specified date, only as of such date). The Seller shall
have received a certificate to the foregoing effect signed by the Chairman or
President and the Chief Financial Officer of the Buyer.
(b) Performance of Obligations of the Buyer. The Buyer shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and the Seller shall
have received a certificate signed on behalf of the Buyer by the Chairman or
President and the Chief Financial Officer to such effect.
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of this Agreement and
the transactions contemplated hereby by the stockholders of the Seller:
(a) by mutual consent of the Seller and the Buyer in a
written instrument, if the Board of Directors of Seller and the Board of
Trustees of Buyer each so determines by a vote of a majority of the members of
its entire Board;
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(b) by either the Board of Trustees of the Buyer or the
Board of Directors of the Seller if any Governmental Authority that must grant a
Requisite Regulatory Approval has denied approval of the Merger and such denial
has become final and nonappealable or any Governmental Authority of competent
jurisdiction shall have issued a final nonappealable order permanently enjoining
or otherwise prohibiting the consummation of the transactions contemplated by
this Agreement;
(c) by either the Board of Trustees of the Buyer or the
Board of Directors of the Seller if the Merger shall not have been consummated
on or before June 30, 2003, unless the failure of the Closing to occur by such
date shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe the covenants and agreements of such party set
forth herein;
(d) by either the Board of Trustees of the Buyer or the
Board of Directors of the Seller (provided, that the terminating party is not
then in material breach of any representation, warranty, covenant or other
agreement contained herein), in the event of a material breach by the other
party of any representation, warranty, covenant or other agreement contained
herein which breach is not cured after thirty (30) days written notice thereof
is given to the party committing such breach;
(e) by either the Buyer or the Seller if the approval of the
Seller's stockholders required for the consummation of the Merger shall not have
been obtained by reason of the failure to obtain the required vote at a duly
held meeting of such party's stockholders or at any adjournment thereof; or
(f) by the Buyer, if the Board of Directors of the Seller
shall not have publicly recommended to the stockholders of the Seller that such
stockholders vote in favor of the approval of this Agreement, the Merger and the
other transactions contemplated hereby; or shall have withdrawn, modified or
amended such recommendation in a manner materially adverse to the Buyer.
8.2 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either
the Buyer or the Seller as provided in Section 8.1 hereof, this Agreement shall
forthwith become void and have no effect, and none of the Buyer, the Seller, any
of their respective subsidiaries or any of the officers or directors or trustees
of any of them shall have any liability of any nature whatsoever hereunder, or
in connection with the transactions contemplated hereby, except that (i)
Sections 6.3(b), 8.2, 9.2 and 9.3 hereof and all obligations of the Buyer to
indemnify or reimburse the Seller under Article V hereof and all other
obligations of the parties intended to be performed after the termination of
this Agreement shall survive any termination of this Agreement; provided,
however, that, notwithstanding anything to the contrary herein, all obligations
of the Buyer to indemnify or reimburse the Seller under Article V hereof shall
terminate in the event
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that this Agreement is terminated by the Buyer pursuant to Section 8.1(f)
hereof; and (ii) notwithstanding anything to the contrary contained in this
Agreement, neither the Buyer nor the Seller shall be relieved or released from
any liabilities or damages arising out of its willful breach of any provision of
this Agreement.
(b) If this Agreement is terminated as a result of any
breach of a representation, warranty, covenant or other agreement which is
caused by the willful breach of a party hereto, such party shall be liable to
the other party for all out-of-pocket costs and expenses, including, without
limitation, the reasonable fees and expenses of lawyers, accountants and
investment bankers, incurred by such other party in connection with the entering
into of this Agreement and the carrying out of any and all acts contemplated
hereunder ("Expenses"). The payment of Expenses is not an exclusive remedy, but
is in addition to any other rights or remedies available to the parties hereto
at law or in equity.
(c) In the event this Agreement is terminated by:
(i) the Buyer pursuant to Section 8.1(f);
(ii) either the Buyer or Seller pursuant to Section
8.1(e) in circumstances where the Board of Directors of the
Seller shall not have publicly recommended to the stockholders
of the Seller that such stockholders vote in favor of the
approval of this Agreement, the Merger and the other
transactions contemplated hereby or shall have withdrawn,
modified or amended such recommendation in a manner adverse to
Buyer; or
(iii) either the Buyer or Seller pursuant to Section
8.1(e) in circumstances where both (y) within twelve (12) months
of such termination, the Seller shall have entered into an
agreement to engage in or there has otherwise occurred an
Acquisition Transaction with any person other than the Buyer or
any Affiliate of the Buyer and (z) at the time of such
termination or event giving rise to such termination, it shall
have been publicly announced that any Person (other than the
Buyer or any Affiliate of the Buyer) shall have (A) made, or
disclosed an intention to make, a bona fide offer to engage in
an Acquisition Transaction, or (B) filed an application (or
given a notice), whether in draft or final form, under the BHCA
or the Change in Bank Control Act of 1978, for approval to
engage in an Acquisition Transaction,
then Seller shall make a single cash payment to the Buyer in the amount of
$17,500,000 upon the occurrence of the events described in Section 8.2(c)(i),
Section 8.2(c)(ii) or Section 8.2(c)(iii) hereof; provided that in no event
shall the Seller be obligated to pay the Buyer more than one termination fee
pursuant to this Section 8.2(c). Any payment required under this Section 8.2(c)
shall be payable by the Seller to the Buyer (by wire transfer of immediately
available funds to an account designated by the Buyer) within two (2) business
days after demand by the Buyer.
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8.3 AMENDMENT. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized by
their respective Boards of Directors or Trustees, as applicable, at any time
before or after approval of the matters presented in connection with Merger by
the stockholders of the Buyer and the Seller; provided, however, that after any
approval of the transactions contemplated by this Agreement by the stockholders
of the Seller, no amendment of this Agreement shall be made which by law
requires further approval by the stockholders of the Seller without obtaining
such approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
8.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors or Trustees, as applicable, may, to the extent legally allowed, (a)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions contained herein;
provided, however, that after any approval of the transactions contemplated by
this Agreement by the stockholders of the Seller, no extension or waiver of this
Agreement or any portion thereof shall be made which by law requires further
approval by the stockholders of the Seller without obtaining such approval. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party,
but such extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
ARTICLE IX - MISCELLANEOUS
9.1 CLOSING. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") will take place at 10:00 a.m. on a
date and at a place to be specified by the parties, which shall be no later than
five (5) business days after the satisfaction or waiver (subject to applicable
law) of the latest to occur of the conditions set forth in Article VII hereof
(other than those conditions that relate to actions to be taken at Closing),
unless extended by mutual agreement of the parties (the "Closing Date");
provided, however, that in no event shall the Closing take place prior to
January 1, 2003.
9.2 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None
of the representations, warranties, covenants and agreements in this Agreement
or in any instrument delivered pursuant to this Agreement (other than the Bank
Merger Agreement, which shall terminate in accordance with its terms) shall
survive the Effective Time, except for Articles I and II, Sections 6.5 and 6.6
and any other Section which by its terms specifically applies in whole or in
part after the Effective Time.
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9.3 EXPENSES. Except as may otherwise be agreed to hereunder or in
other writing by the parties, all legal and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses.
9.4 NOTICES. All notices or other communications hereunder shall be
in writing and shall be deemed given if delivered personally or mailed by
prepaid registered or certified mail (return receipt requested) or by telecopy,
cable, telegram or telex addressed as follows:
(a) If to Buyer, to: Citizens Bank of Pennsylvania
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx
Chairman and Chief
Executive Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
(b) If to Parent, to: Citizens Financial Group, Inc.
Xxx Xxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxxx X. Xxxx
Chairman, President and
Chief Executive Officer
and to: Citizens Financial Group, Inc.
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
Senior Vice President,
General Counsel and
Secretary
Tel: (000) 000-0000
Fax: (000) 000-0000
with required copies to: Xxxxxxx Procter LLP
Xxx Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Pisa, P.C.
Tel: (000) 000-0000
Fax: (000) 000-0000
(54)
(c) If to Seller, to: Commonwealth Bancorp, Inc.
Commonwealth Bank Plaza
0 X. Xxxxxxxxx Xx.
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
President and Chief Executive Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
(d) with required copies to: Elias, Matz, Xxxxxxx & Xxxxxxx L.L.P.
12th Floor, The Xxxxxx Building
000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed or otherwise sent as provided above.
9.5 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." No provision of this Agreement shall be construed to require the
Seller or the Buyer or any their respective subsidiaries or Affiliates to take
any action which would violate applicable law, rule or regulation. The phrases
"the date of this Agreement," "the date hereof" and terms of similar import,
unless the context otherwise requires, shall be deemed to be September 30, 2002.
9.6 COUNTERPARTS. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
9.7 ENTIRE AGREEMENT. This Agreement (including the documents and
the instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties hereto with respect to the subject matter hereof.
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9.8 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Pennsylvania,
without regard to any applicable conflicts of laws principles.
9.9 SEVERABILITY. In the event that any one or more provisions of
this Agreement shall for any reason be held invalid, illegal or unenforceable in
any respect, by any court of competent jurisdiction, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Agreement and
the parties shall use their reasonable best efforts to substitute a valid, legal
and enforceable provision which, insofar as practicable, implements the original
purposes and intents of this Agreement.
9.10 PUBLICITY. Except as otherwise required by applicable law or the
rules of the National Association of Securities Dealers, Inc., neither the Buyer
nor the Seller shall, or shall permit any of its subsidiaries to, issue or cause
the publication of any press release or other public announcement with respect
to, or otherwise make any public statement concerning, the transactions
contemplated by this Agreement without the consent of the party, which consent
shall not be unreasonably withheld.
9.11 ASSIGNMENT; RELIANCE OF OTHER PARTIES. Neither this Agreement
nor any of the rights, interests or obligations shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns. Except as otherwise
specifically provided in Sections 6.5(d) and 6.6 hereof, this Agreement
(including the documents and instruments referred to herein) is not intended to
confer upon any Person other than the parties hereto any rights or remedies
hereunder.
9.12 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that the provisions contained in this Agreement
were not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to seek an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions thereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
9.13 ALTERNATIVE STRUCTURE. Notwithstanding anything to the contrary
contained in this Agreement, at any time prior to the Effective Time, the Buyer
shall be entitled to revise the structure of the Merger, the Bank Merger and the
other transactions contemplated hereby; provided, that, each of the transactions
comprising such revised structure shall not (a) subject the stockholders of
Seller, Seller or any of its subsidiaries to adverse tax consequences, (b)
change the amount or form of consideration to be received by the stockholders of
Seller, (c) alter to the detriment of the Seller or its stockholders the
benefits to be received by the Seller's stockholders hereunder, (d) jeopardize
or materially delay or impede the receipt of any required regulatory
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approvals relating to the consummation of the Merger or the Bank Merger, or (e)
reduce the obligations of any party hereunder or under the Bank Merger
Agreement. This Agreement and any related documents shall be appropriately
amended in order to reflect any such revised structure.
9.14 DEFINITIONS. Except as otherwise provided herein or as otherwise
clearly required by the context, the following terms shall have the respective
meanings indicated when used in this Agreement:
"Acquisition Transaction" shall have the meaning ascribed thereto in
Section 6.2 hereof.
"Affiliate" shall mean, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person. As used in
this definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") means the possession, directly
or indirectly, of power to direct or cause the direction of the management and
policies of a Person whether through the ownership of voting securities, by
contract or otherwise.
"Agents" shall have the meaning ascribed thereto in Section 6.2 hereof.
"Agreement" shall have the meaning ascribed thereto in the recitals.
"Articles of Merger" shall have the meaning ascribed thereto in Section
1.2 hereof.
"Bank Common Stock" shall have the meaning ascribed thereto in Section
4.2(b) hereof.
"Bank Merger" shall have the meaning ascribed thereto in the recitals.
"Bank Merger Agreement" shall have the meaning ascribed thereto in the
recitals.
"Bank Preferred Stock" shall have the meaning ascribed thereto in
Section 4.2(b) hereof.
"Bank Regulator" shall mean and include, any pertinent federal or state
Governmental Authority charged with the supervision of banks or bank, financial
or savings and loan holding companies or engaged in the insurance of bank
deposits, including without limitation, the OTS, the FDIC, the Federal Reserve
Board and the Pennsylvania Commissioner.
"Benefits Date" shall have the meaning ascribed thereto in Section
6.5(g) hereof.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"business day" shall mean Monday through Friday of each week, except a
legal holiday recognized as such by the United States Government or any day on
which banking institutions in the Commonwealth of Pennsylvania are authorized or
obligated to close.
(57)
"Buyer" shall have the meaning ascribed thereto in the recitals.
"Certificate" shall have the meaning ascribed thereto in Section 1.4(b)
hereof.
"C.F.R." shall mean the Code of Federal Regulations.
"Closing" shall have the meaning ascribed thereto in Section 9.1 hereof.
"Closing Date" shall have the meaning ascribed thereto in Section 9.1
hereof.
"Code" shall have the meaning ascribed thereto in Section 4.13(f)
hereof.
"Compensation Agreements" shall have the meaning ascribed thereto in
Section 6.5(d) hereof.
"Confidentiality Agreement" shall have the meaning ascribed thereto in
Section 6.2 hereof.
"CRA" shall have the meaning ascribed thereto in Section 4.17 hereof.
"Criticized Assets" shall have the meaning ascribed thereto in Section
4.20(b) hereof.
"D&O Insurance" shall have the meaning ascribed thereto in Section
6.6(b) hereof.
"Deposit Incentive Plan" shall have the meaning ascribed thereto in
Section 5.10 hereof.
"Dissenters Rights" shall have the meaning ascribed thereto in Section
4.1(a)) hereof.
"DOJ" shall mean the United States Department of Justice.
"DPC Shares" shall have the meaning ascribed thereto in Section 1.4(c)
hereof.
"Effective Time" shall have the meaning ascribed thereto in Section 1.2
hereof.
"Environment" shall have the meaning ascribed thereto in Section 4.24(g)
hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall have the meaning ascribed thereto in Section 4.5
hereof.
"Exchange Agent" shall have the meaning ascribed thereto in Section 2.1
hereof.
"Expenses" shall have the meaning ascribed thereto in Section 8.2(b)
hereof.
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"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System or the Federal Reserve Bank of Philadelphia, as applicable.
"Filed Tax Returns" shall have the meaning ascribed thereto in Section
4.13(a) hereof.
"Financial Services Authority" shall mean the independent
non-governmental body that regulates the financial services industry in the
United Kingdom.
"GAAP" shall mean generally accepted accounting principles and practices
in effect from time to time within the United States applied consistently
throughout the period involved.
"Governmental Authority" shall mean any United States federal, state or
local governmental commission, board or other regulatory authority, agency,
including courts and other judicial bodies, or any self-regulatory body or
authority.
"Hazardous Material" shall have the meaning ascribed thereto in Section
4.24(g) hereof.
"Indemnified Parties" shall have the meaning ascribed thereto in Section
6.6 hereof.
"IRS" shall mean the Internal Revenue Service.
"Joint Venture" shall mean any corporation, limited liability company,
limited liability partnership, partnership, joint venture, trust, association or
other entity which is not a subsidiary of the Seller, as the case may be, and in
which (a) the Seller, directly or indirectly, owns or controls any shares of any
class of the outstanding voting securities or other equity interests, including
without limitation, an equity investment, as such term as of the date hereof is
in the FDIC's rules and regulations regarding activities and investments of
insured state banks at 12 C.F.R. Section 362.2(g), or (b) the Seller or one of
its subsidiaries is a general partner.
"Liaisons" shall have the meaning ascribed thereto in Section 6.11
hereof.
"Liens" shall have the meaning ascribed to such term in Section 4.19(a)
hereof.
"Loan Property" shall have the meaning ascribed thereto in Section
4.24(g) hereof.
"Loans" shall have the meaning ascribed to such term in Section 4.20(a)
hereof.
"Material Adverse Effect" shall mean, with respect to any Person, a
change or effect that is or is reasonably likely to be materially adverse to the
business, results of operations or financial condition of such Person and its
subsidiaries taken as a whole; provided, however, that
(59)
"Material Adverse Effect" shall not be deemed to include the impact of (a)
changes in laws and regulations or interpretations thereof by Governmental
Authorities generally applicable to depository institutions and their holding
companies (including changes in insurance deposit assessment rates and special
assessments with respect thereto), (b) changes in GAAP or regulatory accounting
principles generally applicable to financial institutions and their holding
companies, (c) actions and omissions of the Seller or any of its subsidiaries
taken with the prior written consent of the Buyer, (d) the direct effects of
compliance with this Agreement on the operating performance of the parties
including expenses incurred by the parties hereto in consummating the
transactions contemplated by this Agreement and (e) changes in interest rates
generally.
"MBBI" shall mean the Massachusetts Board of Bank Incorporation.
"Merger" shall have the meaning ascribed thereto in the recitals.
"Merger Consideration" shall have the meaning ascribed thereto in
Section 1.4(a) hereof.
"Merger Sub" shall have the meaning ascribed thereto in the recitals.
"MHPF" shall mean the Massachusetts Housing Partnership Fund.
"NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotation System.
"Notice Period" shall have the meaning ascribed thereto in Section 6.2
hereof.
"Oil" shall have the meaning ascribed thereto in Section 4.24(g) hereof.
"OREO" shall mean other real estate owned.
"OTS" shall mean the Office of Thrift Supervision.
"Owned Property" shall have the meaning ascribed thereto in Section
4.24(a) hereof.
"Parent" shall have the meaning ascribed thereto in the recitals.
"PBCL" shall mean the Pennsylvania Business Corporation Law, as amended.
"Pennsylvania Commissioner" shall mean the Secretary of Banking of the
Pennsylvania Department of Banking.
"Pennsylvania Secretary" shall mean the Secretary of State of the
Commonwealth of Pennsylvania.
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"Person" shall mean any individual, corporation, partnership, Joint
Venture, association, trust, unincorporated organization or other legal entity,
or any governmental agency or political subdivision thereof.
"Requisite Regulatory Approvals" shall have the meaning ascribed thereto
in Section 7.1(b) hereof.
"SEC" shall mean the Securities and Exchange Commission.
"Section 16" shall have the meaning ascribed thereto in Section 6.16
hereof.
"Seller" shall have the meaning ascribed thereto in the recitals.
"Seller Balance Sheet" shall have the meaning ascribed thereto in
Section 4.5 hereof.
"Seller Bank" shall have the meaning ascribed thereto in the recitals.
"Seller Benefit Plans" shall have the meaning ascribed thereto in
Section 4.15(a) hereof.
"Seller Common Stock" shall have the meaning ascribed thereto in Section
1.4(a) hereof.
"Seller Companies" shall have the meaning ascribed thereto in Section
4.13(a) hereof.
"Seller Contract" shall have the meaning ascribed to such term in
Section 4.18(a) hereof.
"Seller Disclosure Schedule" shall mean the disclosure schedule relating
to the Seller and its subsidiaries, as applicable, delivered to Buyer together
herewith.
"Seller Employees" shall have the meaning ascribed thereto in Section
6.5(a) hereof.
"Seller Intellectual Property Assets" shall have the meaning ascribed
thereto in Section 4.32 hereof.
"Seller Other Plans" shall have the meaning ascribed thereto in Section
4.15(a) hereof.
"Seller Pension Plans" shall have the meaning ascribed thereto in
Section 4.15(a) hereof.
"Seller Preferred Stock" shall have the meaning ascribed thereto in
Section 4.2(a) hereof.
"Seller Proxy Statement" shall have the meaning ascribed thereto in
Section 3.8 hereof.
"Seller Reports" shall have the meaning ascribed thereto in Section 4.9
hereof.
"Seller Restricted Share Plans" shall have the meaning ascribed thereto
in Section 1.6(b) hereof.
(61)
"Seller Restricted Shares" shall have the meaning ascribed thereto in
Section 1.6(b) hereof.
"Seller Stock Option Plans" shall have the meaning ascribed thereto in
Section 1.6(a) hereof.
"Seller Stockholders Meeting" shall have the meaning ascribed thereto in
Section 6.1(a) hereof.
"Shares" shall have the meaning ascribed thereto in Section 1.4(a)
hereof.
"Significant Subsidiary" shall have the meaning ascribed to that term in
Rule 1-02 of Regulation S-X of the SEC, as in effect as of the date of this
Agreement, and for purposes of Section 4.12, shall also include Tyler.
"Stockholder Agreements" shall mean those certain Stockholder Agreements
dated as of the date hereof respectively between the Buyer and each member of
the Seller's board of directors and each senior executive officer of the Seller
set forth in Section 7.2(e) of the Seller Disclosure Schedule and substantially
in the form attached hereto as Exhibit II.
"subsidiaries" shall mean, when used with reference to a party, any
corporation or other organization, whether incorporated or unincorporated, of
which such party or any other subsidiary of such party is a general partner
(excluding partnerships the general partnership interests of which held by such
party or any subsidiary of such party do not have a majority of the voting
interests in such partnership), or, with respect to such corporation or other
organization, any such entity with respect to which a party possesses, directly
or indirectly, the power to direct or cause the direction of the management and
policies of such party, whether through the ownership of voting securities, by
contract or otherwise.
"Superior Proposal" shall have the meaning ascribed thereto in Section
6.2 hereof.
"Surviving Bank" shall have the meaning ascribed thereto in the
recitals.
"Surviving Corporation" shall have the meaning ascribed thereto in
Section 1.1 hereof.
"Tax" shall mean any federal, state, local, county or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, natural resources,
severance, stamp, occupation, premium, windfall profit, environmental, customs,
duties, real property, personal property, capital stock, intangibles, social
security, unemployment, disability, payroll, license, employee or other tax or
levy, of any kind whatsoever, including any interest, penalties or additions to
tax in respect of the foregoing.
"Tax Return" shall mean any return, declaration, report, claim for
refund, information return or other document (including any related or
supporting estimates, elections, schedules,
(62)
statements or information) filed or required to be filed in connection with the
determination, assessment or collection of any Tax or the administration of any
laws, regulations or administrative requirements relating to any Tax.
"Transaction Documents" shall mean this Agreement, the Bank Merger
Agreement and the Stockholder Agreements.
"Trust Account Shares" shall have the meaning ascribed thereto in
Section 1.4(c) hereof.
"Tyler" shall mean Tyler Wealth Counselors, Inc., a wholly owned
subsidiary of the Seller Bank.
"USA PATRIOT Act" shall have the meaning ascribed thereto in Section
4.17 hereof.
"U.S.C." shall mean the United States Code.
[SIGNATURE PAGE FOLLOWS]
(63)
IN WITNESS WHEREOF, the Buyer, Parent and the Seller have caused this
Agreement to be executed as a sealed instrument by their duly authorized
officers as of the day and year first above written.
CITIZENS FINANCIAL GROUP, INC.
By: /s/ Xxxxxxxx X. Xxxx
------------------------------------------
Name: Xxxxxxxx X. Xxxx
Title: Chairman, President
and Chief Executive Officer
Attest: /s/ Xxxx X. Xxxxxxxx
--------------------
Name: Xxxx X. Xxxxxxxx By: /s/ Xxxxxxx Xxxxxxx
Title: Senior Vice President, General ------------------------------------------
Counsel and Secretary Name: Xxxxxxx Xxxxxxx
Title: Executive Vice President
and Treasurer
CITIZENS BANK OF PENNSYLVANIA
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman, President and Chief
Executive Officer
Attest: /s/ Xxxxx X. Xxxxxx
-------------------
Name: Xxxxx X. Xxxxxx By: /s/ Xxxxxxx Xxxxxxx
Title: Vice President and Secretary ------------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Treasurer
COMMONWEALTH BANCORP, INC.
By: /s/ Xxxxxxx X. Xxxx
------------------------------------------
Name: Xxxxxxx X. Xxxx
Title: President
and Chief Executive Officer
Attest: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Executive Vice President, Chief
Financial Officer and Assistant
Secretary
EXHIBIT I
AGREEMENT AND PLAN OF MERGER
(BANK MERGER AGREEMENT)
AGREEMENT AND PLAN OF MERGER, dated as of _______ __, 2002
("Agreement"), pursuant to the Pennsylvania Banking Code of 1965, as amended
(the "Banking Code"), by and among Citizens Bank of Pennsylvania, a Pennsylvania
chartered savings bank ("Buyer Bank"), Commonwealth Bank, a Pennsylvania
chartered savings bank ("Seller Bank"), and for the purpose of Section 1.2,
Commonwealth Bancorp, Inc., a Pennsylvania corporation and the parent of Seller
Bank ("Parent").
WHEREAS, Buyer Bank, Citizens Financial Group, Inc., a Delaware
corporation and the parent company of Buyer Bank, and Parent have entered into
an Agreement and Plan of Merger, dated as of September 30, 2002 (as such
agreement may be subsequently amended or modified, the "Agreement and Plan of
Merger"), providing for the merger of a subsidiary of the Buyer Bank with and
into Parent (the "Merger"); and
WHEREAS, in connection with the Agreement and Plan of Merger, this
Agreement provides for the merger (the "Bank Merger") of the Seller Bank with
and into the Buyer Bank in accordance with the Banking Code, promptly following
the consummation of the Merger.
NOW, THEREFORE, the Buyer Bank and the Seller Bank hereby agree as
follows:
ARTICLE I
THE BANK MERGER
1.1 THE BANK MERGER. The constituent corporations to the Bank Merger
shall be the Buyer Bank and the Seller Bank. Subject to the terms and conditions
of this Agreement and the Agreement and Plan of Merger, in accordance with
Chapter 16 of the Banking Code, at the Effective Time (as defined in Section 1.3
hereof), the Seller Bank shall merge with and into the Buyer Bank. The Buyer
Bank shall be the surviving corporation (sometimes referred to herein as the
"Surviving Bank") of the Bank Merger and shall continue its corporate existence
as a Pennsylvania charted savings bank under the Banking Code following
consummation of the Bank Merger. Upon consummation of the Bank Merger, the
separate corporate existence of the Seller Bank shall cease.
1.2 CONTRIBUTION OF ASSETS AND LIQUIDATION. Prior to the date on
which the Bank Merger becomes effective, (i) Parent shall transfer to the Seller
Bank, as a contribution to the capital of the Seller Bank, all of Parent's
assets, except for the shares of common stock, par value $0.10 per share, of the
Seller Bank ("Seller Stock") held by Parent and (ii) thereafter the Buyer Bank
shall liquidate Parent.
1.3 EFFECTIVE TIME. The Bank Merger shall become effective at 11:59
p.m. on the date that this Agreement and the approval of the Department of
Banking of the Commonwealth of Pennsylvania (the "Department of Banking") are
filed with the Department of State of the Commonwealth of Pennsylvania, unless a
different date and time is specified by the Department of Banking. The term
"Effective Time" shall be the date and time when the Bank Merger becomes
effective.
1.4 EFFECTS OF THE BANK MERGER. At and after the Effective Time, the
Bank Merger shall have the effects provided herein and set forth in the
applicable provisions of the Banking Code. Without limiting the generality of
the foregoing and subject thereto, all the property, rights, privileges, powers
and franchises of the Seller Bank and the Buyer Bank shall vest in the Surviving
Bank, and all debts, liabilities, obligations, restrictions, disabilities and
duties of the Seller Bank and the Buyer Bank shall become the debts,
liabilities, obligations, restrictions, disabilities and duties of the Surviving
Bank.
1.5 ARTICLES OF INCORPORATION. At the Effective Time, the Articles
of Incorporation of the Buyer Bank, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving Bank,
until thereafter amended in accordance with applicable law and such Articles of
Incorporation.
1.6 BY-LAWS. At the Effective Time, the By-Laws of the Buyer Bank,
as in effect immediately prior to the Effective Time, shall be the By-Laws of
the Surviving Bank until thereafter amended in accordance with applicable law,
the Articles of Incorporation of the Surviving Bank and such By-Laws.
1.7 NAME. At the Effective Time, the name of the Surviving Bank
shall be "Citizens Bank of Pennsylvania," until thereafter amended in accordance
with applicable law and the Articles of Incorporation of the Surviving Bank.
1.8 CAPITAL STOCK. Unless otherwise determined by the Buyer Bank
prior to the Effective Time by delivery to the Seller Bank of an addendum to
this Agreement, from and after the Effective Time, the total number of shares
and the par value of each class of stock that the Surviving Bank shall be
authorized to issue shall be two hundred thousand (200,000) shares of common
stock, par value $1.00 per share, until thereafter amended in accordance with
applicable law and the Articles of Incorporation of the Surviving Bank.
1.9 TRUSTEES AND OFFICERS. At the Effective Time, the initial
trustees and officers of the Surviving Bank shall be the trustees and officers
of the Buyer Bank immediately prior to the Effective Time, each to hold office
in accordance with the Articles of Incorporation and By-Laws of the Surviving
Bank until their respective successors are duly elected or appointed and
qualified.
1.10 MAIN OFFICE. At the Effective Time, the main office of the
Surviving Bank shall be located in Philadelphia, Pennsylvania.
ARTICLE II
CANCELLATION OF SHARES
Each share of Seller Stock issued and outstanding immediately prior to
the Effective Time shall, by virtue of the Bank Merger and without any action on
the part of the holder thereof, be canceled.
2
ARTICLE III
REPRESENTATIONS
Each of the Buyer Bank and the Seller Bank represents that this
Agreement has been duly authorized, executed and delivered by such party and
constitutes a legal, valid and binding obligation of such party, enforceable
against it in accordance with the terms hereof.
ARTICLE IV
TERMINATION
Consummation of the Bank Merger contemplated hereunder is conditioned
upon the satisfaction of all conditions set forth in Article VII of the
Agreement and Plan of Merger. This Agreement shall terminate and forthwith
become void automatically and without any action on the part of the Buyer Bank
or the Seller Bank immediately upon the termination of the Agreement and Plan of
Merger in accordance with Article VIII thereof, and there shall be no further
liability on the part of the Buyer Bank or the Seller Bank upon such
termination.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
3
IN WITNESS WHEREOF, the Buyer Bank, the Seller Bank and Parent have each
caused this Agreement to be executed as a sealed instrument by their duly
authorized officers as of the day and year first above written.
CITIZENS BANK OF PENNSYLVANIA
By:
Name:
---------------------------------
Title:
-------------------------------
Attest:
By:
Name:
----------------------------- ---------------------------------
Title:
----------------------------- --------------------------------
COMMONWEALTH BANCORP, INC.
By:
Name:
---------------------------------
Title:
-------------------------------
Attest:
By:
Name:
----------------------------- ---------------------------------
Title:
----------------------------- --------------------------------
COMMONWEALTH BANK
By:
Name:
---------------------------------
Title:
-------------------------------
Attest:
By:
Name:
----------------------------- ---------------------------------
Title:
----------------------------- --------------------------------
EXHIBIT II
STOCKHOLDER AGREEMENT
This Stockholder Agreement ("Agreement") dated as of ______ ___, 2002,
by and between Citizens Bank of Pennsylvania, a Pennsylvania chartered savings
bank ("Buyer"), and the undersigned Director, Officer and/or holder of common
stock, par value $0.10 per share, of Commonwealth Bancorp, Inc. ("Stockholder").
WHEREAS, the Buyer, Citizens Financial Group, Inc., a Delaware
corporation and the parent company of the Buyer, and Commonwealth Bancorp, Inc.,
a Pennsylvania corporation ("Seller"), have entered into an Agreement and Plan
of Merger, dated of even date herewith (as such agreement may be subsequently
amended or modified, the "Agreement and Plan of Merger"), providing for the
merger of a subsidiary of the Buyer with and into the Seller (the "Merger");
WHEREAS, the Stockholder beneficially owns and has sole or shared voting
power with respect to the number of shares of the common stock, par value $0.10
per share ("Shares"), of the Seller, and holds stock options or other rights to
acquire the number of Shares indicated opposite the Stockholder's name on
Schedule 1 attached hereto; and
WHEREAS, it is a condition to the consummation of the Merger that the
Stockholder execute and deliver this Agreement.
Capitalized terms used in this Agreement and not otherwise defined
herein have the meanings ascribed to them in the Agreement and Plan of Merger.
NOW, THEREFORE, in consideration of, and as a condition to, the Buyer's
entering into the Agreement and Plan of Merger and proceeding with the
transactions contemplated thereby, and in consideration of the expenses incurred
and to be incurred by the Buyer in connection therewith, the Stockholder and the
Buyer agree as follows:
1. The Stockholder, while this Agreement is in effect, shall vote
or cause to be voted all of the Shares that such Stockholder shall be entitled
to so vote, whether such Shares are beneficially owned by such Stockholder on
the date of this Agreement or are subsequently acquired, at the special meeting
of the Seller's stockholders to be called and held following the date hereof
(the "Special Meeting"), for the approval of the Agreement and Plan of Merger
and transactions contemplated thereby, including the Merger, and, while this
Agreement is in effect, shall vote or cause to be voted all such Shares, at the
Special Meeting or any other meeting of the Seller's stockholders following the
date hereof, against the approval of any other agreement providing for a merger,
acquisition, consolidation, sale of a material amount of assets or other
business combination of the Seller or any of its subsidiaries with any person or
entity other than the Buyer or any subsidiary of the Buyer.
2. While this Agreement is in effect, prior to the Special Meeting,
the Stockholder shall not sell, assign, transfer or otherwise dispose of
(including, without limitation, by the creation of a Lien (as defined in Section
3 below)), or permit to be sold, assigned, transferred or
otherwise disposed of, any Shares owned by the Stockholder, whether such Shares
are held by the Stockholder on the date of this Agreement or are subsequently
acquired prior to the Special Meeting, whether by the exercise of any stock
options to acquire Shares or otherwise, except (a) transfers by will or by
operation of law, in which case this Agreement shall bind the transferee, (b)
transfers pursuant to any pledge agreement, subject to the pledgee agreeing in
writing to be bound by the terms of this Agreement, (c) transfers in connection
with estate and tax planning purposes, including transfers to relatives, trusts
and charitable organizations, subject to the transferee agreeing in writing to
be bound by the terms of this Agreement, (d) transfers to any other stockholder
of the Seller who has executed a copy of this Agreement with respect to some or
all of the Shares held by such stockholder, and (e) as the Buyer may otherwise
agree in writing in its sole discretion.
The Seller shall cause its transfer agent to note on its records for the
Seller (in whatever form maintained) that such Shares are subject to the
restrictions on voting and transfer set forth herein, and at Buyer's request
shall have any existing certificates representing Shares subject to this
Agreement canceled and reissued bearing the following legend:
"THIS CERTIFICATE, AND THE SHARES REPRESENTED HEREBY, ARE SUBJECT TO
CERTAIN VOTING AND TRANSFER RESTRICTIONS CONTAINED IN A STOCKHOLDER
AGREEMENT BY AND BETWEEN CITIZENS BANK OF PENNSYLVANIA AND THE
BENEFICIAL OWNER OF THESE SHARES AND MAY BE TRANSFERRED ONLY IN
COMPLIANCE THEREWITH. COPIES OF THE ABOVE-REFERENCED AGREEMENT ARE ON
FILE AT THE OFFICES OF COMMONWEALTH BANCORP, INC."
3. The Stockholder represents that the Stockholder has the complete
and unrestricted power and the unqualified right to enter into and perform the
terms of this Agreement. The Stockholder further represents and warrants that
this Agreement (assuming this Agreement constitutes a valid and binding
agreement of the Buyer) constitutes a valid and binding agreement with respect
to the Stockholder, enforceable against the Stockholder in accordance with its
terms, except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.
Except as set forth on Schedule 1, the Stockholder represents and warrants that
the Stockholder beneficially owns the number of Shares indicated opposite such
Stockholder's name on Schedule 1, free and clear of any liens, claims, charges
or other encumbrances or restrictions of any kind whatsoever ("Liens"), and has
sole or shared, and otherwise unrestricted, voting power with respect to such
Shares. The Stockholder further represents and warrants that the Stockholder
understands that at the Effective Time of the Merger, (a) each outstanding Share
listed on Schedule 1 shall be automatically cancelled and converted into the
right to receive $46.50, without interest, and (b) to the extent not exercised
in accordance with its terms prior to the Effective Time, each option to
purchase Shares listed on such Schedule shall be automatically cancelled and
converted into the right to receive an amount of cash determined in the manner
set forth in the Agreement and Plan of Merger.
4. The agreements with respect to voting and transfer contained in
Section 1 and, Section 2, respectively, hereof shall remain in full force and
effect until the earlier of (a) the
2
consummation of the Merger or (b) the termination of the Agreement and Plan of
Merger in accordance with Article VIII thereof.
5. The Stockholder has signed this Agreement intending to be
legally bound thereby. The Stockholder expressly agrees that this Agreement
shall be specifically enforceable in any court of competent jurisdiction in
accordance with its terms against the Stockholder. All of the covenants and
agreements contained in this Agreement shall be binding upon, and inure to the
benefit of, the respective parties and their permitted successors, assigns,
heirs, executors, administrators and other legal representatives, as the case
may be.
6. This Agreement may be executed in one or more counterparts, each
of which will be deemed an original but all of which together shall constitute
one and the same instrument.
7. No waivers of any breach of this Agreement extended by the Buyer
to the Stockholder shall be construed as a waiver of any rights or remedies of
the Buyer with respect to any other stockholder of the Seller who has executed a
copy of this Agreement with respect to Shares held or subsequently held by such
stockholder or with respect to any subsequent breach of the Stockholder or any
other such stockholder of the Seller.
8. This Agreement is deemed to be signed as a sealed instrument and
is to be governed by the laws of the Commonwealth of Pennsylvania, without
giving effect to the principles of conflicts of laws thereof. If any provision
hereof is deemed unenforceable, the enforceability of the other provisions
hereof shall not be affected.
9. The Stockholder is executing this Agreement only in the
Stockholder's capacity as a stockholder of the Seller, and not in the
Stockholder's capacity as a director, trustee, officer or employee of the Seller
or any of its subsidiaries. Nothing contained herein shall be construed to
create any obligation on the part of the Stockholder in such Stockholder's
capacity as a director, trustee, officer or employee of the Seller or any of its
subsidiaries.
[Remainder of Page Intentionally Left Blank]
3
EXECUTED as of the date first above written.
STOCKHOLDER
----------------------------------------
Name: [ ]
CITIZENS BANK OF PENNSYLVANIA
By:
-------------------------------------
Name: [ ]
Title: [ ]
4
SCHEDULE 1(1)
STOCKHOLDER SHARES OPTIONS
Notwithstanding anything in this Agreement to the contrary, the Stockholder does
not represent that the Stockholder has any voting or other power with respect to
any of the Shares set forth above which are Shares allocable to such
Stockholder's account under any employee stock ownership, deferred investment or
other similar plan of the Seller.
-----------------------
(1) Shares include shares allocable to a stockholder's account under the
Seller's employee stock ownership, deferred investment or other similar plans.
5
