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AGREEMENT AND PLAN OF MERGER
DATED AS OF MARCH 19, 2007
BY AND AMONG
NEW BRADFORD BANCORP, INC.
(a Maryland corporation)
BRADFORD BANK MHC
(a federally chartered mutual holding company)
BRADFORD BANCORP, INC.
(a federal corporation)
BRADFORD BANK
(a federally chartered savings bank)
AND
PATAPSCO BANCORP, INC.
(a Maryland corporation)
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TABLE OF CONTENTS
Page No.
Introductory Statement.......................................................1
ARTICLE I - DEFINITIONS......................................................2
ARTICLE II - THE MERGER......................................................7
2.1 The Merger................................................7
2.2 Closing...................................................7
2.3 Effective Time............................................7
2.4 Effects of the Merger.....................................7
2.5 Effect on Outstanding Shares of Patapsco Common Stock.....8
2.6 Election and Proration Procedures.........................8
2.7 Exchange Procedures......................................11
2.8 Effect on Outstanding Shares of Newco Common Stock.......13
2.9 Directors of Surviving Corporation After Effective Time..13
2.10 Articles of Incorporation and Bylaws.....................13
2.11 Treatment of Stock Options and Restricted Stock..........14
2.12 Dissenters' Rights.......................................14
2.13 Bank Merger..............................................15
2.14 The Conversion...........................................15
2.15 Alternative Structure....................................15
2.16 Absence of Control.......................................15
ARTICLE III - REPRESENTATIONS AND WARRANTIES................................15
3.1 Disclosure Letters.......................................15
3.2 Representations and Warranties of Patapsco...............16
3.3 Representations and Warranties of the Bradford Parties...32
ARTICLE IV - CONDUCT PENDING THE MERGER.....................................41
4.1 Forbearances by Patapsco.................................41
4.2 Forbearances by the Bradford Parties.....................44
ARTICLE V - COVENANTS.......................................................44
5.1 Acquisition Proposals....................................44
5.2 Advice of Changes........................................45
5.3 Access and Information...................................46
5.4 Applications; Consents...................................47
5.5 Antitakeover Provisions..................................47
5.6 Additional Agreements....................................47
5.7 Publicity................................................48
5.8 Stockholder Meeting......................................48
5.9 Registration of Newco Common Stock.......................49
5.10 Notification of Certain Matters..........................50
5.11 Employee Benefit Matters.................................50
5.12 Indemnification..........................................52
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5.13 Affiliate Letters........................................53
5.14 Environmental Reports....................................53
5.15 MHC Conversion from Mutual to Stock Form.................53
5.16 Accountant's Comfort Letter..............................55
5.17 Trust Preferred Securities...............................55
ARTICLE VI - CONDITIONS TO CONSUMMATION.....................................55
6.1 Conditions to Each Party's Obligations...................55
6.2 Conditions to the Obligations of the Newco...............56
6.3 Conditions to the Obligations of Patapsco................57
ARTICLE VII - TERMINATION...................................................58
7.1 Termination..............................................58
7.2 Termination Fees.........................................59
7.3 Effect of Termination....................................60
ARTICLE VIII - CERTAIN OTHER MATTERS........................................60
8.1 Interpretation...........................................60
8.2 Survival.................................................60
8.3 Waiver; Amendment........................................60
8.4 Counterparts.............................................60
8.5 Governing Law............................................60
8.6 Expenses.................................................61
8.7 Notices..................................................61
8.8 Entire Agreement; etc....................................61
8.9 Successors and Assigns; Assignment.......................62
8.10 Specific Performance.....................................62
EXHIBITS
Exhibit A Plan of Conversion
Exhibit B Form of Voting Agreement
Exhibit C Plan of Bank Merger
Exhibit D Form of Affiliate Letter
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Agreement and Plan of Merger
This is an Agreement and Plan of Merger, dated as of the 19th day of March,
2007 ("Agreement"), by and among New Bradford Bancorp, Inc., a Maryland
corporation ("Newco"), Bradford Bank MHC, a federally chartered mutual holding
company (the "MHC"), Bradford Bancorp, Inc., a federally chartered subsidiary
holding company ("Bradford"), Bradford Bank, a federally chartered savings bank
("Bradford Bank") and Patapsco Bancorp, Inc., a Maryland corporation
("Patapsco").
Introductory Statement
The respective Boards of Directors of Newco, MHC, Bradford and Bradford
Bank (collectively, the "Bradford Parties") and the Board of Directors of
Patapsco have each determined that this Agreement and the business combination
and related transactions contemplated hereby are advisable and in the best
interests of their respective corporations and stockholders or members, as the
case may be.
In connection with the Merger, it is intended that MHC will convert from
the mutual form of organization to the capital stock form of organization
pursuant to certain transactions (the "Conversion") as the result of which,
inter alia, Bradford Bank will become a wholly owned subsidiary of Newco, and
that in connection with such Conversion, Newco will conduct a subscription
offering of its common stock, and if necessary a community and/or syndicated
community offering, all pursuant to a plan of conversion, substantially in the
form attached at Exhibit A hereto and subject to regulatory review and amendment
in connection with such review as provided therein (the "Plan of Conversion").
The parties hereto intend that the Merger as defined herein shall qualify
as a reorganization under the provisions of Section 368(a) of the IRC for
federal income tax purposes.
The parties hereto desire to make certain representations, warranties and
agreements in connection with the business combination and related transactions
provided for herein and to prescribe various conditions to such transactions.
As a condition and inducement to the Bradford Parties' willingness to enter
into this Agreement, each of the members of the Board of Directors of Patapsco
has entered into an agreement dated as of the date hereof in the form of Exhibit
B pursuant to which he or she will vote his or her shares of Patapsco Common
Stock in favor of this Agreement and the transactions contemplated hereby.
In consideration of their mutual promises and obligations hereunder, the
parties hereto adopt and make this Agreement and prescribe the terms and
conditions hereof and the manner and basis of carrying it into effect, which
shall be as follows:
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ARTICLE I
DEFINITIONS
The following terms are defined in this Agreement in the Section indicated:
Defined Term Location of Definition
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Agreement Preamble
Articles of Merger Section 2.3
Bank Merger Section 2.13
Bradford Preamble
Bradford Bank Preamble
Bradford Employee Plans Section 3.3(u)(i)
Bradford Parties Recitals
Cash Consideration Section 2.5(a)
Cash Election Section 2.6(b)
Cash Election Shares Section 2.6(b)
Certificate(s) Section 2.6(c)
Change in Recommendation Section 5.8
Closing Section 2.2
Closing Date Section 2.2
Continuing Employee Section 5.11(a)
Conversion Recitals
Disclosure Letter Section 3.1
Dissenters' Shares Section 2.12
Effective Time Section 2.3
Election Deadline Section 2.6(c)
Election Form Section 2.6(a)
Environmental Consultant Section 5.14
Exchange Agent Section 2.6(c)
Exchange Ratio Section 2.5(a)
Indemnified Party Section 5.12(a)
Initial Offering Price Section 2.14
Intellectual Property Section 3.2(q)
Letter of Transmittal Section 2.7(a)
Mailing Date Section 2.6(a)
Maximum Insurance Amount Section 5.12(c)
Merger Section 2.1
Merger Consideration Section 2.5(a)
MHC Preamble
Mixed Election Section 2.6(b)
Newco Preamble
Non-Election Section 2.6(b)
Non-Election Shares Section 2.6(b)
Patapsco Preamble
Patapsco Employee Plans Section 3.2(s)(i)
Patapsco ESOP Section 5.11(c)
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Patapsco Option Section 2.11(a)
Patapsco Property Section 5.14
Patapsco Qualified Plan Section 3.2(s)(iv)
Patapsco's Reports Section 3.2(h)
Patapsco Stock Plans Section 2.11(a)
Pending Merger Agreements Section 3.2(t)
Pending Merger Applications Section 3.2(t)
Plan of Conversion Recitals
Proxy Statement Section 5.9(a)
Representative Section 2.6(b)
Target Organizations Section 3.2(t)
Termination Date Section 7.1(d)
Shortfall Number Section 2.6(e)(ii)
Stock Consideration Section 2.5(a)
Stock Conversion Number Section 2.6(d)
Stock Election Section 2.6(b)
Stock Election Number Section 2.6(b)
Stock Election Shares Section 2.6(b)
Stockholder Meeting Section 5.8
Surviving Corporation Section 2.1
In addition, for purposes of this Agreement:
"Acquisition Proposal" means any proposal or offer with respect to any of
the following (other than the transactions contemplated hereunder): (i) any
merger, consolidation, share exchange, business combination, or other similar
transaction involving Patapsco or any of its Subsidiaries; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 25% or more of
Patapsco's consolidated assets in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for 25% or more of the
outstanding shares of Patapsco's capital stock or the filing of a registration
statement under the Securities Act of 1933, as amended, in connection therewith;
or (iv) any public announcement of a proposal, plan or intention to do any of
the foregoing or any agreement to engage in an any of the foregoing.
"Agreement" means this Agreement, as amended, modified or amended and
restated from time to time in accordance with its terms.
"BHC Act" means the Bank Holding Company Act of 1956, as amended.
"BMA" means the Bank Merger Act, as amended (12 U.S.C. 1828(c)).
"Conversion Prospectus" means a prospectus issued by Newco in connection
with Offering that meets the requirements of the Securities Act, applicable
state securities laws and banking laws and regulations. The Conversion
Prospectus may be combined with the Proxy Statement delivered to stockholders of
Patapsco in connection with the solicitation of their approval of this Agreement
and the transactions contemplated hereby and the offering of the Newco Common
Stock to them as Merger Consideration.
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"Conversion Registration Statement" means the registration statement,
together with all amendments, filed with the SEC under the Securities Act for
the purpose of registering the shares of Newco Common Stock to be offered and
issued in connection with the Offering. The Conversion Registration Statement
and the Merger Registration Statement may be separate registration statements or
may be combined in one registration statement that shall register shares of
Newco Common Stock to be offered and issued in connection with the Offering and
to be offered to holders of Patapsco Common Stock in connection with the Merger.
"CRA" means the Community Reinvestment Act, as amended.
"Environmental Law" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, directive, executive or administrative order, judgment, decree,
injunction, or agreement with any Governmental Entity relating to (i) the
protection, preservation or restoration of the environment (which includes,
without limitation, air, water vapor, surface water, groundwater, drinking water
supply, soil, surface land, subsurface land, plant and animal life or any other
natural resource), or to human health or safety as it relates to Hazardous
Materials, or (ii) the exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of, Hazardous Materials, in each case as amended and as now in
effect. The term Environmental Law includes, without limitation, the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Superfund Amendments and Reauthorization Act of 1986, the Federal Water
Pollution Control Act of 1972, the Federal Clean Air Act, the Federal Clean
Water Act, the Federal Resource Conservation and Recovery Act of 1976, the
Federal Solid Waste Disposal and the Federal Toxic Substances Control Act, the
Federal Insecticide, Fungicide and Rodenticide Act, the Federal Occupational
Safety and Health Act of 1970 as it relates to Hazardous Materials, the Federal
Hazardous Substances Transportation Act, the Emergency Planning and Community
Right-To-Know Act, the Safe Drinking Water Act, the Endangered Species Act, the
National Environmental Policy Act, the Rivers and Harbors Appropriation Act or
any so-called "Superfund" or "Superlien" law, each as amended and as now in
effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any entity that is considered one employer with
Patapsco or Bradford, as applicable, under Section 4001(b)(1) of ERISA or
Section 414 of the IRC.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Shares" shall consist of (i) Dissenters' Shares and (ii) shares
held directly or indirectly by the Bradford Parties (other than shares held in a
fiduciary capacity or in satisfaction of a debt previously contracted).
"FDIC" means the Federal Deposit Insurance Corporation.
"FRB" means the Board of Governors of the Federal Reserve System.
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"GAAP" means generally accepted accounting principles.
"Government Regulator" means any federal or state governmental authority
charged with the supervision or regulation of depository institutions or
depository institution holding companies or engaged in the insurance of bank
deposits.
"Governmental Entity" means any court, administrative agency or commission
or other governmental authority or instrumentality.
"Hazardous Material" means any substance (whether solid, liquid or gas)
which is or could be detrimental to human health or safety or to the
environment, currently or hereafter listed, defined, designated or classified as
hazardous, toxic, radioactive or dangerous, or otherwise regulated, under any
Environmental Law, whether by type or by quantity, including any substance
containing any such substance as a component. Hazardous Material includes,
without limitation, any toxic waste, pollutant, contaminant, hazardous
substance, toxic substance, hazardous waste, special waste, industrial
substance, oil or petroleum, or any derivative or by-product thereof, radon,
radioactive material, asbestos, asbestos-containing material, urea formaldehyde
foam insulation, lead and polychlorinated biphenyl.
"HOLA" means the Home Owners' Loan Act, as amended.
"IRC" means the Internal Revenue Code of 1986, as amended.
"knowledge" means, with respect to a party hereto, actual knowledge of the
members of the Board of Directors of that party or any officer of that party
with the title ranking not less than vice president.
"Lien" means any charge, mortgage, pledge, security interest, claim, lien
or encumbrance.
"Loan" means a loan, lease, advance, credit enhancement, guarantee or other
extension of credit.
"Loan Property" means any property in which the applicable party (or a
subsidiary of it) holds a security interest and, where required by the context,
includes the owner or operator of such property, but only with respect to such
property.
"Material Adverse Effect" means an effect which is material and adverse to
the business, financial condition or results of operations of Patapsco or
Bradford, as the context may dictate, and its Subsidiaries taken as a whole;
provided, however, that any such effect resulting from any (i) changes in laws,
rules or regulations or generally accepted accounting principles or regulatory
accounting requirements or interpretations thereof that apply to both the
Bradford Parties and Patapsco, or to financial and/or depository institutions
generally, (ii) changes in economic conditions affecting financial institutions
generally, including but not limited to, changes in the general level of market
interest rates, (iii) actions and omissions of the Bradford Parties or Patapsco
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taken with the prior written consent of the other, (iv) changes in national or
international political or social conditions including the engagement by the
United States in hostilities, whether or not pursuant to the declaration of a
national emergency or war, or the occurrence of any military or terrorist attack
upon or within the United States, or any of its territories, possessions or
diplomatic or consular offices or upon any military installation, equipment or
personnel of the United States, or (v) direct effects of compliance with this
Agreement on the operating performance of the parties, including expenses
incurred by the parties in consummating the transactions contemplated by this
Agreement, shall not be considered in determining if a Material Adverse Effect
has occurred.
"Merger Registration Statement" means the registration statement on Form
S-4, together with all amendments, filed with the SEC under the Securities Act
for the purpose of registering the shares of Newco Common Stock to be offered to
holders of Patapsco Common Stock issued in connection with the Merger. The
Conversion Registration Statement and the Merger Registration Statement may be
separate registration statements or may be combined in one registration
statement that shall register shares of Newco Common Stock to be offered and
issued in connection with the Offering and to be offered to holders of Patapsco
Common Stock in connection with the Merger.
"MGCL" means the Maryland General Corporation Law.
"Newco Common Stock" means the common stock, par value $.01 per share, of
Newco.
"Offering" means the offering of shares of Newco Common Stock in a
subscription offering and, if necessary, a community offering and/or a
syndicated community offering as part of the Conversion.
"OTS" means the Office of Thrift Supervision.
"Participation Facility" means any facility in which the applicable party
(or a Subsidiary of it) participates in the management (including all property
held as trustee or in any other fiduciary capacity) and, where required by the
context, includes the owner or operator of such property, but only with respect
to such property.
"Patapsco Common Stock" means the common stock, par value $.01 per share,
of Patapsco.
"person" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization or other entity.
"SDAT" means the Maryland State Department of Assessments and Taxation.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
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"Subsidiary" means a corporation, partnership, joint venture or other
entity in which a party has, directly or indirectly, an equity interest
representing 50% or more of any class of the capital stock thereof or other
equity interests therein.
"Superior Proposal" means an unsolicited, bona fide written offer made by a
third party to consummate an Acquisition Proposal that (i) Patapsco's Board of
Directors determines in good faith, after consulting with its outside legal
counsel and a financial advisor other than Bradford's financial advisor on this
transaction, would, if consummated, result in a transaction that is more
favorable to the stockholders of Patapsco from a financial point of view than
the transactions contemplated hereby (taking into account all legal, financial,
regulatory and other aspects of the proposal and the entity making the
proposal), (ii) is not conditioned on obtaining financing (and with respect to
which Bradford and Newco has received written evidence of such person's ability
to fully finance its Acquisition Proposal), and (iii) is for 100% of the
outstanding shares of Patapsco Common Stock.
"Tax(es)" means all income, franchise, gross receipts, real and personal
property, real property transfer and gains, wage and employment taxes.
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, Patapsco will merge with and into Newco (the "Merger") at the
Effective Time. At the Effective Time, the separate corporate existence of
Patapsco shall cease. Newco shall be the surviving corporation (hereinafter
sometimes referred to in such capacity as the "Surviving Corporation") in the
Merger and shall continue to be governed by the MGCL and its name and separate
corporate existence, with all of its rights, privileges, immunities, powers and
franchises, shall continue unaffected by the Merger.
2.2 Closing. Subject to the satisfaction or waiver of all of the conditions
to closing contained in Article VI hereof (other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the fulfillment
or waiver of those conditions), the closing of the Merger (the "Closing") will
take place in the offices of Xxxxxxx Xxxxxx & Xxxxxxx LLP, 0000 Xxxxxxxxx
Xxxxxx, Xxxxxxxxxx, XX, or at such other location as is agreed to by the parties
hereto, on the date of the closing of the Conversion (the "Closing Date"),
immediately following the completion of the Conversion, unless another time or
date is agreed to by the parties hereto.
2.3 Effective Time. In connection with the Closing, Newco and Patapsco
shall duly execute and deliver articles of merger (the "Articles of Merger") to
the SDAT for filing pursuant to the MGCL. The Merger shall become effective at
such time as the Articles of Merger are duly filed with the SDAT or at such
later date or time as the parties shall agree and specify in the Articles of
Merger (the date and time the Merger becomes effective being the "Effective
Time").
2.4 Effects of the Merger. The Merger will have the effects set forth in
the MGCL. Without limiting the generality of the foregoing, and subject thereto,
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from and after the Effective Time, Newco shall possess all of the properties,
rights, privileges, powers and franchises of Patapsco and be subject to all of
the debts, liabilities and obligations of Patapsco.
2.5 Effect on Outstanding Shares of Patapsco Common Stock.
(a) Subject to the provisions of Section 2.6 hereof, by virtue of the
Merger, automatically and without any action on the part of the holder thereof,
each share of Patapsco Common Stock issued and outstanding at the Effective
Time, other than Excluded Shares, shall become and be converted into, at the
election of the holder as provided in and subject to the limitations set forth
in this Agreement, either the right to receive (i) $23.00 in cash, without
interest (the "Cash Consideration") or (ii) the number of shares of Newco Common
Stock equal to the Exchange Ratio, as defined below (the "Stock Consideration").
The Cash Consideration and the Stock Consideration are sometimes referred to
herein collectively as the "Merger Consideration." The "Exchange Ratio" shall be
equal to the result obtained by dividing the Cash Consideration by the Initial
Offering Price, as defined below.
(b) Notwithstanding any other provision of this Agreement, no fraction
of a share of Newco Common Stock and no certificates or scrip therefor will be
issued in the Merger; instead, Newco shall pay to each holder of Patapsco Common
Stock who would otherwise be entitled to a fraction of a share of Newco Common
Stock an amount in cash, rounded to the nearest cent, determined by multiplying
such fraction by the Initial Offering Price.
(c) If, between the date of this Agreement and the Effective Time, the
outstanding shares of Newco Common Stock shall have been changed into a
different number of shares or into a different class by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares, the Exchange Ratio shall be adjusted appropriately to
provide the holders of Patapsco Common Stock the same economic effect as
contemplated by this Agreement prior to such event.
(d) As of the Effective Time, each Excluded Share, other than
Dissenters' Shares, shall be canceled and retired and shall cease to exist, and
no exchange or payment shall be made with respect thereto. In addition, no
Dissenters' Shares shall be converted into shares of Newco Common Stock pursuant
to this Section 2.5 but instead shall be treated in accordance with the
provisions set forth in Section 2.12 of this Agreement.
2.6 Election and Proration Procedures.
(a) An election form in such form as Patapsco and Newco shall mutually
agree (an "Election Form") shall be mailed on the Mailing Date (as defined
below) to each holder of record of shares of Patapsco Common Stock as of a
record date which shall be the same date as the record date for eligibility to
vote on the Merger. The "Mailing Date" shall be the date on which proxy
materials relating to the Merger are mailed to holders of shares of Patapsco
Common Stock. Newco shall make available Election Forms as may be reasonably
requested by all persons who become holders of Patapsco Common Stock after the
record date for eligibility to vote on the Merger and prior to the Election
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Deadline (as defined herein), and Patapsco shall provide to the Exchange Agent
all information reasonably necessary for it to perform its obligations as
specified herein.
(b) Each Election Form shall entitle the holder of shares of Patapsco
Common Stock (or the beneficial owner through appropriate and customary
documentation and instructions) to (i) elect to receive the Cash Consideration
for all of such holder's shares (a "Cash Election"), (ii) elect to receive the
Stock Consideration for all of such holder's shares (a "Stock Election"), (iii)
elect to receive the Cash Consideration with respect to some of such holder's
shares and the Stock Consideration with respect to such holder's remaining
shares (a "Mixed Election") or (iv) make no election or to indicate that such
holder has no preference as to the receipt of the Cash Consideration or the
Stock Consideration (a "Non-Election"). Holders of record of shares of Patapsco
Common Stock who hold such shares as nominees, trustees or in other
representative capacities (a "Representative") may submit multiple Election
Forms, provided that such Representative certifies that each such Election Form
covers all the shares of Patapsco Common Stock held by that Representative for a
particular beneficial owner. Shares of Patapsco Common Stock as to which a Cash
Election has been made (including pursuant to a Mixed Election) are referred to
herein as "Cash Election Shares." Shares of Patapsco Common Stock as to which a
Stock Election has been made (including pursuant to a Mixed Election) are
referred to herein as "Stock Election Shares." Shares of Patapsco Common Stock
as to which no election has been made are referred to as "Non-Election Shares."
The aggregate number of shares of Patapsco Common Stock with respect to which a
Stock Election has been made is referred to herein as the "Stock Election
Number."
(c) To be effective, a properly completed Election Form must be
received by the transfer agent for Newco Common Stock (the "Exchange Agent") on
or before 5:00 p.m., New York City time, on the Election Deadline. As used
herein, "Election Deadline" means the date, as reasonably determined by Newco,
that is as close as possible to the fifth business day prior to the date on
which the Effective Time is expected to occur. An election shall have been
properly made only if the Exchange Agent shall have actually received a properly
completed Election Form by the Election Deadline. An Election Form shall be
deemed properly completed only if accompanied by one or more certificates
theretofore representing Patapsco Common Stock ("Certificate(s)") (or customary
affidavits and, if required by Newco pursuant to Section 2.7(i), indemnification
regarding the loss or destruction of such Certificates or the guaranteed
delivery of such Certificates) representing all shares of Patapsco Common Stock
covered by such Election Form, together with duly executed transmittal materials
included with the Election Form. Any Patapsco stockholder may at any time prior
to the Election Deadline change his or her election by written notice received
by the Exchange Agent prior to the Election Deadline accompanied by a properly
completed and signed revised Election Form. Any Patapsco stockholder may, at any
time prior to the Election Deadline, revoke his or her election by written
notice received by the Exchange Agent prior to the Election Deadline or by
withdrawal prior to the Election Deadline of his or her Certificates, or of the
guarantee of delivery of such Certificates, previously deposited with the
Exchange Agent. All elections shall be revoked automatically if the Exchange
Agent is notified in writing by Newco and Patapsco that this Agreement has been
terminated. If a stockholder either (i) does not submit a properly completed
Election Form by the Election Deadline or (ii) revokes its Election Form prior
to the Election Deadline and does not submit a new properly executed Election
Form prior to the Election Deadline, the shares of Patapsco Common Stock held by
such stockholder shall be designated Non-Election Shares. Newco shall cause the
Certificates representing Patapsco Common Stock described in clause (ii) to be
9
promptly returned without charge to the person submitting the Election Form upon
written request to that effect from the person who submitted the Election Form.
Subject to the terms of this Agreement and of the Election Form, the Exchange
Agent shall have reasonable discretion to determine whether any election,
revocation or change has been properly or timely made and to disregard
immaterial defects in any Election Form, and any good faith decisions of the
Exchange Agent regarding such matters shall be binding and conclusive.
(d) Notwithstanding any other provision contained in this Agreement,
50% of the total number of shares of Patapsco Common Stock outstanding at the
Effective Time (the "Stock Conversion Number") shall be converted into the Stock
Consideration and the remaining outstanding shares of Patapsco Common Stock
(excluding shares of Patapsco Common Stock to be canceled as provided in Section
2.5(d) and Dissenters' Shares) shall be converted into the Cash Consideration;
provided, however, that for federal income tax purposes, it is intended that the
Merger will qualify as a reorganization under the provisions of Section 368(a)
of the IRC and, notwithstanding anything to the contrary contained herein, in
order that the Merger will not fail to satisfy continuity of interest
requirements under applicable federal income tax principles relating to
reorganizations under Section 368(a) of the IRC, Newco shall increase the number
of shares of Patapsco Common Stock that will be converted into the Stock
Consideration and reduce the number of shares of Patapsco Common Stock that will
be converted into the right to receive the Cash Consideration to ensure that the
Stock Consideration will represent at least 40% of the value of the aggregate
Merger Consideration, increased by the value of any Excluded Shares, each as
measured as of the Effective Time.
(e) Within five business days after the later to occur of the Election
Deadline or the Effective Time, Newco shall cause the Exchange Agent to effect
the allocation among holders of Patapsco Common Stock of rights to receive the
Cash Consideration and the Stock Consideration as follows:
(i) If the Stock Election Number exceeds the Stock Conversion
Number, then all Cash Election Shares and all Non-Election Shares shall be
converted into the right to receive the Cash Consideration, and each holder of
Stock Election Shares will be entitled to receive (A) the Stock Consideration in
respect of the number of Stock Election Shares held by such holder multiplied by
a fraction, the numerator of which is the Stock Conversion Number and the
denominator of which is the Stock Election Number and (B) the Cash Consideration
in respect of the remaining number of such holder's Stock Election Shares;
(ii) If the Stock Election Number is less than the Stock
Conversion Number (the amount by which the Stock Conversion Number exceeds the
Stock Election Number being referred to herein as the "Shortfall Number"), then
all Stock Election Shares shall be converted into the right to receive the Stock
Consideration and the Non-Election Shares and Cash Election Shares shall be
treated in the following manner:
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(A) if the Shortfall Number is less than or equal to the
number of Non-Election Shares, then all Cash Election Shares shall be converted
into the right to receive the Cash Consideration and each holder of Non-Election
Shares shall receive (1) the Stock Consideration in respect of the number of
Non-Election Shares held by such holder multiplied by a fraction, the numerator
of which is the Shortfall Number and the denominator of which is the total
number of Non-Election Shares and (2) the Cash Consideration in respect of the
remaining number of such holder's Non-Election Shares; or
(B) if the Shortfall Number exceeds the number of
Non-Election Shares, then all Non-Election Shares shall be converted into the
right to receive the Stock Consideration, and each holder of Cash Election
Shares shall receive (1) the Stock Consideration in respect of the number of
Cash Election Shares held by such holder multiplied by a fraction, the numerator
of which is the amount by which the Shortfall Number exceeds the number of
Non-Election Shares and the denominator of which is the total number of Cash
Election Shares and (2) the Cash Consideration in respect of the remaining
number of such holder's Cash Election Shares.
For purposes of the foregoing calculations, Excluded Shares shall be
deemed Cash Election Shares. For purposes of this Section 2.6(e), if Newco is
obligated to increase the number of shares of Patapsco Common Stock to be
converted into shares of Newco Common Stock as a result of the application of
the last clause of Section 2.6(d) above, then the higher number shall be
substituted for the Stock Conversion Number in the calculations set forth in
this Section 2.6(e).
2.7 Exchange Procedures.
(a) Appropriate transmittal materials ("Letter of Transmittal") in a
form satisfactory to Newco and Patapsco shall be mailed as soon as practicable
(but in no event later than five business days) after the Effective Time to each
holder of record of Patapsco Common Stock as of the Effective Time who did not
previously submit a completed Election Form. A Letter of Transmittal will be
deemed properly completed only if accompanied by certificates representing all
shares of Patapsco Common Stock to be converted thereby or other acceptable
documentation.
(b) At and after the Effective Time, each Certificate (except as
specifically set forth in Section 2.5) shall represent only the right to receive
the Merger Consideration.
(c) Prior to the Effective Time, Newco shall (i) reserve for issuance
with its transfer agent and registrar a sufficient number of shares of Newco
Common Stock to provide for payment of the aggregate Stock Consideration and
(ii) deposit, or cause to be deposited, with the Exchange Agent, for the benefit
of the holders of shares of Patapsco Common Stock, for exchange in accordance
with this Section 2.7, an amount of cash sufficient to pay the aggregate Cash
Consideration.
(d) The Letter of Transmittal shall (i) specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
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delivery of the Certificates to the Exchange Agent, (ii) be in a form and
contain any other provisions as Newco may reasonably determine and (iii) include
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon the proper surrender of the Certificates to
the Exchange Agent, together with a properly completed and duly executed Letter
of Transmittal, the holder of such Certificates shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Newco Common Stock that such holder has the right to receive pursuant to Section
2.5, if any, and a check in the amount equal to the cash that such holder has
the right to receive pursuant to Section 2.5, if any (including any cash in lieu
of fractional shares, if any, that such holder has the right to receive pursuant
to Section 2.5, and any dividends or other distributions to which such holder is
entitled pursuant to Section 2.5). Certificates so surrendered shall forthwith
be canceled. As soon as practicable following receipt of the properly completed
Letter of Transmittal and any necessary accompanying documentation, the Exchange
Agent shall distribute Newco Common Stock and cash as provided herein. The
Exchange Agent shall not be entitled to vote or exercise any rights of ownership
with respect to the shares of Newco Common Stock held by it from time to time
hereunder, except that it shall receive and hold all dividends or other
distributions paid or distributed with respect to such shares for the account of
the persons entitled thereto. If there is a transfer of ownership of any shares
of Patapsco Common Stock not registered in the transfer records of Patapsco, the
Merger Consideration shall be issued to the transferee thereof if the
Certificates representing such Patapsco Common Stock are presented to the
Exchange Agent, accompanied by all documents required, in the reasonable
judgment of Newco and the Exchange Agent, to evidence and effect such transfer
and to evidence that any applicable stock transfer taxes have been paid.
(e) No dividends or other distributions declared or made after the
Effective Time with respect to Newco Common Stock issued pursuant to this
Agreement shall be remitted to any person entitled to receive shares of Newco
Common Stock hereunder until such person surrenders his or her Certificates in
accordance with this Section 2.7. Upon the surrender of such person's
Certificates, such person shall be entitled to receive any dividends or other
distributions, without interest thereon, which subsequent to the Effective Time
had become payable but not paid with respect to shares of Newco Common Stock
represented by such person's Certificates.
(f) The stock transfer books of Patapsco shall be closed immediately
upon the Effective Time and from and after the Effective Time there shall be no
transfers on the stock transfer records of Patapsco of any shares of Patapsco
Common Stock. If, after the Effective Time, Certificates are presented to Newco,
they shall be canceled and exchanged for the Merger Consideration deliverable in
respect thereof pursuant to this Agreement in accordance with the procedures set
forth in this Section 2.7.
(g) Any portion of the aggregate amount of cash to be paid pursuant to
Section 2.5, any dividends or other distributions to be paid pursuant to this
Section 2.7 or any proceeds from any investments thereof that remains unclaimed
by the stockholders of Patapsco for six months after the Effective Time shall be
repaid by the Exchange Agent to Newco upon the written request of Newco. After
such request is made, any stockholders of Patapsco who have not theretofore
complied with this Section 2.7 shall look only to Newco for the Merger
Consideration deliverable in respect of each share of Patapsco Common Stock such
stockholder holds, as determined pursuant to Section 2.5 of this Agreement,
without any interest thereon. If outstanding Certificates are not surrendered
prior to the date on which such payments would otherwise escheat to or become
the property of any governmental unit or agency, the unclaimed items shall, to
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the extent permitted by any abandoned property, escheat or other applicable
laws, become the property of Newco (and, to the extent not in its possession,
shall be paid over to it), free and clear of all claims or interest of any
person previously entitled to such claims. Notwithstanding the foregoing,
neither the Exchange Agent nor any party to this Agreement (or any affiliate
thereof) shall be liable to any former holder of Patapsco Common Stock for any
amount delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(h) Newco and the Exchange Agent shall be entitled to rely upon
Patapsco's stock transfer books to establish the identity of those persons
entitled to receive the Merger Consideration, which books shall be conclusive
with respect thereto. In the event of a dispute with respect to ownership of
stock represented by any Certificate, Newco and the Exchange Agent shall be
entitled to deposit any Merger Consideration represented thereby in escrow with
an independent third party and thereafter be relieved with respect to any claims
thereto.
(i) If any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such Certificate
to be lost, stolen or destroyed and, if required by the Exchange Agent or Newco,
the posting by such person of a bond in such amount as the Exchange Agent may
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration deliverable in respect
thereof pursuant to Section 2.5.
2.8 Effect on Outstanding Shares of Newco Common Stock. At the Effective
Time, each share of Newco Common Stock issued and outstanding immediately prior
to the Effective Time shall remain issued and outstanding and shall not be
affected by the Merger.
2.9 Directors of Surviving Corporation After Effective Time. Immediately
after the Effective Time, until their respective successors are duly elected or
appointed and qualified, the directors of the Surviving Corporation shall
consist of the directors of Newco serving immediately prior to the Effective
Time. Newco shall take all action necessary to appoint two members of Patapsco's
Board of Directors, selected by Newco prior to the mailing of the Proxy
Statement, to the Boards of Directors of Newco and Bradford Bank, effective
immediately following the Effective Time. To the extent consistent with the
requirement to stagger the terms of the directors of Newco and Bradford Bank,
Newco and Bradford Bank will nominate one such person for election at the 2008
annual meeting of stockholders to a one year term and one such person for
election to a three year term.
2.10 Articles of Incorporation and Bylaws. The articles of incorporation of
Newco, as in effect immediately prior to the Effective Time, shall be the
articles of incorporation of the Surviving Corporation until thereafter amended
in accordance with applicable law. The bylaws of Newco, as in effect immediately
prior to the Effective Time, shall be the bylaws of the Surviving Corporation
until thereafter amended in accordance with applicable law.
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2.11 Treatment of Stock Options and Restricted Stock.
(a) As soon as practicable following the date of this Agreement,
Patapsco's Board of Directors shall adopt such resolutions or take such other
actions as are required to provide for the cancellation of all outstanding
options to acquire shares of Patapsco Common Stock (each, a "Patapsco Option")
issued pursuant to the equity-based compensation plans identified in Section
3.2(s) of the Patapsco Disclosure Letter (the "Patapsco Stock Plans"), whether
or not vested, as of the Effective Time in exchange for a cash payment by
Patapsco in cash an amount equal to the product of (i) the number of shares of
Patapsco Common Stock subject to such option at the Effective Time and (ii) the
amount by which the Cash Consideration exceeds the exercise price per share of
such option, net of any cash which must be withheld under federal and state
income and employment tax requirements. In the event that the exercise price of
a Patapsco Option is greater than the Cash Consideration, then at the Effective
Time such Patapsco Option shall be canceled without any payment made in exchange
therefor. Notwithstanding the foregoing, any vested Patapsco Option may be
exercised in accordance with its terms at any time prior to the Effective Time.
(b) At the Effective Time, each share of restricted stock outstanding
as of the Effective Time and issued pursuant to the Patapsco Bancorp, Inc. 2004
Stock Incentive Plan, to the extent not already vested, shall vest and shall
represent a right to receive the same Merger Consideration provided to other
holders of Patapsco Common Stock pursuant to Section 2.5 above, net of any
amounts that must be withheld under federal and state income and employment tax
requirements.
2.12 Dissenters' Rights. Notwithstanding any other provision of this
Agreement to the contrary, shares of Patapsco Common Stock that are outstanding
immediately prior to the Effective Time and which are held by stockholders who
shall have filed with Patapsco a written objection to the Merger in compliance
with applicable Maryland law and who shall have not voted in favor of the Merger
or consented thereto in writing (collectively, the "Dissenters' Shares") shall
not be converted into or represent the right to receive the Merger
Consideration. Such stockholders instead shall be entitled to demand and receive
payment of the fair value of such shares held by them in accordance with the
provisions of the MGCL, except that all Dissenters' Shares held by stockholders
who shall have failed to perfect or who effectively shall have withdrawn or
otherwise lost their rights as dissenting stockholders under the MGCL shall
thereupon be deemed to have been converted into and to have become exchangeable,
as of the Effective Time, for the right to receive, without any interest
thereon, the Merger Consideration upon surrender in the manner provided in
Section 2.7 of the Certificate(s) that, immediately prior to the Effective Time,
evidenced such shares. Patapsco shall give Newco (i) prompt notice of any
objections to the Merger, written demands for payment of fair value of any
shares of Patapsco Common Stock, attempted withdrawals of such demands and any
other instruments served pursuant to the MGCL and received by Patapsco relating
to stockholders' dissenters' rights and (ii) the opportunity to participate in
all negotiations and proceedings with respect to demands under the MGCL
consistent with the obligations of Patapsco thereunder. Patapsco shall not,
except with the prior written consent of Newco, (x) make any payment with
respect to such demand, (y) offer to settle or settle any demand for payment of
fair value or (z) waive any failure to timely deliver a written demand for
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payment of fair value or timely take any other action to perfect payment of fair
value rights in accordance with the MGCL.
2.13 Bank Merger. Concurrently with or as soon as practicable after the
execution and delivery of this Agreement, Bradford Bank and The Patapsco Bank, a
wholly owned subsidiary of Patapsco, shall enter into the Plan of Bank Merger,
in the form attached hereto as Exhibit C, pursuant to which The Patapsco Bank
will merge with and into Bradford Bank (the "Bank Merger"). The parties intend
that the Bank Merger will become effective simultaneously with or immediately
following the Effective Time.
2.14 The Conversion. Contemporaneous with the adoption of this Agreement,
the Board of Directors of MHC is adopting the Plan of Conversion to convert into
the capital stock form of organization. Newco is being organized to become the
parent of Bradford Bank and to offer for sale shares of common stock to the
Participants (as defined in the Plan of Conversion) in the Conversion. The price
per share of the shares of Newco Common Stock to be issued in the Conversion is
referred to as the "Initial Offering Price." The Initial Offering Price is
expected to be $10.00. The shares of Newco Common Stock to be issued in
connection with the Merger may be either shares unsubscribed for in the
Conversion subscription or community offerings, or to the extent such shares are
unavailable, authorized but unissued shares of Newco Common Stock, which shares
shall be issued immediately following completion of the Conversion.
2.15 Alternative Structure. Notwithstanding anything to the contrary
contained in this Agreement, prior to the Effective Time, Bradford or Newco
shall be entitled to revise the structure of the Merger, the Bank Merger or the
Conversion, provided that (i) there are no adverse federal or state income tax
consequences to Patapsco stockholders as a result of the modification; (ii) the
consideration to be paid to the holders of Patapsco Common Stock under this
Agreement is not thereby changed in kind or value or reduced in amount as a
result of such change in structure and, in the case of any revision to the
structure of the Conversion, the pro forma capitalization of Newco (or the
corporation issuing its capital stock to Patapsco stockholders giving effect to
such revision) shall not be materially different than that contemplated by the
Plan of Conversion; and (iii) such modification will not materially delay or
jeopardize receipt of any required regulatory approvals or other consents and
approvals relating to the consummation of the Merger. Each of the parties hereto
agrees to appropriately amend this Agreement and any related documents in order
to reflect any such revised structure.
2.16 Absence of Control. Subject to any specific provisions of this
Agreement, it is the intent of the parties hereto that the Bradford Parties by
reason of this Agreement shall not be deemed (until consummation of the
transactions contemplated hereby) to control, directly or indirectly, Patapsco
or to exercise, directly or indirectly, a controlling influence over the
management or policies of Patapsco.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Disclosure Letters. Prior to the execution and delivery of this
Agreement, the Bradford Parties and Patapsco have each delivered to the other a
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letter (each, its "Disclosure Letter") setting forth, among other things, facts,
circumstances and events the disclosure of which is required or appropriate
either in response to an express disclosure requirement contained in a provision
hereof or as an exception to one or more of their respective representations and
warranties (and making specific reference to the Section of this Agreement to
which they relate). Any disclosures made with respect to a subsection of Section
3.2 or 3.3 shall be deemed to qualify (i) any subsections of Section 3.2 or 3.3
specifically referenced or cross-referenced and (ii) other subsections of
Section 3.2 or 3.3 to the extent that it is reasonably apparent (notwithstanding
the absence of a specific cross-reference) from a reading of the disclosure that
such disclosure is relevant to such other subsections and contains sufficient
detail to enable a reasonable person to recognize the relevance of such
disclosure to such other subsections.
3.2 Representations and Warranties of Patapsco. Patapsco represents and
warrants to the Bradford Parties that, except as disclosed in Patapsco's
Disclosure Letter:
(a) Organization and Qualification. Patapsco is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland and is registered as a bank holding company under the BHC Act. Patapsco
has all requisite corporate power and authority to own, lease and operate its
properties and to conduct the business currently being conducted by it. Patapsco
is duly qualified or licensed as a foreign corporation to transact business and
is in good standing in each jurisdiction in which the character of the
properties owned or leased by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so qualified or licensed and in good standing would not have a Material Adverse
Affect on Patapsco.
(b) Subsidiaries.
(i) Patapsco's Disclosure Letter sets forth with respect to each
of Patapsco's Subsidiaries its name, its jurisdiction of incorporation,
Patapsco's percentage ownership, the number of shares of stock owned or
controlled by Patapsco and the name and number of shares held by any other
person who owns any stock of the Subsidiary. Patapsco owns of record and
beneficially all the capital stock of each of its Subsidiaries free and clear of
any Liens. There are no contracts, commitments, agreements or understandings
relating to Patapsco's right to vote or dispose of any equity securities of its
Subsidiaries. Patapsco's ownership interest in each of its Subsidiaries is in
compliance with all applicable laws, rules and regulations relating to equity
investments by bank holding companies.
(ii) Each of Patapsco's Subsidiaries is a corporation duly
organized and validly existing under the laws of its jurisdiction of
incorporation, has all requisite corporate power and authority to own, lease and
operate its properties and to conduct the business currently being conducted by
it and is duly qualified or licensed as a foreign corporation to transact
business and is in good standing in each jurisdiction in which the character of
the properties owned or leased by it or the nature of the business conducted by
it makes such qualification or licensing necessary, except where the failure to
be so qualified or licensed and in good standing would not have a Material
Adverse Affect on such Subsidiary.
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(iii) The outstanding shares of capital stock of each Subsidiary
have been validly authorized and are validly issued, fully paid and
nonassessable. No shares of capital stock of any Subsidiary of Patapsco are or
may be required to be issued by virtue of any options, warrants or other rights,
no securities exist that are convertible into or exchangeable for shares of such
capital stock or any other debt or equity security of any Subsidiary, and there
are no contracts, commitments, agreements or understandings of any kind for the
issuance of additional shares of capital stock or other debt or equity security
of any Subsidiary or options, warrants or other rights with respect to such
securities.
(iv) No Subsidiary of Patapsco other than The Patapsco Bank is an
"insured depository institution" as defined in the Federal Deposit Insurance
Act, as amended, and the applicable regulations thereunder. The Patapsco Bank's
deposits are insured by the FDIC to the fullest extent permitted by law. The
Patapsco Bank is a member in good standing of the Federal Home Loan Bank of
Atlanta.
(c) Capital Structure.
(i) The authorized capital stock of Patapsco consists of 4,000,000
shares of Patapsco Common Stock and 1,000,000 shares of preferred stock, par
value $.01 per share.
(ii) As of the date of this Agreement: (A) 1,889,033 shares of
Patapsco Common Stock are issued and outstanding and no shares of preferred
stock are outstanding; and (B) no shares of Patapsco Common Stock are reserved
for issuance except for 68,297 shares of Patapsco Common Stock reserved for
issuance upon the exercise of Patapsco Options issued pursuant to the Patapsco
Stock Plans and 40,769 shares of Patapsco Common Stock reserved for issuance in
connection with outstanding deferred compensation obligations. All of the issued
and outstanding shares of Patapsco Common Stock have been, and all shares of
Patapsco Common Stock that may be issued upon the exercise of Patapsco Stock
Options will be, when issued in accordance with the terms thereof, validly
issued, fully paid and nonassessable and are free of preemptive rights.
(iii) Set forth in Patapsco's Disclosure Letter is a complete and
accurate list of all outstanding Patapsco Options, including the names of the
optionees, dates of grant, exercise prices, dates of vesting, dates of
termination, shares subject to each grant and whether stock appreciation,
limited or other similar rights were granted in connection with such options.
The per share exercise price or purchase price for each Patapsco Option is equal
to or greater than the fair market value of the underlying shares of Patapsco
Common Stock determined as prescribed by the relevant Patapsco Stock Plan on the
effective date of the corporate action effectuating the grant of such Patapsco
Option.
(iv) No bonds, debentures, notes or other indebtedness having the
right to vote on any matters on which stockholders of Patapsco may vote are
issued or outstanding.
(v) Except pursuant to the Patapsco Stock Plans, neither Patapsco
nor any of its Subsidiaries has or is bound by any outstanding subscriptions,
17
options, warrants, calls, rights, convertible securities, commitments or
agreements of any character obligating Patapsco or any of its Subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, any additional
shares of capital stock of Patapsco or obligating Patapsco or any of its
Subsidiaries to grant, extend or enter into any such option, warrant, call,
right, convertible security, commitment or agreement. As of the date hereof,
there are no outstanding contractual obligations of Patapsco or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of Patapsco or any of its Subsidiaries.
(d) Authority. Patapsco has all requisite corporate power and
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement have been duly authorized by all necessary corporate actions
on the part of Patapsco's Board of Directors. The Board of Directors of Patapsco
has determined that this Agreement and the transactions contemplated hereby are
advisable and in the best interests of Patapsco and its stockholders and has
directed that this Agreement and the transactions contemplated by this Agreement
be submitted to Patapsco's stockholders for adoption at a duly held meeting of
such stockholders and, except for the approval of this Agreement and the
transactions contemplated by this Agreement by the affirmative vote of the
holders of at least two-thirds of the outstanding shares of Patapsco Common
Stock entitled to vote on such proposal at such meeting at which a quorum is
present, no other corporate proceedings on the part of Patapsco are necessary to
approve this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Patapsco and
constitutes a valid and binding obligation of Patapsco, enforceable against
Patapsco in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally
and to general principles of equity, whether applied in a court of law or a
court of equity.
(e) No Violations. The execution, delivery and performance of this
Agreement by Patapsco do not, and the consummation of the transactions
contemplated by this Agreement will not, (i) assuming all required governmental
approvals have been obtained and the applicable waiting periods have expired,
violate any law, rule or regulation or any judgment, decree, order, governmental
permit or license to which Patapsco or any of its Subsidiaries (or any of their
respective properties) is subject, (ii) violate the articles of incorporation or
bylaws of Patapsco or the similar organizational documents of any of its
Subsidiaries or (iii) constitute a breach or violation of, or a default under
(or an event which, with due notice or lapse of time or both, would constitute a
default under), or result in the termination of, accelerate the performance
required by, or result in the creation of any Lien upon any of the properties or
assets of Patapsco or any of its Subsidiaries under, any of the terms,
conditions or provisions of any note, bond, indenture, deed of trust, loan
agreement or other agreement, instrument or obligation to which Patapsco or any
of its Subsidiaries is a party, or to which any of their respective properties
or assets may be subject except, in the case of (iii), for any such breaches,
violations or defaults that would not, individually or in the aggregate, have a
Material Adverse Effect on Patapsco.
(f) Consents and Approvals. Except for (i) the filing of the Merger
Registration Statement and the declaration of effectiveness of the Merger
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Registration Statement by the SEC, and such proxy solicitation materials and
reports under the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated by this Agreement; (ii) the filing
of the Articles of Merger with the SDAT and such filings with Governmental
Entities to satisfy the applicable requirements of the laws of states in which
Patapsco and its Subsidiaries are qualified or licensed to do business or state
securities or "blue sky" laws; (iii) the approval of FRB under the BHC Act in
connection with the merger of Patapsco and Newco, or the waiver thereof; (iv)
the approval or non-objection of the OTS under the HOLA in connection with the
merger of Patapsco and Newco and the approval of the OTS under the BMA in
connection with the merger of Bradford Bank and The Patapsco Bank; and (v) the
approval of the Maryland Superintendent of Financial Regulation in connection
with the acquisition of the voting stock of The Patapsco Bank as a result of the
merger of Patapsco and Newco, no consents or approvals of or filings or
registrations with any Governmental Entity are necessary in connection with (A)
the execution and delivery by Patapsco of this Agreement and (B) the
consummation by Patapsco of the Merger and the other transactions contemplated
by this Agreement. As of the date hereof, Patapsco has no knowledge of any
reason pertaining to Patapsco why any of the approvals referred to in this
Section 3.2(f) should not be obtained without the imposition of any material
condition or restriction described in Section 6.1(b).
(g) Governmental Filings. Patapsco and each of its Subsidiaries have
timely filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were required to
file since January 1, 2004 with (i) the FRB, (ii) the FDIC, (iii) the Maryland
Office of Financial Regulation or any state regulatory authority, (iv) the SEC,
and (v) each other applicable Governmental Entity, and all other reports and
statements required to be filed by them since January 1, 2004, including any
report or statement required to be filed pursuant to the laws, rules or
regulations of the United States, any state, any foreign entity, or any
Government Regulator, and have paid all fees and assessments due and payable in
connection therewith. No administrative actions have been taken or, to the
knowledge of Patapsco, threatened or orders issued in connection with any such
report, registration or statement. As of their respective dates, each such
report, registration and statement complied in all material respects with all
laws or regulations under which it was filed (or was amended so as to be in
compliance promptly following discovery of such noncompliance).
(h) Securities Filings. Patapsco has previously made available to
Newco an accurate and complete copy of each (i) final registration statement,
prospectus, report, schedule and definitive proxy statement filed since January
1, 2004 by Patapsco with the SEC pursuant to the Securities Act or the Exchange
Act (collectively, "Patapsco's Reports"), and prior to the date of this
Agreement and (ii) communication mailed by Patapsco to its stockholders since
January 1, 2004 and prior to the date of this Agreement. None of Patapsco's
Reports contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, all of Patapsco's Reports complied in
all material respects with the applicable requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder. Each of the financial statements (including, in each
case, any notes thereto) of Patapsco included in Patapsco's Reports complied as
to form, as of their respective dates of filing with the SEC, in all material
19
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto.
(i) Financial Statements. Patapsco has previously made available to
Newco copies of (i) the consolidated balance sheets of Patapsco and its
Subsidiaries as of June 30, 2006 and 2005 and related consolidated statements of
income, cash flows and changes in stockholders' equity for each of the years in
the two-year period ended June 30, 2006, together with the notes thereto,
accompanied by the audit report of Patapsco's independent public auditors, as
reported in Patapsco's Annual Report on Form 10-KSB for the year ended June 30,
2006 filed with the SEC and (ii) the unaudited consolidated balance sheet of
Patapsco and its Subsidiaries as of December 31, 2006 and the related
consolidated statements of income, cash flows and changes in stockholders'
equity for the three and six months ended December 31, 2006, as reported in
Patapsco's Quarterly Report on Form 10-QSB for the period ended December 31,
2006 filed with the SEC. Such financial statements were prepared from the books
and records of Patapsco and its Subsidiaries, fairly present the consolidated
financial position of Patapsco and its Subsidiaries in each case at and as of
the dates indicated and the consolidated results of operations, retained
earnings and cash flows of Patapsco and its Subsidiaries for the periods
indicated, and, except as otherwise set forth in the notes thereto, were
prepared in accordance with GAAP consistently applied throughout the periods
covered thereby; provided, however, that the unaudited financial statements for
interim periods are subject to normal year-end adjustments (which will not be
material individually or in the aggregate) and lack footnotes and other
disclosures to the extent permitted under applicable regulations. The books and
records of Patapsco and its Subsidiaries have been, and are being, maintained in
all respects in accordance with GAAP and any other legal and accounting
requirements and reflect only actual transactions.
(j) Undisclosed Liabilities. Neither Patapsco nor any of its
Subsidiaries has incurred any debt, liability or obligation of any nature
whatsoever (whether accrued, contingent, absolute or otherwise and whether due
or to become due) other than liabilities reflected on or reserved against in the
consolidated balance sheet of Patapsco as of December 31, 2006 included in
Patapsco's Quarterly Report on Form 10-QSB for the period ended December 31,
2006, except for (i) liabilities incurred since December 31, 2006 in the
ordinary course of business consistent with past practice that, either alone or
when combined with all similar liabilities, have not had, and would not
reasonably be expected to have, a Material Adverse Effect on Patapsco and (ii)
liabilities incurred for legal, accounting, financial advising fees,
out-of-pocket and other expenses in connection with the transactions
contemplated by this Agreement.
(k) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or as disclosed in Patapsco's Reports
filed prior to the date of this Agreement, since December 31, 2006:
(i) Patapsco and its Subsidiaries have conducted their respective
businesses only in the ordinary and usual course of such businesses consistent
with their past practices;
(ii) there has not been any event or occurrence that has had, or
is reasonably expected to have, a Material Adverse Effect on Patapsco;
20
(iii) Patapsco has not declared, paid or set aside any dividends
or distributions with respect to the Patapsco Common Stock, other than regular
quarterly cash dividends not in excess of $.07 per share on Patapsco Common
Stock;
(iv) except for supplies or equipment purchased in the ordinary
course of business, neither Patapsco nor any of its Subsidiaries have made any
capital expenditures exceeding individually or in the aggregate $25,000;
(v) there has not been any write-down by The Patapsco Bank in
excess of $25,000 with respect to any of its Loans or other real estate owned;
(vi) there has not been any sale, assignment or transfer of any
assets by Patapsco or any of its Subsidiaries in excess of $25,000 other than in
the ordinary course of business or pursuant to a contract or agreement disclosed
in Patapsco's Disclosure Letter;
(vii) there has been no increase in the salary, compensation,
pension, severance or other benefits payable or to become payable by Patapsco or
any of its Subsidiaries to any of their respective directors, officers or
employees, other than in conformity with the policies and practices of such
entity in the usual and ordinary course of its business;
(viii) neither Patapsco nor any of its Subsidiaries has paid or
made any accrual or arrangement for payment of bonuses or special compensation
of any kind or any severance or termination pay to any of their directors,
officers or employees;
(ix) neither Patapsco nor any of its Subsidiaries has entered into
or amended any employment, deferred compensation, consulting, severance,
termination or indemnification agreement with any current or former director or
officer; and
(x) there has been no change in any accounting principles,
practices or methods of Patapsco or any of its Subsidiaries other than as
required by GAAP.
(l) Litigation. There are no suits, actions or legal, administrative
or arbitration proceedings pending or, to the knowledge of Patapsco, threatened
against or affecting Patapsco or any of its Subsidiaries or any property or
asset of Patapsco or any of its Subsidiaries. To the knowledge of Patapsco,
there are no investigations, reviews or inquiries by any court or Governmental
Entity pending or threatened against Patapsco or any of its Subsidiaries. There
are no judgments, decrees, injunctions, orders or rulings of any Governmental
Entity or arbitrator outstanding against Patapsco or any of its Subsidiaries
that have not been satisfied or that enjoin Patapsco or any of its Subsidiaries
from taking any action.
(m) Absence of Regulatory Actions. Since January 1, 2004, neither
Patapsco nor any of its Subsidiaries has been a party to any cease and desist
order, written agreement or memorandum of understanding with, or any commitment
letter or similar undertaking to, or has been subject to any action, proceeding,
order or directive by any Government Regulator, or has adopted any board
resolutions at the request of any Government Regulator, or has been advised by
21
any Government Regulator that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such action,
proceeding, order, directive, written agreement, memorandum of understanding,
commitment letter, board resolutions or similar undertaking. There are no
violations, criticisms or exceptions by any Government Regulator with respect to
any report or statement relating to any examinations of Patapsco or its
Subsidiaries that have not been addressed by Patapsco.
(n) Compliance with Laws. Patapsco and each of its Subsidiaries
conducts its business in material compliance with all statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees applicable to it.
Patapsco and each of its Subsidiaries has all permits, licenses, certificates of
authority, orders and approvals of, and has made all filings, applications and
registrations with, all Governmental Entities that are required in order to
permit it to carry on its business as it is presently conducted; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect, and, to the knowledge of Patapsco, no suspension or
cancellation of any of them is threatened. Neither Patapsco nor any of its
Subsidiaries has been given notice or been charged with any violation of, any
law, ordinance, regulation, order, writ, rule, decree or condition to approval
of any Governmental Entity which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on Patapsco.
(o) Taxes. All federal, state, local and foreign Tax returns required
to be filed by or on behalf of Patapsco or any of its Subsidiaries have been
timely filed or requests for extensions have been timely filed and any such
extension shall have been granted and not have expired, and all such filed
returns are complete and accurate in all material respects. All Taxes shown on
such returns, all Taxes required to be shown on returns for which extensions
have been granted and all other taxes required to be paid by Patapsco or any of
its Subsidiaries have been paid in full or adequate provision has been made for
any such Taxes on Patapsco's balance sheet (in accordance with GAAP). There is
no audit examination, deficiency assessment, tax investigation or refund
litigation with respect to any Taxes of Patapsco or any of its Subsidiaries, and
no claim has been made in writing by any authority in a jurisdiction where
Patapsco or any of its Subsidiaries do not file Tax returns that Patapsco or any
such Subsidiary is subject to taxation in that jurisdiction. All Taxes,
interest, additions and penalties due with respect to completed and settled
examinations or concluded litigation relating to Patapsco or any of its
Subsidiaries have been paid in full or adequate provision has been made for any
such Taxes on Patapsco's balance sheet (in accordance with GAAP). Patapsco and
its Subsidiaries have not executed an extension or waiver of any statute of
limitations on the assessment or collection of any Tax due that is currently in
effect. Patapsco and each of its Subsidiaries has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder or other third
party, and Patapsco and each of its Subsidiaries has timely complied with all
applicable information reporting requirements under Part III, Subchapter A of
Chapter 61 of the IRC and similar applicable state and local information
reporting requirements. Neither Patapsco nor any of its Subsidiaries is a party
to any agreement, contract, arrangement or plan that has resulted or would
result, individually or in the aggregate, in connection with this Agreement in
the payment of any "excess parachute payments" within the meaning of Section
280G of the IRC and neither Patapsco nor any of its Subsidiaries has made any
payments and is not a party to any agreement, and does not maintain any plan,
program or arrangement, that could require it to make any payments (including
22
any deemed payment of compensation upon the exercise of a Patapsco Option or
upon the issuance of any Patapsco Common Stock), that would not be fully
deductible by reason of Section 162(m) of the IRC.
(p) Agreements.
(i) Except as set forth in the exhibit index for Patapsco's Annual
Report on Form 10-KSB for the year ended June 30, 2006 or as set forth in
Section 3.2(p) of Patapsco's Disclosure Letter, neither Patapsco nor any of its
Subsidiaries is a party to or bound by:
(A) any agreement relating to the incurring of indebtedness
or guarantee thereof by Patapsco or any of its Subsidiaries in an amount in
excess in the aggregate of $250,000, other than deposit liabilities and advances
from the Federal Home Loan Bank of Atlanta;
(B) any "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC);
(C) any non-competition or exclusive dealing agreement, or
any other agreement or obligation which purports to limit or restrict in any
material respect (1) the ability of Patapsco or its Subsidiaries to solicit
customers or (2) the manner in which, or the localities in which, all or any
portion of the business of Patapsco and its Subsidiaries or, following
consummation of the transactions contemplated by this Agreement, Newco and its
Subsidiaries, is or would be conducted;
(D) any contract or agreement providing for any payments
that are conditioned, in whole or in part, on a change of control of Patapsco or
any of its Subsidiaries;
(E) any agreement providing for the indemnification by
Patapsco or a Subsidiary of Patapsco of any person other than with vendors
providing goods or services to Patapsco or its Subsidiaries where the potential
indemnity obligations thereunder are not reasonably expected to be material to
Patapsco;
(F) any joint venture or partnership agreement material to
Patapsco;
(G) 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 Patapsco any of its Subsidiaries to own, operate, sell, transfer,
pledge or otherwise dispose of any assets or business;
(H) any employment agreement with, or any agreement or
arrangement that contains any severance pay or post-employment liabilities or
obligations to, any current or former director, officer or employee of Patapsco
or its Subsidiaries;
23
(I) any agreement material to Patapsco and its Subsidiaries
taken as a whole pertaining to the use of or granting any right to use or
practice any rights under any Intellectual Property (as defined in Section
3.2(q)), whether Patapsco or its Subsidiary is the licensee or licensor
thereunder;
(J) any contract or agreement material to Patapsco and its
Subsidiaries taken as a whole providing for the outsourcing or provision of
servicing of customers, technology or product offerings of Patapsco or its
Subsidiaries; and
A complete and correct copy of each agreement listed in Section 3.2(p)
of Patapsco's Disclosure Letter has previously been provided to Newco.
(K) any contract or other agreement not made in the ordinary
course of business which (1) is material to Patapsco and its Subsidiaries taken
as a whole or (2) which would reasonably be expected to materially delay the
consummation of the Merger or any of the transactions contemplated by this
Agreement.
(ii) Neither Patapsco nor any of its Subsidiaries is in default
under (and no event has occurred which, with due notice or lapse of time or
both, would constitute a default under) or is in violation of any provision of
any note, bond, indenture, mortgage, deed of trust, loan agreement, lease or
other agreement to which it is a party or by which it is bound or to which any
of its respective properties or assets is subject and, to the knowledge of
Patapsco, no other party to any such agreement (excluding any loan or extension
of credit made by Patapsco or any of its Subsidiaries) is in default in any
respect thereunder, except for such defaults or violations that would not,
individually or in the aggregate, have a Material Adverse Effect on Patapsco.
(q) Intellectual Property. Patapsco and each of its Subsidiaries owns
or possesses valid licenses or other rights to use without payment all patents,
copyrights, trade secrets, trade names, service marks and trademarks material to
its business. Patapsco's Disclosure Letter sets forth a complete and correct
list of all material trademarks, trade names, service marks and copyrights owned
by or licensed to Patapsco or any of its Subsidiaries for use in its business,
and all licenses and other agreements relating thereto and all agreements
relating to third party intellectual property that Patapsco or any of its
Subsidiaries is licensed or authorized to use in its business, including without
limitation any software licenses (collectively, the "Intellectual Property").
With respect to each item of Intellectual Property owned by Patapsco or any of
its Subsidiaries, the owner possesses all right, title and interest in and to
the item, free and clear of any Lien. With respect to each item of Intellectual
Property that Patapsco or any of its Subsidiaries is licensed or authorized to
use, the license, sublicense or agreement covering such item is legal, valid,
binding, enforceable and in full force and effect. Neither Patapsco nor any of
its Subsidiaries has received any charge, complaint, claim, demand or notice
alleging any interference, infringement, misappropriation or violation with or
of any intellectual property rights of a third party (including any claims that
Patapsco or any of its Subsidiaries must license or refrain from using any
intellectual property rights of a third party). To the knowledge of Patapsco,
neither Patapsco nor any of its Subsidiaries has interfered with, infringed
upon, misappropriated or otherwise come into conflict with any intellectual
property rights of third parties and, to the knowledge of Patapsco, no third
24
party has interfered with, infringed upon, misappropriated or otherwise come
into conflict with any intellectual property rights of Patapsco or any of its
Subsidiaries.
(r) Labor Matters. Patapsco and its Subsidiaries are in material
compliance with all applicable laws respecting employment, retention of
independent contractors, employment practices, terms and conditions of
employment, and wages and hours. Neither Patapsco nor any of its Subsidiaries is
or has ever been a party to, or is or has ever been bound by, any collective
bargaining agreement, contract or other agreement or understanding with a labor
union or labor organization with respect to its employees, nor is Patapsco or
any of its Subsidiaries the subject of any proceeding asserting that it has
committed an unfair labor practice or seeking to compel it or any such
Subsidiary to bargain with any labor organization as to wages and conditions of
employment nor, to the knowledge of Patapsco, has any such proceeding been
threatened, nor is there any strike, other labor dispute or organizational
effort involving Patapsco or any of its Subsidiaries pending or, to the
knowledge of Patapsco, threatened.
(s) Employee Benefit Plans.
(i) Patapsco's Disclosure Letter contains a complete and accurate
list of all pension, retirement, stock option, stock purchase, stock ownership,
savings, stock appreciation right, profit sharing, deferred compensation,
consulting, bonus, group insurance, severance and other benefit plans,
contracts, agreements and arrangements, including, but not limited to, "employee
benefit plans," as defined in Section 3(3) of ERISA, incentive and welfare
policies, contracts, plans and arrangements and all trust agreements related
thereto with respect to any present or former directors, officers or other
employees of Patapsco or any of its Subsidiaries (hereinafter referred to
collectively as the "Patapsco Employee Plans"). Patapsco has previously
delivered or made available to Newco true and complete copies of each agreement,
plan and other documents referenced in Patapsco's Disclosure Letter, along with,
where applicable, copies of the IRS Form 5500 or 5500-C for the most recently
completed year. There has been no announcement or commitment by Patapsco or any
of its Subsidiaries to create an additional Patapsco Employee Plan, or to amend
any Patapsco Employee Plan, except for amendments required by applicable law
which do not materially increase the cost of such Patapsco Employee Plan.
(ii) There is no pending or, to the knowledge of Patapsco,
threatened litigation, administrative action or proceeding relating to any
Patapsco Employee Plan. All of the Patapsco Employee Plans comply in all
material respects with all applicable requirements of ERISA, the IRC and other
applicable laws. There has occurred no "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the IRC) with respect to the Patapsco
Employee Plans which is likely to result in the imposition of any penalties or
taxes upon Patapsco or any of its Subsidiaries under Section 502(i) of ERISA or
Section 4975 of the IRC.
(iii) Neither Patapsco, its Subsidiaries nor any ERISA Affiliates
maintains or has maintained during the last ten years a Patapsco Employee Plan
which is subject to Title IV of ERISA or which is subject to the minimum funding
requirements of Section 412 of the Code. Neither Patapsco, its Subsidiaries, nor
25
any ERISA Affiliate has contributed to any "multiemployer plan," as defined in
Section 3(37) of ERISA, on or after September 26, 1980.
(iv) Each Patapsco Employee Plan that is an "employee pension
benefit plan" (as defined in Section 3(2) of ERISA) and which is intended to be
qualified under Section 401(a) of the IRC (a "Patapsco Qualified Plan") has
received a favorable determination letter from the IRS, and Patapsco and its
Subsidiaries are not aware of any circumstances likely to result in revocation
of any such favorable determination letter. Each Patapsco Qualified Plan that is
an "employee stock ownership plan" (as defined in Section 4975(e)(7) of the IRC)
has satisfied all of the applicable requirements of Sections 409 and 4975(e)(7)
of the IRC and the regulations thereunder in all material respects and any
assets of any such Patapsco Qualified Plan that, as of the end of the plan year,
are not allocated to participants' individual accounts are pledged as security
for, and may be applied to satisfy, any securities acquisition indebtedness.
(v) With respect to each Patapsco Employee Plan that is a
"multiple employer plan" (as defined in Section 4063 of ERISA): (A) none of
Patapsco or any of its Subsidiaries, nor any of their respective ERISA
Affiliates, has received any notification, nor has any actual knowledge, that if
Patapsco or any of its Subsidiaries or any of their respective ERISA Affiliates
were to experience a withdrawal or partial withdrawal from such plan it would
incur withdrawal liability that would be reasonably likely to have a Material
Adverse Effect on Patapsco; and (B) none of Patapsco or any of its Subsidiaries,
nor any of their respective ERISA Affiliates, has received any notification, nor
has any reason to believe, that any Patapsco Employee Plan is in reorganization,
has been terminated, is insolvent, or may be in reorganization, become insolvent
or be terminated.
(vi) Neither Patapsco nor any of its Subsidiaries has any
obligations for post-retirement or post-employment benefits under any Patapsco
Employee Plan that cannot be amended or terminated upon 60 days' notice or less
without incurring any liability thereunder, except for coverage required by Part
6 of Title I of ERISA or Section 4980B of the IRC, or similar state laws, the
cost of which is borne by the insured individuals.
(vii) All contributions required to be made with respect to any
Patapsco Employee Plan by applicable law or regulation or by any plan document
or other contractual undertaking, and all premiums due or payable with respect
to insurance policies funding any Patapsco Employee Plan, for any period through
the date hereof have been timely made or paid in full, or to the extent not
required to be made or paid on or before the date hereof, have been fully
reflected in the financial statements of Patapsco. Each Patapsco Employee Plan
that is an employee welfare benefit plan under Section 3(1) of ERISA either (A)
is funded through an insurance company contract and is not a "welfare benefit
fund" within the meaning of Section 419 of the IRC or (B) is unfunded.
(t) Properties.
(i) A list and description of all real property owned or leased by
Patapsco or a Subsidiary of Patapsco is set forth in Patapsco's Disclosure
Letter. Patapsco and each of its Subsidiaries has good and marketable title to
26
all real property owned by it (including any property acquired in a judicial
foreclosure proceeding or by way of a deed in lieu of foreclosure or similar
transfer), in each case free and clear of any Liens except (i) liens for taxes
not yet due and payable and (ii) such easements, restrictions and encumbrances,
if any, as are not material in character, amount or extent, and do not
materially detract from the value, or materially interfere with the present use
of the properties subject thereto or affected thereby. Each lease pursuant to
which Patapsco or any of its Subsidiaries as lessee, leases real or personal
property is valid and in full force and effect and neither Patapsco nor any of
its Subsidiaries, nor, to the knowledge of Patapsco, any other party to any such
lease, is in default or in violation of any material provisions of any such
lease. A complete and correct copy of each such lease has previously been
provided to Newco. All real property owned or leased by Patapsco or any of its
Subsidiaries are in a good state of maintenance and repair (normal wear and tear
excepted), conform in all material respects with all applicable ordinances,
regulations and zoning laws and are considered by Patapsco to be adequate for
the current business of Patapsco and its Subsidiaries. To the knowledge of
Patapsco, none of the buildings, structures or other improvements located on any
real property owned or leased by Patapsco or any of its Subsidiaries encroaches
upon or over any adjoining parcel or real estate or any easement or
right-of-way.
(ii) Patapsco and each of its Subsidiaries has good and marketable
title to all tangible personal property owned by it, free and clear of all Liens
except such Liens, if any, as are not material in character, amount or extent,
and do not materially detract from the value, or materially interfere with the
present use of the properties subject thereto or affected thereby. With respect
to personal property used in the business of Patapsco and its Subsidiaries that
is leased rather than owned, neither Patapsco nor any of its Subsidiaries is in
default under the terms of any such lease.
(u) Fairness Opinion. Patapsco has received the opinion of Sandler
X'Xxxxx & Partners, L.P. to the effect that, as of the date hereof, the Merger
Consideration is fair, from a financial point of view, to Patapsco's
stockholders.
(v) Fees. Other than for financial advisory services performed for
Patapsco by Sandler X'Xxxxx & Partners, L.P. pursuant to an agreement dated
November 1, 2006, a complete and correct copy of which has previously been
provided to Newco, neither Patapsco nor any of its Subsidiaries, nor any of
their respective officers, directors, employees or agents, has employed any
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder's fees, and no broker or finder has acted
directly or indirectly for Patapsco or any of its Subsidiaries in connection
with this Agreement or the transactions contemplated hereby.
(w) Environmental Matters.
(i) Each of Patapsco and its Subsidiaries, the Participation
Facilities, and, to the knowledge of Patapsco, the Loan Properties are, and have
been, in substantial compliance with all Environmental Laws.
27
(ii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or, to the
knowledge of Patapsco, threatened, before any court, governmental agency or
board or other forum against Patapsco or any of its Subsidiaries or any
Participation Facility (A) for alleged noncompliance (including by any
predecessor) with, or liability under, any Environmental Law or (B) relating to
the presence of or release into the environment of any Hazardous Material,
whether or not occurring at or on a site owned, leased or operated by Patapsco
or any of its Subsidiaries or any Participation Facility.
(iii) To the knowledge of Patapsco, there is no suit, claim,
action, demand, executive or administrative order, directive, investigation or
proceeding pending or threatened before any court, governmental agency or board
or other forum relating to or against any Loan Property (or Patapsco or any of
its Subsidiaries in respect of such Loan Property) (A) relating to alleged
noncompliance (including by any predecessor) with, or liability under, any
Environmental Law or (B) relating to the presence of or release into the
environment of any Hazardous Material, whether or not occurring at a Loan
Property.
(iv) Neither Patapsco nor any of its Subsidiaries has received
any notice, demand letter, executive or administrative order, directive or
request for information from any Governmental Entity or any third party
indicating that it may be in violation of, or liable under, any Environmental
Law.
(v) There are no underground storage tanks at any properties owned
or operated by Patapsco or any of its Subsidiaries or any Participation
Facility. Neither Patapsco nor any of its Subsidiaries nor, to the knowledge of
Patapsco, any other person or entity, has closed or removed any underground
storage tanks from any properties owned or operated by Patapsco or any of its
Subsidiaries or any Participation Facility.
(vi) During the period of (A) Patapsco's or its Subsidiary's
ownership or operation of any of their respective current properties or (B)
Patapsco's or its Subsidiary's participation in the management of any
Participation Facility, there has been no release of Hazardous Materials in, on,
under or affecting such properties. To the knowledge of Patapsco, prior to the
period of (A) Patapsco's or its Subsidiary's ownership or operation of any of
their respective current properties or (B) Patapsco's or its Subsidiary's
participation in the management of any Participation Facility, there was no
contamination by or release of Hazardous Material in, on, under or affecting
such properties.
(x) Loan Portfolio; Allowance for Loan Losses.
(i) With respect to each Loan owned by Patapsco or its
Subsidiaries in whole or in part:
(A) The note and the related security documents are each
legal, valid and binding obligations of the maker or obligor thereof,
enforceable against such maker or obligor in accordance with their terms;
28
(B) neither Patapsco nor any of its Subsidiaries, nor any
prior holder of a Loan, has modified the note or any of the related security
documents in any material respect or satisfied, canceled or subordinated the
note or any of the related security documents except as otherwise disclosed by
documents in the applicable Loan file;
(C) Patapsco or a Subsidiary of Patapsco is the sole holder
of legal and beneficial title to each Loan (or Patapsco's or its Subsidiary's
applicable participation interest, as applicable), except as otherwise
referenced on the books and records of Patapsco or a Subsidiary of Patapsco;
(D) the original note and the related security documents are
included in the Loan files, and copies of any documents in the Loan files are
true and correct copies of the documents they purport to be and have not been
suspended, amended, modified, canceled or otherwise changed except as otherwise
disclosed by documents in the applicable Loan file; and
(E) with respect to a Loan held in the form of a
participation, the participation documentation is legal, valid, binding and
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(ii) Neither the terms of any Loan, any of the documentation for
any Loan, the manner in which any Loans have been administered and serviced, nor
Patapsco's practices of approving or rejecting Loan applications, violate in any
material respect any federal, state, or local law, rule or regulation applicable
thereto, including, without limitation, the Truth In Lending Act, Regulations O
and Z of the Federal Reserve Board, the CRA, the Equal Credit Opportunity Act,
and any state laws, rules and regulations relating to consumer protection,
installment sales and usury.
(iii) The allowance for loan losses reflected in Patapsco's
audited balance sheet at June 30, 2006 was, and the allowance for loan losses
shown on the balance sheets in Patapsco's Reports for periods ending after such
date, in the opinion of management, was or will be adequate, as of the dates
thereof, under GAAP.
(y) Anti-takeover Provisions Inapplicable. Patapsco and its
Subsidiaries have taken all actions required to exempt Newco, the Agreement, the
Plan of Bank Merger, the Merger and the Bank Merger from any provisions of an
antitakeover nature contained in their organizational documents, and the
provisions of any federal or state "anti-takeover," "fair price," "moratorium,"
"control share acquisition" or similar laws or regulations.
(z) Material Interests of Certain Persons. No current or former
officer or director of Patapsco, or any family member or affiliate of any such
person, has any material interest, directly or indirectly, in any contract or
property (real or personal), tangible or intangible, used in or pertaining to
the business of Patapsco or any of its Subsidiaries.
(aa) Insurance. In the opinion of management, Patapsco and its
Subsidiaries are presently insured for amounts deemed reasonable by management
29
against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured. Patapsco's
Disclosure Letter contains a list of all policies of insurance carried and owned
by Patapsco or any of Patapsco's Subsidiaries showing the name of the insurance
company and agent, the nature of the coverage, the policy limit, the annual
premiums and the expiration date. All of the insurance policies and bonds
maintained by Patapsco and its Subsidiaries are in full force and effect,
Patapsco and its Subsidiaries are not in default thereunder, all premiums and
other payments due under any such policy have been paid and all material claims
thereunder have been filed in due and timely fashion.
(bb) Investment Securities; Derivatives.
(i) Except for restrictions that exist for securities that are
classified as "held to maturity," none of the investment securities held by
Patapsco or any of its Subsidiaries is subject to any restriction (contractual
or statutory) that would materially impair the ability of the entity holding
such investment freely to dispose of such investment at any time.
(ii) Neither Patapsco nor any of its Subsidiaries is a party to or
has agreed to enter into an exchange-traded or over-the-counter equity, interest
rate, foreign exchange or other swap, forward, future, option, cap, floor or
collar or any other contract that is a derivative contract (including various
combinations thereof) or owns securities that (A) are referred to generically as
"structured notes," "high risk mortgage derivatives," "capped floating rate
notes" or "capped floating rate mortgage derivatives" or (B) are likely to have
changes in value as a result of interest or exchange rate changes that
significantly exceed normal changes in value attributable to interest or
exchange rate changes.
(cc) Indemnification. Except as provided in the articles of
incorporation or bylaws of Patapsco and the similar organizational documents of
its Subsidiaries, neither Patapsco nor any of its Subsidiaries is a party to any
agreement that provides for the indemnification of any of its present or former
directors, officers or employees, or other persons who serve or served as a
director, officer or employee of another corporation, partnership or other
enterprise at the request of Patapsco and, to the knowledge of Patapsco, there
are no claims for which any such person would be entitled to indemnification
under the articles of incorporation or bylaws of Patapsco or the similar
organizational documents of any of its Subsidiaries, under any applicable law or
regulation or under any indemnification agreement.
(dd) Corporate Documents and Records. Patapsco has previously
delivered to Newco a complete and correct copy of the articles of incorporation,
bylaws and similar organizational documents of Patapsco and each of Patapsco's
Subsidiaries, as in effect as of the date of this Agreement. Neither Patapsco
nor any of Patapsco's Subsidiaries is in violation of its articles of
incorporation, bylaws or similar organizational documents. The minute books of
Patapsco and each of Patapsco's Subsidiaries constitute a complete and correct
record of all actions taken by their respective boards of directors (and each
committee thereof) and their stockholders.
(ee) Information Supplied. The information regarding Patapsco and its
Subsidiaries to be supplied by Patapsco for inclusion in the Proxy Statement,
30
the Merger Registration Statement, the Conversion Registration Statement, any
filings or approvals under applicable state securities laws or any filing
pursuant to Rule 165 or Rule 425 under the Securities Act or Rule 14a-12 under
the Exchange Act will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.
(ff) CRA, Anti-Money Laundering, OFAC and Customer Information
Security. The Patapsco Bank has received a rating of "Satisfactory" or better in
its most recent examination or interim review with respect to the CRA. Patapsco
is not aware of, and has not been advised of, any facts or circumstances exist
that would cause The Patapsco Bank or any other Subsidiary of Patapsco: (i) to
be deemed not to be in satisfactory compliance in any material respect with 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
Bank Secrecy Act, the Patriot Act, any order issued with respect to anti-money
laundering by the U.S. Department of the Treasury's Office of Foreign Assets
Control, or any other applicable anti-money laundering statute, rule or
regulation; or (iii) to be deemed not to be in satisfactory compliance in any
material respect with the applicable privacy of customer information
requirements contained in any federal and state privacy laws and regulations,
including without limitation, in Title V of the Xxxxx-Xxxxx-Xxxxxx Act of 1999
and the regulations promulgated thereunder, as well as the provisions of the
information security program adopted by The Patapsco Bank. Patapsco is not aware
of any facts or circumstances that would cause it to believe that any non-public
customer information has been disclosed to or accessed by an unauthorized third
party in a manner which would cause either Patapsco or any of its Subsidiaries
to undertake any remedial action. The Board of Directors of The Patapsco Bank
(or where appropriate of any other Subsidiary of Patapsco) has adopted, and The
Patapsco Bank (or such other Subsidiary of Patapsco) has implemented, an
anti-money laundering program that contains adequate and appropriate customer
identification verification procedures that comply with Section 326 of the
Patriot Act and such anti-money laundering program meets the requirements in all
material respects of Section 352 of the Patriot Act and the regulations
thereunder, and The Patapsco Bank (or such other Subsidiary of Patapsco) has
complied in all material respects with any requirements to file reports and
other necessary documents as required by the Patriot Act and the regulations
thereunder.
(gg) Internal Controls.
(i) Patapsco has devised and maintained a system of internal
accounting controls sufficient to provide reasonable assurance that: (A) all
material transactions are executed in accordance with general or specific
authorization of the Board of Directors and the duly authorized executive
officers of Patapsco; (B) all material transactions are recorded as necessary to
permit the preparation of financial statements in conformity with GAAP
consistently applied; and (C) access to the material properties and assets of
Patapsco is permitted only in accordance with general or specific authorization
of the Board of Directors and the duly authorized executive officers of
Patapsco.
31
(ii) Patapsco (A) has implemented and maintains disclosure
controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to
ensure that material information relating to Patapsco, including its
Subsidiaries, is made known to the chief executive officer and the chief
financial officer of Patapsco by others within those entities, and (B) has
disclosed, based on its most recent evaluation prior to the date hereof, to
Patapsco's outside auditors and the audit committee of Patapsco's Board of
Directors (1) any significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting (as defined in Rule
13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect
Patapsco's ability to record, process, summarize and report financial
information, and (2) any fraud, whether or not material, that involves
management or other employees who have a significant role in Patapsco's internal
controls over financial reporting. Any such disclosures were made in writing by
management to Patapsco's auditors and audit committee and a copy has previously
been made available to Newco. As of the date hereof, there is no reason to
believe that Patapsco's chief executive officer and chief financial officer will
not be able to give the certifications required under SEC regulations when next
due.
(iii) Since January 1, 2004, (A) through the date hereof, neither
Patapsco nor any of its Subsidiaries has received or otherwise had or obtained
knowledge of any material complaint, allegation, assertion or claim, whether
written or oral, regarding the accounting or auditing practices, procedures,
methodologies or methods of Patapsco or any of its Subsidiaries or their
respective internal accounting controls, including any material complaint,
allegation, assertion or claim that Patapsco or any of its Subsidiaries has
engaged in questionable accounting or auditing practices, and (B) no attorney
representing Patapsco or any of its Subsidiaries, whether or not employed by
Patapsco or any of its Subsidiaries, has reported evidence of a material
violation of securities laws, federal banking laws and regulations, breach of
fiduciary duty or similar violation by Patapsco or any of its officers,
directors, employees or agents to the Board of Directors of Patapsco or any
committee thereof or to any director or officer of Patapsco.
(hh) Tax Treatment of the Merger. Patapsco has no knowledge of any
fact or circumstance relating to it that would prevent the transactions
contemplated by this Agreement from qualifying as a reorganization under Section
368 of the IRC.
3.3 Representations and Warranties of the Bradford Parties. Each of the
Bradford Parties, severally and not jointly, represents and warrants to Patapsco
that, except as set forth in the Bradford Parties' Disclosure Letter:
(a) Organization and Qualification.
(i) MHC is a federally chartered mutual holding company duly
organized, validly existing and in good standing under the laws of the United
States and is registered as a savings and loan holding company under the HOLA.
MHC has all requisite corporate power and authority to own, lease and operate
its properties and to conduct the business currently being conducted by it. MHC
is duly qualified or licensed as a foreign corporation to transact business and
is in good standing in each jurisdiction in which the character of the
properties owned or leased by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
32
so qualified or licensed and in good standing would not have a Material Adverse
Affect on the Bradford Parties.
(ii) Bradford is a federal corporation duly organized, validly
existing and in good standing under the laws of the United States and is
registered as a savings and loan holding company under the HOLA. Bradford has
all requisite corporate power and authority to own, lease and operate its
properties and to conduct the business currently being conducted by it. Bradford
is duly qualified or licensed as a foreign corporation to transact business and
is in good standing in each jurisdiction in which the character of the
properties owned or leased by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so qualified or licensed and in good standing would not have a Material Adverse
Affect on the Bradford Parties.
(iii) Newco is a corporation duly organized, validly existing and
in good standing under the laws of the State of Maryland. Newco has all
requisite corporate power and authority to own, lease and operate its properties
and to conduct the business currently being conducted by it. Newco is duly
qualified or licensed as a foreign corporation to transact business and is in
good standing in each jurisdiction in which the character of the properties
owned or leased by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed and in good standing would not have a Material Adverse
Affect on the Bradford Parties.
(b) Subsidiaries. Bradford owns of record and beneficially all the
capital stock of Bradford Bank free and clear of any Liens. Following completion
of the Conversion, Newco will own of record and beneficially all of the capital
stock of Bradford Bank free and clear of any Liens. Bradford Bank is a bank duly
organized and validly existing under the laws of the United States, has all
requisite corporate power and authority to own, lease and operate its properties
and to conduct the business currently being conducted by it and is duly
qualified or licensed as a foreign corporation to transact business and is in
good standing in each jurisdiction in which the character of the properties
owned or leased by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed and in good standing would not have a Material Adverse
Affect on the Bradford Parties. No Subsidiary of Bradford other than Bradford
Bank is an "insured depository institution" as defined in the Federal Deposit
Insurance Act, as amended, and the applicable regulations thereunder. Bradford
Bank's deposits are insured by the FDIC to the fullest extent permitted by law.
Bradford Bank is a member in good standing of the Federal Home Loan Bank of
Atlanta.
(c) Capital Structure.
(i) The authorized capital stock of Bradford consists of
10,000,000 shares of common stock, par value $.01 per share, and 1,000,000
shares of preferred stock, par value $.01 per share. MHC owns of record and
beneficially all the capital stock of Bradford free and clear of any Liens.
33
(ii) The authorized capital stock of Newco consists of 100,000,000
shares of Newco Common Stock, of which 1,000 shares are outstanding, and
10,000,000 shares of preferred stock, par value $.01 per share, none of which
are outstanding. Bradford Bank owns of record and beneficially all the
outstanding Newco Common Stock free and clear of any Liens.
(iii) The shares of Newco Common Stock to be issued in exchange
for shares of Patapsco Common Stock upon consummation of the Merger in
accordance with this Agreement have been duly authorized and when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable and subject to no preemptive rights.
(iv) Neither Bradford nor any of its Subsidiaries has or is bound
by any outstanding subscriptions, options, warrants, calls, rights, convertible
securities, commitments or agreements of any character obligating Bradford or
any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, any additional shares of capital stock of Bradford or
obligating Bradford or any of its Subsidiaries to grant, extend or enter into
any such option, warrant, call, right, convertible security, commitment or
agreement.
(d) Authority. MHC, Xxxxxxxx, Xxxxxxxx Bank and Newco each has all
requisite corporate power and authority to enter into this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate actions on the part of the Boards of
Directors of MHC, Xxxxxxxx, Xxxxxxxx Bank and Newco, by Bradford as the sole
stockholder of Bradford Bank and by Bradford Bank as the sole stockholder of
Newco. Except for the approval of the members of MHC in connection with the
Conversion as described in the Plan of Conversion, no other corporate
proceedings on the part of MHC, Xxxxxxxx, Xxxxxxxx Bank and Newco are necessary
to authorize this Agreement or to consummate the transactions contemplated by
this Agreement. This Agreement has been duly and validly executed and delivered
by MHC, Xxxxxxxx, Xxxxxxxx Bank and Newco and constitutes a valid and binding
obligation of MHC, Xxxxxxxx, Xxxxxxxx Bank and Newco, enforceable against MHC,
Xxxxxxxx, Xxxxxxxx Bank and Newco in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
and remedies generally and to general principles of equity, whether applied in a
court of law or a court of equity.
(e) No Violations. The execution, delivery and performance of this
Agreement by MHC, Xxxxxxxx, Xxxxxxxx Bank and Newco do not, and the consummation
of the transactions contemplated by this Agreement will not, (i) assuming all
required governmental approvals have been obtained and the applicable waiting
periods have expired, violate any law, rule or regulation or any judgment,
decree, order, governmental permit or license to which MHC, Xxxxxxxx, Xxxxxxxx
Bank and Newco or any of their respective Subsidiaries (or any of their
respective properties) is subject, (ii) violate the articles of incorporation or
bylaws of MHC, Xxxxxxxx, Xxxxxxxx Bank and Newco or the similar organizational
documents of any of their respective Subsidiaries or (iii) constitute a breach
or violation of, or a default under (or an event which, with due notice or lapse
of time or both, would constitute a default under), or result in the termination
of, accelerate the performance required by, or result in the creation of any
Lien upon any of the properties or assets of MHC, Xxxxxxxx, Xxxxxxxx Bank and
Newco or any of their respective Subsidiaries under, any of the terms,
conditions or provisions of any note, bond, indenture, deed of trust, loan
34
agreement or other agreement, instrument or obligation to which MHC, Xxxxxxxx,
Xxxxxxxx Bank and Newco or any of their respective Subsidiaries is a party, or
to which any of their respective properties or assets may be subject except, in
the case of (iii), for any such breaches, violations or defaults that would not,
individually or in the aggregate, have a Material Adverse Effect on the Bradford
Parties.
(f) Consents and Approvals. Except for (i) the regulatory approvals
required for the completion of the Conversion, as described in the Plan of
Conversion, (ii) the filing by Newco with the SEC of the Merger Registration
Statement and the declaration of effectiveness of the Merger Registration
Statement by the SEC; (iii) the filing of the Articles of Merger with the SDAT
and such filings with Governmental Entities to satisfy the applicable
requirements of the laws of states in which Patapsco and its Subsidiaries are
qualified or licensed to do business or state securities or "blue sky" laws;
(iv) the approval of the FRB under the BHC Act in connection with the merger of
Patapsco and Newco, or the waiver thereof; (v) the approval or non-objection of
the OTS under the HOLA in connection with the merger of Patapsco and Newco and
the approval of the OTS under the BMA in connection with the merger of Bradford
Bank and The Patapsco Bank; and (vi) the approval of the Maryland Superintendent
of Financial Regulation in connection with the acquisition of the voting stock
of The Patapsco Bank as a result of the merger of Patapsco and Newco, no
consents or approvals of or filings or registrations with any Governmental
Entity are necessary in connection with (A) the execution and delivery by MHC,
Xxxxxxxx, Xxxxxxxx Bank and Newco of this Agreement and (B) the consummation by
Newco of the Merger and the other transactions contemplated by this Agreement.
As of the date hereof, neither MHC, Xxxxxxxx, Xxxxxxxx Bank nor Newco knows of
no reason pertaining to MHC, Xxxxxxxx, Xxxxxxxx Bank and Newco why any of the
approvals referred to in this Section 3.3(f) should not be obtained without the
imposition of any material condition or restriction described in Section 6.1(b).
(g) Governmental Filings. MHC, Bradford and Bradford Bank have timely
filed all reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file since
January 1, 2004 with (i) the OTS, (ii) the FDIC, and (iii) each other applicable
Governmental Entity, and all other reports and statements required to be filed
by them since January 1, 2004, including any report or statement required to be
filed pursuant to the laws, rules or regulations of the United States, any
state, any foreign entity, or any Government Regulator, and have paid all fees
and assessments due and payable in connection therewith. No administrative
actions have been taken or, to the knowledge of MHC, Bradford and Bradford Bank,
threatened or orders issued in connection with any such report, registration or
statement. As of their respective dates, each such report, registration and
statement complied in all material respects with all laws or regulations under
which it was filed (or was amended so as to be in compliance promptly following
discovery of such noncompliance).
(h) Financial Statements. MHC has previously made available to
Patapsco copies of (i) the consolidated balance sheets of MHC and its
Subsidiaries as of December 31, 2005 and 2004 and related consolidated
statements of income, cash flows and changes in stockholders' equity for each of
35
the years in the two-year period ended December 31, 2005, together with the
notes thereto, accompanied by the audit report of Bradford's independent public
auditors, and (ii) the unaudited consolidated balance sheet of MHC and its
Subsidiaries as of September 30, 2006 and the related consolidated statements of
income for the nine months ended September 30, 2006. Such financial statements
were prepared from the books and records of MHC and its Subsidiaries, fairly
present the consolidated financial position of MHC and its Subsidiaries in each
case at and as of the dates indicated and the consolidated results of
operations, retained earnings and cash flows of MHC and its Subsidiaries for the
periods indicated, and, except as otherwise set forth in the notes thereto, were
prepared in accordance with GAAP consistently applied throughout the periods
covered thereby; provided, however, that the unaudited financial statements for
interim periods are subject to normal year-end adjustments (which will not be
material individually or in the aggregate) and lack statements of cash flows and
changes in stockholders' equity and footnotes. The books and records of MHC and
its Subsidiaries have been, and are being, maintained in all respects in
accordance with GAAP and any other legal and accounting requirements and reflect
only actual transactions.
(i) Undisclosed Liabilities. Neither MHC, Xxxxxxxx, Xxxxxxxx Bank nor
Newco nor any of their respective Subsidiaries has incurred any debt, liability
or obligation of any nature whatsoever (whether accrued, contingent, absolute or
otherwise and whether due or to become due) other than liabilities reflected on
or reserved against in the consolidated balance sheet of Bradford as of
September 30, 2006, except for (i) liabilities incurred since September 30, 2006
in the ordinary course of business consistent with past practice that, either
alone or when combined with all similar liabilities, have not had, and would not
reasonably be expected to have, a Material Adverse Effect on Bradford and (ii)
liabilities incurred for legal, accounting, financial advising fees and
out-of-pocket expenses in connection with the transactions contemplated by this
Agreement.
(j) Absence of Certain Changes or Events. Since September 30, 2006,
(i) MHC, Xxxxxxxx, Xxxxxxxx Bank and Newco and their respective Subsidiaries
have conducted their respective businesses only in the ordinary and usual course
of such businesses consistent with their past practices and (ii) there has not
been any event or occurrence that has had, or is reasonably expected to have, a
Material Adverse Effect on the Bradford Parties.
(k) Litigation. There are no suits, actions or legal, administrative
or arbitration proceedings pending or, to the knowledge of MHC, Xxxxxxxx,
Xxxxxxxx Bank and Newco, threatened against or affecting MHC, Xxxxxxxx, Xxxxxxxx
Bank and Newco or any of their Subsidiaries or any property or asset of MHC,
Xxxxxxxx, Xxxxxxxx Bank and Newco or any of their respective Subsidiaries. There
are no judgments, decrees, injunctions, orders or rulings of any Governmental
Entity or arbitrator outstanding against MHC, Xxxxxxxx, Xxxxxxxx Bank and Newco
or any of their respective Subsidiaries that, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on the Bradford
Parties.
(l) Absence of Regulatory Actions. Since January 1, 2004, neither MHC,
Xxxxxxxx, Xxxxxxxx Bank nor any of their respective Subsidiaries has been a
party to any cease and desist order, written agreement or memorandum of
understanding with, or any commitment letter or similar undertaking to, or has
been subject to any action, proceeding, order or directive by any Government
36
Regulator, or has adopted any board resolutions at the request of any Government
Regulator, or has been advised by any Government Regulator that it is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such action, proceeding, order, directive, written
agreement, memorandum of understanding, commitment letter, board resolutions or
similar undertaking. There are no unresolved violations, criticisms or
exceptions by any Government Regulator with respect to any report or statement
relating to any examinations of MHC, Xxxxxxxx, Xxxxxxxx Bank or their respective
Subsidiaries.
(m) Compliance with Laws. Each of MHC, Xxxxxxxx, Xxxxxxxx Bank and
Newco conducts its business in material compliance with all statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees applicable to it.
Each of MHC, Xxxxxxxx, Xxxxxxxx Bank and Newco has all permits, licenses,
certificates of authority, orders and approvals of, and has made all filings,
applications and registrations with, all Governmental Entities that are required
in order to permit it to carry on its business as it is presently conducted; all
such permits, licenses, certificates of authority, orders and approvals are in
full force and effect, and, to the knowledge of MHC, Xxxxxxxx, Xxxxxxxx Bank and
Newco, no suspension or cancellation of any of them is threatened. Neither MHC,
Xxxxxxxx, Xxxxxxxx Bank nor Newco has been given notice or been charged with any
violation of, any law, ordinance, regulation, order, writ, rule, decree or
condition to approval of any Governmental Entity which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on
Bradford.
(n) Information Supplied. The information to be supplied by the
Bradford Parties, including any information related to any entities to be
acquired by them, for inclusion in the Merger Registration Statement, the
Conversion Registration Statement, any filings or approvals under applicable
state securities laws, or any filing pursuant to Rule 165 or Rule 425 under the
Securities Act or Rule 14a-12 under the Exchange Act will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Proxy Statement
(except for such portions thereof that relate only to Patapsco or any of its
Subsidiaries) will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder. The
Merger Registration Statement and the Conversion Registration Statement will
comply as to form in all material respects with the provisions of the Securities
Act and the rules and regulations thereunder.
(o) Environmental Matters.
(i) Each of Bradford and its Subsidiaries are, and have been, in
substantial compliance with all Environmental Laws.
(ii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or, to the
knowledge of Bradford, threatened, before any court, governmental agency or
board or other forum against Bradford or any of its Subsidiaries (A) for alleged
noncompliance (including by any predecessor) with, or liability under, any
Environmental Law or (B) relating to the presence of or release into the
37
environment of any Hazardous Material, whether or not occurring at or on a site
owned, leased or operated by Bradford or any of its Subsidiaries.
(iii) To the knowledge of Bradford, there is no suit, claim,
action, demand, executive or administrative order, directive, investigation or
proceeding pending or threatened before any court, governmental agency or board
or other forum relating to or against any Loan Property (or Bradford or any of
its Subsidiaries in respect of such Loan Property) (A) relating to alleged
noncompliance (including by any predecessor) with, or liability under, any
Environmental Law or (B) relating to the presence of or release into the
environment of any Hazardous Material, whether or not occurring at a Loan
Property.
(iv) Neither Bradford nor any of its Subsidiaries has received any
notice, demand letter, executive or administrative order, directive or request
for information from any Governmental Entity or any third party indicating that
it may be in violation of, or liable under, any Environmental Law.
(v) There are no underground storage tanks at any properties owned
or operated by Bradford or any of its Subsidiaries or any Participation
Facility. Neither Bradford nor any of its Subsidiaries nor, to the knowledge of
Bradford, any other person or entity, has closed or removed any underground
storage tanks from any properties owned or operated by Bradford or any of its
Subsidiaries or any Participation Facility.
(vi) During the period of Bradford's or its Subsidiary's ownership
or operation of any of their respective current properties, there has been no
release of Hazardous Materials in, on, under or affecting such properties. To
the knowledge of Bradford, prior to the period of Bradford's or its Subsidiary's
ownership or operation of any of their respective current properties, there was
no contamination by or release of Hazardous Material in, on, under or affecting
such properties.
(p) CRA, Anti-Money Laundering, OFAC and Customer Information
Security. Bradford Bank has received a rating of "Satisfactory" or better in its
most recent examination or interim review with respect to the CRA. Bradford is
not aware of, and has not been advised of, any facts or circumstances exist that
would cause Bradford Bank or any other Subsidiary of Bradford: (i) to be deemed
not to be in satisfactory compliance in any material respect with 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
Bank Secrecy Act, the Patriot Act, any order issued with respect to anti-money
laundering by the U.S. Department of the Treasury's Office of Foreign Assets
Control, or any other applicable anti-money laundering statute, rule or
regulation; or (iii) to be deemed not to be in satisfactory compliance in any
material respect with the applicable privacy of customer information
requirements contained in any federal and state privacy laws and regulations,
including without limitation, in Title V of the Xxxxx-Xxxxx-Xxxxxx Act of 1999
and the regulations promulgated thereunder, as well as the provisions of the
information security program adopted by Bradford Bank. Bradford is not aware of
any facts or circumstances that would cause it to believe that any non-public
customer information has been disclosed to or accessed by an unauthorized third
party in a manner which would cause either Bradford or any of its Subsidiaries
to undertake any remedial action. The Board of Directors of Bradford Bank (or
where appropriate of any other Subsidiary of Bradford) has adopted, and Bradford
Bank (or such other Subsidiary of Bradford) has implemented, an anti-money
38
laundering program that contains adequate and appropriate customer
identification verification procedures that comply with Section 326 of the
Patriot Act and such anti-money laundering program meets the requirements in all
material respects of Section 352 of the Patriot Act and the regulations
thereunder, and Bradford Bank (or such other Subsidiary of Bradford) has
complied in all material respects with any requirements to file reports and
other necessary documents as required by the Patriot Act and the regulations
thereunder.
(q) Internal Controls.
(i) Bradford and Bradford Bank have devised and maintained, and
Newco will have at the Effective Time, a system of internal accounting controls
sufficient to provide reasonable assurances that: (A) all material transactions
are executed in accordance with general or specific authorization of the Board
of Directors and the duly authorized executive officers of Bradford and Bradford
Bank; (B) all material transactions are recorded as necessary to permit the
preparation of financial statements in conformity with GAAP consistently
applied; and (C) access to the material properties and assets of Bradford and
Bradford Bank is permitted only in accordance with general or specific
authorization of the Board of Directors and the duly authorized executive
officers of Bradford and Bradford Bank.
(ii) Since January 1, 2004, (A) through the date hereof, neither
Bradford nor Bradford Bank has received or otherwise had or obtained knowledge
of any material complaint, allegation, assertion or claim, whether written or
oral, regarding the accounting or auditing practices, procedures, methodologies
or methods of Bradford or Bradford Bank or their respective internal accounting
controls, including any material complaint, allegation, assertion or claim that
Bradford or Bradford Bank or any of their respective Subsidiaries has engaged in
questionable accounting or auditing practices, and (B) no attorney representing
Xxxxxxxx, Xxxxxxxx Bank or any of their respective Subsidiaries, whether or not
employed by Bradford or Bradford Bank or any of their respective Subsidiaries,
has reported evidence of a material violation of securities laws, federal
banking laws and regulations, breach of fiduciary duty or similar violation by
Bradford or Bradford Bank or any of their officers, directors, employees or
agents to the Board of Directors of Bradford or Bradford Bank or any committee
thereof or to any director or officer of Bradford or Bradford Bank.
(r) Tax Treatment of the Merger. Neither MHC, Xxxxxxxx, Xxxxxxxx Bank
nor Newco has any knowledge of any fact or circumstance relating to it that
would prevent the transactions contemplated by this Agreement from qualifying as
a reorganization under Section 368 of the IRC.
(s) Availability of Funds. Newco will have available to it at the
Effective Time sources of capital sufficient to pay the aggregate Cash
Consideration and to pay any other amounts payable pursuant to this Agreement
and to effect the transactions contemplated hereby.
39
(t) Pending Acquisitions. As of the date hereof, Bradford Bank and the
MHC have entered into an Agreement and Plan of Merger, dated as of January 2,
2007, with Golden Prague Federal Savings and Loan Association and an Agreement
and Plan of Merger, dated as of January 25, 2007, with Senator Bank (together,
the "Pending Merger Agreements"). Golden Prague Federal Savings and Loan
Association and Senator Bank are referred to collectively as the "Target
Organizations". Bradford has previously made available to Patapsco copies of the
Pending Merger Agreements, including all exhibits and disclosure schedules
thereto. To Bradford's knowledge, each of the representations and warranties of
the Target Organizations contained in the Pending Merger Agreements were
accurate as of the date of such agreements and are accurate as of the date of
this Agreement, except for such inaccuracies that would not have a Material
Adverse Effect on the Bradford Parties. To Bradford's knowledge, none of the
parties to the Pending Merger Agreements are in breach thereof. Bradford has
previously made available to Patapsco copies of all regulatory applications,
notices and other information (the "Pending Merger Applications") that have been
filed with Government Entities with respect to the acquisition of the Target
Organizations. To Bradford's knowledge, all the information contained in the
Pending Merger Applications is accurate. Bradford knows of no reason why all
approvals, consents and clearances necessary for the consummation of the
transactions contemplated by the Pending Merger Agreements will not be received
by July 31, 2007.
(u) Employee Benefit Plans.
(i) Bradford's Disclosure Letter contains a complete and accurate
list of all pension, retirement, stock option, stock purchase, stock ownership,
savings, stock appreciation right, profit sharing, deferred compensation,
consulting, bonus, group insurance, severance and other benefit plans,
contracts, agreements and arrangements, including, but not limited to, "employee
benefit plans," as defined in Section 3(3) of ERISA, incentive and welfare
policies, contracts, plans and arrangements and all trust agreements related
thereto with respect to any present or former directors, officers or other
employees of Bradford or any of its Subsidiaries (hereinafter referred to
collectively as the "Bradford Employee Plans"). Bradford has previously
delivered or made available to Patapsco true and complete copies of each
agreement, plan and other documents referenced in Bradford's Disclosure Letter,
along with, where applicable, copies of the IRS Form 5500 or 5500-C for the most
recently completed year. Each Bradford Employee Plan that is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) and which is
intended to be qualified under Section 401(a) of the IRC has received a
favorable determination letter from the IRS, and Bradford and its subsidiaries
are not aware of any circumstances likely to result in revocation of any such
favorable determination letter.
(ii) There is no pending or, to the knowledge of Bradford,
threatened litigation, administrative action or proceeding relating to any
Bradford Employee Plan. All of the Bradford Employee Plans comply in all
material respects with all applicable requirements of ERISA, the IRC and other
applicable laws. There has occurred no "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the IRC) with respect to the Bradford
Employee Plans which is likely to result in the imposition of any penalties or
taxes upon Bradford or any of its Subsidiaries under Section 502(i) of ERISA or
Section 4975 of the IRC.
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(iii) Neither Bradford, its Subsidiaries nor any ERISA Affiliates
maintains or has maintained during the last ten years a Bradford Employee Plan
which is subject to Title IV of ERISA or which is subject to the minimum funding
requirements of Section 412 of the Code. Neither Bradford, its Subsidiaries, nor
any ERISA Affiliate has contributed to any "multiemployer plan," as defined in
Section 3(37) of ERISA, on or after September 26, 1980.
ARTICLE IV
CONDUCT PENDING THE MERGER
4.1 Forbearances by Patapsco. Except as set forth in its Disclosure Letter
and except as expressly contemplated or permitted by this Agreement, during the
period from the date of this Agreement to the Effective Time, Patapsco shall
not, nor shall Patapsco permit any of its Subsidiaries to, without the prior
written consent of the Bradford Parties, which consent shall not be unreasonably
withheld:
(a) conduct its business other than in the regular, ordinary and usual
course consistent with past practice; fail to maintain and preserve intact its
business organization, properties, leases, employees and advantageous business
relationships and retain the services of its officers and key employees; or take
any action that would adversely affect or delay its ability to perform its
obligations under this Agreement or to consummate the transactions contemplated
hereby;
(b) (i) incur, modify, extend or renegotiate any indebtedness for
borrowed money, or assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any other individual, corporation or
other entity, other than (A) the creation of deposit liabilities in the ordinary
course of business consistent with past practice and (B) advances from the
Federal Home Loan Bank of Atlanta with a maturity of not more than one year;
(ii) prepay any indebtedness or other similar arrangements so as
to cause Patapsco to incur any prepayment penalty thereunder;
(c) (i) adjust, split, combine or reclassify any capital stock;
(ii) make, declare or pay any dividend or any other distribution
on its capital stock, except for regular quarterly cash dividends at a rate not
in excess of $0.07 per share of Patapsco Common Stock on a schedule consistent
with past practice and dividends paid by any of Patapsco's Subsidiaries for the
purpose of enabling Patapsco to pay such dividends; provided that for purposes
of the regular quarterly cash dividend to be paid in October 2007, the
declaration date shall be September 19, 2007, the record date shall be October
1, 2007 and the payment date shall be October 5, 2007; provided further, that if
the Effective Date occurs after October 1, 2007 and prior to October 5, 2007,
Bradford shall assume such dividend payment obligation;
41
(iii) grant any stock options, restricted stock or stock
appreciation rights or grant any individual, corporation or other entity any
right to acquire any shares of its capital stock;
(iv) issue any additional shares of capital stock or any
securities or obligations convertible or exercisable for any shares of its
capital stock except pursuant to the exercise of Patapsco Options outstanding as
of the date hereof; or
(v) directly or indirectly redeem, purchase or otherwise acquire
any shares of its capital stock;
(d) sell, transfer, mortgage, encumber or otherwise dispose of any of
its material properties or assets to any person other than a Subsidiary, or
cancel, release or assign any indebtedness to any person or any claims held by
any person, except in the ordinary course of business consistent with past
practice or pursuant to contracts or agreements in force at the date of this
Agreement;
(e) except pursuant to contracts or agreements in force at the date of
or permitted by this Agreement, investments in the Federal Home Loan Bank of
Atlanta and the Federal Reserve Bank of Richmond and intra-company equity
transfers in the ordinary course of business, make any equity investment, either
by purchase of stock or securities, contributions to capital, property
transfers, or purchase of any property or assets of any other person;
(f) enter into, renew, amend or terminate any contract or agreement,
or make any change in any of its leases or contracts, other than with respect to
those involving aggregate payments of less than, or the provision of goods or
services with a market value of less than, $25,000 per annum, the renewal of
insurance policies for coverage levels comparable to those in effect on the date
hereof, and contracts or agreements covered by Section 4.1(g);
(g) make, renegotiate, renew, increase, extend, modify or purchase any
loan, lease (credit equivalent), advance, credit enhancement or other extension
of credit, or make any commitment in respect of any of the foregoing, except (i)
in conformity with existing lending practices in amounts not to exceed an
aggregate of $1,675,000 with respect to any individual borrower, or (ii) loans
or advances as to which Patapsco has a binding obligation to make such loans or
advances as of the date hereof;
(h) except for loans or extensions of credit made on terms generally
available to the public, make or increase any loan or other extension of credit,
or commit to make or increase any such loan or extension of credit, to any
director or executive officer of Patapsco or The Patapsco Bank, or any entity
controlled, directly or indirectly, by any of the foregoing, other than renewals
of existing loans or commitments to loan;
(i) (i) increase in any manner the compensation or fringe benefits of
any of its employees or directors other than in the ordinary course of business
consistent with past practice and pursuant to policies currently in effect, or
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pay any bonus, pension, retirement allowance or contribution not required by any
existing plan or agreement to any such employees or directors;
(ii) become a party to, amend (other than amendments required by
applicable law) or commit itself to any pension, retirement, profit-sharing or
welfare benefit plan or agreement or employment agreement with or for the
benefit of any employee or director;
(iii) voluntarily accelerate the vesting of, or the lapsing of
restrictions with respect to, any stock options or other stock-based
compensation; or
(iv) elect to any senior executive office any person who is not a
member of its senior executive officer team as of the date of this Agreement or
elect to its Board of Directors any person who is not a member of its Board of
Directors as of the date of this Agreement, or hire any employee with annual
compensation in excess of $50,000;
(j) settle any claim, action or proceeding involving payment by it of
money damages in excess of $20,000 or impose any material restriction on its
operations or the operations of any of its Subsidiaries;
(k) amend its articles of incorporation or bylaws, or similar
governing documents;
(l) restructure or materially change its investment securities
portfolio or its interest rate risk position, through purchases, sales or
otherwise, or in the manner in which the portfolio is classified;
(m) make any investment in any debt security, including
mortgage-backed and mortgage-related securities, other than U.S. government and
U.S. government agency securities with final maturities not greater than one
year;
(n) make any capital expenditures other than pursuant to binding
commitments existing on the date hereof and other than expenditures necessary to
maintain existing assets in good repair or to make payment of necessary taxes;
(o) establish or commit to the establishment of any new branch or
other office facilities or file any application to relocate or terminate the
operation of any banking office;
(p) take any action that is intended or 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 VI not being satisfied
or in a violation of any provision of this Agreement;
(q) implement or adopt any change in its accounting principles,
practices or methods, other than as may be required by GAAP or regulatory
guidelines;
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(r) knowingly take action that would prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368 of the IRC; or
(s) agree to take, make any commitment to take, or adopt any
resolutions of its board of directors in support of, any of the actions
prohibited by this Section 4.1.
Any request by Patapsco or response thereto by the Bradford Parties
shall be made in accordance with the notice provisions of Section 8.7 and shall
note that it is a request pursuant to this Section 4.1.
4.2 Forbearances by the Bradford Parties. Except as expressly contemplated
or permitted by this Agreement, and except to the extent required by law or
regulation or any Governmental Entity, during the period from the date of this
Agreement to the Effective Time, the Bradford Parties shall not, without the
prior written consent of Patapsco, which shall not unreasonably be withheld:
(a) take any action that would adversely affect or delay its ability
to perform its obligations under this Agreement or to consummate the
transactions contemplated hereby, including the Conversion;
(b) take any action that is intended to or 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 VI not being
satisfied or in a violation of any provision of this Agreement;
(c) knowingly take action that would prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368 of the IRC; or
(d) agree to take, make any commitment to take, or adopt any
resolutions of its Board of Directors in support of, any of the actions
prohibited by this Section 4.2.
ARTICLE V
COVENANTS
5.1 Acquisition Proposals.
(a) Except as permitted by this Agreement, Patapsco shall not, and
shall not authorize or permit any of its Subsidiaries or any of its
Subsidiaries' officers, directors or employees or any investment banker,
financial advisor, attorney, accountant or other representative retained by
Patapsco or any of its Subsidiaries to, directly or indirectly, (i) solicit,
initiate or encourage (including by way of furnishing non-public information),
or take any other action to facilitate, any inquiries, discussions or the making
of any proposal that constitutes or could reasonably be expected to lead to an
Acquisition Proposal, (ii) participate in any discussions or negotiations, or
otherwise communicate in any way with any person (other than the Bradford
Parties), regarding an Acquisition Proposal or (iii) enter into or consummate
44
any agreement, arrangement or understanding requiring it to abandon, terminate
or fail to consummate the transactions contemplated hereby. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth in
the preceding sentence by any officer, director or employee of Patapsco or any
of the Subsidiaries or any investment banker, financial advisor, attorney,
accountant or other representative retained by Patapsco or any of its
Subsidiaries shall be deemed to be a breach of this Section 5.1 by Patapsco.
Notwithstanding the foregoing, Patapsco may, in response to a Superior Proposal
that has not been withdrawn and that did not otherwise result from a breach of
this Section 5.1, (x) furnish non-public information with respect to Patapsco to
the person who made such Superior Proposal pursuant to a confidentiality
agreement on terms no more favorable to such person than the confidentiality
agreement between Patapsco and Bradford dated December 13, 2006 and (y)
participate in discussions or negotiations with such person regarding such
Superior Proposal, if and so long as Patapsco's Board of Directors determines in
good faith, after consultation with and based upon the advice of its outside
legal counsel, that failing to take such action would constitute a breach of its
fiduciary duties under applicable law.
(b) Patapsco will notify Bradford immediately orally (within one day)
and in writing (within three days) of receipt of any Acquisition Proposal, any
request for non-public information that could reasonably be expected to lead to
an Acquisition Proposal, or any inquiry with respect to or that could reasonably
be expected to lead to an Acquisition Proposal, including, in each case, the
identity of the person making such Acquisition Proposal, request or inquiry and
the terms and conditions thereof, and shall provide to Bradford any written
materials received by Patapsco or any of its Subsidiaries in connection
therewith. Patapsco will keep Bradford informed of any developments with respect
to any such Acquisition Proposal, request or inquiry immediately upon the
occurrence thereof.
(c) Patapsco will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
prior to the date of this Agreement with respect to any of the foregoing.
Patapsco will take the necessary steps to inform the appropriate individuals or
entities referred to in the first sentence of Section 5.1(a) of the obligations
undertaken in this Section 5.1. Patapsco will promptly request each person
(other than Bradford) that has executed a confidentiality agreement in the 12
months prior to the date hereof in connection with its consideration of a
business combination with Patapsco or any of its Subsidiaries to return or
destroy all confidential information previously furnished to such person by or
on behalf of Patapsco or any of its Subsidiaries. Patapsco shall not release any
third party from, or waive any provisions of, any confidentiality agreements or
standstill agreement to which it or any of its Subsidiaries is a party.
5.2 Advice of Changes. Prior to the Closing, each party shall promptly
advise the other party orally and in writing to the extent that it has knowledge
of (i) any representation or warranty made by it contained in this Agreement
becoming untrue or inaccurate in any material respect or (ii) the failure by it
to comply in any material respect with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
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5.3 Access and Information.
(a) Upon reasonable notice, Patapsco shall (and shall cause Patapsco's
Subsidiaries to) afford Bradford and its representatives (including, without
limitation, directors, officers and employees of Bradford and its affiliates and
counsel, accountants and other professionals retained by Bradford) such
reasonable access during normal business hours throughout the period prior to
the Effective Time to the books, records (including, without limitation, tax
returns and work papers of independent auditors), contracts, properties,
personnel and to such other information relating to Patapsco and Patapsco's
Subsidiaries as Xxxxxxxx xxx reasonably request; provided, however, that no
investigation pursuant to this Section 5.3 shall affect or be deemed to modify
any representation or warranty made by Patapsco in this Agreement.
(b) From the date hereof until the Effective Time, Patapsco shall, and
shall cause Patapsco's Subsidiaries to, promptly provide Bradford with (i) a
copy of each report filed with federal or state banking regulators, (ii) a copy
of each periodic report to its senior management and all materials relating to
its business or operations furnished to its Board of Directors, (iii) a copy of
each press release made available to the public and (iv) all other information
concerning its business, properties and personnel as Xxxxxxxx xxx reasonably
request. Notwithstanding the foregoing, neither Patapsco nor its Subsidiaries
shall be required to provide access to or to disclose information where such
access or disclosure would violate the rights of such entity's customers,
jeopardize the attorney-client privilege of the entity in possession or control
of such information, or contravene any law, rule, regulation, order, judgment,
decree 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 previous sentence apply.
(c) Bradford will not, and will cause its representatives not to, use
any information obtained pursuant to this Section 5.3 for any purpose unrelated
to the consummation of the transactions contemplated by this Agreement. Subject
to the requirements of applicable law, Bradford will keep confidential, and will
cause its representatives to keep confidential, all information and documents
obtained pursuant to this Section 5.3 unless such information (i) was already
known to Bradford or an affiliate of Bradford, other than pursuant to a
confidentiality agreement or other confidential relationship, (ii) becomes
available to Bradford or an affiliate of Bradford from other sources not known
by such party to be bound by a confidentiality agreement or other obligation of
secrecy, (iii) is disclosed with the prior written approval of Patapsco or (iv)
is or becomes readily ascertainable from published information or trade sources.
(d) From and after the date hereof, representatives of Bradford and
Patapsco shall meet on a regular basis to discuss and plan for the conversion of
Patapsco's and its Subsidiaries' data processing and related electronic
informational systems to those used by Bradford Bank with the goal of conducting
such conversion simultaneously with the consummation of the Bank Merger.
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(e) Patapsco shall give notice, and shall cause The Patapsco Bank to
give notice, to a designee of Bradford, and shall invite such person to attend
all regular and special meetings of the Board of Directors of Patapsco and The
Patapsco Bank and all meetings of the Directors' Loan Committee of The Patapsco
Bank. Such designees shall have no right to vote and shall not attend sessions
of board and committees during which there is being discussed (i) matters
involving this Agreement, (ii) information or material that Patapsco or The
Patapsco Bank is required or obligated to maintain as confidential under
applicable laws or regulations or policies or procedures of Patapsco or The
Patapsco Bank, (iii) pending or threatened litigation or investigations if, in
the opinion of counsel to Patapsco, the presence of such designees would or
might adversely affect the confidential nature of or any privilege relating to
the matters being discussed, or (iv) matters involving an Acquisition Proposal.
5.4 Applications; Consents.
(a) The parties hereto shall cooperate with each other and shall use
their reasonable best efforts to prepare and file as soon as practicable after
the date hereof all necessary applications, notices and filings to obtain all
permits, consents, approvals and authorizations of all Governmental Entities
that are necessary or advisable to consummate the transactions contemplated by
this Agreement, including the Conversion. Patapsco and the Bradford Parties
shall furnish each other with all information concerning themselves, their
respective Subsidiaries, and their respective Subsidiaries' directors, officers
and stockholders and such other matters as may be reasonably necessary or
advisable in connection with any application, notice or filing made by or on
behalf of the Bradford Parties, Patapsco or any of their respective subsidiaries
to any Governmental Entity in connection with the transactions contemplated by
this Agreement and the Plan of Bank Merger. Bradford and Patapsco shall have the
right to review in advance, and to the extent practicable each will consult with
the other on, all the information relating to the Bradford Parties and Patapsco,
as the case may be, and any of their respective subsidiaries, that appears in
any filing made with, or written materials submitted to, any Governmental Entity
pursuant to this Section 5.4(a).
(b) As soon as practicable after the date hereof, each of the parties
hereto shall, and they shall cause their respective subsidiaries to, use its
best efforts to obtain any consent, authorization or approval of any third party
that is required to be obtained in connection with the transactions contemplated
by this Agreement and the Plan of Bank Merger.
5.5 Antitakeover Provisions. Patapsco and its Subsidiaries shall take all
steps required by any relevant federal or state law or regulation or under any
relevant agreement or other document to exempt or continue to exempt Newco,
Bradford Bank, the Agreement, the Plan of Bank Merger and the Merger from any
provisions of an antitakeover nature in Patapsco's or its Subsidiaries' articles
of incorporation and bylaws, or similar organizational documents, and the
provisions of any federal or state antitakeover laws.
5.6 Additional Agreements. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to
take promptly, or cause to be taken promptly, all actions and to do promptly, or
47
cause to be done promptly, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including the Conversion, as
expeditiously as possible, including using efforts to obtain all necessary
actions or non-actions, extensions, waivers, consents and approvals from all
applicable Governmental Entities, effecting all necessary registrations,
applications and filings (including, without limitation, filings under any
applicable state securities laws) and obtaining any required contractual
consents and regulatory approvals.
5.7 Publicity. The initial press release announcing this Agreement shall be
a joint press release and thereafter Patapsco and the Bradford Parties shall
consult with each other prior to issuing any press releases or otherwise making
public statements (including any written communications to stockholders) with
respect to the Merger and any other transaction contemplated hereby and in
making any filings with any Governmental Entity; provided, however, that nothing
in this Section 5.7 shall be deemed to prohibit any party from making any
disclosure which its counsel deems necessary in order to satisfy such party's
disclosure obligations imposed by law.
5.8 Stockholder Meeting. Patapsco will submit to its stockholders this
Agreement and any other matters required to be approved or adopted by
stockholders in order to carry out the intentions of this Agreement. In
furtherance of that obligation, Patapsco will take, in accordance with
applicable law and its articles of incorporation and bylaws, all action
necessary to call, give notice of, convene and hold a meeting of its
stockholders (the "Stockholder Meeting") as promptly as practicable for the
purpose of considering and voting on approval and adoption of this Agreement and
the transactions provided for in this Agreement. Patapsco's Board of Directors
will use all reasonable best efforts to obtain from Patapsco's stockholders a
vote approving this Agreement. Except as provided in this Agreement, (i)
Patapsco's Board of Directors shall recommend to Patapsco's stockholders
approval of this Agreement, (ii) the Proxy Statement shall include a statement
to the effect that Patapsco's Board of Directors has recommended that Patapsco's
stockholders vote in favor of the approval of this Agreement and (iii) neither
Patapsco's Board of Directors nor any committee thereof shall withdraw, amend or
modify, or propose or resolve to withdraw, amend or modify, the recommendation
of Patapsco's Board of Directors that Patapsco's stockholders vote in favor of
approval of this Agreement or make any statement in connection with the
Stockholder Meeting inconsistent with such recommendation (collectively, a
"Change in Recommendation"). Notwithstanding the foregoing, if (x) Patapsco has
complied in all material respects with its obligations under Section 5.1, (y)
Patapsco (1) has received an unsolicited bona fide written Acquisition Proposal
from a third party that Patapsco's Board of Directors concludes in good faith
constitutes a Superior Proposal after giving effect to all of the adjustments
that may be offered by the Bradford Parties pursuant to clause (3) below, (2)
has notified Bradford, at least five business days in advance, of it is
intention to effect a Change in Recommendation, specifying the material terms
and conditions of any such Superior Proposal and furnishing to Bradford a copy
of the relevant proposed transaction documents, if such exist, with the person
making such Superior Proposal and (3) during the period of not less than five
business days following Patapsco's delivery of the notice referred to in clause
(2) above and prior to effecting such Change in Recommendation, has negotiated,
and has used reasonable best efforts to cause its financial and legal advisors
to negotiate, with the Bradford Parties in good faith (to the extent that the
Bradford Parties desire to negotiate) to make such adjustments in the terms and
conditions of this Agreement so that such Acquisition Proposal ceases to
constitute a Superior Proposal and (z) Patapsco's Board of Directors, after
48
consultation with and based on the advice of counsel, determines in good faith
that it would result in a violation of its fiduciary duties under applicable law
to recommend this Agreement, then in submitting the Agreement to stockholders at
the Stockholder Meeting it may submit the Agreement without recommendation, or
following submission of the Agreement to stockholders it may withdraw, amend or
modify its recommendation, in which case the Board of Directors may communicate
the basis for its lack of a recommendation, or the withdrawal, amendment or
modification of its recommendation, to the stockholders in the Proxy Statement
or an appropriate amendment or supplement thereto to the extent required by law.
5.9 Registration of Newco Common Stock.
(a) As promptly as reasonably practicable following the date hereof,
Newco shall prepare and file with the SEC the Merger Registration Statement. The
Merger Registration Statement shall contain proxy materials relating to the
matters to be submitted to the Patapsco stockholders at the Stockholders
Meeting, which may be combined with the Conversion Prospectus (such proxy
statement, and any amendments or supplements thereto, the "Proxy Statement").
Patapsco will furnish to Newco the information required to be included in the
Merger Registration Statement and Conversion Registration Statement with respect
to its business and affairs and shall have the right to review and consult with
Newco and approve the form of, and any characterizations of such information
included in, the Merger Registration Statement and Conversion Registration
Statement prior to its being filed with the SEC. Newco shall use reasonable best
efforts to have the Merger Registration Statement declared effective by the SEC
and to keep the Merger Registration Statement effective as long as is necessary
to consummate the Merger and the transactions contemplated hereby. Patapsco will
use reasonable best efforts to cause the Proxy Statement to be mailed to
Patapsco's stockholders as promptly as practicable after the Merger Registration
Statement is declared effective under the Securities Act. Newco will advise
Patapsco, promptly after it receives notice thereof, of the time when the Merger
Registration Statement has become effective, the issuance of any stop order, the
suspension of the qualification of the Newco Common Stock issuable in connection
with the Merger for offering or sale in any jurisdiction, or any request by the
SEC for amendment of the Proxy Statement or the Merger Registration Statement.
If at any time prior to the Effective Time any information relating to Newco or
Patapsco, or any of their respective affiliates, officers or directors, should
be discovered by Newco or Patapsco which should be set forth in an amendment or
supplement to any of the Merger Registration Statement or the Proxy Statement so
that any of such documents would not include any misstatement of a material fact
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, the party
which discovers such information shall promptly notify the other party hereto
and, to the extent required by law, rules or regulations, an appropriate
amendment or supplement describing such information shall be promptly filed by
Newco with the SEC and disseminated by Patapsco to the stockholders of Patapsco.
(b) Newco shall also take any action required to be taken under any
applicable state securities laws in connection with the Merger and each of
49
Patapsco and Newco shall furnish all information concerning it and the holders
of Patapsco Common Stock as may be reasonably requested in connection with any
such action.
(c) Newco shall use its best efforts to cause the Newco Common Stock
to be issued by Newco in exchange for the shares of Patapsco Common Stock to be
approved for issuance on the Nasdaq Global Market, subject to official notice of
issuance, as promptly as practicable after the date hereof, and in any event
prior to the Effective Time.
5.10 Notification of Certain Matters. Each party shall give prompt notice
to the other of: (i) any event or notice of, or other communication relating to,
a default or event that, with notice or lapse of time or both, would become a
default, received by it or any of its Subsidiaries subsequent to the date of
this Agreement and prior to the Effective Time, under any contract material to
the financial condition, properties, businesses or results of operations of each
party and its Subsidiaries taken as a whole to which each party or any
Subsidiary is a party or is subject; and (ii) any event, condition, change or
occurrence which individually or in the aggregate has, or which, so far as
reasonably can be foreseen at the time of its occurrence, is reasonably likely
to result in a Material Adverse Effect. Each of Patapsco and the Bradford
Parties shall give prompt notice to the other party of any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with any of the transactions contemplated by
this Agreement.
5.11 Employee Benefit Matters.
(a) All persons who are employees of The Patapsco Bank immediately
prior to the Effective Time and whose employment is not specifically terminated
at or prior to the Effective Time (a "Continuing Employee") shall, at the
Effective Time, become employees of Bradford Bank; provided, however, that in no
event shall any of The Patapsco Bank's employees be officers of Bradford Bank,
or have or exercise any power or duty conferred upon such an officer, unless and
until duly elected or appointed to such position in accordance with the bylaws
of Bradford Bank. Except for those persons who enter into an employment
agreement with Bradford Bank, all of the Continuing Employees shall be employed
at the will of Bradford Bank and no contractual right to employment shall inure
to such employees because of this Agreement.
(b) Continuing Employees will receive credit for service with Patapsco
for purposes of vesting and determination of eligibility to participate in
Bradford Bank's 401(k) plan, but not for accrual of benefits. Each Continuing
Employee who meets the eligibility requirements shall enter the 401(k) plan and
be eligible to participate immediately after the Effective Time. Each Continuing
Employee shall be eligible to participate in any employee stock ownership plan
established by Bradford Bank in connection with the Conversion on the same basis
as all other employees of Bradford Bank as of the Effective Time. As of the
Effective Time, Bradford Bank shall make available employer-provided health and
other employee welfare benefit plans to each Continuing Employee on the same
basis as it provides such coverage to Bradford Bank employees except that any
pre-existing condition, eligibility waiting period or other limitations or
exclusions otherwise applicable under such plans to new employees shall not
apply to a Continuing Employee or their covered dependents who were covered
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under a similar Patapsco plan at the Effective Time of the Merger. To the extent
permitted, Bradford shall maintain for the benefit of Continuing Employees the
Patapsco employer-paid health plan until February 28, 2008.
(c) The Patapsco employee stock ownership plan ("Patapsco ESOP") was
terminated and a favorable determination letter on termination was received from
the Internal Revenue Service on October 10, 2006. Following receipt of the final
accounting on the Patapsco ESOP, Patapsco will distribute the account
statements, distribution election forms and special tax notices to the
participants in order for the participants to elect their form of distribution
from the Patapsco ESOP. Following distribution of the account balances,
participants will be given the opportunity, with respect to any Patapsco Common
Stock received in such distribution, to elect to "put" such shares to Patapsco
and receive the value, as determined in the last valuation immediately preceding
such distribution, in accordance with the terms of the Patapsco ESOP and
applicable law. Participants who fail to exercise their put option shall be
entitled to elect to receive the Merger Consideration in connection with the
Merger.
(d) Prior to the Effective Time, Patapsco shall take such action as
may be necessary to withdraw from participation in the Pentegra Defined
Contribution Plan for Financial Institutions, effective as of the Effective
Time. Following execution of this Agreement, Patapsco shall continue to accrue a
profit sharing contribution for both the plan year ending June 30, 2007 and the
portion of the plan year in which the Effective Time occurs; prior to the
Effective Time, any accrued contributions shall be made to such plan. Prior to
withdrawal from the Pentegra Defined Contribution Plan for Financial
Institutions, Patapsco shall amend its Adoption Agreement to such plan (to the
extent permitted by Pentegra), in order to provide that any contribution made in
the portion of the plan year occurring prior to such withdrawal shall be
allocated to the accounts of participants who are employed on the effective date
of the withdrawal. Such amendment shall also provide that any minimum
"hours-of-service" requirement for participation in such allocation shall be
pro-rated.
(e) The foregoing subparagraph (b) notwithstanding, Newco agrees to
honor in accordance with their terms all benefits vested as of the Effective
Time under the Patapsco Employee Plans and all vested benefits or other vested
amounts earned or accrued through such time under contracts, arrangements,
commitments or understandings described in Patapsco's Disclosure Letter,
including benefits which vest or are otherwise accrued as a result of the
consummation of the transactions contemplated by this Agreement.
(f) Notwithstanding anything to the contrary contained herein, The
Patapsco Bank may pay cash bonuses to employees of The Patapsco Bank, subject to
the prior approval of Bradford, in order to help retain such employees through
the conversion of The Patapsco Bank's data processing systems to those of
Bradford Bank, provided that the aggregate amount of such bonuses shall not
exceed $110,000.
(g) Newco agrees that each Patapsco employee who is involuntarily
terminated by Newco (other than for cause) within 12 months of the Effective
Date and who is not covered by a separate severance or change in control
agreement shall receive a severance payment equal to two weeks of base pay (at
the rate in effect on the termination date) for each full year of service at
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Patapsco, with a minimum payment equal to four weeks of base pay for Patapsco
employees who have at least one full year of service as of their date of
termination and a maximum payment equal to 26 weeks of base pay. For purposes of
calculating the number of years of service, fractional years of service shall be
rounded up or down to the nearest full year, except for purposes of determining
eligibility to receive a severance payment.
(h) Within 90 days of the date of this Agreement, Bradford Bank shall
offer to Xxxxxxx X. Xxx an employee agreement substantially in the same form
(other than with respect to the amount of compensation) as it offers to the
current Chief Financial Officer of Bradford Bank.
(i) Prior to the Effective Time, Patapsco shall take such action as
may be necessary to terminate the Patapsco Bancorp, Inc. 2004 Deferred
Compensation Plan, effective no later than the Effective Time. In connection
with the termination of such plan, the account balances of the former Patapsco
directors participating in such plan shall be distributed in cash to such
directors in accordance with Section 409A of the IRC.
5.12 Indemnification.
(a) From and after the Effective Time through the sixth anniversary of
the Effective Time, Newco agrees to indemnify and hold harmless each present and
former director and officer of Patapsco and its Subsidiaries and each officer or
employee of Patapsco and its Subsidiaries that is serving or has served as a
director or officer of another entity expressly at Patapsco's request or
direction (each, an "Indemnified Party"), against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, amounts paid in
settlement, losses, claims, damages or liabilities incurred in connection with
any claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring at
or prior to the Effective Time (including the transactions contemplated by this
Agreement), whether asserted or claimed prior to, at or after the Effective
Time, as they are from time to time incurred, in each case to the fullest extent
such person would have been indemnified pursuant to Patapsco's articles of
incorporation and bylaws as in effect on the date of this Agreement.
(b) Any Indemnified Party wishing to claim indemnification under
Section 5.12(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify Newco thereof, but the failure to so notify
shall not relieve Newco of any liability it may have hereunder to such
Indemnified Party if such failure does not materially and substantially
prejudice Newco.
(c) Newco shall use its reasonable best efforts to maintain Patapsco's
existing directors' and officers' liability insurance policy (or provide a
policy providing comparable coverage and amounts on terms no less favorable to
the persons currently covered by Patapsco's existing policy, including Newco's
existing policy if it meets the foregoing standard) covering persons who are
currently covered by such insurance for a period of three years after the
Effective Time; provided, however, that in no event shall Newco be obligated to
expend, in order to maintain or provide insurance coverage pursuant to this
Section 5.12(c), an amount per annum in excess of 200% of the amount of the
annual premiums paid by Patapsco as of the date hereof for such insurance
52
("Maximum Insurance Amount"); provided further, that if the amount of the annual
premiums necessary to maintain or procure such insurance coverage exceeds the
Maximum Insurance Amount, Newco shall obtain the most advantageous coverage
obtainable for an annual premium equal to the Maximum Insurance Amount.
(d) In the event Newco or any of its successors or assigns (i)
consolidates with or merges into any other person or entity 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 or entity, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Newco
assume the obligations set forth in this Section 5.12.
(e) The provisions of this Section 5.12 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
representatives.
5.13 Affiliate Letters. Patapsco shall use its best efforts to cause each
director, executive officer and other person who is an "affiliate" of Patapsco
under Rule 145 of the Securities Act to deliver to Newco as soon as practicable
and prior to the mailing of the Proxy Statement executed letter agreements, each
substantially in the form attached hereto as Exhibit D, providing that such
person will comply with Rule 145.
5.14 Environmental Reports. Patapsco shall cooperate with an environmental
consulting firm designated by Bradford that is reasonably acceptable to Patapsco
(the "Environmental Consultant") in connection with the conduct by the
Environmental Consultant of a Phase I and/or II Environmental Site Assessment or
other environmental investigation on all real property owned or leased by
Patapsco or its Subsidiaries as of the date of this Agreement (the "Patapsco
Property"). If Bradford reasonably determines that further investigatory
procedures are required as to any Patapsco Property on the basis of the review
of the report of the initial investigation with respect to such Patapsco
Property prepared by the Environmental Consultant, and should Bradford order the
Environmental Consultant to perform such further investigatory procedures,
Patapsco shall cooperate with such further investigatory procedures. Bradford
shall furnish to Patapsco true and complete copies of any reports of the
Environmental Consultant that it receives with respect to any Patapsco Property.
Patapsco shall not, and shall cause its Subsidiaries not to, without the written
consent of Bradford, knowingly take any action or execute any instruments that
would affect the status of any of its properties under environmental laws or its
rights or duties under such laws.
5.15 MHC Conversion from Mutual to Stock Form. Commencing promptly after
the date of this Agreement, MHC, Xxxxxxxx, Xxxxxxxx Bank and Newco will use
reasonable best efforts to, and will take all reasonable steps necessary, to
effect promptly the Conversion. In addition, without limiting the generality of
the foregoing, MHC and Bradford shall cause the following to be done:
(a) MHC will (i) as promptly as practicable after the Conversion
Registration Statement is declared effective by the SEC, and the requisite
53
approvals from the Regulatory Authorities have been obtained, take all steps
necessary to duly call, give notice of, convene and hold the Special Meeting (as
defined in the Plan of Conversion) for the purpose of approving the Plan of
Conversion, and for such other purposes as may be, in the reasonable judgment of
MHC, necessary or desirable, (ii) recommend to the Voting Members (as defined in
the Plan of Conversion) the approval of the aforementioned matters to be
submitted by it to the Voting Members, and (iii) cooperate and consult with
Patapsco with respect to each of the foregoing matters.
(b) MHC will use reasonable best efforts to prepare and file all
regulatory applications required to be filed in connection with the Conversion.
(c) Bradford and Newco shall prepare as promptly as practicable, and
Patapsco shall cooperate in the preparation of, the Conversion Prospectus. Such
Conversion Prospectus shall be incorporated into the Conversion Registration
Statement. Newco shall file the Conversion Registration Statement with the SEC
as promptly as practicable. Newco shall use its reasonable best efforts to have
the Conversion Registration Statement declared effective under the Securities
Act as promptly as practicable after such filing.
(d) Patapsco shall provide Newco with any information concerning it
that Newco may reasonably request in connection with the Conversion Prospectus,
and Newco shall notify Patapsco promptly of the receipt of any comments of the
SEC, the OTS and any other Government Regulator with respect to the Conversion
Prospectus and of any requests by the SEC, the OTS or any other Government
Regulator for any amendment or supplement thereto or for additional information,
and shall promptly provide to Patapsco copies of all correspondence between
Newco or any representative of Newco and the SEC, the OTS or any other
Government Regulator. Newco shall give Patapsco and its counsel the opportunity
to review and comment on the Conversion Prospectus prior to its being filed with
the SEC, the OTS and any Government Regulator and shall give Patapsco and its
counsel the opportunity to review and comment on all amendments and supplements
to the Conversion Prospectus and all responses to requests for additional
information and replies to comments prior to their being filed with, or sent to,
the SEC, the OTS and any Government Regulator. Each of Newco and Patapsco agrees
to use all reasonable efforts, after consultation with the other party hereto,
to respond promptly to all such comments of and requests by the SEC, the OTS and
any Government Regulator and to cause the Conversion Prospectus and all required
amendments and supplements thereto to be mailed to the Participants at the
earliest practicable time.
(e) Each party hereto shall promptly notify the other if at any time
it becomes aware that the Conversion Prospectus or the Conversion Registration
Statement contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading. In such event, the parties shall cooperate in the preparation of a
supplement or amendment to such Conversion Prospectus, which corrects such
misstatement or omission, and Newco shall file an amended Conversion
Registration Statement with the SEC.
(f) If any shares of Newco Common Stock that are offered for sale in
the subscription offering that is conducted as part of the Conversion Offering
54
remain unsold, then, at Newco's discretion, such shares may be issued to
Patapsco stockholders as part of the Merger Consideration if necessary to
complete the Conversion.
5.16 Accountant's Comfort Letter. Patapsco shall use its reasonable best
efforts to cause to be delivered to Newco a letter from its independent public
accountants addressed to Newco, dated a date within two business days before the
date on which the Conversion Registration Statement shall become effective, in
form and substance reasonably satisfactory to Newco and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Conversion Registration Statement.
5.17 Trust Preferred Securities. Newco agrees that it will take all actions
that are necessary or that are otherwise reasonably requested by Patapsco to
cause, as of the Effective Time, Newco to be the successor to, or to assume the
obligations of, Patapsco under and pursuant to the Indenture, dated as of
October 31, 2005, between Patapsco and U.S. Bank National Association, as
trustee, relating to $5,155,000 in aggregate principal amount of Junior
Subordinated Deferrable Interest Debentures, the Amended and Restated
Declaration of Trust of Patapsco Statutory Trust I, dated as of October 31,
2005, among Patapsco, as sponsor, U.S. Bank National Association, as
institutional trustee, and the administrators named therein, and the related
Guarantee Agreement dated October 31, 2005.
ARTICLE VI
CONDITIONS TO CONSUMMATION
6.1 Conditions to Each Party's Obligations. The respective obligations of
each party to effect the Merger shall be subject to the satisfaction of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been approved by
the requisite vote of Patapsco's stockholders in accordance with applicable laws
and regulations.
(b) Regulatory Approvals. All approvals, consents or waivers of any
Governmental Entity required to permit consummation of the Conversion and the
Merger and the other transactions contemplated by this Agreement shall have been
obtained and shall remain in full force and effect, and all statutory waiting
periods shall have expired; provided, however, that none of such approvals,
consents or waivers shall contain any condition or requirement, excluding
standard conditions that are normally imposed by the OTS in bank merger
transactions and mutual-to-stock conversions, that would so materially and
adversely impact the economic or business benefits to Newco of the transactions
contemplated hereby that, had such condition or requirement been known, the
Bradford Parties would not, in their reasonable judgment, have entered into this
Agreement.
(c) No Injunctions or Restraints; Illegality. No party hereto shall be
subject to any order, decree or injunction of a court or agency of competent
jurisdiction that enjoins or prohibits the consummation of the Merger or the
Bank Merger and no Governmental Entity shall have instituted any proceeding for
the purpose of enjoining or prohibiting the consummation of the Merger or the
Bank Merger or any transactions contemplated by this Agreement. No statute, rule
55
or regulation shall have been enacted, entered, promulgated or enforced by any
Governmental Entity which prohibits or makes illegal consummation of the Merger.
(d) Third Party Consents. The parties shall have obtained the consent
or approval of each person (other than the governmental approvals or consents
referred to in Section 6.1(b)) whose consent or approval shall be required to
consummate the transactions contemplated by this Agreement, except those for
which failure to obtain such consents and approvals would not, individually or
in the aggregate, have a Material Adverse Effect on Newco (after giving effect
to the consummation of the transactions contemplated hereby).
(e) Tax Opinions. Newco and Patapsco shall have received opinions of
Xxxxxxx Xxxxxx & Xxxxxxx LLP and Xxxx Xxxxxx Xxxxxxxx & Xxxxxx, P.C.,
respectively, dated as of the Closing Date, in form and substance customary in
transactions of the type contemplated hereby, and reasonably satisfactory to
Newco and Patapsco, as the case may be, substantially to the effect that on the
basis of the facts, representations and assumptions set forth in such opinions
which are consistent with the state of facts existing at the Effective Time, (i)
the Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the IRC and (ii) Newco and Patapsco will
each be a party to that reorganization within the meaning of Section 368(b) of
the IRC. Such opinions may be based on, in addition to the review of such
matters of fact and law as counsel considers appropriate, representations
contained in certificates of officers of Newco, Patapsco and others.
(f) Registration Statement; Blue Sky Laws. The Merger Registration
Statement shall have been declared effective by the SEC and no proceedings shall
be pending or threatened by the SEC to suspend the effectiveness of the Merger
Registration Statement, and Newco shall have received all required approvals by
state securities or "blue sky" authorities with respect to the transactions
contemplated by this Agreement.
(g) Nasdaq Listing. The shares of Newco Common Stock issuable pursuant
to the Merger shall have been approved for listing on the Nasdaq Global Market,
subject to official notice of issuance.
(h) Conversion. The Conversion shall have been consummated.
6.2 Conditions to the Obligations of Newco. The obligations of Newco to
effect the Merger shall be further subject to the satisfaction of the following
additional conditions, any one or more of which may be waived by Newco:
(a) Patapsco's Representations and Warranties. Each of the
representations and warranties of Patapsco contained in this Agreement and in
any certificate or other writing delivered by Patapsco pursuant hereto shall be
true and correct in all material respects at and as of the Closing Date as
though made at and as of the Closing Date, except that those representations and
warranties that address matters only as of a particular date need only be true
and correct as of such date, provided that no representation or warranty of
Patapsco shall be deemed untrue and incorrect for purposes hereunder as a
consequence of the existence of any fact, event or circumstance inconsistent
with such representation or warranty, unless such fact, event or circumstance,
individually or taken together with all other facts, events or circumstances
56
inconsistent with any representations or warranties of Patapsco, has had or
would result in a Material Adverse Effect on Patapsco, disregarding for these
purposes (x) any qualification or exception for, or reference to, materiality in
any such representation or warranty and (y) any use of the terms "material",
"materially", "in all material respects", "Material Adverse Effect" or similar
terms or phrases in any such representations or warranty.
(b) Performance of Patapsco's Obligations. Patapsco shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Time.
(c) Officers' Certificate. Newco shall have received a certificate
signed by the chief executive officer and the chief financial or principal
accounting officer of Patapsco to the effect that the conditions set forth in
Sections 6.2(a) and (b) have been satisfied.
(d) Financial Statements. Patapsco shall have filed with the SEC its
Annual Report on Form 10-KSB for the year ended June 30, 2007 and shall have
delivered a copy thereof to Bradford.
6.3 Conditions to the Obligations of Patapsco. The obligations of Patapsco
to effect the Merger shall be further subject to the satisfaction of the
following additional conditions, any one or more of which may be waived by
Patapsco:
(a) The Bradford Parties' Representations and Warranties. Each of the
representations and warranties of MHC, Xxxxxxxx, Xxxxxxxx Bank and Newco
contained in this Agreement and in any certificate or other writing delivered by
MHC, Xxxxxxxx, Xxxxxxxx Bank and Newco pursuant hereto shall be true and correct
in all material respects at and as of the Closing Date as though made at and as
of the Closing Date, except that those representations and warranties that
address matters only as of a particular date need only be true and correct as of
such date, provided that no representation or warranty of MHC, Xxxxxxxx,
Xxxxxxxx Bank and Newco shall be deemed untrue and incorrect for purposes
hereunder as a consequence of the existence of any fact, event or circumstance
inconsistent with such representation or warranty, unless such fact, event or
circumstance, individually or taken together with all other facts, events or
circumstances inconsistent with any representations or warranties of MHC,
Xxxxxxxx, Xxxxxxxx Bank and Newco, has had or would result in a Material Adverse
Effect on the Bradford Parties, disregarding for these purposes (x) any
qualification or exception for, or reference to, materiality in any such
representation or warranty and (y) any use of the terms "material",
"materially", "in all material respects", "Material Adverse Effect" or similar
terms or phrases in any such representations or warranty.
(b) Performance of the Bradford Parties' Obligations. MHC, Xxxxxxxx,
Xxxxxxxx Bank and Newco shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Effective Time.
(c) Officers' Certificate. Patapsco shall have received a certificate
signed by the chief executive officer and the chief financial or principal
57
accounting officer of MHC, Xxxxxxxx, Xxxxxxxx Bank and Newco to the effect that
the conditions set forth in Sections 6.3(a) and (b) have been satisfied.
(d) Payment of Merger Consideration. Newco shall have delivered the
aggregate Cash Consideration to the Exchange Agent and authorized the Exchange
Agent to issue the Stock Consideration.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated, and the Merger
abandoned, at any time prior to the Effective Time, by action taken or
authorized by the Board of Directors of the terminating party, either before or
after any requisite stockholder approval:
(a) by the mutual written consent of Bradford and Patapsco; or
(b) by either Bradford or Patapsco, in the event of the failure of
Patapsco's stockholders to approve the Agreement at the Stockholder Meeting;
provided, however, that Patapsco shall only be entitled to terminate the
Agreement pursuant to this clause if it has complied in all material respects
with its obligations under Section 5.8; or
(c) by either Bradford or Patapsco, if either (i) any approval,
consent or waiver of a Governmental Entity required to permit consummation of
the transactions contemplated by this Agreement shall have been denied or (ii)
any Governmental Entity of competent jurisdiction shall have issued a final,
unappealable order enjoining or otherwise prohibiting consummation of the
transactions contemplated by this Agreement; or
(d) by either Bradford or Patapsco, in the event that the Merger is
not consummated by the date that is 12 months following the date hereof (the
"Termination Date"), unless the failure to so consummate by the Termination Date
is 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;
or
(e) by either Bradford or Patapsco (provided that the party seeking
termination is not then in material breach of any representation, warranty,
covenant or other agreement contained herein), in the event of a breach of any
covenant or agreement on the part of the other party set forth in this
Agreement, or if any representation or warranty of the other party shall have
become untrue, in either case such that the conditions set forth in Sections
6.2(a) or (b) or Sections 6.3(a) or (b), as the case may be, would not be
satisfied and such breach or untrue representation or warranty has not been or
cannot be cured within thirty (30) days following written notice to the party
committing such breach or making such untrue representations or warranty; or
(f) by Bradford, (i) if Patapsco shall have materially breached its
obligations under Section 5.1 or Section 5.8 or (ii) if the Patapsco's Board of
Directors does not publicly recommend in the Proxy Statement that stockholders
approve and adopt this Agreement or if, after recommending in the Proxy
58
Statement that stockholders approve and adopt this Agreement, the Board of
Directors of Patapsco withdraws, qualifies or revises such recommendation or
takes any action in any respect materially adverse to Bradford.
7.2 Termination Fees.
(a) Patapsco shall pay to Bradford a fee if this Agreement is
terminated as follows:
(i) if this Agreement is terminated by Bradford pursuant to
Section 7.1(f), then Patapsco shall pay a fee of $2,000,000 on the second
business day following such termination; and
(ii) if this Agreement is terminated by (A) either party pursuant
to Section 7.1(b) or (B) by Bradford pursuant to Section 7.1(e) because of
Patapsco's willful breach of any representation, warranty, covenant or agreement
under this Agreement, and in the case of (A) or (B) an Acquisition Proposal with
respect to Patapsco shall have been publicly announced or otherwise communicated
or made known to Patapsco's Board of Directors (or any person shall have
publicly announced, communicated or made known to Patapsco's Board of Directors
an intention to make an Acquisition Proposal) at any time after the date of this
Agreement and on or prior to the date of the Stockholders Meeting, in the case
of clause (A), or the date of termination, in the case of clause (B), then
Patapsco shall pay (x) $1,000,000 to Bradford on the second business day
following such termination and (y) if within 12 months after such termination
Patapsco enters into a definitive agreement with respect to, or consummates, an
Acquisition Proposal, then Patapsco shall pay $1,000,000 on the date of such
execution or consummation. Notwithstanding anything to the contrary contained
herein, Patapsco shall not be obligated to pay aggregate termination fees in
excess of $2,000,000 pursuant to this Section 7.2(a).
(b) In the event that this agreement is terminated (i) by either party
pursuant to Section 7.1(d) and, as of the Termination Date, the conditions set
forth in Section 6.1(h) shall not have been satisfied; (ii) by either party
pursuant to Section 7.1(c), provided that (x) the basis for such termination is
the failure to receive a requisite regulatory approval with respect to the
Conversion or (y) the reason for the failure to receive a requisite regulatory
approval is not primarily attributable to Patapsco; or (iii) by Patapsco
pursuant to Section 7.1(e) based on a breach by a Bradford Party of its
obligations under Section 5.4 or Section 5.15, then Bradford shall pay to
Patapsco a fee equal to $2,000,000 no later than the second business day after
such termination.
(c) Any amount that becomes payable pursuant to Section 7.2(a) or (b)
shall be paid by wire transfer of immediately available funds to an account
designated by the recipient in writing.
(d) The parties acknowledge that the agreements contained in Section
7.2(a) and (b) are an integral part of the transactions contemplated by this
Agreement, that without such agreements the parties would not have entered into
59
this Agreement and that such amounts do not constitute a penalty. If either
party fails to pay the amounts due by them under Section 7.2(a) or (b) within
the time periods specified, such party shall pay the costs and expenses
(including reasonable legal fees and expenses) incurred by the other party in
connection with any action, including the filing of any lawsuit, taken to
collect payment of such amounts, together with interest on the amount of any
such unpaid amounts at the prime lending rate prevailing during such period as
published in The Wall Street Journal, calculated on a daily basis from the date
such amounts were required to be paid until the date of actual payment.
7.3 Effect of Termination. In the event of termination of this Agreement by
either Bradford or Patapsco as provided in Section 7.1, this Agreement shall
forthwith become void and, subject to Section 7.2, have no effect, and there
shall be no liability on the part of any party hereto or their respective
officers and directors, except that (i) Sections 5.3(c), 7.2 and 8.6, shall
survive any termination of this Agreement, and (ii) notwithstanding anything to
the contrary contained in this Agreement, no party shall be relieved or released
from any liabilities or damages arising out of its willful breach of any
provision of this Agreement.
ARTICLE VIII
CERTAIN OTHER MATTERS
8.1 Interpretation. When a reference is made in this Agreement to Sections
or Exhibits such reference shall be to a Section of, or Exhibit to, this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for ease of reference only and shall not affect
the meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation." Any singular term in this Agreement
shall be deemed to include the plural, and any plural term the singular. Any
reference to gender in this Agreement shall be deemed to include any other
gender.
8.2 Survival. Only those agreements and covenants of the parties that are
by their terms applicable in whole or in part after the Effective Time,
including Section 5.12 of this Agreement, shall survive the Effective Time. All
other representations, warranties, agreements and covenants shall be deemed to
be conditions of the Agreement and shall not survive the Effective Time.
8.3 Waiver; Amendment. Prior to the Effective Time, any provision of this
Agreement may be: (i) waived in writing by the party benefited by the provision
or (ii) amended or modified at any time (including the structure of the
transaction) by an agreement in writing between the parties hereto except that,
after the vote by the stockholders of Patapsco, no amendment or modification may
be made that would reduce the amount or alter or change the kind of
consideration to be received by holders of Patapsco Common Stock or that would
contravene any provision of the MGCL, or the federal banking laws, rules and
regulations.
8.4 Counterparts. This Agreement may be executed in counterparts each of
which shall be deemed to constitute an original, but all of which together shall
constitute one and the same instrument.
60
8.5 Governing Law. This Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of Maryland, without regard to conflicts
of laws principles (except to the extent that mandatory provisions of federal
law are applicable).
8.6 Expenses. Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby.
8.7 Notices. All notices, requests, acknowledgments and other
communications hereunder to a party shall be in writing and shall be deemed to
have been duly given when delivered by hand, overnight courier or facsimile
transmission to such party at its address or facsimile number set forth below or
such other address or facsimile transmission as such party may specify by notice
(in accordance with this provision) to the other party hereto.
If to Bradford, to:
0000 Xxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
With copies to:
Xxxxxxx Xxxxxx & Aguggia LLP
0000 Xxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxxxx, Esq.
If to Patapsco, to:
0000 Xxxxxxx Xxxxxxxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxx
With copies to:
Xxxx Xxxxxx Xxxxxxxx & Xxxxxx, P.C.
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Facsimile: (000) 000-0000
Attention: Xxx X. Xxxxxxxx, Esq.
8.8 Entire Agreement; etc. This Agreement, together with the Exhibits and
the Disclosure Letters, represents the entire understanding of the parties
hereto with reference to the transactions contemplated hereby and supersedes any
and all other oral or written agreements heretofore made. All terms and
61
provisions of this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
Except for Section 5.12, which confers rights on the parties described therein,
nothing in this Agreement is intended to confer upon any other person any rights
or remedies of any nature whatsoever under or by reason of this Agreement.
8.9 Successors and Assigns; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that this Agreement may not be
assigned by either party hereto without the written consent of the other party.
8.10 Specific Performance. Each of the parties hereto acknowledges that the
other party would be irreparably damaged and would not have an adequate remedy
at law for money damages in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. Each of the parties hereto therefore agrees that, without
the necessity of proving actual damages or posting bond or other security, the
other party shall be entitled to temporary or permanent injunction or
injunctions to prevent breaches of such performance and to enforce specifically
the terms and provisions of this Agreement in addition to any other remedy to
which they may be entitled, at law or in equity.
[Signature page follows]
62
63
In Witness Whereof, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
Bradford Bank, MHC
By: /s/ Xxxxxx X. Xxxxxx
---------------------
Xxxxxx X. Xxxxxx
President
Bradford Bancorp, Inc.
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Xxxxxx X. Xxxxxx
President
Bradford Bank
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Xxxxxx X. Xxxxxx
President
New Bradford Bancorp, Inc.
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Xxxxxx X. Xxxxxx
President
Patapsco Bancorp, Inc.
By: /s/ Xxxxxxx X. Xxx
------------------
Xxxxxxx X. Xxx
President, Chief Executive Officer
and Chief Financial Officer
63
EXHIBIT A
PLAN OF CONVERSION
PLAN OF CONVERSION
OF
BRADFORD BANK MHC
AS ADOPTED ON MARCH 16, 2007
TABLE OF CONTENTS
-----------------
PAGE
1. Introduction...............................................................................................1
2. Definitions................................................................................................2
3. General Procedure for the Conversion.......................................................................7
3A. Establishment and Funding of Charitable Foundation.........................................................9
4. Total Number of Shares and Purchase Price of Common Stock.................................................10
5. Subscription Rights of Eligible Account Holders (First Priority)..........................................11
6. Subscription Rights of Tax-Qualified Employee Stock Benefit Plans (Second Priority) ......................11
7. Subscription Rights of Supplemental Eligible Account Holders (Third Priority).............................12
8. Subscription Rights of Other Members (Fourth Priority)....................................................12
9. Community Offering, Syndicated Community Offering, Public Offering and Other Offerings ...................13
10. Limitations on Subscriptions and Purchases of Common Stock................................................14
11. Timing of Subscription Offering; Manner of Exercising Subscription Rights and Order Forms ................16
12. Payment for Common Stock..................................................................................17
13. Account Holders in Nonqualified States or Foreign Countries...............................................18
14. Voting Rights After Conversion............................................................................18
15. Liquidation Account.......................................................................................19
16. Transfer of Deposit Accounts..............................................................................20
17. Requirements Following the Conversion for Registration, Market Making and
Stock Exchange Listing ...................................................................................20
18. Completion of the Stock Offering..........................................................................20
19. Directors and Officers of the Savings Bank................................................................20
20. Requirements for Stock Purchases by Directors and Officers Following the Conversion.......................21
21. Restrictions on Transfer of Stock.........................................................................21
22. Tax Rulings or Opinions...................................................................................21
23. Restrictions on Acquisitions of Stock of Holding Company..................................................22
24. Stock Compensation Plans..................................................................................22
25. Dividend and Repurchase Restrictions on Stock.............................................................22
26. Effective Date............................................................................................22
27. Amendment or Termination of the Plan of Conversion........................................................22
28. Interpretation of the Plan of Conversion..................................................................23
EXHIBIT INDEX
EXHIBIT
Agreement and Plan of Merger by and among Bradford Bancorp, Inc., Bradford Bank
and Bradford Interim Federal Savings Bank II .....................................................................A
Agreement and Plan of Merger by and among Bradford Bank MHC, Bradford Bank and
Bradford Interim Federal Savings Bank I ..........................................................................B
Agreement and Plan of Merger by and among Bradford Bank, Holding Company and
Bradford Interim Federal Savings Bank III ........................................................................C
BRADFORD BANK MHC
PLAN OF CONVERSION
1. INTRODUCTION.
-------------
For purposes of this section, all capitalized terms have the meanings
ascribed to them in Section 2.
On July 15, 2005, Bradford Bank (the "Savings Bank") reorganized into the
mutual holding company form of organization whereby the Savings Bank became a
wholly owned subsidiary of Bradford Bancorp, Inc. ("Bradford Bancorp") and
Bradford Bancorp became a wholly owned subsidiary of Bradford Bank MHC (the
"MHC"). This Plan of Conversion provides for the conversion of the MHC from the
mutual holding company form of organization to the fully public stock holding
company form of organization. As part of the Conversion, the Savings Bank will
become the wholly owned subsidiary of a newly formed Maryland corporation (the
"Holding Company") and the Holding Company will issue 100% of its stock in the
Offerings, all as described in this Plan.
In furtherance of the Savings Bank's commitment to its community, the Plan
provides for the establishment of a charitable foundation as part of the
Conversion. The Foundation is intended to complement the Savings Bank's existing
community reinvestment activities in a manner that will allow the Savings Bank's
local communities to share in the growth and profitability of the Holding
Company and the Savings Bank over the long term. Consistent with the Savings
Bank's goal, the Holding Company intends to donate to the Foundation immediately
following the Offerings cash plus a number of shares of its authorized but
unissued Common Stock in an amount up to 8% of the Common Stock issued in the
Offerings.
A. Business Purposes for the Conversion
The Boards of Directors of the MHC, Bradford Bancorp and the Savings Bank
believe that a conversion of the MHC to stock form is in the best interests of
the MHC, Members of the MHC, Bradford Bancorp and the Savings Bank. The Board of
Directors determined that this Plan of Conversion equitably provides for the
interests of Members through the granting of subscription rights and the
establishment of a liquidation account.
The Conversion will provide the Savings Bank with a larger capital base
that will enhance its ability to pursue lending and investment opportunities, as
well as opportunities for growth and expansion, including the Patapsco Merger.
The Conversion also will provide a more flexible operating structure, which will
enable the Savings Bank to compete more effectively with other financial
institutions.
B. Procedure for Conversion
As described in greater detail herein in Section 3, pursuant to
the Plan:
(i) The Savings Bank will form a new first-tier subsidiary, which will be
incorporated under the laws of the state of Maryland as a stock corporation (the
"Holding Company").
(ii) Bradford Bancorp will convert to an interim federal stock savings bank
("Interim II"). Interim II will merge with and into the Savings Bank.
1
(iii) The MHC will convert to an interim federal stock savings bank
("Interim I"). Interim I will merge with and into the Savings Bank. In
connection with that merger, a liquidation account will be established by the
Savings Bank for the benefit of Members.
(iv) The Holding Company will form an interim federal stock savings bank
("Interim III") as a wholly owned subsidiary. Interim III will merge with and
into the Savings Bank, pursuant to which the Savings Bank will become a wholly
owned subsidiary of the Holding Company.
(v) The Holding Company will issue and sell its Common Stock in the
Offerings as provided herein.
C. Approval of the Plan
On March 16, 2007, after careful study and consideration, the Boards of
Directors of Bradford Bancorp, the MHC and the Savings Bank adopted this Plan
and the funding of the Foundation. The Plan and the funding of the Foundation
must be approved by the affirmative vote of a majority of the total number of
votes eligible to be cast by Members of the MHC. Before submitting the Plan and
the funding of the Foundation to the Members for consideration, the Plan and the
funding of the Foundation must be approved by the Office of Thrift Supervision.
2. DEFINITIONS.
------------
As used in this Plan, the terms set forth below have the following meaning:
ACTING IN CONCERT means (i) knowing participation in a joint activity or
interdependent conscious parallel action towards a common goal whether or not
pursuant to an express agreement or understanding; or (ii) a combination or
pooling of voting or other interests in the securities of an issuer for a common
purpose pursuant to any contract, understanding, relationship, agreement or
other arrangement, whether written or otherwise. A Person that acts in concert
with another Person ("other party") shall also be deemed to be acting in concert
with any Person that is also acting in concert with that other party, except
that any Tax-Qualified Employee Stock Benefit Plan will not be deemed to be
acting in concert with its trustee or a person who serves in a similar capacity
solely for the purpose of determining whether stock held by the trustee and
stock held by the plan will be aggregated and participants or beneficiaries of
any such Tax-Qualified Employee Stock Benefit Plan will not be deemed to be
acting in concert solely as a result of their common interests as participants
or beneficiaries. When Persons act together for such purpose, their group is
deemed to have acquired their stock. The determination of whether a group is
Acting in Concert shall be made solely by the Board of Directors of the Savings
Bank or Officers delegated by such Board and may be based on any evidence upon
which the Board or such delegatee chooses to rely, including, without
limitation, joint account relationships or the fact that such Persons have filed
joint Schedules 13D or Schedules 13G with the SEC with respect to other
companies. Directors of the Holding Company, the Savings Bank, Bradford Bancorp,
and the MHC shall not be deemed to be Acting in Concert solely as a result of
their membership on any such board or boards.
AFFILIATE means a Person who, directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control with the
Person specified.
ASSOCIATE of a Person means (i) a corporation or organization (other than
the MHC, Bradford Bancorp, the Holding Company, the Savings Bank or a
majority-owned subsidiary of the MHC, Bradford Bancorp, the Holding Company or
the Savings Bank), if the Person is a senior officer or partner or beneficially
owns, directly or indirectly, 10% or more of any class of equity securities of
2
the corporation or organization, (ii) a trust or other estate, if the Person has
a substantial beneficial interest in the trust or estate or is a trustee or
fiduciary of the trust or estate, provided, however, that such term shall not
include any Tax-Qualified Employee Stock Benefit Plan of the MHC, Bradford
Bancorp, the Holding Company or the Savings Bank in which such Person has a
substantial beneficial interest or serves as a trustee or in a similar fiduciary
capacity, and (iii) any person who is related by blood or marriage to such
Person and who lives in the same home as the Person or who is a director or
senior officer of the MHC, Bradford Bancorp, the Holding Company or the Savings
Bank or any of their subsidiaries.
BRADFORD BANCORP means Bradford Bancorp, Inc., an existing
federally-chartered stock corporation.
CODE means the Internal Revenue Code of 1986, as amended.
COMMON STOCK means the shares of common stock, par value $0.01 per share,
to be contributed to the Foundation by the Holding Company and to be issued and
sold by the Holding Company in the Offerings, including Patapsco Merger Shares
(issued as described in Section 9(e)), if any, all pursuant to this Plan of
Conversion. The Common Stock will not be insured by the Federal Deposit
Insurance Corporation.
COMMUNITY OFFERING means the offering for sale by the Holding Company of
any shares of Common Stock not subscribed for in the Subscription Offering to
such Persons as may be selected by the Holding Company and the Savings Bank in
their sole discretion and to whom a copy of the Prospectus is delivered by or on
behalf of the Holding Company.
CONTROL (including the terms "controlling," "controlled by," and "under
common control with") means the possession, directly or indirectly, of the 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.
CONVERSION means: (i) the conversion of Bradford Bancorp to an interim
federal stock bank and the subsequent Mid-Tier Merger pursuant to which Bradford
Bancorp will cease to exist; (ii) the conversion of the MHC to an interim
federal stock savings bank and the subsequent MHC Merger, pursuant to which the
MHC will cease to exist; (iii) the Savings Bank Merger, pursuant to which the
Savings Bank will become a wholly owned subsidiary of the Holding Company; and
(iv) the issuance of Common Stock in the Offerings as provided herein.
DEPOSIT ACCOUNT means any withdrawable account as defined in Section 561.42
of the Rules and Regulations of the OTS, including a demand account as defined
in Section 561.16 of the Rules and Regulations of the OTS.
ELIGIBLE ACCOUNT HOLDER means any Person holding a Qualifying Deposit on
the Eligibility Record Date for purposes of determining Subscription Rights.
ELIGIBILITY RECORD DATE means the date for determining Qualifying Deposits
of Eligible Account Holders and is the close of business on December 31, 2005.
ESOP means a Tax-Qualified Employee Stock Benefit Plan adopted by the
Holding Company or the Savings Bank in connection with the Conversion, the
purpose of which shall be to acquire shares of the Common Stock.
3
ESTIMATED PRICE RANGE means the range of the estimated aggregate pro forma
market value of the total number of shares of Common Stock to be issued in the
Offerings, as determined by the Independent Appraiser in accordance with Section
4 hereof.
FDIC means the Federal Deposit Insurance Corporation or any successor
thereto.
FOUNDATION means a charitable foundation that will qualify as an exempt
organization under Section 501(c)(3) of the Code, the establishment and funding
of which is contemplated by Section 3A herein.
HOLDING COMPANY means the stock corporation to be organized under the laws
of the state of Maryland, that, upon completion of the Conversion, shall hold
all of the outstanding capital stock of the Savings Bank.
INDEPENDENT APPRAISER means the independent investment b anking or
financial consulting firm retained by the Primary Parties to prepare an
appraisal of the estimated pro forma market value of the Common Stock.
INTERIM I means Bradford Interim Federal Savings Bank I, which will be the
resultant entity following the conversion of the MHC to an interim federal stock
savings bank. Interim I will subsequently be merged with and into the Savings
Bank.
INTERIM II means Bradford Interim Federal Savings Bank II, which will be
the resultant entity following the conversion of Bradford Bancorp to an interim
federal stock savings bank. Interim II will subsequently be merged with and into
the Savings Bank.
INTERIM III means Bradford Interim Federal Savings Bank III, which will be
formed as an interim federal stock savings bank and a wholly-owned subsidiary of
the Holding Company to effect the Savings Bank Merger.
MANAGEMENT PERSON means any Officer or director of the Savings Bank, the
MHC, Bradford Bancorp or the Holding Company or any Affiliate of the Savings
Bank, the MHC, Bradford Bancorp or the Holding Company and any person Acting in
Concert with such Officer or director.
MAXIMUM SHARES means the number of shares representing the maximum of the
Estimated Price Range as set forth in the Prospectus.
MEMBER means any Person qualifying as a member of the MHC in accordance
with its charter and bylaws and the laws of the United States.
MHC means Bradford Bank MHC, a federally-chartered mutual holding company.
MHC MERGER means the merger of Interim I (the successor to the MHC
following its conversion to an interim federal stock savings bank) with and into
the Savings Bank pursuant to the Agreement and Plan of Merger attached to this
Plan as Exhibit B.
MID-TIER MERGER means the merger of Interim II (the successor to Bradford
Bancorp following its conversion to an interim federal stock savings bank) with
and into the Savings Bank pursuant to the Agreement and Plan of Merger attached
to this Plan as Exhibit A.
4
OFFERINGS means the offering of Common Stock to Persons other than the
Foundation in the Subscription Offering, the Community Offering and the
Syndicated Community or Public Offering and as issued pursuant to Section 9(e)
in connection with the Patapsco Merger.
OFFICER means the president, chief executive officer, vice-president,
secretary, treasurer or principal financial officer, comptroller or principal
accounting officer and any other person performing similar functions with
respect to any organization whether incorporated or unincorporated.
ORDER FORM means the form or forms to be provided by the Holding Company,
containing all such terms and provisions as set forth in Section 11 hereof, to a
Participant or other Person by which Common Stock may be ordered in the
Subscription Offering and in the Community Offering.
OTHER MEMBER means a Voting Member who is not an Eligible Account Holder or
a Supplemental Eligible Account Holder.
OTS means the Office of Thrift Supervision or any successor thereto.
PARTICIPANT means any Eligible Account Holder, Tax-Qualified Employee Stock
Benefit Plan, Supplemental Eligible Account Holder or Other Member, but does not
include the Foundation.
PATAPSCO BANCORP means Patapsco Bancorp, Inc., a bank holding company, and
The Patapsco Bank, its wholly owned subsidiary, that will be merged into the
Holding Company (or a subsidiary thereof) at the closing of, or following, the
Conversion.
PATAPSCO MERGER means the merger of Patapsco Bancorp into the Holding
Company (or a subsidiary thereof) at the closing of, or following, the
Conversion.
PATAPSCO MERGER SHARES means any shares of Holding Company Common Stock
issued to stockholders of Patapsco Bancorp in consideration of the Patapsco
Merger.
PERSON means an individual, a corporation, a partnership, an association, a
joint stock company, a limited liability company, a trust, an unincorporated
organization or a government or any political subdivision of a government.
PLAN and PLAN OF CONVERSION mean this Plan of Conversion as adopted by the
Board of Directors of the MHC, Bradford Bancorp and the Savings Bank and any
amendment hereto approved as provided herein.
PLAN PARTICIPANT means any individual participant in a Tax-Qualified
Employee Stock Benefit Plan.
PREFERRED SUBSCRIBER means, for purposes of any Community Offering, natural
persons and trusts of natural persons residing in Baltimore City and Xxxx
Arundel, Baltimore and Xxxxxx Counties in Maryland.
PRIMARY PARTIES means the MHC, Bradford Bancorp, the Savings Bank and the
Holding Company.
PROSPECTUS means the one or more documents to be used in offering the
Common Stock in the Offerings.
5
PROXY STATEMENT means the document used to solicit approval of the Plan and
the funding of the Foundation by Voting Members.
PUBLIC OFFERING means an underwritten firm commitment offering to the
public through one or more underwriters.
PURCHASE PRICE means the price per share at which the Common Stock is
ultimately sold by the Holding Company in the Offerings in accordance with the
terms hereof.
QUALIFYING DEPOSITS means: (A) the aggregate balance of all Deposit
Accounts in the Savings Bank of (i) an Eligible Account Holder at the close of
business on the Eligibility Record Date, provided such aggregate balance is not
less than $50, and (ii) a Supplemental Eligible Account Holder at the close of
business on the Supplemental Eligibility Record Date, provided such aggregate
balance is not less than $50; (B) the aggregate balance of all Deposit Accounts
in American Bank of an Eligible Account Holder at the close of business on the
Eligibility Record Date, provided such aggregate balance is not less than $50
and provided further that such deposit account in American Bank was assumed by
the Savings Bank pursuant to the Purchase Agreement by and between American Bank
and the Savings Bank, dated June 7, 2006; (C) the aggregate balance of all
Deposit Accounts in Valley Bank of Maryland of an Eligible Account Holder at the
close of business on the Eligibility Record Date, provided such aggregate
balance is not less than $50; (D) the aggregate balance of all Deposit Accounts
in Golden Prague Federal Savings and Loan Association (provided the merger of
the Savings Bank and Golden Prague Federal Savings and Loan Association is
consummated prior to the closing of the Conversion) of (i) an Eligible Account
Holder at the close of business on the Eligibility Record Date, provided such
aggregate balance is not less than $50, and (ii) a Supplemental Eligible Account
Holder at the close of business on the Supplemental Eligibility Record Date,
provided such aggregate balance is not less than $50; and (E) the aggregate
balance of all Deposit Accounts in Senator Bank (provided the merger of the
Savings Bank and Senator Bank is consummated prior to the closing of the
Conversion) of (i) an Eligible Account Holder at the close of business on the
Eligibility Record Date, provided such aggregate balance is not less than $50,
and (ii) a Supplemental Eligible Account Holder at the close of business on the
Supplemental Eligibility Record Date, provided such aggregate balance is not
less than $50.
SAVINGS BANK means Bradford Bank, a federal stock savings bank.
SAVINGS BANK BENEFIT PLANS includes, but is not limited to, Tax-Qualified
Employee Stock Benefit Plans and Non-Tax-Qualified Employee Stock Benefit Plans.
SAVINGS BANK COMMON STOCK means the common stock of the Savings Bank, par
value $1.00 per share, which stock is not and will not be insured by the FDIC or
any other governmental authority, all of which will be held by the Holding
Company after the Conversion.
SAVINGS BANK MERGER means the Merger of Interim III with and into the
Savings Bank pursuant to the Plan of Merger included as Exhibit C hereto.
SEC means the Securities and Exchange Commission.
SPECIAL MEETING means the Special Meeting of Voting Members called for the
purpose of submitting this Plan and the funding of the Foundation to the Members
for their approval, including any adjournments of such meeting.
SUBSCRIPTION OFFERING means the offering of the Common Stock to
Participants.
6
SUBSCRIPTION RIGHTS means nontransferable rights to subscribe for Common
Stock granted to Participants pursuant to the terms of this Plan.
SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER means any Person, except directors and
Officers of Bradford Bancorp, the MHC or the Savings Bank and their Associates,
holding a Qualifying Deposit at the close of business on the Supplemental
Eligibility Record Date.
SUPPLEMENTAL ELIGIBILITY RECORD DATE, if applicable, means the date for
determining Supplemental Eligible Account Holders and shall be required if the
Eligibility Record Date is more than 15 months prior to the date of the approval
of the Conversion by the OTS. If applicable, the Supplemental Eligibility Record
Date shall be the last day of the calendar quarter preceding OTS approval of the
Conversion.
SYNDICATED COMMUNITY OFFERING means the offering for sale by a syndicate of
broker-dealers to the general public of shares of Common Stock not purchased in
the Subscription Offering and the Community Offering.
TAX-QUALIFIED EMPLOYEE STOCK BENEFIT PLAN means any defined benefit plan or
defined contribution plan, such as an employee stock ownership plan, stock bonus
plan, profit-sharing plan or other plan, which is established for the benefit of
the employees of the Holding Company and/or the Savings Bank and any Affiliate
thereof and which, with its related trust, meets the requirements to be
"qualified" under Section 401 of the Code as from time to time in effect. A
"Non-Tax-Qualified Employee Stock Benefit Plan" is any defined benefit plan or
defined contribution stock benefit plan that is not so qualified.
VOTING MEMBER means a Person who, at the close of business on the Voting
Record Date, is entitled to vote as a Member of the MHC in accordance with its
mutual charter and bylaws.
VOTING RECORD DATE means the date or dates for determining the eligibility
of Members to vote at the Special Meeting.
3. GENERAL PROCEDURE FOR THE CONVERSION.
-------------------------------------
A. Steps for Conversion; Regulatory Filings
(i) After the Savings Bank's organization of the Holding Company and the
receipt of all requisite regulatory approvals, the Holding Company will form
Interim III as its wholly owned subsidiary and the Board of Directors of Interim
III shall adopt the Plan of Merger included as Exhibit C hereto by at least a
two-thirds vote. The Holding Company shall approve such Plan of Merger in its
capacity as the sole stockholder of Interim III and Bradford Bancorp shall
approve the Plan and the Plan of Merger in its capacity as the sole stockholder
of the Savings Bank.
(ii) An application for the Conversion, including the Plan and all other
requisite material (the "Application for Conversion"), shall be submitted to the
OTS for approval. The MHC, Bradford Bancorp and the Savings Bank also will cause
notice of the adoption of the Plan by the Boards of Directors of the MHC,
Bradford Bancorp and the Savings Bank to be given by publication in accordance
with the requirements of applicable regulations of the OTS and will cause copies
of the Plan to be made available at each office of the MHC, Bradford Bancorp and
the Savings Bank for inspection by Members. The MHC, Bradford Bancorp and the
Savings Bank will also cause to be published, in accordance with the
requirements of applicable regulations of the OTS, a notice of the filing with
the OTS of an application to convert the MHC from mutual to stock form.
7
(iii) Promptly following receipt of requisite approval of the OTS, the Plan
and the funding of the Foundation will be submitted to the Voting Members for
their consideration and approval at the Special Meeting. The MHC may, at its
option, mail to all Voting Members, at their last known address appearing on the
records of the MHC and the Savings Bank, the Proxy Statement. The Holding
Company also shall mail to all such Members (as well as other Participants) a
Prospectus and Order Form for the purchase of Common Stock, subject to the
provisions of Section 11 hereof.
(iv) Subscription Rights to purchase shares of Common Stock will be issued
without payment therefor to Eligible Account Holders, the Tax-Qualified Employee
Stock Benefit Plan, Supplemental Eligible Account Holders and Other Members, as
set forth in Sections 5 through 8 hereof.
(v) The Holding Company shall submit or cause to be submitted a holding
company application to the OTS for approval of the acquisition of the Savings
Bank. All notices required to be published in connection with such applications
shall be published at the times required.
(vi) The Holding Company shall file a Registration Statement with the SEC
to register the Common Stock to be issued in the Conversion, including Common
Stock to be issued to the Foundation, under the Securities Act of 1933, as
amended, and shall register such Common Stock under any applicable state
securities laws. Upon registration and after the receipt of all required
regulatory approvals, the Common Stock shall be first offered for sale in a
Subscription Offering to Eligible Account Holders, the Tax-Qualified Employee
Stock Benefit Plan, Supplemental Eligible Account Holders, if any, and Other
Members. It is anticipated that any shares of Common Stock remaining unsold
after the Subscription Offering will be sold through a Community Offering, a
Syndicated Community Offering and/or a Public Offering. The purchase price per
share for the Common Stock shall be a uniform price determined in accordance
with Section 4 hereof and shall be set forth in the Prospectus. The Holding
Company shall contribute to the Savings Bank an amount of at least fifty percent
(50%) of the net proceeds received by the Holding Company from the sale of
Common Stock.
(vii) All assets, rights, interests, privileges, powers, franchises and
property (real, personal and mixed) of Bradford Bancorp shall be automatically
transferred to and vested in the Holding Company by virtue of the Conversion
without any deed or other document of transfer. The Holding Company, without any
order or action on the part of any court or otherwise and without any document
of assumption or assignment, shall hold and enjoy all of the properties,
franchises and interests, including appointments, powers, designations,
nominations and all other rights and interests as the agent or fiduciary in the
same manner and to the same extent as such rights, franchises, interests and
powers were held or enjoyed by Bradford Bancorp. The Holding Company shall be
responsible for all of the liabilities, restrictions and duties of every kind
and description of Bradford Bancorp immediately before the Conversion, including
liabilities for all debts, obligations and contracts of Bradford Bancorp,
matured or unmatured, whether accrued, absolute, contingent or otherwise and
whether or not reflected or reserved against on balance sheets, book or accounts
or records of Bradford Bancorp.
(viii) The home office and branch offices of the Savings Bank shall be
unaffected by the Conversion. The executive offices of the Holding Company shall
be located at the current offices of the MHC and Bradford Bancorp.
(ix) Each Deposit Account of the Savings Bank at the effective date shall
remain a Deposit Account in the Savings Bank for the same amount and subject to
the same terms and conditions applicable to such Deposit Account before the
Conversion.
(x) The Board of Directors of the Savings Bank also intends to take all
necessary steps to establish the Foundation and to fund the Foundation in the
manner set forth in Section 3A hereof.
8
B. Votes Required for Consummation of Conversion
The Plan and the funding of the Foundation are subject to the approval of
the OTS and must be adopted by at least a majority of the total number of votes
eligible to be cast by Voting Members at the Special Meeting.
C. Consummation of the Conversion
The effective date of the Conversion shall be the date set forth in Section
27 hereof. Upon the effective date, the following transactions shall occur:
(i) Bradford Bancorp shall convert into an interim federal stock savings
bank and simultaneously merge with and into the Savings Bank in the Mid-Tier
Merger, with the Savings Bank being the surviving institution. As a result of
the Mid-Tier Merger, the MHC will receive shares of Savings Bank Common Stock in
exchange for its Bradford Bancorp common stock. Immediately thereafter, the MHC
shall convert from a mutual holding company to an interim federal stock savings
bank and merge with and into the Savings Bank in the MHC Merger, with the
Savings Bank being the surviving institution. As a result of the MHC Merger, the
shares of Savings Bank Common Stock held by the MHC (as converted) shall be
canceled and Members of the MHC will be granted interests in the liquidation
account to be established by the Savings Bank pursuant to Section 15 hereof.
(ii) Interim III shall merge with and into the Savings Bank pursuant to the
Savings Bank Merger, with the Savings Bank being the surviving institution. As a
result of the Savings Bank Merger, the shares of Holding Company common stock
held by the Savings Bank shall be canceled, and the shares of common stock of
Interim III held by the Holding Company shall be converted into shares of
Savings Bank Common Stock on a one-for-one basis, with the result that the
Savings Bank shall become a wholly owned subsidiary of the Holding Company.
(iii) The Holding Company shall sell the Common Stock in the Offerings, as
provided herein.
D. Retention of Investment Bankers and Financial Advisors
The Primary Parties may retain and pay for the services of financial and
other advisors and investment bankers to assist in connection with any or all
aspects of the Conversion, including in connection with the Offerings the
payment of fees to brokers and investment bankers for assisting Persons in
completing and/or submitting Order Forms. All fees, expenses, retainers and
similar items shall be reasonable.
3A ESTABLISHMENT AND FUNDING OF CHARITABLE FOUNDATION.
---------------------------------------------------
As part of the Conversion, the Savings Bank intends to establish a
charitable foundation that will qualify as an exempt organization under Section
501(c)(3) of the Code and to donate to the Foundation from authorized but
unissued shares of Common Stock an amount up to 8% of the number of shares of
Common Stock issued in the Offerings. The Holding Company also may make a
contribution of cash or marketable securities to the Foundation. The Foundation
is being formed in connection with the Conversion to complement the Savings
Bank's existing community reinvestment activities and to share with the Savings
Bank's local community a part of the Savings Bank's financial success as a
locally headquartered, community minded, financial services institution. The
funding of the Foundation with Common Stock accomplishes this goal as it enables
the community to share in the growth and profitability of the Holding Company
and the Savings Bank over the long-term.
9
The Foundation will be dedicated to the promotion of charitable purposes
within the Savings Bank's community. The Foundation will annually distribute
total grants to assist charitable organizations or to fund projects within its
local community of not less than 5% of the average fair value of Foundation
assets each year, less certain expenses. To serve the purposes for which it was
formed, the Foundation may sell, on an annual basis, a limited portion of the
Common Stock contributed to it by the Holding Company.
The Board of Directors of the Foundation will be comprised of individuals
who are Officers and/or Directors of the Holding Company or the Savings Bank.
Additionally, for at least five years after the Foundation's organization, one
member of the Foundation's Board of Directors must be a member of the local
community that is not an officer, director or employee of the Holding Company,
the Savings Bank or any of its Affiliates and who has experience with local
charitable organizations and grant making. The Board of Directors of the
Foundation will be responsible for establishing the policies of the Foundation
with respect to grants or donations, consistent with the stated purposes of the
Foundation.
4. TOTAL NUMBER OF SHARES AND PURCHASE PRICE OF COMMON STOCK.
----------------------------------------------------------
(a) The aggregate price at which shares of Common Stock shall be sold in
the Offerings shall be based on a pro forma valuation of the aggregate market
value of the Common Stock prepared by the Independent Appraiser. The valuation
shall be based on financial information relating to the Primary Parties, market,
financial and economic conditions, a comparison of the Primary Parties with
selected publicly-held financial institutions and holding companies and with
comparable financial institutions and holding companies and such other factors
as the Independent Appraiser may deem to be important, including, but not
limited to, the projected operating results and financial condition of the
Holding Company and the Savings Bank. The valuation shall be stated in terms of
an Estimated Price Range, the maximum of which shall be no more than 15% above
the average of the minimum and maximum of such price range and the minimum of
which shall be no more than 15% below such average. The valuation shall be
updated during the Conversion as market and financial conditions warrant and as
may be required by the OTS.
(b) Based upon the independent valuation, the Boards of Directors of the
Primary Parties shall fix the Purchase Price and the number of shares of Common
Stock to be offered in the Offerings. The Purchase Price shall be a uniform
price determined in accordance with applicable OTS rules and regulations. The
total number of shares of Common Stock to be issued in the Offerings shall be
determined by the Boards of Directors of the Primary Parties upon conclusion of
the Offerings in consultation with the Independent Appraiser and any financial
advisor or investment banker retained by the Primary Parties in connection with
such Offerings.
(c) Subject to the approval of the OTS, the Estimated Price Range may be
increased or decreased to reflect market, financial and economic conditions
before completion of the Conversion or to fill the order of the Tax-Qualified
Employee Stock Benefit Plans, and under such circumstances the Primary Parties
may increase or decrease the total number of shares of Common Stock to be issued
in the Offerings to reflect any such change. Notwithstanding anything to the
contrary contained in this Plan, no resolicitation of subscribers shall be
required and subscribers shall not be permitted to modify or cancel their
subscriptions unless the gross proceeds from the sale of the Common Stock in the
Offerings are less than the minimum or more than 15% above the maximum of the
Estimated Price Range set forth in the Prospectus. In the event of an increase
in the total number of shares offered in the Offerings due to an increase in the
Estimated Price Range, the priority of share allocation shall be as set forth in
this Plan.
10
5. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS (FIRST PRIORITY).
-----------------------------------------------------------------
(a) Each Eligible Account Holder shall receive, as first priority and
without payment, Subscription Rights to purchase up to the greater of (i)
$100,000 of Common Stock (or such maximum purchase limitation as may be
established for the Community Offering, and/or Syndicated Community Offering),
(ii) one-tenth of 1% of the total offering of shares in the Offering s, or (iii)
15 times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Common Stock issued by a fraction, of
which the numerator is the amount of the Qualifying Deposits of the Eligible
Account Holder and the denominator is the total amount of all Qualifying
Deposits of all Eligible Account Holders, in each case subject to Section 10
hereof.
(b) In the event of an oversubscription for shares of Common Stock pursuant
to Section 5(a), available shares shall be allocated among subscribing Eligible
Account Holders so as to permit each such Eligible Account Holder, to the extent
possible, to purchase a number of shares that will make his or her total
allocation equal to the lesser of the number of shares subscribed for or 100
shares. Any available shares remaining after each subscribing Eligible Account
Holder has been allocated the lesser of the number of shares subscribed for or
100 shares shall be allocated among the subscribing Eligible Account Holders
whose subscriptions remain unsatisfied in the proportion that the Qualifying
Deposits of each such subscribing Eligible Account Holder bears to the total
Qualifying Deposits of all such subscribing Eligible Account Holders whose
orders are unfilled, provided that no fractional shares shall be issued.
(c) Subscription Rights of Eligible Account Holders who are also directors
or Officers of the Primary Parties and their Associates shall be subordinated to
those of other Eligible Account Holders to the extent that they are attributable
to increased deposits during the one-year period preceding the Eligibility
Record Date.
6. SUBSCRIPTION RIGHTS OF TAX-QUALIFIED EMPLOYEE STOCK BENEFIT PLANS (SECOND
-------------------------------------------------------------------------
PRIORITY).
----------
Tax-Qualified Employee Stock Benefit Plans shall receive, without payment,
Subscription Rights to purchase in the aggregate up to 10% of the Common Stock,
including the Common Stock contributed to the Foundation. The Subscription
Rights granted to Tax-Qualified Employee Stock Benefit Plans shall be subject to
the availability of shares of Common Stock after taking into account the shares
of Common Stock purchased by Eligible Account Holders; provided, however, that
if the total number of shares of Common Stock is increased to any amount greater
than the number of shares representing the maximum of the Estimated Price Range
as set forth in the Prospectus (the "Maximum Shares"), the ESOP shall have a
priority right to purchase any such shares exceeding the Maximum Shares up to an
aggregate of 10% of the Common Stock, including Common Stock contributed to the
Foundation. Shares of Common Stock purchased by any individual participant
("Plan Participant") in a Tax-Qualified Employee Stock Benefit Plan using funds
therein pursuant to the exercise of Subscription Rights granted to such
Participant in his individual capacity as an Eligible Account Holder and/or
Supplemental Eligible Account Holder and/or purchases by such Plan Participant
in the Community Offering shall not be deemed to be purchases by a Tax-Qualified
Employee Stock Benefit Plan for purposes of calculating the maximum amount of
Common Stock that Tax-Qualified Employee Stock Benefit Plans may purchase
pursuant to the first sentence of this Section 6 if the individual Plan
Participant controls or directs the investment authority with respect to such
account or subaccount. Consistent with applicable laws and regulations and
policies and practices of the OTS, the Tax-Qualified Employee Stock Benefit
Plans may use funds contributed by the Holding Company or the Savings Bank
and/or borrowed from an independent financial institution to exercise such
Subscription Rights, and the Holding Company and the Savings Bank may make
scheduled discretionary contributions thereto, provided that such contributions
do not cause the Savings Bank to fail to meet any applicable regulatory capital
requirement. The Tax-Qualified Employee Stock Benefit Plans may, in whole or in
11
part, fill their orders through open market purchases subsequent to the closing
of the Offering.
The Tax-Qualified Employee Stock Benefit Plans shall not be deemed to be an
Associate or Affiliate of, or Person Acting in Concert with, any Management
Person.
7. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS (THIRD
-------------------------------------------------------------------
PRIORITY).
----------
(a) In the event that the Eligibility Record Date is more than 15 months
before the date of OTS approval of the Plan, then, and only in that event, a
Supplemental Eligibility Record Date shall be set and each Supplemental Eligible
Account Holder shall receive, without payment, Subscription Rights to purchase
up to the greater of (i) $100,000 of Common Stock (or such maximum purchase
limitation as may be established for the Community Offering and/or Syndicated
Community Offering), (ii) one-tenth of 1% of the total offering of shares in the
Offerings or (iii) 15 times the product (rounded down to the next whole number)
obtained by multiplying the total number of shares of Common Stock issued by a
fraction, of which the numerator is the amount of the Qualifying Deposits of the
Supplemental Eligible Account Holder and the denominator is the total amount of
all Qualifying Deposits of all Supplemental Eligible Account Holders, in each
case subject to Section 10 hereof and the availability of shares of Common Stock
for purchase after taking into account the shares of Common Stock purchased by
Eligible Account Holders and Tax-Qualified Employee Stock Benefit Plans through
the exercise of Subscription Rights under Sections 5 and 6 hereof.
(b) In the event of an oversubscription for shares of Common Stock pursuant
to Section 7(a), available shares shall be allocated among subscribing
Supplemental Eligible Account Holders so as to permit each such Supplemental
Eligible Account Holder, to the extent possible, to purchase a number of shares
sufficient to make his or her total allocation (including the number of shares,
if any, allocated in accordance with Section 5(a)) equal to the lesser of the
number of shares subscribed for or 100 shares. Any remaining available shares
shall be allocated among subscribing Supplemental Eligible Account Holders whose
subscriptions remain unsatisfied in the proportion that the amount of their
respective Qualifying Deposits bears to the total amount of the Qualifying
Deposits of all such subscribing Supplemental Eligible Account Holders whose
orders are unfilled, provided that no fractional shares shall be issued.
8. SUBSCRIPTION RIGHTS OF OTHER MEMBERS (FOURTH PRIORITY).
-------------------------------------------------------
(a) Each Other Member shall receive, without payment, Subscription Rights
to purchase up to the greater of (i) $100,000 of Common Stock (or such maximum
purchase limitation as may be established for the Community Offering and/or
Syndicated Community Offering) and (ii) one-tenth of 1% of the total offering of
shares in the Offerings, subject to Section 10 hereof and the availability of
shares of Common Stock for purchase after taking into account the shares of
Common Stock purchased by Eligible Account Holders, Tax-Qualified Employee Stock
Benefit Plans and Supplemental Eligible Account Holders, if any, through the
exercise of Subscription Rights under Sections 5, 6 and 7 hereof.
(b) If, pursuant to this Section 8, Other Members subscribe for a number of
shares of Common Stock in excess of the total number of shares of Common Stock
remaining, available shares shall be allocated among subscribing Other Members
so as to permit each such Other Member, to the extent possible, to purchase a
number of shares which will make his or her total allocation equal to the lesser
of the number of shares subscribed for or 100 shares. Any remaining available
shares shall be allocated among subscribing Other Members whose subscriptions
remain unsatisfied on a pro rata basis in the same proportion as each such Other
12
Member's subscription bears to the total subscriptions of all such subscribing
Other Members, provided that no fractional shares shall be issued.
9. COMMUNITY OFFERING, SYNDICATED COMMUNITY OFFERING, PUBLIC OFFERING AND
----------------------------------------------------------------------
OTHER OFFERINGS.
----------------
(a) If less than the total number of shares of Common Stock offered by the
Holding Company are sold in the Subscription Offering, it is anticipated that
all such remaining shares shall, if practicable, be sold in a Community
Offering. Subject to the requirements set forth herein, the manner in which
Common Stock is sold in the Community Offering shall have as the objective the
achievement of the widest possible distribution of such stock. The Primary
Parties may commence the Community Offering concurrently with, at any time
during, or as soon as practicable after the end of, the Subscription Offering,
and the Community Offering must be completed within 45 days after the completion
of the Subscription Offering, unless extended by the Primary Parties with any
required regulatory approval.
(b) In the event of a Community Offering, all shares of Common Stock that
are not subscribed for in the Subscription Offering shall be offered for sale by
means of a direct community marketing program, which may provide for the use of
brokers, dealers or investment banking firms experienced in the sale of
financial institution securities. Any available shares in excess of those
subscribed for in the Subscription Offering will be available for purchase by
members of the general public to whom a Prospectus is delivered by the Holding
Company or on its behalf, with preference given first to natural persons and
trusts of natural persons residing in Baltimore City and Xxxx Arundel, Baltimore
and Xxxxxx Counties in Maryland ("Preferred Subscribers").
(c) A Prospectus and Order Form shall be furnished to such Persons as the
Primary Parties may select in connection with the Community Offering, and each
order for Common Stock in the Community Offering shall be subject to the
absolute right of the Primary Parties to accept or reject any such order in
whole or in part either at the time of receipt of an order or as soon as
practicable following completion of the Community Offering. In the event of an
oversubscription for shares in the Community Offering, available shares will be
allocated first to each Preferred Subscriber whose order is accepted in an
amount equal to the lesser of 100 shares or the number of shares subscribed for
by each such Preferred Subscriber, if possible. Thereafter, unallocated shares
shall be allocated among the Preferred Subscribers whose accepted orders remain
unsatisfied on an equal number of shares per order basis until all available
shares have been allocated, provided that no fractional shares shall be issued.
If there are any shares remaining after all accepted orders by Preferred
Subscribers have been satisfied, such remaining shares shall be allocated to
other members of the general public who purchase in the Community Offering,
applying the same allocation described above for Preferred Subscribers.
(d) No Person may purchase more than $100,000 of Common Stock in the
Community Offering; provided, however, that this amount may be increased to up
to 5% of the total offering of shares of Common Stock or decreased to less than
$100,000, subject to any required regulatory approval but without the further
approval of Members or the resolicitation of subscribers.
(e) Notwithstanding Sections 9(a) through 9(d), if subscriptions totaling
at least the minimum of the Estimated Price Range are not received in the
Subscription Offering in the categories described in Sections 5 through 8
hereof, then unsubscribed shares of Common Stock may be issued to stockholders
of Patapsco Bancorp in exchange for their shares of Patapsco Bancorp or in any
other manner that facilitates the completion of the Patapsco Merger, provided
that the total Patapsco Merger Shares, including the Patapsco Merger Shares
issued pursuant to this Section 9(e), are less than 50% of the outstanding
Common Stock immediately after the closing of the Conversion and the Patapsco
13
Merger. Common Stock may only be issued pursuant to this Section 9(e) in order
to achieve the minimum of the Estimated Price Range.
(f) Subject to such terms, conditions and procedures as may be determined
by the Primary Parties, all shares of Common Stock not subscribed for in the
Subscription Offering or ordered in the Community Offering may be sold by a
syndicate of broker-dealers to the general public in a Syndicated Community
Offering. Each order for Common Stock in the Syndicated Community Offering shall
be subject to the absolute right of the Primary Parties to accept or reject any
such order in whole or in part either at the time of receipt of an order or as
soon as practicable after completion of the Syndicated Community Offering. The
amount of Common Stock that any Person may purchase in the Syndicated Community
Offering shall not exceed $100,000 of Common Stock, provided, however, that this
amount may be increased to up to 5% of the total offering of shares of Common
Stock or decreased to less than $100,000, subject to any required regulatory
approval but without the further approval of Members or the resolicitation of
subscribers; and provided further that, to the extent applicable, and subject to
the limitations on purchases of Common Stock set forth in this Section 9(e) and
Section 10 of this Plan, in the event of an oversubscription for shares in the
Syndicated Community Offering orders for Common Stock in the Syndicated
Community Offering shall first be filled to a maximum of 2% of the total number
of shares of Common Stock sold in the Offerings and thereafter any remaining
shares shall be allocated on an equal number of shares per order basis until all
available shares have been allocated, provided no fractional shares shall be
issued. The Primary Parties may commence the Syndicated Community Offering
concurrently with, at any time during, or as soon as practicable after the end
of, the Subscription Offering and/or Community Offering, and the Syndicated
Community Offering must be completed within 45 days after the completion of the
Subscription Offering, unless extended by the Primary Parties with any required
regulatory approval.
(g) The Primary Parties may sell any shares of Common Stock remaining
following the Subscription Offering and the Community Offering in a Public
Offering instead of a Syndicated Community Offering. The provisions of Section
10 hereof shall not be applicable to the sales to underwriters for purposes of
the Public Offering but shall be applicable to sales by the underwriters to the
public. The price to be paid by the underwriters in such an offering shall be
equal to the Purchase Price less an underwriting discount to be negotiated among
such underwriters and the Primary Parties, subject to any required regulatory
approval or consent.
(h) If, for any reason, a Syndicated Community Offering or Public Offering
of shares of Common Stock not sold in the Subscription Offering and the
Community Offering cannot be effected, or if any insignificant residue of shares
of Common Stock is not sold in the Offerings, the Primary Parties shall use
their best efforts to obtain other purchasers for such shares in such manner and
upon such conditions as may be satisfactory to the OTS.
10. LIMITATIONS ON SUBSCRIPTIONS AND PURCHASES OF COMMON STOCK.
-----------------------------------------------------------
The following limitations shall apply to all purchases of Common Stock in
the Offerings:
(a) Except in the case of Tax-Qualified Employee Stock Benefit Plans in the
aggregate, and in addition to the other restrictions and limitations set forth
herein, no Person may subscribe for or purchase more than $100,000 of Common
Stock in the Offerings and no Person, any Person together with any Associates or
Persons otherwise Acting in Concert may, directly or indirectly, subscribe for
or purchase more than $200,000 of Common Stock in the Offerings.
14
(b) The maximum number of shares of Common Stock that may be purchased in
the Conversion by the ESOP shall not exceed 8% of the total Common Stock issued
in the Conversion, including shares contributed to the Foundation, the maximum
number of shares that may be allocated to all Tax-Qualified Employee Stock
Benefit Plans shall not exceed 10% of the total Common Stock issued in the
Conversion, including shares contributed to the Foundation, in each instance,
including any shares which may be issued in the event of an increase in the
maximum of the Estimated Price Range to reflect changes in market, financial and
economic conditions after commencement of the Subscription Offering and before
completion of the Offerings; provided, however, that purchases of Common Stock
that are made by Plan Participants pursuant to the exercise of Subscription
Rights granted to such Plan Participant in his or her individual capacity as a
Participant or purchases by a Plan Participant in the Community Offering using
the funds thereof held in Tax-Qualified Employee Stock Benefit Plans shall not
be deemed to be purchases by a Tax-Qualified Employee Stock Benefit Plan for
purposes of this Section 10(b).
(c) The number of shares of Common Stock that directors and Officers of the
Primary Parties and their Associates may purchase in the aggregate in the
Offerings shall not exceed 26% of the total shares sold in the Offerings,
including any shares that may be sold in the event of an increase in the maximum
of the Estimated Price Range to reflect changes in market, financial and
economic conditions after commencement of the Subscription Offering and before
completion of the Offerings.
(d) No Person may purchase fewer than 25 shares of Common Stock in the
Offerings, to the extent such shares are available; provided, however, that if
the Purchase Price is greater than $20.00 per share, such minimum number of
shares shall be adjusted so that the aggregate Purchase Price for such minimum
shares will not exceed $500.00.
(e) For purposes of the foregoing limitations and the determination of
Subscription Rights, (i) directors, Officers and employees of the Primary
Parties or their subsidiaries shall not be deemed to be Associates or a group
Acting in Concert solely as a result of their capacities as such, (ii) shares
purchased by Tax-Qualified Employee Stock Benefit Plans shall not be
attributable to the individual trustees or beneficiaries of any such plan for
purposes of determining compliance with the limitations set forth in Section
10(c) or Section 10(d) hereof, and (iii) shares purchased by a Tax-Qualified
Employee Stock Benefit Plan pursuant to instructions of an individual in an
account in such plan in which the individual has the right to direct the
investment, including any plan of the Savings Bank qualified plan under Section
401(k) of the Code, shall be aggregated and included in that individual's
purchases and not attributed to the Tax-Qualified Employee Stock Benefit Plan.
(f) Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of the Members,
the Primary Parties may increase or decrease any of the individual or aggregate
purchase limitations set forth herein to a percentage which does not exceed 5%
of the total offering of shares of Common Stock in the Conversion whether
before, during or after the Subscription Offering, Community Offering and/or
Syndicated Community Offering. If an individual purchase limitation is increased
after commencement of the Subscription Offering or any other offering, the
Primary Parties shall permit any Person who subscribed for the maximum number of
shares of Common Stock to purchase an additional number of shares, so that such
Person shall be permitted to subscribe for the then maximum number of shares
permitted to be subscribed for by such Person, subject to the rights and
preferences of any Person who has priority Subscription Rights. If any of the
individual or aggregate purchase limitations are decreased after commencement of
the Subscription Offering or any other offering, the orders of any Person who
subscribed for more than the new purchase limitation shall be decreased by the
minimum amount necessary so that such Person shall be in compliance with the
then maximum number of shares permitted to be subscribed for by such Person. In
the event the maximum purchase limitation is increased to 5% of the shares sold
in the Offerings, such limitation may be further increased to 9.99%, provided
that orders for Common Stock exceeding 5% of the shares of Common Stock sold in
15
the Offerings shall not exceed in the aggregate 10% of the total shares of
Common Stock sold in the Offerings.
(g) The Primary Parties shall have the right to take all such action as
they may, in their sole discretion, deem necessary, appropriate or advisable to
monitor and enforce the terms, conditions, limitations and restrictions
contained in this Section 10 and elsewhere in this Plan and the terms,
conditions and representations contained in the Order Form, including, but not
limited to, the absolute right (subject only to any necessary regulatory
approvals or concurrences) to reject, limit or revoke acceptance of any
subscription or order and to delay, terminate or refuse to consummate any sale
of Common Stock that they believe might violate, or is designed to, or is any
part of a plan to, evade or circumvent such terms, conditions, limitations,
restrictions and representations. Any such action shall be final, conclusive and
binding on all persons, and the Primary Parties and their respective Boards
shall be free from any liability to any Person on account of any such action.
11. TIMING OF SUBSCRIPTION OFFERING; MANNER OF EXERCISING SUBSCRIPTION RIGHTS
-------------------------------------------------------------------------
AND ORDER FORMS.
----------------
(a) The Offerings shall be conducted in compliance with the Securities
Exchange Act of 1933, as amended and, to the extent applicable, Form OC. The
Subscription Offering may be commenced concurrently with or at any time after
the mailing of the Proxy Statement to Members. The Subscription Offering may be
closed before the Special Meeting of Members, provided that the offer and sale
of the Common Stock shall be conditioned upon the approval of the Plan by the
Voting Members at the Special Meeting.
(b) The exact timing of the commencement of the Subscription Offering shall
be determined by the Primary Parties in consultation with the Independent
Appraiser and any financial or advisory or investment banking firm retained by
them in connection with the Conversion. The Primary Parties may consider a
number of factors, including, but not limited to, their current and projected
future earnings, local and national economic conditions, and the prevailing
market for stocks in general and stocks of financial institutions in particular.
The Primary Parties shall have the right to withdraw, terminate, suspend, delay,
revoke or modify any such Subscription Offering, at any time and from time to
time, as they in their sole discretion may determine, without liability to any
Person, subject to compliance with applicable securities laws and any necessary
regulatory approval or concurrence.
(c) Promptly after the SEC has declared the Registration Statement, which
includes the Prospectus, effective and all required regulatory approvals have
been obtained, the Primary Parties shall, distribute or make available the
Prospectus, together with Order Forms for the purchase of Common Stock, to all
Participants for the purpose of enabling them to exercise their respective
Subscription Rights, subject to Section 13 hereof.
(d) A single Order Form for all Deposit Accounts maintained with the
Savings Bank by an Eligible Account Holder and any Supplemental Eligible Account
Holder may be furnished, irrespective of the number of Deposit Accounts
maintained with the Savings Bank on the Eligibility Record Date and Supplemental
Eligibility Record Date, respectively. No person holding a Subscription Right
may exceed any otherwise applicable purchase limitation by submitting multiple
orders for Common Stock. Multiple orders are subject to adjustment, as
appropriate, on a pro rata basis and deposit balances will be divided equally
among such orders in allocating shares in the event of an oversubscription.
(e) The recipient of an Order Form shall have no less than 20 days and no
more than 45 days from the date of mailing of the Order Form (with the exact
termination date to be set forth on the Order Form) to properly complete and
16
execute the Order Form and deliver it to the Primary Parties. The Primary
Parties may extend such period by such amount of time as they determine is
appropriate. Failure of any Participant to deliver a properly executed Order
Form to the Primary Parties, along with full payment (or authorization for full
payment by withdrawal) for the shares of Common Stock subscribed for, within the
time limits prescribed, shall be deemed a waiver and release by such person of
any rights to subscribe for shares of Common Stock. Each Participant shall be
required to confirm to the Primary Parties by executing an Order Form that such
Person has fully complied with all of the terms, conditions, limitations and
restrictions in the Plan.
(f) The Primary Parties shall have the absolute right, in their sole
discretion and without incurring any liability to any Participant or other
Person, to reject any Order Form, including, but not limited to, any Order Form
that is (i) improperly completed or executed; (ii) not timely received; (iii)
not accompanied by the proper and full payment (or authorization of withdrawal
for full payment) or, in the case of institutional investors in the Community
Offering, not accompanied by an irrevocable order together with a legally
binding commitment to pay the full amount of the purchase price at any time
prior to 48 hours before the completion of the Offerings; or (iv) submitted by a
Person whose representations the Primary Parties believe to be false or who they
otherwise believe, either alone, or Acting in Concert with others, is violating,
evading or circumventing, or intends to violate, evade or circumvent, the terms
and conditions of the Plan. Furthermore, if (i) Order Forms are not delivered
and are returned to the Primary Parties by the United States Postal Service or
the Primary Parties are unable to locate the addressee, or (ii) Order Forms are
not mailed pursuant to a "no mail" order placed in effect by the account holder,
the Subscription Rights of the Person to which such rights have been granted
will lapse as though such Person failed to return the contemplated Order Form
within the time period specified thereon. The Primary Parties may, but will not
be required to, waive any irregularity on any Order Form or may require the
submission of corrected Order Forms or the remittance of full payment for shares
of Common Stock by such date as they may specify. The interpretation by the
Primary Parties of the terms and conditions of the Order Forms shall be final
and conclusive.
12. PAYMENT FOR COMMON STOCK.
-------------------------
(a) Payment for shares of Common Stock subscribed for by Participants in
the Subscription Offering and payment for shares of Common Stock ordered by
Persons in the Community Offering shall be equal to the Purchase Price
multiplied by the number of shares that are being subscribed for or ordered,
respectively. Such payment may be made in cash, if delivered in person, or by
check, bank draft or money order at the time the Order Form is delivered to the
Savings Bank, provided that checks will only be accepted subject to collection.
The Primary Parties, in their sole and absolute discretion, may also elect to
receive payment for shares of Common Stock by wire transfer. In addition, the
Primary Parties may elect to provide Participants and/or other Persons who have
a Deposit Account with the Savings Bank the opportunity to pay for shares of
Common Stock by authorizing the Savings Bank to withdraw from such Deposit
Account an amount equal to the aggregate Purchase Price of such shares. Payment
may also be made by a Participant using funds held for such Participant's
benefit by a Savings Bank Benefit Plan to the extent that such plan allows
participants or any related trust established for the benefit of such
participants to direct that some or all of their individual accounts or
sub-accounts be invested in Common Stock.
(b) Notwithstanding the above, if the Tax-Qualified Employee Stock Benefit
Plans subscribe for shares of Common Stock during the Subscription Offering,
such plans will not be required to pay for the shares at the time they subscribe
but rather may pay for such shares subscribed for by such plans upon
consummation of the Offerings, provided that, in the case of the employee stock
ownership plan, there is in force from the time of its subscription until the
consummation of the Offerings, a loan commitment to lend to the employee stock
ownership plan, at such time, the aggregate price of the shares for which it
subscribed.
17
(c) If a Participant or other Person authorizes the Savings Bank to
withdraw the amount of the Purchase Price from his or her Deposit Account, the
Savings Bank shall have the right to make such withdrawal or to freeze funds
equal to the aggregate Purchase Price upon receipt of the Order Form.
Notwithstanding any regulatory provisions regarding penalties for early
withdrawals from certificate accounts, the Savings Bank may allow payment by
means of withdrawal from certificate accounts without the assessment of such
penalties. In the case of an early withdrawal of only a portion of such account,
the certificate evidencing such account shall be canceled if any applicable
minimum balance requirement ceases to be met. In such case, the remaining
balance will earn interest at the regular passbook rate . However, where any
applicable minimum balance is maintained in such certificate account, the rate
of return on the balance of the certificate account shall remain the same as
before such early withdrawal. This waiver of the early withdrawal penalty
applies only to withdrawals made in connection with the purchase of Common Stock
and is entirely within the discretion of the Primary Parties.
(d) The subscription funds will be held by the Savings Bank or, in the
Savings Bank's discretion, in an escrow account at an unaffiliated financial
institution. The Holding Company shall pay interest, at not less than the
Savings Bank's passbook rate, for all amounts paid in cash, by check, bank draft
or money order to purchase shares of Common Stock in the Subscription Offering
and the Community Offering from the date payment is received until the date the
Conversion is completed or terminated.
(e) The Holding Company will not offer or sell any of the Common Stock
proposed to be issued to any Person whose purchase would be financed by funds
loaned, directly or indirectly, to the Person by the Savings Bank.
(f) Each share of Common Stock shall be non-assessable upon payment in full
of the Purchase Price.
13. ACCOUNT HOLDERS IN NONQUALIFIED STATES OR FOREIGN COUNTRIES.
------------------------------------------------------------
The Primary Parties shall make reasonable efforts to comply with the
securities laws of all jurisdictions in the United States in which Participants
reside. However, no Participant will be offered or receive any Common Stock
under the Plan if such Participant resides in a foreign country or resides in a
jurisdiction of the United States with respect to which any of the following
apply: (a) there are few Participants otherwise eligible to subscribe for shares
under this Plan who reside in such jurisdiction; (b) the granting of
Subscription Rights or the offer or sale of shares of Common Stock to such
Participants would require any of the Primary Parties or their respective
directors and Officers, under the laws of such jurisdiction, to register as a
broker-dealer, salesman or selling agent or to register or otherwise qualify the
Common Stock for sale in such jurisdiction, or any of the Primary Parties would
be required to qualify as a foreign corporation or file a consent to service of
process in such jurisdiction; or (c) such registration, qualification or filing
in the judgment of the Primary Parties would be impracticable or unduly
burdensome for reasons of cost or otherwise.
14. VOTING RIGHTS AFTER CONVERSION.
-------------------------------
Following consummation of the Conversion, voting rights with respect to the
Savings Bank shall be held and exercised exclusively by the Holding Company as
holder of all of the Savings Bank's outstanding voting capital stock, and voting
rights with respect to the Holding Company shall be held and exercised
exclusively by the holders of the Holding Company's voting capital stock.
18
15. LIQUIDATION ACCOUNT.
--------------------
(a) At the time of the MHC Merger, the Savings Bank shall establish a
liquidation account in an amount equal to the MHC's equity as reflected in its
latest statement of financial condition contained in the final Prospectus
utilized in the Conversion. The function of the liquidation account will be to
preserve the rights of certain holders of Deposit Accounts in the Savings Bank
who maintain such accounts in the Savings Bank following the Conversion to a
priority to distributions in the unlikely event of a liquidation of the Savings
Bank subsequent to the Conversion.
(b) The liquidation account shall be maintained for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders, if any, who maintain
their Deposit Accounts in the Savings Bank after the Conversion. Each such
account holder will, with respect to each Deposit Account held, have a related
inchoate interest in a portion of the liquidation account balance, which
interest will be referred to in this Section 15 as the "subaccount balance." All
Deposit Accounts having the same social security number will be aggregated for
purposes of determining the initial subaccount balance with respect to such
Deposit Accounts, except as provided in Section 15(d) hereof.
(c) In the event of a complete liquidation of the Savings Bank subsequent
to the Conversion (and only in such event), each Eligible Account Holder and
Supplemental Eligible Account Holder, if any, shall be entitled to receive a
liquidation distribution from the liquidation account in the amount of the then
current subaccount balances for Deposit Accounts then held (adjusted as
described below) before any liquidation distribution may be made with respect to
the capital stock of the Savings Bank. No merger, consolidation, sale of bulk
assets or similar combination transaction with another FDIC-insured institution
in which the Savings Bank is not the surviving entity shall be considered a
complete liquidation for this purpose. In any such transaction, the liquidation
account shall be assumed by the surviving entity.
(d) The initial subaccount balance for a Deposit Account held by an
Eligible Account Holder and Supplemental Eligible Account Holder, if any, shall
be determined by multiplying the opening balance in the liquidation account by a
fraction, of which the numerator is the amount of the Qualifying Deposits of
such account holder and the denominator is the total amount of Qualifying
Deposits of all Eligible Account Holders and Supplemental Eligible Account
Holders, if any. For Deposit Accounts in existence at both the Eligibility
Record Date and the Supplemental Eligibility Record Date, if any, separate
initial subaccount balances shall be determined on the basis of the Qualifying
Deposits in such Deposit Accounts on each such record date. Initial subaccount
balances shall not be increased, and shall be subject to downward adjustment as
provided below.
(e) If the aggregate deposit balance in the Deposit Account(s) of any
Eligible Account Holder or Supplemental Eligible Account Holder, if any, at the
close of business on any December 31 annual closing date, commencing on or after
the effective date of the Conversion, is less than the lesser of (a) the
aggregate deposit balance in such Deposit Account(s) at the close of business on
any other annual closing date subsequent to such record dates or (b) the
aggregate deposit balance in such Deposit Account(s) as of the Eligibility
Record Date or the Supplemental Eligibility Record Date, if any, the subaccount
balance for such Deposit Account(s) shall be adjusted by reducing such
subaccount balance in an amount proportionate to the reduction in such deposit
balance. In the event of such a downward adjustment, the subaccount balance
shall not be subsequently increased, notwithstanding any subsequent increase in
the deposit balance of the related Deposit Account(s). The subaccount balance of
an Eligible Account Holder or Supplemental Eligible Account Holder, if any, will
be reduced to zero if the Account Holder ceases to maintain a Deposit Account at
the Savings Bank.
19
(f) Subsequent to the Conversion, the Savings Bank may not pay cash
dividends generally on deposit accounts and/or capital stock of the Savings
Bank, or repurchase any of the capital stock of the Savings Bank, if such
dividend or repurchase would reduce the Savings Bank's regulatory capital below
the aggregate amount of the then current subaccount balances for Deposit
Accounts then held; otherwise, the existence of the liquidation account shall
not operate to restrict the use or application of any of the net worth accounts
of the Savings Bank.
(g) For purposes of this Section 15, a Deposit Account includes a
predecessor or successor account which is held by an Account Holder with the
same social security number.
16. TRANSFER OF DEPOSIT ACCOUNTS.
-----------------------------
Each Deposit Account in the Savings Bank at the time of the consummation of
the Conversion shall become, without further action by the holder, a Deposit
Account in the Savings Bank equivalent in withdrawable amount to the withdrawal
value (as adjusted to give effect to any withdrawal made for the purchase of
Common Stock), and subject to the same terms and conditions (except as to voting
and liquidation rights) as such Deposit Account in the Savings Bank immediately
preceding consummation of the Conversion. Holders of Deposit Accounts in the
Savings Bank shall not, as such holders, have any voting rights.
17. REQUIREMENTS FOLLOWING THE CONVERSION FOR REGISTRATION, MARKET MAKING AND
-------------------------------------------------------------------------
STOCK EXCHANGE LISTING.
-----------------------
In connection with the Conversion, the Holding Company shall register the
Common Stock pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended, and shall undertake not to deregister such stock for a period of three
years thereafter. The Holding Company also shall use its best efforts to (i)
encourage and assist a market maker to establish and maintain a market for the
Common Stock, and (ii) list the Common Stock on a national or regional
securities exchange or to have quotations for such stock disseminated on the
Nasdaq Stock Market.
18. COMPLETION OF THE STOCK OFFERING.
---------------------------------
The Offerings will be terminated if not completed within 90 days of the
date of approval of the Plan by the OTS, unless the extension is approved by the
OTS.
19. DIRECTORS AND OFFICERS OF THE SAVINGS BANK.
-------------------------------------------
Each person serving as a director or Officer of the Savings Bank at the
time of the adoption of the Plan of Conversion shall continue to serve as a
director or Officer of the Savings Bank for the balance of the term for which
the person was elected before the adoption of the Plan of Conversion, and until
a successor is elected and qualified. Each person serving as a director or
Officer of Bradford Bancorp at the time of the adoption of the Plan of
Conversion shall continue to serve as a director or Officer of the Holding
Company for the balance of the term for which the person was elected before the
adoption of the Plan of Conversion, and until a successor is elected and
qualified. The number, names, business, addresses and terms of the Directors of
the Holding Company and the Savings Bank are set forth in the Plans of Merger
included as Exhibits A, B and C hereto.
20
20. REQUIREMENTS FOR STOCK PURCHASES BY DIRECTORS AND OFFICERS FOLLOWING THE
------------------------------------------------------------------------
CONVERSION.
-----------
For a period of three years following the Conversion, the directors and
Officers of the Holding Company and the Savings Bank and their Associates may
not purchase Common Stock, without the prior written approval of the OTS, except
from a broker-dealer registered with the SEC. This prohibition shall not apply,
however, to (i) a negotiated transaction involving more than 1% of the
outstanding Common Stock, and (ii) purchases of stock made by and held by any
Tax-Qualified Employee Stock Benefit Plan (and purchases of stock made by and
held by any Non-Tax-Qualified Employee Stock Benefit Plan following the receipt
of stockholder approval of such plan) even if such Common Stock may be
attributable to individual Officers or directors and their Associates. The
foregoing restriction on purchases of Common Stock shall be in addition to any
restrictions that may be imposed by federal and state securities laws.
21. RESTRICTIONS ON TRANSFER OF STOCK.
----------------------------------
All shares of Common Stock that are purchased by Persons other than
directors and Officers of the Holding Company or the Savings Bank shall be
transferable without restriction. Shares of Common Stock purchased by directors
and Officers of the Holding Company or the Savings Bank on original issue from
the Holding Company (by subscription or otherwise) shall be subject to the
restriction that such shares shall not be sold or otherwise disposed of for
value for a period of one year following the date of purchase, except for any
disposition of such shares following the death of the original purchaser. The
shares of Common Stock issued by the Holding Company to such directors and
Officers shall bear the following legend giving appropriate notice of such
one-year restriction:
"The shares of stock evidenced by this Certificate are restricted as to
transfer for a period of one year from the date of this Certificate
pursuant to Part 563b of the Rules and Regulations of the Office of
Thrift Supervision. These shares may not be sold during such one-year
period without a legal opinion of counsel for the Company that said
transfer is permissible under the provisions of applicable law and
regulation. This restrictive legend shall be deemed null and void after
one year from the date of this Certificate."
In addition, the Holding Company shall give appropriate instructions to the
transfer agent for the Holding Company with respect to the applicable
restrictions relating to the transfer of restricted stock. Any shares issued at
a later date as a stock dividend, stock split or otherwise with respect to any
such restricted stock shall be subject to the same holding period restrictions
as may then be applicable to such restricted stock. The foregoing restriction on
transfer shall be in addition to any restrictions on transfer that may be
imposed by federal and state securities laws.
22. TAX RULINGS OR OPINIONS.
------------------------
Consummation of the Conversion is conditioned upon prior receipt by the
Primary Parties of either a ruling or an opinion of counsel with respect to
federal tax laws to the effect that consummation of the transactions
contemplated hereby will not result in a taxable reorganization under the
provisions of the applicable codes or otherwise result in any adverse tax
consequences to the Primary Parties or to account holders receiving Subscription
Rights before or after the Conversion, except in each case to the extent, if
any, that Subscription Rights are deemed to have fair market value on the date
such rights are issued.
21
23. RESTRICTIONS ON ACQUISITION OF STOCK OF HOLDING COMPANY.
--------------------------------------------------------
The Articles of Incorporation of the Holding Company may contain a
provision stipulating that in no event shall any record owner of any outstanding
shares of Common Stock who beneficially owns in excess of 10% of such
outstanding shares be entitled or permitted to any vote with respect to any
shares held in excess of 10%.
24. STOCK COMPENSATION PLANS.
-------------------------
(a) The Holding Company and the Savings Bank are authorized to adopt
Tax-Qualified Employee Stock Benefit Plans in connection with the Conversion,
including without limitation an employee stock ownership plan.
(b) The Holding Company and the Savings Bank also are authorized to adopt
stock option plans, restricted stock grant plans and other Non-Tax-Qualified
Employee Stock Benefit Plans, provided that no stock options shall be granted,
and no shares of Common Stock shall be purchased, pursuant to any of such plans
before the earlier of (i) the one-year anniversary of the consummation of the
Conversion or (ii) the receipt of stockholder approval of such plans at either
an annual or special meeting of stockholders of the Holding Company held no
earlier than six months following the Conversion.
(c) Existing, as well as any newly-created, Tax-Qualified Employee Stock
Benefit Plans may purchase shares of Common Stock in the Offerings, to the
extent permitted by the terms of such benefit plans and this Plan.
(d) The Holding Company and the Savings Bank are authorized to enter into
employment or severance agreements with their Officers.
25. DIVIDEND AND REPURCHASE RESTRICTIONS ON STOCK.
----------------------------------------------
(a) Following consummation of the Conversion, any repurchases of shares of
capital stock by the Holding Company will be made in accordance with then
applicable laws and regulations.
(b) The Savings Bank may not declare or pay a cash dividend on, or
repurchase any of, its capital stock if the effect thereof would cause the
regulatory capital of the Savings Bank to be reduced below the amount required
for the liquidation account. Any dividend declared or paid on, or repurchase of,
the Savings Bank's capital stock also shall be in compliance with Section
563.146 of the Rules and Regulations of the OTS, or any successor thereto.
26. EFFECTIVE DATE.
---------------
The effective date of the Conversion shall be the date of the closing of
the sale of all shares of Common Stock. The closing of the sale of all shares of
Common Stock sold in the Offerings shall occur simultaneously and shall be
conditioned upon the prior receipt of all requisite regulatory and other
approvals.
27 AMENDMENT OR TERMINATION OF THE PLAN.
-------------------------------------
If deemed necessary or desirable by the Board of Directors of the Primary
Parties, this Plan may be substantively amended, as a result of comments from
regulatory authorities or otherwise, at any time before the solicitation of
proxies from Members to vote on the Plan and at any time thereafter with the
concurrence of the OTS. Any amendment to this Plan made after approval by the
Members with the concurrence of the OTS shall not necessitate further approval
22
by the Members unless otherwise required by the OTS. This Plan shall terminate
if the sale of all shares of Common Stock is not completed within 24 months from
the date of the Special Meeting. Before the Special Meeting, this Plan may be
terminated by the Board of Directors of the Primary Parties without approval of
the OTS. After the Special Meeting, the Board of Directors may terminate this
Plan only with the concurrence of the OTS.
28. INTERPRETATION OF THE PLAN.
---------------------------
All interpretations of this Plan and application of its provisions to
particular circumstances by a majority of each of the Boards of Directors of the
Primary Parties shall be final, subject to the authority of the OTS.
23
Exhibit A
Agreement and Plan of Merger by and among Bradford Bancorp, Inc.,
Bradford Bank and Bradford Interim Federal Savings Bank II
AGREEMENT AND
PLAN OF MERGER
This Agreement and Plan of Merger, dated as of _______________, 200_, is
made by and between Bradford Bancorp, Inc. ("Bradford Bancorp"), a federal
corporation, Bradford Bank (the "Bank" or the "Surviving Corporation"), a
federal savings bank and Bradford Interim Federal Savings Bank II, an interim
federal savings bank ("Interim II") (collectively, the "Constituent
Corporations").
WITNESSETH:
WHEREAS, Bradford Bank MHC, a federal mutual holding company (the "MHC"),
the Bank and Bradford Bancorp have adopted a Plan of Conversion pursuant to
which: (i) Bradford Bancorp will convert to an interim federal savings bank and
simultaneously merge with and into the Bank, with the Bank as the surviving
entity (the "Mid-Tier Merger"); (ii) the MHC will convert to an interim federal
stock savings bank and simultaneously merge with and into the Bank, with the
Bank as the surviving entity; (iii) the Bank and a newly-formed interim federal
savings bank will merge, pursuant to which the Bank will become a wholly-owned
subsidiary of a newly-formed stock corporation (the "Holding Company") (the
"Bank Merger"); and (iv) the Holding Company will offer shares of its common
stock in the manner set forth in the Plan of Conversion (collectively, the
"Conversion"); and
WHEREAS, the Constituent Corporations desire to provide for the terms and
conditions of the Mid-Tier Merger;
NOW, THEREFORE, the Constituent Corporations hereby agree as follows:
1. EFFECTIVE DATE. The Mid-Tier Merger shall become effective on the date
specified in the endorsement of the Articles of Combination relating to the
Mid-Tier Merger by the Secretary of the Office of Thrift Supervision (the "OTS")
pursuant to 12 C.F.R. ss.552.13(k), or any successor thereto (the "Effective
Date").
2. THE MID-TIER MERGER AND EFFECT THEREOF. Subject to the terms and
conditions set forth herein and the prior approval of the OTS of the Conversion
and the expiration of all applicable waiting periods, Bradford Bancorp shall
convert to an interim federal savings bank and simultaneously merge with and
into the Bank, which shall be the Surviving Corporation. Upon consummation of
the Mid-Tier Merger, the Surviving Corporation shall be considered the same
business and corporate entity as each of the Constituent Corporations and the
Surviving Corporation shall be subject to and be deemed to have assumed all of
the property, rights, privileges, powers, franchises, debts, liabilities,
obligations, duties and relationships of each of the Constituent Corporations
and shall have succeeded to all of each of their relationships, fiduciary or
otherwise, as fully and to the same extent as if such property, rights,
privileges, powers, franchises, debts, obligations, duties and relationships had
been originally acquired, incurred or entered into by the Surviving Corporation.
In addition, any reference to either of the Constituent Corporations in any
contract or document, whether executed or taking effect before or after the
Effective Date, shall be considered a reference to the Surviving Corporation if
not inconsistent with the other provisions of the contract or document; and any
pending action or other judicial proceeding to which either of the Constituent
Corporations is a party shall not be deemed to have abated or to have been
discontinued by reason of the Mid-Tier Merger, but may be prosecuted to final
judgment, order or decree in the same manner as if the Mid-Tier Merger had not
occurred or the Surviving Corporation may be substituted as a party to such
action or proceeding, and any judgment, order or decree may be rendered for or
against it that might have been rendered for or against either of the
Constituent Corporations if the Mid-Tier Merger had not occurred.
3. EXCHANGE OF BANK COMMON STOCK AND CANCELLATION OF BRADFORD BANCORP
COMMON STOCK.
On the Effective Date:
(a) each share of common stock, $1.00 par value per share, of the Bank
issued and outstanding immediately before the Effective Date and held by
Bradford Bancorp shall, by virtue of the Mid-Tier Merger and without any action
on the part of the holder thereof, be exchanged for the common stock, $0.01 par
value per share, of Bradford Bancorp held by the MHC (the "Bradford Bancorp
Common Stock"); and
(b) each share of Bradford Bancorp Common Stock shall be canceled.
4. RIGHTS OF DISSENT AND APPRAISAL ABSENT. The MHC, the sole holder of
Bradford Bancorp Common Stock, shall not have any dissenter or appraisal rights
in connection with the Mid-Tier Merger.
5. NAME OF SURVIVING CORPORATION. The name of the Surviving Corporation
shall be "Bradford Bank."
6. DIRECTORS OF THE SURVIVING CORPORATION. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Corporation and applicable law, the number of directors of the Surviving
Corporation shall be eight. The names of those persons who, upon and after the
Effective Date, shall be directors of the Surviving Corporation are set forth
below. Each such director shall serve for the term which expires at the annual
meeting of stockholders of the Surviving Corporation in the year set forth after
his respective name, and until a successor is elected and qualified.
Name Term Expires
---- ------------
Xxxxxx X. Xxxxxx 2009
Xxxx X. Brand, III 2007
Xxxxxxxx X. Xxxxxx 2007
Xxxx X. Xxxxxxxx, III 2007
Xxxxxx X. Xxxxxxx, Xx. 0000
Xxxxxxx X. Xxxxxxxxx, Xx. 2009
G. Xxxxx Xxxxxxxx 2008
Xxxxxx X. Mister, Jr. 2008
The address of each director is 0000 Xxxx Xxxx, Xxxxxxxxx, Xxxxxxxx,
00000-0000.
7. OFFICERS OF THE SURVIVING CORPORATION. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Corporation and applicable law, the officers of the Bank immediately before the
Effective Date shall be the officers of the Surviving Corporation.
8. OFFICES. Upon the Effective Date, all offices of the Bank shall be
offices of the Surviving Corporation. As of the Effective Date, the home office
of the Surviving Corporation shall remain at 0000 Xxxx Xxxx, Xxxxxxxxx,
Xxxxxxxx, 00000-0000.
2
9. CHARTER AND BYLAWS. On and after the Effective Date, the Charter of the
Bank as in effect immediately before the Effective Date shall be the Charter of
the Surviving Corporation until amended in accordance with the terms thereof and
applicable law, except that the Charter shall be amended to provide for the
establishment of a liquidation account in accordance with applicable law and the
Plan of Conversion. On and after the Effective Date, the Bylaws of the Bank as
in effect immediately before the Effective Date shall be the Bylaws of the
Surviving Corporation until amended in accordance with the terms thereof and
applicable law.
10. STOCKHOLDER APPROVALS. The approval of the MHC, as the sole stockholder
of Bradford Bancorp, shall be required to approve the Plan of Conversion, of
which this Agreement and Plan of Merger is a part, on behalf of Bradford
Bancorp. The approval of Bradford Bancorp, as the sole stockholder of the Bank,
shall be required to approve the Plan of Conversion, of which this Agreement and
Plan of Merger is a part, on behalf of the Bank.
11. DIRECTOR APPROVAL. At least two-thirds of the members of the Board of
Directors of each of the Constituent Corporations have approved this Agreement
and Plan of Merger.
12. ABANDONMENT OF PLAN. This Agreement and Plan of Merger may be abandoned
by either Bradford Bancorp or the Bank at any time before the Effective Date in
the manner set forth in the Plan of Conversion.
13. AMENDMENTS. This Agreement and Plan of Merger may be amended in the
manner set forth in the Plan of Conversion by a subsequent writing signed by the
parties hereto upon the approval of the Boards of Directors of the Constituent
Corporations.
14. SUCCESSORS. This Agreement shall be binding on the successors of the
Constituent Corporations.
15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland, except to the extent
superseded by the laws of the United States.
3
IN WITNESS WHEREOF, the Constituent Corporations have caused this Agreement
and Plan of Merger to be executed by their duly authorized officers as of the
day and year first above written.
Attest: BRADFORD BANCORP, INC.
By:
--------------------------------- -------------------------------
Xxxxxxxx Xxxxxx Xxxxxx X. Xxxxxx
Corporate Secretary President
ttest: BRADFORD BANK
By:
--------------------------------- -------------------------------
Xxxxxxxx Xxxxxx Xxxxxx X. Xxxxxx
Corporate Secretary President
Attest: BRADFORD INTERIM FEDERAL
SAVINGS BANK II
By:
--------------------------------- -------------------------------
Xxxxxxxx Xxxxxx Xxxxxx X. Xxxxxx
Corporate Secretary President
4
Exhibit B
Agreement and Plan of Merger by and among Bradford Bank MHC,
Bradford Bank and Bradford Interim Federal Savings Bank I
AGREEMENT AND
PLAN OF MERGER
This Agreement and Plan of Merger, dated as of ______________, 200_, is
made by and between Bradford Bank MHC (the "MHC"), a federal mutual holding
company, Bradford Bank (the "Bank" or the "Surviving Corporation"), a federally
chartered savings bank and Bradford Interim Federal Savings Bank I, an interim
federal savings bank ("Interim I") (collectively, the "Constituent
Corporations").
WITNESSETH:
WHEREAS, the MHC, the Bank and Bradford Bancorp, Inc. ("Bradford Bancorp"),
a federal corporation, have adopted a Plan of Conversion pursuant to which: (i)
Bradford Bancorp will convert to an interim federal savings bank and
simultaneously merge with and into the Bank, with the Bank as the surviving
entity (the "Mid-Tier Merger"); (ii) the MHC will convert to an interim federal
stock savings bank and simultaneously merge with and into the Bank, with the
Bank as the surviving entity (the "MHC Merger"); (iii) the Bank and a
newly-formed interim federal savings bank will merge, pursuant to which the Bank
will become a wholly-owned subsidiary of a newly-formed stock corporation (the
"Holding Company"); and (iv) the Holding Company will offer shares of its common
stock in the manner set forth in the Plan of Conversion (collectively, the
"Conversion"); and
WHEREAS, the Constituent Corporations desire to provide for the terms and
conditions of the MHC Merger;
NOW, THEREFORE, the Constituent Corporations hereby agree as follows:
1. EFFECTIVE DATE. The MHC Merger shall become effective on the date
specified in the endorsement of the Articles of Combination relating to the MHC
Merger by the Secretary of the Office of Thrift Supervision (the "OTS") pursuant
to 12 C.F.R. ss.552.13(k), or any successor thereto (the "Effective Date").
2. THE MHC MERGER AND EFFECT THEREOF. Subject to the terms and conditions
set forth herein and the prior approval of the OTS of the Conversion and the
expiration of all applicable waiting periods, the MHC shall convert from the
mutual form to an interim federal stock savings bank and simultaneously merge
with and into the Bank, which shall be the Surviving Corporation. Upon
consummation of the MHC Merger, the Surviving Corporation shall be considered
the same business and corporate entity as each of the Constituent Corporations
and the Surviving Corporation shall be subject to and be deemed to have assumed
all of the property, rights, privileges, powers, franchises, debts, liabilities,
obligations, duties and relationships of each of the Constituent Corporations
and shall have succeeded to all of each of their relationships, fiduciary or
otherwise, as fully and to the same extent as if such property, rights,
privileges, powers, franchises, debts, obligations, duties and relationships had
been originally acquired, incurred or entered into by the Surviving Corporation.
In addition, any reference to either of the Constituent Corporations in any
contract or document, whether executed or taking effect before or after the
Effective Date, shall be considered a reference to the Surviving Corporation if
not inconsistent with the other provisions of the contract or document; and any
pending action or other judicial proceeding to which either of the Constituent
Corporations is a party shall not be deemed to have abated or to have been
discontinued by reason of the MHC Merger, but may be prosecuted to final
judgment, order or decree in the same manner as if the MHC Merger had not
occurred or the Surviving Corporation may be substituted as a party to such
action or proceeding, and any judgment, order or decree may be rendered for or
against it that might have been rendered for or against either of the
Constituent Corporations if the MHC Merger had not occurred.
3. CANCELLATION OF BRADFORD BANK COMMON STOCK HELD BY THE MHC AND MEMBER
INTERESTS; LIQUIDATION ACCOUNT.
On the Effective Date:
(a) each share of common stock, $1.00 par value per share, of Bradford Bank
issued and outstanding immediately before the Effective Date and held by the MHC
(pursuant to the Mid-Tier Merger) shall, by virtue of the MHC Merger and without
any action on the part of the holder thereof, be canceled;
(b) the interests in the MHC of any person, firm or entity who or which
qualified as a member of the MHC in accordance with its mutual charter and
bylaws and the laws of the United States before the MHC's conversion from mutual
to stock form ("Members") shall, by virtue of the MHC Merger and without any
action on the part of any Member, be canceled; and
(c) the Bank shall establish a liquidation account on behalf of each
depositor Member as provided for in the Plan of Conversion.
4. RIGHTS OF DISSENT AND APPRAISAL ABSENT. No Member of the MHC shall have
any dissenter or appraisal rights in connection with the MHC Merger.
5. NAME OF SURVIVING CORPORATION. The name of the Surviving Corporation
shall be "Bradford Bank."
6. DIRECTORS OF THE SURVIVING CORPORATION. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Corporation and applicable law, the number of directors of the Surviving
Corporation shall be eight. The names of those persons who, upon and after the
Effective Date, shall be directors of the Surviving Corporation are set forth
below. Each such director shall serve for the term which expires at the annual
meeting of stockholders of the Surviving Corporation in the year set forth after
his respective name, and until a successor is elected and qualified.
Name Term Expires
---- ------------
Xxxxxx X. Xxxxxx 2009
Xxxx X. Brand, III 2007
Xxxxxxxx X. Xxxxxx 2007
Xxxx X. Xxxxxxxx, III 2007
Xxxxxx X. Xxxxxxx, Xx. 0000
Xxxxxxx X. Xxxxxxxxx, Xx. 2009
G. Xxxxx Xxxxxxxx 2008
Xxxxxx X. Mister, Jr. 2008
The address of each director is 0000 Xxxx Xxxx, Xxxxxxxxx, Xxxxxxxx,
00000-0000.
7. OFFICERS OF THE SURVIVING CORPORATION. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Corporation and applicable law, the officers of the Bank immediately before the
Effective Date shall be the officers of the Surviving Corporation.
2
8. OFFICES. Upon the Effective Date, all offices of the Bank shall be
offices of the Surviving Corporation. As of the Effective Date, the home office
of the Surviving Corporation shall remain at 0000 Xxxx Xxxx, Xxxxxxxxx,
Xxxxxxxx, 00000-0000.
9. CHARTER AND BYLAWS. On and after the Effective Date, the Charter of the
Bank as in effect immediately before the Effective Date shall be the Charter of
the Surviving Corporation until amended in accordance with the terms thereof and
applicable law, except that the Charter shall be amended to provide for the
establishment of a liquidation account in accordance with applicable law and the
Plan of Conversion. On and after the Effective Date, the Bylaws of the Bank as
in effect immediately before the Effective Date shall be the Bylaws of the
Surviving Corporation until amended in accordance with the terms thereof and
applicable law.
10. STOCKHOLDER AND MEMBER APPROVALS. The affirmative vote of the Members
as set forth in the Plan of Conversion shall be required to approve the Plan of
Conversion, of which this Agreement and Plan of Merger is a part, on behalf of
the MHC. The approval of Bradford Bancorp, as the sole stockholder of the Bank,
shall be required to approve the Plan of Conversion, of which this Agreement and
Plan of Merger is a part, on behalf of the Bank.
11. DIRECTOR APPROVAL. At least two-thirds of the members of the Board of
Directors of each of the Constituent Corporations have approved this Agreement
and Plan of Merger.
12. ABANDONMENT OF PLAN. This Agreement and Plan of Merger may be abandoned
by either the MHC or the Bank at any time before the Effective Date in the
manner set forth in the Plan of Conversion.
13. AMENDMENTS. This Agreement and Plan of Merger may be amended in the
manner set forth in the Plan of Conversion by a subsequent writing signed by the
parties hereto upon the approval of the Boards of Directors of the Constituent
Corporations.
14. SUCCESSORS. This Agreement shall be binding on the successors of the
Constituent Corporations.
15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland, except to the extent
superseded by the laws of the United States.
3
IN WITNESS WHEREOF, the Constituent Corporations have caused this Agreement
and Plan of Merger to be executed by their duly authorized officers as of the
day and year first above written.
ttest: BRADFORD BANK MHC
By:
--------------------------------- -------------------------------
Xxxxxxxx Xxxxxx Xxxxxx X. Xxxxxx
Corporate Secretary President
ttest: BRADFORD BANK
By:
--------------------------------- -------------------------------
Xxxxxxxx Xxxxxx Xxxxxx X. Xxxxxx
Corporate Secretary President
ttest: BRADFORD INTERIM FEDERAL
SAVINGS BANK I
By:
--------------------------------- -------------------------------
Xxxxxxxx Xxxxxx Xxxxxx X. Xxxxxx
Corporate Secretary President
4
Exhibit C
Agreement and Plan of Merger by and among Bradford Bank, Holding Company and
Bradford Interim Federal Savings Bank III
AGREEMENT AND
PLAN OF MERGER
This Agreement and Plan of Merger, dated as of ________________, 200_, is
made by and among Bradford Bank (the "Bank" or the "Surviving Corporation"), a
federal savings bank, Bradford Bancorp, Inc. (the "Holding Company"), a Maryland
corporation, and Bradford Interim Federal Savings Bank III ("Interim III"), an
interim federal savings bank (collectively, the "Constituent Corporations").
WITNESSETH:
WHEREAS, the Bank has organized the Holding Company as a first-tier, wholly
owned subsidiary for the purpose of becoming the stock holding company of the
Bank upon completion of the Conversion as defined in the Plan of Conversion
adopted by the Boards of Directors of Bradford Bank MHC, a federal mutual
holding company (the "MHC"), Bradford Bancorp, Inc. ("Bradford Bancorp"), a
federal corporation, and the Bank; and
WHEREAS, Bradford Bancorp will convert into an interim federal savings bank
and simultaneously merge with and into the Bank pursuant to the Plan of
Conversion and the Agreement and Plan of Merger included as Annex A thereto (the
"Mid-Tier Merger") and the shares of Bradford Bancorp common stock held by the
MHC will be exchanged for the shares of Bank common stock held by Bradford
Bancorp and then canceled; and
WHEREAS, immediately after the Mid-Tier Merger, the MHC will own 100% of
the outstanding common stock of Bradford Bank, par value $1.00 per share, and
will convert to an interim federal stock savings bank and simultaneously merge
with and into the Bank pursuant to the Plan of Conversion and the Agreement and
Plan of Merger included as Annex B thereto (the "MHC Merger"), pursuant to which
all shares of Bradford Bank common stock held by the MHC will be canceled; and
WHEREAS, the reorganization into the stock holding company structure by the
Bank will be facilitated by causing the Holding Company to become the sole
stockholder of a newly-formed interim federal savings bank, Interim III, and
then merging Interim III with and into the Bank (the "Bank Merger"), pursuant to
which the Bank will become a wholly-owned subsidiary of the Holding Company, as
described more fully in Section 3(a)(i) herein; and
WHEREAS, Interim III is being organized by the officers of the Bank as an
interim federal savings bank with the Holding Company as its sole stockholder to
effect the Bank Merger; and
WHEREAS, the Constituent Corporations desire to provide for the terms and
conditions of the Bank Merger.
NOW, THEREFORE, the Constituent Corporations hereby agree as follows:
1. EFFECTIVE DATE. The Bank Merger shall become effective on the date
specified in the endorsement of the Articles of Combination relating to the Bank
Merger by the Office of Thrift Supervision ("OTS") pursuant to 12 C.F.R.
ss.552.13(k), or any successor thereto (the "Effective Date").
2. THE MERGER AND EFFECT THEREOF. Subject to the terms and conditions set
forth herein and the prior approval of the OTS of the Conversion, as defined in
the Plan of Conversion, and the expiration of all applicable waiting periods,
Interim III shall merge with and into the Bank, with the Bank as the Surviving
Corporation. Upon consummation of the Bank Merger, the Surviving Corporation
shall be considered the same business and corporate entity as each of the
Constituent Corporations and thereupon and thereafter all the property, rights,
powers and franchises of each of the Constituent Corporations shall vest in the
Surviving Corporation and the Surviving Corporation shall be subject to and be
deemed to have assumed all of the property, rights, privileges, powers,
franchises, debts, liabilities, obligations and duties of each of the
Constituent Corporations and shall have succeeded to all of each of their
relationships, fiduciary or otherwise, fully and to the same extent as if such
property, rights, privileges, powers, franchises, debts, obligations, duties and
relationships had been originally acquired, incurred or entered into by the
Surviving Corporation. In addition, any reference to either of the Constituent
Corporations in any contract or document, whether executed or taking effect
before or after the Effective Date, shall be considered a reference to the Bank
if not inconsistent with the other provisions of the contract or document; and
any pending action or other judicial proceeding of which either of the
Constituent Corporations is a party shall not be deemed to have abated or to
have been discontinued by reason of the Bank Merger, but may be prosecuted to
final judgment, order or decree in the same manner as if the Bank Merger had not
occurred or the Surviving Corporation may be substituted as a party to such
action or proceeding, and any judgment, order or decree may be rendered for or
against it that might have been rendered for or against either of the
Constituent Corporations if the Bank Merger had not occurred.
3. TREATMENT OF BANK, HOLDING COMPANY AND INTERIM III COMMON STOCK.
On the Effective Date:
(a) each share of Holding Company common stock issued and outstanding
immediately before the Effective Date shall, by virtue of the Bank Merger and
without any action on the part of the holder thereof, be canceled; and
(b) each share of common stock, par value $0.01 per share, of Interim III
issued and outstanding immediately before the Effective Date shall, by virtue of
the Bank Merger and without any action on the part of the holder thereof, be
converted into one share of Bank common stock.
4. STOCK OFFERING. Contemporaneously with the Bank Merger, the Holding
Company will offer all of its shares of common stock for sale in the Offerings
as described in the Plan of Conversion.
5. RIGHTS OF DISSENT AND APPRAISAL ABSENT. The holder of Interim III common
stock shall have no dissenter or appraisal rights in connection with the Bank
Merger.
6. NAME OF SURVIVING CORPORATION. The name of the Surviving Corporation
shall be "Bradford Bank."
7. DIRECTORS OF THE SURVIVING CORPORATION. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Corporation and applicable law, the number of directors of the Surviving
Corporation shall be eight. The names of those persons who, upon and after the
Effective Date, shall be directors of the Surviving Corporation are set forth
below. Each such director shall serve for the term which expires at the annual
2
meeting of stockholders of the Surviving Corporation in the year set forth after
his respective name, and until a successor is elected and qualified.
Name Term Expires
---- ------------
Xxxxxx X. Xxxxxx 2009
Xxxx X. Brand, III 2007
Xxxxxxxx X. Xxxxxx 2007
Xxxx X. Xxxxxxxx, III 2007
Xxxxxx X. Xxxxxxx, Xx. 0000
Xxxxxxx X. Xxxxxxxxx, Xx. 2009
G. Xxxxx Xxxxxxxx 2008
Xxxxxx X. Mister, Jr. 2008
The address of each director is 0000 Xxxx Xxxx, Xxxxxxxxx, Xxxxxxxx,
00000-0000.
8. OFFICERS OF THE SURVIVING CORPORATION. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Corporation and applicable law, the officers of the Bank immediately before the
Effective Date shall be the officers of the Surviving Corporation.
9. OFFICES. Upon the Effective Date, all offices of the Bank shall be
offices of the Surviving Corporation. As of the Effective Date, the home office
of the Surviving Corporation shall remain at 0000 Xxxx Xxxx, Xxxxxxxxx,
Xxxxxxxx, 00000-0000.
10. CHARTER AND BYLAWS. On and after the Effective Date, the Charter and
Bylaws of the Bank as in effect immediately before the Effective Date shall be
the Charter and Bylaws of the Surviving Corporation until amended in accordance
with the terms thereof and applicable law.
11. SAVINGS ACCOUNTS. Upon the Effective Date, any savings accounts of
Interim III, without reissue, shall be and become savings accounts of the
Surviving Corporation without change in their respective terms, including,
without limitation, maturity minimum required balances or withdrawal value.
12. STOCKHOLDER APPROVALS. The approval of Bradford Bancorp, as the sole
stockholder of the Bank, shall be required to approve the Plan of Conversion, of
which this Agreement and Plan of Merger is a part, on behalf of the Bank. The
approval of the Holding Company as sole stockholder of Interim III, shall be
required to approve this Agreement and Plan of Merger, on behalf of Interim III.
13. DIRECTOR APPROVAL. At least two-thirds of the members of the Board
of Directors of each of the Constituent Corporations have approved this
Agreement and Plan of Merger.
14. REGISTRATION; OTHER APPROVALS. In addition to the approvals set forth
in Sections 1, 13 and 14 hereof and in the Plan of Conversion, the obligations
of the parties hereto to consummate the Bank Merger shall be subject to the
Common Stock to be issued hereunder in exchange for Bradford Bancorp common
stock being registered under the Securities Act of 1933, as amended, and
registered or qualified under applicable state securities laws, as well as the
receipt of all other approvals, consents or waivers as the parties may deem
necessary or advisable.
3
15. ABANDONMENT OF PLAN. This Agreement and Plan of Merger may be abandoned
by either the Constituent Corporations at any time before the Effective Date in
the manner set forth in the Plan of Conversion.
16. AMENDMENTS. This Agreement and Plan of Merger may be amended in the
manner set forth in the Plan of Conversion by a subsequent writing signed by the
parties hereto upon the approval of the Board of Directors of each of the
parties hereto.
17. SUCCESSORS. This Agreement and Plan of Merger shall be binding on the
successors of the parties hereto.
18. GOVERNING LAW. This Agreement and Plan of Merger shall be governed by
and construed in accordance with the laws of the State of Maryland, except to
the extent superseded by the laws of the United States.
4
IN WITNESS WHEREOF, the Constituent Corporations hereto have caused this
Plan of Merger to be duly executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
[HOLDING COMPANY]
By:
--------------------------------- -------------------------------
Xxxxxxxx Xxxxxx Xxxxxx X. Xxxxxx
Corporate Secretary President
ttest: BRADFORD BANK
By:
--------------------------------- -------------------------------
Xxxxxxxx Xxxxxx Xxxxxx X. Xxxxxx
Corporate Secretary President
ttest: BRADFORD INTERIM FEDERAL
SAVINGS BANK III
By:
--------------------------------- -------------------------------
Xxxxxxxx Xxxxxx Xxxxxx X. Xxxxxx
Corporate Secretary President
5
EXHIBIT B
FORM OF VOTING AGREEMENT
EXHIBIT B
________________, 2007
Board of Directors
New Bradford Bancorp, Inc.
0000 Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
To the Board of Directors:
The undersigned is a director of Patapsco Bancorp, Inc. ("Patapsco
Bancorp") and the beneficial holder of shares of common stock of Patapsco
Bancorp (the "Patapsco Bancorp Common Stock").
New Bradford Bancorp, Inc. ("New Bradford Bancorp") and Patapsco Bancorp
are considering the execution of an Agreement and Plan of Merger (the
"Agreement") pursuant to which New Bradford Bancorp will acquire Patapsco
Bancorp through the merger of Patapsco Bancorp with and into New Bradford
Bancorp (the "Merger"). The execution of the Agreement by New Bradford Bancorp
is subject to the execution and delivery of this letter agreement.
The undersigned, to induce New Bradford Bancorp to execute and deliver to
Patapsco Bancorp the Agreement, agrees and undertakes, solely in his or her
capacity as a stockholder of Patapsco Bancorp, and not in his or her capacity as
a director or officer of Patapsco Bancorp, as follows:
1. While this letter agreement is in effect the undersigned shall not,
directly or indirectly, (a) sell or otherwise dispose of or encumber prior to
the record date of the Stockholder Meeting, as defined in the Agreement, any or
all of his or her shares of Patapsco Bancorp Common Stock, or (b) deposit any
shares of Patapsco Bancorp Common Stock into a voting trust or enter into a
voting agreement or arrangement with respect to any shares of Patapsco Bancorp
Common Stock or grant any proxy with respect thereto, other than to other
members of the Board of Directors of Patapsco Bancorp for the purpose of voting
to approve the Agreement and the Merger and matters related thereto.
2. While this letter agreement is in effect the undersigned shall vote or
cause to be voted all of the shares of Patapsco Bancorp Common Stock that the
undersigned shall be entitled to so vote, whether such shares are beneficially
owned by the undersigned on the date of this letter agreement or are
subsequently acquired, and whether pursuant to the exercise of stock options or
otherwise, for the approval of the Agreement and the Merger at the Stockholder
Meeting.
New Bradford Bancorp, Inc.
_______________, 2007
Page 2
3. The undersigned acknowledges and agrees that any remedy at law for
breach of the foregoing provisions shall be inadequate and that, in addition to
any other relief which may be available, New Bradford Bancorp shall be entitled
to temporary and permanent injunctive relief without having to prove actual
damages.
4. The foregoing restrictions shall not apply to shares with respect to
which the undersigned may have voting power as a fiduciary for others. In
addition, this letter agreement shall only apply to actions taken by the
undersigned in his or her capacity as a stockholder of Patapsco Bancorp and, if
applicable, shall not in any way limit or affect actions the undersigned may
take in his or her capacity as a director or officer of Patapsco Bancorp.
5. This letter agreement shall automatically terminate upon the earlier of
(i) the favorable vote of Patapsco Bancorp's stockholders with respect to the
approval of the Agreement and the Merger, (ii) the termination of the Agreement
in accordance with its terms, or (iii) the Effective Time, as that term is
defined in the Agreement, of the Merger.
6. As of the date hereof, the undersigned has voting power with respect to
shares of Patapsco Bancorp Common Stock.
IN WITNESS WHEREOF, the undersigned has executed this agreement as of the
date first above written.
Very truly yours,
------------------------------------
------------------------------------
Print Name
Accepted and agreed to as of
the date first above written:
New Bradford Bancorp, Inc.
---------------------------
Xxxxxx X. Xxxxxx
President
EXHIBIT C
PLAN OF BANK MERGER
PLAN OF MERGER
of
THE PATAPSCO BANK
with and into
BRADFORD BANK
THIS PLAN OF MERGER ("Plan of Merger") is entered into as of the ___ day of
______________, 2007 by and between THE PATAPSCO BANK, a commercial bank
chartered and existing under the laws of the state of Maryland with its
principal office at 0000 Xxxxxxx Xxxxxxxxx, Xxxxxxxxx, Xxxxxxxx 00000 ("Patapsco
Bank"), and BRADFORD BANK, a stock savings bank chartered and existing under the
laws of the United States of America with its principal office at 0000 Xxxx
Xxxx, Xxxxxxxxx, Xxxxxxxx 00000 ("Bradford Bank").
WHEREAS, this Plan of Merger is being entered into pursuant to the
Agreement and Plan of Merger dated as of March 19, 2007 (the "Merger Agreement")
by and among New Bradford Bancorp, Inc., Bradford Bank MHC, Bradford Bancorp,
Inc., Bradford Bank and Patapsco Bancorp, Inc., pursuant to which New Bradford
Bancorp, Inc. will acquire Patapsco Bancorp, Inc.; and
WHEREAS, this Plan of Merger has been approved by at least two-thirds of
the directors of each of Bradford Bank and Patapsco Bank.
NOW, THEREFORE, in consideration of the covenants and agreements of the
parties contained herein, the parties hereto hereby make, adopt and approve this
Plan of Merger in order to set forth the terms and conditions for the merger of
Patapsco Bank with and into Bradford Bank (the "Merger").
1. Effective Time of the Merger. The Merger shall not be
effective unless and until the Merger receives any necessary
approvals from the Office of Thrift Supervision pursuant to 12
C.F.R. 563.22 or such other later time specified on the
Articles of Combination filed with the Office of Thrift
Supervision (the "Effective Time").
2. Constituent Institutions. The name of each constituent
institution to the Merger is BRADFORD BANK and THE PATAPSCO
BANK.
3. Name of the Resulting Institution. The resulting institution
in the Merger shall be BRADFORD BANK (Bradford Bank is
sometimes referred to herein as the "Resulting Institution").
4. Location of Home Office and Other Offices of Resulting
Institution. The location of the principal office and other
offices of the Resulting Institution are listed in Appendix A
hereto attached.
5. Terms and Conditions of Merger. Subject to the terms and
conditions of this Plan of Merger, at the Effective Time,
Patapsco Bank shall be merged with and into Bradford Bank
pursuant to the provisions of, and with the effect provided
under the laws of, the United States of America and the State
of Maryland. At the Effective Time, the separate existence of
Patapsco Bank shall cease and Bradford Bank as the Resulting
Institution, shall continue unaffected and unimpaired by the
Merger.
6. Charter. At the Effective Time, the charter of Bradford Bank,
as in effect immediately prior to the Effective Time, shall
constitute the charter of the Resulting Institution, unless
and until the same shall be amended as provided by law and the
terms of such charter.
7. Bylaws. At the Effective Time, the bylaws of Bradford Bank, as
in effect immediately prior to the Effective Time, shall be
the bylaws of the Resulting Institution, unless and until
amended or repealed as provided by law, its charter and such
bylaws.
8. Savings Account Issuance by Resulting Institution. After the
Effective Time, the Resulting Institution will continue to
issue deposit accounts, including savings accounts, on the
same basis as immediately prior to the Effective Time.
9. Directors of Resulting Institution. The names of the persons
who shall constitute the Board of Directors of the Resulting
Institution after the Effective Time are listed in Appendix B
hereto attached.
10. Effect on Outstanding Shares of Patapsco Bank Common Stock. At
the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, all outstanding
shares of common stock, par value $10.00 per share, of
Patapsco Bank shall automatically be canceled and retired and
shall cease to exist.
11. Effect on Outstanding Shares of Bradford Bank Common Stock.
The shares of common stock, par value $1.00 per share, of
Bradford Bank issued and outstanding immediately prior to the
Effective Time shall remain outstanding and unchanged after
the Merger and shall be the only issued and outstanding shares
of the Resulting Institution. The authorized capital stock of
the Resulting Institution shall be 1,000 shares of common
stock, par value $1.00 per share.
12. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger
shall be subject to the approval of the stockholders of each
party and to the satisfaction of the conditions set forth in
Article VI of the Merger Agreement.
2
13. Termination. This Plan of Merger shall terminate automatically
upon termination of the Merger Agreement.
14. Amendment. This Plan of Merger may not be amended except by an
agreement in writing signed on behalf of each of the parties
hereto.
15. Governing Law. This Plan of Merger shall be governed by and
construed and enforced in accordance with the laws of the
United States of America.
16. Captions. The captions heading the sections in this Plan of
Merger are for convenience only and shall not affect the
construction or interpretation of this Plan of Merger.
17. Counterparts. This Plan of Merger may be executed in two or
more counterparts, any of which may be facsimile copies, each
of which shall be deemed an original instrument, but all of
which together shall constitute one and the same instrument.
3
IN WITNESS WHEREOF, each of the Parties has caused this Plan of Merger to
be duly executed and delivered by its duly authorized officers as of the date
first above written.
BRADFORD BANK
ATTEST:
By:
--------------------------------------- -------------------------------
Xxxxxx X. Xxxxxx
Its: President
ATTEST: THE PATAPSCO BANK
By:
-------------------------------------- -------------------------------
Xxxxxxx X. Xxx
Its: President, Chief Executive
Officer and Chief Financial
Officer
4
APPENDIX A
Location of Home Office and Other Offices of Resulting Institution
Home Office
-----------
0000 Xxxx Xxxx, Xxxxxxxxx, Xxxxxxxx 00000
Other Offices
-------------
0000 Xxxxxxxxx-Xxxxxxxxx Xxxxxxxxx, Xxxx Xxxxxx, Xxxxxxxx 00000
00 Xxxx Xxxxxxx Xxxx, Xxxxxxxxxxx, Xxxxxxxx 00000
00000 Xxxxxxxxxxxxx Xxxx, Xxxxxxx, Xxxxxxxx 00000
0000 Xxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000
000 Xxxxxxxxx Xxxxx, Xxxx Xxxxxx, Xxxxxxxx 00000
0000 Xxxxxxxxxxxx Xxxx, Xxxxxxxxxx 00000
00000 Xxxxxxxxx Xxxxxxxx Xxxx, Xxxxxxxx Xxxx, Xxxxxxxx 00000
0000 Xxxx Xxxx, Xxxxxxxxxxxx, Xxxxxxxx 00000
0000 Xxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxx 00000
0000 Xx Xxxxxxx Xx., Xxxxxxxxx, Xxxxxxxx 00000
0000 Xxxxxxx Xxxxxxxxx, Xxxxxxxxx, Xxxxxxxx 00000
00000 Xxxx Xxxxx Xxxx, Xxxx Xxx, Xxxxxxxx 00000
000 Xxxx 00xx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000
0000 Xxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxx 00000
0000 Xxxxx Xxxx, Xxxxxxxxx, Xxxxxxxx 00000
APPENDIX B
Directors of Resulting Institution
Name Residence Address Year Term Expires
------------------------------------ --------------------------------------------- -------------------------------
Xxxxxx X. Xxxxxx 000 Xxx Xxxxxx Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxx 00000
Xxxx X. Brand, III 10718 Xxx Xxxxxx Xxxx 0000
Xxxxxxxxxxxx, Xxxxxxxx 00000
Xxxxxxxx X. Xxxxxx 000 X. Xxxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Xxxx X. Xxxxxxxx, III 00 Xxxxxx Xxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Xxxxxx X. Xxxxxxx 25 Springhill Farm Court 2008
Xxxx Xxxxxx, Xxxxxxxx 00000
Xxxxxxx X. Xxxxxxxxx, Xx. 00000 Xxxx Xxxxxx Xxxx 0000
Xxxxxxxx, Xxxxxxxx 00000
Xxxxxx X. Mister, Jr. 27 Xxxxxx Xxxxx Court 2008
Xxxxxxx, Xxxxxxxx 00000
G. Xxxxx Xxxxxxxx 00000 Xxxx Xxxxxx Xxxx 0000
Xxxxxxxxxxx, Xxxxxxxx 00000
EXHIBIT D
FORM OF AFFILIATE LETTER
EXHIBIT D
____________________, 2007
Board of Directors
New Bradford Bancorp, Inc.
0000 Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
To the Board of Directors:
I have been advised that I may be deemed to be, but do not admit that I am,
an "affiliate" of Patapsco Bancorp, Inc., a Maryland corporation ("Patapsco
Bancorp"), as that term is defined in Rule 144 and used in Rule 145 promulgated
by the Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "Securities Act"). I understand that pursuant to the
terms of the Agreement and Plan of Merger, dated as of March ___, 2007 (the
"Merger Agreement"), by and among New Bradford Bancorp, Inc., a Maryland
corporation ("New Bradford Bancorp"), Bradford Bank MHC, a federally chartered
mutual holding company (the "MHC"), Bradford Bancorp, Inc., a federally
chartered subsidiary holding company ("Bradford Bancorp"), Bradford Bank, a
federally chartered savings bank ("Bradford Bank") and Patapsco Bancorp, Inc., a
Maryland corporation ("Patapsco"), Patapsco plans to merge with and into New
Bradford Bancorp (the "Merger").
I further understand that as a result of the Merger, I may receive shares
of common stock of New Bradford Bancorp (the "New Bradford Bancorp Common
Stock") in exchange for shares of common stock, $0.01 par value per share, of
Patapsco Bancorp (the "Patapsco Bancorp Common Stock").
I have carefully read this letter agreement (the "Letter Agreement") and
reviewed the Merger Agreement and discussed their requirements and other
applicable limitations upon my ability to sell, transfer or otherwise dispose of
New Bradford Bancorp Common Stock, to the extent I felt necessary, with my
counsel.
I represent, warrant and covenant with and to New Bradford Bancorp that
with regard to any shares of New Bradford Bancorp Common Stock that I receive as
a result of the Merger:
1. I shall not make any sale, transfer or other disposition of such shares
of New Bradford Bancorp Common Stock unless (i) such sale, transfer or other
disposition has been registered under the Securities Act, (ii) such sale,
transfer or other disposition is made in conformity with the provisions of Rule
145 promulgated under the Securities Act (as such rule may be amended from time
to time), or (iii) in the opinion of counsel in form and substance reasonably
satisfactory to New Bradford Bancorp, or under a "no-action" letter obtained by
me from the staff of the SEC, such sale, transfer or other disposition will not
New Bradford Bancorp, Inc.
_____________, 2007
Page 2
violate the registration requirements of, or is otherwise exempt from
registration under, the Securities Act.
2. I understand that New Bradford Bancorp is under no obligation to
register the sale, transfer or other disposition of shares of New Bradford
Bancorp Common Stock by me or on my behalf under the Securities Act or to take
any other action necessary to make compliance with an exemption from such
registration available.
3. I understand that stop transfer instructions will be given to New
Bradford Bancorp's transfer agent with respect to shares of New Bradford Bancorp
Common Stock issued to me as a result of the Merger and that there will be
placed on the certificates for such shares, or any substitutions thereof, a
legend stating in substance:
"The shares represented by this certificate were issued as a result of
the merger of Patapsco Bancorp, Inc. with and into a subsidiary of New
Bradford Bancorp, Inc. on ________________, 2007, in a transaction to
which Rule 145 promulgated under the Securities Act of 1933 applies.
The shares represented by this certificate may be transferred only in
accordance with the terms of a letter agreement between the registered
holder hereof and New Bradford Bancorp. New Bradford Bancorp will send
to the holder of this certificate a copy of such letter agreement
without charge within five days after receipt of a written request
therefor."
It is understood and agreed that the legend set forth above shall be
removed by delivery of substitute certificates without such legends if I shall
have delivered to New Bradford Bancorp (i) a copy of a "no-action" letter from
the staff of the SEC, or an opinion of counsel in form and substance reasonably
satisfactory to New Bradford Bancorp, to the effect that such legend is not
required for purposes of the Securities Act, or (ii) evidence or representations
satisfactory to New Bradford Bancorp that New Bradford Bancorp Common Stock
represented by such certificates has been sold in conformity with the provisions
of Rule 145(d).
By acceptance hereof, New Bradford Bancorp agrees, for a period of two
years after the Effective Time, as that term is defined in the Merger Agreement,
that, so long as it is obligated to file reports pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, that it will use its
reasonable best efforts to timely file such reports so that the public
information requirements of Rule 144(c) promulgated under the Securities Act are
satisfied and the resale provisions of Rule 145(d)(1) and (2) are therefore
available to me in the event that I desire to transfer any New Bradford Bancorp
Common Stock issued to me in the Merger. In addition, (i) in connection with any
sale, transfer or other disposition by me of New Bradford Bancorp Common Stock
issued to me in the Merger, New Bradford Bancorp agrees to cause its legal
counsel to provide promptly an opinion to New Bradford Bancorp's transfer agent
to the effect that such sale, transfer or other disposition is exempt from
registration under the Securities Act, where such opinion of counsel may be
New Bradford Bancorp, Inc.
_____________, 2007
Page 3
properly given and (ii) at my request, New Bradford Bancorp agrees to cause its
legal counsel to promptly provide an opinion to New Bradford Bancorp's transfer
agent to the effect that the legend set forth above may be removed from the
certificate or certificates representing my shares of New Bradford Bancorp
Common Stock upon expiration of the restrictive period set forth in Rule
145(d)(2), so long as New Bradford Bancorp is then in compliance with Rule
144(c), or the restrictive period set forth in Rule 145(d)(3).
This Letter Agreement will be binding upon and enforceable against my
administrators, executors, representatives, heirs, legatees and devisees. This
Letter Agreement is the complete agreement between New Bradford Bancorp and me
concerning the subject matter hereof and shall be governed in accordance with
the laws of the State of Maryland, without regard to its conflict of laws
principles.
Very truly yours,
------------------------------
------------------------------
Print Name
Accepted and agreed to as of
the date first above written:
New Bradford Bancorp, Inc.
-------------------------------
Xxxxxx X. Xxxxxx
President
