EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
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THIS AGREEMENT dated as of December 19, 1996 (the "Agreement") between
KEYSTONE FINANCIAL, INC., a Pennsylvania corporation ("Keystone"), and
FINANCIAL TRUST CORP, a Pennsylvania corporation ("FTC"),
W I T N E S S E T H :
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WHEREAS, Keystone and FTC desire to merge in the manner provided for herein;
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements herein contained and intending to be legally bound
hereby, covenant and agree as follows:
ARTICLE I
THE MERGER
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1.1. The Merger. The reorganization contemplated by this Agreement is
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the merger of FTC and Keystone (the "Merger") pursuant to the Agreement and Plan
of Merger attached hereto as Appendix A (the "Merger Agreement"). As provided in
the Merger Agreement, at the Effective Time (as defined in Section 8.1 hereof)
FTC will be merged with and into Keystone, which will be the surviving
corporation. In the Merger, each outstanding share of Common Stock, par value
$5.00 per share, of FTC ("FTC Common Stock") will be converted into 1.65 shares
(the "Exchange Ratio") of Common Stock, par value $2.00 per share, of Keystone
("Keystone Common Stock") (with cash in lieu of any fractional share) as
provided in the Merger Agreement. The Exchange Ratio is subject to adjustment as
provided in the Merger Agreement.
ARTICLE II
CONDITIONS
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2.1. Mutual Conditions. The respective obligations of each party to effect
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the Merger shall be subject to the fulfillment at or prior to the Closing of
the following conditions:
(a) Shareholder Approval. This Agreement and the Merger Agreement
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shall have been approved by the affirmative vote of (1) the holders of at least
two-thirds of the outstanding shares of FTC Common Stock at the FTC Shareholders
Meeting referred to in Section 6.3 and (2) at least a majority of the votes cast
thereon by the holders of Keystone Common Stock at the Keystone Shareholders
Meeting referred to in Section 6.3, at which meetings a quorum of such
shareholders shall be present in person or by proxy.
(b) Regulatory Approvals. The Merger shall have been approved (1) by
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the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board") under Section 3(a) of the Bank Holding Company Act of 1956 (the "Bank
Holding Company Act"), 12 U.S.C. (S) 1842(a), (2) by the Pennsylvania Department
of Banking (the "Department") under Section 112 of the Pennsylvania Banking Code
of 1965 (the "Pennsylvania Banking Code"), 7 P.S. (S) 112, and (3) by
the Maryland Bank Commissioner under Subtitle 9 of Title 5 of the Maryland
Financial Institutions Code, Md. Financial Institutions Code Xxx. (S) 5-901 et
seq.; any other regulatory approvals necessary to the consummation of the Merger
shall have been obtained; and all waiting periods imposed by any governmental
authority in connection therewith shall have expired. None of such regulatory
approvals shall contain or impose any conditions or requirements, including
without limitation requirements relating to divestiture of branches or other
material assets, which Keystone in its reasonable judgment considers to be
materially adverse to its interests. No action or suit to enjoin or prohibit the
Merger shall have been filed by the United States under the antitrust laws
during the 30 days following the date of the approval of the Merger by the
Federal Reserve Board.
(c) Securities Act Registration. The Registration Statement
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contemplated by Section 6.1 hereof shall have been filed by Keystone with the
Securities and Exchange Commission ("SEC") under the Securities Act of 1933, as
amended (the "Securities Act"), and shall have been declared effective prior to
the time the joint proxy statement/prospectus contained therein (the "Proxy
Statement/Prospectus ") is first mailed to the shareholders of FTC and Keystone,
and no stop order with respect to the effectiveness of the Registration
Statement shall have been issued nor any proceeding therefor initiated or
threatened. In addition, the shares of Keystone Common Stock to be issued
pursuant to the Merger Agreement shall be duly registered or qualified under the
securities or "blue sky" laws of all states in which such action is required for
purposes of the initial issuance of such stock and its distribution to the
shareholders of FTC entitled to receive it.
(d) Federal Tax Opinion. There shall have been received by each party
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an opinion of counsel or of independent public accountants satisfactory to the
parties, to the effect that:
(i) The Merger will constitute a reorganization within the meaning
of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code"), and Keystone and FTC will each be a "party to a reorganization" within
the meaning of Section 368(b) of the Code;
(ii) No gain or loss will be recognized by Keystone or FTC as a
result of the Merger;
(iii) Except for cash received in lieu of fractional shares, no
gain or loss will be recognized by the shareholders of FTC who receive solely
Keystone Common Stock on the exchange of their shares of FTC Common Stock for
shares of Keystone Common Stock;
(iv) The basis of the shares of Keystone Common Stock to be
received by the shareholders of FTC will be the same as the basis of the shares
of FTC Common Stock exchanged therefor; and
(v) The holding period of the shares of Keystone Common Stock to
be received by the shareholders of FTC will include the period during which the
FTC Common Stock surrendered in exchange therefor was held by the FTC
shareholder, provided such FTC Common Stock was held as a capital asset in the
hands of the FTC shareholder at the time of the exchange.
2.2. Keystone Conditions. The obligations of Keystone to effect the Merger
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shall be subject to the fulfillment at or prior to the Closing of the following
conditions:
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(a) Representations and Warranties; Performance of Obligations. Except
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as otherwise consented to in writing by Keystone or contemplated by this
Agreement, the representations and warranties of FTC contained herein shall be
true and correct in all material respects as of the date hereof and as of the
date of the Closing as though made on such date, except that any representation
or warranty which specifically relates to an earlier date shall be true and
correct in all material respects as of such earlier date; FTC shall have
performed or complied in all material respects with all agreements, covenants
and conditions under this Agreement and the Merger Agreement required to be
performed or complied with by FTC at or prior to the Closing; and Keystone shall
have received a certificate to each of the foregoing effects signed by the
principal executive officer, the principal accounting officer and the secretary
or an assistant secretary of FTC.
(b) Investment Banker's Opinion. Keystone shall have received from an
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investment banking or financial advisory firm nationally or regionally
recognized in the valuation of financial institution securities an affirmative
written opinion dated as of a date within twenty business days of the date of
mailing to the shareholders of Keystone of the Proxy Statement/Prospectus to the
effect that, as of the date of such opinion, the terms of the Merger are fair,
from a financial point of view, to Keystone and its shareholders.
(c) Accounting Treatment. The Merger shall as of the date of the
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Closing meet the requirements for pooling-of-interests accounting treatment
under generally accepted accounting principles and under the accounting rules of
the SEC, and, if requested by Keystone, Keystone shall have received a letter
from Ernst & Young LLP in form and substance reasonably satisfactory to Keystone
as to the foregoing matters.
(d) Affiliates' Agreements. Keystone shall have received from each of
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the persons identified by FTC pursuant to Section 6.4 hereof an executed
counterpart of an affiliate's agreement in the form contemplated by such
Section.
(e) Legal Opinion. Keystone shall have received from XxXxxx, Xxxxxxx &
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Nurick, counsel for FTC, an opinion dated the date of the Closing and in form
and substance reasonably satisfactory to Keystone as to such matters related to
this Agreement, the Merger Agreement and the transactions contemplated thereby
as Keystone may reasonably request.
(f) Orders, etc. Neither Keystone nor FTC shall be subject to any
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order, decree or injunction of any court or agency of competent jurisdiction
which enjoins, prohibits or materially adversely affects the Merger or to any
pending or threatened litigation or proceeding by or before any such court or
agency which seeks to enjoin or prohibit the Merger or to impose material
damages on either party or any of its directors or officers by reason thereof.
(g) Additional Documents. Keystone shall have received such certified
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or other copies of such documents and proceedings of FTC in connection with the
transactions contemplated hereby as Keystone may reasonably request.
2.3. FTC Conditions. The obligations of FTC to effect the Merger shall be
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subject to the fulfillment at or prior to the Closing of the following
conditions:
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(a) Representations and Warranties; Performance of Obligations. Except
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as otherwise consented to in writing by FTC or contemplated by this Agreement,
the representations and warranties of Keystone contained herein shall be true
and correct in all material respects as of the date hereof and as of the date of
the Closing as though made on such date, except that any representation or
warranty which specifically relates to an earlier date shall be true and correct
in all material respects as of such earlier date; Keystone shall have performed
or complied in all material respects with all agreements, covenants and
conditions under this Agreement and the Merger Agreement required to be
performed or complied with by Keystone at or prior to the Closing; and FTC shall
have received a certificate to each of the foregoing effects signed by the
principal executive officer, the principal accounting officer and the secretary
or an assistant secretary of Keystone.
(b) Investment Banker's Opinion. FTC shall have received from Berwind
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Financial Group, L.P. or another investment banking or financial advisory firm
nationally or regionally recognized in the valuation of financial institution
securities an affirmative written opinion dated as of a date within twenty
business days of the date of mailing to the shareholders of FTC of the Proxy
Statement/Prospectus to the effect that, as of the date of such opinion, the
terms of the Merger are fair, from a financial point of view, to FTC and its
shareholders.
(c) Legal Opinion. FTC shall have received from Xxxx Xxxxx Xxxx &
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XxXxxx, counsel for Keystone, an opinion dated the date of the Closing and in
form and substance reasonably satisfactory to FTC as to such matters related to
this Agreement, the Merger Agreement and the transactions contemplated thereby
as FTC may reasonably request.
(d) Orders, etc. Neither Keystone nor FTC shall be subject to any
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order, decree or injunction of any court or agency of competent jurisdiction
which enjoins or prohibits the Merger or to any pending or threatened litigation
or proceeding by or before any such court or agency which seeks to enjoin or
prohibit the Merger or to impose material damages on either party or any of
FTC's directors or officers by reason thereof.
(e) Keystone Rights Agreement. If a Distribution Date, as such term is
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defined in the Rights Agreement dated as of January 25, 1990, as amended (the
"Keystone Rights Agreement"), between Keystone and American Stock Transfer and
Trust Company, as Rights Agent, shall have occurred, then either (i) all Rights
(as defined in the Keystone Rights Agreement) then outstanding (other than
Rights which have become void pursuant to Section 7(f) of the Keystone Rights
Agreement) shall have been either (A) exchanged for shares of Keystone Common
Stock pursuant to Section 24 of the Keystone Rights Agreement or (B) redeemed
pursuant to Section 23 of the Keystone Rights Agreement or (ii) Keystone shall
have made adequate provision for the issuance of a right substantially
equivalent to the Rights with each share of Keystone Common Stock issuable
pursuant to the Merger Agreement.
(f) Additional Documents. FTC shall have received such certified or
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other copies of such documents and proceedings of Keystone in connection with
the transactions contemplated hereby as FTC may reasonably request.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FTC
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FTC represents and warrants to Keystone that, except in each case as
disclosed in a letter delivered to Keystone on the date of this Agreement:
3.1. Organization. FTC is a corporation duly organized, validly existing and
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in good standing under the laws of the Commonwealth of Pennsylvania and is duly
registered as a bank holding company under the Bank Holding Company Act. FTC has
full corporate power and legal authority (including all material licenses,
franchises, permits and other governmental authorizations which are legally
required) to own its assets and to transact the business in which it is
presently engaged.
3.2. Capitalization. The authorized capital stock of FTC consists as of the
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date of this Agreement of 16,000,000 shares of FTC Common Stock, of which
8,507,932 shares are issued and outstanding and 32,663 shares are held in
treasury. All of such issued and outstanding shares are duly and validly
authorized and issued, fully paid and nonassessable. Except for (1) the
Investment Agreement between Keystone and FTC dated the date hereof and the
Warrants issued thereunder (collectively, the "Warrant Agreement") and (2) stock
options for 94,760 shares of FTC Common Stock outstanding under FTC's Stock
Option Plan of 1992 and its Non-Employee Director Stock Option Plan of 1994 (the
"FTC Option Plans") and stock options exercisable in December 1996 under FTC's
Employee Stock Purchase Plan of 1992 (together with the options outstanding
under the FTC Option Plans, the "Outstanding FTC Options"), FTC is not a party
to or bound by any option, call, warrant, conversion privilege or other
agreement obligating FTC at present, at any future time or upon the occurrence
of any event to issue or sell any shares of FTC Common Stock or other capital
stock of FTC. None of the terms of any Outstanding FTC Options provide that upon
consummation of the Merger (i) unexercised options shall be converted into
options for greater than the number of shares of Keystone Common Stock the
optionee would have received in the Merger had the option been exercised prior
to the Merger, (ii) the aggregate option price shall be decreased or (iii) the
per share option price shall be adjusted other than proportionately to reflect
the number of shares of Keystone Common Stock subject to the option.
3.3. Subsidiaries. FTC owns, directly or indirectly, all of the issued and
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outstanding shares of capital stock of Financial Trust Company, Chambersburg
Trust Company, First National Bank and Trust Co. and Washington County National
Bank (collectively, the "FTC Bank Subsidiaries") and of Financial Trust Services
Company, Financial Trust Life Insurance Company and FT Realty Co. (all of the
foregoing banks and corporations, collectively, the FTC Subsidiaries"). FTC has
no other direct or indirect subsidiaries. All of the issued and outstanding
capital stock of the FTC Subsidiaries is duly and validly authorized and issued,
fully paid and nonassessable (except with respect to the national banks as
provided in Section 55 of the National Bank Act) and is owned by FTC or an FTC
Subsidiary free and clear of any liens, security interests, encumbrances,
restrictions or other rights of any third person with respect thereto. There are
no options, calls, warrants, conversion privileges or other agreements
obligating any FTC Subsidiary at present or upon the occurrence of any event to
issue or sell any shares of its capital stock. Each of Financial Trust Company
and Chambersburg Trust Company is a bank and trust company duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania; each of First National Bank and Trust Co. and Washington County
National Bank is a national banking association duly organized, validly existing
and in good standing under the laws of the United States; Financial Trust
Services Company is a trust company duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania; Financial Trust
Life Insurance Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Arizona;
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and FT Realty Co. is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania. Each of the FTC
Bank Subsidiaries is duly authorized to engage in the banking and trust business
as an insured bank under the Federal Deposit Insurance Act (the "FDIC Act").
Each FTC Subsidiary has full corporate power and legal authority (including all
material licenses, franchises, permits and other governmental authorizations
which are legally required) to own its assets and to transact the business in
which it is presently engaged.
3.4. Joint Ventures, etc. Neither FTC nor any FTC Subsidiary is a party to
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any joint venture, a general or limited partner of any partnership or the owner
of any equity or similar interest in any other person (including without
limitation any interest pursuant to which FTC or an FTC Subsidiary has or may in
any circumstance have an obligation to make a capital contribution to, or be
liable for or on account of the liabilities, acts or omissions of, such other
person) except (i) FTC's ownership of all the issued and outstanding capital
stock of the FTC Subsidiaries identified in Section 3.3 and (ii) the ownership
of marketable equity securities held as investments in the ordinary course of
business and not exceeding 5% of the outstanding shares of any class and (iii)
joint venture or other interests disclosed to Keystone in writing on the date
hereof (the "FTC Joint Ventures").
3.5. Corporate Authority; Absence of Violation. The Board of Directors of
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FTC has authorized the execution and delivery by FTC of this Agreement, the
Merger Agreement and the Warrant Agreement, has authorized the performance by
FTC of this Agreement and the Warrant Agreement, has directed or will direct
that this Agreement and the Merger Agreement be submitted to the shareholders of
FTC for their approval and, subject to such approval, has authorized the
performance by FTC of the Merger Agreement. FTC has the full power, authority
and legal right to enter into this Agreement, the Merger Agreement and the
Warrant Agreement, to perform its obligations hereunder and under the Warrant
Agreement (except that the acquisition of more than 5% of the outstanding FTC
Common Stock and certain other transactions pursuant to the Warrant Agreement
would require the approval of regulatory authorities) and, subject to the
approval of its shareholders and regulatory authorities, to perform its
obligations under the Merger Agreement. This Agreement, the Merger Agreement and
the Warrant Agreement have been duly and validly executed and delivered by FTC,
and this Agreement constitutes, and subject to the approval of its shareholders
and regulatory authorities the Merger Agreement constitutes, a valid and binding
obligation of FTC enforceable against FTC in accordance with its terms, except
to the extent enforcement is limited by bankruptcy, insolvency, moratorium,
conservatorship, receivership or other similar laws of general application
affecting creditors' rights or by the application by a court of equitable
principles. Neither the execution and delivery by FTC of this Agreement, the
Merger Agreement or the Warrant Agreement, compliance by FTC with any provision
hereof or of the Warrant Agreement, nor, subject to the approval of its
shareholders and regulatory authorities, compliance by FTC with any provision of
the Merger Agreement will (i) violate any provision of the Articles of
Incorporation or By-Laws of FTC, (ii) conflict with or result in a material
breach of or material default under any material agreement, obligation or
instrument to which FTC or any FTC Subsidiary is a party or by which any of them
is bound or to which any of their material properties or assets is subject or
(iii) violate any order or decree of any court or governmental authority or any
statute, rule or regulation applicable to FTC, any FTC Subsidiary or any of
their properties or assets (except that the acquisition of more than 5% of the
outstanding FTC Common Stock and certain other transactions pursuant to the
Warrant Agreement would require the approval of regulatory authorities).
3.6. Exchange Act Reports and Financial Statements. FTC has delivered to
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Keystone (i) FTC's Annual Report on Form 10-K for the year ended December 31,
1995 containing consolidated balance sheets of FTC at December 31, 1995 and 1994
and consolidated statements of income, shareholders' equity and cash flows of
FTC for the three years ended December 31, 1995, all certified by Ernst & Young
LLP,
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independent auditors, (ii) FTC's Quarterly Reports on Form 10-Q for the
quarters ended March 31, June 30, 1996 and September 30, 1996 containing
unaudited consolidated balance sheets of FTC as of such dates and unaudited
consolidated statements of income and cash flows of FTC for the interim periods
reflected therein and (iii) any Current Reports on Form 8-K filed by FTC since
December 31, 1995. All such reports (i) comply in all material respects with the
requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and the
rules and regulations of the SEC thereunder, (ii) do not contain any untrue
statement of a material fact and (iii) do not 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. All such
financial statements, including the related notes and schedules, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis (except as indicated therein) and fairly present the
consolidated financial condition, assets and liabilities of FTC at the dates
thereof and the consolidated results of operations, shareholders' equity and
cash flows of FTC for the periods stated therein, subject, in the case of the
interim financial statements, to normal and recurring year-end audit adjustments
and except that the interim financial statements do not contain all of the notes
required by generally accepted accounting principles.
3.7. Absence of Certain Changes. Since December 31, 1995 there has not been
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any material change in the condition, financial or otherwise, or in the assets,
liabilities or business of FTC and the FTC Subsidiaries other than changes in
the ordinary course of business, none of which changes has had, or may be
reasonably expected to have, a material adverse effect on the financial
condition, results of operations, adequacy of the allowance for loan losses or
business of FTC and the FTC Subsidiaries taken as a whole. Since December 31,
1995 there has not been (i) any damage to or destruction or loss of property of
FTC or any FTC Subsidiary (whether or not insured) which has had or may have a
material adverse effect on the business of FTC or any FTC Subsidiary or (ii) any
material event which, had it occurred subsequent to the date hereof, would have
required the consent of Keystone under Section 5.1 hereof.
3.8. Taxes. (a) The Federal income tax returns of FTC and the FTC
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Subsidiaries have either been audited by the Internal Revenue Service or closed
by statute for all periods beginning prior to January 1, 1995, except that the
Federal income tax returns of Washington County National Bank for 1993, 1994 and
the nine months ended September 30, 1995 remain open. All taxes, deficiencies,
interest and penalties which are reflected as due under such returns or which
have been assessed as a result of such audits have been paid in full, and there
are no outstanding agreements to extend periods during which additional
assessments may be made.
(b) Federal income tax returns of FTC and the FTC Subsidiaries for all
periods beginning on or after January 1, 1995 have been timely filed. Such
returns are accurate in all material respects, and to the best of FTC's
knowledge there is no material proposed deficiency, assessment, penalty or
delinquency with respect to any of such returns or any of the taxes reflected as
due and payable thereby. All taxes, deficiencies, interest and penalties which
are reflected as due under such returns or which have been assessed as a result
of audits thereof have either been paid in full or have been accrued or
adequately reserved against in the financial statements contained in FTC's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996.
(c) All required Federal income tax returns of any FTC Joint Venture and all
returns in respect of all other Federal, state and local taxes of any kind
required to be filed by FTC, any FTC Subsidiary or any FTC Joint Venture have
been timely filed, and all taxes, interest and penalties due in respect thereof
have been paid. Such returns are accurate in all material respects, and to the
best of FTC's knowledge there is no material proposed deficiency, assessment,
penalty or delinquency with respect to any of such returns or any of the taxes
reflected as due and payable thereby.
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3.9. Properties. FTC and the FTC Subsidiaries have good and marketable title
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to all of their properties and assets (including those reflected in the
consolidated balance sheet of FTC at December 31, 1995, except such as have been
disposed of in the ordinary course of business) free of any mortgage,
encumbrance, lien or security interest, except pledges of assets to secure
public deposits and minor imperfections in title and encumbrances which do not
materially detract from the value or impair the use of the properties affected
thereby. All leases material to FTC pursuant to which FTC or any FTC Subsidiary,
as lessee, leases real or personal property are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any material existing default by FTC or any FTC Subsidiary or any event
which with notice or lapse of time or both would constitute such a material
default.
3.10. Employee Contracts and Plans. Except as disclosed to Keystone in
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writing on the date hereof, neither FTC nor any FTC Subsidiary is a party or
subject to (i) any contract of employment or consulting agreement not terminable
at will without penalty, (ii) any collective bargaining agreement or (iii) any
profit sharing, pension, retirement, thrift, savings, incentive compensation,
deferred compensation, bonus, stock option, stock purchase, restricted stock,
stock appreciation right, performance share, performance unit, severance, salary
continuation, holiday, vacation, disability, insurance, medical or other
employee benefit, incentive or welfare plan, policy, contract or arrangement
("Employee Benefit Plan"). FTC has heretofore made available to Keystone copies
of all Employee Benefit Plans of FTC and the FTC Subsidiaries, including
individual employment contracts and stock option agreements. There are no
pending or threatened strikes or labor stoppages involving any employees of FTC
or any FTC Subsidiary, nor is FTC or any FTC Subsidiary aware of any organizing
activity seeking to certify a collective bargaining unit or representative for
any of such employees. All retirement and employee benefit or welfare plans of
FTC or any FTC Subsidiary have been maintained and operated in accordance with
their terms, and all such plans which are subject to the Employee Retirement
Income Security Act of 1974 ("ERISA") and/or the Code have been maintained and
operated in material compliance with all applicable provisions of ERISA and the
Code and the regulations thereunder and are not subject to any accumulated
funding deficiency within the meaning of ERISA and the regulations thereunder or
to any outstanding liability to the Pension Benefit Guaranty Corporation. No
"prohibited transaction" has occurred and is continuing with respect to any such
plan, nor has any "reportable event" occurred in respect thereof, as such terms
are defined in ERISA and the regulations thereunder, and no such plan is a
"Multiemployer Plan" or a "Multiple Employer Plan", as such terms are defined in
ERISA and the regulations thereunder. The current value of the assets of each
FTC Employee Benefit Plan that is subject to Title IV of ERISA exceeds the
present value of the accrued benefits under such plan based upon the actuarial
assumptions (to the extent reasonable) presently used by such plan, and there is
no complete or partial withdrawal liability within the meaning of Sections 4205
and 4203 of ERISA (and there would be no such liability assuming a complete or
partial withdrawal from all FTC Employee Benefit Plans at the Effective Time)
with respect to any such plan. There are no pending, threatened or anticipated
claims (other than routine claims for benefits) by, on behalf of or against any
of the FTC Employee Benefit Plans or any trusts related thereto.
3.11. Other Material Contracts. Neither FTC nor any FTC Subsidiary is a
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party or subject to any other contract or agreement which, if entered into after
the date hereof, would require the consent of Keystone under Section 5.1 hereof.
3.12. Litigation and Other Proceedings. Neither FTC nor any FTC Subsidiary
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is a party or subject to any pending, or to the knowledge of FTC may become a
party or subject to any threatened, action, suit, arbitration, administrative
proceeding or investigation, or judicial or administrative order, judgment or
decree, which individually or in the aggregate will have, or could reasonably be
expected to
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have, a material adverse effect on the consolidated financial condition, results
of operations or business of FTC and the FTC Subsidiaries taken as a whole.
3.13. Compliance with Laws; Regulatory Matters. FTC and the FTC Subsidiaries
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are in compliance in all material respects with all laws, rules and regulations,
all orders, directives and supervisory letters of, and all agreements, memoranda
of understanding or similar arrangements with, regulatory authorities and all
other legal requirements applicable to them or their businesses. Neither FTC nor
any FTC Subsidiary is subject to any order, directive or supervisory letter of,
or agreement, memorandum of understanding or similar arrangement (including
board resolutions adopted at the request of a regulatory authority) with, any
regulatory authority restricting its operations, restricting it from taking any
action or requiring that certain actions be taken, and FTC has no knowledge that
any such order, directive, supervisory letter, agreement, memorandum of
understanding or similar arrangement is threatened, contemplated or under
consideration by any regulatory authority.
3.14. Environmental Matters. To the knowledge of FTC, (a) no Hazardous
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Substances (as hereinafter defined) have been stored, treated, dumped, spilled,
disposed of, discharged, released or deposited in violation of any law or
regulation or in a manner which would subject FTC or any FTC Subsidiary to
liability under any law or regulation at, under or on (1) any property now
owned, occupied or leased ("Present Property") by FTC, any FTC Subsidiary, any
former subsidiary of FTC or any FTC Joint Venture (each, an "FTC Entity"), (2)
any property previously owned, occupied or leased ("Former Property") by any FTC
Entity during the time of such previous ownership, occupancy or lease; or (3)
any Participation Facility (as hereinafter defined) during the time that any FTC
Entity participated in the management of, or may be deemed to be or to have been
an owner or operator of, such Participation Facility; (b) no FTC Entity has
disposed of, or arranged for the disposal of, Hazardous Substances in violation
of any law or regulation or in a manner which would subject FTC or any FTC
Subsidiary to liability under any law or regulation from any Present Property,
Former Property or Participation Facility, and no owner or operator of a
Participation Facility disposed of, or arranged for the disposal of, Hazardous
Substances in violation of any law or regulation or in a manner which would
subject FTC or any FTC Subsidiary to liability under any law or regulation from
a Participation Facility during the time that any FTC Entity participated in the
management of, or may be deemed to be or to have been an owner or operator of,
such Participation Facility; and (c) no Hazardous Substances have been stored,
treated, dumped, spilled, disposed of, discharged, released or deposited in
violation of any law or regulation or in a manner which would subject FTC or any
FTC Subsidiary to liability under any law or regulation at, under or on any Loan
Property (as hereinafter defined), nor is there, with respect to any such Loan
Property, any violation of environmental law which could materially adversely
affect the value of such Loan Property to an extent which could prevent or delay
any FTC Entity from recovering the full value of its loan in the event of a
foreclosure on such Loan Property.
As used in this Section 3.14, (a) "Participation Facility" shall mean any
property or facility of which any FTC Entity (i) has at any time participated in
the management or (ii) may be deemed to be or to have been an owner or operator,
(b) "Loan Property" shall mean any real property in which any FTC Entity holds a
security interest in an amount greater than $100,000 and (c) "Hazardous
Substances" shall mean (i) any flammable substances, explosives, radioactive
materials, hazardous materials, hazardous substances, hazardous wastes, toxic
substances, pollutants, contaminants or any related materials or substances
specified in any applicable Federal or Pennsylvania law or regulation relating
to pollution or protection of human health or the environment (including,
without limitation, ambient or indoor air, surface water, groundwater, land
surface or subsurface strata) and (ii) friable asbestos, polychlorinated
biphenyls, urea formaldehyde, and petroleum and petroleum-based fuels.
-9-
3.15. Proxy Statement/Prospectus, etc. None of the information relating to
-------------------------------
FTC or any FTC Subsidiary contained in the Proxy Statement/Prospectus or in any
amendment or supplement thereto, at the time the Registration Statement is
declared effective, at the time the Proxy Statement/Prospectus is mailed to the
shareholders of FTC and Keystone or at the dates of the Shareholders' Meetings
of FTC and Keystone to consider the Merger, will 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, in light of the circumstances under
which they are made, not misleading. All documents which FTC is responsible for
filing with the SEC or any regulatory agency in connection with the Merger will
comply as to form in all material respects with the requirements of applicable
law, and all of the information relating to FTC and the FTC Subsidiaries in any
document filed with the SEC or any other regulatory agency in connection with
this Agreement, the Merger Agreement or the transactions contemplated thereby
shall be true and correct in all material respects.
3.16. Accurate and Complete Disclosure. To the knowledge of FTC, the
--------------------------------
information furnished to Keystone by or on behalf of FTC or any FTC Subsidiary
in connection with its investigation of FTC and the FTC Subsidiaries, whether
before or after the date of this Agreement, is true and correct in all material
respects, and no representation or warranty of FTC contained herein contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading. Other than matters of a general economic,
regulatory or political nature, there are no presently existing material facts,
circumstances or contingencies known to FTC which have had or which may be
reasonably expected in the future to have a material adverse effect on the
consolidated financial condition, results of operations or business of FTC and
the FTC Subsidiaries taken as a whole.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF KEYSTONE
------------------------------------------
Keystone represents and warrants to FTC that, except in each case as
disclosed in a letter delivered to FTC on the date of this Agreement:
4.1. Organization. Keystone is a corporation duly organized, validly
------------
existing and in good standing under the laws of the Commonwealth of Pennsylvania
and is duly registered as a bank holding company under the Bank Holding Company
Act. Keystone has full corporate power and legal authority (including all
material licenses, franchises, permits and other governmental authorizations
which are legally required) to own its assets and to transact the business in
which it is presently engaged.
4.2. Capitalization. As of the date of this Agreement, the authorized
--------------
capital stock of Keystone consists of 75,000,000 shares of Keystone Common
Stock, of which approximately 37,998,000 shares are issued and outstanding, and
8,000,000 shares of Preferred Stock, par value $1.00 per share, of which no
shares have been issued. All of such issued and outstanding shares are, and upon
consummation of the Merger the shares of Keystone Common Stock to be issued
pursuant to the Merger Agreement will be, duly and validly authorized and
issued, fully paid and nonassessable.
4.3. Bank Subsidiaries. Keystone owns, directly or indirectly, all of the
-----------------
issued and outstanding shares of capital stock of Mid-State Bank and Trust
Company, Northern Central Bank, Pennsylvania National Bank and Trust Company,
The Frankford Bank, N.A. and American Trust Bank, N.A. (collectively, the
"Keystone Bank Subsidiaries"). All of the issued and outstanding capital stock
of the Keystone Bank Subsidiaries is duly and validly authorized and issued,
fully paid and nonassessable (except
-10-
with respect to the national banks as provided in Section 55 of the National
Bank Act) and is owned by Keystone free and clear of any liens, security
interests, encumbrances, restrictions on transfer or other rights of any third
person with respect thereto. There are no options, calls, warrants, conversion
privileges or other agreements obligating any Keystone Bank Subsidiary at
present or upon the occurrence of any event to issue or sell any shares of its
capital stock. Each of the Keystone Bank Subsidiaries is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is duly authorized to engage in the banking or banking and
trust business as an insured depository institution under the FDIC Act. Each
Keystone Bank Subsidiary has full corporate power and legal authority (including
all material licenses, franchises, permits and other governmental authorizations
which are legally required) to own its assets and to transact the business in
which it is presently engaged.
4.4. Corporate Authority; Absence of Violation. The Board of Directors of
-----------------------------------------
Keystone has authorized the execution and delivery by Keystone of this
Agreement, the Merger Agreement and the Warrant Agreement, has authorized the
performance by Keystone of this Agreement and the Warrant Agreement, has
directed or will direct that this Agreement and the Merger Agreement be
submitted to the shareholders of Keystone for their approval and, subject to
such approval and to the approval of regulatory authorities, has authorized the
performance by Keystone of the Merger Agreement. Keystone has the full power,
authority and legal right to enter into this Agreement, the Merger Agreement and
the Warrant Agreement, to perform its obligations hereunder and under the
Warrant Agreement (except that the acquisition of more than 5% of the
outstanding FTC Common Stock and certain other transactions pursuant to the
Warrant Agreement would require the approval of regulatory authorities) and,
subject to the approval of its shareholders and regulatory authorities, to
perform its obligations under the Merger Agreement. This Agreement, the Merger
Agreement and the Warrant Agreement have been duly and validly executed and
delivered by Keystone, and this Agreement constitutes, and subject to the
approval of its shareholders and regulatory authorities the Merger Agreement
constitutes, a valid and binding obligation of Keystone enforceable against
Keystone in accordance with its terms, except to the extent enforcement is
limited by bankruptcy, insolvency, moratorium, conservatorship, receivership or
other similar laws of general application affecting creditors' rights or by the
application by a court of equitable principles. Neither the execution and
delivery by Keystone of this Agreement, the Merger Agreement or the Warrant
Agreement, compliance by Keystone with any provision hereof or of the Warrant
Agreement, nor, subject to the approval of its shareholders and regulatory
authorities, compliance by Keystone with any provision of the Merger Agreement
will (i) violate any provision of the Articles of Incorporation or By-Laws of
Keystone, (ii) conflict with or result in a material breach of or material
default under any material agreement, obligation or instrument to which Keystone
or any of its subsidiaries is a party or by which any of them is bound or to
which any of their material properties or assets is subject or (iii) violate any
order or decree of any court or governmental authority or any statute, rule or
regulation applicable to Keystone, any of its subsidiaries or any of their
properties or assets (except that the acquisition of more than 5% of the
outstanding FTC Common Stock and certain other transactions pursuant to the
Warrant Agreement would require the approval of regulatory authorities).
4.5. Exchange Act Reports and Financial Statements. Keystone has delivered
---------------------------------------------
to FTC (i) Keystone's Annual Report on Form 10-K for the year ended December 31,
1995 containing consolidated statements of condition of Keystone at December 31,
1995 and 1994 and consolidated statements of income, changes in shareholders'
equity and cash flows of Keystone for the three years ended December 31, 1995,
all certified by Ernst & Young LLP, independent auditors, (ii) Keystone's
Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30 and
September 30, 1996 containing unaudited consolidated statements of condition of
Keystone as of such dates and unaudited consolidated statements of income and
cash flows of Keystone for the interim periods reflected therein and (iii) any
Current Reports on Form 8-K filed by Keystone since December 31, 1995. All such
reports (i) comply in all material respects
-11-
with the requirements of the Exchange Act and the rules and regulations of the
SEC thereunder, (ii) do not contain any untrue statement of a material fact and
(iii) do not 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. All such financial statements, including
the related notes and schedules, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as
indicated therein) and fairly present the consolidated financial condition,
assets and liabilities of Keystone at the dates thereof and the consolidated
results of operations and changes in shareholders' equity and cash flows of
Keystone for the periods stated therein, subject, in the case of the interim
financial statements, to normal and recurring year-end audit adjustments and
except that the interim financial statements do not contain all of the notes
required by generally accepted accounting principles.
4.6. Absence of Certain Changes. Since December 31, 1995, there has not been
--------------------------
any material adverse change in the consolidated financial condition, results of
operations or business of Keystone and its subsidiaries taken as a whole.
4.7. Litigation and Other Proceedings. Neither Keystone nor any of its
--------------------------------
subsidiaries is a party or subject to any pending, or to the knowledge of
Keystone may become a party or subject to any threatened, action, suit,
arbitration, administrative proceeding or investigation, or judicial or
administrative order, judgment or decree, which individually or in the aggregate
will have, or could reasonably be expected to have, a material adverse effect on
the consolidated financial condition, results of operations or business of
Keystone and its subsidiaries taken as a whole.
4.8. Compliance with Laws; Regulatory Matters. Keystone and its subsidiaries
----------------------------------------
are in compliance in all material respects with all laws, rules and regulations,
all orders, directives and supervisory letters of, and all agreements, memoranda
of understanding or similar arrangements with, regulatory authorities and all
other legal requirements applicable to them or their businesses. Neither
Keystone nor any of its subsidiaries is subject to any order, directive or
supervisory letter of, or agreement, memorandum of understanding or similar
arrangement (including board resolutions adopted at the request of a regulatory
authority) with, any regulatory authority restricting its operations,
restricting it from taking any action or requiring that certain actions be
taken, and Keystone has no knowledge that any such order, directive, supervisory
letter, agreement, memorandum of understanding or similar arrangement is
threatened, contemplated or under consideration by any regulatory authority.
4.9. Registration Statement, etc. Except for information relating to FTC and
---------------------------
the FTC Subsidiaries, neither the Registration Statement, the Proxy
Statement/Prospectus nor any amendment or supplement thereto, at the time the
Registration Statement is declared effective, at the time the Proxy
Statement/Prospectus is mailed to the shareholders of FTC and Keystone or at the
dates of the Shareholders' Meetings of FTC and Keystone to consider the Merger,
will 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, in light of the circumstances under which they are made, not
misleading. All documents which Keystone is responsible for filing with the SEC
or any regulatory agency in connection with the Merger will comply as to form in
all material respects with the requirements of applicable law, and all of the
information relating to Keystone and its subsidiaries in any document filed with
the SEC or any other regulatory agency in connection with this Agreement, the
Merger Agreement or the transactions contemplated thereby shall be true and
correct in all material respects.
4.10. Environmental Matters. To the knowledge of Keystone, (a) no Hazardous
---------------------
Substances (as hereinafter defined) have been stored, treated, dumped, spilled,
disposed of, discharged, released or deposited in violation of any law or
regulation or in a manner which would subject Keystone or any
-12-
Keystone subsidiary to liability under any law or regulation at, under or on (1)
any property now owned, occupied or leased ("Present Property") by Keystone or
any subsidiary or former subsidiary of Keystone (each, a "Keystone Entity"), (2)
any property previously owned, occupied or leased ("Former Property") by any
Keystone Entity during the time of such previous ownership, occupancy or lease;
or (3) any Participation Facility (as hereinafter defined) during the time that
any Keystone Entity participated in the management of, or may be deemed to be or
to have been an owner or operator of, such Participation Facility; (b) no
Keystone Entity has disposed of, or arranged for the disposal of, Hazardous
Substances in violation of any law or regulation or in a manner which would
subject Keystone or any Keystone subsidiary to liability under any law or
regulation from any Present Property, Former Property or Participation Facility,
and no owner or operator of a Participation Facility disposed of, or arranged
for the disposal of, Hazardous Substances in violation of any law or regulation
or in a manner which would subject Keystone or any Keystone subsidiary to
liability under any law or regulation from a Participation Facility during the
time that any Keystone Entity participated in the management of, or may be
deemed to be or to have been an owner or operator of, such Participation
Facility; and (c) no Hazardous Substances have been stored, treated, dumped,
spilled, disposed of, discharged, released or deposited in violation of any law
or regulation or in a manner which would subject Keystone or any Keystone
subsidiary to liability under any law or regulation at, under or on any Loan
Property (as hereinafter defined), nor is there, with respect to any such Loan
Property, any violation of environmental law which could materially adversely
affect the value of such Loan Property to an extent which could prevent or delay
any Keystone Entity from recovering the full value of its loan in the event of a
foreclosure on such Loan Property.
As used in this Section 4.10, (a) "Participation Facility" shall mean any
property or facility of which any Keystone Entity (i) has at any time
participated in the management or (ii) may be deemed to be or to have been an
owner or operator, (b) "Loan Property" shall mean any real property in which any
Keystone Entity holds a security interest in an amount greater than $500,000 and
(c) "Hazardous Substances" shall mean (i) any flammable substances, explosives,
radioactive materials, hazardous materials, hazardous substances, hazardous
wastes, toxic substances, pollutants, contaminants or any related materials or
substances specified in any applicable Federal or Pennsylvania law or regulation
relating to pollution or protection of human health or the environment
(including, without limitation, ambient or indoor air, surface water,
groundwater, land surface or subsurface strata) and (ii) friable asbestos,
polychlorinated biphenyls, urea formaldehyde, and petroleum and petroleum-based
fuels.
4.11. Accurate and Complete Disclosure. To the knowledge of Keystone, the
--------------------------------
information furnished to FTC by or on behalf of Keystone or any of its
subsidiaries in connection with FTC's investigation of Keystone and its
subsidiaries, whether before or after the date of this Agreement, is true and
correct in all material respects, and no representation or warranty of Keystone
contained herein contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading. Other
than matters of a general economic, regulatory or political nature, there are no
presently existing material facts, circumstances or contingencies known to
Keystone which have had or which may be reasonably expected in the future to
have a material adverse effect on the consolidated financial condition, results
of operations or business of Keystone and its subsidiaries taken as a whole.
-13-
ARTICLE V
CONDUCT OF FTC'S BUSINESS PENDING THE EFFECTIVE TIME
----------------------------------------------------
5.1. Conduct of Business in Ordinary Course. Pending the Effective Time,
--------------------------------------
except as otherwise consented to in writing by Keystone or as contemplated by
this Agreement or the Warrant Agreement, (a) FTC will and will cause each FTC
Subsidiary to (i) conduct its business only in the ordinary course thereof as
conducted on the date hereof and (ii) use its best efforts to preserve its
business organization and assets intact and to preserve its good will with its
customers and others having business relations with it; and (b) FTC will not
and, except in the case of clause (ii) below, will not permit any FTC Subsidiary
to:
(i) amend its Articles of Incorporation or By-Laws;
(ii) declare, pay or set aside any dividend or other distribution
in respect of its capital stock, except for cash dividends on the FTC Common
Stock in an amount not in excess of $.25 per share in each of the calendar
quarters ending March 31 and June 30, 1997 and not in excess of $.27 per share
in any calendar quarter thereafter. The parties agree to consult with respect to
the amount of the last FTC dividend payable prior to the Effective Time with the
objective of assuring that the shareholders of FTC do not receive a shortfall or
a premium based on the record and payment dates of their last dividend prior to
the Merger and the record and payment dates of the first dividend of Keystone
following the Merger;
(iii) except for (A) the issuance and sale of FTC Common Stock
upon exercise of the Outstanding FTC Options and (B) the grant and exercise of
additional stock options under FTC's Stock Option Plan of 1992 in the ordinary
course of business and consistent with past practice, issue, sell, purchase,
redeem or otherwise dispose of or acquire, or grant any options, warrants or
other rights to purchase or acquire, or combine, split or reclassify, any shares
of its capital stock or any securities convertible into its capital stock;
(iv) enter into any contract of employment or consulting agreement
not terminable at will without penalty;
(v) adopt or modify to increase the compensation or benefits under
any Employee Benefit Plan or otherwise increase the compensation payable to its
employees, except for modifications or increases required by law or existing
contract or involving merit increases in accordance with past practices, normal
cost-of-living increases, regular bonuses (including under FTC's executive
incentive plan) and normal increases related to promotions or increased job
responsibilities;
(vi) merge or consolidate with or into any other corporation or
bank, subject the proviso to the first sentence of Section 6.8; acquire control
over, or any equity interest in, any other firm, bank, corporation or
organization (except in connection with foreclosures in bona fide loan
---------
transactions or investments in marketable equity securities in the ordinary
course of business and not exceeding 5% of the outstanding shares of any class);
liquidate; or purchase or acquire or, subject to the proviso in the first
sentence of Section 6.8, sell or otherwise dispose of any material assets
otherwise than in the ordinary course of business;
-14-
(vii) make any expenditure for a capital asset in excess of
$50,000 per asset or $250,000 in the aggregate or enter into as lessee any lease
of personal property providing for annual payments in excess of $50,000 or any
lease of real property;
(viii) change or modify in any material respect any of its lending
or investment policies;
(ix) take any action which if taken as of the date hereof would
constitute a material breach of any representation or warranty contained herein;
or
(x) enter into any agreement, commitment or understanding with any
person relating to any action prohibited by this Agreement, subject the proviso
to the first sentence of Section 6.8.
5.2. FTC Stock Options. Notwithstanding anything contained in Section 5.1,
-----------------
FTC may at any time prior to the Effective Time amend the stock option
agreements relating to any or all of the stock options outstanding under the FTC
Option Plans (the "FTC Options") to provide that upon consummation of the Merger
(1) the FTC Options will become options for a number of shares of Keystone
Common Stock equal to the number of shares of FTC Common Stock currently subject
thereto multiplied by the Exchange Ratio, rounded downward to the nearest whole
share and (2) the option price per share of Keystone Common Stock shall be equal
the current option price per share of FTC Common Stock divided by the Exchange
Ratio, rounded to the nearest cent. Except as otherwise consented to in writing
by Keystone, no other changes shall be made to the terms of the FTC Options. Not
later than 30 days after the filing of Keystone's first Annual Report on Form
10K following the Effective Time, Keystone shall cause the shares of Keystone
Common Stock subject to the FTC Options to be registered under the Securities
Act by filing one or more Registration Statements on SEC Form S-8 or SEC Form S-
3. Provided that Keystone continues to be eligible to use SEC Form X-0, XXX Xxxx
X-0 or a successor Form permitting similar incorporation by reference, Keystone
shall maintain the registration under the Securities Act of the shares of
Keystone Common Stock subject to the FTC Options until such options are
exercised or expire.
ARTICLE VI
COVENANTS AND ACTIONS PENDING THE EFFECTIVE TIME
------------------------------------------------
6.1 Securities Registration and Disclosure. As soon as practicable after the
--------------------------------------
date hereof, Keystone will file with the SEC under the Securities Act a
registration statement for the registration of the shares of Keystone Common
Stock to be issued pursuant to the Merger Agreement (the "Registration
Statement"). The parties shall cooperate in the preparation of the Proxy
Statement/Prospectus and any amendments or supplements thereto, and each party
shall be responsible for providing all information concerning itself and its
subsidiaries required to be included therein. Keystone shall take any action
required to be taken under any applicable state securities or "blue sky" laws in
connection with the issuance of shares of Keystone Common Stock pursuant to the
Merger Agreement, and FTC shall furnish Keystone all information concerning FTC
and its shareholders as Keystone may reasonably request in connection with any
such action. Each party will promptly provide the other with copies of all
correspondence, comment letters, notices or other communications to or from the
SEC relating to the Registration Statement, the Proxy Statement/Prospectus or
any amendment or supplement thereto, and Keystone will advise FTC promptly after
it receives notice thereof, of the effectiveness of the Registration Statement,
of the issuance of any stop order with respect to the effectiveness thereof, of
the suspension of the qualification of the Keystone Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or of the
initiation or threat of any proceeding for any such purpose.
-15-
6.2. Regulatory Approvals. As soon as practicable after the date hereof, the
--------------------
parties shall prepare and file (i) with the Federal Reserve Board an application
for its approval of the Merger under the Bank Holding Company Act, (ii) with the
Department an application for its approval of the Merger under the Pennsylvania
Banking Code, (iii) with the Maryland Bank Commissioner an application for its
approval of the Merger under the Maryland Financial Institutions Code and (iv)
with any other regulatory agencies having jurisdiction any other applications
for approvals or consents which may be necessary for the consummation of the
Merger. Subject to the limitations herein provided, the parties will take or
cause to be taken all actions necessary for such applications to be approved,
and each party will promptly provide the other with copies of all
correspondence, notices or other communications to or from such agencies
relating to such applications.
6.3. Shareholders' Meetings. FTC and Keystone will each take appropriate
----------------------
action to call a meeting of its shareholders (the "Shareholders' Meetings"), to
be held not more than forty-five days following the effective date of the
Registration Statement (or, if later, the date of Keystone's Annual Meeting of
Shareholders), to consider approval of this Agreement and the Merger Agreement
and, subject to the fiduciary duties of its Board of Directors, will use its
best efforts to secure such approval. In connection with its Shareholders'
Meeting, FTC and Keystone will duly solicit, in compliance with Section 14(a) of
the Exchange Act and the proxy rules of the SEC thereunder, the vote of its
shareholders by mailing or delivering to each such shareholder, as soon as
practicable after the effectiveness of the Registration Statement, the Proxy
Statement/Prospectus, and as soon as practicable thereafter, any amendments or
supplements thereto as may be necessary to assure that at the date of its
Shareholders' Meeting the Proxy Statement/Prospectus shall conform to the
requirements of Sections 3.15 and 4.9 hereof.
6.4. FTC Affiliates' Agreements. FTC will furnish to Keystone a list of all
--------------------------
persons known to FTC who at the date of the FTC Shareholders' Meeting may be
deemed to be "affiliates" of FTC within the meaning of Rule 145 under the
Securities Act and for purposes of qualifying the Merger for "pooling of
interests" accounting treatment ("FTC Affiliates"). FTC will use its best
efforts to cause each FTC Affiliate to deliver to Keystone not later than 30
days prior to the Effective Time a written agreement providing that such person
will not sell, pledge, transfer or otherwise dispose of (a) the shares of
Keystone Common Stock to be received by such person in the Merger (the "Merger
Shares") or any other shares of Keystone Common Stock or FTC Common Stock held
by such person during the period commencing 30 days prior to the Effective Time
and ending at such time as financial results covering at least 30 days of post-
Merger combined operations have been published within the meaning of Section
201.01 of the SEC's Codification of Financial Reporting Policies or (b) the
Merger Shares except in compliance with the applicable provisions of the
Securities Act and the rules and regulations thereunder.
6.5. Public Announcements. The parties will consult with each other as to
--------------------
the form and substance of any press release or other public disclosure of
matters related to this Agreement or any of the transactions contemplated
hereby.
6.6. Notice of Certain Events. Pending the Effective Time, each party will
------------------------
promptly notify the other of (i) any material change in the normal course of its
business or in the operation of its properties, (ii) any event which may cause
any of its representations and warranties hereunder to be inaccurate in any
material respect as of the time of the Closing and (iii) any actions, claims or
legal, administrative or arbitration proceedings or investigations threatened or
commenced against it or its subsidiaries which are or may be material to their
business or assets or to the consummation of the Merger and the transactions
contemplated hereby.
-16-
6.7. All Reasonable Efforts. Subject to the terms and conditions herein
----------------------
provided, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement and the Merger
Agreement, including, without limitation, using reasonable efforts to lift or
rescind any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the Merger; provided, however, that
nothing contained herein shall require Keystone to agree to any condition or
requirement which is sought or imposed by any regulatory authority in connection
with the regulatory approvals referred to in Section 2.1(b) hereof and which
Keystone reasonably considers to be materially adverse to its interests. Each
party agrees to use all reasonable efforts to fulfill, or cause to be fulfilled,
all conditions provided hereunder to the obligations of the other party to
consummate the Merger; provided that nothing contained herein shall obligate a
party or any of its directors or officers to breach their fiduciary obligations
owed to the shareholders of such party. Each party will, and will cause its
subsidiaries to, use its best efforts to obtain all consents of third parties
required in connection with this Agreement or the transactions contemplated
hereby under any other contract or agreement of such party or its subsidiaries.
6.8. Inconsistent Activities. Unless and until the Merger has been
-----------------------
consummated or this Agreement has been terminated in accordance with its terms,
FTC will not (i) solicit or encourage, directly or indirectly, any inquiries or
proposals to acquire more than 1% of the FTC Common Stock, any other capital
stock of itself or of any FTC Subsidiary or any significant portion of its or
any FTC Subsidiary's assets (whether by tender offer, merger, purchase of assets
or other transactions of any type); (ii) afford any third party which may be
considering any such transaction access to its or any FTC Subsidiary's
properties, books or records except as required by mandatory provisions of law;
(iii) enter into any discussions or negotiations for, or enter into any
agreement or understanding which provides for, any such transaction or (iv)
authorize or permit any of its directors, officers, employees or agents to do or
permit any of the foregoing; provided, however, that notwithstanding the
-----------------
foregoing, FTC may afford such access, enter into any such discussions,
negotiations or agreements or understandings, or authorize or permit any of its
directors, officers, employees or agents to do so if the Board of Directors of
FTC, after consulting with counsel, determines that such actions should be taken
or permitted in the exercise of its fiduciary duties. If FTC becomes aware of
any offer or proposed offer to acquire any such shares of capital stock of
itself or any FTC Subsidiary or any significant portion of its or any FTC
Subsidiary's assets (regardless of the form of the proposed transaction) or of
any other matter which could adversely affect this Agreement or the Merger, FTC
shall immediately give notice thereof to Keystone.
-17-
6.9. Transactions Involving Keystone. Keystone shall not enter into any
-------------------------------
agreement for a merger, consolidation or share exchange with or into any other
person, unless the surviving or resulting corporation, if other than Keystone,
shall have agreed in writing to be bound by the terms of this Agreement, the
Merger Agreement and the Warrant Agreement. In the event that under the terms of
any such agreement the outstanding Keystone Common Stock is converted into or
exchanged for other securities of any person, cash or other property, the terms
of this Agreement and the Merger Agreement shall be appropriately amended so
that the shareholders of FTC shall receive in the Merger, for each share of FTC
Common Stock, the consideration per share received by the holders of Keystone
Common Stock in such transaction multiplied by the Exchange Ratio (as defined in
the Merger Agreement and appropriately adjusted to reflect such event), provided
that fractional shares or fractional units of other securities or property may
be paid in cash based on the value of $26.50 for one whole share of Keystone
Common Stock. It is understood that the condition contained in Section 2.1(d)
shall not prevent Keystone from entering into any such transaction, but FTC
shall not be required to amend or waive such condition. Keystone shall obtain
the consent of FTC, which consent shall not unreasonably be withheld, before
entering into an agreement for any such transaction which would result in the
acquisition by Keystone of a business for which (excluding the impact of the
Merger and Keystone's proposed merger with First Financial Corporation of
Western Maryland) Keystone would be required under Rule 3-05(b)(2) of SEC
Regulation S-X to include separate financial statements in a registration
statement of Keystone under the Securities Act.
6.10. Access and Information. Pending the Effective Time, FTC and Keystone
----------------------
will each afford the other party and its authorized representatives reasonable
access during normal business hours to its properties, books and records and
personnel and those of its subsidiaries and will furnish promptly to the other
party such financial and operating data and other information relating to its
and its subsidiaries' business, assets and personnel as the other party may
reasonably request.
ARTICLE VII
AMENDMENT, WAIVER AND TERMINATION
---------------------------------
7.1. Amendment. Subject to applicable law, this Agreement or the Merger
---------
Agreement may be amended in any respect by an instrument in writing signed by an
authorized officer of each of the parties, whether before or after the
Shareholders' Meetings, except that no such amendment after the FTC
Shareholders' Meeting shall affect the rate of exchange of FTC Common Stock for
Keystone Common Stock provided in the Merger Agreement or change the form of
such consideration.
7.2. Waiver. Keystone or FTC may (i) extend the time for performance of any
------
of the obligations of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party, (iii) waive compliance by the
other party with any of its covenants or agreements contained herein or in the
Merger Agreement and (iv) waive the fulfillment of any condition to its
obligations hereunder other than those set forth in Section 2.1 hereof, all of
the foregoing to the fullest extent permitted by law. No such extension or
waiver shall be effective unless contained in a writing signed by an authorized
officer of the party against which it is asserted.
7.3. Termination. Notwithstanding prior approval by the shareholders of FTC
-----------
or Keystone, this Agreement may be terminated and the Merger abandoned:
(a) by mutual written consent of each of the parties hereto at any time
prior to the Effective Time; or
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(b) by either party in the event of a material breach of a
representation and warranty or covenant of the other party contained herein,
which breach has not been cured within 30 days after written notice of such
breach is given to the breaching party by the party electing to terminate; or
(c) by either party at any time after the shareholders of FTC or
Keystone shall fail to approve this Agreement and the Merger Agreement in a vote
taken at a meeting duly convened for that purpose, provided that the party
electing to terminate shall have performed its obligations under Section 6.3
hereof; or
(d) by either party at any time after a final judicial or regulatory
determination (as to which all periods for appeal have expired an no appeal
shall be pending) denying any regulatory approval required for the Merger or
imposing conditions or requirements which Keystone in its reasonable judgment
has determined to be materially adverse to its interests; or
(e) by either party at any time after December 31, 1997 in the event of
failure to satisfy any of the conditions to the obligations of the party
electing to terminate, if such failure occurred despite the good faith effort of
such party to perform all agreements and covenants and to satisfy all conditions
required to be performed or satisfied by it.
Termination pursuant to subparagraphs (b) through (e) of this Section 7.3
shall be effected by written notice provided by the terminating party in
accordance with Section 8.6 hereof.
7.4. Keystone Due Diligence. Following the execution and delivery of this
----------------------
Agreement, FTC will permit Keystone to conduct an on-site due diligence
investigation of FTC and its subsidiaries by (1) affording to Keystone's
authorized representatives reasonable access during normal business hours to
FTC's and its subsidiaries' books, records and properties, (2) making the
personnel of FTC and its subsidiaries having knowledge of the matters to be
investigated by Keystone reasonably available to Keystone during normal business
hours and at their normal places of work and (3) furnishing to Keystone promptly
upon request such financial and operating data and other information relating to
FTC's and its subsidiaries' business, assets and personnel as Keystone may
reasonably request. Keystone shall conduct its investigation in such a manner as
to minimize any disruption of FTC's normal business operations.
Notwithstanding anything else contained in this Agreement, Keystone may at
any time during the period for its on-site investigation, in its sole and
absolute discretion and without necessity of specifying any reason therefor,
elect to terminate this Agreement, without liability of either party, by written
notice to FTC. Keystone's right to terminate pursuant to this Section 7.4 shall
expire unless written notice of exercise is received by FTC at its address
provided in Section 8.6 not later than 5:00 p.m., Eastern Standard Time, on
January 8, 1997.
7.5. FTC Due Diligence. Following the execution and delivery of this
-----------------
Agreement, Keystone will permit FTC to conduct an on-site due diligence
investigation of Keystone and its subsidiaries by (1) affording to FTC's
authorized representatives reasonable access during normal business hours to
Keystone's and its subsidiaries' books, records and properties, (2) making the
personnel of Keystone and its subsidiaries having knowledge of the matters to be
investigated by FTC reasonably available to FTC during normal business hours and
at their normal places of work and (3) furnishing to FTC promptly upon request
such financial and operating data and other information relating to Keystone's
and its subsidiaries' business, assets and personnel as FTC may reasonably
request. FTC shall conduct its investigation in such a manner as to minimize any
disruption of Keystone's normal business operations.
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Notwithstanding anything else contained in this Agreement, FTC may at any
time during the period for its on-site investigation, in its sole and absolute
discretion and without necessity of specifying any reason therefor, elect to
terminate this Agreement, without liability of either party, by written notice
to Keystone. FTC's right to terminate pursuant to this Section 7.5 shall expire
unless written notice of exercise is received by Keystone at its address
provided in Section 8.6 not later than 5:00 p.m., Eastern Standard Time, on
January 8, 1997.
7.6. Effect of Termination. In the event of termination of this Agreement as
---------------------
provided in Section 7.3, 7.4 or 7.5, this Agreement and the Merger Agreement
shall forthwith become void, and there shall be no liability on the part of
either party or their respective officers or directors except (i) as set forth
in Sections 8.2, 8.7 and 8.8 hereof and (ii) in the event of a willful breach of
this Agreement.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
------------------------
8.1. Closing and Effective Time. The closing of the transactions
--------------------------
contemplated by this Agreement and the Merger Agreement (the "Closing") shall
take place at the offices of Keystone, One Keystone Plaza, Front & Market
Streets, Harrisburg, Pennsylvania at 10:00 a.m., local time, on the second
business day following the fulfillment of all conditions set forth in Section
2.1 hereof, or at such other place, time and date as the parties shall agree.
Subject to the fulfillment or waiver at or prior to the Closing of all other
conditions to its obligations to consummate the Merger, each party shall execute
and deliver for filing with the Pennsylvania Department of State Articles of
Merger specifying that the Merger shall become effective at the close of
business on the date of the Closing or at such other time and date as the
parties shall agree (the "Effective Time").
8.2. Confidentiality. Each party hereto shall cause all information obtained
---------------
by it or its subsidiaries or representatives from the other party and its
subsidiaries and representatives under or in connection with this Agreement or
the negotiation hereof to be treated as confidential unless such information is,
or through no fault of such party becomes, generally available to the public or
unless required by legal process to release such information. Neither party
shall use, or unless required by legal process to release such information
knowingly permit others to use, any such information for any purpose other than
in connection with this Agreement and the transactions contemplated hereby
unless such information is, or through no fault of such party becomes, generally
available to the public. In the event of termination of this Agreement, each
party will, and will cause its subsidiaries and representatives to, return to
the other all documents (including copies thereof and extracts therefrom)
obtained by it from the other party and its subsidiaries and representatives
under or in connection with this Agreement or its negotiation and which are not
publicly available.
8.3. Entire Agreement. This Agreement, together with the Merger Agreement,
----------------
the Warrant Agreement and any other agreements signed between the parties on the
date hereof, sets forth the entire understanding of the parties with respect to
the subject matter hereof and supersedes all previous agreements or
understandings between the parties with respect thereto.
8.4. Counterparts; Headings. This Agreement may be executed in several
----------------------
counterparts, and by the parties hereto on separate counterparts, each of which
will constitute an original. The headings and captions contained herein are for
reference purposes only and do not constitute a part hereof.
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8.5. Further Assurances. Each party will execute and deliver such
------------------
instruments and take such other actions as the other party hereto may reasonably
request in order to carry out the intent and purposes hereof and of the Merger
Agreement.
8.6. Communications. All notices and other communications hereunder shall be
--------------
in writing and will be deemed to have been given if delivered by hand or express
carrier, telecopied with acknowledgment of receipt, or mailed by first-class or
by registered or certified mail, postage prepaid, addressed as follows:
If to Keystone:
Keystone Financial, Inc.
One Keystone Xxxxx
Xxxxx & Xxxxxx Xxxxxxx
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000-0000
Telecopier: 000-000-0000
Attention: Xxx X. Xxxxx, Esquire
With a copy to:
Xxxx Xxxxx Xxxx & XxXxxx
Xxxxx X. Xxxx Building
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Telecopier: 000-000-0000
Attention: Xxxxxx X. Xxxxxx, Esquire
If to FTC:
Financial Trust Corp
0000 Xxxxxx Xxxxxxx
Xxxxxxxx, Xxxxxxxxxxxx 00000
Telecopier: 000-000-0000
Attention: Xxx X. Xxxxx, Chairman and CEO
With a copy to:
XxXxxx, Xxxxxxx & Xxxxxx
000 Xxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000-0000
Telecopier: 717-236-2665
Attention: W. Xxxxxx Xxxxxxxxx, Esquire
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or at such other address or addresses as may hereafter be furnished by the
addressee party. All such notices and other communications shall be deemed to
have been duly given as follows: when delivered by hand, if personally
delivered; five business days after being deposited in the mail, postage
prepaid, if delivered by mail; when receipt acknowledged, if telecopied; and the
next business day after being delivered to an overnight delivery service.
8.7. Expenses. Each party shall pay its own expenses incident to preparing
--------
for, entering into and carrying out this Agreement and to the consummation of
the Merger, including fees of its accountants, attorneys and investment
advisors, except that it is agreed that (i) each party shall pay the cost of
printing and mailing the final Proxy Statement/Prospectus and other proxy
materials to the shareholders of such party, (ii) each party shall pay one-half
of the cost of the tax opinion referred to in Section 2.1(d) and (iii) the cost
of printing and filing the Registration Statement and any blue sky materials and
the costs of preparing and filing the applications for the regulatory approvals
referred to in Section 2.1(b) hereof are expenses of Keystone. Notwithstanding
the foregoing, if the Merger is not effected as a consequence, directly or
indirectly, of a change in control of FTC or Keystone which would require the
filing of a report under Item 1 of Form 8-K under the Exchange Act, the party
experiencing the change of control shall reimburse the other party for all of
its reasonable out-of-pocket expenses incurred in connection with this Agreement
and the transactions contemplated hereby.
8.8. Brokers. Keystone and FTC each represents and warrants that except as
-------
disclosed in writing to the other party on or prior to the date hereof, neither
it nor any of its subsidiaries is obligated to pay any brokerage commissions,
finder's fees or other like payments in connection with the transactions
contemplated hereby. Each party agrees to pay or discharge, and to indemnify and
hold the other and its subsidiaries harmless from and against, any and all
claims or liabilities for brokerage commissions, finder's fees and other like
payments incurred by such party or its subsidiaries in connection with the
transactions contemplated hereby.
8.9. Survival. The representations and warranties of the parties contained
--------
herein or in any document, schedule or certificate delivered in connection
herewith will not survive the Closing and Effective Time but will expire with
and be terminated and extinguished by the consummation of the Merger
contemplated hereby.
8.10. Successors and Assigns; No Third Party Beneficiaries. Neither this
----------------------------------------------------
Agreement nor the Merger Agreement, nor any of the rights or obligations of the
parties hereunder or thereunder, may be assigned by either party, whether by
operation of law or otherwise, without the prior written consent of the other
party. Subject to the preceding sentence, this Agreement and the Merger
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties hereto and their respective successors and assigns. Except as
provided in Section 8.12, this Agreement is not intended to confer any right or
benefit upon any person other than the parties hereto, and no provision hereof
shall be enforceable other than by the parties hereto and their successors and
permitted assigns.
8.11. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Pennsylvania without regard to
principles of conflicts of laws thereof.
8.12. Indemnification.
---------------
(a) Keystone agrees that, to the extent permitted by law, all rights to
indemnification and limitation of liability now existing in favor of the current
or former directors or officers of FTC and the FTC Subsidiaries as provided in
their respective charters or by-laws shall survive the Merger and that following
-22-
the Merger, to the extent permitted by law, Keystone (with respect to
obligations of FTC) or such FTC Subsidiary (with respect to obligations of FTC
Subsidiaries) shall honor such obligations in accordance with their respective
terms with respect to events, acts or omissions occurring prior to the Effective
Time.
(b) Keystone agrees that following the Merger, any amendment to the
provisions of the charter or by-laws of any FTC Subsidiary referred to in
Section 8.12(a) which would have the effect of reducing or hindering the rights
of indemnity or limitation of liability currently afforded under such provisions
to the current or former directors or officers of any FTC Subsidiary shall
operate prospectively only and shall not apply to events, acts or omissions
occurring prior to the adoption thereof.
(c) In the event that Keystone or an FTC Subsidiary or its successors or
assigns (i) consolidates with or merges into another person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties or assets to any
person, then, and in each such case, proper provisions shall be made so that the
successor or transferee in such transaction shall assume the obligations of
Keystone or such FTC Subsidiary set forth in this Section 8.12, it being
understood that that the provisions of this paragraph shall be satisfied if the
effect of such transaction is that the successor or transferee assumes such
obligations by operation of law.
8.13. FTC Bank Subsidiaries. It is Keystone's present intention that the
---------------------
charter of at least one of FTC's bank subsidiaries shall survive the Merger.
8.14. Keystone Benefit Plans. As soon as administratively practicable
----------------------
following the Merger, Keystone shall take appropriate action so that employees
of the FTC Subsidiaries and employees of FTC who become employees of Keystone
shall be entitled to participate in generally applicable Keystone employee
benefit plans on the same basis as other similarly situated employees of
Keystone and its subsidiaries. Prior service of such employees with FTC or an
FTC Subsidiary shall be counted in
-23-
determining eligibility to participate in such plans and for purposes of vesting
of benefits, but shall not be counted for purposes of benefit accrual.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Agreement as of the day and year first above
written.
[CORPORATE SEAL]
Attest: FINANCIAL TRUST CORP
/s/ Xxxxxx X. Xxxxxx By /s/ Xxx X. Xxxxx
------------------------------------- ------------------------------------
Xxxxxx X. Xxxxx, Xxx X. Xxxxx, Chairman
Secretary and Chief Executive Officer
[CORPORATE SEAL]
Attest:
KEYSTONE FINANCIAL, INC.
/s/ Xxx X. Xxxxx By /s/ Xxxx X. Xxxxxxxx
------------------------------------- ------------------------------------
Xxx X. Xxxxx, Xxxx X. Xxxxxxxx, President
Secretary and Chief Executive Officer
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT dated as of December 19, 1996 between KEYSTONE FINANCIAL,
INC., a Pennsylvania corporation ("Keystone"), and FINANCIAL TRUST CORP, a
Pennsylvania corporation ("FTC"),
W I T N E S S E T H:
-------------------
WHEREAS, Keystone and FTC have entered into an Agreement and Plan of
Reorganization of even date herewith (the "Reorganization Agreement") which
provides, among other things, for the merger of FTC and Keystone (the "Merger");
NOW, THEREFORE, in consideration of their mutual covenants and agreements
contained herein and in the Reorganization Agreement, and for the purpose of
stating the method, terms and conditions of the Merger, including the rights of
the shareholders of FTC, and such other details and provisions as are deemed
desirable, the parties hereto, intending to be legally bound hereby, agree as
follows:
1. The Merger. Subject to the terms and conditions of this Agreement and the
----------
Reorganization Agreement, and in accordance with the laws of the Commonwealth of
Pennsylvania, at the Effective Time (as defined in Section 8.1 of the
Reorganization Agreement) FTC shall be merged with and into Keystone, which
shall be the surviving corporation.
2. Articles of Incorporation and By-Laws. The Articles of Incorporation and
-------------------------------------
By-Laws of Keystone as in effect immediately prior to the Effective Time shall
be the Articles of Incorporation of the surviving corporation.
3. Board of Directors. Upon the merger becoming effective, the Board of
------------------
Directors of the surviving corporation shall consist of:
(a) the persons who where directors of Keystone immediately prior to
the Merger, without change in their respective terms of office by reason of the
Merger;
(b) Xxx X. Xxxxx, the Chairman and Chief Executive Officer of FTC, to
serve, subject to the By-Laws of Keystone and any other applicable
qualifications, for a term expiring at the Annual Meeting of Shareholders of
Keystone in 2000; and
(c) two additional persons to be designated by FTC, subject to the
approval of Keystone, to serve, subject to the By-Laws of Keystone and any other
applicable qualifications, for terms expiring at the Annual Meetings of
Shareholders of Keystone in 1998 and 1999.
If prior to the Effective Time Xxx X. Xxxxx or either of such persons
designated by FTC becomes unable to serve or declines to serve as a director of
Keystone, FTC shall be entitled to designate a substitute director acceptable to
Keystone. If Xxx X. Xxxxx shall be available and willing to serve as a director
of Keystone following the Merger as hereinabove provided, then upon the Merger
becoming effective he shall, without
A-1
necessity of further action, be deemed to have been elected as Chairman of the
Board of Directors of Keystone, to serve in such capacity in accordance with the
By-Laws of Keystone.
4. Conversion of FTC Shares. (a) Subject to the provisions of Section 5
------------------------
hereof with respect to the payment of fractional shares in cash, upon the Merger
becoming effective, each share of Common Stock, par value $5.00 per share, of
FTC ("FTC Common Stock") shall, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into and become a right to
receive 1.65 shares (the "Exchange Ratio") of Common Stock, par value $2.00 per
share, of Keystone ("Keystone Common Stock"). No change will be made by reason
of the Merger in the shares of Keystone Common Stock outstanding immediately
prior to the Effective Time.
(b) If after the date of this Agreement and prior to the Effective Time the
number of outstanding shares of Keystone Common Stock or FTC Common Stock shall
have been increased or decreased by reason of a dividend payable in shares of
Common Stock or a split or combination of outstanding shares, or if pursuant to
Section 24 of the Keystone Rights Agreement (as defined in the Reorganization
Agreement) all Rights (as defined in the Keystone Rights Agreement) then
outstanding (other than Rights which have become void pursuant to Section 7(f)
of the Keystone Rights Agreement) shall have been exchanged for shares of
Keystone Common Stock, then the Exchange Ratio shall be adjusted (a) in the case
of any such event involving the Keystone Common Stock by multiplying the
Exchange Ratio by a fraction the numerator of which shall be the number of
shares of Keystone Common Stock issued and outstanding immediately after such
event and the denominator of which shall be the number of shares of Keystone
Common Stock issued and outstanding immediately prior to such event and (b) in
the case of any such event involving the FTC Common Stock by multiplying the
Exchange Ratio by a fraction the numerator of which shall be the number of
shares of FTC Common Stock issued and outstanding immediately prior to such
event and the denominator of which shall be the number of shares of FTC Common
Stock issued and outstanding immediately after such event. The Exchange Ratio
shall also be appropriately adjusted to reflect any capital reorganization
involving the reclassification of the Keystone Common Stock or the FTC Common
Stock subsequent to the date of this Agreement and prior to the Effective Time.
Similar adjustments shall be made to the amount payable in lieu of fractional
shares.
5. Surrender and Exchange of FTC Certificates. As promptly as practicable
------------------------------------------
after the Effective Time, Keystone shall cause to be sent to each person who
immediately prior to the Effective Time was a holder of record of FTC Common
Stock transmittal materials and instructions for surrendering certificates for
FTC Common Stock ("Old Certificates") in exchange for a certificate or
certificates for the number of whole shares of Keystone Common Stock to which
such person is entitled under Section 4 hereof.
No certificates for fractional shares of Keystone Common Stock shall be
issued in connection with the Merger. In lieu thereof, Keystone shall issue to
any holder of FTC Common Stock certificates otherwise entitled to a fractional
share, upon surrender of such certificates in accordance with the instructions
furnished by Keystone, a check for an amount of cash equal to the fraction of a
share of Keystone Common Stock represented by the certificates so surrendered
multiplied by the value of $26.50 for one whole share of Keystone Common Stock.
If any dividend on Keystone Common Stock is declared after the Effective
Time, the declaration shall include dividends on all whole shares of Keystone
Common Stock into which shares of FTC Common Stock have been converted under
this Agreement, but no former holder of record of FTC Common Stock shall be
entitled to receive payment of any such dividend until surrender of the
shareholder's Old Certificates shall have been effected in accordance with the
instructions furnished by Keystone. Upon surrender for exchange of a
shareholder's Old Certificates, such shareholder shall be entitled to receive
A-2
from Keystone an amount equal to all such dividends (without interest thereon
and less the amount of taxes, if any, which may have been imposed or paid
thereon) declared, and for which the payment date has occurred, on the whole
shares of Keystone Common Stock into which the shares represented by such Old
Certificates have been converted.
After the Effective Time, there shall be no transfer on the stock transfer
books of FTC or Keystone of shares of FTC Common Stock. If Old Certificates are
presented for transfer after the Effective Time, they shall be canceled and
certificates representing whole shares of Keystone Common Stock (and a check in
lieu of any fractional share) shall be issued in exchange therefor as provided
herein.
6. Failure to Surrender Old Certificates. In the event that any Old
-------------------------------------
Certificates have not been surrendered for exchange in accordance with Section 5
hereof on or before the second anniversary of the Effective Time, Keystone may
at any time thereafter, with or without notice to the holders of record of such
Old Certificates, sell for the accounts of any or all of such holders pursuant
to Section 1532 of the Pennsylvania Business Corporation Law any or all of the
shares of Keystone Common Stock which such holders are entitled to receive under
Section 4 hereof (the "Unclaimed Shares"). Any such sale may be made by public
or private sale or sale at any broker's board or on any securities exchange in
such manner and at such times as Keystone shall determine. If in the opinion of
counsel for Keystone it is necessary or desirable, any Unclaimed Shares may be
registered for sale under the Securities Act of 1933 and applicable state laws.
Keystone shall not be obligated to make any sale of Unclaimed Shares if it shall
determine not to do so, even if notice of sale of the Unclaimed Shares has been
given. The net proceeds of any such sale of Unclaimed Shares shall be held for
the holders of the unsurrendered Old Certificates whose Unclaimed Shares have
been sold, to be paid to them upon surrender of their Old Certificates. From and
after any such sale, the sole right of the holders of the unsurrendered Old
Certificates whose Unclaimed Shares have been sold shall be the right to collect
the net sale proceeds held by Keystone for their respective accounts, and such
holders shall not be entitled to receive any interest on such net sale proceeds
held by Keystone.
7. Termination and Amendment. Notwithstanding prior approval by the
-------------------------
shareholders of FTC, this Agreement shall be terminated and the Merger shall be
abandoned in the event that prior to the Effective Time the Reorganization
Agreement is terminated as provided therein. If there is such termination after
the delivery of Articles of Merger to the Pennsylvania Department of State, the
parties shall execute and file prior to the Effective Time with such Department
a statement of termination pursuant to Section 1902 of the Pennsylvania Business
Corporation Law. Notwithstanding prior approval by the shareholders of FTC or
Keystone, this Agreement may be amended in any respect in the manner and subject
only to the limitations set forth in Section 7.1 of the Reorganization
Agreement.
8. Counterparts; Headings. This Agreement may be executed in several
----------------------
counterparts, and by the parties hereto on separate counterparts, each of which
will constitute an original. The headings and captions contained herein are for
reference purposes only and do not constitute a part hereof.
A-3
9. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Agreement as of the day and year first above
written.
[CORPORATE SEAL]
Attest: FINANCIAL TRUST CORP
/s/ Xxxxxx X. Xxxxx By /s/ Xxx X. Xxxxx
------------------------------------ ---------------------------------
Xxxxxx X. Xxxxx, Xxx X. Xxxxx, Chairman
Secretary and Chief Executive Officer
[CORPORATE SEAL]
Attest: KEYSTONE FINANCIAL, INC.
/s/ Xxx X. Xxxxx By /s/ Xxxx X. Xxxxxxxx
------------------------------------ ---------------------------------
Xxx X. Xxxxx, Xxxx X. Xxxxxxxx, President
Secretary and Chief Executive Officer
A-4
