AGREEMENT AND PLAN OF MERGER
dated as of
June 22, 2000
by and between
CITIZENS & NORTHERN CORPORATION
and
PEOPLES LTD.
TABLE OF CONTENTS
PAGE
----
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE I Certain Definitions
1.01 CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II The Merger
2.01 THE PEOPLES MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.02 THE SUBSIDIARY MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.03 EFFECTIVENESS OF THE PEOPLES MERGER . . . . . . . . . . . . . . . . . . . . .7
2.04 EFFECTIVE DATE AND EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE III Consideration; Exchange Procedures
3.01 MERGER CONSIDERATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.02 RIGHTS AS SHAREHOLDERS; STOCK TRANSFERS . . . . . . . . . . . . . . . . . . .8
3.03 FRACTIONAL SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.04 EXCHANGE PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.05 ANTI-DILUTION PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.06 OTHER TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
ARTICLE IV Representations and Warranties
4.01 DISCLOSURE SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.02 STANDARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.03 REPRESENTATIONS AND WARRANTIES OF PEOPLES . . . . . . . . . . . . . . . . . 11
4.04 REPRESENTATIONS AND WARRANTIES OF CNN . . . . . . . . . . . . . . . . . . . 21
ARTICLE V Covenants
5.01 PEOPLES TO CARRY ON BUSINESS IN NORMAL MANNER . . . . . . . . . . . . . . . 25
5.02 CNN TO CARRY ON BUSINESS IN NORMAL MANNER . . . . . . . . . . . . . . . . . 27
5.03 REASONABLE BEST EFFORTS . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.04 SHAREHOLDER APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.05 REGISTRATION STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.06 PRESS RELEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.07 ACCESS; INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.08 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.09 AFFILIATE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
i
5.10 TAKEOVER LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.11 [INTENTIONALLY DELETED]
5.12 REGULATORY APPLICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.13 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.14 OPPORTUNITY OF EMPLOYMENT; EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . 32
5.15 NOTIFICATION OF CERTAIN MATTERS . . . . . . . . . . . . . . . . . . . . . . 33
5.16 DIVIDEND COORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.17 CNN BOARD REPRESENTATION. . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.18 RESULTING BANK BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . 33
5.19 FORMATION OF ADVISORY BOARD . . . . . . . . . . . . . . . . . . . . . . . . 33
5.20 ACCOUNTING AND TAX TREATMENT. . . . . . . . . . . . . . . . . . . . . . . . 33
5.21 NO BREACHES OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 34
5.22 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.23 INSURANCE COVERAGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.24 CORRECTION OF INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.25 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.26 SUPPLEMENTAL ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.27 EMPLOYMENT AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.28 VOTING AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VI Conditions to Consummation of the Holding Company Merger
6.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. . . . . . . . . 35
6.02 CONDITIONS TO OBLIGATION OF PEOPLES . . . . . . . . . . . . . . . . . . . . 36
6.03 CONDITIONS TO OBLIGATION OF CNN . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VII Termination
7.01 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.02 EFFECT OF TERMINATION AND ABANDONMENT; ENFORCEMENT OF AGREEMENT . . . . . . 39
ARTICLE VIII Miscellaneous
8.01 SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.02 WAIVER; AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.03 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.04 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.05 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.06 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.07 ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES. . . . . . . . . . . . . 41
8.08 INTERPRETATION; EFFECT. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.09 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ii
EXHIBIT A Form of Stock Option Agreement
EXHIBIT B Form of PEOPLES Affiliate Agreement
EXHIBIT C Form of Voting Agreement
EXHIBIT D First Amendment to Executive Employment Agreement
iii
AGREEMENT AND PLAN OF MERGER, dated as of June 22, 2000, (this
"AGREEMENT"), is by and between Citizens & Northern Corporation ("CNN") and
Peoples Ltd. ("PEOPLES").
RECITALS
A. CITIZENS & NORTHERN CORPORATION. CNN is a Pennsylvania corporation,
having its principal place of business in Wellsboro, Pennsylvania.
X. XXXXXXX LTD. PEOPLES is a Pennsylvania corporation, having its
principal place of business in Wyalusing, Pennsylvania.
C. STOCK OPTION AGREEMENT. As an inducement to the willingness of CNN to
continue to pursue the transactions contemplated by this Agreement, PEOPLES
intends to grant to CNN an option pursuant to a stock option agreement, in
substantially the form of Exhibit A.
D. INTENTIONS OF THE PARTIES. It is the intention of the parties to this
Agreement that the business combinations contemplated hereby be accounted for
under the "pooling-of-interests" accounting method and that each be treated as
a "reorganization" under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "CODE").
E. BOARD ACTION. The respective Boards of Directors of each of CNN and
PEOPLES have determined that it is in the best interests of their respective
companies and their shareholders to consummate the strategic business
combinations provided for herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein the
parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 CERTAIN DEFINITIONS. The following terms are used in this Agreement
with the meanings set forth below:
"ACQUISITION PROPOSAL" means any tender or exchange offer, proposal
for a merger, consolidation or other business combination involving PEOPLES
or any of its Subsidiaries or any proposal or offer to acquire in any
manner a substantial equity interest in, or a substantial portion of the
assets or deposits of, PEOPLES or any of its Subsidiaries, other than the
transactions contemplated by this Agreement.
"AGREEMENT" means this Agreement, as amended or modified from time to
time in accordance with Section 8.02.
"AGREEMENT TO MERGE" has the meaning set forth in Section 2.03.
1
"BANK" means Peoples State Bank of Wyalusing, Pa., a wholly-owned
subsidiary of PEOPLES.
"BHCA" means the Bank Holding Company Act of 1956, as amended.
"CNN" has the meaning set forth in the preamble to this Agreement.
"CNN ARTICLES" means the Articles of Incorporation of CNN, as amended.
"CNN BANK" means Citizens & Northern Bank, a Pennsylvania banking
corporation which is a wholly-owned subsidiary of CNN.
"CNN BOARD" means the Board of Directors of CNN.
"CNN BYLAWS" means the Bylaws of CNN, as amended.
"CNN COMMON STOCK" means the common stock, par value $1.00 per share,
of CNN.
"CNN SEC DOCUMENTS" has the meaning set forth in Section 4.04(g).
"CNN STOCK" means the CNN Common Stock.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPENSATION AND BENEFIT PLANS" has the meaning set forth in Section
4.03(m).
"CONSULTANTS" has the meaning set forth in Section 4.03(m).
"COSTS" has the meaning set forth in Section 5.14(a).
"DIRECTORS" has the meaning set forth in Section 4.03(m).
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 4.01.
"DISSENTING SHARES" means any shares of PEOPLES Common Stock held by a
holder who properly demands and perfects appraisal rights with respect to
such shares in accordance with applicable provisions of the PBCL.
"DSCP" means the Department of State of the Commonwealth of
Pennsylvania.
"EFFECTIVE DATE" means the date on which the Effective Time occurs.
"EFFECTIVE TIME" means the effective time of the Merger, as provided
for in Section 2.04.
2
"EMPLOYEES" has the meaning set forth in Section 4.03(m).
"EMPLOYMENT AGREEMENT" has the meaning set forth in Section 5.01(d).
"ENVIRONMENTAL LAWS" means all applicable local, state and federal
environmental, health and safety laws and regulations, including, without
limitation, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Clean Water
Act, the Federal Clean Air Act, and the Occupational Safety and Health Act,
each as amended, regulations promulgated thereunder, and state
counterparts.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means PEOPLES and any other employer that is, or at
any relevant time was, together with PEOPLES, treated as a "single
employer" under Code Sections 414(b), 414(c), 414(m) or 414(o).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"EXCHANGE AGENT" has the meaning set forth in Section 3.04.
"EXCHANGE FUND" has the meaning set forth in Section 3.04.
"EXCHANGE RATIO" has the meaning set forth in Section 3.01.
"FDIC" means the Federal Deposit Insurance Corporation.
"FFIEC" means Federal Financial Institutions Examination Committee.
"GOVERNMENTAL AUTHORITY" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.
"INDEMNIFIED PARTY" has the meaning set forth in Section 5.14(a).
"IRS" has the meaning set forth in Section 4.03(m).
The term "KNOWLEDGE" means, with respect to a party hereto, actual
knowledge of any officer of that party with the title of not less than the
senior vice president.
"LIEN" means any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"MATERIAL ADVERSE EFFECT" means, with respect to CNN or PEOPLES, any
effect that (i) is material and adverse to the financial position, results
of operations or business of CNN and
3
its Subsidiaries taken as a whole, or PEOPLES and its Subsidiaries taken as
a whole, respectively, or (ii) would materially impair the ability of
either CNN or PEOPLES to perform its obligations under this Agreement or
otherwise materially threaten or materially impede the consummation of the
Merger and the other transactions contemplated by this Agreement; PROVIDED,
HOWEVER, that Material Adverse Effect shall not be deemed to include the
impact of (a) changes in banking and similar laws of general applicability
or interpretations thereof by courts or governmental authorities or other
changes affecting depository institutions generally, including changes in
general economic conditions and changes in prevailing interest and deposit
rates, (b) any modifications or changes to valuation policies and practices
in connection with the Merger or restructuring charges taken in connection
with the Merger, in each case in accordance with generally accepted
accounting principles, (c) changes resulting from expenses (such as legal,
accounting and investment bankers' fees) incurred in connection with this
Agreement or the transactions contemplated herein, and (d) actions or
omissions of a party which have been waived in accordance with Section 8.02
hereof.
"MERGER" collectively refers to the PEOPLES Merger and the Subsidiary
Merger, as set forth in Section 2.01 and Section 2.02, respectively.
"MERGER CONSIDERATION" has the meaning set forth in Section 2.01.
"NEW CERTIFICATE" has the meaning set forth in Section 3.04.
"NASD" means The National Association of Securities Dealers.
"OLD CERTIFICATE" has the meaning set forth in Section 3.04.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PBCL" means the Pennsylvania Business Corporation Law of 1988, as
amended.
"PDB" means the Pennsylvania Department of Banking.
"PENSION PLAN" has the meaning set forth in Section 4.03(m).
"PEOPLES" has the meaning set forth in the preamble to this Agreement.
"PEOPLES ARTICLES" means the Articles of Incorporation of PEOPLES.
"PEOPLES AFFILIATE" has the meaning set forth in Section 5.09.
"PEOPLES BOARD" means the Board of Directors of PEOPLES.
"PEOPLES BYLAWS" means the Bylaws of PEOPLES, as amended.
4
"PEOPLES COMMON STOCK" means the common stock, par value $.50 per
share, of PEOPLES.
"PEOPLES MEETING" has the meaning set forth in Section 5.04.
"PEOPLES MERGER" has the meaning set forth in Section 2.01.
"PEOPLES STOCK" means PEOPLES Common Stock, par value $.50 per share.
"PERSON" means any individual, bank, corporation, partnership,
association, joint-stock company, business trust or unincorporated
organization.
"PREVIOUSLY DISCLOSED" by a party shall mean information set forth in
its Disclosure Schedule.
"PROXY/PROSPECTUS" has the meaning set forth in Section 5.05.
"PROXY STATEMENT" has the meaning set forth in Section 5.05.
"REGISTRATION STATEMENT" has the meaning set forth in Section 5.05.
"REGULATORY AUTHORITY" has the meaning set forth in Section 4.03(i).
"REPLACEMENT OPTION" has the meaning set forth in Section 3.06.
"REPRESENTATIVES" means, with respect to any Person, such Person's
directors, officers, employees, legal or financial advisors or any
representatives of such legal or financial advisors.
"RESULTING BANK" has the meaning set forth in Section 2.02.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"STOCK OPTION AGREEMENT" has the meaning set forth in Recital C.
"SUBSIDIARY" AND "SIGNIFICANT SUBSIDIARY" have the meanings ascribed
to them in Rule 1-02 of Regulation S-X of the SEC.
"SUBSIDIARY MERGER" has the meaning set forth in Section 2.02.
"SURVIVING CORPORATION" has the meaning set forth in Section 2.01.
5
"TAKEOVER LAWS" has the meaning set forth in Section 6.03(c).
"TAX" AND "TAXES" means all federal, state, local or foreign taxes,
charges, fees, levies or other assessments, however denominated, including,
without limitation, all net income, gross income, gains, gross receipts,
sales, use, ad valorem, goods and services, capital, production, transfer,
franchise, windfall profits, license, withholding, payroll, employment,
disability, employer health, excise, estimated, severance, stamp,
occupation, property, environmental, unemployment or other taxes, custom
duties, fees, assessments or charges of any kind whatsoever, together with
any interest and any penalties, additions to tax or additional amounts
imposed by any taxing authority whether arising before, on or after the
Effective Date.
"TAX RETURNS" means any return, amended return or other report
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be filed with respect to any Tax.
"TREASURY STOCK" shall mean shares of PEOPLES Stock held by PEOPLES or
any of its Subsidiaries or by CNN or any of its Subsidiaries, in each case
other than in a fiduciary capacity or as a result of debts previously
contracted in good faith.
ARTICLE II
THE MERGER
2.01 THE HOLDING COMPANY MERGER. At the Effective Time (i) PEOPLES
shall be merged with and into CNN (the "HOLDING COMPANY MERGER" or the "PEOPLES
MERGER"), (ii) CNN shall survive and continue to exist as a Pennsylvania
corporation (CNN, as the surviving corporation in the Holding Company Merger,
sometimes being referred to herein as the "SURVIVING CORPORATION"). The
Articles of Incorporation of CNN, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation; and the Bylaws of CNN, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation.
2.02 THE SUBSIDIARY MERGER. At the time specified by CNN Bank in its
articles of merger filed with the PDB (which shall not be earlier than the
Effective Time, Bank shall merge with and into CNN Bank (the "SUBSIDIARY
MERGER") pursuant to an agreement to merge (the "AGREEMENT TO MERGE") to be
executed by Bank and CNN Bank and filed with the PDB. Upon consummation of the
Subsidiary Merger, the separate corporate existence of Bank shall cease and CNN
Bank shall survive and continue to exist as a state banking corporation (CNN
Bank, as the resulting bank in the Subsidiary Merger, sometimes being referred
to herein as the "RESULTING BANK"). (The Holding Company Merger and the
Subsidiary Merger shall sometimes collectively be referred to herein as the
"MERGER".)
2.03 EFFECTIVENESS OF THE HOLDING COMPANY MERGER. Subject to the
satisfaction or waiver of the conditions set forth in Article VI, the PEOPLES
Merger shall become effective
6
upon the occurrence of the filing in the office of the DSCP of articles of
merger in accordance with Section 1928 of the PBCL, or such later date and time
as may be set forth in such filings.
2.04 EFFECTIVE DATE AND EFFECTIVE TIME. The parties shall cause the
effective date of the Holding Company Merger (the "EFFECTIVE DATE") to occur as
soon as is practicable after each of the conditions set forth in Article VI have
been satisfied or waived, provided, no such election shall cause the Effective
Date to fall after the date specified in Section 7.01(c) hereof or after the
date or dates on which any Regulatory Authority approval or any extension
thereof expires. The time on the Effective Date when the Holding Company Merger
shall become effective is referred to as the "EFFECTIVE TIME."
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
3.01 MERGER CONSIDERATION. Subject to the provisions of this
Agreement, at the Effective Time, automatically by virtue of the PEOPLES Merger
and without any action on the part of any Person:
(a) OUTSTANDING PEOPLES COMMON STOCK AND PEOPLES RIGHTS. Each share,
excluding Treasury Stock and Dissenting Shares, of PEOPLES Common Stock issued
and outstanding immediately prior to the Effective Time shall become and be
converted into 2.5 shares of CNN Common Stock (the "EXCHANGE RATIO"). The
Exchange Ratio shall be subject to adjustment as set forth in Section 3.05.
(b) TREASURY SHARES. Each share of PEOPLES Common Stock held as Treasury
Stock and each share of PEOPLES Common Stock held by CNN immediately prior to
the Effective Time shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
(c) OUTSTANDING CNN STOCK. Each share of CNN Common Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and unaffected by the PEOPLES Merger.
3.02 RIGHTS AS SHAREHOLDERS; STOCK TRANSFERS. At the Effective Time,
holders of PEOPLES Common Stock shall cease to be, and shall have no rights as,
shareholders of PEOPLES, other than to receive any dividend or other
distribution with respect to such PEOPLES Common Stock with a record date
occurring prior to the Effective Time and the consideration provided under this
Article III, and appraisal rights in the case of Dissenting Shares. After the
Effective Time, there shall be no transfers on the stock transfer books of
PEOPLES or the Surviving Corporation of any shares of PEOPLES Stock.
3.03 FRACTIONAL SHARES. Notwithstanding any other provision hereof,
no fractional shares of CNN Common Stock and no certificates or scrip therefor,
or other evidence of ownership thereof, will be issued in the PEOPLES Merger;
instead, CNN shall pay to each
7
holder of PEOPLES Common Stock who would otherwise be entitled to a fractional
share of CNN Common Stock (after taking into account all Old Certificates
delivered by such holder) an amount in cash (without interest) determined by
multiplying such fractional share of CNN Common Stock to which the holder would
be entitled by the average of the bid and ask prices of CNN Common Stock, as
reported by the OTC Bulletin Board for the twenty (20) trading days immediately
proceeding the fifth (5th) trading day prior to the Effective Date.
3.04 EXCHANGE PROCEDURES. (a) At or prior to the Effective Time, CNN
shall deposit, or shall cause to be deposited, with the CNN Bank (in such
capacity, the "EXCHANGE AGENT"), for the benefit of the holders of certificates
formerly representing shares of PEOPLES Common Stock ("OLD CERTIFICATES"), for
exchange in accordance with this Article III, certificates representing the
shares of CNN Common Stock ("NEW CERTIFICATES") and an estimated amount of cash
(such cash and New Certificates, together with any dividends or distributions
with a record date occurring on or after the Effective Date with respect thereto
(without any interest on any such cash, dividends or distributions), being
hereinafter referred to as the "EXCHANGE FUND") to be paid pursuant to this
Article III in exchange for outstanding shares of PEOPLES Common Stock.
(b) Within five (5) business days after the Effective Date, CNN shall
send or cause to be sent to each former holder of record of shares of PEOPLES
Common Stock immediately prior to the Effective Time transmittal materials for
use in exchanging such shareholder's Old Certificates for the consideration set
forth in this Article III. CNN shall cause the New Certificates into which
shares of a shareholder's PEOPLES Common Stock are converted on the Effective
Date and/or any check in respect of any fractional share interests or dividends
or distributions which such person shall be entitled to receive to be delivered
to such shareholder upon delivery to the Exchange Agent of Old Certificates
representing such shares of PEOPLES Common Stock (or an indemnity affidavit
reasonably satisfactory to CNN and the Exchange Agent, if any of such
certificates are lost, stolen or destroyed) owned by such shareholder. No
interest will be paid on any such cash to be paid in lieu of fractional share
interests or in respect of dividends or distributions which any such person
shall be entitled to receive pursuant to this Article III upon such delivery.
(c) Notwithstanding the foregoing, neither the Exchange Agent, if any, nor
any party hereto shall be liable to any former holder of PEOPLES Stock for any
amount properly delivered in good faith to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(d) Dividends, if any, payable by CNN after the Effective Date to any
former shareholder of PEOPLES who has not prior to the payment date surrendered
his PEOPLES Common Stock certificates shall be withheld. Any dividends so
withheld shall be paid, without interest, to such former shareholder of PEOPLES
upon proper surrender of his PEOPLES Common Stock certificates.
(e) All PEOPLES Common Stock certificates must be surrendered to the
Exchange Agent within two (2) years after the Effective Date. In the event that
any former shareholder of
8
PEOPLES shall not have properly surrendered his PEOPLES Common Stock
certificates within two (2) years after the Effective Date, the shares of CNN
Common Stock that would otherwise have been issued to him may, at the option of
CNN, be sold and the net proceeds of such sale, together with the cash (if any)
to which he is entitled in lieu of the issuance of a fractional share and any
previously accrued dividends, shall be held in a non-interest bearing account
for his benefit. From and after any such sale, the sole right of such former
shareholder of PEOPLES shall be the right to collect such net proceeds, cash and
accumulated dividends. Subject to all applicable laws of escheat, such net
proceeds, cash and accumulated dividends shall be paid to such former
shareholder of PEOPLES, without interest, upon proper surrender of his PEOPLES
Common Stock certificates.
3.05 ANTI-DILUTION PROVISIONS. In the event CNN changes (or
establishes a record date for changing) the number of shares of CNN Common Stock
issued and outstanding between the date hereof and the Effective Date as a
result of a stock split, stock dividend, recapitalization, reclassification,
split up, combination, exchange of shares, readjustment or similar transaction
with respect to the outstanding CNN Common Stock and the record date therefor
shall be prior to the Effective Date, the Exchange Ratio shall be
proportionately adjusted.
3.06 OTHER TRANSACTIONS. Nothing set forth in this Agreement or any
Exhibit hereto shall be construed:
(a) to preclude CNN or CNN Bank from acquiring or assuming, or to limit
in any way the right of CNN or CNN Bank to acquire or assume, prior to or
following the Effective Time, the stock, assets or liabilities of any other
financial services institution or other corporation or entity, whether by
issuance or exchange of CNN Common Stock, or otherwise;
(b) to preclude CNN or CNN Bank from issuing, or to limit in any way the
right of either of them to issue, prior to or following the Effective Date, CNN
Common Stock or other securities;
(c) to preclude CNN from granting options at any time with respect to CNN
Common Stock or other securities;
(d) to preclude option holders of CNN from exercising options at any time
with respect to CNN Common Stock or other securities; or
(e) to preclude CNN from taking, or to limit in any way the right of CNN
to take, any other action not expressly and specifically prohibited by the terms
of this Agreement; provided, however, that during the period extending from the
date of this Agreement until the Effective Date, in the event CNN desires to (1)
sell all or substantially all of its assets, (2) issue CNN Common Stock or other
securities convertible into CNN Common Stock such that such newly issued CNN
Common Stock or the CNN Common Stock into which such other securities would be
converted would equal or exceed 20% of the number of shares of CNN Common Stock
issued as of the date of this Agreement, or (3) merge or consolidate with or
into, or convert to, any other person or entity, CNN shall notify PEOPLES
simultaneously with taking any such
9
action, and PEOPLES shall have the right, in its sole discretion, to terminate
this Agreement without cost, expense or liability on its part to any other
party.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01 DISCLOSURE SCHEDULES. On or prior to the date hereof, CNN has
delivered to PEOPLES a schedule and PEOPLES has delivered to CNN a schedule
(respectively, its "DISCLOSURE SCHEDULE") setting forth, among other things,
items, the disclosure of which are necessary in response to an express
disclosure requirement contained in a provision hereof or as an exception to one
or more representations or warranties contained in Section 4.03 or 4.04 or to
one or more of its respective covenants contained in Article V and Article VI;
PROVIDED, that (a) no such item is required to be set forth in a Disclosure
Schedule as an exception to a representation or warranty if its absence would
not be reasonably likely to result in the related representation or warranty
being deemed untrue or incorrect under the standard established by Section 4.02,
and (b) the mere inclusion of an item in a Disclosure Schedule as an exception
to a representation or warranty shall not be deemed an admission by a party that
such item represents a material exception or fact, event or circumstance or that
such item is reasonably likely to have or result in a Material Adverse Effect on
the party making the representation. PEOPLES' representations, warranties and
covenants contained in this Agreement shall not be deemed to be untrue,
incorrect or to have been breached as a result of effects on PEOPLES arising
solely from actions taken in compliance with a written request of CNN or this
Agreement.
4.02 STANDARD. No representation or warranty of PEOPLES or CNN
contained in Section 4.03 or 4.04 shall be deemed untrue or incorrect, and no
party hereto shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance unless such
fact, circumstance or event, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or warranty
contained in Section 4.03 or 4.04 has had, or is reasonably likely to have, a
Material Adverse Effect.
4.03 REPRESENTATIONS AND WARRANTIES OF PEOPLES. Subject to Sections
4.01 and 4.02 and except as Previously Disclosed in a paragraph of its
Disclosure Schedule corresponding to the relevant paragraph below, PEOPLES
hereby represents and warrants to CNN:
(a) ORGANIZATION, STANDING AND AUTHORITY. PEOPLES is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and any foreign jurisdictions where its ownership
or leasing of property or assets or the conduct of its business requires it to
be so qualified. PEOPLES is registered as a bank holding company under the
BHCA. Bank is a state chartered banking institution duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania. Bank is duly qualified to do business and is in good standing in
the Commonwealth of Pennsylvania and any foreign jurisdictions where its
ownership or leasing of property or assets or the conduct of its business
requires it to be so qualified.
10
(b) CAPITAL STRUCTURE OF PEOPLES. As of June 1, 2000, the authorized
capital stock of PEOPLES consisted solely of 500,000 shares of PEOPLES Common
Stock, of which 410,325 shares were issued and outstanding and 15,165 shares
were issued and held as Treasury Stock. The outstanding shares of PEOPLES
Common Stock have been duly authorized, are validly issued and outstanding,
fully paid and nonassessable, and are not subject to any preemptive rights (and
were not issued in violation of any preemptive rights). No options, warrants or
other rights to purchase, agreements or other obligations to issue, or other
rights to convert any obligation into any shares of PEOPLES Common Stock have
been authorized, granted or entered into by PEOPLES.
(c) SUBSIDIARIES. (i)(A) PEOPLES has Previously Disclosed a list of all
of its Subsidiaries together with the jurisdiction of organization of each such
Subsidiary, (B) except as Previously Disclosed, it owns, directly or indirectly,
all the issued and outstanding equity securities of each of its Subsidiaries,
(C) except as Previously Disclosed, no equity securities of any of its
Subsidiaries are or may become required to be issued (other than to it or its
wholly-owned Subsidiaries) by reason of any Right or otherwise, (D) except as
Previously Disclosed, there are no contracts, commitments, understandings or
arrangements by which any of such Subsidiaries is or may be bound to sell or
otherwise transfer any equity securities of any such Subsidiaries (other than to
it or its wholly-owned Subsidiaries), (E) except as Previously Disclosed, there
are no contracts, commitments, understandings, or arrangements relating to its
rights to vote or to dispose of such securities and (F) except as Previously
Disclosed, all the equity securities of each Subsidiary held by PEOPLES or its
Subsidiaries are fully paid and nonassessable and are owned by PEOPLES or its
Subsidiaries free and clear of any Liens.
(ii) PEOPLES does not own beneficially, directly or indirectly, any
equity securities or similar interests of any Person, or any interest in a
partnership or joint venture of any kind, other than its Subsidiaries.
(iii) Each of PEOPLES' Subsidiaries has been duly organized and is
validly existing in good standing under the laws of the jurisdiction of its
organization, and is duly qualified to do business and in good standing in the
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified.
(d) CORPORATE POWER; AUTHORIZED AND EFFECTIVE AGREEMENT. Each of PEOPLES
and its Subsidiaries has full corporate power and authority to carry on its
business as it is now being conducted and to own all its properties and assets;
PEOPLES has the corporate power and authority to execute, deliver and perform
its obligations under this Agreement and the Stock Option Agreement; and Bank
has the corporate power and authority to consummate the Subsidiary Merger and
the Agreement to Merge in accordance with the terms of this Agreement.
(e) CORPORATE AUTHORITY. Subject to receipt of the requisite adoption of
this Agreement by the holders of Seventy-Five Percent (75%) of the outstanding
shares of PEOPLES Common Stock entitled to vote thereon (which is the only
shareholder vote required thereon), this Agreement, the Stock Option Agreement
and the transactions contemplated hereby and
11
thereby have been authorized by all necessary corporate action of PEOPLES and
the PEOPLES Board no later than the date hereof. The Agreement to Merge, when
executed by Bank, shall have been approved by the Board of Directors of Bank and
by the PEOPLES Board, as the sole shareholder of Bank. This Agreement is a
valid and legally binding obligation of PEOPLES, enforceable in accordance with
its terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to or affecting creditors' rights or by general
equity principles). The PEOPLES Board has received the written opinion of
Xxxx, Xxxx & Co. to the effect that as of the date hereof the Exchange Ratio to
be received by the holders of PEOPLES Common Stock in the PEOPLES Merger is fair
to the holders of PEOPLES Common Stock from a financial point of view.
(f) REGULATORY FILINGS; NO DEFAULTS. (i) No consents or approvals of, or
filings or registrations with, any Governmental Authority or with any third
party are required to be made or obtained by PEOPLES or any of its Subsidiaries
in connection with the execution, delivery or performance by PEOPLES of this
Agreement or the Stock Option Agreement or to consummate the Merger except for
(A) filings of applications, and notices and the Agreement to Merge, as
applicable, with federal and state banking authorities, (B) filings with the SEC
and state securities authorities, and (C) the filing of the articles of merger
with the DSCP pursuant to the PBCL. As of the date hereof, PEOPLES is not aware
of any reason why the approvals set forth in Section 6.01(b) will not be
received without the imposition of a condition, restriction or requirement of
the type described in Section 6.01(b).
(ii) Subject to receipt of the regulatory and shareholder approvals
referred to above and expiration of related regulatory waiting periods, and
required filings under federal and state securities laws, the execution,
delivery and performance of this Agreement and the Stock Option Agreement and
the consummation of the transactions contemplated hereby and thereby do not and
will not (A) constitute a breach or violation of, or a default under, or give
rise to any Lien, any acceleration of remedies or any right of termination
under, any law, rule or regulation or any judgment, decree, order, governmental
permit or license, or agreement, indenture or instrument of PEOPLES or of any of
its Subsidiaries or to which PEOPLES or any of its Subsidiaries or properties is
subject or bound, (B) constitute a breach or violation of, or a default under,
the PEOPLES Articles or the PEOPLES Bylaws, or (C) require any consent or
approval under any such law, rule, regulation, judgment, decree, order,
governmental permit or license, agreement, indenture or instrument.
(g) FINANCIAL STATEMENTS. PEOPLES has delivered or will deliver to CNN
(a) consolidated financial statements for each of the fiscal years ended
December 31, 1997, 1998, and 1999, respectively, consisting of balance sheets
and the related statements of income, changes in shareholder equity and cash
flows for the fiscal years ended on such date, all as certified by Parente
Xxxxxxxx, PEOPLES' independent auditors, and (b) unaudited consolidated
financial statements for the interim period ended March 31, 2000 consisting of
balance sheets and the related statements of income. The aforesaid financial
statements, as of the dates thereof and for the periods covered thereby, have
been prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods indicated, and fairly present
12
the financial position of PEOPLES as of the dates thereof and the results of
operations and cash flow for the periods indicated, except in the case of the
interim financial statements, normal year-end adjustments and the absence of
notes thereto. Since the date of the December 31, 1999 balance sheet (the
"BALANCE SHEET"), there has not been any material adverse change in the
financial condition, results of operations, assets of business of PEOPLES.
(h) LITIGATION. No litigation, claim or other proceeding before any court
or governmental agency is pending against PEOPLES or any of its Subsidiaries
and, to PEOPLES' knowledge, no such litigation, claim or other proceeding has
been threatened.
(i) REGULATORY MATTERS.
(i) Neither PEOPLES nor any of its Subsidiaries or properties is a
party to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or similar
submission to, or extraordinary supervisory letter from, any federal or state
governmental agency or authority charged with the supervision or regulation of
financial institutions (or their holding companies) or issuers of securities or
engaged in the insurance of deposits (including, without limitation, PDB, the
Federal Reserve System and the FDIC) or the supervision or regulation of it or
any of its Subsidiaries (collectively, the "REGULATORY AUTHORITIES").
(ii) Neither it nor any of its Subsidiaries has been advised by any
Regulatory Authority that such Regulatory Authority is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting) any
such order, decree, agreement, memorandum of understanding, commitment letter,
supervisory letter or similar submission.
(j) COMPLIANCE WITH LAWS. Each of PEOPLES and its Subsidiaries:
(i) is in compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable thereto or to the employees conducting such businesses,
including, without limitation, the Equal Credit Opportunity Act, the Fair
Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act
and all other applicable fair lending laws and other laws relating to
discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and approvals
of, and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to own or
lease their properties and to conduct their businesses as presently conducted;
all such permits, licenses, certificates of authority, orders and approvals are
in full force and effect and, to PEOPLES' knowledge, no suspension or
cancellation of any of them is threatened; and
(iii) has received, since December 31, 1999, no notification or
communication from any Governmental Authority (A) asserting that PEOPLES or any
of its Subsidiaries is not in compliance with any of the statutes, regulations,
or ordinances which such Governmental
13
Authority enforces or (B) threatening to revoke any license, franchise, permit,
or governmental authorization (nor, to PEOPLES's knowledge, do any grounds for
any of the foregoing exist).
(k) MATERIAL CONTRACTS; DEFAULTS.
(i) Except for the Stock Option Agreement and as Previously
Disclosed, as of the date of this Agreement, PEOPLES is not a party to, or bound
by, any oral or written:
(A) "material contract" as such term is defined in Item
601(b)(10) of Regulation S-K promulgated by the SEC;
(B) consulting agreement not terminable on thirty (30) days
or less notice involving the payment of more than $10,000 per annum, in the case
of any such agreement;
(C) agreement with any officer or other key employee the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction of the nature contemplated by this
Agreement;
(D) agreement with respect to any officer providing any
term of employment or compensation guarantee extending for a period longer than
one year or for a payment in excess of $10,000;
(E) agreement or plan, including any stock option plan,
stock appreciation rights plan, employee stock ownership plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement;
(F) agreement containing covenants that limit its ability
to compete in any line of business or with any person, or that involve any
restriction on the geographic area in which, or method by which, it may carry on
its business (other than as may be required by law or any regulatory agency);
(G) agreement, contract or understanding, other than this
Agreement, and the Stock Option Agreement, regarding the capital stock of
PEOPLES or committing to dispose of some or all of the capital stock or
substantially all of the assets of PEOPLES; or
(H) collective bargaining agreement, contract, or other
agreement or understanding with a labor union or labor organization.
(ii) PEOPLES is not in default under or in violation of any
provision of any note, bond, indenture, mortgage, deed of trust, loan agreement,
lease of other agreement to which it is a party or to which any of its
respective properties or assets is subject, other that such
14
defaults or violations as could not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect on it.
(l) NO BROKERS. No action has been taken by PEOPLES that would give rise
to any valid claim against any party hereto for a brokerage commission, finder's
fee or other like payment with respect to the transactions contemplated by this
Agreement, except for a fee to be paid to Xxxx, Xxxx & Co.
(m) EMPLOYEE BENEFIT PLANS. (i) Section 4.03(m)(i) of PEOPLES Disclosure
Schedule contains a complete and accurate list of all existing bonus, incentive,
deferred compensation, pension, retirement, profit-sharing, thrift, savings,
employee stock ownership, stock bonus, stock purchase, restricted stock, stock
option, severance, welfare and fringe benefit plans, employment or severance
agreements and all similar practices, policies and arrangements maintained or
contributed to by PEOPLES or any of its Subsidiaries and in which any employee
or former employee (the "EMPLOYEES"), consultant or former consultant (the
"CONSULTANTS") or director or former director (the "DIRECTORS") of PEOPLES or
any of its Subsidiaries participates or to which any such Employees, Consultants
or Directors are a party (the "COMPENSATION AND BENEFIT PLANS"). Neither
PEOPLES nor any of its Subsidiaries has any commitment to create any additional
Compensation and Benefit Plan or to modify or change any existing Compensation
and Benefit Plan, except as otherwise contemplated by Section 5.01(e) of this
Agreement.
(ii) Each Compensation and Benefit Plan has been operated and
administered in all material respects in accordance with its terms and with
applicable law, including, but not limited to, ERISA, the Code, the Securities
Act, the Exchange Act, the Age Discrimination in Employment Act, or any
regulations or rules promulgated thereunder, and all filings, disclosures and
notices required by ERISA, the Code, the Securities Act, the Exchange Act, the
Age Discrimination in Employment Act and any other applicable law have been
timely made. Each Compensation and Benefit Plan which is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA (a "PENSION PLAN") and
which is intended to be qualified under Section 401(a) of the Code has received
a favorable determination letter (including a determination that the related
trust under such Compensation and Benefit Plan is exempt from tax under Section
501(a) of the Code) from the Internal Revenue Service ("IRS"), and PEOPLES is
not aware of any circumstances likely to result in revocation of any such
favorable determination letter. There is no material pending or, to the
knowledge of PEOPLES, threatened legal action, suit or claim relating to the
Compensation and Benefit Plans other than routine claims for benefits
thereunder. Neither PEOPLES nor any of its Subsidiaries has engaged in a
transaction, or omitted to take any action, with respect to any Compensation and
Benefit Plan that would reasonably be expected to subject PEOPLES or any of its
Subsidiaries to a tax or penalty imposed by either Section 4975 of the Code or
Section 502 of ERISA, assuming for purposes of Section 4975 of the Code that the
taxable period of any such transaction expired as of the date hereof. To the
knowledge of PEOPLES, there is no pending investigation or enforcement action by
the PBGC, the Department of Labor (the "DOL") or IRS or any other governmental
agency with respect to any Compensation and Benefit Plan.
15
(iii) Neither PEOPLES nor any ERISA Affiliate has sponsored,
maintained or contributed to any employee pension benefit plan (within the
meaning of ERISA Section 3(2)) that is subject to Title IV of ERISA.
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan or ERISA Affiliate Plan or any employee benefit
arrangements under any collective bargaining agreement to which PEOPLES or any
of its Subsidiaries is a party have been timely made or have been reflected on
PEOPLES's financial statements.
(v) Neither PEOPLES nor any of its Subsidiaries has any obligations
to provide retiree health and life insurance or other retiree death benefits
under any Compensation and Benefit Plan, other than benefits mandated by
Section 4980B of the Code. There has been no communication to Employees by
PEOPLES or any of its Subsidiaries that would reasonably be expected to promise
or guarantee such Employees retiree health or life insurance or other retiree
death benefits on a permanent basis.
(vi) PEOPLES and its Subsidiaries do not maintain any Compensation
and Benefit Plans covering foreign Employees.
(vii) With respect to each Compensation and Benefit Plan, if
applicable, PEOPLES has provided or made available to CNN, true and complete
copies of existing: (A) Compensation and Benefit Plan documents and amendments
thereto; (B) trust instruments and insurance contracts; (C) two most recent
Forms 5500 filed with the IRS; (D) most recent actuarial report and financial
statement; (E) the most recent summary plan description; (F) forms filed with
the PBGC within the past year (other than for premium payments); (G) most recent
determination letter issued by the IRS; (H) any Form 5310 or Form 5330 filed
within the past year with the IRS; and (I) most recent nondiscrimination tests
performed under ERISA and the Code (including 401(k) and 401(m) tests).
(viii) Except as disclosed on Section 4.03(m)(viii) of PEOPLES's
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement would not, directly or indirectly (including, without limitation, as a
result of any termination of employment prior to or following the Effective
Time) reasonably be expected to (A) entitle any Employee, Consultant or Director
to any payment (including severance pay or similar compensation) or any increase
in compensation, (B) result in the vesting or acceleration of any benefits under
any Compensation and Benefit Plan or (C) result in any material increase in
benefits payable under any Compensation and Benefit Plan.
(ix) Except as disclosed on Section 4.03(m)(ix) of PEOPLES's
Disclosure Schedule, neither PEOPLES nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments under which would not
reasonably be expected to be deductible as a result of the limitations under
Section 162(m) of the Code and the regulations issued thereunder.
16
(x) Except as disclosed on Section 4.03(m)(x) of PEOPLES's
Disclosure Schedule, as a result, directly or indirectly, of the transactions
contemplated by this Agreement (including, without limitation, as a result of
any termination of employment prior to or following the Effective Time), none of
CNN, PEOPLES or the Surviving Corporation, or any of their respective
Subsidiaries will be obligated to make a payment that would be characterized as
an "excess parachute payment" to an individual who is a "disqualified
individual" (as such terms are defined in Section 280G of the Code) of PEOPLES
on a consolidated basis, without regard to whether such payment is reasonable
compensation for personal services performed or to be performed in the future.
(n) LABOR MATTERS. Neither PEOPLES nor any of its Subsidiaries is a party
to or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is
PEOPLES or any of its Subsidiaries the subject of a proceeding asserting that it
or any such Subsidiary has committed an unfair labor practice (within the
meaning of the National Labor Relations Act) or seeking to compel PEOPLES or any
such Subsidiary to bargain with any labor organization as to wages or conditions
of employment, nor is there any strike or other labor dispute involving it or
any of its Subsidiaries pending or, to PEOPLES's knowledge, threatened, nor is
PEOPLES aware of any activity involving its or any of its Subsidiaries'
employees seeking to certify a collective bargaining unit or engaging in other
organizational activity.
(o) TAKEOVER LAWS. [INTENTIONALLY DELETED]
(p) ENVIRONMENTAL MATTERS. To PEOPLES's Knowledge, neither the conduct
nor operation of PEOPLES or its Subsidiaries nor any condition of any property
presently or previously owned, leased or operated by any of them (including,
without limitation, in a fiduciary or agency capacity), violates or violated
Environmental Laws and to PEOPLES's Knowledge, no condition has existed or event
has occurred with respect to any of them or any such property that, with notice
or the passage of time, or both, is reasonably likely to result in liability
under Environmental Laws. To PEOPLES's Knowledge, neither PEOPLES nor any of
its Subsidiaries has received any notice from any person or entity that PEOPLES
or its Subsidiaries or the operation or condition of any property ever owned,
leased, operated, or held as collateral or in a fiduciary capacity by any of
them are or were in violation of or otherwise are alleged to have liability
under any Environmental Law, including, but not limited to, responsibility (or
potential responsibility) for the cleanup or other remediation of any
pollutants, contaminants, or hazardous or toxic wastes, substances or materials
at, on, beneath, or originating from any such property.
(q) TAX MATTERS. (i) All Tax Returns that are required to be filed by or
with respect to PEOPLES and its Subsidiaries have been duly filed, (ii) all
Taxes shown to be due on the Tax Returns referred to in clause (i) have been
paid in full, (iii) the Tax Returns referred to in clause (i) for tax years
prior to 1997, in the case of federal tax returns, and tax years prior to 1998,
for Pennsylvania state tax returns, have been examined, fettled or closed by the
Internal Revenue Service or the appropriate state, local or foreign taxing
authority or the period for assessment of the Taxes in respect of which such Tax
Returns were required to be filed has expired, (iv) all deficiencies asserted or
assessments made as a result of such examinations have been paid in full,
17
(v) no issues that have been raised by the relevant taxing authority in
connection with the examination of any of the Tax Returns referred to in clause
(i) are currently pending, and (vi) no waivers of statutes of limitation have
been given by or requested with respect to any Taxes of PEOPLES or its
Subsidiaries. PEOPLES has made or will make available to CNN true and correct
copies of the United States federal income Tax Returns filed by PEOPLES and its
Subsidiaries for each of the three most recent fiscal years ended on or before
December 31, 1999. Neither PEOPLES nor any of its Subsidiaries has any
liability with respect to income, franchise or similar Taxes that accrued on or
before the end of the most recent period covered by PEOPLES' Balance Sheet filed
prior to the date hereof in excess of the amounts accrued with respect thereto
that are reflected in the financial statements included in PEOPLES' Balance
Sheet filed on or prior to the date hereof. As of the date hereof, neither
PEOPLES nor any of its Subsidiaries has any reason to believe that any
conditions exist that might prevent or impede the PEOPLES Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the Code.
(ii) No Tax is required to be withheld pursuant to Section 1445 of
the Code as a result of the transfer contemplated by this Agreement.
(iii) To their Knowledge, neither PEOPLES nor its Subsidiaries will
be liable for any taxes as a result of any covered transaction.
(r) RISK MANAGEMENT INSTRUMENTS. All material interest rate swaps, caps,
floors, option agreements, futures and forward contracts and other similar risk
management arrangements, whether entered into for PEOPLES's own account, or for
the account of one or more of PEOPLES's Subsidiaries or their customers (all of
which are listed on PEOPLES's Disclosure Schedule) were entered into (i) in
accordance with prudent business practices and all applicable laws, rules,
regulations and regulatory policies and (ii) with counterparties believed to be
financially responsible at the time; and each of them constitutes the valid and
legally binding obligation of PEOPLES or one of its Subsidiaries, enforceable in
accordance with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors' rights
or by general equity principles), and is in full force and effect. Neither
PEOPLES nor its Subsidiaries, nor to PEOPLES' knowledge any other party thereto,
is in breach of any of its obligations under any such agreement or arrangement.
(s) BOOKS AND RECORDS. The books of account, minute books, stock record
books, and other records of PEOPLES, all of which have been or will be made
available to CNN, are complete and correct in all material respects and have
been maintained in accordance with sound business practices and, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of PEOPLES, including the maintenance of an adequate system of internal
controls that is sufficient to provide reasonable assurances that transactions
are executed in accordance with management's authorization, that transactions
are recorded as necessary, that access to assets is permitted only in accordance
with management's authorization, and that the recorded accountability for assets
is compared at reasonable intervals and appropriate action is taken with respect
to any differences. The minute books of PEOPLES contain accurate and
18
complete records of all meetings held of, and corporate action taken by, the
shareholders, the Board of Directors, and committees of the Board of Directors
and PEOPLES, and no meeting of any such shareholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books, which minutes have not yet been prepared.
(t) INSURANCE. PEOPLES' Disclosure Schedule sets forth all of the
insurance policies, binders, or bonds maintained by PEOPLES or its Subsidiaries.
PEOPLES and its Subsidiaries are insured with reputable insurers against such
risks and in such amounts as the management of PEOPLES reasonably has determined
to be prudent in accordance with industry practices. All such insurance
policies are in full force and effect; PEOPLES and its Subsidiaries are not in
material default thereunder; and all claims thereunder have been filed in due
and timely fashion.
(u) ACCOUNTING TREATMENT. As of the date hereof, it is not aware of any
reason why the Merger will fail to qualify for "pooling-of-interests" accounting
treatment.
(v) DISCLOSURE. The representations and warranties contained in this
Section 4.03 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 4.03 not misleading.
(w) YEAR 2000. [INTENTIONALLY DELETED].
(x) MATERIAL ADVERSE CHANGE. PEOPLES has not, on a consolidated basis,
suffered a change in its business, financial condition or results of operations
since December 31, 1999, that has had a Material Adverse Effect on PEOPLES.
(y) ABSENCE OF UNDISCLOSED LIABILITIES. Neither PEOPLES nor any of its
Subsidiaries has any liability (contingent or otherwise) that is material to
PEOPLES on a consolidated basis, or that, when combined with all liabilities as
to similar matters would be material to PEOPLES on a consolidated basis, except
as disclosed in the PEOPLES Financial Statements.
(z) PROPERTIES. PEOPLES and its Subsidiaries have good and marketable
title, free and clear of all liens, encumbrances, charges, debts or equitable
interests to all of the properties and assets, real and personal, reflected on
the PEOPLES Financial Statements as being owned by PEOPLES as of December 31,
1999 or acquired after such date, except (i) statutory liens for amounts not yet
due and payable, (ii) pledges to secure deposits and other liens incurred in the
ordinary course of banking business, (iii) such imperfections of title,
easements, encumbrances, liens, charges, defaults or equitable interests, if
any, as do not affect the use of properties or assets subject thereto or
affected thereby or otherwise materially impair business operations at such
properties, (iv) dispositions and encumbrances in the ordinary course of
business, and (v) liens on properties acquired in foreclosure or on account of
debts previously contracted. All leases pursuant to which PEOPLES or any of its
Subsidiaries, as lessee, leases real or personal property (except for leases
that have expired by their terms or that PEOPLES or any such Subsidiary has
agreed to terminate since the date hereof) are valid without default thereunder
by the lessee or, to PEOPLES' knowledge, the lessor.
19
(aa) LOANS. Each loan reflected as an asset in the PEOPLES financial
statements as of December 31, 1999 and each balance sheet date subsequent
thereto, other than loans the unpaid balance of which does not exceed $150,000
in the aggregate, (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and what they purport to be, (ii) to the
extent secured, has been secured by valid liens and security interests which
have been perfected, and (iii) is the legal, valid and binding obligation of the
obligor named therein, 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. Except as Previously Disclosed, as of December 31, 1999, Bank is
not a party to a loan, including any loan guaranty, with any director, executive
officer or 5% shareholder of PEOPLES or any of its Subsidiaries or any person,
corporation or enterprise controlling, controlled by or under common control
with any of the foregoing. All loans and extensions of credit that have been
made by Bank and that are subject either to Section 22(b) of the Federal Reserve
Act, as amended, or to 12 C.F.R. Section 563.43, comply therewith.
(bb) ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses reflected on
the PEOPLES Financial Statements, as of their respective dates, is adequate in
all material respects under the requirements of generally accepted accounting
principles to provide for reasonably anticipated losses on outstanding loans.
(cc) REPURCHASE AGREEMENTS. With respect to all agreements pursuant to
which PEOPLES or any of its Subsidiaries has purchased securities subject to an
agreement to resell, if any, PEOPLES or such Subsidiary, as the case may be, has
a valid, perfected first lien or security interest in or evidence of ownership
in book entry form of the government securities or other collateral securing the
repurchase agreement, and the value of such collateral equals or exceeds the
amount of the debt secured thereby.
(dd) DEPOSIT INSURANCE. The deposits of Bank are insured by the FDIC in
accordance with The Federal Deposit Insurance Act ("FDIA"), and Bank has paid
all assessments and filed all reports required by the FDIA.
4.04 REPRESENTATIONS AND WARRANTIES OF CNN. Subject to Sections 4.01 and
4.02 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, CNN hereby represents
and warrants to PEOPLES as follows :
(a) ORGANIZATION, STANDING AND AUTHORITY. CNN is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. CNN is duly qualified to do business and is in
good standing in the Commonwealth of Pennsylvania and any foreign jurisdictions
where its ownership or leasing of property or assets or the conduct of its
business requires it to be so qualified. CNN is registered as a bank holding
company under the BHCA. CNN Bank is a state chartered banking institution duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. CNN Bank is duly qualified to do business and is
in good standing in the Commonwealth of
20
Pennsylvania and any foreign jurisdictions where its ownership or leasing of
property or assets or the conduct of its business requires it to be so
qualified.
(b) CNN STOCK. (i) As of June 1, 2000, the authorized capital stock of
CNN consists of 10,000,000 shares of CNN Common Stock, of which 5,205,492 shares
were outstanding and 119,470 shares were held as Treasury Stock. As of June 1,
2000, except as set forth in its Disclosure Schedule, CNN does not have any
Rights issued or outstanding with respect to CNN Common Stock and CNN does not
have any commitment to authorize, issue or sell any CNN Common Stock or Rights,
except pursuant to this Agreement. The outstanding shares of CNN Common Stock
have been duly authorized and are validly issued and outstanding, fully paid and
nonassessable, and subject to no preemptive rights (and were not issued in
violation of any preemptive rights).
(ii) The shares of CNN Common Stock to be issued in exchange for
shares of PEOPLES Common Stock in the PEOPLES Merger, when issued in accordance
with the terms of this Agreement, will be duly authorized, validly issued, fully
paid and nonassessable and subject to no preemptive rights and duly registered
under the Securities Act of 1933, as amended.
(c) SUBSIDIARIES. CNN has Previously Disclosed a list of all its
Subsidiaries together with the jurisdiction or organization of each Subsidiary.
Each of CNN's Subsidiaries has been duly organized and is validly existing in
good standing under the laws of the jurisdiction of its organization, and is
duly qualified to do business and is in good standing in the jurisdictions where
its ownership or leasing of property or the conduct of its business requires it
to be so qualified and it owns, directly or indirectly, all the issued and
outstanding equity securities of each of its Significant Subsidiaries.
(d) CORPORATE POWER. Each of CNN and its Subsidiaries has the corporate
power and authority to carry on its business as it is now being conducted and to
own all its properties and assets; and CNN has the corporate power and authority
to execute, deliver and perform its obligations under this Agreement and the
Stock Option Agreement and to consummate the transactions contemplated hereby
and thereby.
(e) CORPORATE AUTHORITY; AUTHORIZED AND EFFECTIVE AGREEMENT. This
Agreement, the Stock Option Agreement and the transactions contemplated hereby
and thereby have been authorized by all necessary corporate action of CNN and
the CNN Board prior to the date hereof and no shareholder approval is required
on the part of CNN. The Agreement to Merge, when executed by CNN Bank, shall
have been approved by the Board of Directors of CNN Bank and by the CNN Board,
as the sole shareholder of CNN Bank. This Agreement is a valid and legally
binding agreement of CNN, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors rights or by general equity
principles).
(f) REGULATORY APPROVALS; NO DEFAULTS. (i) No consents or approvals of,
or filings or registrations with, any Governmental Authority or with any third
party are required to be made or
21
obtained by CNN or any of its Subsidiaries in connection with the execution,
delivery or performance by CNN of this Agreement or to consummate the Merger
except for (A) the filing of applications, notices, or the Agreement to Merge,
as applicable, with the federal and state banking authorities; (B) the filing
and declaration of effectiveness of the Registration Statement; (C) the filing
of the articles of merger with the DSCP pursuant to the PBCL; (D) such filings
as are required to be made or approvals as are required to be obtained under the
securities or "Blue Sky" laws of various states in connection with the issuance
of CNN Common Stock in the PEOPLES Merger; and (E) receipt of the approvals set
forth in Section 7.01(d). As of the date hereof, CNN is not aware of any reason
why the approvals set forth in Section 7.01(d) will not be received without the
imposition of a condition, restriction or requirement of the type described in
Section 7.01(d).
(ii) Subject to the satisfaction of the requirements referred to in
the preceding paragraph and expiration of the related waiting periods, and
required filings under federal and state securities laws, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (A) constitute a breach or
violation of, or a default under, or give rise to any Lien, any acceleration of
remedies or any right of termination under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or agreement, indenture
or instrument of CNN or of any of its Subsidiaries or to which CNN or any of its
Subsidiaries or properties is subject or bound, (B) constitute a breach or
violation of, or a default under, the Articles of Incorporation or Bylaws (or
similar governing documents) of CNN or any of its Subsidiaries, or (C) require
any consent or approval under any such law, rule, regulation, judgment, decree,
order, governmental permit or license, agreement, indenture or instrument.
(g) FINANCIAL REPORTS AND SEC DOCUMENTS; MATERIAL ADVERSE EFFECT. (i)
CNN's Annual Report on Form 10-K for the fiscal years ended December 31, 1997,
1998 and 1999, and all other reports, registration statements, definitive proxy
statements or other statements filed or to be filed by it or any of its
Subsidiaries with the SEC subsequent to December 31, 1997 under the Securities
Act, or under Section 13, 14 or 15(d) of the Exchange Act, in the form filed or
to be filed (collectively, "CNN SEC DOCUMENTS") as of the date filed, (A)
complied or will comply in all material respects with the applicable
requirements under the Securities Act or the Exchange Act, as the case may be,
and (B) did not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; and each of the balance sheets or statements of condition
contained in or incorporated by reference into any such CNN SEC Document
(including the related notes and schedules thereto) fairly presents, or will
fairly present, the financial position of CNN and its Subsidiaries as of its
date, and each of the statements of income or results of operations and changes
in shareholders' equity and cash flows or equivalent statements in such CNN SEC
Documents (including any related notes and schedules thereto) fairly presents,
or will fairly present, the results of operations, changes in shareholders'
equity and cash flows, as the case may be, of CNN and its Subsidiaries for the
periods to which they relate, in each case in accordance with generally accepted
accounting principles consistently applied during the periods involved, except
in each
22
case as may be noted therein, subject to normal year-end audit adjustments in
the case of unaudited statements.
(ii) CNN has not, on a consolidated basis, suffered a change in its
business, financial condition or results of operations since December 31, 1999,
that has had a Material Adverse Effect on CNN.
(h) LITIGATION; REGULATORY ACTION. (i) No litigation, claim or other
proceeding before any court or governmental agency is pending against CNN or any
of its Subsidiaries and, to the best of CNN's knowledge, no such litigation,
claim or other proceeding has been threatened.
(ii) Neither CNN nor any of its Subsidiaries or properties is a
party to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or similar
submission to, or extraordinary supervisory letter from a Regulatory Authority,
nor has CNN or any of its Subsidiaries been advised by a Regulatory Authority
that such agency is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum of understanding, commitment letter, supervisory letter or similar
submission.
(i) COMPLIANCE WITH LAWS. Each of CNN and its Subsidiaries:
(i) is in compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable thereto or to the employees conducting such businesses,
including, without limitation, the Equal Credit Opportunity Act, the Fair
Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act
and all other applicable fair lending laws and other laws relating to
discriminatory business practices; and
(ii) has all permits, licenses, authorizations, orders and approvals
of, and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to conduct
their businesses substantially as presently conducted; all such permits,
licenses, certificates of authority, orders and approvals are in full force and
effect and, to the best of its knowledge, no suspension or cancellation of any
of them is threatened; and
. (iii) has received, since December 31, 1999, no notification or
communication from any Governmental Authority (A) asserting that CNN or any of
its Subsidiaries is not in compliance with any of the statutes, regulations, or
ordinances which such Governmental Authority enforces or (B) threatening to
revoke any license, franchise, permit, or governmental authorization (nor, to
CNN's knowledge, do any grounds for any of the foregoing exist).
(j) BROKERAGE AND FINDER'S FEES. Except for fees payable to its financial
advisor, Sandler X'Xxxxx & Partners, LLP ("Sandler"), CNN has not employed any
broker, finder, or agent, or agreed to pay or incurred any brokerage fee,
finder's fee, commission or other similar form of compensation in connection
with this Agreement or the transactions contemplated hereby.
23
(k) TAKEOVER LAWS. CNN has taken all action required to be taken by it in
order to exempt this Agreement, the Stock Option Agreement and the transactions
contemplated hereby and thereby from, and this Agreement, the Stock Option
Agreement and the transactions contemplated hereby and thereby are exempt from,
the requirements of any Takeover Laws applicable to CNN.
(l) ACCOUNTING TREATMENT. As of the date hereof, CNN is aware of no
reason why the Merger will fail to qualify for "pooling-of-interests" accounting
treatment and is aware of no reason why any other merger of CNN consummated
within the prior two years will fail to so qualify.
(m) DEPOSIT INSURANCE. The deposits of CNN Bank are insured by the FDIC
in accordance with the FDIA, and CNN Bank has paid all assessments and filed all
reports required by the FDIA.
(n) BOOKS AND RECORDS. The books of account, minute books, stock record
books, and other records of CNN, all of which have been or will be made
available to PEOPLES, are complete and correct in all material respects and have
been maintained in accordance with sound business practices and, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of CNN, including the maintenance of an adequate system of internal
controls that is sufficient to provide reasonable assurances that transactions
are executed in accordance with management's authorization, that transactions
are recorded as necessary, that access to assets if permitted only in accordance
with management's authorization, and that the recorded accountability for assets
is compared at reasonable intervals and appropriate action is taken with respect
to any differences. The minute books of CNN contain accurate and complete
records of all meetings held of, and corporate action taken by, the
shareholders, the Board of Directors, and committees of the Board of Directors
and CNN, and no meeting of any such shareholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books, which minutes have not yet been prepared.
(o) RISK MANAGEMENT INSTRUMENTS. All material interest rate swaps, caps,
floors, option agreements, futures and forward contracts and other similar risk
management arrangements, whether entered into for CNN's own account, or for the
account of one or more of its Subsidiaries or their customers, were entered into
(i) in accordance with prudent business practices and all applicable laws,
rules, regulations and regulatory policies and with counterparties believed to
be financially responsible at the time; and each of them constitutes the valid
and legally binding obligation of CNN or one of its Subsidiaries, enforceable in
accordance with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors' rights
or by general equity principles), and is in full force and effect. Neither CNN
nor its Subsidiaries, nor to CNN's knowledge any other party thereto, is in
breach of any of its obligations under any such agreement or arrangement in any
material respect.
24
(p) LOANS. Each loan reflected as an asset in the CNN financial
statements as of December 31, 1999 and each balance sheet date subsequent
thereto, other than loans the unpaid balance of which does not exceed $500,000
in the aggregate, (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and what they purport to be, (ii) to the
extent secured, has been secured by valid liens and security interests which
have been perfected, and (iii) is the legal, valid and binding obligation of the
obligor named therein, 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. Except as Previously Disclosed, as of December 31, 1999, CNN Bank
is not a party to a loan, including any loan guaranty, with any director,
executive officer or 5% shareholder of CNN or any of its Subsidiaries or any
person, corporation or enterprise controlling, controlled by or under common
control with any of the foregoing. All loans and extensions of credit that have
been made by Bank and that are subject either to Section 22(b) of the Federal
Reserve Act, as amended, or to 12 C.F.R. Section 563.43, comply therewith.
(q) ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses reflected on
the CNN financial statements, as of their respective dates, is adequate in all
material respects under the requirements of generally accepted accounting
principles to provide for reasonably anticipated losses on outstanding loans.
(r) REPURCHASE AGREEMENTS. With respect to all agreements pursuant to
which CNN or any of its Subsidiaries has purchased securities subject to an
agreement to resell, if any, CNN or such Subsidiary, as the case may be, has a
valid, perfected first lien or security interest in or evidence of ownership in
book entry form of the government securities or other collateral securing the
repurchase agreement, and the value of such collateral equals or exceeds the
amount of the debt secured thereby.
ARTICLE V
COVENANTS
5.01 PEOPLES TO CARRY ON BUSINESS IN NORMAL MANNER. From the date hereof
until the Effective Time, except as expressly contemplated by this Agreement
and/or disclosed on the Disclosure Schedule, without the prior written consent
of CNN, PEOPLES will not, and will cause each of its Subsidiaries not to:
(a) ORDINARY COURSE. Conduct the business of PEOPLES and its Subsidiaries
other than in the ordinary and usual course or fail to use reasonable efforts to
preserve intact their business organizations and assets and maintain their
rights, franchises and existing relations with customers, suppliers, employees
and business associates, or voluntarily take any action which, at the time
taken, is reasonably likely to have an adverse affect upon PEOPLES' ability to
perform any of its material obligations under this Agreement.
(b) CAPITAL STOCK. Other than pursuant to Rights Previously Disclosed and
outstanding on the date hereof (i) issue, sell or otherwise permit to become
outstanding, or
25
authorize the creation of, any additional shares of PEOPLES Stock or any Rights,
(ii) enter into any agreement with respect to the foregoing, or (iii) permit any
additional shares of PEOPLES Stock to become subject to new grants of employee
or director stock options, other Rights or similar stock-based employee rights.
(c) DIVIDENDS, ETC. Except as otherwise provided in Section 5.16, (i)
Make, declare, pay or set aside for payment any dividend, other than (A)
quarterly cash dividends on PEOPLES Stock in an amount not to exceed 40% of
annual net income and consistent with past practice, and (B) dividends from
wholly owned Subsidiaries to PEOPLES, or (ii) directly or indirectly adjust,
split, combine, redeem, reclassify, purchase or otherwise acquire, any shares of
its capital stock.
(d) COMPENSATION; EMPLOYMENT AGREEMENTS; ETC. Enter into or amend or
renew any employment, consulting, severance or similar agreements or
arrangements with any director, officer or employee of PEOPLES or its
Subsidiaries (other than Executive Employment Agreement by and among Xxxxxx X.
Xxxxx, PEOPLES and the Bank dated May 15, 2000 (the "EMPLOYMENT AGREEMENT")),
change the position or title of any officer or employee of PEOPLES or any of its
Subsidiaries or grant any salary or wage increase or increase any employee
benefit, (including incentive or bonus payments) except (i) for normal
individual increases in compensation to employees in the ordinary course of
business consistent with past practice, (ii) for other changes that are required
by applicable law, (iii) to satisfy Previously Disclosed contractual obligations
existing as of the date hereof, or (iv) for grants of awards to newly hired
employees consistent with past practice.
(e) BENEFIT PLANS. Enter into, establish, adopt or amend except to
satisfy (i) Previously Disclosed contractual obligations existing as of the date
hereof, (ii) the regular annual renewal of insurance contract, any pension,
retirement, stock option, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement (or
similar arrangement) related thereto, in respect of any director, officer or
employee of PEOPLES or its Subsidiaries, or take any action to accelerate the
vesting or exercisability of stock options, restricted stock or other
compensation or benefits payable thereunder or (iii) to comply with applicable
law or regulation.
(f) DISPOSITIONS. Sell, transfer, mortgage, encumber or otherwise dispose
of or discontinue any of its assets, deposits, business or properties except in
the ordinary course of business.
(g) ACQUISITIONS. Acquire (other than by way of foreclosures or
acquisitions of control in a bona fide fiduciary capacity or in satisfaction of
debts previously contracted in good faith, in each case in the ordinary and
usual course of business consistent with past practice) all or any portion of,
the assets, business, deposits or properties of any other entity.
26
(h) GOVERNING DOCUMENTS. Amend the PEOPLES Articles, PEOPLES Bylaws or
the articles of incorporation or bylaws (or similar governing documents) of any
of PEOPLES' Subsidiaries.
(i) ACCOUNTING METHODS. Implement or adopt any change in its accounting
principles, practices or methods, other than as may be required by generally
accepted accounting principles.
(j) CONTRACTS. Except in the ordinary course of business consistent with
past practice, enter into, terminate, amend or modify in any material respect
any of its existing contracts, involving payments in excess of $25,000.
(k) CLAIMS. Except in the ordinary course of business consistent with
past practice, settle any claim, action or proceeding, except for any claim,
action or proceeding which does not involve precedent for other material claims,
actions or proceedings and which involve solely money damages in an amount,
individually or in the aggregate for all such settlements, that is not material
to PEOPLES and its Subsidiaries, taken as a whole.
(l) ADVERSE ACTIONS. (a) Take any action while knowing that such action
would, or is reasonably likely to, prevent or impede the Merger from qualifying
(i) for "pooling-of-interests" accounting treatment or (ii) as a reorganization
within the meaning of Section 368(a) of the Code; or (b) knowingly take any
action that is intended or is reasonably likely to result in (i) any of its
representations and warranties set forth in this Agreement being or becoming
untrue in any material respect at any time at or prior to the Effective Time,
(ii) any of the conditions to the Merger set forth in Article VI not being
satisfied or (iii) a material violation of any provision of this Agreement
except, in each case, as may be required by applicable law or regulation.
(m) RISK MANAGEMENT. Except pursuant to applicable law or regulation,
(i) implement or adopt any material change in its interest rate risk management
and other risk management policies, procedures or practices; (ii) fail to follow
its existing policies or practices with respect to managing its exposure to
interest rate and other risk; or (iii) fail to use commercially reasonable means
to avoid any material increase in its aggregate exposure to interest rate risk.
(n) INDEBTEDNESS. Incur any indebtedness for borrowed money other than in
the ordinary course of business.
(o) COMMITMENTS. Agree or commit to do any of the foregoing.
(p) OTHERS. Purchase any securities except in conformance with its
investment policy in effect as of May 9, 2000. In addition, PEOPLES shall
submit for review to CNN all loan packages submitted to PEOPLES' loan committee.
5.02 CNN TO CARRY ON BUSINESS IN NORMAL MANNER. From the date hereof until
the Effective Time, except as expressly contemplated by this Agreement, without
the prior written consent of PEOPLES, CNN will not, and will cause each of its
Subsidiaries not to:
27
(a) ORDINARY COURSE. Conduct the business of CNN and its Subsidiaries
other than in the ordinary and usual course or fail to use reasonable efforts to
preserve intact their business organizations and assets and maintain their
rights, franchises and existing relations with customers, suppliers, employees
and business associates, or voluntarily take any action which, at the time
taken, is reasonably likely to have an adverse affect upon CNN's ability to
perform any of its material obligations under this Agreement.
(b) PRESERVATION. Fail to use reasonable efforts to preserve intact in
any material respect their business organizations and assets and maintain their
rights, franchises and existing relations with customers, suppliers, employees
and business associates.
(c) EXTRAORDINARY DIVIDENDS. Make, declare, pay or set aside for payment
any dividend other than normal quarterly dividends in accordance with past
practice.
(d) ACCOUNTING METHODS. Implement or adopt any change in its accounting
principles, practices or methods, other than as may be required by generally
accepted accounting principles.
(e) CLAIMS. Except in the ordinary course of business consistent with
past practice, settle any claim, action or proceeding, except for any claim,
action or proceeding which does not involve precedent for other material claims,
actions or proceedings and which involve solely money damages in an amount,
individually or in the aggregate for all such settlements, that is not material
to CNN and its Subsidiaries, taken as a whole.
(f) ADVERSE ACTIONS. (a) Take any action while knowing that such action
would, or is reasonably likely to, prevent or impede the Merger from qualifying
(i) for "pooling-of-interests" accounting treatment or (ii) as a reorganization
within the meaning of Section 368(a) of the Code; or (b) knowingly take any
action that is intended or is reasonably likely to result in (i) any of its
representations and warranties set forth in this Agreement being or becoming
untrue in any material respect at any time at or prior to the Effective Time,
(ii) any of the conditions to the Merger set forth in Article VII not being
satisfied or (iii) a material violation of any provision of this Agreement
except, in each case, as may be required by applicable law or regulation;
PROVIDED, HOWEVER, that nothing contained herein shall limit the ability of CNN
to exercise its rights under the Stock Option Agreement.
(g) COMMITMENTS. Agree or commit to do any of the foregoing.
(h) GOVERNING DOCUMENTS. Amend the articles, bylaws (or similar governing
documents) of CNN or CNN Bank.
5.03 REASONABLE BEST EFFORTS. Subject to the terms and conditions
of this Agreement, each of PEOPLES and CNN agrees to use their reasonable best
efforts in good faith to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or desirable, or advisable under
applicable laws, so as to permit consummation of the Merger as
28
promptly as practicable and otherwise to enable consummation of the transactions
contemplated hereby and shall cooperate fully with the other party hereto to
that end.
5.04 SHAREHOLDER APPROVAL. PEOPLES agrees to take, in accordance with
applicable law and the PEOPLES Articles and PEOPLES Bylaws, all action necessary
to convene an appropriate meeting of its shareholders to consider and vote upon
the adoption of this Agreement and any other matters required to be approved or
adopted by PEOPLES' shareholders for consummation of the PEOPLES Merger
(including any adjournment or postponement, the "PEOPLES MEETING"), as promptly
as practicable after the Registration Statement is declared effective. The
PEOPLES Board shall recommend that its shareholders adopt this Agreement at the
PEOPLES Meeting unless otherwise necessary under the applicable fiduciary duties
of the PEOPLES Board, as determined by the PEOPLES Board in good faith after
consultation with and based upon advice of independent legal counsel.
5.05 REGISTRATION STATEMENT. (a) CNN agrees to prepare pursuant to all
applicable laws, rules and regulations a registration statement on Form S-4 (the
"REGISTRATION STATEMENT") to be filed by CNN with the SEC in connection with the
issuance of CNN Common Stock in the PEOPLES Merger (including the proxy
statement and prospectus and other proxy solicitation materials of PEOPLES
constituting a part thereof (the "PROXY STATEMENT") and all related documents).
Each party agrees to cooperate, and to cause its Subsidiaries to cooperate, with
the other, its counsel and its accountants, in preparation of the Registration
Statement and the Proxy Statement; and PROVIDED that PEOPLES and its
Subsidiaries have cooperated as required above, CNN agrees to file the Proxy
Statement and the Registration Statement (together, the "PROXY/PROSPECTUS")
with the SEC as promptly as reasonably practicable. Each of PEOPLES and CNN
agrees to use all reasonable efforts to cause the Proxy/Prospectus to be
declared effective under the Securities Act as promptly as reasonably
practicable after filing thereof. CNN also agrees to use all reasonable efforts
to obtain, prior to the effective date of the Registration Statement, all
necessary state securities law or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement. PEOPLES agrees to
furnish to CNN all information concerning PEOPLES, its Subsidiaries, officers,
directors and shareholders as may be reasonably requested in connection with the
foregoing.
(b) Each of PEOPLES and CNN agrees, as to itself and its Subsidiaries,
that none of the information supplied or to be supplied by it for inclusion or
incorporation by reference in (i) the Registration Statement will, at the time
the Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and (ii) the Proxy
Statement and any amendment or supplement thereto will, at the date of mailing
to the PEOPLES shareholders and at the time of the PEOPLES Meeting, as the case
may be, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading or any statement which, in the light of the circumstances
under which such statement is made, will be false or misleading with respect to
any material fact, or which will omit to state any material fact necessary in
order to make the statements therein not false or misleading or necessary to
correct any statement in any earlier statement in the Proxy
29
Statement or any amendment or supplement thereto. Each of PEOPLES and CNN
further agrees that if it shall become aware prior to the Effective Date of any
information furnished by it that would cause any of the statements in the Proxy
Statement to be false or misleading with respect to any material fact, or to
omit to state any material fact necessary to make the statements therein not
false or misleading, to promptly inform the other party thereof and to take the
necessary steps to correct the Proxy Statement.
(c) CNN agrees to advise PEOPLES, promptly after CNN receives notice
thereof, of the time when the Registration Statement has become effective or any
supplement or amendment has been filed, of the issuance of any stop order or the
suspension of the qualification of CNN Stock for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information.
5.06 PRESS RELEASES. Each of PEOPLES and CNN agrees that it will not,
without the prior approval of the other party, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby, except as otherwise required by applicable law or
regulation or NASD rules.
5.07 ACCESS; INFORMATION. (a) Each of PEOPLES and CNN agrees that upon
reasonable notice and subject to applicable laws relating to the exchange of
information, it shall afford the other party and the other party's officers,
employees, counsel, accountants and other authorized representatives, such
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), properties, personnel and to such other
information as any party may reasonably request and, during such period, it
shall furnish promptly to such other party (i) a copy of each material report,
schedule and other document filed by it pursuant to federal or state securities
or banking laws, and (ii) all other information concerning the business,
properties and personnel of it as the other may reasonably request.
(b) Each agrees that it will not, and will cause its representatives not
to, use any information obtained pursuant to this Section 5.07 (as well as any
other information obtained prior to the date hereof in connection with the
entering into of this Agreement) for any purpose unrelated to the consummation
of the transactions contemplated by this Agreement. Subject to the requirements
of law, each party will keep confidential, and will cause its representatives to
keep confidential, all information and documents obtained pursuant to this
Section 5.07 (as well as any other information obtained prior to the date hereof
in connection with the entering into of this Agreement) unless such information
(i) was already known to such party, (ii) becomes available to such party from
other sources not known by such party to be bound by a confidentiality
obligation, (iii) is disclosed with the prior written approval of the party to
which such information pertains or (iv) is or becomes readily ascertainable from
published information or trade sources. In the event that this Agreement is
terminated or the transactions contemplated by this Agreement shall otherwise
fail to be consummated, each party shall promptly cause all copies of documents
or extracts thereof containing information and data as to another party hereto
to be returned to the party which furnished the same. No investigation by
either party of
30
the business and affairs of the other shall affect or be deemed to modify or
waive any representation, warranty, covenant or agreement in this Agreement, or
the conditions to either party's obligation to consummate the transactions
contemplated by this Agreement.
(c) During the period from the date of this Agreement to the Effective
Time, PEOPLES party shall promptly furnish CNN with copies of all monthly and
other interim financial statements produced in the ordinary course of business
as the same shall become available.
5.08 ACQUISITION PROPOSALS. PEOPLES agrees that it shall not, and shall
cause its Subsidiaries and its and its Subsidiaries' officers, directors,
agents, advisors and affiliates not to, solicit or encourage inquiries or
proposals with respect to, or engage in any negotiations concerning, or provide
any confidential information to, or have any discussions with, any person
relating to, any Acquisition Proposal, subject to the extent that the PEOPLES
Board determines in good faith, after consultations with independent legal
counsel that it may be required by its fiduciary duties to do so. It shall
immediately cease and cause to be terminated any activities, discussions or
negotiations conducted prior to the date of this Agreement with any parties
other than CNN with respect to any of the foregoing and shall use its reasonable
best efforts to enforce any confidentiality or similar agreement relating to an
Acquisition Proposal. So long as it is consistent with PEOPLES' fiduciary
duties, PEOPLES shall promptly (within 48 hours) advise CNN following the
receipt by PEOPLES of any Acquisition Proposal and the substance thereof
(including the identity of the person making such Acquisition Proposal), and
advise CNN of any material developments with respect to such Acquisition
Proposal immediately upon the occurrence thereof.
5.09 AFFILIATE AGREEMENTS. (a) Not later than the 15th day prior to the
mailing of the Proxy Statement, PEOPLES shall deliver to CNN a schedule of each
person that, to the best of its knowledge, is or is reasonably likely to be, as
of the date of the PEOPLES Meeting, deemed to be an "affiliate" of PEOPLES
(each, a "PEOPLES AFFILIATE") as that term is used in Rule 145 under the
Securities Act or SEC Accounting Series Releases 130 and 135. PEOPLES shall use
its reasonable best efforts to cause each person who may be deemed to be a
PEOPLES Affiliate to execute and deliver to PEOPLES on or before the date of
mailing of the Proxy Statement an agreement in the form attached hereto as
Exhibit B.
5.10 TAKEOVER LAWS. No party hereto shall take any action that would cause
the transactions contemplated by this Agreement or the Stock Option Agreement to
be subject to requirements imposed by any Takeover Law and each of them shall
take all necessary steps within its control to exempt (or ensure the continued
exemption of) the transactions contemplated by this Agreement from, or if
necessary challenge the validity or applicability of, any applicable Takeover
Law, as now or hereafter in effect.
5.11 [INTENTIONALLY DELETED].
5.12 REGULATORY APPLICATIONS. (a) CNN and PEOPLES and their respective
Subsidiaries shall cooperate and use their respective reasonable best efforts to
prepare all
31
documentation, to timely effect all filings and to obtain all permits, consents,
approvals and authorizations of all third parties and Governmental Authorities
necessary to consummate the transactions contemplated by this Agreement. Each
of CNN, PEOPLES and PEOPLES' counsel shall have the right to review at least 5
business days in advance, and each will consult with the other, in each case
subject to applicable laws relating to the exchange of information, with respect
to, and shall be provided in advance so as to reasonably exercise its right to
review in advance, all material written information submitted to any third party
or any Governmental Authority in connection with the transactions contemplated
by this Agreement. In exercising the foregoing right, each of the parties
hereto agrees to act reasonably and as promptly as practicable. Each party
hereto agrees that it will consult with the other party hereto with respect to
the obtaining of all material permits, consents, approvals and authorizations of
all third parties and Governmental Authorities necessary or advisable to
consummate the transactions contemplated by this Agreement and each party will
keep the other party apprised of the status of material matters relating to
completion of the transactions contemplated hereby.
(b) Each party agrees, upon request, to furnish the other party with all
information concerning itself, its Subsidiaries, directors, officers and
shareholders and such other matters as may be reasonably necessary or advisable
in connection with any filing, notice or application made by or on behalf of
such other party or any of its Subsidiaries to any third party or Governmental
Authority.
5.13 INDEMNIFICATION. (a) Following the Effective Date, CNN shall
indemnify, defend and hold harmless the present and past directors, officers and
employees of PEOPLES and its Subsidiaries (each, an "INDEMNIFIED PARTY") against
all costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "COSTS") incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of actions or
omissions occurring on or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement) to the fullest
extent that PEOPLES is permitted to indemnify (and advance expenses to) its
directors, officers, and employees under the laws of the Commonwealth of
Pennsylvania, the PEOPLES Articles and the PEOPLES By-Laws as in effect on the
date hereof; PROVIDED that any determination required to be made with respect to
whether an officer's, director's or employee's conduct complies with the
standards set forth under Pennsylvania law, the PEOPLES Articles and the
PEOPLES By-Laws shall be made by independent counsel (which shall not be
counsel that provides material services to CNN) selected by CNN and reasonably
acceptable to such officer, director or employee.
(b) For a period of six (6) years from the Effective Time, CNN shall use
its reasonable best efforts to provide that portion of director's and officer's
liability insurance that serves to reimburse the present and former officers and
directors of PEOPLES or any of its Subsidiaries (determined as of the Effective
Time) (as opposed to PEOPLES) with respect to claims against such directors and
officers arising from facts or events which occurred before the Effective Time,
on terms no less favorable than those in effect on the date hereof; PROVIDED,
HOWEVER, that CNN may substitute therefor policies providing at least comparable
coverage containing terms and conditions no less favorable than those in effect
on the date hereof; and
32
PROVIDED, FURTHER, that officers and directors of PEOPLES or any Subsidiary may
be required to make application and provide customary representations and
warranties to CNN's insurance carrier for the purpose of obtaining such
insurance.
(c) Any Indemnified Party wishing to claim indemnification under Section
5.13(a), upon learning of any claim, action, suit, proceeding or investigation
described above, shall promptly notify CNN thereof; PROVIDED that the failure so
to notify shall not affect the obligations of CNN under Section 5.13(a) unless
and to the extent that CNN is actually prejudiced as a result of such failure.
(d) If CNN or any of its successors or assigns shall consolidate with or
merge into any other entity and shall not be the continuing or surviving entity
of such consolidation or merger or shall transfer all or substantially all of
its assets to any entity, then and in each case, proper provision shall be made
so that the successors and assigns of CNN shall assume the obligations set forth
in this Section 5.13.
5.14 OPPORTUNITY OF EMPLOYMENT; EMPLOYEE BENEFITS. The existing employees
of PEOPLES shall have the opportunity to continue as employees of CNN or one of
its Subsidiaries, on the Closing Date; subject, however, to the right of CNN and
its Subsidiaries, in their discretion to extend offers of employment to any such
employees. Prior to the Effective Date, PEOPLES shall be responsible for any
and all obligations owing to any of its employees who do not become employees of
CNN and its Subsidiaries, including but not limited to back pay, bonus,
severance, unemployment compensation and the like. It is understood and agreed
that PEOPLES will not enter into any severance agreement except pursuant to
written severance policies which were in effect prior to contemplation of this
transaction and except for the Employment Agreement. It is understood and
agreed that nothing in this Section 5.14 or elsewhere in this Agreement shall be
deemed to be a contract of employment or be construed to give said employees any
rights other than as employees at will under applicable law and said employees
shall not be deemed to be third-party beneficiaries of this provision.
From and after the Effective Time, PEOPLES employees shall continue to
participate in the PEOPLES employee benefit plans in effect at the Effective
Time unless and until CNN, in its sole discretion, shall determine that PEOPLES
employees shall, subject to applicable eligibility requirements, participate in
employee benefit plans of CNN and that all or some of the PEOPLES plans shall be
terminated or merged into certain employee benefit plans of CNN.
Notwithstanding the foregoing, each PEOPLES employee shall be credited with
years of PEOPLES (or predecessor) service for purposes of eligibility and
vesting in the employee benefit plans of CNN. As provided herein, CNN will
provide or allow severance payments to employees of PEOPLES (other than
employees whose severance benefits are provided for in written employment
agreements) whose employment is terminated (other than for cause) on or after
the Effective Date and before the expiration of six months following the
Effective Date, in the amount equal to one week for each year of service with
PEOPLES, up to a maximum of thirteen (13) weeks. In computing such severance
payments for non-exempt, full time employees, overtime and bonus are excluded.
In computing such severance payments for non-exempt regular part time employees,
the weekly compensation shall be based on one-fifty-second (1/52) of the
employee's
33
total salary, excluding overtime and bonus, paid in 1999. For full time exempt
employees, weekly compensation is calculated by taking 1/52 of the employee's
1999 annual salary, excluding bonus.
5.15 NOTIFICATION OF CERTAIN MATTERS. Each of PEOPLES and CNN shall give
prompt notice to the other of any fact, event or circumstance known to it that
(i) is reasonably likely, individually or taken together with all other facts,
events and circumstances known to it, to result in any Material Adverse Effect
with respect to it or (ii) would cause or constitute a material breach of any of
its representations, warranties, covenants or agreements contained herein.
5.16 DIVIDEND COORDINATION. It is agreed by the parties hereto that they
will cooperate to assure that as a result of the PEOPLES Merger, during any
applicable period, there shall not be a payment of both a CNN and a PEOPLES
dividend. The parties further agree that if the Effective Date is at the end
of a fiscal quarter, then they will cooperate to assure that the PEOPLES
shareholders receive the dividend, if any, declared by PEOPLES rather than the
dividend for that period, if any, declared by CNN. In no event will the
selection of the Effective Date cause the shareholders of PEOPLES to lose a
quarterly or a portion of a quarterly dividend.
5.17 CNN BOARD REPRESENTATION. At the first CNN Board meeting following
the Effective Date, CNN shall appoint Xxxxxxx Xxxxxx and Xxxxxx Xxxxx to fill
vacancies on the CNN Board for terms of office expiring in 2003. Upon
appointment to the CNN Board, Xxxxxx Xxxxx shall be appointed to the Executive
Committee. Upon expiration of the initial term of Messrs. Xxxxxx and Xxxxx to
the CNN Board, CNN shall cause Messrs. Xxxxxx and Abrey's names to be submitted
to its Executive Committee for consideration as director nominees for an
additional three year term.
5.18 RESULTING BANK BOARD OF DIRECTORS. At the first CNN Bank board
meeting following the Effective Date, CNN shall cause Xxxxxxx Xxxxxx and Xxxxxx
Xxxxx to fill vacancies on the Resulting Bank Board for terms of office
expiring in 2003. Upon appointment to the Resulting Bank Board, Xxxxxx Xxxxx
shall be appointed to the Resulting Bank Executive Committee. Upon expiration
of the initial term of Messrs. Xxxxxx and Xxxxx to the Resulting Bank Board,
Resulting Bank shall cause Messrs. Xxxxxx and Abrey's names to be submitted to
its Executive Committee for consideration as director nominees for an additional
three year term.
5.19 FORMATION OF ADVISORY BOARD. Following the consummation of the
Subsidiary Merger, the members of the PEOPLES Board of Directors who do not
become members of the CNN or the Resulting Bank's Board of Directors shall be
given the opportunity to serve on the Advisory Board of Directors for the
Wyalusing Area pursuant to the CNN Bank Advisory Board of Directors Standards
and Responsibilities in effect as of the date of this Agreement.
5.20 ACCOUNTING AND TAX TREATMENT. Subject to the consummation of the
Holding Company Merger on or before December 31, 2000, each of CNN and PEOPLES
agrees not to take any actions subsequent to the date of this Agreement that
would adversely affect the ability to treat the Merger as a "pooling-of-
interests" in accordance with GAAP or PEOPLES or the
34
shareholders of PEOPLES to characterize the Merger as a tax-free reorganization
under Section 368(a) of the Code.
5.21 NO BREACHES OF REPRESENTATIONS AND WARRANTIES. Between the date of
this Agreement and the Effective Time, without the written consent of the other
party, each of CNN and PEOPLES will not do any act or suffer any omission of any
nature whatsoever which would cause any of the representations or warranties
made in Article IV of this Agreement to become untrue or incorrect in any
material respect.
5.22 CONSENTS. Each of CNN and PEOPLES shall use its best efforts to
obtain any required consents to the transactions contemplated by this Agreement.
5.23 INSURANCE COVERAGE. PEOPLES shall cause the policies of insurance
listed in the Disclosure Schedule to remain in effect between the date of this
Agreement and the Closing Date.
5.24 CORRECTION OF INFORMATION. Each of CNN and PEOPLES shall promptly
correct and supplement any information furnished under this Agreement so that
such information shall be correct and complete in all material respects at all
times, and shall include all facts necessary to make such information correct
and complete in all material respects at all times.
5.25 CONFIDENTIALITY. Except for the use of information in connection with
the Registration Statement and any other governmental filings required in order
to complete the transactions contemplated by this Agreement, all information
(collectively, the "INFORMATION") received by each of PEOPLES and CNN, pursuant
to the terms of this Agreement shall be kept in strictest confidence; provided
that, subsequent to the filing of the Registration Statement with the Securities
and Exchange Commission, this Section 5.25 shall not apply to information
included in the Registration Statement or to be included in the official
proxy/prospectus to be sent to the shareholders of PEOPLES and CNN under Section
5.05. PEOPLES and CNN agree that the Information will be used only for the
purpose of completing the transactions contemplated by this Agreement. PEOPLES
and CNN agree to hold the Information in strictest confidence and shall not use,
and shall not disclose directly or indirectly any of such Information except
when, after and to the extent such Information (i) is or becomes generally
available to the public other than through the failure of PEOPLES or CNN to
fulfill its obligations hereunder, (ii) was already known to the party receiving
the Information on a nonconfidential basis prior to the disclosure or (iii) is
subsequently disclosed to the party receiving the Information on a
nonconfidential basis by a third party having no obligation of confidentiality
to the party disclosing the Information. It is agreed and understood that the
obligations of PEOPLES and CNN contained in this Section 5.25 shall survive the
Closing. In the event the transactions contemplated by this Agreement are not
consummated, PEOPLES and CNN agree to return all copies of the Information
provided to the other promptly.
5.26 SUPPLEMENTAL ASSURANCES. (a) On the date the Registration Statement
becomes effective and on the Effective Date, PEOPLES shall deliver to CNN a
certificate signed by its principal executive officer and its principal
financial officer to the effect, to such officers' knowledge, that the
information contained in the Proxy/Prospectus provided by PEOPLES
35
relating to the business and financial condition and affairs of PEOPLES, does
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading.
(b) On the date the Registration Statement becomes effective and on the
Effective Date, CNN shall deliver to PEOPLES a certificate signed by its chief
executive officer and its chief financial officer to the effect, to such
officers' knowledge, that the Registration Statement (other than the information
contained therein relating to the business and financial condition and affairs
of PEOPLES) does not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading.
5.27 EMPLOYMENT AGREEMENT. As a result of the PEOPLES Merger, Xxxxxx X.
Xxxxx will be entitled to receive payment under the Employment Agreement. Prior
to the Effective Date, the Employment Agreement will be amended as set forth on
Exhibit D.
5.28 VOTING AGREEMENT. On or before the date of execution of this
Agreement, certain shareholders of PEOPLES shall execute and deliver to CNN a
voting agreement with respect to the PEOPLES common stock, which agreement shall
be in the form attached hereto as Exhibit C.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
6.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each of CNN and PEOPLES to consummate the Merger is
subject to the fulfillment or written waiver by CNN and PEOPLES prior to the
Effective Time of each of the following conditions:
(a) SHAREHOLDER APPROVALS. This Agreement shall have been duly adopted by
the requisite vote of the shareholders of PEOPLES.
(b) REGULATORY APPROVALS. All regulatory approvals required to consummate
the transactions contemplated hereby shall have been obtained and shall remain
in full force and effect and all statutory waiting periods in respect thereof
shall have expired and no such approvals shall contain (i) any conditions,
restrictions or requirements which the CNN Board reasonably determines would
either before or after the Effective Time have a Material Adverse Effect on CNN
and its Subsidiaries taken as a whole after giving effect to the consummation of
the Merger, or (ii) any conditions, restrictions or requirements that are not
customary and usual for approvals of such type including, but not limited to,
any requirement to divest any offices or branches of PEOPLES or the Bank.
(c) NO INJUNCTION. No Governmental Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree,
36
injunction or other order (whether temporary, preliminary or permanent) which is
in effect and prohibits consummation of the transactions contemplated by this
Agreement.
(d) REGISTRATION STATEMENT. The Registration Statement shall have become
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the SEC.
(e) BLUE SKY APPROVALS. All permits and other authorizations under state
securities laws necessary to consummate the transactions contemplated hereby and
to issue the shares of CNN Common Stock to be issued in the PEOPLES Merger shall
have been received and be in full force and effect.
(f) ACCOUNTING TREATMENT. CNN and PEOPLES shall have both received from
Parente Xxxxxxxx PC, CNN's and PEOPLES's independent auditors, letters, dated
the date of or shortly prior to each of the mailing date of the Proxy Statement
and the Effective Date, stating its opinion that the Merger shall qualify for
pooling-of-interests accounting treatment.
6.02 CONDITIONS TO OBLIGATION OF PEOPLES. The obligation of PEOPLES to
consummate the Merger is also subject to the fulfillment or written waiver by
PEOPLES prior to the Effective Time of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
CNN set forth in this Agreement shall be true and correct, subject to Section
4.02, as of the date of this Agreement and as of the Effective Date as though
made on and as of the Effective Date (except that representations and warranties
that by their terms speak as of the date of this Agreement or some other date
shall be true and correct as of such date), and PEOPLES shall have received a
certificate, dated the Effective Date, signed on behalf of CNN by the Chief
Executive Officer and the Chief Financial Officer of CNN to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF CNN. CNN 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, and PEOPLES shall have received a
certificate, dated the Effective Date, signed on behalf of CNN by the Chief
Executive Officer and the Chief Financial Officer of CNN to such effect.
(c) TAX OPINION. PEOPLES shall have received an opinion of Xxxxxxxx
Xxxxxxxx, PC, dated the Effective Date, to the effect that, on the basis of
facts, representations and assumptions set forth in such opinion,
(i) The Merger will constitute a reorganization within the meaning
of Section 368(a) of the Code and CNN and PEOPLES will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code;
37
(ii) No gain or loss will be recognized by PEOPLES shareholders by
reason of the Merger;
(iii) Except for cash received in lieu of fractional shares and cash
received by Shareholders who exercise their dissenter's rights, no gain or loss
will be reorganized by the Shareholders of PEOPLES who receive solely CNN Stock
upon the exchange of their shares of PEOPLES Stock for shares of CNN Stock;
(iv) The tax basis of the CNN Stock to be received by the PEOPLES
shareholders will be, in each instance, the same as the basis of the PEOPLES
Stock surrendered in exchange thereof;
(v) The holding period of the CNN Stock received by a PEOPLES
shareholder receiving CNN Stock will include the period during which the PEOPLES
Stock surrendered in exchange therefor was held;
(vi) Cash received by a PEOPLES shareholder in lieu of a fractional
share interest of CNN Stock or upon exercise of dissenter's rights will be
treated as having been received as a distribution in full payment in exchange
for the fractional share interest of CNN Stock, or the tax basis in the shares
surrendered, as the case may be, which they would otherwise be entitled to
receive and will qualify as capital gain or loss if their PEOPLES Stock was held
by them as a capital asset; and
(vii) Subject to any limitations imposed under Sections 381 and 382
of the Code and certain U.S. Treasury regulations promulgated under Code Section
1502, where applicable, CNN, as the survivor to the Merger, will carry-over and
take into account all accounting items and tax attributes of PEOPLES, including
but not limited to earning and profits, methods of accounting, and tax basis and
holding periods of PEOPLES.
(d) OPINION OF CNN'S COUNSEL. PEOPLES shall have received an opinion of
Squire, Xxxxxxx & Xxxxxxx L.L.P., counsel to CNN, dated the Effective Date, to
the effect that, on the basis of the facts, representations and assumptions set
forth in the opinion, (i) CNN is a corporation duly organized and presently
subsisting under the laws of the Commonwealth of Pennsylvania, (ii) this
Agreement has been duly executed by CNN and constitutes the binding obligation
of CNN, enforceable in accordance with its terms against CNN, except as the same
may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, and other similar laws relating to or affecting the enforcement of
creditors' rights generally, by general equitable principles (regardless of
whether enforceability is considered in a proceeding in equity or at law), (iii)
that, the shares CNN Common Stock to be issued under the Agreement, when issued,
shall be duly authorized, fully paid and non-assessable and duly registered
under the Securities Act of 1933, as amended, and (iv) that, the adoption of the
Agreement of CNN's shareholders is not required by the PBCL.
(e) FAIRNESS OPINION. PEOPLES shall have received a fairness opinion
from Xxxx, Xxxx & Co., financial advisor to PEOPLES, dated as of a date
reasonably proximate to the date
38
of the Proxy Statement, stating that the Exchange Ratio is fair to the
shareholders of PEOPLES from a financial point of view.
6.03 CONDITIONS TO OBLIGATION OF CNN. The obligation of CNN to consummate
the Merger is also subject to the fulfillment or written waiver by CNN prior to
the Effective Time of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
PEOPLES set forth in this Agreement shall be true and correct, subject to
Section 4.02, as of the date of this Agreement and as of the Effective Date as
though made on and as of the Effective Date (except that representations and
warranties that by their terms speak as of the date of this Agreement or some
other date shall be true and correct as of such date) and CNN shall have
received a certificate, dated the Effective Date, signed on behalf of PEOPLES by
the Chief Executive Officer and the Chief Financial Officer of PEOPLES to such
effect.
(b) PERFORMANCE OF OBLIGATIONS OF PEOPLES. PEOPLES 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, and CNN shall have received a
certificate, dated the Effective Date, signed on behalf of PEOPLES by the Chief
Executive Officer and the Chief Financial Officer of PEOPLES to such effect.
(c) OPINION OF PEOPLES' COUNSEL. CNN shall have received an opinion of
Xxxxxxxx Xxxxxxxx, PC, counsel to PEOPLES, dated the Effective Date, to the
effect that, on the basis of the facts, representations and assumptions set
forth in the opinion, (i) PEOPLES is a corporation duly organized and presently
subsisting under the laws of the Commonwealth of Pennsylvania, (ii) this
Agreement has been duly executed by PEOPLES and constitutes a binding obligation
on PEOPLES, enforceable in accordance with its terms against PEOPLES, except as
the same may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, and other similar laws relating to or affecting the
enforcement of creditors' rights generally, by general equitable principles
(regardless of whether enforceability is considered in a proceeding in equity or
at law) and (iii) PEOPLES is not subject to Subchapters D (Section 2538), E, F,
G, H, I and J of Chapter 25 of the PBCL.
(d) AFFILIATE AGREEMENTS. CNN shall have received the agreements referred
to in Section 5.09 from each affiliate of PEOPLES.
ARTICLE VII
TERMINATION
7.01 TERMINATION. This Agreement may be terminated, and the Merger
may be abandoned:
39
(a) MUTUAL CONSENT. At any time prior to the Effective Time, by the
mutual consent of CNN and PEOPLES, if the Board of Directors of each so
determines by vote of a majority of the members of its entire Board.
(b) BREACH. At any time prior to the Effective Time, by CNN or PEOPLES,
if its Board of Directors so determines by vote of a majority of the members of
its entire Board, in the event of either: (i) a breach by the other party of any
representation or warranty contained herein (subject to the standard set forth
in Section 4.02), which breach cannot be or has not been cured within 30 days
after the giving of written notice to the breaching party of such breach; or
(ii) a breach by the other party of any of the covenants or agreements contained
herein, which breach cannot be or has not been cured within 30 days after the
giving of written notice to the breaching party of such breach, provided that
such breach (whether under (i) or (ii)) would be reasonably likely, individually
or in the aggregate with other breaches, to result in a Material Adverse Effect.
(c) DELAY. At any time prior to the Effective Time, by CNN or PEOPLES, if
its Board of Directors so determines by vote of a majority of the members of its
entire Board, in the event that the PEOPLES Merger is not consummated by
December 31, 2000, except to the extent that the failure of the PEOPLES Merger
then to be consummated arises out of or results from the knowing action or
inaction of the party seeking to terminate pursuant to this Section 7.01(c).
(d) NO APPROVAL. By PEOPLES or CNN, if its Board of Directors so
determines by a vote of a majority of the members of its entire Board, in the
event (i) the approval of any Governmental Authority required for consummation
of the Merger and the other transactions contemplated by this Agreement shall
have been denied by final nonappealable action of such Governmental Authority;
(ii) the PEOPLES shareholders fail to adopt this Agreement at the PEOPLES
Meeting; or (iii) any of the closing conditions have not been met as required by
Article VI hereof.
(e) FAILURE TO EXECUTE AND DELIVER STOCK OPTION AGREEMENT. By CNN, if at
any time prior to the close of business, Eastern Daylight Savings Time on June
23, 2000, PEOPLES shall not have executed and delivered the Stock Option
Agreement to CNN.
7.02 EFFECT OF TERMINATION AND ABANDONMENT; ENFORCEMENT OF AGREEMENT. In
the event of termination of this Agreement and the abandonment of the Merger
pursuant to this Article VII, no party to this Agreement shall have any
liability or further obligation to any other party hereunder except (i) as set
forth in Section 8.01 and (ii) that termination will not relieve a breaching
party from liability for any willful breach of this Agreement giving rise to
such termination. Notwithstanding anything contained herein to the contrary,
the parties hereto agree that irreparable damage will occur in the event that a
party breaches any of its obligations, duties, covenants and agreements
contained herein. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches or threatened breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the Commonwealth of Pennsylvania, this being in
addition to any other remedy to which they are entitled by law or in equity.
40
ARTICLE VIII
MISCELLANEOUS
8.01 SURVIVAL. No representations, warranties, agreements and covenants
contained in this Agreement shall survive the Effective Time (other than
Sections 5.13, 5.14, 5.17, 5.18, 5.19, 5.25 and 5.27 and this Article VIII which
shall survive the Effective Time and be enforceable by its terms) or the
termination of this Agreement if this Agreement is terminated prior to the
Effective Time (other than Sections 5.05(b), 5.07(b), 7.02, and this Article
VIII which shall survive such termination).
8.02 WAIVER; AMENDMENT. Prior to the Effective Time, any provision of this
Agreement may be (i) waived by the party benefited by the provision, or (ii)
amended or modified at any time, by an agreement in writing between the parties
hereto executed in the same manner as this Agreement, except that no amendment
or waiver may be made that would change the form or the amount of the merger
consideration following the PEOPLES Meeting.
8.03 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
8.04 GOVERNING LAW. This Agreement shall be governed by, and interpreted
in accordance with, the laws of the Commonwealth of Pennsylvania applicable to
contracts made and to be performed entirely within such Commonwealth (except to
the extent that mandatory provisions of Federal law are applicable).
8.05 EXPENSES. Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby, except
that printing and mailing expenses shall be borne by CNN. All fees to be paid
to Regulatory Authorities and the SEC in connection with the transactions
contemplated by this Agreement shall be borne by CNN.
8.06 NOTICES. All notices, requests and other communications hereunder to
a party shall be in writing and shall be deemed given if personally delivered,
telecopied (with confirmation) or mailed by registered or certified mail (return
receipt requested) to such party at its address set forth below or such other
address as such party may specify by notice to the parties hereto.
41
If to PEOPLES, to:
Peoples Ltd.
000 Xxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxx, President
With a copy to:
Xxxxxxxx Xxxxxxxx, P.C.
The Pennsylvania Center
0000 Xxxxxxx Xxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxxxxx Xxxxx, Xx.
If to CNN, to:
Citizens & Northern Corporation
00-00 Xxxx Xxxxxx
X.X. Xxx 00
Xxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxxx, President
With a copy to:
M. Xxxxxxxx Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx & Xxxxxxx L.L.P.
0000 Xxx Xxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
8.07 ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES. This Agreement,
any separate agreement entered into by the parties on even date herewith, and
any Stock Option Agreement entered into represent the entire understanding of
the parties hereto with reference to the transactions contemplated hereby and
thereby and this Agreement supersedes any and all other oral or written
agreements heretofore made (other than any such separate agreement or Stock
Option Agreement). Nothing in this Agreement, whether express or implied, is
intended to confer upon any person, other than the parties hereto or their
respective successors, any rights, remedies, obligations or liabilities under or
by reason of this Agreement.
8.08 INTERPRETATION; EFFECT. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of, or
Exhibit or Schedule to, this
42
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and are not part of
this Agreement. Whenever the words "include", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation."
8.09 WAIVER OF JURY TRIAL. Each of the parties hereto hereby irrevocably
waives any and all right to trial by jury in any legal proceeding arising out of
or related to this Agreement or the transactions contemplated hereby.
[the rest of this page is intentionally left blank]
43
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
PEOPLES LTD.
By: /s/ Xxxxxx X. Xxxxx
--------------------------------------
Xxxxxx X. Xxxxx, President and Chief
Executive Officer
CITIZENS & NORTHERN CORPORATION
By: /s/ Xxxxx X. Xxxxxxxxxx
--------------------------------------
Xxxxx X. Xxxxxxxxxx, President and Chief
Executive Officer
44
EXHIBIT A
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT ("Agreement"), effective as of this 23 day
of June, 2000, by and between Citizens & Northern Corporation, a Pennsylvania
corporation ("Grantee"); and Peoples Ltd., a Pennsylvania corporation
("Grantor");
WITNESSETH:
A. Grantor and Grantee have entered into an Agreement and Plan of Merger
dated as of June 22, 2000 (the "Merger Agreement"), providing for their
affiliation with one another.
B. As further inducement for the parties to consummate the transactions
contemplated by the Merger Agreement, Grantor wishes to grant Grantee the Option
described herein.
C. The Board of Directors of Grantor has approved the grant of the Option
and the Merger Agreement prior to the date hereof.
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS.
Capitalized terms not defined herein shall have the meanings set forth
in the Merger Agreement.
"Applicable Price" shall mean the highest of (i) the highest price per
share of Grantor Common Stock paid for any such share by the person or groups
described in the definition of a Repurchase Event or (ii) the price per share of
Grantor Common Stock received by holders of Grantor Common Stock in connection
with any merger or other business combination transaction which is a Purchase
Event. If the consideration to be offered, paid or received pursuant to either
of the foregoing clauses (i) or (ii) shall be other than in cash, the value of
such consideration shall be determined in good faith by an independent
nationally recognized investment banking firm selected by Grantee and reasonably
acceptable to Grantor, which determination shall be conclusive for all purposes
of this Agreement.
"Bank" shall mean a financial institution subsidiary of a party.
"Burdensome Condition" shall mean, in connection with the grant of a
requisite regulatory approval or otherwise, imposition by a governmental entity
of any condition or restriction upon the party or one of its Subsidiaries (as
defined herein) which would reasonably be expected to either (i) have a material
adverse effect after the effective time of the Merger Agreement on the present
or prospective consolidated financial condition, business or operating results
of the party, or (ii) prevent the parties from realizing the major portion of
the economic benefits of the transactions contemplated by the Merger Agreement
that they currently anticipate obtaining.
- 1 -
"Commission" shall mean the Securities and Exchange Commission.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Grantee" shall mean Citizens & Northern Corporation.
"Grantor" shall mean Peoples Ltd.
"Grantor Common Stock" shall mean the respective shares of common
stock of the same class for which Peoples Ltd. is granting an Option under this
Agreement.
"Merger Agreement" shall mean the definitive agreement executed by
Citizens & Northern Corporation and Peoples Ltd., pursuant to which the parties
hereto intend to affiliate.
"Option" shall mean the option granted by Peoples Ltd. to Citizens &
Northern Corporation under this Agreement.
"Person" shall have the meanings specified in Sections 3(a)(9) and
13(d)(3) of the Exchange Act.
"Purchase Event" shall mean any of the following events or
transactions occurring after the date of this Agreement with respect to the
Grantor:
(i) the Grantor or any of its Subsidiaries (as defined in Rule
1-02 of Regulation S-X promulgated by the Securities and Exchange Commission
(the "SEC") (each hereinafter individually referred to as a "Subsidiary" and
collectively, as the "Subsidiaries")), without having received the Grantee's
prior written consent, shall have entered into an agreement with, or the Board
of Directors of Grantor shall have recommended that the shareholders of Grantor
approve or accept a transaction with any person (x) to merge or consolidate, or
enter into any similar transaction, except as contemplated by the Merger
Agreement, (y) to purchase, lease or otherwise acquire all or substantially all
of the assets of the Grantor or any of its Subsidiaries, or (z) to purchase or
otherwise acquire (including by way of merger, consolidation, share exchange or
any similar transaction) securities representing 20% or more of the voting power
of such Grantor or any of its Subsidiaries (other than pursuant to this
Agreement);
(ii) any person (other than the Grantor or its Bank in a
fiduciary capacity, or Grantee or its Bank in a fiduciary capacity) shall have
acquired beneficial ownership or the right to acquire beneficial ownership of
20% or more of the outstanding shares of such Grantor Common Stock after the
date of this Agreement (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder);
(iii) Grantor shall have materially breached this Agreement in
any material respect, which breach shall not have been cured within fifteen (15)
days after notice thereof is given by Grantee to Grantor;
- 2 -
(iv) any person other than Grantee shall have made a bona fide
Takeover Proposal to the Grantor by public announcement or written communication
that is or becomes the subject of public disclosure, and following such bona
fide Takeover Proposal, the shareholders of the Grantor vote not to adopt the
Merger Agreement;
(v) Grantor shall have breached the Merger Agreement following
a bona fide Takeover Proposal to such Grantor or any of its Subsidiaries, which
breach would entitle Grantee to terminate the Merger Agreement and such breach
shall not have been cured prior to the Notice Date (as defined below);
(vi) the shareholders of Grantor shall have voted and failed to
approve the Merger Agreement and the Merger at a meeting which has been held for
that purpose or any adjournment or postponement thereof, or such meeting shall
not have been held in violation of the Merger Agreement or shall have been
canceled prior to termination of the Merger Agreement if, prior to such meeting
(or if such meeting shall not have been held or shall have been canceled, prior
to such termination), it shall have been publicly announced that any person
(other than Grantee or any of its Subsidiaries) shall have made a Takeover
Proposal; or
(vii) the Grantor Board of Directors shall have withdrawn or
modified (or publicly announced its intention to withdraw or modify) its
recommendation that the shareholders of Grantor approve the transactions
contemplated by the Merger Agreement, or Grantor or any Grantor Subsidiary or
group of Grantor Subsidiaries that is, or would on an aggregate basis
constitute, a Significant Subsidiary shall have authorized, recommended,
proposed (or publicly announced its intention to authorize, recommend or
propose) an agreement to engage in a Takeover Proposal with any person other
than Grantee or a Grantee Subsidiary.
If more than one of the transactions giving rise to a Purchase Event
under this Agreement is undertaken or effected, then all such transactions shall
be deemed to give rise only to one Purchase Event with respect to the Option,
which Purchase Event shall be deemed continuing for all purposes hereunder until
all such transactions are abandoned.
"Repurchase Event" shall mean if (i) any person (other than the
Grantee or any subsidiary of the Grantee) shall have acquired actual ownership
or control, or any "group" (as such term is defined under the Exchange Act)
shall have been formed which shall have acquired actual ownership or control, of
24.9% or more of the then outstanding shares of Grantor Common Stock, or (ii)
any Purchase Event shall be consummated.
"Takeover Proposal" shall mean any tender or exchange offer, bona fide
written offer for a merger, consolidation or other business combination
involving Grantor or any of its Subsidiaries or any bona fide written offer to
acquire in any manner 20% or more of the outstanding shares of any class of
voting securities, or 20% or more of the consolidated assets, of the Grantor or
any of its Subsidiaries, other than the transactions contemplated by the Merger
Agreement. If Grantor receives an unsolicited Takeover Proposal and it is
determined by the Grantor to be consistent with its fiduciary duties, it shall
notify Grantee promptly of the receipt of such Takeover Proposal, it being
understood, however, that the giving of such notice by Grantor shall not be a
condition to the right of Grantee to exercise the Option.
- 3 -
2. GRANT OF OPTION.
Subject to the terms and conditions set forth herein, Grantor hereby
grants to Grantee an unconditional, irrevocable Option to purchase up to 81,655
shares of Grantor Common Stock as of the date of this Agreement (or such number
equaling 19.9% of Grantor Common Stock) at an exercise price of $47.00 per share
payable in cash as provided in Section 4. In the event that the Grantor issues
or agrees to issue any shares of Grantor Common Stock (other than as permitted
under the Merger Agreement) at a price less than the exercise price per share
set forth in this section (as adjusted pursuant to Section 6), the exercise
price of the Option shall be such lesser price.
3. EXERCISE OF OPTION.
(a) Unless the Grantee shall have breached in any material
respect any material covenant, representation or warranty contained in this
Agreement or the Merger Agreement and such breach shall not have been cured, the
Grantee may exercise the Option, in whole or part, at any time or from time to
time if a Purchase Event shall have occurred with respect to the Grantor and be
continuing; provided that to the extent the Option shall not have been
exercised, it shall terminate and be of no further force and effect (i) on the
effective date of the transaction contemplated by the Merger Agreement, or (ii)
upon termination of the Merger Agreement in accordance with the provisions
thereof (other than a termination resulting from a willful breach by the Grantor
of the Merger Agreement or following the occurrence of a Purchase Event, failure
of the Grantor's shareholders to approve the Merger Agreement by the vote
required under applicable law or under the respective Grantor's articles), or
(iii) 9 months after termination of the Merger Agreement due to a willful breach
by the Grantor of the Merger Agreement or, following the occurrence of a
Purchase Event, failure of the Grantor's shareholders to approve the Merger
Agreement by the vote required under applicable law or under the Grantor's
articles. Any exercise of the Option shall be subject to compliance with
applicable provisions of law.
(b) In the event the Grantee wishes to exercise the Option, it
shall send to the Grantor a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise, and (ii) a place and date not earlier
than three (3) business days nor later than 60 business days after the Notice
Date for the closing of such purchase ("Closing Date"). If prior notification
to or approval of any federal or state regulatory agency is required in
connection with such purchase, the Grantee shall promptly file the required
notice or application for approval and shall expeditiously process the same and
the period of time that otherwise would run pursuant to this section shall run
instead from the date on which any required notification period has expired or
been terminated or any requisite approval has been obtained and any requisite
waiting period shall have passed.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) At the closing referred to in Section 3, the Grantee shall
pay to the Grantor the aggregate purchase price for the shares of Grantor Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by a wire transfer to a bank account designated by the Grantor. Grantor
shall pay all expenses, and any and all United States federal, state and local
taxes and other charges that may be payable in connection with the preparation,
issue and delivery of stock certificates under this Section 4 in the name of the
Grantee or its assignee,
- 4 -
transferee or designee.
(b) At such closing, simultaneously with the delivery of funds
as provided in Section 4(a), the Grantor shall deliver to the Grantee a
certificate or certificates representing the number of shares of Grantor Common
Stock purchased by the Grantee, and the Grantee shall deliver to the Grantor a
letter agreeing that Grantee will not offer to sell or otherwise dispose of such
shares in violation of applicable law or the provisions of this Agreement or
federal or state laws.
(c) Certificates for Grantor Common Stock delivered at a
closing hereunder shall be endorsed with a restrictive legend which shall read
substantially as follows:
The transfer of the shares represented by this certificate
is subject to certain provisions of a Stock Option Agreement
dated ____________, 2000, between the registered holder
hereof and [Grantor] (a copy of which agreement is on file
at the principal office of [Grantor]). A copy of such
agreement will be provided to the holder hereof without
charge within five days after receipt by [Grantor] of a
written request therefor. The shares evidenced by this
certificate have not been registered under the Securities
Act of 1933 and may not be sold, pledged, transferred, or
hypothecated except pursuant to an opinion of counsel
satisfactory to the corporation that such transfer is
lawful.
The above legend shall be removed or modified as appropriate by
delivery of substitute certificate(s) without such legend if the Grantee shall
have delivered to the Grantor a copy of a letter from the staff of the
Commission, or an opinion of counsel, in form and substance satisfactory to
Grantor, to the effect that such legend is not required for purposes of the
Securities Act of 1933, as amended.
5. REPRESENTATIONS.
The Grantor represents, warrants and covenants to the Grantee as
follows:
(a) Grantor agrees: (i) that it shall at all times maintain,
free from preemptive rights, sufficient authorized but unissued or treasury
shares of Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Grantor;
(iii) in the event, under the Bank Holding Company Act of 1956, as amended (the
"BHCA"), or the Change in Bank Control Act of 1978, as amended, or any state or
other federal banking law, prior approval of or notice of the Federal Reserve
Board or to any state or other federal regulatory authority is necessary before
the Option may be exercised, cooperating fully with the Grantee in preparing
such applications or notices and providing such information to the Federal
Reserve Board or such state or other federal regulatory authority as they may
require in order to permit the Grantee to exercise the Option and Grantor duly
and effectively to issue shares
- 5 -
of Common Stock pursuant thereto; and (iv) promptly to take all action provided
herein to protect the rights of the Grantee against dilution.
(b) The shares to be issued upon due exercise, in whole or in
part, of the Option, when paid for as provided herein, will be duly authorized,
validly issued and fully paid.
(c) Grantor has full corporate power and authority to execute,
deliver and perform this Agreement and all corporate action necessary for
execution, delivery and performance of this Agreement has been duly taken by
such party.
(d) Neither the execution and delivery of this Agreement nor
consummation of the transactions contemplated hereby (assuming all appropriate
shareholder and regulatory approvals) will violate or result in any violation of
or be in conflict with or constitute a default under any term of the articles,
regulations or by-laws of such party or any agreement, instrument, judgment,
decree, statute, rule or order applicable to such party.
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
The Grantor agrees that, in the event of any change in its Grantor
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, exchanges of shares or the like, the type and
number of shares subject to the Option, and the purchase price per share, as the
case may be, shall be adjusted appropriately. The Grantor agrees that, in the
event that any additional shares of its Grantor Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement), the number of shares of its Grantor Common Stock
subject to the Option shall be adjusted so that, after such issuance, it equals
the same percentage (as that on the date of this Agreement) of the number of
shares of Grantor Common Stock then issued and outstanding without giving effect
to any shares subject to or issued pursuant to the Option. Nothing contained in
this Section 6 shall be deemed to authorize the Grantor to breach any provision
of the Merger Agreement.
7. TERMINATION.
This Agreement may be terminated at any time prior to the effective
date of the transaction set forth in the Merger Agreement, by action taken or
authorized by the Board of Directors of the terminating party or parties,
whether before or after approval by the stockholders of the matters presented in
connection with the Merger Agreement:
(a) by mutual consent of Grantee and Grantor;
(b) by either Grantee or Grantor if the Federal Reserve Board
shall have issued an order denying approval of the transaction set forth in the
Merger Agreement or if any governmental entity of competent jurisdiction shall
have issued a final permanent order enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement or the Merger
Agreement, or imposing a Burdensome Condition, and in any such case the time for
appeal or petition for reconsideration of such order shall have expired without
such appeal or petition being granted;
- 6 -
(c) by either Grantee or Grantor if the transactions
contemplated by the Merger Agreement shall not have been consummated on or
before December 31, 2000, unless such date is extended by mutual consent of the
parties hereto;
(d) by either Grantee or Grantor if no Purchase Event has
occurred and if any approval of their shareholders required for the consummation
of the transactions set forth in the Merger Agreement shall not have been
obtained by reason of the failure to obtain the required vote at a duly called
and held meeting of shareholders or at any adjournment thereof;
8. EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by any party
as provided in Section 7, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of any party or their respective
officers or directors except (i) Sections 10, 11, 12, and 13 of this Agreement
shall survive the termination and (ii) with respect to any liabilities or
damages incurred or suffered by a party as a result of the breach by another
party of any of its representations, warranties, covenants or agreements set
forth in this Agreement.
(b) If a Purchase Event occurs with respect to the Grantor,
then in such event Grantor shall pay to the Grantee, within five business days
after a termination of this Agreement following such an event, the reasonable
expenses of Grantee incurred in connection with this Agreement and the
transactions set forth in the Merger Agreement, but not more than $250,000.
9. ACCESS TO INFORMATION.
During the term of this Agreement, each party will afford each of the
other parties full and free access during normal business hours to such party,
its personnel, properties, contracts, books and records, and all other documents
and data.
10. CONFIDENTIALITY.
Except as and to the extent required by law, no party will disclose or
use, and will direct its representatives not to disclose or use, any
Confidential Information (as defined below) with respect to the other parties
furnished or to be furnished by such other parties, or their respective
representatives to the party or its representatives at any time or in any manner
other than in connection with its evaluation of the transaction proposed in this
Agreement. For purposes of this section, "Confidential Information" means any
information about the Merger Agreement and this Agreement as well as any
information about a party stamped "confidential" or identified in writing as
such promptly following its disclosure, unless (i) such information is already
known to the party or its representatives or to others not bound by a duty of
confidentiality or such information becomes publicly available through no fault
of the party or its representatives, (b) the use of such information is
necessary in making any filing or obtaining any consent or approval required for
the consummation of the transactions set forth in the Merger Agreement, or (c)
the furnishing or use of such information is required by or necessary in
connection with legal proceedings. Upon the written request of a party, each of
the other parties will promptly return or destroy any Confidential Information
in its possession and certify in writing to the disclosing party that it has
done so.
- 7 -
11. DISCLOSURE.
Except as and to the extent required by law, without the prior written
consent of the other parties, no party will, and each will direct its
representatives not to, make directly or indirectly any public comment,
statement or communication with respect to, or otherwise to disclose or to
permit the disclosure of the existence of discussions regarding, a possible
transaction among the parties or any of the terms, conditions or other aspects
of the transaction proposed in this Agreement. If a party is required by law to
make any such disclosure, it must first provide to the other parties the content
of the proposed disclosure, the reasons that such disclosure is required by law,
and the time and place that the disclosure will be made.
12. COSTS.
Except as otherwise expressly agreed, each party will be responsible
for and bear all of its own costs and expenses (including any broker's or
finder's fees and the expenses of its representatives) incurred at any time in
connection with this Agreement and in pursuing or consummating the Merger
Agreement.
13. SEVERABILITY.
If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that applicable law will not permit the Grantee to acquire the full number of
shares of Grantor Common Stock provided in Section 2 (as adjusted pursuant to
Section 6), it is the express intention of the Grantor to allow the Grantee to
acquire such lesser number of shares as may be permissible, without any
amendment or modification hereof.
14. MISCELLANEOUS.
(a) THIRD PARTIES. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto,
and their respective permitted successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided herein.
(b) ENTIRE AGREEMENT. Except as otherwise expressly provided
herein, this Agreement contains the entire agreement among the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective permitted successors and assigns.
(c) ASSIGNMENT. Neither of the parties hereto may assign any
of its rights or obligations under this Agreement or the Option created
hereunder to any other person, without the express written consent of the other
party, except that in the event a Purchase Event shall have occurred and be
continuing, the Grantee may assign in whole or in part its rights and
- 8 -
obligations hereunder; provided, however, that Grantee may not assign its rights
under the Option except in (i) a widely dispersed public distribution, (ii) a
private placement in which no one party acquires the right to purchase in excess
of 2% of the Grantor Common Stock, (iii) an assignment to a single party (e.g.,
a broker or investment banker) for the purpose of conducting a widely dispersed
public distribution on the Grantee's behalf, or (iv) any other manner approved
by applicable regulatory authorities, so long as the Grantee is responsible for
all costs associated with the same and the assignment is in compliance with
federal and state law.
(d) NOTICES. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
by registered or certified mail, postage prepaid, express service, personal
delivery, telecopy or telefacsimile to the following addresses:
If to Citizens & Northern Corporation, to:
Citizens & Northern Corporation
00-00 Xxxx Xxxxxx
X.X. Xxx 00
Xxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxxx, President
With a copy to:
Squire, Xxxxxxx & Xxxxxxx L.L.P.
0000 Xxx Xxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attn: M. Xxxxxxxx Xxxxxxxx Xxxxxx
If to Peoples Ltd., to:
Peoples Ltd.
000 Xxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxxxx, XX00000
Attn: Xxxxxx Xxxxx, President
With a copy to:
Xxxxxxxx Xxxxxxxx, PC
The Pennsylvania Center
0000 Xxxxxxx Xxxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxxxxx Xxxxx
(e) COUNTERPARTS. This Agreement may be executed in any
number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such
- 9 -
counterparts together shall constitute but one agreement.
(f) SPECIFIC PERFORMANCE. The parties agree that damages
would be an inadequate remedy for a breach of the provisions of this Agreement
by any party hereto and that this Agreement may be enforced by a party hereto
through injunctive or other equitable relief.
(g) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania applicable to
agreements made and entirely to be performed within such state and such federal
laws as may be applicable.
15. REPURCHASE AT THE OPTION OF GRANTEE.
(a) At the request of the Grantee at any time commencing upon
the first occurrence of a Repurchase Event and ending 9 months immediately
thereafter, Grantor shall repurchase from Grantee (i) the Option and (ii) all
shares of Grantor Common Stock purchased by Grantee pursuant hereto with respect
to which Grantee then has beneficial ownership. The date on which Grantee
exercises its rights under this Section 17 is referred to as the "Request Date."
Such repurchase shall be at an aggregate price (the "Repurchase Consideration")
equal to the sum of:
(i) the aggregate purchase price paid by Grantee for
any shares of Grantor Common Stock acquired pursuant to the Option with respect
to which Grantee then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price
for each share of Grantor Common Stock over (y) the purchase price (subject to
adjustment pursuant to Section 6 hereof), multiplied by the number of shares of
Grantor Common Stock with respect to which the Option has not been exercised;
and
(iii) the excess, if any, of the Applicable Price over
the purchase price (subject to adjustment pursuant to Section 6 hereof paid (or,
in the case of Option Shares with respect to which the Option has been exercised
but the Closing Date has not occurred, payable) by Grantee for each share of
Grantor Common Stock with respect to which the Option has been exercised and
with respect to which Grantee then has beneficial ownership, multiplied by the
number of such shares.
(b) If Grantee exercises its rights under this section,
Grantor shall, within 10 business days after the Request Date, pay the Grantor
Repurchase Consideration to Grantee in immediately available funds, and
contemporaneously with such payment Grantee shall surrender to Grantor the
Option and the certificates evidencing the shares of Grantor Common Stock
purchased thereunder with respect to which Grantee then has beneficial
ownership, and Grantee shall warrant that it has sole record and beneficial
ownership of such shares and that the same are then free and clear of all liens,
claims, charges and encumbrances of any kind whatsoever. Notwithstanding the
foregoing, to the extent that prior notification to or approval of the Federal
Reserve Board or other regulatory authority is required in connection with the
repayment of all or any portion of the Repurchase Consideration Grantee shall
have the ongoing option to revoke its request for repurchase pursuant to this
section, in whole or in part, or to require that Grantor deliver from time to
time that portion of the Repurchase Consideration that it is not then so
prohibited from paying and promptly file the required notice or application for
approval and expeditiously process
- 10 -
the same (and each party shall cooperate with the other in the filing of any
such notice or application and the obtaining of any such approval). If the
Federal Reserve Board or any other regulatory authority disapproves of any part
of Grantor's proposed repurchase pursuant to the section, Grantor shall promptly
give notice of such fact to Grantee. If the Federal Reserve Board or other
agency prohibits the repurchase in part but not in whole, then Grantee shall
have the right (i) to revoke the repurchase request, or (ii) to the extent
permitted by the Federal Reserve Board or other agency, determine whether the
purchase should apply to the Option and or Option shares and to what extent to
each, and Grantee shall thereupon have the right to exercise the Option as to
the number of Option shares for wich the Option was exercisable at the Request
Date less the sum of the number of shares covered by the Option in respect of
which payment has been made pursuant to this section and the number of shares
covered by the portion of the Option (if any) that has been repurchased. Grantee
shall notify Grantor of its determination under the preceding sentence within
five (5) business days of receipt of notice of disapproval of the purchase.
Notwithstanding anything herein to the contrary, all of Grantee's
rights under this section shall terminate on the date of termination of this
Option.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement to be effective as of the day and year set forth in the first
paragraph above.
CITIZENS & NORTHERN CORPORATION
By:_____________________________
Xxxxx X. Xxxxxxxxxx, President and Chief
Executive Officer
PEOPLES LTD.
By:______________________________
Xxxxxx X. Xxxxx, President and Chief
Executive Officer
- 11 -
EXHIBIT B
_____________, 2000
Citizens & Northern Corporation
Gentlemen:
I have been advised that as of the date hereof I may be deemed to be an
"affiliate" of Peoples, Ltd. (the "Company"), as that term is defined for
purposes of Paragraphs (c) and (d) of Rule 145 of the Rules and Regulations (the
"Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") promulgated under the Securities Act of 1933, as amended (the
"Act").
Pursuant to the terms of the Agreement and Plan of Merger by and between
Citizens & Northern Corporation ("CNN") and the Company dated as of June __,
2000 (the "Merger Agreement"), providing for the merger of the Company with and
into CNN (the "Merger"), and as a result of the Merger, I will receive shares of
CNN common stock ("CNN Common Stock") in exchange for shares of common stock of
the Company ("Company Stock") owned by me at the Effective Time (as defined and
determined pursuant to the Merger Agreement). This letter is being delivered
pursuant to Sections 5.09 and 6.03(d) of the Merger Agreement. I represent and
warrant to CNN that in such event:
A. I will not sell, assign or transfer the CNN Common Stock which I
receive as aforesaid in violation of the Act or the Rules and Regulations.
Moreover, to help insure that the Merger will qualify for pooling-of-interests
accounting treatment, I shall make no sale, transfer, or other disposition of
the CNN Common Stock which I receive as aforesaid until such time as financial
results covering at least thirty (30) days of post-merger combined operations of
CNN and the Company have been published within the meaning of Section 201.01 of
the Commission's Codification of Financial Reporting Policies.
B. I have carefully read this letter and the Merger Agreement and have
discussed their requirements and other applicable limitations upon my ability to
sell, transfer or otherwise dispose of the CNN Common Stock, to the extent I
feel necessary, with my counsel or counsel for the Company. I understand that
CNN is relying on the representations I am making in this letter and I hereby
agree to hold harmless and indemnify CNN and its officers and directors from and
against any losses, claims, damages, expenses (including reasonable attorneys'
fees), or liabilities ("Losses") to which CNN or any officer or director of CNN
may become subject under the Act or otherwise as a result of the untruth,
breach, or failure of such representations.
- 1 -
C. I have been advised that the issuance of the CNN Common Stock issued
to me pursuant to the Merger will have been registered with the Commission under
the Act on a Registration Statement on Form S-4. However, I have also been
advised that since I may be deemed to be an affiliate of the Company under the
Rules and Regulations at the time the Merger is submitted for a vote of the
shareholders of the Company, that the CNN Common Stock must be held by me
indefinitely unless (i) my subsequent distribution of CNN Common Stock has been
registered under the Act; (ii) a sale of the CNN Common Stock is made in
conformity with the volume and other applicable limitations of a transaction
permitted by Rule 145 promulgated by the Commission under the Act and as to
which CNN has received satisfactory evidence of the compliance and conformity
with said Rule, or (iii) a transaction in which, in the opinion of Squire,
Xxxxxxx & Xxxxxxx L.L.P. (or other counsel reasonably acceptable to CNN) or in
accordance with a no-action letter from the Commission, some other exemption
from registration is available with respect to any such proposed sale, transfer
or other disposition of the CNN Common Stock. I am also aware of the additional
limitation on transfers of CNN Common Stock set forth in the second sentence of
Paragraph A above.
D. I also understand that stop transfer instructions will be given to CNN
transfer agent with respect to any CNN Common Stock which I receive in the
Merger and that there will be placed on the certificates for such CNN Common
Stock, a legend stating in substance:
"The shares represented by this certificate have been issued or
transferred to the registered holder as a result of a transaction to
which Rule 145 under the Securities Act of 1933, as amended (the
"Act"), applies. The shares represented by this certificate may not
be sold, transferred or assigned, and the issuer shall not be required
to give effect to any attempted sale, transfer or assignment, except
pursuant to (i) an effective registration statement under the Act,
(ii) a transaction permitted by Rule 145 and as to which the issuer
has received reasonable and satisfactory evidence of compliance with
the provisions of Rule 145, or (iii) a transaction in which, in the
opinion of Squire, Xxxxxxx & Xxxxxxx L.L.P. or other counsel
satisfactory to the issuer or in accordance with a "no action" letter
from the staff of the Securities and Exchange Commission, such shares
are not required to be registered under the Act."
- 2 -
It is understood and agreed that the legend set forth in Paragraph D above shall
be removed and any stop order instructions with respect thereto shall be
canceled upon receipt of advice from Squire, Xxxxxxx & Xxxxxxx L.L.P. or other
counsel satisfactory to CNN that such actions are appropriate under the
then-existing circumstances.
Very truly yours,
----------------------------------------
(Name of Affiliate)
Date: ____________, 2000
PLEASE PRINT YOUR NAME
Accepted this _____ day of _____________, 2000
HERE:________________________
CITIZENS & NORTHERN CORPORATION
By:
-------------------------
Name:
Title:
- 3 -
EXHIBIT C
VOTING AGREEMENT
This Voting Agreement is entered into on __________, 2000 (this
"Agreement") by and among the persons listed on the attached Schedule A
(collectively, the "Control Stockholders").
WHEREAS, the Control Stockholders own _______ common shares, par value
$____ of Peoples, Ltd., a corporation organized and existing under the laws of
the Commonwealth of Pennsylvania (the "Company") (all shares of such stock now
owned and which may hereafter be acquired by the Control Stockholders prior to
the termination of this Agreement shall be referred to herein as the "Control
Shares");
WHEREAS, Citizens & Northern Corporation and the Company propose to enter
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), which provides, among other things, that the Company will merge
with and into Citizens & Northern Corporation, pursuant to the Merger (this and
other capitalized terms used and not defined herein shall have the meanings
given to such terms in the Merger Agreement).
WHEREAS, it is a condition to the willingness of Citizens & Northern
Corporation to enter into the Merger Agreement that the Control Stockholders
agree, and in order to induce Citizens & Northern Corporation to enter into the
Merger Agreement, the Control Stockholders have agreed to enter into this
Agreement; and
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereby agree as follows:
ARTICLE 1
VOTING OF CONTROL SHARES
1.1 VOTING AGREEMENT. Except as may be otherwise required to fulfill our
fiduciary duties as a Director of Peoples and/or Peoples State Bank of
Wyalusing, the Control Stockholders hereby agree that during the time this
Agreement is in effect, at any meeting of the stockholders of the Company,
however called, and in any action by consent of the stockholders of the Company,
they shall vote their Control Shares: (i) in favor of the Merger and the Merger
Agreement (as amended from time to time) and (ii) against any proposal for any
recapitalization, merger, sale of assets or other business combination between
the Company and any person or entity other than Citizens & Northern Corporation,
or any other action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or that would result in any of the conditions to the
obligations of the Company under the Merger Agreement not being fulfilled.
-1-
ARTICLE 2
REPRESENTATION AND WARRANTIES
The Control Stockholders hereby represent and warrant to Citizens &
Northern Corporation as follows:
2.1 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of them has all necessary
power and authority or capacity, as the case may be, to execute and deliver this
Agreement, to perform his, her or its obligations hereunder and to consummate
the transaction contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Control Stockholders and constitutes a legal,
valid and binding obligation of them, enforceable against them in accordance
with its terms subject to.
2.2 VOTING POWER OF THE CONTROL SHARES. The Control Shares collectively
represent _____ Percent (___%) of the voting power of the outstanding shares of
capital stock of the Company. The Control Shares are common shares, each of
which has one vote per share pursuant to the Articles of Incorporation of the
Company.
2.3 NO CONFLICT.
(a) The execution and delivery of this Agreement by the Control
Stockholders do not as of the hereof, and the performance of this Agreement
by them will not (i) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to them or by which the Control Shares
are bound, or (ii) result in any breach of or constitute a default (or
event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration
or cancellation of, or result in the creation of a lien or encumbrance on
any of the Control Shares pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument
or obligation to which any such Control Stockholder is a party or by which
any such Control Stockholder or any Control Shares are bound, except, in
the case of clauses (i) and (ii), for any such conflicts, violations,
breaches, defaults or other occurrences which would not prevent or delay
the performance by any Control Stockholders of his, her or its obligations
under this Agreement.
(b) The execution and delivery of this Agreement by the Control
Stockholders do not, and the performance of this Agreement by them will
not, require any consent, approval, authorization or permit of, or filing
with or notification to, any federal, state, local or foreign regulatory
body.
2.4 TITLE TO THE CONTROL SHARES. Each Control Stockholder is the sole
owner of the number and class of Control Shares specified on Schedule A hereto,
free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on voting rights, charges and
other encumbrances of any nature whatsoever. No Control Stockholder has
appointed or granted any proxy, which appointment or grant is still effective,
with respect to the
-2-
Common Shares. Each Control Stockholder has sole voting power with respect to
his, her or its Control Shares.
ARTICLE 3
MISCELLANEOUS
3.1 TERMINATION. This Agreement shall terminate on the earlier to occur
of (i) the date of consummation of the Merger and (ii) the date of the
termination of the Merger Agreement.
3.2 SPECIFIC PERFORMANCE. The Control Stockholders agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that Citizens & Northern
Corporation shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or in equity.
3.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings with
respect to the subject matter hereof.
3.4 AMENDMENT. This Agreement may not be amended except by an instrument
in writing signed by all the parties hereto.
3.5 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
3.6 GOVERNMENT LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
3.7 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
3.8 ASSIGNMENTS. This Agreement shall not be assigned by operation of law
or otherwise.
3.9 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any person, any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
-3-
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day first written above.
[SIGNATURE OF EACH CONTROL STOCKHOLDER INCLUDE STOCK HELD JOINTLY, ETC.]
-4-
SCHEDULE A
--------------------------------------------------------------------------------
NAME NUMBER OF CONTROL SHARES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-5-
EXHIBIT D
FIRST AMENDMENT
TO
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 15th day of May, 2000, between PEOPLES
LTD. (the "Corporation") and PEOPLES STATE BANK OF WYALUSING PA (the "Bank"),
and XXXXXX X. XXXXX (the "Executive").
WHEREAS, the Corporation, the Bank and the Executive entered into an
Executive Employment Agreement dated May 15, 2000 (the "Employment Agreement");
and
WHEREAS, the Corporation, the Bank and the Executive desire to amend
the Employment Agreement to accurately reflect the agreement of the parties;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and intending to be legally bound hereby, the parties agree
that the Employment Agreement is amended as follows:
1. Paragraph 1(a) is amended to read as follows:
(a) General. The Corporation and the Bank hereby shall
employ the Executive and the Executive hereby accepts
employment with the Corporation and Bank for a term
of two (2) year(s) beginning on January 1, 2000, and
ending on December 31, 2001, subject, however, to
prior termination of this Agreement as set forth
below.
2. Paragraph 1(b) is amended to read as follows:
(b) This Agreement shall renew and the Employment Period
shall be extended for an additional period of one (1)
year upon the mutual agreement (on or after September
1, 2001) of the Executive, the Corporation and the
Bank.
3. The following additional language is added at the end of
Paragraph 2:
Notwithstanding the foregoing, upon the Effective Time of the
merger of the Corporation with and into Citizens & Northern
Corporation (as such term is defined in that certain Agreement
and Plan of Merger dated June
___, 2000), the Executive's position shall be that of
Senior Vice President of the Bank and Senior Vice President
and Chief Executive Officer of Citizens & Northern Financial
Services Corporation with such duties as may from time to time
be prescribed by the Chief Executive Officer of Citizens &
Northern Bank as approved by the Board of Citizens & Northern
Bank.
4. A new paragraph 4(d) is hereby added to read as follows:
(d) CHANGE IN CONTROL PAYMENT. At the Effective Time of
the merger of the Corporation with and into Citizens
& Northern Corporation, providing that the Executive
was not terminated prior to said Effective Time by
the Corporation, the Executive shall be entitled to
receive a lump sum cash payment or such other form of
payment acceptable to the Executive equal to 2.99
times the highest annual compensation, including cash
bonuses, which the Executive received during the
preceding three (3) year period ending on the date of
termination (the "Payment Amount"). Executive will be
responsible for all tax withholding obligations with
respect to such payment (other than Medicare) and
will hold the Corporation and Citizens & Northern
Corporation harmless with respect thereto. In the
event that:
(i) the Payment Amount would be deemed to
include an "excess parachute payment" under
Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") or any
successor thereto, and
(ii) if such Payment Amount were reduced to an
amount (the "Non-Triggering Amount"), the
value of which is one dollar ($1.00) less
than an amount equal to three (3) times
Executive's "base amount," as determined in
accordance with said Code Section 280G, and
the Non-Triggering Amount would be greater
than the aggregate value of the Payment
Amount (without such reduction) minus the
amount of tax required to be paid by the
Executive thereon by Section 4999 of the
Code, then the Payment Amount shall be
reduced to the Non-Triggering Amount.
5. Paragraph 9(d) is amended to read as follows:
(d) TERMINATION BY EXECUTIVE. The Executive may terminate
his employment hereunder if (1) his health should
become impaired to an extent that it makes continued
performance of his duties hereunder hazardous to his
physical or mental health or his life, or (2) for
Good Reason. The term "Good Reason" shall mean (i)
any removal of the Executive from (other than as a
result of his
- 2 -
regulatory removal) any of the positions indicated in
Paragraph 2 hereof, except in connection with
termination of the Executive's employment for Cause
or (ii) failure of the Bank to comply with Paragraph
5 hereof, after notice from the Executive to the
Corporation and the Bank that such action or
limitation of the Bank or Corporation constitutes
Good Reason and the failure to cure such situation
within thirty (30) day(s) of said notice, or if said
situation cannot be cured within thirty (30) day(s),
within a reasonable time thereafter if a diligent
effort is being made by the Corporation and/or the
Bank to cure such situation.
6. The phrase "other than a Change of Control as defined herein"
is deleted form the seventh line of Paragraph 10(b).
7. Paragraph 10(c) is amended to read as follows:
If the Executive terminates his employment for Good Reason or
the Bank or Corporation or Citizens & Northern Corporation
terminates the Executive's employment other than for Cause,
the Corporation and/or Bank or Citizens & Northern Corporation
(as applicable) shall maintain in full force and effect, for
the continued benefit of the Executive through the term of his
Agreement, all employee benefit plans and programs to which
the Executive was entitled prior to the date of termination,
except those under paragraphs 5(b) (but not including accrued
vacation days), (c) and (d), if the Executive's continued
participation is possible under the general terms and
provisions of such plans and programs except that if the
Executive's participation in any health, medical, life
insurance or disability plan or program is barred, the
Corporation and/or Bank or Citizens & Northern Corporation (as
applicable) shall obtain and pay for, on the Executive's
behalf, individual insurance plans, policies or programs which
provide to the Executive health, medical, life and disability
insurance coverage which is substantially equivalent to the
insurance coverage which the Executive was entitled prior to
the date of termination.
8. Paragraph 10(d) is deleted in its entirety.
9. Paragraph 13 is deleted in its entirety.
10. Paragraph 14 is deleted in its entirety.
- 3 -
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be duly executed in their respective names
and, in the case of the Corporation and Bank, by its authorized representatives
as of the day and year above mentioned.
ATTEST: PEOPLES STATE BANK OF
WYALUSING PA
By:
---------------------------------- --------------------------------
SECRETARY Xxxxxxx Xxxxxx, Jr.
Chairman
ATTEST: PEOPLES LTD.
By:
---------------------------------- --------------------------------
SECRETARY Xxxxxxx Xxxxxx, Jr.
Chairman
WITNESS:
---------------------------------- --------------------------------
Xxxxxx X. Xxxxx
- 4 -
