EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
BETWEEN
KEYSTONE FINANCIAL, INC.
AND
FIRST FINANCIAL CORPORATION OF WESTERN MARYLAND
DATED AS OF NOVEMBER 26, 1996
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . .2
ARTICLE II THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.2 Effective Time; Closing . . . . . . . . . . . . . . . . . . . .8
2.3 Treatment of Capital Stock. . . . . . . . . . . . . . . . . . .8
2.4 Shareholder Rights; Stock Transfers . . . . . . . . . . . . . .9
2.5 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . .9
2.6 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . .9
2.7 Election Procedures . . . . . . . . . . . . . . . . . . . . . 10
2.8 Exchange Procedures . . . . . . . . . . . . . . . . . . . . . 13
2.9 Anti-Dilution Provisions. . . . . . . . . . . . . . . . . . . 15
2.10 Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.11 Additional Actions. . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . 16
3.1 Capital Structure . . . . . . . . . . . . . . . . . . . . . . 16
3.2 Organization, Standing and Authority of the Company . . . . . 17
3.3 Ownership of the Company Subsidiaries . . . . . . . . . . . . 17
3.4 Organization, Standing and Authority of
the Company Subsidiaries. . . . . . . . . . . . . . . . . . 18
3.5 Authorized and Effective Agreement. . . . . . . . . . . . . . 18
3.6 Securities Documents and Regulatory Reports . . . . . . . . . 19
3.7 Financial Statements. . . . . . . . . . . . . . . . . . . . . 20
3.8 Material Adverse Change . . . . . . . . . . . . . . . . . . . 20
3.9 Environmental Matters . . . . . . . . . . . . . . . . . . . . 20
3.10 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.11 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 22
3.12 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . 22
3.13 Certain Information . . . . . . . . . . . . . . . . . . . . . 23
3.14 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . 24
3.15 Certain Contracts . . . . . . . . . . . . . . . . . . . . . . 25
3.16 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . 26
3.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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3.18 Properties. . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.19 Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.20 Required Vote; Inapplicability of Antitakover States. . . . . 27
3.21 Ownership of Acquiror Common Stock. . . . . . . . . . . . . . 28
3.22 Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR. . . . . . . . 28
4.1 Capital Structure . . . . . . . . . . . . . . . . . . . . . . 28
4.2 Organization, Standing and Authority of the Acquiror. . . . . 29
4.3 Ownership of the Acquiror Subsidiaries. . . . . . . . . . . . 29
4.4 Organization, Standing and Authority of the
Acquiror Subsidiaries . . . . . . . . . . . . . . . . . . . 29
4.5 Authorized and Effective Agreement. . . . . . . . . . . . . . 30
4.6 Securities Documents and Regulatory Reports . . . . . . . . . 31
4.7 Financial Statements. . . . . . . . . . . . . . . . . . . . . 31
4.8 Material Adverse Change . . . . . . . . . . . . . . . . . . . 32
4.9 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.10 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 33
4.11 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . 33
4.12 Certain Information . . . . . . . . . . . . . . . . . . . . . 34
4.13 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . 34
4.14 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.15 Acquiror Rights Agreement . . . . . . . . . . . . . . . . . . 34
4.16 Ownership of Company Common Stock . . . . . . . . . . . . . . 35
4.17 Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.1 Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . 35
5.2 Shareholder Meeting . . . . . . . . . . . . . . . . . . . . . 35
5.3 Regulatory Matters. . . . . . . . . . . . . . . . . . . . . . 36
5.4 Investigation and Confidentiality . . . . . . . . . . . . . . 37
5.5 Press Releases. . . . . . . . . . . . . . . . . . . . . . . . 38
5.6 Business of the Parties . . . . . . . . . . . . . . . . . . . 38
5.7 Certain Actions . . . . . . . . . . . . . . . . . . . . . . . 42
5.8 Current Information . . . . . . . . . . . . . . . . . . . . . 42
5.9 Indemnification; Insurance. . . . . . . . . . . . . . . . . . 43
5.10 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.11 Benefit Plans and Arrangements. . . . . . . . . . . . . . . . 45
5.12 Bank Merger . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.13 Disclosure Supplements. . . . . . . . . . . . . . . . . . . . 46
5.14 Failure to Fulfill Conditions . . . . . . . . . . . . . . . . 46
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ARTICLE VI CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . 47
6.1 Conditions Precedent - The Acquiror and the Company . . . . . 47
6.2 Conditions Precedent - The Company. . . . . . . . . . . . . . 48
6.3 Conditions Precedent - The Acquiror . . . . . . . . . . . . . 49
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT . . . . . . . . . . . . . . 50
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . 51
7.3 Survival of Representations, Warranties and Covenants . . . . 52
7.4 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.5 Amendment or Supplement . . . . . . . . . . . . . . . . . . . 52
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.1 Expenses; Termination Fee . . . . . . . . . . . . . . . . . . 53
8.2 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 53
8.3 No Assignment . . . . . . . . . . . . . . . . . . . . . . . . 54
8.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.5 Alternative Structure . . . . . . . . . . . . . . . . . . . . 55
8.6 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . 55
8.7 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 55
8.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 55
Exhibit A Form of Company Stock Option Agreement
Exhibit B Form of Company Stockholder Agreement
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AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (the "Agreement"), dated as of November 26,
1996, by and between Keystone Financial, Inc. (the "Acquiror"), a Pennsylvania
corporation, and First Financial Corporation of Western Maryland (the
"Company"), a Delaware corporation.
W I T N E S S E T H:
WHEREAS, the Boards of Directors of the Acquiror and the Company have
determined that it is in the best interests of their respective companies and
their shareholders to consummate the business combination transactions provided
for herein, including the merger of First Federal Savings Bank of Western
Maryland, a federally-chartered savings bank and a wholly-owned subsidiary of
the Company, with and into American Trust Bank, N.A., a national bank and a
wholly-owned subsidiary of the Acquiror, which is to be immediately followed by
the merger of the Company with and into the Acquiror, in each case subject to
the terms and conditions set forth herein; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby; and
WHEREAS, as a condition and inducement to the Acquiror's willingness to
enter into this Agreement, (i) the Company is concurrently entering into a Stock
Option Agreement with the Acquiror (the "Company Stock Option Agreement"), in
substantially the form attached hereto as Exhibit A, pursuant to which the
Company is granting to the Acquiror the option to purchase shares of Company
Common Stock (as defined herein) under certain circumstances and (ii) each of
the directors of the Company is concurrently entering into an agreement with the
Acquiror (the "Company Stockholder Agreement"), in substantially the form
attached hereto as Exhibit B, pursuant to which, among other things, each such
stockholder agrees to vote his shares of Company Common Stock in favor of this
Agreement and the transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto do hereby agree as
follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Acquiror Common Stock" shall mean the common stock, par value $2.00 per
share, of the Acquiror and, unless the context otherwise requires, related
Acquiror Rights.
"Acquiror Employee Stock Benefit Plans" shall mean the following employee
benefit plans of the Acquiror, as amended and in effect from time to time: 1995
Management Stock Purchase Plan, 1990 Non-Employee Directors' Stock Option Plan,
1992 Stock Incentive Plan, 1995 Non-Employee Directors' Stock Option Plan,
Management Stock Ownership Program, Dividend Reinvestment Plan, 1995 Employee
Stock Purchase Plan, 1992 Director Fee Plan, 1988 Stock Incentive Plan, 401(k)
Savings Plan and outstanding stock options assumed under stock option plans of
previously acquired companies.
"Acquiror Financial Statements" shall mean (i) the consolidated statements
of condition (including related notes and schedules, if any) of the Acquiror as
of December 31, 1995, 1994 and 1993 and the consolidated statements of income,
shareholders' equity and cash flows (including related notes and schedules, if
any) of the Acquiror for each of the three years ended December 31, 1995, 1994
and 1993 as filed by the Acquiror in its Securities Documents, and (ii) the
consolidated statements of condition of the Acquiror (including related notes
and schedules, if any) and the consolidated statements of income, shareholders'
equity and cash flows (including related notes and schedules, if any) of the
Acquiror included in the Securities Documents filed by the Acquiror with respect
to the quarterly and annual periods ended subsequent to December 31, 1995.
"Acquiror Maryland Bank" shall mean American Trust Bank, N.A., a national
bank and a wholly-owned subsidiary of the Acquiror.
"Acquiror Banks" shall mean the Acquiror Maryland Bank and each other
Subsidiary of the Company with accounts insured by the FDIC.
"Acquiror Preferred Stock" shall mean the shares of preferred stock, par
value $1.00 per share, of the Acquiror.
"Acquiror Rights" shall mean the rights attached to shares of Common Stock
pursuant to the Acquiror Rights Agreement.
"Acquiror Rights Agreement" shall mean the Series A Junior Participating
Preferred Stock Purchase Rights Agreement, dated January 25, 1990, between the
Acquiror and American Stock Transfer and Trust Company, as Rights Agent, as
amended.
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"Articles of Merger" shall have the meaning set forth in Section 2.2
hereof.
"Average Closing Price" shall mean the average of the Closing Bid Prices
for the Acquiror Common Stock for the 20 consecutive NASDAQ Trading Days ending
with (and including) (i) the sixth NASDAQ Trading Day preceding the date of the
Effective Time in the case of Section 2.3(b) and (ii) the date on which the
approval of the OCC for consummation of the Bank Merger is obtained for purposes
of Section 7.1(f) and (g). "Closing Bid Price" for any NASDAQ Trading Day shall
mean the last bid price for the Acquiror Common Stock reported on the NASDAQ
National Market as of 4:00 p.m., Eastern Time, on such NASDAQ Trading Day.
"NASDAQ Trading Day" shall mean a full trading day for the Nasdaq Stock Market's
National Market.
"Bank" shall mean First Federal Savings Bank of Western Maryland, a
federally-chartered savings bank and a wholly-owned subsidiary of the Company.
"Bank Merger" shall have the meaning set forth in Section 5.12 hereof.
"Bank Merger Agreement" shall have the meaning set forth in Section 5.12
hereof.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"BIF" means the Bank Insurance Fund administered by the FDIC or any
successor thereto.
"Closing" shall have the meaning set forth in Section 2.2 hereof.
"Closing Date" shall have the meaning set forth in Section 2.2 hereof.
"Certificate of Merger" shall have the meaning set forth in Section 2.2
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"Company Common Stock" shall mean the common stock, par value $1.00 per
share, of the Company.
"Company Employee Plans" shall have the meaning set forth in Section
3.14(a) hereof.
"Company Financial Statements" shall mean (i) the consolidated statements
of financial condition (including related notes and schedules, if any) of the
Company as of June 30, 1996, 1995 and 1994 and the consolidated statements of
operations, shareholders' equity and cash flows (including related notes and
schedules, if any) of the Company for each of
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the three years ended June 30, 1996, 1995 and 1994 as filed by the Company in
its Securities Documents, and (ii) the consolidated statements of financial
condition of the Company (including related notes and schedules, if any) and the
consolidated statements of operations, shareholders' equity and cash flows
(including related notes and schedules, if any) of the Company included in the
Securities Documents filed by the Company with respect to the quarterly and
annual periods ended subsequent to June 30, 1996.
"Company Options" shall mean options to purchase shares of Company Common
Stock granted pursuant to the Company Stock Option Plan.
"Company Preferred Stock" shall mean the shares of preferred stock, par
value $1.00 per share, of the Company.
"Company Stock Option Plan" shall mean the Stock Option Incentive Plan of
the Company, as amended and as in effect as of the date hereof.
"Dissenting Shares" shall have the meaning set forth in Section 2.5 hereof.
"DGCL" shall mean the General Corporation Law of the State of Delaware, as
amended.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the date and time specified pursuant to Section
2.2 hereof as the effective time of the Merger.
"Environmental Claim" means any written notice from any Governmental Entity
or third party alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on, or resulting from the presence, or
release into the environment, of any Materials of Environmental Concern.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environment Concern.
The term Environmental Law includes without limitation (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
Section 9601, ET SEQ; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. Section 6901, ET SEQ; the Clean Air Act, as amended, 42 U.S.C. Section
7401, ET SEQ; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
Section 1251, ET SEQ; the
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Toxic Substances Control Act, as amended, 15 U.S.C. Section 9601, ET SEQ; the
Emergency Planning and Community Right to Know Act, 42 U.S.C. Section 1101, ET
SEQ; the Safe Drinking Water Act, 42 U.S.C. Section 300f, ET SEQ; and all
comparable state and local laws, and (2) any common law (including without
limitation common law that may impose strict liability) that may impose
liability or obligations for injuries or damages due to, or threatened as a
result of, the presence of or exposure to any Materials of Environmental
Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Ratio" shall have the meaning set forth in Section 2.3(b) hereof.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean Federal Home Loan Bank.
"Form S-4" shall mean the registration statement on Form S-4 (or on any
successor or other appropriate form) to be filed by the Acquiror in connection
with the issuance of shares of Acquiror Common Stock pursuant to the Merger,
including the Proxy Statement which forms a part thereof, as amended and
supplemented.
"FRB" means the Board of Governors of the Federal Reserve System or any
successor thereto.
"Governmental Entity" shall mean any federal or state court, administrative
agency or commission or other governmental authority or instrumentality.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"Material Adverse Effect" shall mean, with respect to the Acquiror or the
Company, respectively, any effect that (i) is material and adverse to the
financial condition, results of operations or business of the Acquiror and its
Subsidiaries taken as whole or the Company and its Subsidiaries taken as a
whole, respectively, or (ii) materially impairs the ability of the Company
and/or the Bank, on the one hand, or the Acquiror and/or the Acquiror Maryland
Bank, on the other hand, to consummate the transactions contemplated by this
Agreement, provided, however, that Material Adverse Effect shall not be deemed
to include the impact of (a) changes in laws and regulations or interpretations
thereof that are generally applicable to the banking or savings industries, (b)
changes in generally accepted accounting principles that are generally
applicable to the banking or savings industries, (c)
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expenses incurred in connection with the transactions contemplated hereby, (d)
changes attributable to or resulting from changes in general economic
conditions, including changes in the prevailing level of interest rates, (e)
actions or omissions of a party (or any of its Subsidiaries) taken with the
prior informed written consent of the other party or parties in contemplation of
the transactions contemplated hereby or (f) expenses incurred pursuant to
Section 5.4(b) hereof and remediative expenses Previously Disclosed pursuant to
Section 3.9 hereof.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"Merger" shall mean the merger of the Company with and into the Acquiror
pursuant to the terms hereof.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OCC" shall mean the Office of the Comptroller of the Currency of the U.S.
Department of the Treasury or any successor thereto.
"OTS" shall mean the Office of Thrift Supervision of the U.S. Department of
the Treasury or any successor thereto.
"PBCL" shall mean the Pennsylvania Business Corporation Law, as amended.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Previously Disclosed" shall mean disclosed (i) in a letter dated the date
hereof delivered from the disclosing party to the other party specifically
referring to the appropriate section of this Agreement and describing in
reasonable detail the matters contained therein, or (ii) a letter dated after
the date hereof from the disclosing party specifically referring to this
Agreement and describing in reasonable detail the matters contained therein and
delivered by the other party pursuant to Section 5.13 hereof.
"Proxy Statement" shall mean the prospectus/proxy statement contained in
the Form S-4, as amended or supplemented, and to be delivered to shareholders of
the Company in connection with the solicitation of their approval of this
Agreement and the transactions contemplated hereby.
"Rights" shall mean warrants, options, rights, convertible securities and
other arrangements or commitments which obligate an entity to issue or dispose
of any of its capital stock or other ownership interests.
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"SAIF" means the Savings Association Insurance Fund administered by the
FDIC or any successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars, proxy
statements, registration statements and all similar documents filed, or required
to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"Subsidiary" and "Significant Subsidiary" shall have the meanings set forth
in Rule 1-02 of Regulation S-X of the Commission.
Other terms used herein are defined in the preamble and elsewhere in this
Agreement.
ARTICLE II
THE MERGER
2.1 THE MERGER
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 2.2 hereof), the Company shall be merged
with and into the Acquiror (the "Merger") in accordance with the provisions of
Section 1921 et. seq. of the PBCL and Section 252 of the DGCL. The Acquiror
shall be the surviving corporation (hereinafter sometimes called the "Surviving
Corporation") of the Merger, and shall continue its corporate existence under
the laws of the Commonwealth of Pennsylvania. The name of the Surviving
Corporation shall continue to be "Keystone Financial, Inc." Upon consummation of
the Merger, the separate corporate existence of the Company shall terminate.
(b) From and after the Effective Time, the Merger shall have the effects
set forth in Section 1929 ET. SEQ. of the PBCL and Section 259 of the DGCL.
(c) The Articles of Incorporation and Bylaws of the Acquiror, as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation
and Bylaws of the Surviving Corporation, respectively, until altered, amended or
repealed in accordance with their terms and applicable law.
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(d) The authorized capital stock of the Surviving Corporation shall be as
stated in the Articles of Incorporation of the Acquiror immediately prior to the
Effective Time.
(e) The directors and officers of the Acquiror immediately prior to the
Effective Time shall be the directors and officers of the Surviving Corporation,
each to hold office in accordance with the Articles of Incorporation and Bylaws
of the Surviving Corporation.
2.2 EFFECTIVE TIME; CLOSING
The Merger shall become effective upon the occurrence of the filing of (i)
Articles of Merger with the Department of State of the Commonwealth of
Pennsylvania pursuant to the PBCL and (ii) a Certificate of Merger with the
Secretary of State of the State of Delaware pursuant to the DGCL, unless a later
date and time is specified as the effective time in such Articles of Merger and
Certificate of Merger (the "Effective Time"). A closing (the "Closing") shall
take place immediately prior to the Effective Time at 10:00 a.m., Eastern Time,
on the fifth business day following the satisfaction or waiver, to the extent
permitted hereunder, of the conditions to the consummation of the Merger
specified in Article VI of this Agreement (other than the delivery of
certificates, opinions and other instruments and documents to be delivered at
the Closing) (the "Closing Date"), at the principal executive offices of the
Acquiror in Harrisburg, Pennsylvania, or at such other place, at such other
time, or on such other date as the parties may mutually agree upon. At the
Closing, there shall be delivered to the Acquiror and the Company the opinions,
certificates and other documents required to be delivered under Article VI
hereof. Subject to the fulfillment or waiver at or prior to the Closing of the
conditions to its obligations set forth in Article VI, at the Closing each party
shall execute and deliver Articles of Merger for filing with the Department of
State of the Commonwealth of Pennsylvania and a Certificate of Merger for filing
with the Secretary of State of the State of Delaware.
2.3 TREATMENT OF CAPITAL STOCK
Subject to the provisions of this Agreement, at the Effective Time,
automatically by virtue of the Merger and without any action on the part of any
shareholder:
(a) each share of Acquiror Common Stock issued and outstanding immediately
prior to the Effective Time shall be unchanged and shall remain issued and
outstanding; and
(b) subject to Sections 2.5 and 2.6 hereof, each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time (excluding
shares held, otherwise than in a fiduciary capacity for the benefit of third
parties or as a result of debts previously contracted, by the Acquiror or any of
its Subsidiaries, which shares shall be cancelled and retired) shall become and
be converted into the right to receive, at the election of the holder thereof as
provided in or as otherwise determined in accordance with Section 2.7 hereof,
either (i) 1.29 shares of Acquiror Common Stock (subject to possible adjustment
as set forth in Sections 2.9 and 7.1(g) hereof, the "Exchange Ratio") or (ii) an
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amount in cash equal to the Exchange Ratio multiplied by the Average Closing
Price (the "Cash Election Amount").
2.4 SHAREHOLDER RIGHTS; STOCK TRANSFERS
Except as provided for in Section 2.5 hereof, at the Effective Time,
holders of Company Common Stock shall cease to be and shall have no rights as
shareholders of the Company, other than to receive the consideration provided
under this Article II. After the Effective Time, there shall be no transfers on
the stock transfers books of the Company or the Surviving Corporation of shares
of Company Common Stock and if certificates evidencing such shares are presented
for transfer after the Effective Time, they shall be cancelled against delivery
of certificates for whole shares of Acquiror Common Stock (plus cash in lieu of
any fractional share interest) or cash (without interest) as herein provided.
2.5 DISSENTING SHARES
Each outstanding share of Company Common Stock the holder of which has
perfected his right to dissent under the DGCL and has not effectively withdrawn
or lost such right as of the Effective Time (the "Dissenting Shares") shall not
be converted into or represent a right to receive shares of Acquiror Common
Stock or cash hereunder, and the holder thereof shall be entitled only to such
rights as are granted by the DGCL. The Company shall give the Acquiror prompt
notice upon receipt by the Company of any such written demands for payment of
the fair value of such shares of Company Common Stock and of withdrawals of such
demands and any other instruments provided pursuant to the DGCL (any shareholder
duly making such demand being hereinafter called a "Dissenting Shareholder").
If any Dissenting Shareholder shall effectively withdraw or lose (through
failure to perfect or otherwise) his right to such payment at any time, such
holder's shares of Company Common Stock shall be converted into the right to
receive whole shares of Acquiror Common Stock (plus cash in lieu of any
fractional share interest) or cash (without interest) in accordance with the
provisions of Section 2.7 of this Agreement dealing with the consideration to be
received by Non-Electing Holders. Any payments made in respect of Dissenting
Shares shall be made by the Surviving Corporation.
2.6 FRACTIONAL SHARES
Notwithstanding any other provision hereof, no fractional shares of
Acquiror Common Stock shall be issued to holders of Company Common Stock. In
lieu thereof, each holder of shares of Company Common Stock entitled to a
fraction of a share of Acquiror Common Stock shall, at the time of surrender of
the certificate or certificates representing such holder's shares, receive an
amount of cash (without interest) equal to the product arrived at by multiplying
such fraction of a share of Acquiror Common Stock by $34.19. No such holder
shall be entitled to dividends, voting rights or any other rights in respect of
any fractional share interest.
9
2.7 ELECTION PROCEDURES
(a) ELECTION FORMS. An election form (the "Election Form") pursuant to
which each holder of Company Common Stock (other than shares held by the
Acquiror or any of its Subsidiaries other than in a fiduciary capacity that are
beneficially owned by third parties or as a result of debts previously
contracted, which shall be cancelled and retired) may elect to receive either
1.29 shares of Acquiror Common Stock (plus cash in lieu of any fractional share
interest) (the "Stock Election") or cash in the amount provided in Section
2.3(b) (the "Cash Election") for each share of Acquiror Common Stock held by
such holder will be mailed to each holder of record of Company Common Stock on
the record date (the "Company Record Date") for the meeting of shareholders of
the Company to be called and held pursuant to Section 5.2 hereof (the "Company
Shareholders' Meeting"). In addition, the Company will use its reasonable
efforts to make the Election Form available to all persons who become holders of
record of Company Common Stock between the Company Record Date and the Election
Deadline (as hereinafter defined), as well as all holders who acquire shares of
Company Common Stock issued by the Company upon the exercise of Company Options
after the Election Deadline. To be effective, an Election Form (or a facsimile
thereof), properly completed and signed, must be received by the Company no
later than 5:00 p.m., local time, on the last business day before the date of
the Company Shareholders' Meeting (the "Election Deadline"). Any holder of
record of Company Common Stock whose Election Form is not so received by the
Election Deadline (a "Non-Electing Holder") shall be deemed to have made either
the Stock Election or the Cash Election as determined pursuant to Section
2.7(d)(iv) hereof.
(b) NO PARTIAL ELECTIONS; NOMINEE HOLDERS. Except as otherwise
hereinafter provided, each holder of record of Company Common Stock may make
only either SOLELY the Stock Election or SOLELY the Cash Election with respect
to all shares of Company Common Stock held of record by such holder, whether
such shares be held in a single or in multiple shareholder accounts. For
purposes of this Agreement, a person holding shares of record individually will
be treated as a separate holder from the same person holding shares of record
jointly with another person or in a fiduciary capacity. A holder of record of
Company Common Stock who is a nominee only may submit one or more Election Forms
indicating thereon a combination of Elections covering up to the aggregate
number of shares of Company Common Stock registered in the name of such holder;
provided that such holder certifies to the satisfaction of the Acquiror that
such shares are held by such holder as nominee for more than one beneficial
owner and that either SOLELY the Stock Election or SOLELY the Cash Election has
been made with respect to all shares held as nominee for any one beneficial
owner. For purposes of this Agreement, each beneficial owner for which such an
Election Form is so submitted will be treated as a separate holder of Company
Common Stock.
(c) REVOCATION OF ELECTIONS. Any holder of record who has made an
Election may change it at any time prior to the Election Deadline by submitting
to the Company a revised Election Form (or a facsimile thereof), properly
completed and signed. Upon the Election
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Deadline, Elections will become irrevocable except to the extent changes therein
are made as provided in, or are permitted by the Acquiror in order to satisfy
the limitations referred to in, Section 2.7(d) hereof. Unless changed as
aforesaid, an Election Form submitted by any holder of record of Company Common
Stock shall be binding upon any transferee of the shares of such holder.
(d) LIMITATIONS ON EFFECTIVENESS OF ELECTIONS. Notwithstanding any other
provision contained herein or in any Election Form, the effectiveness of the
Elections by holders of Company Common Stock herein provided for shall be
subject to the following limitations:
(i) MINIMUM STOCK LIMITATION. The aggregate market value on the day
prior to the Effective Time of all whole shares of Acquiror Common Stock to
be issued pursuant to the Stock Election (the "Stock Value") shall be at
least equal to 55% of the Total Consideration, as hereinafter defined (the
"Minimum Stock Limitation"); and
(ii) MAXIMUM STOCK LIMITATION. The Stock Value shall not exceed 60%
(or such greater percentage as the Acquiror in its sole discretion shall
determine to permit) of the Total Consideration except as necessary to
ensure that each holder of Company Common Stock shall be deemed to have
made either SOLELY the Stock Election or SOLELY the Cash Election (the
"Maximum Stock Limitation").
(iii) TOTAL CONSIDERATION. For purposes of the Minimum Stock and
Maximum Stock Limitations, the term "Total Consideration" shall mean the
sum of (1) the Stock Value, (2) the aggregate amount of cash to be paid
pursuant to the Cash Election, (3) the aggregate amount of cash to be paid
in lieu of fractional shares of Acquiror Common Stock pursuant to the Stock
Election and (4) the aggregate amount of cash which the Acquiror determines
may be payable to holders of Dissenting Shares.
In applying the Minimum Stock Limitation and the Maximum Stock Limitation,
(iv) First, after tentatively giving effect to the Elections made by
the holders of Company Common Stock who are not Non-Electing Holders, all
Non-Electing Holders shall be deemed (A) to have made the Stock Election if
necessary to comply with the Minimum Stock Limitation or (B) to have made
the Cash Election if necessary to comply with the Maximum Stock Limitation.
If in order to comply with both the Minimum and Maximum Stock Limitations,
it is necessary that not all Non-Electing Holders be deemed to have made
the same Election, the Acquiror shall rank the Non-Electing Holders in the
order of the number of shares of Company Common Stock held by such holders
as of the Effective Time, with the holder of the smallest number of shares
ranking first, the holder of the second smallest number of
11
shares ranking second, and so on. The Non-Electing Holders shall be deemed
to have made the Stock Election in the order of such ranking (A) to the
extent the Acquiror shall determine to be reasonably necessary in order to
ensure that the Minimum Stock Limitation shall be met and (B) if to do so
would not violate the Maximum Stock Limitation to such greater extent, if
any, as the Acquiror in its sole discretion may determine, and all
remaining Non-Electing Holders shall be deemed to have made the Cash
Election.
(v) In the event that, after allocating the Non-Electing Holders as
provided above and after tentatively giving effect to the Elections by
holders of Company Common Stock herein provided for, the Acquiror shall
determine that either the Minimum Stock Limitation or the Maximum Stock
Limitation may be violated, then certain of such Elections shall be deemed
ineffective as follows:
(A) IF THE MINIMUM STOCK LIMITATION MIGHT OTHERWISE NOT BE MET,
the Acquiror shall rank the holders of Company Common Stock that have
made the Cash Election in the order of the number of shares of Company
Common Stock held by such holders as of the Effective Time, with the
holder of the smallest number of shares ranking first, the holder of
the second smallest number of shares ranking second, and so on. The
Elections of the holders making the Cash Election shall automatically
be converted to the Stock Election in the order of such ranking to the
extent the Acquiror shall determine to be reasonably necessary in
order to ensure that the Minimum Stock Limitation shall be met.
(B) IF THE MAXIMUM STOCK LIMITATION MIGHT OTHERWISE BE EXCEEDED,
the Acquiror shall rank the holders of Company Common Stock that have
made the Stock Election in the order of the number of shares of
Company Common Stock held by such holders as of the Effective Time,
with the holder of the smallest number of shares ranking first, the
holder of the second smallest number of shares ranking second, and so
on. The Elections of the holders making the Stock Election shall
automatically be converted to the Cash Election in the order of such
ranking to the extent the Acquiror shall determine to be reasonably
necessary in order to ensure that the Maximum Stock Limitation will
not be exceeded.
(e) ADDITIONAL PROCEDURES. The Acquiror shall have the right to establish
additional procedures and to make reasonable determinations not inconsistent
with the provisions of this Agreement governing any matters in connection with
this Agreement,
12
including but not limited to procedures and determining as to the manner, form
and validity of Elections, the ranking of holders of Company Common Stock for
the purposes of the conversions of Elections provided for in Section 2.7(d)
hereof and the necessity for, manner and extent of such conversions. Any such
procedures established shall be effective as if set forth in this Agreement, and
any such determinations made by the Acquiror in good faith shall be final and
conclusive.
2.8 EXCHANGE PROCEDURES
(a) On the Closing Date, the Acquiror shall issue to an agent, duly
appointed by the Acquiror (the "Exchange Agent"), the number of shares of
Acquiror Common Stock issuable and the amount of cash payable to holders of
Company Common Stock pursuant to Sections 2.3 and 2.7 hereof (which shall be
held by the Exchange Agent in trust for such holders of Company Common Stock).
Promptly after the Effective Time, the Exchange Agent shall distribute Acquiror
Common Stock and cash as provided herein. The Exchange Agent shall not be
entitled to vote or exercise any rights of ownership with respect to the shares
of Acquiror Common Stock held by it from time to time hereunder.
(b) At or after the Effective Time, each holder of a certificate or
certificates theretofore evidencing issued and outstanding shares of Company
Common Stock (except as provided in Section 2.3(b) hereof), upon surrender of
the same to the Exchange Agent, shall be entitled to receive in exchange
therefor either a certificate or certificates representing the number of whole
shares of Acquiror Common Stock into which the shares of Company Common Stock
theretofore represented by the certificate or certificates so surrendered shall
have been converted (plus cash in lieu of any fractional share interest) or cash
(without interest), as provided in Sections 2.3 and 2.7 hereof. As promptly as
practicable after the Effective Time, the Exchange Agent shall mail to each
holder of record of an outstanding certificate which immediately prior to the
Effective Time evidenced shares of Company Common Stock, and which is to be
exchanged for Acquiror Common Stock (plus cash in lieu of any fractional share
interest) or cash (without interest), as provided in Sections 2.3 and 2.7
hereof, a form of letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to such certificate shall pass, only
upon delivery of such certificate to the Exchange Agent) advising such holder of
the terms of the exchange effected by the Merger and of the procedure for
surrendering to the Exchange Agent such certificate in exchange for a
certificate or certificates evidencing Acquiror Common Stock (plus cash in lieu
of any fractional share interest) or cash, as applicable. The Exchange Agent
shall accept such certificates upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with customary exchange practices.
(c) Each outstanding certificate which prior to the Effective Time
represented Company Common Stock and which is not surrendered to the Exchange
Agent in accordance with the procedures provided for herein shall, except as
otherwise herein provided, until duly surrendered to the Exchange Agent be
deemed to evidence ownership
13
of the number of whole shares of Acquiror Common Stock (plus cash in lieu of any
fractional share interest) or cash, as applicable, into which such Company
Common Stock shall have been converted by virtue of the Merger.
(d) No holder of a certificate theretofore representing shares of Company
Common Stock shall be entitled to receive any dividends in respect of the
Acquiror Common Stock into which such shares shall have been converted by virtue
of the Merger until the certificate representing such shares is surrendered in
exchange for a certificate or certificates representing whole shares of Acquiror
Common Stock (plus cash in lieu of any fractional share interest) or cash, as
applicable. In the event that dividends are declared and paid by the Acquiror
in respect of Acquiror Common Stock after the Effective Time but prior to any
holder's surrender of certificates representing shares of Company Common Stock,
dividends payable to such holder in respect of whole shares of Acquiror Common
Stock not then issued shall accrue (without interest). Any such dividends shall
be paid (without interest) upon surrender of the certificates representing such
shares of Company Common Stock.
(e) The Acquiror shall not be obligated to deliver a certificate or
certificates representing whole shares of Acquiror Common Stock (plus cash in
lieu of any fractional share interest) or cash, as applicable, to which a holder
of Company Common Stock would otherwise be entitled as a result of the Merger
until such holder surrenders the certificate or certificates representing the
shares of Company Common Stock for exchange as provided in this Section 2.8, or,
in default thereof, an appropriate affidavit of loss and indemnity agreement
and/or a bond in an amount as may be reasonably required in each case by the
Acquiror. If any certificate evidencing shares of Acquiror Common Stock is to
be issued in a name other than that in which the certificate evidencing Company
Common Stock surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange pay to the Exchange Agent any transfer or other tax
required by reason of the issuance of a certificate for shares of Acquiror
Common Stock in any name other than that of the registered holder of the
certificate surrendered or otherwise establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(f) Any portion of the shares of Acquiror Common Stock and cash delivered
to the Exchange Agent by the Acquiror pursuant to Section 2.7(a) hereof that
remains unclaimed by the shareholders of the Company by the second anniversary
of the Effective Time shall be delivered by the Exchange Agent to the Acquiror.
Any shareholders of the Company who have not theretofore complied with Section
2.7(b) hereof shall thereafter look only to the Acquiror for the consideration
deliverable in respect of each share of Company Common Stock such shareholder
holds as determined pursuant to this Agreement without any interest thereon. If
outstanding certificates for shares of Company Common Stock are not surrendered
or the payment for them is not claimed prior to the second anniversary of the
Effective Time (the "Old Certificates"), the Acquiror may at any time
thereafter, with
14
or without notice to the holders of record of the Old Certificates which were
converted into whole shares of Acquiror Common Stock (plus cash in lieu of any
fractional share interest) pursuant to the terms of this Agreement, sell for the
accounts of such holders any or all of the shares of Acquiror Common Stock which
such holders are entitled to receive under Sections 2.3 and 2.7 hereof (the
"Unclaimed Shares"), provided, however, that the Acquiror shall not be obligated
to make any sale of Unclaimed Shares (even if notice of sale of the Unclaimed
Shares has been given) and instead may issue to the holder of any Old
Certificates properly delivered to the Acquiror in accordance with the terms
thereof a certificate evidencing the number of whole shares of Acquiror Common
Stock (plus cash in lieu of any fractional share interest) to which such holder
is entitled by virtue of Sections 2.3 and 2.7 hereof. In the event that the
Acquiror elects to sell Unclaimed Shares, it may do so in a registered public
offering under the Securities Act and applicable state securities laws, by
private sale or by sale at any broker's board or in any securities exchange, in
each case in such manner and at such times as the Acquiror shall determine. 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 the Acquiror for their respective accounts, and such holders
shall not be entitled to receive any interest on such net sale proceeds held by
the Acquiror.
(g) The Acquiror and the Exchange Agent shall be entitled to rely upon the
stock transfer books of the Company to establish the identity of those persons
entitled to receive the consideration specified in this Agreement, which books
shall be conclusive with respect thereto. In the event of a dispute with
respect to ownership of stock represented by any certificate, the Acquiror and
the Exchange Agent shall be entitled to deposit any consideration represented
thereby in escrow with an independent third party and thereafter be relieved
with respect to any claims thereto.
2.9 ANTI-DILUTION PROVISIONS
If after the date of this Agreement and prior to the Effective Time the
number of outstanding shares of Acquiror Common Stock or Company 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 Acquiror Rights Agreement all Rights (as defined in the
Acquiror Rights Agreement) then outstanding (other than Rights which have become
void pursuant to Section 7(f) of the Acquiror Rights Agreement) shall have been
exchanged for shares of Acquiror Common Stock, then the Exchange Ratio shall be
adjusted (a) in the case of any such event involving the Acquiror Common Stock
by multiplying the Exchange Ratio by a fraction the numerator of which shall be
the number of shares of Acquiror Common Stock issued and outstanding immediately
after such event and the denominator of which shall be the number of shares of
Acquiror Common Stock issued and outstanding immediately prior to such event and
(b)
15
in the case of any such event involving the Company Common Stock by multiplying
the Exchange Ratio by a fraction the numerator of which shall be the number of
shares of Company Common Stock issued and outstanding immediately prior to such
event and the denominator of which shall be the number of shares of Company
Common Stock issued and outstanding immediately after such event. The Exchange
Ratio also shall be appropriately adjusted to reflect any capital reorganization
involving the reclassification of the Acquiror Common Stock or the Company
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 share interests.
2.10 OPTIONS
Each Company Option which is outstanding and unexercised as of the
Effective Time shall be converted into the right to receive an amount in cash
equal in value to the excess of (i) the product of the number of shares of
Company Common Stock subject to such option, the Exchange Ratio and the Average
Closing Price over (ii) the aggregate exercise price of such option.
2.11 ADDITIONAL ACTIONS
If, at any time after the Effective Time, the Surviving Corporation shall
consider that any further assignments or assurances in law or any other acts are
necessary or desirable to (i) vest, perfect or confirm, of record or otherwise,
in the Surviving Corporation its right, title or interest in, to or under any of
the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger, or
(ii) otherwise carry out the purposes of this Agreement, the Company and its
proper officers and directors shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all such
proper deeds, assignments and assurances in law and to do all acts necessary or
proper to vest, perfect or confirm title to and possession of such rights,
properties or assets in the Surviving Corporation and otherwise to carry out the
purposes of this Agreement; and the proper officers and directors of the
Surviving Corporation are fully authorized in the name of the Company or
otherwise to take any and all such action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Acquiror as follows:
3.1 CAPITAL STRUCTURE
The authorized capital stock of the Company consists of 5,000,000 shares of
Company Common Stock and 2,000,000 shares of Company Preferred Stock. As of the
date hereof, 2,128,648 shares of Company Common Stock are issued and
outstanding, 63,848 shares of
16
Company Common Stock are directly or indirectly held by the Company as treasury
stock and no shares of Company Preferred Stock are issued and outstanding. All
outstanding shares of Company Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable, and none of the outstanding shares
of Company Common Stock has been issued in violation of the preemptive rights of
any person, firm or entity. Except for the Company Stock Option Agreement and
for Company Options to acquire not more than 73,421 shares of Company Common
Stock as of the date hereof, a schedule of which has been Previously Disclosed,
there are no Rights authorized, issued or outstanding with respect to the
capital stock of the Company.
3.2 ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted and is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Company. The Company
is duly registered as a unitary savings and loan holding company under the HOLA
and the regulations of the OTS thereunder. The Company has heretofore delivered
to the Acquiror true and complete copies of the Certificate of Incorporation and
Bylaws of the Company as in effect as of the date hereof.
3.3 OWNERSHIP OF THE COMPANY SUBSIDIARIES
The Company has Previously Disclosed the name, jurisdiction of
incorporation and percentage ownership of each direct or indirect Company
Subsidiary and identified the Bank as its only Significant Subsidiary. Except
for (x) capital stock of the Company Subsidiaries, (y) securities and other
interests held in a fiduciary capacity and beneficially owned by third parties
or taken in consideration of debts previously contracted and (z) securities and
other interests which are Previously Disclosed, the Company does not own or have
the right to acquire, directly or indirectly, any outstanding capital stock or
other voting securities or ownership interests of any corporation, bank, savings
association, partnership, joint venture or other organization, other than
investment securities representing not more than 1% of any entity. The
outstanding shares of capital stock or other ownership interests of each Company
Subsidiary have been duly authorized and validly issued, are fully paid and
nonassessable, and are directly owned by the Company free and clear of all
liens, claims, encumbrances, charges, pledges, restrictions or rights of third
parties of any kind whatsoever. No Rights are authorized, issued or outstanding
with respect to the capital stock or other ownership interests of the Company
Subsidiaries and there are no agreements, understandings or commitments relating
to the right of the Company to vote or to dispose of such capital stock or other
ownership interests.
17
3.4 ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY SUBSIDIARIES
Each of the Company Subsidiaries is a corporation or partnership duly
organized, validly existing and in good standing under the laws of the United
States or the jurisdiction in which it is organized. Each of the Company
Subsidiaries (i) has full power and authority to own or lease all of its
properties and assets and to carry on its business as now conducted, and (ii) is
duly licensed or qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of property or the conduct of its
business requires such qualification, except where the failure to be so
licensed, qualified or in good standing would not have a Material Adverse Effect
on the Company. The deposit accounts of the Bank are insured by the SAIF to the
maximum extent permitted by the FDIA. The Bank has paid all deposit insurance
premiums and assessments required by the FDIA and the regulations thereunder.
The Company has heretofore delivered or made available to the Acquiror true and
complete copies of the Charter and Bylaws of the Bank as in effect as of the
date hereof.
3.5 AUTHORIZED AND EFFECTIVE AGREEMENT
(a) The Company has all requisite corporate power and authority to enter
into this Agreement and (subject to receipt of all necessary governmental
approvals and the approval of the Company's shareholders of this Agreement) to
perform all of its obligations under this Agreement. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action in
respect thereof on the part of the Company, except for the approval of this
Agreement by the Company's shareholders. This Agreement has been duly and
validly executed and delivered by the Company and, assuming due authorization,
execution and delivery by the Acquiror, constitutes a legal, valid and binding
obligation of the Company which is enforceable against the Company in accordance
with its terms, subject, as to enforceability, to bankruptcy, insolvency and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby (including the Merger and the Bank
Merger), nor compliance by the Company with any of the provisions hereof (i)
does or will conflict with or result in a breach of any provisions of the
Certificate of Incorporation or Bylaws of the Company or, except as Previously
Disclosed, the equivalent documents of any Company Subsidiary, (ii) violate,
conflict with or result in a breach of any term, condition or provision of, or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of the Company or a
Company Subsidiary pursuant to, any material note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which the Company or a Company Subsidiary is a party, or by which any of their
respective properties or assets may be bound or affected, or (iii) subject to
receipt of all required governmental and shareholder approvals, violate any
order, writ,
18
injunction, decree, statute, rule or regulation applicable to the Company or a
Company Subsidiary.
(c) Except for (i) the filing of applications and notices with, and the
consents and approvals of, as applicable, the OTS and the OCC, (ii) the filing
and effectiveness of the Form S-4 with the Commission, (iii) the approval of
this Agreement by the requisite vote of the shareholders of the Company, (iv)
the filing of Articles of Merger with the Department of State of the
Commonwealth of Pennsylvania and a Certificate of Merger with the Secretary of
State of the State of Delaware pursuant to the PBCL and the DGCL, respectively,
in connection with the Merger and (v) review of the Merger by the DOJ under
federal antitrust laws, and except for such filings, registrations, consents or
approvals which are Previously Disclosed, no consents or approvals of or filings
or registrations with any Governmental Entity or with any third party are
necessary on the part of the Company or the Bank in connection with (i) the
execution and delivery by the Company of this Agreement and the consummation by
the Company of the transactions contemplated hereby and (ii) the execution and
delivery by the Bank of the Bank Merger Agreement and the consummation by the
Bank of the transactions contemplated thereby.
(d) As of the date hereof, neither the Company nor the Bank is aware of
any reasons relating to the Company or the Bank (including without limitation
Community Reinvestment Act compliance) why all consents and approvals shall not
be procured from all regulatory agencies having jurisdiction over the
transactions contemplated by this Agreement as shall be necessary for
consummation of the transactions contemplated by this Agreement and the Bank
Merger Agreement.
3.6 SECURITIES DOCUMENTS AND REGULATORY REPORTS
(a) Since January 1, 1993, the Company has timely filed with the
Commission and the NASD all Securities Documents required by the Securities Laws
and such Securities Documents complied in all material respects with the
Securities Laws and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) Since January 1, 1993, each of the Company and the Bank has duly filed
with the OTS, the FDIC and any other applicable federal or state banking
authority, as the case may be, in correct form the reports required to be filed
under applicable laws and regulations and such reports were in all material
respects complete and accurate and in compliance with the requirements of
applicable laws and regulations. In connection with the most recent
examinations of the Company and the Bank by the OTS and the FDIC, neither the
Company nor the Bank was required to correct or change any action, procedure or
proceeding which the Company or the Bank believes has not been corrected or
changed as required as of the date hereof and which could have a Material
Adverse Effect on the Company.
19
3.7 FINANCIAL STATEMENTS
(a) The Company has previously delivered or made available to the Acquiror
accurate and complete copies of the Company Financial Statements which, in the
case of the consolidated statements of financial condition of the Company as of
June 30, 1996, 1995 and 1994 and the consolidated statements of operations,
shareholders' equity and cash flows for each of the three years ended June 30,
1996, 1995 and 1994, are accompanied by the audit reports of KPMG Peat Marwick
LLP, independent public accountants with respect to the Company. The Company
Financial Statements referred to herein, as well as the Company Financial
Statements to be delivered pursuant to Section 5.8 hereof, fairly present or
will fairly present, as the case may be, the consolidated financial condition of
the Company as of the respective dates set forth therein, and the consolidated
results of operations, shareholders' equity and cash flows of the Company for
the respective periods or as of the respective dates set forth therein.
(b) Each of the Company Financial Statements referred to in Section 3.7(a)
has been or will be, as the case may be, prepared in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as stated therein. The audits of the Company and the Company
Subsidiaries have been conducted in all material respects in accordance with
generally accepted auditing standards. The books and records of the Company and
the Company Subsidiaries are being maintained in material compliance with
applicable legal and accounting requirements, and such books and records
accurately reflect in all material respects all dealings and transactions in
respect of the business, assets, liabilities and affairs of the Company and its
Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for in
the consolidated statement of financial condition of the Company as of September
30, 1996 (including related notes) and (ii) of liabilities incurred since
September 30, 1996 in the ordinary course of business, neither the Company nor
any Company Subsidiary has any liabilities, whether absolute, accrued,
contingent or otherwise, material to the financial condition, results of
operations or business of the Company on a consolidated basis.
3.8 MATERIAL ADVERSE CHANGE
Since September 30, 1996, (i) the Company and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
(excluding the incurrence of expenses in connection with this Agreement and the
transactions contemplated hereby) and (ii) no event has occurred or circumstance
arisen that, individually or in the aggregate, has had or is reasonably likely
to have a Material Adverse Effect on the Company.
3.9 ENVIRONMENTAL MATTERS
(a) To the best of the Company's knowledge, the Company and its
Subsidiaries are in compliance with all Environmental Laws, except for any
violations of any
20
Environmental Law which would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. Neither the Company nor a Company
Subsidiary has received any communication alleging that the Company or a Company
Subsidiary is not in such compliance and, to the best knowledge of the Company,
there are no present circumstances that would prevent or interfere with the
continuation of such compliance.
(b) To the best of the Company's knowledge, none of the properties owned,
leased or operated by the Company or a Company Subsidiary has been or is in
violation of or liable under any Environmental Law, except any such violations
or liabilities which would not individually or in the aggregate have a Material
Adverse Effect on the Company.
(c) To the best of the Company's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents that could
reasonably form the basis of any Environmental Claim or other claim or action or
governmental investigation that could result in the imposition of any liability
arising under any Environmental Law against the Company or a Company Subsidiary
or against any person or entity whose liability for any Environmental Claim the
Company or a Company Subsidiary has or may have retained or assumed either
contractually or by operation of law or with respect to any of the properties
owned, leased or operated by the Company or a Company Subsidiary, except such
which would not individually or in the aggregate have a Material Adverse Effect
on the Company.
(d) Except as Previously Disclosed, the Company has not conducted any
environmental studies during the past five years with respect to any properties
owned by it or a Company Subsidiary as of the date hereof.
3.10 TAX MATTERS
(a) The Company and its Subsidiaries have timely filed all federal, state
and local (and, if applicable, foreign) income, franchise, bank, excise, real
property, personal property and other tax returns required by applicable law to
be filed by them (including, without limitation, estimated tax returns, income
tax returns, information returns and withholding and employment tax returns) and
have paid, or where payment is not required to have been made, have set up an
adequate reserve or accrual for the payment of, all material taxes required to
be paid in respect of the periods covered by such returns and, as of the
Effective Time, will have paid, or where payment is not required to have been
made, will have set up an adequate reserve or accrual for the payment of, all
material taxes for any subsequent periods ending on or prior to the Effective
Time. Neither the Company nor a Company Subsidiary will have any material
liability for any such taxes in excess of the amounts so paid or reserves or
accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by the Company and its Subsidiaries are complete and accurate in all
material respects. Neither the
21
Company nor a Company Subsidiary is delinquent in the payment of any tax,
assessment or governmental charge or, except as Previously Disclosed, has
requested any extension of time within which to file any tax returns in respect
of any fiscal year or portion thereof which have not since been filed. Except
as Previously Disclosed, the federal, state and local income tax returns of the
Company and its Subsidiaries have been examined by the applicable tax
authorities (or are closed to examination due to the expiration of the
applicable statute of limitations) and no deficiencies for any tax, assessment
or governmental charge have been proposed, asserted or assessed (tentatively or
otherwise) against the Company or a Company Subsidiary as a result of such
examinations or otherwise which have not been settled and paid. There are
currently no agreements in effect with respect to the Company or a Company
Subsidiary to extend the period of limitations for the assessment or collection
of any tax. As of the date hereof, no audit, examination or deficiency or
refund litigation with respect to such return is pending or, to the best of the
Company's knowledge, threatened.
(c) Except as Previously Disclosed, neither the Company nor any Company
Subsidiary (i) is a party to any agreement providing for the allocation or
sharing of taxes, (ii) is required to include in income any adjustment pursuant
to Section 481(a) of the Code by reason of a voluntary change in accounting
method initiated by the Company or a Company Subsidiary (nor does the Company
have any knowledge that the Internal Revenue Service has proposed any such
adjustment or change of accounting method) or (iii) has filed a consent pursuant
to Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply.
3.11 LEGAL PROCEEDINGS
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of the Company,
threatened against the Company or a Company Subsidiary or against any asset,
interest or right of the Company or a Company Subsidiary, or against any
officer, director or employee of any of them that individually or in the
aggregate, if decided adversely, would have a Material Adverse Effect on the
Company. Neither the Company nor a Company Subsidiary is a party to any order,
judgment or decree which has or could reasonably be expected to have a Material
Adverse Effect on the Company.
3.12 COMPLIANCE WITH LAWS
(a) Each of the Company and the Company Subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local and foreign
governmental or regulatory bodies that are required in order to permit it to
carry on its business as it is presently being conducted and the absence of
which could reasonably be expected to have a Material Adverse Effect on the
Company; all such permits, licenses, certificates of authority, orders and
approvals
22
are in full force and effect; and to the best knowledge of the Company, no
suspension or cancellation of any of the same is threatened.
(b) Neither the Company nor a Company Subsidiary is in violation of its
respective Certificate of Incorporation, Charter or other organizational
document or Bylaws, or of any applicable federal, state or local law or
ordinance or any order, rule or regulation of any federal, state, local or other
governmental agency or body (including, without limitation, all banking
(including without limitation all regulatory capital requirements), securities,
municipal securities, safety, health, environmental, zoning, anti-
discrimination, antitrust, and wage and hour laws, ordinances, orders, rules and
regulations), or in default with respect to any order, writ, injunction or
decree of any court, or in default under any order, license, regulation or
demand of any governmental agency, any of which violations or defaults,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on the Company; and neither the Company nor a Company
Subsidiary has received any notice or communication from any federal, state or
local governmental authority asserting that the Company or a Company Subsidiary
is in violation of any of the foregoing which could reasonably be expected to
have a Material Adverse Effect on the Company. Neither the Company nor a
Company Subsidiary is subject to any regulatory or supervisory cease and desist
order, agreement, written directive, memorandum of understanding or written
commitment (other than those of general applicability to all savings
associations or savings and loan holding companies issued by governmental
authorities), and none of them has received any written communication requesting
that it enter into any of the foregoing.
3.13 CERTAIN INFORMATION
None of the information relating to the Company and its Subsidiaries
supplied or to be supplied for inclusion or incorporation by reference in (i)
the Form S-4 will, at the time the Form S-4 and any amendment thereto becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(ii) the Proxy Statement, as of the date such Proxy Statement is mailed to
shareholders of the Company and up to and including the date of the meeting of
shareholders to which such Proxy Statement relates, will contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, provided that information as of a later date shall be
deemed to modify information as of an earlier date. The Proxy Statement mailed
by the Company to its shareholders in connection with the meeting of
shareholders at which this Agreement will be considered by such shareholders
will comply as to form in all material respects with the Exchange Act and the
rules and regulations promulgated thereunder.
23
3.14 EMPLOYEE BENEFIT PLANS
(a) The Company has Previously Disclosed all stock option, employee stock
purchase and stock bonus plans, qualified pension or profit-sharing plans, any
deferred compensation, consultant, bonus or group insurance contract or any
other incentive, health and welfare or employee benefit plan or agreement
maintained for the benefit of employees or former employees of the Company or
any Company Subsidiary (the "Company Employee Plans"), whether written or oral,
and the Company has previously furnished or made available to the Acquiror
accurate and complete copies of the same together with (i) the most recent
actuarial and financial reports prepared with respect to any qualified plans,
(ii) the most recent annual reports filed with any governmental agency, and
(iii) all rulings and determination letters and any open requests for rulings or
letters that pertain to any qualified plan.
(b) None of the Company, any Company Subsidiary, any Company Employee Plan
constituting an "employee benefit plan" within the meaning of Section 3(2) of
ERISA ("Company Pension Plan") or, to the best of the Company's knowledge, any
fiduciary of such Company Pension Plan, has incurred any direct or indirect
material liability to the PBGC, the Internal Revenue Service or any present or
former employees of the Company or a Company Subsidiary with respect to any such
Company Pension Plan. To the best of the Company's knowledge, no reportable
event under Section 4043(b) of ERISA has occurred with respect to any such
Company Pension Plan.
(c) Except as Previously Disclosed, neither the Company nor any Company
Subsidiary participates in or has incurred any liability under Section 4201 of
ERISA for a complete or partial withdrawal from a multi-employer plan (as such
term is defined in ERISA).
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Company Pension Plan which is intended to
qualify under Section 401 of the Code to the effect that such plan is qualified
under Section 401 of the Code and the trust associated with such Company Pension
Plan is tax exempt under Section 501 of the Code. No such letter has been
revoked or, to the best of the Company's knowledge, is threatened to be revoked
and the Company does not know of any ground on which such revocation may be
based. Neither the Company nor any Company Subsidiary has any liability under
any such Company Pension Plan that is not reflected on the consolidated
statement of financial condition of the Company at September 30, 1996 included
in the Company Financial Statements, other than liabilities incurred in the
ordinary course of business in connection therewith subsequent to the date
thereof.
(e) To the best of the Company's knowledge, no prohibited transaction
(which shall mean any transaction prohibited by Section 406 of ERISA and not
exempt under Section 408 of ERISA or Section 4975 of the Code) has occurred with
respect to any Company Employee Plan which would result in the imposition,
directly or indirectly, of a
24
material excise tax under Section 4975 of the Code or otherwise have a Material
Adverse Effect on the Company.
(f) Full payment has been made (or proper accruals have been established)
of all contributions which are required for periods prior to the date hereof,
and full payment will be so made (or proper accruals will be so established) of
all contributions which are required for periods after the date hereof and prior
to the Effective Time, under the terms of each Company Employee Plan or ERISA;
no accumulated funding deficiency (as defined in Section 302 of ERISA or Section
412 of the Code), whether or not waived, exists with respect to any Company
Pension Plan, and there is no "unfunded current liability" (as defined in
Section 412 of the Code) with respect to any Company Pension Plan.
(g) To the best of the Company's knowledge, the Company Employee Plans
have been operated in compliance in all material respects with the terms of the
operative plan documents and the applicable provisions of ERISA, the Code, all
regulations, rulings and announcements promulgated or issued thereunder and all
other applicable governmental laws and regulations.
(h) There are no pending or, to the best knowledge of the Company,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Company Employee Plans or any trust related thereto or any
fiduciary thereof.
3.15 CERTAIN CONTRACTS
(a) Except as Previously Disclosed, neither the Company nor a Company
Subsidiary is a party to, is bound or affected by, receives, or is obligated to
pay, benefits under (i) any agreement, arrangement or commitment, including
without limitation any agreement, indenture or other instrument, relating to the
borrowing of money by the Company or a Company Subsidiary (other than in the
case of the Bank deposits, FHLB advances, federal funds purchased and securities
sold under agreements to repurchase in the ordinary course of business) or the
guarantee by the Company or a Company Subsidiary of any obligation, other than
by the Bank in the ordinary course of its banking business, (ii) any agreement,
arrangement or commitment relating to the employment of a consultant or the
employment, election or retention in office of any present or former director,
officer or employee of the Company or a Company Subsidiary, (iii) any agreement,
arrangement or understanding pursuant to which any payment (whether of severance
pay or otherwise) became or may become due to any director, officer or employee
of the Company or a Company Subsidiary upon execution of this Agreement or upon
or following consummation of the transactions contemplated by this Agreement
(either alone or in connection with the occurrence of any additional acts or
events); (iv) any agreement, arrangement or understanding pursuant to which the
Company or a Company Subsidiary is obligated to indemnify any director, officer,
employee or agent of the Company or a Company Subsidiary; (v) any agreement,
arrangement or understanding to which the Company or a Company Subsidiary is a
party or by which any of the same is bound which limits the
25
freedom of the Company or a Company Subsidiary to compete in any line of
business or with any person, (vi) any assistance agreement, supervisory
agreement, memorandum of understanding, consent order, cease and desist order or
condition of any regulatory order or decree with or by the OTS, the FDIC or any
other regulatory agency, (vii) any other agreement, arrangement or understanding
which would be required to be filed as an exhibit to the Company's Annual Report
on Form 10-K under the Exchange Act and which has not been so filed or (viii)
any other agreement, arrangement or understanding which, if entered into after
the date hereof, would require the consent of the Acquiror under Section 5.6(a)
hereof.
(b) Neither the Company nor any Company Subsidiary is in default or in
non-compliance, which default or non-compliance could reasonably be expected to
have a Material Adverse Effect on the Company, under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to which it
is a party or by which its assets, business or operations may be bound or
affected, whether entered into in the ordinary course of business or otherwise
and whether written or oral, and there has not occurred any event that with the
lapse of time or the giving of notice, or both, would constitute such a default
or non-compliance.
3.16 BROKERS AND FINDERS
Except as Previously Disclosed, neither the Company nor any Company
Subsidiary nor any of their respective directors, officers or employees, has
employed any broker or finder or incurred any liability for any broker or finder
fees or commissions in connection with the transactions contemplated hereby.
3.17 INSURANCE
Each of the Company and its Subsidiaries is insured for reasonable amounts
with financially sound and reputable insurance companies against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured and has maintained all insurance required by
applicable laws and regulations.
3.18 PROPERTIES
All real and personal property owned by the Company or its Subsidiaries or
presently used by any of them in its respective business is in an adequate
condition (ordinary wear and tear excepted) and is sufficient to carry on the
business of the Company and its Subsidiaries in the ordinary course of business
consistent with their past practices. The Company has good and marketable title
free and clear of all liens, encumbrances, charges, defaults or equities (other
than equities of redemption under applicable foreclosure laws) to all of the
material properties and assets, real and personal, reflected on the consolidated
statement of financial condition of the Company as of September 30, 1996
included in the Company Financial Statements or acquired after such date, except
(i) liens for current taxes
26
not yet due or payable (ii) pledges to secure deposits and other liens incurred
in the ordinary course of its banking business, (iii) such imperfections of
title, easements and encumbrances, if any, as are not material in character,
amount or extent and (iv) as reflected on the consolidated statement of
financial condition of the Company as of September 30, 1996 included in the
Company Financial Statements. All real and personal property which is material
to the Company's business on a consolidated basis and leased or licensed by the
Company or a Company Subsidiary is held pursuant to leases or licenses which are
valid and enforceable in accordance with their respective terms and such leases
will not terminate or lapse prior to the Effective Time.
3.19 LABOR
No work stoppage involving the Company or a Company Subsidiary is pending
or, to the best knowledge of the Company, threatened. Neither the Company nor a
Company Subsidiary is involved in, or threatened with or affected by, any labor
dispute, arbitration, lawsuit or administrative proceeding involving the
employees of the Company or a Company Subsidiary which could have a Material
Adverse Effect on the Company. Employees of the Company and the Company
Subsidiaries are not represented by any labor union nor are any collective
bargaining agreements otherwise in effect with respect to such employees, and to
the best of the Company's knowledge, there have been no efforts to unionize or
organize any employees of the Company or any of the Company Subsidiaries during
the past five years.
3.20 REQUIRED VOTE; INAPPLICABILITY OF ANTITAKOVER STATUTES
(a) Assuming the accuracy of the representation and warranty of the
Acquiror contained in Section 4.16 hereof, the affirmative vote of the holders
of a majority of the issued and outstanding shares of Company Common Stock is
necessary to approve this Agreement and the transactions contemplated hereby on
behalf of the Company.
(b) Two thirds of the Disinterested Directors of the Company (as defined
in Article Eight, Section 3F of the Certificate of Incorporation of the Company)
has approved the Merger and this Agreement such that the provisions of Article
Eight and Section B of Article Fourteenth of the Certificate of Incorporation of
the Company are inapplicable to this Agreement and the transactions contemplated
hereby.
(c) Assuming the accuracy of the representation and warranty of the
Acquiror contained in Section 4.16 hereof, the Acquiror is not an "interested
stockholder," as defined in Section 203(c)(5) of the DGCL and, as a result, the
provisions of Section 203 of the DGCL do not apply to the Merger and the other
transactions contemplated hereby.
27
3.21 OWNERSHIP OF ACQUIROR COMMON STOCK
As of the date hereof, neither the Company nor, to its best knowledge, any
of its affiliates or associates (as such terms are defined under the Exchange
Act), (i) beneficially own, directly or indirectly, or (ii) are parties to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of Acquiror Common Stock which in
the aggregate represent 5% or more of the outstanding shares of Acquiror Common
Stock (other than shares held in a fiduciary capacity and beneficially owned by
third parties and shares taken in consideration of debts previously contracted).
3.22 DISCLOSURES
None of the representations and warranties of the Company or any of the
written information or documents furnished or to be furnished by the Company to
the Acquiror in connection with or pursuant to this Agreement or the
consummation of the transactions contemplated hereby, when considered as a
whole, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact required to be stated or necessary
to make any such information or document, in light of the circumstances, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
The Acquiror represents and warrants to the Company as follows:
4.1 CAPITAL STRUCTURE
The authorized capital stock of the Acquiror consists of 75,000,000 shares
of Acquiror Common Stock and 8,000,000 shares of Acquiror Preferred Stock. As
of October 31, 1996, there were 38,005,429 shares of Acquiror Common Stock
issued and outstanding, 18,000 shares of Acquiror Common Stock were held as
treasury stock and not outstanding and there were no shares of Acquiror
Preferred Stock issued and outstanding. All outstanding shares of Acquiror
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable, and none of the outstanding shares of Acquiror Common Stock has
been issued in violation of the preemptive rights of any person, firm or entity.
As of the date hereof, there are no Rights authorized, issued or outstanding
with respect to the capital stock of the Acquiror, except for (i) shares of
Acquiror Common Stock issuable pursuant to the Acquiror Employee Stock Benefit
Plans, (ii) shares of Acquiror Common Stock or other Acquiror securities
issuable pursuant to the Acquiror Rights Agreement and (iii) by virtue of this
Agreement.
28
4.2 ORGANIZATION, STANDING AND AUTHORITY OF THE ACQUIROR
The Acquiror is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania with full corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as now conducted and is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which its ownership or
leasing of property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Acquiror. The Acquiror
is duly registered as a bank holding company under the BHCA and the regulations
of the FRB thereunder. The Acquiror has heretofore delivered to the Company
true and complete copies of the Articles of Incorporation and Bylaws of the
Acquiror as in effect as of the date hereof.
4.3 OWNERSHIP OF THE ACQUIROR SUBSIDIARIES
The Acquiror has Previously Disclosed each direct or indirect Acquiror
Subsidiary and each such subsidiary which constitutes a Significant Subsidiary
as of the date hereof. The outstanding shares of capital stock of each of the
Acquiror Subsidiaries which is a Significant Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable (except as
otherwise provided with respect to the capital stock of national bank
Subsidiaries by the National Bank Act) and are directly or indirectly owned by
the Acquiror free and clear of all liens, claims, encumbrances, charges,
pledges, restrictions or rights of third parties of any kind whatsoever. No
Rights are authorized, issued or outstanding with respect to the capital stock
or other ownership interests of any Acquiror Subsidiary which is a Significant
Subsidiary and there are no agreements, understandings or commitments relating
to the right of the Acquiror to vote or to dispose of said shares or other
ownership interests.
4.4 ORGANIZATION, STANDING AND AUTHORITY OF THE ACQUIROR SUBSIDIARIES
Each Acquiror Subsidiary which is a Significant Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of the
United States or the laws of the jurisdiction in which it is organized, as
applicable. Each of the Acquiror Subsidiaries which is a Significant Subsidiary
(i) has full power and authority to own or lease all of its properties and
assets and to carry on its business as now conducted, and (ii) is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which its ownership or leasing of property or the conduct of its business
requires such qualification and where the failure to be so licensed, qualified
or in good standing would have a Material Adverse Effect on the Acquiror. The
deposit accounts of each of the Acquiror Banks are insured by either the BIF or,
in the case of certain deposits, the SAIF to the maximum extent permitted by the
FDIA, and each such entity has paid all premiums and assessments required by the
FDIA and the regulations thereunder.
29
4.5 AUTHORIZED AND EFFECTIVE AGREEMENT
(a) The Acquiror has all requisite corporate power and authority to enter
into this Agreement and (subject to receipt of all necessary governmental
approvals) to perform all of its obligations under this Agreement. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of the Acquiror. This
Agreement has been duly and validly executed and delivered by the Acquiror and,
assuming due authorization, execution and delivery by the Company, constitutes a
legal, valid and binding obligation of the Acquiror which is enforceable against
the Acquiror in accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby (including the Merger and the Bank
Merger) nor compliance by the Acquiror with any of the provisions hereof (i)
does or will conflict with or result in a breach of any provisions of the
Articles of Incorporation or Bylaws of the Acquiror or any Acquiror Subsidiary,
(ii) violate, conflict with or result in a breach of any term, condition or
provision of, or constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, or give rise to any right
of termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of the
Acquiror or any Acquiror Subsidiary pursuant to, any material note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Acquiror or any Acquiror Subsidiary is a
party, or by which any of their respective properties or assets may be bound or
affected, or (iii) subject to receipt of all required governmental and
shareholder approvals, violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Acquiror or any Acquiror Subsidiary.
(c) Subject to the FRB's confirmation that FRB approval of the Merger or
the Bank Merger is not required under the BHCA or otherwise, except for (i) the
filing of applications and notices with, and the consents and approvals of, as
applicable, the OTS and the OCC, (ii) the filing and effectiveness of the Form
S-4 with the Commission, (iii) compliance with applicable state securities or
"blue sky" laws in connection with the issuance of Acquiror Common Stock
pursuant to this Agreement, (iv) the filing of Articles of Merger with the
Department of State of the Commonwealth of Pennsylvania and a Certificate of
Merger with the Secretary of State of the State of Delaware pursuant to the PBCL
and the DGCL, respectively, in connection with the Merger and (v) review of the
Merger by the DOJ under federal antitrust laws, and except for such filings,
registrations, consents or approvals as are Previously Disclosed, no consents or
approvals of or filings or registrations with any Governmental Entity or with
any third party are necessary on the part of the Acquiror or Acquiror Maryland
Bank in connection with (i) the execution and delivery by the Acquiror of this
Agreement and the consummation by the Acquiror of the transactions
30
contemplated hereby and (ii) the execution and delivery by the Acquiror Maryland
Bank of the Bank Merger Agreement and the consummation by the Acquiror Maryland
Bank of the transactions contemplated thereby.
(d) As of the date hereof, the Acquiror is not aware of any reasons
relating to the Acquiror or any of its Subsidiaries (including without
limitation Community Reinvestment Act compliance) why all consents and approvals
shall not be procured from all regulatory agencies having jurisdiction over the
transactions contemplated by this Agreement as shall be necessary for
consummation of the transactions contemplated by this Agreement and the Bank
Merger Agreement.
4.6 SECURITIES DOCUMENTS AND REGULATORY REPORTS
(a) Since January 1, 1993, the Acquiror has timely filed with the
Commission and the NASD all Securities Documents required by the Securities Laws
and such Securities Documents complied in all material respect with the
Securities Laws and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) Since January 1, 1993, the Acquiror and each Acquiror Subsidiary which
is an insured depository institution under the FDIA has duly filed with the FRB,
the OCC, the FDIC and the Pennsylvania Department of Banking, as the case may
be, in correct form the reports required to be filed under applicable laws and
regulations and such reports were in all material respects complete and accurate
and in compliance with the requirements of applicable laws and regulations. In
connection with the most recent examinations of the Acquiror or an Acquiror
Subsidiary by the FRB, the OCC, the FDIC or the Pennsylvania Department of
Banking, neither the Acquiror nor any Acquiror Subsidiary was required to
correct or change any action, procedure or proceeding which the Acquiror or the
Acquiror Subsidiary believes has not been corrected or changed as required as of
the date hereof and which could have a Material Adverse Effect on the Acquiror.
4.7 FINANCIAL STATEMENTS
(a) The Acquiror has previously delivered or made available to the Company
accurate and complete copies of the Acquiror Financial Statements which, in the
case of the consolidated statements of condition of the Acquiror as of December
31, 1995, 1994 and 1993 and the consolidated statements of income, shareholders'
equity and cash flows for each of the three years ended December 31, 1995, 1994
and 1993, are accompanied by the audit reports of Ernst & Young LLP, independent
public accountants with respect to the Acquiror. The Acquiror Financial
Statements referred to herein, as well as the Acquiror Financial Statements to
be delivered pursuant to Section 5.8 hereof, fairly present or will fairly
present, as the case may be, the consolidated condition of the Acquiror as of
the respective dates set forth therein, and the consolidated income,
shareholders' equity and
31
cash flows of the Acquiror for the respective periods or as of the respective
dates set forth therein.
(b) Each of the Acquiror Financial Statements referred to in Section
4.7(a) has been or will be, as the case may be, prepared in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except as stated therein. The audits of the Acquiror and the Acquiror
Subsidiaries have been conducted in all material respects in accordance with
generally accepted auditing standards. The books and records of the Acquiror
and the Acquiror Subsidiaries are being maintained in material compliance with
applicable legal and accounting requirements, and all such books and records
accurately reflect in all material respects all dealings and transactions in
respect of the business, assets, liabilities and affairs of the Acquiror and the
Acquiror Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for in
the consolidated statement of financial condition of the Acquiror as of
September 30, 1996 (including related notes) and (ii) of liabilities incurred
since September 30, 1996 in the ordinary course of business (including without
limitation liabilities assumed or incurred in connection with actions by the
Acquiror consistent with the terms of Section 5.6(b) hereof), neither the
Acquiror nor any Acquiror Subsidiary has any liabilities, whether absolute,
accrued, contingent or otherwise, material to the financial condition, results
of operations or business of the Acquiror on a consolidated basis.
4.8 MATERIAL ADVERSE CHANGE
Since September 30, 1996, no event has occurred or circumstance arisen
that, individually or in the aggregate, has had or is reasonably likely to have
a Material Adverse Effect on the Acquiror.
4.9 TAX MATTERS
The Acquiror and the Acquiror Subsidiaries, and each of their predecessors,
have timely filed all federal, state and local (and, if applicable, foreign)
income, franchise, bank, excise, real property, personal property and other tax
returns required by applicable law to be filed by them (including, without
limitation, estimated tax returns, income tax returns, information returns and
withholding and employment tax returns) and have paid, or where payment is not
required to have been made, have set up an adequate reserve or accrual for the
payment of, all material taxes required to be paid in respect of the periods
covered by such returns and, as of the Effective Time, will have paid, or where
payment is not required to have been made, will have set up an adequate reserve
or accrual for the payment of, all material taxes for any subsequent periods
ending on or prior to the Effective Time. Neither the Acquiror nor any of the
Acquiror Subsidiaries will have any material liability for any such taxes in
excess of the amounts so paid or reserves or accruals so established. Except as
Previously Disclosed, as of the date hereof, no audit, examination or deficiency
or refund litigation with respect to any federal, state and local (and, if
applicable, foreign) income,
32
franchise, bank, excise, real property, personal property and other tax returns
filed by the Acquiror and the Acquiror Subsidiaries is pending or, to the best
of the Acquiror's knowledge, threatened.
4.10 LEGAL PROCEEDINGS
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of the Acquiror
threatened against the Acquiror or any Acquiror Subsidiary or against any asset,
interest or right of the Acquiror or any Acquiror Subsidiary, or against any
officer, director or employee of any of them that individually or in the
aggregate, if decided adversely, would have a Material Adverse Effect on the
Acquiror. Neither the Acquiror nor any of the Acquiror Subsidiaries is a party
to any order, judgment or decree which has or could reasonably be expected to
have a Material Adverse Effect on the Acquiror.
4.11 COMPLIANCE WITH LAWS
(a) Each of the Acquiror and each of the Acquiror Subsidiaries has all
permits, licenses, certificates of authority, orders and approvals of, and has
made all filings, applications and registrations with, federal, state, local and
foreign governmental or regulatory bodies that are required in order to permit
it to carry on its business as it is presently being conducted and the absence
of which could reasonably be expected to have a Material Adverse Effect on the
Acquiror; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect; and to the best knowledge of the
Acquiror, no suspension or cancellation of any of the same is threatened.
(b) Neither the Acquiror nor any of the Acquiror Subsidiaries is in
violation of its respective Articles of Incorporation, Charter or other
organizational document or Bylaws, or of any applicable federal, state or local
law or ordinance or any order, rule or regulation of any federal, state, local
or other governmental agency or body (including, without limitation, all banking
(including without limitation all regulatory capital requirements), securities,
municipal securities, safety, health, environmental, zoning, anti-
discrimination, antitrust, and wage and hour laws, ordinances, orders, rules and
regulations), or in default with respect to any order, writ, injunction or
decree of any court, or in default under any order, license, regulation or
demand of any governmental agency, any of which violations or defaults could
reasonably be expected to have a Material Adverse Effect on the Acquiror; and
neither the Acquiror nor any Acquiror Subsidiary has received any notice or
communication from any federal, state or local governmental authority asserting
that the Acquiror or any Acquiror Subsidiary is in violation of any of the
foregoing which could reasonably be expected to have a Material Adverse Effect
on the Acquiror. Neither the Acquiror nor any Acquiror Subsidiary is subject to
any regulatory or supervisory cease and desist order, agreement, written
directive, memorandum of understanding or written commitment (other than those
of general applicability to all banks, savings associations or holding companies
thereof, as applicable, issued by governmental authorities), and none of
33
them has received any written communication requesting that it enter into any of
the foregoing.
4.12 CERTAIN INFORMATION
None of the information relating to the Acquiror and the Acquiror
Subsidiaries to be included or incorporated by reference in (i) the Form S-4
will, at the time the Form S-4 and any amendment thereto becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (ii) the Proxy
Statement, as of the date such Proxy Statement is mailed to shareholders of the
Company and up to and including the date of the meeting of shareholders to which
such Proxy Statement relates, will contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
provided that information as of a later date shall be deemed to modify
information as of an earlier date. The Proxy Statement mailed by the Company to
its shareholders in connection with the meeting of shareholders at which this
Agreement will be considered by such shareholders will comply as to form in all
material respects with the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder.
4.13 BROKERS AND FINDERS
Except as Previously Disclosed, neither the Acquiror nor any Acquiror
Subsidiary, nor any of their respective directors, officers or employees, has
employed any broker or finder or incurred any liability for any broker or finder
fees or commissions in connection with the transactions contemplated hereby.
4.14 INSURANCE
The Acquiror and each Acquiror Subsidiary is insured for reasonable amounts
with financially sound and reputable insurance companies against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured and has maintained all insurance required by
applicable laws and regulations.
4.15 ACQUIROR RIGHTS AGREEMENT
As of the date hereof, there is no Acquiring Person, and none of a Shares
Acquisition Date, a Distribution Date or an event set forth in Sections
11(a)(ii) or 13 of the Acquiror Rights Agreement has occurred, in each case as
such terms are defined in the Acquiror Rights Agreement.
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4.16 OWNERSHIP OF COMPANY COMMON STOCK.
As of the date hereof, neither the Acquiror nor, to its best knowledge, any
of its affiliates or associates (as such terms are defined under the Exchange
Act), (i) beneficially own, directly or indirectly, or (ii) are parties to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of Company Common Stock which in
the aggregate represent 5% or more of the outstanding shares of Company Common
Stock (other than shares held in a fiduciary capacity and beneficially owned by
third parties, shares taken in consideration of debts previously contracted or
in the case of the Acquiror shares which may be acquired pursuant to the Company
Stock Option Agreement).
4.17 DISCLOSURES
None of the representations and warranties of the Acquiror or any of the
written information or documents furnished or to be furnished by the Acquiror to
the Company in connection with or pursuant to this Agreement or the consummation
of the transactions contemplated hereby, when considered as a whole, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
ARTICLE V
COVENANTS
5.1 REASONABLE BEST EFFORTS
Subject to the terms and conditions of this Agreement, each of the Company
and the Acquiror shall use its reasonable best efforts in good faith to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary or advisable under applicable laws and regulations so as to permit
consummation of the Merger and the Bank Merger as promptly as reasonably
practicable, and to otherwise enable consummation of the transactions
contemplated hereby, and shall cooperate fully with the other party or parties
hereto to that end.
5.2 SHAREHOLDER MEETING
The Company shall take all action necessary to properly call and convene a
meeting of its shareholders as soon as practicable after the date hereof to
consider and vote upon this Agreement and the transactions contemplated hereby.
The Board of Directors of the Company will recommend that the shareholders of
the Company approve this Agreement and the transactions contemplated hereby,
provided that the Board of Directors of the Company may fail to make such
recommendation, or withdraw, modify or change any such recommendation, if such
Board of Directors, after having consulted with and considered the
35
advice of outside counsel, has determined that the making of such
recommendation, or the failure to withdraw, modify or change such
recommendation, would constitute a breach of the fiduciary duties of such
directors under applicable law.
5.3 REGULATORY MATTERS
(a) The parties hereto shall promptly cooperate with each other in the
preparation and filing of the Form S-4, including the Proxy Statement. Each of
the Acquiror and the Company shall use its reasonable best efforts to have the
Form S-4 declared effective under the Securities Act as promptly as practicable
after such filing, and the Company shall thereafter promptly mail the Proxy
Statement to its shareholders. The Acquiror also shall use its reasonable best
efforts to obtain all necessary state securities law or "blue sky" permits and
approvals required to carry out the issuance of Acquiror Common Stock pursuant
to the Merger and all other transactions contemplated by this Agreement, and the
Company shall furnish all information concerning the Company and the holders of
the Company Common Stock as may be reasonably requested in connection with any
such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all Governmental Entities and third parties which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Merger and the Bank Merger). The
Acquiror and the Company shall have the right to review in advance, and to the
extent practicable each will consult with the other on, in each case subject to
applicable laws relating to the exchange of information, all the information
which appears in any filing made with or written materials submitted to any
third party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein.
(c) The Acquiror and the Company shall, upon request, furnish each other
with all information concerning themselves, their respective Subsidiaries,
directors, officers and shareholders and such other matters as may be reasonably
necessary or advisable in connection with the Proxy Statement, the Form S-4 or
any other statement, filing, notice or application made by or on behalf of the
Acquiror, the Company or any of their respective Subsidiaries to any
Governmental Entity in connection with the Merger, the Bank Merger and the other
transactions contemplated hereby.
36
(d) The Acquiror and the Company shall promptly furnish each other with
copies of written communications received by the Acquiror or the Company, as the
case may be, or any of their respective Subsidiaries from, or delivered by any
of the foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
5.4 INVESTIGATION AND CONFIDENTIALITY
(a) Each party shall permit the other party and its representatives
reasonable access to its properties and personnel, and shall disclose and make
available to such other party all books, papers and records relating to the
assets, stock ownership, properties, operations, obligations and liabilities of
it and its Subsidiaries, including, but not limited to, all books of account
(including the general ledger), tax records, minute books of meetings of boards
of directors (and any committees thereof) and shareholders, organizational
documents, bylaws, material contracts and agreements, filings with any
regulatory authority, accountants' work papers, litigation files, loan files,
plans affecting employees, and any other business activities or prospects in
which the other party may have a reasonable interest, provided that such access
shall be reasonably related to the transactions contemplated hereby and, in the
reasonable opinion of the respective parties providing such access, not unduly
interfere with normal operations. Each party and its Subsidiaries shall make
their respective directors, officers, employees and agents and authorized
representatives (including counsel and independent public accountants) available
to confer with the other party and its representatives, provided that such
access shall be reasonably related to the transactions contemplated hereby and
shall not unduly interfere with normal operations.
(b) The Acquiror may request the Company to conduct at the Company's
expense environmental audits by an independent qualified environmental engineer
or consultant (the "Environmental Consultant") of any parcel or parcels of real
property owned by the Company. The Environmental Consultant shall conduct any
audits or other investigations pursuant to this Section 5.4(b) with reasonable
care and subject to customary practices among environmental consultants and
engineers, including without limitation, following completion thereof the
restoration of any site to the extent practicable to its condition prior to such
audit or investigation and the removal of all monitoring xxxxx.
(c) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be treated
as the sole property of the party furnishing the information until consummation
of the transactions contemplated hereby and, if such transactions shall not
occur, the party receiving the information shall either destroy or return to the
party which furnished such information all documents or other materials
containing, reflecting or referring to such information, shall use its best
efforts to keep confidential all such information, and shall not directly or
indirectly use such information for any competitive or other commercial
purposes. The obligation to keep such information confidential shall continue
for five years from the date the proposed transactions are abandoned but shall
not apply to (i) any information which (x) the party receiving the information
can establish was already in its possession prior to the disclosure
37
thereof by the party furnishing the information; (y) was then generally known to
the public; or (z) became known to the public through no fault of the party
receiving the information; or (ii) disclosures pursuant to a legal requirement
or in accordance with an order of a court of competent jurisdiction, provided
that the party which is the subject of any such legal requirement or order shall
use its best efforts to give the other party at least ten business days prior
notice thereof.
5.5 PRESS RELEASES
The Acquiror and the Company shall agree with each other as to the form and
substance of any press release related to this Agreement or the transactions
contemplated hereby, and consult with each other as to the form and substance of
other public disclosures which may relate to the transactions contemplated by
this Agreement, provided, however, that nothing contained herein shall prohibit
either party, following notification to the other party, from making any
disclosure which is required by law or regulation.
5.6 BUSINESS OF THE PARTIES
(a) During the period from the date of this Agreement and continuing until
the Effective Time, except as expressly contemplated or permitted by this
Agreement or with the prior written consent of the Acquiror, the Company and its
Subsidiaries shall carry on their respective businesses in the ordinary course
consistent with past practice. During such period, the Company also will use
all reasonable efforts to (x) preserve its business organization and that of the
Bank intact, (y) keep available to itself and the Acquiror the present services
of the employees of the Company and the Bank and (z) preserve for itself and the
Acquiror the goodwill of the customers of the Company and the Bank and others
with whom business relationships exist. Without limiting the generality of the
foregoing, except with the prior written consent of the Acquiror or as expressly
contemplated hereby, between the date hereof and the Effective Time, the Company
shall not, and shall cause each Company Subsidiary not to:
(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the Company Common Stock, except for regular
quarterly cash dividends at a rate per share of Company Common Stock not in
excess of $.12 per share, which shall be declared and paid at approximately
the same time as dividends on the Acquiror Common Stock, it being the
intention of the parties that the shareholders of the Company receive
dividends for any particular calendar quarter on either the Company Common
Stock or the Acquiror Common Stock acquired in exchange therefor pursuant
to the terms of this Agreement but not both, provided, however, that
nothing contained herein shall be deemed to affect the ability of a Company
Subsidiary to pay dividends on its capital stock to the Company;
38
(ii) issue any shares of its capital stock, other than in the case of
the Company pursuant to the Company Stock Option Agreement and upon
exercise of the Company Options referred to in Section 3.1 hereof, or
issue, grant, modify or authorize any Rights, other than the Company Stock
Option Agreement; purchase any shares of Company Common Stock; or effect
any recapitalization, reclassification, stock dividend, stock split or like
change in capitalization;
(iii) amend its Certificate of Incorporation, Charter, Bylaws or
similar organizational documents; impose, or suffer the imposition, on any
share of stock or other ownership interest held by the Company in a Company
Subsidiary of any lien, charge or encumbrance or permit any such lien,
charge or encumbrance to exist; or waive or release any material right or
cancel or compromise any material debt or claim;
(iv) increase the rate of compensation of any of its directors,
officers or employees, or pay or agree to pay any bonus or severance to, or
provide any other new employee benefit or incentive to, any of its
directors, officers or employees, except (i) as may be required pursuant to
binding commitments existing on the date hereof, (ii) as may be required by
law, (iii) merit increases in accordance with past practices, normal cost-
of-living increases and normal increases related to promotions or increased
job responsibilities and (iv) a pro rata bonus for fiscal 1997 pursuant to
the Company's Executive Annual Incentive Plan, as Previously Disclosed by
the Company pursuant to Section 3.14(a) hereof;
(v) except as Previously Disclosed, enter into or, except as may be
required by law, modify any pension, retirement, stock option, stock
purchase, stock appreciation right, savings, profit sharing, deferred
compensation, supplemental retirement, consulting, bonus, group insurance
or other employee benefit, incentive or welfare contract, plan or
arrangement, or any trust agreement related thereto, in respect of any of
its directors, officers or employees; make any contributions to the
Company's defined contribution employee retirement plan, except as required
by the presently existing terms of the plan or the policies under which it
is operated as of the date hereof; or make any contributions to the
Company's Employee Stock Ownership Plan, other than necessary to enable
such plan to make required payments on its indebtedness as of the date
hereof;
(vi) enter into (w) any transaction, agreement, arrangement or
commitment not made in the ordinary course of business, (x) any agreement,
indenture or other instrument relating to the borrowing of money by the
Company or a Company Subsidiary or guarantee by the Company or any Company
Subsidiary of any such obligation, except in the case of the Bank for
deposits, FHLB advances, federal funds purchased and securities sold under
agreements to repurchase in the ordinary course of business consistent with
past practice, (y) any agreement, arrangement or commitment relating to the
employment of an employee or consultant, or amend any
39
such existing agreement, arrangement or commitment, provided that the
Company and the Bank may employ an employee or consultant in the ordinary
course of business if the employment of such employee or consultant is
terminable by the Company or the Bank at will without liability, other than
as required by law; or (z) any contract, agreement or understanding with a
labor union;
(vii) change its method of accounting in effect for the fiscal year
ended June 30, 1996, except as required by changes in laws or regulations
or generally accepted accounting principles, or change any of its methods
of reporting income and deductions for federal income tax purposes from
those employed in the preparation of its federal income tax return for the
fiscal year ended June 30, 1996, except as required by changes in laws or
regulations;
(viii) make any capital expenditures in excess of $50,000 individually
or $250,000 in the aggregate, other than pursuant to binding commitments
existing on the date hereof and other than expenditures necessary to
maintain existing assets in good repair; or enter into as lessee any new
lease of real property or any new lease of personal property providing for
annual payments in excess of $25,000;
(ix) file any applications or make any contract with respect to
branching or site location or relocation;
(x) acquire in any manner whatsoever (other than to realize upon
collateral for a defaulted loan) control over or any equity interest in any
business or entity, except for investments in marketable equity securities
in the ordinary course of business and not exceeding 5% of the outstanding
shares of any class;
(xi) enter into any futures contract, option contract, interest rate
caps, interest rate floors, interest rate exchange agreement or other
agreement for purposes of hedging the exposure of its interest-earning
assets and interest-bearing liabilities to changes in market rates of
interest (other than forward commitments to sell loans in the ordinary
course of business);
(xii) enter or agree to enter into any agreement or arrangement
granting any preferential right to purchase any of its assets or rights or
requiring the consent of any party to the transfer and assignment of any
such assets or rights;
(xiii) change or modify in any material respect any of its lending or
investment policies, except to the extent required by law or an applicable
regulatory authority;
(xiv) take any action that would prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368 of the
Code;
40
(xv) take any action that would result in any of the representations
and warranties of the Company contained in this Agreement not to be true
and correct in any material respect at the Effective Time; or
(xvi) agree to do any of the foregoing.
(b) During the period from the date of this Agreement and continuing until
the Effective Time, the Acquiror shall continue to conduct its business and the
business of the Acquiror Subsidiaries which are Significant Subsidiaries in a
manner designed in its reasonable judgment to enhance the long-term value of the
Acquiror Common Stock and the business prospects of the Acquiror. Without
limiting the generality of the foregoing, except with the prior written consent
of the Company or as expressly contemplated hereby, between the date hereof and
the Effective Time, the Acquiror shall not, and shall cause each Acquiror
Subsidiary which is a Significant Subsidiary not to:
(i) amend its Articles of Incorporation or Bylaws in a manner which
would adversely affect in any manner the terms of the Acquiror Common Stock
or the ability of the Acquiror or the Acquiror Maryland Bank to consummate
the transactions contemplated hereby;
(ii) make any acquisition or take any other action that individually
or in the aggregate could materially adversely affect the ability of the
Acquiror or the Acquiror Maryland Bank to consummate the transactions
contemplated hereby, or enter into any agreement providing for, or
otherwise participate in, any merger, consolidation or other transaction in
which the Acquiror or any surviving corporation may be required not to
consummate the Merger or any of the other transactions contemplated hereby
in accordance with the terms of this Agreement;
(iii) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the Acquiror Common Stock, except for regular
quarterly cash dividends in an amount determined by the Board of Directors
in the ordinary course of business and consistent with past practice,
provided, however, that nothing contained herein shall be deemed to affect
the ability of (x) an Acquiror Subsidiary to pay dividends on its capital
stock to the Acquiror or (y) the Acquiror to repurchase shares of Acquiror
Common Stock;
(iv) take any action that would prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368 of the
Code; provided, however, that nothing contained herein shall limit the
ability of the Acquiror to exercise its rights under the Company Stock
Option Agreement;
41
(v) take any action that would result in any of the representations
and warranties of the Acquiror contained in this Agreement not to be true
and correct in any material respect at the Effective Time; or
(vi) agree to do any of the foregoing.
5.7 CERTAIN ACTIONS
The Company shall not, and shall cause each Company Subsidiary not to,
solicit or encourage inquiries or proposals with respect to, furnish any
information relating to, or participate in any negotiations or discussions
concerning, any acquisition, lease or purchase of all or a substantial portion
of the assets of, or any equity interest in, the Company or a Company Subsidiary
(other than with the Acquiror or an affiliate thereof), provided, however, that
the Board of Directors of the Company may furnish such information or
participate in such negotiations or discussions if such Board of Directors,
after having consulted with and considered the advice of outside counsel, has
determined that the failure to do the same would cause the members of such Board
of Directors to breach their fiduciary duties under applicable law. The Company
will promptly inform the Acquiror orally and in writing of any such request for
information or of any such negotiations or discussions, as well as instruct its
and its Subsidiaries' directors, officers, representatives and agents to refrain
from taking any action prohibited by this Section 5.7.
5.8 CURRENT INFORMATION
During the period from the date of this Agreement to the Effective Time,
each party shall, upon the request of the other party, cause one or more of its
designated representatives to confer on a monthly or more frequent basis with
representatives of the other party regarding its financial condition, operations
and business and matters relating to the completion of the transactions
contemplated hereby. As soon as reasonably available, but in no event more than
45 days after the end of each calendar quarter ending after the date of this
Agreement (other than the last quarter of each fiscal year ending December 31 in
the case of the Acquiror and June 30 in the case of the Company), the Company
and the Acquiror will deliver to the other party its quarterly report on Form
10-Q under the Exchange Act, and, as soon as reasonably available, but in no
event more than 90 days after the end of each fiscal year ending December 31 in
the case of the Acquiror and June 30 in the case of the Company, the Company and
the Acquiror will deliver to the other party its Annual Report on Form 10-K.
Within 25 days after the end of each month, the Company and the Acquiror will
deliver to the other party a consolidated balance sheet and a consolidated
statement of operations, without related notes, for such month prepared in
accordance with generally accepted accounting principles.
42
5.9 INDEMNIFICATION; INSURANCE
(a) From and after the Effective Time through the sixth anniversary of the
Effective Time, the Acquiror, in the case of an indemnification obligation of
the Company, or the applicable Company Subsidiary or its successor by merger, in
the case of an indemnification obligation of a Company Subsidiary (the Acquiror
or such Company Subsidiary, as applicable, being referred to herein as the
"Indemnifying Party") shall provide indemnification to any present or former
director, officer or employee of the Company or a Company Subsidiary, in each
case determined as of the Effective Time (the "Indemnified Parties"), with
respect to any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities incurred in connection
with any claim, action, suit, proceeding or investigation, whether, civil,
criminal, administrative or investigative, arising out of matters existing or
occurring at or prior to the Effective Time, if first asserted or claimed prior
to the date hereof and Previously Disclosed, if first asserted or claimed
between the date hereof and the Effective Time and disclosed pursuant to Section
5.13 hereof or if first asserted or claimed after the Effective Time, to the
fullest extent, if any, that such Indemnified Party, would have been entitled to
indemnification by the Company under Article Thirteenth of the Certificate of
Incorporation or Article XI of the Bylaws of the Company or by Mid-Atlantic
Service Corporation under Article III, Section 7 of the Bylaws of Mid-Atlantic
Service Corporation (collectively, "the Indemnification Rights Documents"), in
each case as in effect on the date hereof and Previously Disclosed, provided,
however, that all rights to indemnification in respect of any claim asserted or
made within such period shall continue until the final disposition of such
claim, and provided, further, that nothing contained herein shall enlarge the
rights to indemnification contained in the Indemnification Rights Documents or
extend or be deemed a waiver of any applicable statute of limitations in respect
of any claim or claim for indemnification. Without limiting the foregoing, the
Acquiror also agrees that all limitations of liability existing in favor of the
Indemnified Parties in Article Twelfth of the Certificate of Incorporation of
the Company, as in effect on the date hereof and Previously Disclosed, arising
out of matters existing or occurring at or prior to the Effective Time shall
survive the Merger and shall continue in full force and effect.
(b) Any Indemnified Party wishing to claim indemnification under Section
5.9(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure to
so notify shall not relieve the Indemnifying Party of any liability it may have
to such Indemnified Party if such failure does not materially prejudice the
Indemnifying Party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Indemnifying Party shall have the right to assume the defense thereof and the
Indemnifying Party shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if the
Indemnifying Party elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between the Indemnifying Party and the Indemnified Parties, the
Indemnified
43
Parties may retain counsel which is reasonably satisfactory to the Indemnifying
Party, and the Indemnifying Party shall pay, promptly as statements therefor are
received, the reasonable fees and expenses of such counsel for the Indemnified
Parties (which may not exceed one firm in any jurisdiction unless the use of one
counsel for such Indemnified Parties would present such counsel with a conflict
of interest) in accordance with the obligations set forth in Section 5.9(a)
hereof, (ii) the Indemnified Parties will cooperate in the defense of any such
matter, (iii) the Indemnifying Party shall not be liable for any settlement
effected without its prior written consent and (iv) the Indemnifying Party shall
have no obligation hereunder in the event a federal banking agency or a court of
competent jurisdiction shall ultimately determine, and such determination shall
have become final and nonappealable, that indemnification of an Indemnified
Party in the manner contemplated hereby is prohibited by applicable law.
(c) The Acquiror shall maintain the Company's existing directors' and
officers' liability insurance policy (or purchase an insurance policy providing
coverage on substantially the same terms and conditions) for acts or omissions
occurring prior to the Effective Time by persons who are currently covered by
such insurance policy maintained by the Company for a period of three years
following the Effective Time, provided, however, that in no event shall the
Acquiror be required to expend on an annual basis more than 125% of the amount
paid by the Company as of the date hereof for such insurance coverage (the
"Insurance Amount") to maintain or procure such insurance coverage, and further
provided that if the Acquiror is unable to maintain or obtain the insurance
called for hereby, the Acquiror shall use all reasonable efforts to obtain as
much comparable insurance as is available for the Insurance Amount. At the
request of the Acquiror, the Company shall use reasonable efforts to procure the
insurance coverage referred to in the preceding sentence prior to the Effective
Time on the terms set forth in such sentence.
(d) In the event that the Acquiror or any of its respective successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case the successors and assigns of such
entity shall assume the obligations set forth in this Section 5.9, which
obligations are expressly intended to be for the irrevocable benefit of, and
shall be enforceable by, each director and officer covered hereby.
5.10 DIRECTORS
(a) The Acquiror agrees to take all action necessary to appoint or elect,
effective as of the Effective Time, three directors of the Company as of the
date hereof selected by the Acquiror as a director of the Acquiror Maryland
Bank. Each such person shall serve until the first annual meeting of the sole
shareholder of the Acquiror Maryland Bank following the Effective Time and until
his successor is elected and qualified.
44
(b) For being available for reasonable advisory services during the one-
year period following consummation of the Merger, the Acquiror agrees to pay
during such period to any director of the Company as of the date hereof who
remains such until immediately prior to the Effective Time an amount equal to
the fees which such director received from the Company during the one-year
period preceding the Merger (taking into account the retainer received from the
Company and the fees paid by the Company for attendance at meetings of the Board
of Directors of the Company and committees thereof of which the director was a
member), provided, however, that the amount to be paid by the Acquiror pursuant
to this Section 5.10(b) to any director of the Company who becomes a director of
the Acquiror Maryland Bank shall be reduced by the fees received by such
director pursuant to Section 5.10(a) hereof.
(c) The provisions of this Section 5.10 are intended to be for the benefit
of, and shall be enforceable by, each party to, or beneficiary of, the foregoing
agreements or arrangements, and his or her representatives.
5.11 BENEFIT PLANS AND ARRANGEMENTS
(a) As soon as administratively practicable after the Effective Time, the
Acquiror shall take all reasonable action so that employees of the Company and
its Subsidiaries shall be entitled to participate in the Acquiror Employee Plans
of general applicability, and until such time the Company Employee Plans shall
remain in effect, provided that no employee of the Company or a Company
Subsidiary who becomes an employee of the Acquiror and subject to the Acquiror's
medical insurance plans shall be excluded from coverage thereunder on the basis
of a preexisting condition that was not also excluded under the Company's
medical insurance plans, except to the extent such preexisting condition was
excluded from coverage under the Company's medical insurance plans, in which
case this Section 5.11(a) shall not require coverage for such preexisting
condition. For purposes of determining eligibility to participate in and the
vesting of benefits (but not for purposes of benefit accrual) under the Acquiror
Employee Plans, the Acquiror shall recognize years of service with the Company
and a Company Subsidiary prior to the Effective Time.
(b) All employees of the Company or a Company Subsidiary as of the
Effective Time shall become employees of the Acquiror or an Acquiror Subsidiary
as of the Effective Time, provided that the Acquiror or an Acquiror Subsidiary
shall have no obligation to continue the employment of any such person and
nothing contained in this Agreement shall give any employee of the Company or
any Company Subsidiary a right to continuing employment with the Acquiror or an
Acquiror Subsidiary after the Effective Time. To the extent that the employment
of any employee of the Company or any Company Subsidiary (other than any
employee who is party to an employment agreement or severance agreement) is
involuntarily terminated following the Effective Time, such employee will be
entitled to receive severance and other benefits in accordance with, and to the
extent provided in, the Acquiror Severance Plan, which has been Previously
Disclosed by the Acquiror, as modified by Schedule 5.11(b) hereto. For purposes
of determining benefits
5
under such severance plan, the Acquiror shall recognize years of service and
unused vacation with the Company and a Company Subsidiary prior to the Effective
Time.
(c) Following the Merger, the Acquiror shall, or shall cause the Surviving
Corporation and/or the Bank to, honor in accordance with their terms the
employment agreements and severance agreements which have been Previously
Disclosed by the Company to the Acquiror. The provisions of this Section
5.11(c) are intended to be for the benefit of, and shall be enforceable by, each
party to, or beneficiary of, the foregoing agreements or arrangements, and his
or her representatives.
5.12 BANK MERGER
The Acquiror and the Company shall take, and shall respectively cause the
Acquiror Maryland Bank and the Bank to take, all necessary and appropriate
actions, including causing the entering into of a merger agreement by the
Acquiror Maryland Bank and the Bank (the "Bank Merger Agreement"), to cause the
Bank to merge with and into the Acquiror Maryland Bank (the "Bank Merger")
immediately prior to the Effective Time, in accordance with the requirements of
all applicable laws of the United States and regulations of the OCC and the OTS
thereunder. The Acquiror Maryland Bank shall be the surviving corporation in
the Bank Merger, and shall continue its corporate existence under the laws of
the United States as a wholly-owned subsidiary of the Acquiror. Upon
consummation of the Bank Merger, the separate corporate existence of the Bank
shall cease.
5.13 DISCLOSURE SUPPLEMENTS
From time to time prior to the Effective Time, each party shall promptly
supplement or amend any materials Previously Disclosed and delivered to the
other party pursuant hereto with respect to any matter hereafter arising which,
if existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in materials Previously Disclosed to the
other party or which is necessary to correct any information in such materials
which has been rendered materially inaccurate thereby; no such supplement or
amendment to such materials shall be deemed to have modified the
representations, warranties and covenants of the parties for the purpose of
determining whether the conditions set forth in Article VI hereof have been
satisfied.
5.14 FAILURE TO FULFILL CONDITIONS
In the event that either of the parties hereto determines that a condition
to its respective obligations to consummate the transactions contemplated may
not be fulfilled on or prior to the termination of this Agreement, it will
promptly notify the other party. Each party will promptly inform the other
party of any facts applicable to it that would be likely to prevent or
materially delay approval of the Merger or the Bank Merger by any Governmental
Entity or third party or which would otherwise prevent or materially delay
completion of the Merger or the Bank Merger.
46
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT - THE ACQUIROR AND THE COMPANY
The respective obligations of the Acquiror and the Company to effect the
Merger shall be subject to satisfaction of the following conditions at or prior
to the Effective Time.
(a) All corporate action necessary to authorize the execution and delivery
of this Agreement and consummation of the Merger shall have been duly and
validly taken by the Acquiror and the Company, including approval by the
requisite vote of the shareholders of the Company of this Agreement, and all
corporate and shareholder action necessary to authorize the execution and
delivery of the Bank Merger Agreement and consummation of the transactions
contemplated thereby shall have been duly and validly taken by the Bank and the
Acquiror Maryland Bank.
(b) All approvals and consents from any Governmental Entity the approval
or consent of which is required for the consummation of the Merger and the Bank
Merger shall have been received and all statutory waiting periods in respect
thereof shall have expired; and the Acquiror and the Company shall have procured
all other approvals, consents and waivers of each person (other than the
Governmental Entities referred to above) whose approval, consent or waiver is
necessary to the consummation of the Merger and the Bank Merger.
(c) None of the Acquiror, the Company or their respective Subsidiaries
shall be subject to any statute, rule, regulation, injunction or other order or
decree which shall have been enacted, entered, promulgated or enforced by any
governmental or judicial authority which prohibits, restricts or makes illegal
consummation of the Merger or the Bank Merger.
(d) The Form S-4 shall have become effective under the Securities Act, and
the Acquiror shall have received all state securities laws or "blue sky" permits
and other authorizations or there shall be exemptions from registration
requirements necessary to issue the Acquiror Common Stock in connection with the
Merger, and neither the Form S-4 nor any such permit, authorization or exemption
shall be subject to a stop order or threatened stop order by the Commission or
any state securities authority.
(e) The shares of Acquiror Common Stock to be issued in connection with
the Merger shall have been approved for listing on the Nasdaq Stock Market's
National Market.
(f) The Acquiror and the Company shall have received the written opinion
of either the Acquiror's independent public accountants or counsel to the
Acquiror which is reasonably satisfactory to the Company, which opinion shall be
addressed to each of the Acquiror and the Company and reasonably satisfactory to
it, to the effect that the Merger will constitute a reorganization within the
meaning of Section 368 of the Code and that (i)
47
except for cash received in lieu of fractional share interests, holders of
Company Common Stock who exchange such stock for Acquiror Common Stock in the
Merger will not recognize income, gain or loss for federal income tax purposes,
(ii) the basis of such Acquiror Common Stock will equal the basis of the Company
Common Stock for which it is exchanged and (iii) the holding period of such
Acquiror Common Stock will include the holding period of the Company Common
Stock for which it is exchanged, assuming that such stock is a capital asset in
the hands of the holder thereof at the Effective Time. Such opinion shall be
based on such written representations from the Acquiror, the Company and others
as such independent public accountants or counsel shall reasonably request as to
factual matters.
(g) The Bank Merger shall have been consummated in accordance with the
terms of the Bank Merger Agreement.
6.2 CONDITIONS PRECEDENT - THE COMPANY
The obligations of the Company to effect the Merger shall be subject to
satisfaction of the following conditions at or prior to the Effective Time
unless waived by the Company pursuant to Section 7.4 hereof.
(a) The representations and warranties of the Acquiror set forth in Article
IV hereof shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though made on and as of the
Closing Date, except to the extent that a representation and warranty
specifically relates to an earlier date, in which case it shall be true and
correct in all material respects as of such earlier date. Notwithstanding the
preceding sentence, except for the representations and warranties contained in
the second and fourth sentences of Section 4.1, Section 4.3 and the first
sentence of Section 4.12, any inaccuracies in the representations and warranties
of the Acquiror shall not prevent the satisfaction of the condition contained in
this Section 6.2(a) unless the cumulative effect of all such inaccuracies, taken
in the aggregate, represent a Material Adverse Effect on the Acquiror. In
applying the preceding sentence, the determination of whether a representation
and warranty of the Acquiror is inaccurate shall be made without regard to any
language in Article IV which would otherwise qualify such representation and
warranty individually by reference to materiality or a Material Adverse Effect.
(b) The Acquiror shall have performed in all material respects all
obligations and complied with all covenants required to be performed and
complied with by it pursuant to this Agreement on or prior to the Effective
Time.
(c) The Acquiror shall have delivered to the Company a certificate, dated
the date of the Closing and signed by its President and Chief Executive Officer
and by its Chief Financial Officer, to the effect that the conditions set forth
in Sections 6.2(a) and 6.2(b) have been satisfied.
48
(d) No proceeding initiated by any Governmental Entity seeking an order,
injunction or decree issued by any court or agency of competent jurisdiction or
other legal restraint or prohibition preventing the consummation of the Merger
or the Bank Merger shall be pending.
(e) If a Distribution Date, as such term is defined in the Acquiror Rights
Agreement, shall have occurred, then either (i) all Rights (as defined in the
Acquiror Rights Agreement) then outstanding (other than Rights which have become
void pursuant to Section 7(f) of the Acquiror Rights Agreement) shall have been
either (A) exchanged for shares of Common Stock pursuant to Section 24 of the
Acquiror Rights Agreement or (B) redeemed pursuant to Section 23 of the Acquiror
Rights Agreement or (ii) the Acquiror shall have made adequate provision for the
issuance of a right substantially equivalent to the Rights with each share of
Acquiror Common Stock issuable pursuant to this Agreement.
(f) The Acquiror shall have furnished the Company with such certificates
of its respective officers or others and such other documents to evidence
fulfillment of the conditions set forth in Sections 6.1 and 6.2 as such
conditions relate to the Acquiror as the Company may reasonably request.
6.3 CONDITIONS PRECEDENT - THE ACQUIROR
The obligations of the Acquiror to effect the Merger shall be subject to
satisfaction of the following conditions at or prior to the Effective Time
unless waived by the Acquiror pursuant to Section 7.4 hereof.
(a) The representations and warranties of the Company set forth in Article
III hereof shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though made on and as of the
Closing Date, except to the extent that a representation and warranty
specifically relates to an earlier date, in which case it shall be true and
correct in all material respects as of such earlier date. Notwithstanding the
preceding sentence, except for the representations and warranties contained in
the second and fourth sentences of Section 3.1, the first, third and fourth
sentences of Section 3.3 and the first sentence of Section 3.13, any
inaccuracies in the representations and warranties of the Company shall not
prevent the satisfaction of the condition contained in this Section 6.3(a)
unless the cumulative effect of all such inaccuracies, taken in the aggregate,
represent a Material Adverse Effect on the Company. In applying the preceding
sentence, the determination of whether a representation and warranty of the
Company is inaccurate shall be made without regard to any language in Article
III which would otherwise qualify such representation and warranty individually
by reference to materiality or a Material Adverse Effect.
(b) The Company shall have performed in all material respects all
obligations and covenants required to be performed by it pursuant to this
Agreement on or prior to the Effective Time.
49
(c) The Company shall have delivered to the Acquiror a certificate, dated
the date of the Closing and signed by its Chairman, President and Chief
Executive Officer and by its Chief Financial Officer, to the effect that the
conditions set forth in Sections 6.3(a) and 6.3(b) have been satisfied.
(d) No proceeding initiated by any Governmental Entity seeking an order,
injunction or decree issued by any court or agency of competent jurisdiction or
other legal restraint or prohibition preventing the consummation of the Merger
or the Bank Merger shall be pending.
(e) The Company shall have furnished the Acquiror with such certificates
of its officers or others and such other documents to evidence fulfillment of
the conditions set forth in Sections 6.1 and 6.3 as such conditions relate to
the Company as the Acquiror may reasonably request.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 TERMINATION
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time, by the mutual consent
in writing of the parties hereto;
(b) at any time on or prior to the Effective Time, by the Acquiror in
writing if the Company has, or by the Company in writing if the Acquiror has, in
any material respect, breached (i) any material covenant or undertaking
contained herein or (ii) any representation or warranty contained herein, in any
case if such breach would have a Material Adverse Effect on the party and has
not been cured by the earlier of 30 days after the date on which written notice
of such breach is given to the party committing such breach or the Effective
Time;
(c) at any time, by either party hereto in writing, (i) if any application
for prior approval of a Governmental Entity which is necessary to consummate the
Merger or the Bank Merger is denied or withdrawn at the request or
recommendation of the Governmental Entity which must grant such approval, unless
within the ten-day period following such denial or withdrawal a petition for
rehearing or an amended application has been filed with the applicable
Governmental Entity, provided, however, that no party shall have the right to
terminate this Agreement pursuant to this Section 7(c)(i) if such denial or
request or recommendation for withdrawal shall be due to the failure of the
party seeking to terminate this Agreement to perform or observe the covenants
and agreements of such party set forth herein, or (ii) if any Governmental
Entity of competent jurisdiction shall have
50
issued a final nonappealable order enjoining or otherwise prohibiting the
consummation of any of the transactions contemplated by this Agreement;
(d) at any time, by either party hereto in writing, if the shareholders of
the Company do not approve this Agreement after a vote taken thereon at a
meeting duly called for such purpose (or at any adjournment thereof), unless the
failure of such occurrence shall be due to the failure of the party seeking to
terminate to perform or observe in any material respect its agreements set forth
herein to be performed or observed by such party at or before the Effective
Time;
(e) by either the Company or the Acquiror in writing if the Effective Time
has not occurred by the close of business on the first anniversary of the date
hereof, provided that this right to terminate shall not be available to any
party whose failure to perform an obligation in breach of such party's
obligations under this Agreement has been the cause of, or resulted in, the
failure of the Merger and the other transactions contemplated hereby to be
consummated by such date;
(f) by the Company if the Average Closing Price is less than $21.20; and
(g) by the Acquiror if the Average Closing Price is greater than $31.80,
subject to the next three sentences. If the Acquiror elects to exercise its
termination rights pursuant to this Section 7.1(g), it shall give written notice
to the Company (provided that such notice of election to terminate may be
withdrawn at any time). During the five-day period commencing with its receipt
of such notice, the Company shall have the option to decrease the consideration
to be received by the holders of the Company Common Stock hereunder by adjusting
the Exchange Ratio to equal a number (calculated to the nearest one-thousandth)
obtained by dividing (A) $41.02 by (B) the Average Closing Price. If the
Company so elects within such five-day period, it shall give prompt written
notice to the Acquiror of such election and the revised Exchange Ratio,
whereupon no termination shall have occurred pursuant to this Section 7.1(g) and
this Agreement shall remain in effect in accordance with its terms (except as
the Exchange Ratio shall have been so modified).
7.2 EFFECT OF TERMINATION
In the event that this Agreement is terminated pursuant to Section 7.1
hereof, this Agreement shall become void and have no effect, except that (i) the
provisions relating to confidentiality, expenses and termination fee set forth
in Section 5.4(c) and Section 8.1, respectively, and this Section 7.2 shall
survive any such termination and (ii) a termination pursuant to Section 7.1(b),
(c), (d) or (e) shall not relieve the breaching party from liability for willful
breach of any covenant, undertaking, representation or warranty giving rise to
such termination.
51
7.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All representations, warranties and covenants in this Agreement or in any
instrument delivered pursuant hereto or thereto shall expire on, and be
terminated and extinguished at, the Effective Time other than covenants that by
their terms are to be performed after the Effective Time (including without
limitation the covenants set forth in Sections 5.9, 5.10 and 5.11(c) hereof),
provided that the covenant of the Acquiror contained in Section 5.6(b)(iv)
hereof shall survive and be applicable following the Effective Time, and further
provided that no such representations, warranties or covenants shall be deemed
to be terminated or extinguished so as to deprive the Acquiror or the Company
(or any director, officer or controlling person thereof) of any defense at law
or in equity which otherwise would be available against the claims of any
person, including, without limitation, any shareholder or former shareholder of
either the Acquiror or the Company.
7.4 WAIVER
Each party hereto by written instrument signed by an executive officer of
such party, may at any time (whether before or after approval of this Agreement
by the shareholders of the Company) extend the time for the performance of any
of the obligations or other acts of the other party hereto and may waive (i) any
inaccuracies of the other party in the representations or warranties contained
in this Agreement or any document delivered pursuant hereto, (ii) compliance
with any of the covenants, undertakings or agreements of the other party, (iii)
to the extent permitted by law, satisfaction of any of the conditions precedent
to its obligations contained herein or (iv) the performance by the other party
of any of its obligations set forth herein, provided that any such waiver
granted, or any amendment or supplement pursuant to Section 7.5 hereof executed
after shareholders of the Company have approved this Agreement shall not modify
either the amount or form of the consideration to be provided hereby to the
holders of Company Common Stock upon consummation of the Merger or otherwise
materially adversely affect such shareholders without the approval of the
shareholders who would be so affected.
7.5 AMENDMENT OR SUPPLEMENT
This Agreement may be amended or supplemented at any time by mutual
agreement of the Acquiror and the Company, subject to the proviso to Section 7.4
hereof. Any such amendment or supplement must be in writing and authorized by
or under the direction of their respective Boards of Directors.
52
ARTICLE VIII
MISCELLANEOUS
8.1 EXPENSES; TERMINATION FEE
(a) Each party hereto shall bear and pay all costs and expenses incurred
by it in connection with the transactions contemplated by this Agreement,
including fees and expenses of its own financial consultants, accountants and
counsel, provided that (i) expenses of printing the Form S-4 and the
registration fee to be paid to the Commission in connection therewith shall be
shared equally between the Company and the Acquiror and (ii) notwithstanding
anything to the contrary contained in this Agreement, neither the Acquiror nor
the Company shall be released from any liabilities or damages arising out of its
willful breach of any provision of this Agreement.
(b) In the event that this Agreement is terminated (i) by the Company
pursuant to 6.2(d) or by the Acquiror pursuant to Section 6.3(d) or (ii) by
either party pursuant to Section 7.1(c), the Acquiror shall pay to the Company
on the date of any such termination by the Acquiror and within five business
days of any such termination by the Company, in immediately available funds, the
sum of $1,000,000. If within three years from the date of such termination of
this Agreement, the Company or any of its Subsidiaries shall enter into an
agreement, arrangement or understanding providing for (a) the merger or
consolidation of the Company or any of its Subsidiaries with or into any person
other than the Company or a wholly-owned subsidiary of the Company, (b) the
disposition, by sale, lease, exchange, division or otherwise, to any person or
persons other than the Company or a wholly-owned subsidiary of the Company in
one or any series of related transactions not in the ordinary course of business
of assets or deposits representing in either case 15% or more of the
consolidated assets or deposits of the Company and its consolidated Subsidiaries
or (c) the issuance, sale, transfer or other disposition (including by way of
merger, consolidation, share exchange or any similar transaction) directly or
indirectly to any one person (including any affiliates or associates of such
person, as such terms are presently defined in Rule 12b-2 under the Exchange
Act) of securities representing 15% or more of the voting power of the Company
or any of its Subsidiaries, then the Company shall, within five business days of
entering into such agreement, arrangement or understanding, repay such amount to
the Acquiror in immediately available funds without interest.
8.2 ENTIRE AGREEMENT
This Agreement contains the entire agreement among the parties with respect
to the transactions contemplated hereby and supersedes all prior arrangements or
understandings with respect thereto, written or oral, other than documents
referred to herein and therein. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the parties hereto and thereto
and their respective successors. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the
53
parties hereto, and their respective successors, any rights, remedies,
obligations or liabilities other than as set forth in Sections 5.9, 5.10 and
5.11(c) hereof.
8.3 NO ASSIGNMENT
None of the parties hereto may assign any of its rights or obligations
under this Agreement to any other person.
8.4 NOTICES
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally, telecopied
(with confirmation) or sent by overnight mail service or by registered or
certified mail (return receipt requested), postage prepaid, addressed as
follows:
If to the Acquiror:
Keystone Financial, Inc.
One Keystone Plaza
Front and Market Streets
P.O. Box 3660
Harrisburg, Pennsylvania 17105-3660
Attn: Xxx X. Xxxxx, Esq.
Executive Vice President, General Counsel and Secretary
Fax: (000) 000-0000
With a required copy to:
Xxxx Xxxxx Xxxx & XxXxxx
Xxxxx X. Xxxx Building
000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxx, Esquire
Fax: 000-000-0000
If to the Company:
First Financial Corporation of Western Maryland
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx
Chairman, President and Chief Executive Officer
Fax: (000) 000-0000
54
With a required copy to:
Elias, Matz, Xxxxxxx & Xxxxxxx L.L.P.
000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
8.5 ALTERNATIVE STRUCTURE
Notwithstanding any provision of this Agreement to the contrary, the
Acquiror may, with the written consent of the Company, which shall not be
unreasonably withheld, elect, subject to the filing of all necessary
applications and the receipt of all required regulatory approvals, to modify the
structure of the acquisition of the Company set forth herein, provided that (i)
the federal income tax consequences of any transactions created by such
modification shall not be other than those set forth in Section 6.1(f) hereof,
(ii) consideration to be paid to the holders of the Company Common Stock is not
thereby changed in kind or reduced in amount as a result of such modification
and (iii) such modification will not materially delay or jeopardize receipt of
any required regulatory approvals or any other condition to the obligations of
the Acquiror set forth in Sections 6.1 and 6.3 hereof.
8.6 INTERPRETATION
The captions contained in this Agreement are for reference purposes only
and are not part of this Agreement.
8.7 COUNTERPARTS
This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.8 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania applicable to agreements made and
entirely to be performed within such jurisdiction.
55
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers and their corporate
seal to be hereunto affixed and attested by their officers thereunto duly
authorized, all as of the day and year first above written.
KEYSTONE FINANCIAL, INC.
Attest:
/s/ Xxx X. Xxxxx By: /s/ Xxxx X. Xxxxxxxx
------------------------------------- ------------------------------
Name: Xxx X. Xxxxx Name: Xxxx X. Xxxxxxxx
Title: Executive Vice President, Title: President and Chief
General Counsel and Secretary Executive Officer
FIRST FINANCIAL CORPORATION OF
WESTERN MARYLAND
Attest:
/s/ Xxxxxxx X. Xxxxx By: /s/ Xxxxxxx X. Xxxxx
------------------------------------- ------------------------------
Name: Xxxxxxx X. Xxxxx Name: Xxxxxxx X. Xxxxx
Title: Executive Vice President Title: Chairman, President and
and Chief Financial Officer Chief Executive
Officer
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EXHIBIT A
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of November 26, 1996 (the "Agreement"),
between First Financial Corporation of Western Maryland, a Delaware corporation
("Issuer"), and Keystone Financial, Inc., a Pennsylvania corporation
("Grantee").
WITNESSETH:
WHEREAS, Issuer and Grantee have entered into an Agreement and Plan of
Merger, dated as of November 26, 1996 (the "Plan"), providing for, among other
things, the merger of Issuer with and into Grantee (the "Merger"), with Grantee
as the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the Plan,
Grantee has required that Issuer agree, and Issuer has agreed, to grant to
Grantee the Option (as hereinafter defined);
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Plan.
2. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 423,600 shares (as adjusted as set forth herein) (the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares) of Common Stock, par value $1.00 per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (the "Purchase Price")
of $34.19, provided, however, that in no event shall the number of Option Shares
for which the Option is exercisable exceed 19.9% of the issued and outstanding
shares of Issuer Common Stock without giving effect to any shares subject to or
issued pursuant to the Option.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or the Plan, and (ii) no preliminary or permanent
injunction or other order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction in the United States shall be in
effect, Holder may exercise the Option, in whole or in part, at any time and
from time to time following the occurrence of a Purchase Event (as hereinafter
defined); provided that the Option shall terminate and be of no further force
and effect upon the earliest to occur of (A) the Effective Time of the Merger,
(B) termination of the
Plan in accordance with the terms thereof prior to the occurrence of a Purchase
Event or a Preliminary Purchase Event, other than a termination of the Plan by
Grantee pursuant to Section 7.1(b)(i) (a "Default Termination"), (C) 12 months
after the termination of the Plan by Grantee pursuant to a Default Termination,
and (D) 12 months after termination of the Plan (other than pursuant to a
Default Termination) following the occurrence of a Purchase Event or a
Preliminary Purchase Event; and provided, further, that any purchase of shares
upon exercise of the Option shall be subject to compliance with applicable laws,
including without limitation the Bank Holding Company Act of 1956, as amended
(the "BHCA"), and the Home Owners' Loan Act, as amended ("HOLA"). The term
"Holder" shall mean the holder or holders of the Option from time to time, and
which is initially Grantee. The rights set forth in Section 8 hereof shall
terminate when the right to exercise the Option terminates (other than as a
result of a complete exercise of the Option) as set forth above.
(b) As used herein, a "Purchase Event" means any of the following events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an
intention to authorize, recommend or propose, or entered into an agreement
with any person (other than Grantee or any subsidiary of Grantee) to effect
(A) a merger, consolidation or similar transaction involving Issuer or any
of its subsidiaries, (B) the disposition, by sale, lease, exchange or
otherwise, of assets of Issuer or any of its subsidiaries representing in
either case 15% or more of the consolidated assets of Issuer and its
subsidiaries, or (C) the issuance, sale or other disposition of (including
by way of merger, consolidation, share exchange or any similar transaction)
securities representing 15% or more of the voting power of Issuer or any of
its subsidiaries (any of the foregoing an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in Rule
13d-3 promulgated under the Exchange Act) of or the right to acquire
beneficial ownership of, or any "group" (as such term is defined in Section
13(d)(3) of the Exchange Act) shall have been formed which beneficially
owns or has the right to acquire beneficial ownership of, 25% or more of
the then outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any subsidiary of Grantee)
shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act), or shall have filed a registration statement under the
Securities Act with respect to, a tender offer or exchange offer to
purchase any shares of Issuer Common Stock such that, upon consummation of
such offer, such person would own or control 15% or more of the then
outstanding shares of Issuer Common Stock (such an offer being referred to
herein as a "Tender Offer" and an "Exchange Offer," respectively); or
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(ii) (A) the holders of Issuer Common Stock shall not have approved
the Plan at the meeting of such stockholders held for the purpose of voting
on the Plan, (B) such meeting shall not have been held or shall have been
canceled prior to termination of the Plan or (C) Issuer's Board of
Directors shall have withdrawn or modified in a manner adverse to Grantee
the recommendation of Issuer's Board of Directors with respect to the Plan,
in each case after it shall have been publicly announced that any person
(other than Grantee or any subsidiary of Grantee) shall have (x) made, or
disclosed an intention to make, a proposal to engage in an Acquisition
Transaction, (y) commenced a Tender Offer or filed a registration statement
under the Securities Act with respect to an Exchange Offer, or (z) filed an
application (or given notice), whether in draft or final form, under the
BHCA, the HOLA, the Bank Merger Act, as amended, or the Change in Bank
Control Act of 1978, as amended, for approval to engage in an Acquisition
Transaction; or
(iii) Issuer shall have breached any representation, warranty, covenant
or obligation contained in the Plan and such breach would entitle Grantee
to terminate the Plan under Section 7.1(b) thereof (without regard to the
cure period provided for therein unless such cure is promptly effected
without jeopardizing consummation of the Merger pursuant to the terms of
the Plan) after (x) a bona fide proposal is made by any person (other than
Grantee or any subsidiary of Grantee) to Issuer or its stockholders to
engage in an Acquisition Transaction, (y) any person (other than Grantee or
any subsidiary of Grantee) states its intention to Issuer or its
stockholders to make a proposal to engage in an Acquisition Transaction if
the Plan terminates or (z) any person (other than Grantee or any subsidiary
of Grantee) shall have filed an application or notice with any Governmental
Entity to engage in an Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Preliminary Purchase Event or Purchase Event, it being understood that the
giving of such notice by Issuer shall not be a condition to the right of Holder
to exercise the Option.
(e) In the event Holder wishes to exercise the Option, it shall send to
Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise, and (ii) a date not earlier than three
business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"), provided that if
prior notification to or approval of the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), the Office of Thrift Supervision
("OTS") or any other Governmental Entity is required in connection with such
purchase, Holder shall promptly file the required notice or application for
approval and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead
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from the date on which any required notification periods have expired or been
terminated or such approvals have been obtained and any requisite waiting period
or periods shall have passed. Any exercise of the Option shall be deemed to
occur on the Notice Date relating thereto.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in immediately
available funds by wire transfer to a bank account designated by Issuer, an
amount equal to the Purchase Price multiplied by the number of Option Shares to
be purchased on such Closing Date, and (ii) present and surrender this Agreement
to Issuer at the address of Issuer specified in Section 12(f) hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a), (i)
Issuer shall deliver to Holder (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever and subject to no preemptive rights, and (B) if the Option is
exercised in part only, an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the shares of Issuer
Common Stock purchasable hereunder, and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise dispose of such
Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED
AS OF NOVEMBER 26, 1996. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO
THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY ISSUER OF A WRITTEN
REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Holder shall have
delivered to Issuer a copy of a letter from the staff of the Commission, or an
opinion of counsel in form and substance reasonably satisfactory to Issuer and
its counsel, to the effect that such legend is not required for purposes of the
Securities Act.
(d) Upon the giving by Holder to Issuer of the written notice of exercise
of the Option provided for under Section 3(e), the tender of the applicable
purchase price in
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immediately available funds and the tender of this Agreement to Issuer, Holder
shall be deemed to be the holder of record of the shares of Issuer Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Issuer Common Stock shall not then be actually delivered to Holder.
(e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer, (iii) promptly to take all action as may from time to time be required
(including (A) complying with all premerger notification, reporting and waiting
period requirements and (B) in the event prior approval of or notice to any
Governmental Entity is necessary before the Option may be exercised, cooperating
fully with Holder in preparing such applications or notices and providing such
information to such Governmental Entity as it may require) in order to permit
Holder to exercise the Option and Issuer duly and effectively to issue shares of
Issuer Common Stock pursuant hereto, and (iv) promptly to take all action
provided herein to protect the rights of Holder against dilution.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents
and warrants to Grantee (and Holder, if different than Grantee) as follows:
(a) DUE AUTHORIZATION. Issuer has all requisite corporate power and
authority to enter into this Agreement, and subject to any approvals referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Issuer, and this Agreement has been duly executed and delivered by Issuer.
(b) NO VIOLATIONS. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Issuer
with any of the provisions hereof will not (i) conflict with or result in a
breach of any provision of its Articles of Agreement or Bylaws or a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, debenture, mortgage,
indenture, license, material agreement or other material instrument or
obligation to which Issuer is a party, or by which it or any of its properties
or assets may be bound, or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Issuer or any of its properties or
assets.
5
(c) AUTHORIZED STOCK. Issuer has taken all necessary corporate and other
action to authorize and reserve and to permit it to issue, and at all times from
the date hereof until the obligation to deliver Issuer Common Stock upon the
exercise of the Option terminates, will have reserved for issuance upon exercise
of the Option that number of shares of Issuer Common Stock equal to the maximum
number of shares of Issuer Common Stock at any time and from time to time
purchasable upon exercise of the Option, and all such shares, upon issuance
pursuant to the Option, will be duly and validly issued, fully paid and
nonassessable, and will be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever and not subject to any
preemptive rights.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents
and warrants to Issuer that Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee, and this Agreement has been duly
executed and delivered by Grantee.
7. ADJUSTMENT UPON CHANGES IN ISSUER CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by reason of a stock
dividend, stock split, split-up, recapitalization, combination, exchange of
shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transactions so that Holder shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Holder would
have received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable. If
any additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Issuer Common Stock previously issued pursuant hereto, equals 19.9% of
the number of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option.
(b) In the event that Issuer shall enter in an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee or one of
its subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock or
other securities of Issuer or any other person or cash or any other property or
the outstanding shares of Issuer Common Stock immediately prior to such merger
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the
6
merged company, or (iii) to sell or otherwise transfer assets representing more
than 50% of the consolidated assets of Issuer and its subsidiaries to any
person, other than Grantee or one of its subsidiaries, then, and in each such
case (but at the election of the Holder in the case of clause (iii)), the
agreement governing such transaction shall make proper provisions so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of Holder, of any of (x) the
Acquiring Corporation (as hereinafter defined), (y) any person that controls the
Acquiring Corporation or (z) in the case of a merger described in clause (ii),
Issuer (such person being referred to as "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Holder. Substitute Option Issuer also shall enter
into an agreement with Holder in substantially the same form as this Agreement,
which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock (as hereinafter defined) as is equal to the Assigned
Value (as hereinafter defined) multiplied by the number of shares of Issuer
Common Stock for which the Option was theretofore exercisable, divided by the
Average Price (as hereinafter defined). The exercise price of Substitute Option
per share of Substitute Common Stock (the "Substitute Option Price") shall then
be equal to the Purchase Price multiplied by a fraction in which the numerator
is the number of shares of Issuer Common Stock for which the Option was
theretofore exercisable and the denominator is the number of shares of the
Substitute Common Stock for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, or (iii) the transferee of assets representing more than
50% of the consolidated assets of Issuer and its subsidiaries.
(2) "Substitute Common Stock" shall mean the shares of capital stock
(or similar equity interest) with the greatest voting power in respect of
the election of directors (or persons similarly responsible for the
direction of the business and affairs) of the Substitute Option Issuer.
(3) "Assigned Value" shall mean the highest of (w) the price per
share of Issuer Common Stock at which a Tender Offer or an Exchange Offer
therefor has been made, (x) the price per share of Issuer Common Stock to
be paid by any third party pursuant to an agreement with Issuer, (y) the
highest closing price for shares
7
of Issuer Common Stock within the six-month period immediately preceding
the consolidation, merger or sale in question and (z) in the event of a
sale of assets representing more than 50% of the consolidated assets of
Issuer and its subsidiaries or deposits, an amount equal to (i) the sum of
the price paid in such sale for such assets (and/or deposits) and the
current market value of the remaining assets of Issuer, as determined by a
nationally-recognized investment banking firm selected by Holder, divided
by (ii) the number of shares of Issuer Common Stock outstanding at such
time. In the event that a Tender Offer or an Exchange Offer is made for
Issuer Common Stock or an agreement is entered into for a merger or
consolidation involving consideration other than cash, the value of the
securities or other property issuable or deliverable in exchange for Issuer
Common Stock shall be determined by a nationally-recognized investment
banking firm selected by Holder.
(4) "Average Price" shall mean the average closing price of a share
of Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by Issuer, the person merging into Issuer
or by any company which controls such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for the limitation in the first sentence of this Section 7(f), Substitute
Option Issuer shall make a cash payment to Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in the
first sentence of this Section 7(f) over (ii) the value of the Substitute Option
after giving effect to the limitation in the first sentence of this Section
7(f). This difference in value shall be determined by a nationally-recognized
investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in Section 7(b)
unless the Acquiring Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer hereunder and take
all other actions that may be necessary so that the provisions of this Section 7
are given full force and effect (including, without limitation, any action that
may be necessary so that the holders of the other shares of common stock issued
by Substitute Option Issuer are not entitled to exercise any rights by reason of
the issuance or exercise of the Substitute Option and the shares of Substitute
Common Stock are otherwise in no way distinguishable from or have lesser
economic value (other than any diminution in value resulting from the fact that
the shares of Substitute Common Stock are restricted securities, as defined in
Rule 144 under the Securities Act or
8
any successor provision) than other shares of common stock issued by Substitute
Option Issuer).
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a), at the request of Holder
at any time commencing upon the first occurrence of a Repurchase Event (as
defined in Section 8(d)) and ending 12 months immediately thereafter, Issuer
shall repurchase from Holder (i) the Option and (ii) all shares of Issuer Common
Stock purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 8 is referred to as the "Request Date." Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to which
Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number of
shares of Issuer Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7) paid (or, in the case
of Option Shares with respect to which the Option has been exercised but
the Closing Date has not occurred, payable) by Holder for each share of
Issuer Common Stock with respect to which the Option has been exercised and
with respect to which Holder then has beneficial ownership, multiplied by
the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and shall warrant
that it has sole record and beneficial ownership of such shares and that the
same are then free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever. Notwithstanding the foregoing, to the extent that prior
notification to or approval of the Federal Reserve Board, the OTS or any other
Governmental Entity is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to Section 8, in whole or
in part, or to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited from paying
and promptly file the required notice or application for approval and
9
expeditiously process the same (and each party shall cooperate with the other in
the filing of any such notice or application and the obtaining of any such
approval), in which case the ten-day period referred to in the first sentence of
this Section 8(b) shall run instead from the date on which any required
notification periods have expired or been terminated or such approvals have been
obtained and any requisite waiting period or periods shall have passed. If the
Federal Reserve Board, the OTS or any other Governmental Entity disapproves of
any part of Issuer's proposed repurchase pursuant to this Section 8, Issuer
shall promptly give notice of such fact to Holder. If the Federal Reserve
Board, the OTS or any other Governmental Entity prohibits the repurchase in part
but not in whole, then Holder shall have the right (i) to revoke the repurchase
request or (ii) to the extent permitted by the Federal Reserve Board, the OTS or
other Governmental Entity, determine whether the repurchase should apply to the
Option and/or Option Shares and to what extent to each, and Holder shall
thereupon have the right to exercise the Option as to the number of Option
Shares for which the Option was exercisable at the Request Date less the sum of
the number of shares covered by the Option in respect of which payment has been
made pursuant to Section 8(a)(ii) and the number of shares covered by the
portion of the Option (if any) that has been repurchased. Holder shall notify
Issuer of its determination under the preceding sentence within five business
days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Grantee's rights
under this Section 8 shall terminate on the date of termination of the Option
pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i), (ii) the price
per share of Issuer Common Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination transaction described
in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest closing sales
price per share of Issuer Common Stock quoted on the Nasdaq Stock Market's
National Market ("NASDAQ/NMS") (or if Issuer Common Stock is not quoted on
NASDAQ/NMS, the highest bid price per share as quoted on the principal trading
market or securities exchange on which such shares are traded, as reported by a
recognized source chosen by Holder) during the 60 business days preceding the
Request Date; provided, however, that in the event of a sale of less than all of
Issuer's assets, the Applicable Price shall be the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of
Issuer as determined by a nationally-recognized investment banking firm selected
by Holder, divided by the number of shares of Issuer Common Stock outstanding at
the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally-recognized investment banking firm selected by Holder and
reasonably acceptable to Issuer, which determination shall be conclusive for all
purposes of this Agreement.
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(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire beneficial ownership of, or any "group"
(as such term is defined in Section 13(d)(3) of the Exchange Act) shall have
been formed which beneficially owns or has the right to acquire beneficial
ownership of, 50% or more of the then outstanding shares of Issuer Common Stock,
or (ii) any of the transactions described in Section 7(b)(i), Section 7(b)(ii)
or Section 7(b)(iii) shall be consummated.
(e) Notwithstanding anything herein to the contrary, the aggregate amount
payable to Holder pursuant to this Section 8 shall not exceed $4.0 million.
9. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. Issuer shall, subject to the conditions
of Section 9(c), if requested by any Holder, as expeditiously as possible
prepare and file a registration statement under the Securities Act if such
registration is necessary in order to permit the sale or other disposition of
any or all shares of Issuer Common Stock or other securities that have been
acquired by or are issuable to Holder upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by Holder in such
request, including without limitation a "shelf" registration statement under
Rule 415 under the Securities Act or any successor provision, and Issuer shall
use its best efforts to qualify such shares or other securities for sale under
any applicable state securities laws.
(b) ADDITIONAL REGISTRATION RIGHTS. If Issuer at any time after the
exercise of the Option proposes to register any shares of Issuer Common Stock
under the Securities Act in connection with an underwritten public offering of
such Issuer Common Stock, Issuer will promptly give written notice to Holder of
its intention to do so and, upon the written request of Holder given within 30
days after receipt of any such notice (which request shall specify the number of
shares of Issuer Common Stock intended to be included in such underwritten
public offering by Holder), Issuer will cause all such shares for which a Holder
shall have requested participation in such registration to be so registered and
included in such underwritten public offering; provided, however, that Issuer
may elect to not cause any such shares to be so registered (i) if the
underwriters in good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement an employee benefit plan or a
registration filed on Form S-4 under the Securities Act or any successor form;
provided, further, however, that such election pursuant to clause (i) may only
be made one time. If some but not all the shares of Issuer Common Stock with
respect to which Issuer shall have received requests for registration pursuant
to this Section 9(b) shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among Holders permitted to
register their shares of Issuer Common Stock in connection with such
registration pro rata in the proportion that the number of shares requested to
be registered by each such Holder bears to the total number of shares requested
to be registered by all such Holders then desiring to have Issuer Common Stock
registered for sale.
11
(c) CONDITIONS TO REQUIRED REGISTRATION. Issuer shall use all reasonable
efforts to cause each registration statement referred to in Section 9(a) to
become effective and to obtain all consents or waivers of other parties which
are required therefor and to keep such registration statement effective;
provided, however, that Issuer may delay any registration of Option Shares
required pursuant to Section 9(a) for a period not exceeding 90 days if Issuer
shall in good faith determine that any such registration would adversely affect
an offering or contemplated offering of other securities by Issuer, and Issuer
shall not be required to register Option Shares under the Securities Act
pursuant to Section 9(a):
(i) prior to the earliest of (A) termination of the Plan pursuant to
Article VII thereof, and (B) a Purchase Event or a Preliminary Purchase
Event;
(ii) on more than one occasion during any calendar year and on more
than two occasions in total;
(iii) within 90 days after the effective date of a registration
referred to in Section 9(b) pursuant to which the Holder or Holders
concerned were afforded the opportunity to register such shares under the
Securities Act and such shares were registered as requested; and
(iv) unless a request therefor is made to Issuer by the Holder or
Holders of at least 25% or more of the aggregate number of Option Shares
(including shares of Issuer Common Stock issuable upon exercise of the
Option) then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain the
effectiveness of any registration statement after the expiration of nine months
from the effective date of such registration statement. Issuer shall use all
reasonable efforts to make any filings, and take all steps, under all applicable
state securities laws to the extent necessary to permit the sale or other
disposition of the Option Shares so registered in accordance with the intended
method of distribution for such shares, provided, however, that Issuer shall not
be required to consent to general jurisdiction or to qualify to do business in
any state where it is not otherwise required to so consent to such jurisdiction
or to so qualify to do business.
(d) EXPENSES. Issuer will pay all expenses (including without limitation
registration fees, qualification fees, blue sky fees and expenses, accounting
expenses, legal expenses and printing expenses incurred by it) in connection
with each registration pursuant to Section 9(a) or (b) and all other
qualifications, notifications or exemptions pursuant to Section 9(a) or (b).
Underwriting discounts and commissions relating to Option Shares, fees and
disbursements of counsel to the Holder(s) of Option Shares being registered and
any other expenses incurred by such Holder(s) in connection with any such
registration shall be borne by such Holder(s).
(e) INDEMNIFICATION. In connection with any registration under Section
9(a) or (b), Issuer hereby indemnifies each Holder, and each underwriter
thereof, including each person,
12
if any, who controls such Holder or underwriter within the meaning of Section 15
of the Securities Act, against all expenses, losses, claims, damages and
liabilities caused by any untrue, or alleged untrue, statement of a material
fact contained in any registration statement or prospectus or notification or
offering circular (including any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission, or alleged omission, to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such expenses, losses,
claims, damages or liabilities of such indemnified party are caused by any
untrue statement or alleged untrue statement that was included by Issuer in any
such registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) in reliance upon, and in
conformity with, information furnished in writing to Issuer by such indemnified
party expressly for use therein, and Issuer and each officer, director and
controlling person of Issuer shall be indemnified by such Holder, or by such
underwriter, as the case may be, for all such expenses, losses, claims, damages
and liabilities caused by any untrue, or alleged untrue, statement that was
included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon, and in conformity with, information furnished in
writing to Issuer by such Holder or such underwriter, as the case may be,
expressly for such use.
Promptly upon receipt by a party indemnified under this Section 9(e) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but,
except to the extent of any actual prejudice to the indemnifying party, the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party agrees to pay the same, (ii) the indemnifying party fails to
assume the defense of such action with counsel reasonably satisfactory to the
indemnified party, or (iii) the indemnified party has been advised by counsel
that one or more legal defenses may be available to the indemnifying party that
may be contrary to the interest of the indemnified party, in which case the
indemnifying party shall be entitled to assume the defense of such action
notwithstanding its obligation to bear fees and expenses of such counsel. No
indemnifying party shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
13
If the indemnification provided for in this Section 9(e) is unavailable to
a party otherwise entitled to be indemnified in respect of any expenses, losses,
claims, damages or liabilities referred to herein, then the indemnifying party,
in lieu of indemnifying such party otherwise entitled to be indemnified, shall
contribute to the amount paid or payable by such party to be indemnified as a
result of such expenses, losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of Issuer, the
selling Holders and the underwriters in connection with the statement or
omissions which results in such expenses, losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The amount
paid or payable by a party as a result of the expenses, losses, claims, damages
and liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim; provided, however, that in no
case shall the selling Holders be responsible, in the aggregate, for any amount
in excess of the net offering proceeds attributable to its Option Shares
included in the offering. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(g) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Any obligation by any Holder to indemnify shall be several
and not joint with other Holders.
In connection with any registration pursuant to Section 9(a) or (b) above,
Issuer and each selling Holder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this Section 9(e).
(f) MISCELLANEOUS REPORTING. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by the Holder(s) in accordance
with and to the extent permitted by any rule or regulation permitting
nonregistered sales of securities promulgated by the Commission from time to
time, including, without limitation, Rule 144A. Issuer shall at its expense
provide the Holder with any information necessary in connection with the
completion and filing of any reports or forms required to be filed by them under
the Securities Act or the Exchange Act, or required pursuant to any state
securities laws or the rules of any stock exchange.
(g) ISSUE TAXES. Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save any Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. QUOTATION; LISTING. If Issuer Common Stock or any other securities to
be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on NASDAQ/NMS or any securities exchange, Issuer, upon the
request of Holder, will promptly file an application, if required, to authorize
for quotation or trading or listing the shares of Issuer Common Stock or other
securities to be acquired upon exercise of the
14
Option on NASDAQ/NMS or such other securities exchange and will use its best
efforts to obtain approval, if required, of such quotation or listing as soon as
practicable.
11. DIVISION OF OPTION. Upon the occurrence of a Purchase Event or a
Preliminary Purchase Event, this Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of the Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. MISCELLANEOUS.
(a) EXPENSES. Except as otherwise provided in Section 9, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may be waived
at any time by the party that is entitled to the benefits of such provision by
written instrument signed by a duly authorized executive officer of such party.
This Agreement may not be modified, amended, altered or supplemented except upon
the execution and delivery of a written agreement executed by the parties
hereto.
(c) ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; SEVERABILITY. This
Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between Grantee and Issuer (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof,
and (ii) is not intended to confer upon any person other than the parties hereto
(other than the indemnified parties under Section 9(e) and any transferee of the
Option Shares or any permitted transferee of this Agreement pursuant to Section
12(h)) any rights or remedies hereunder. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or a
federal or state regulatory agency to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. If for any reason such court or
15
regulatory agency determines that the Option does not permit Holder to acquire,
or does not require Issuer to repurchase, the full number of shares of Issuer
Common Stock as provided in Sections 3 and 8 (as adjusted pursuant to Section
7), it is the express intention of Issuer to allow Holder to acquire or to
require Issuer to repurchase such lesser number of shares as may be permissible
without any amendment or modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Pennsylvania without regard to
any applicable conflicts of law rules.
(e) DESCRIPTIVE HEADINGS. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or sent by overnight mail service or mailed by registered or
certified mail (return receipt requested) postage prepaid, to the parties at the
following address (or at such other address for a party as shall be specified by
like notice):
If to Grantee:
Keystone Financial, Inc.
One Keystone Plaza
Front and Market Streets
P.O. Box 3660
Harrisburg, Pennsylvania 17105-3660
Attn: Xxx X. Xxxxx, Esq.
Executive Vice President, General Counsel
and Secretary
Fax: (000) 000-0000
With a required copy to:
Xxxx Xxxxx Xxxx & XxXxxx
Xxxxx X. Xxxx Building
000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxx, Esquire
Fax: 000-000-0000
16
If to Issuer:
First Financial Corporation of Western Maryland
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx
Chairman, President and Chief Executive Officer
Fax: (000) 000-0000
With a required copy to:
Elias, Matz, Xxxxxxx & Xxxxxxx L.L.P.
000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
(g) COUNTERPARTS. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Holder may assign this Agreement
to a wholly-owned subsidiary of Holder and Holder may assign its rights
hereunder in whole or in part after the occurrence of a Purchase Event. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
(i) FURTHER ASSURANCES. In the event of any exercise of the Option by
Holder, Issuer and Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) SPECIFIC PERFORMANCE. The parties hereto agree that this Agreement
may be enforced by either party through specific performance, injunctive relief
and other equitable relief. Both parties further agree to waive any requirement
for the securing or posting of any bond in connection with the obtaining of any
such equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
17
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
KEYSTONE FINANCIAL, INC.
Attest:
By:
------------------------------------- ------------------------------
Name: Xxx X. Xxxxx Name: Xxxx X. Xxxxxxxx
Title: Executive Vice President, Title: President and Chief
General Counsel and Secretary Executive Officer
FIRST FINANCIAL CORPORATION OF
WESTERN MARYLAND
Attest:
By:
------------------------------------- ------------------------------
Name: Xxxxxxx X. Xxxxx Name: Xxxxxxx X. Xxxxx
Title: Executive Vice President Title: Chairman, President and
and Chief Financial Officer Chief Executive
Officer
18
EXHIBIT B
November 26, 1996
Keystone Financial, Inc.
One Keystone Xxxxx
Xxxxx & Xxxxxx Xxxxxxx
X.X. Xxx 0000
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Gentlemen:
The undersigned director of First Financial Corporation of Western Maryland
(the "Company") understands that Keystone Financial, Inc. (the "Acquiror") is
about to enter into an Agreement and Plan of Merger (the "Merger Agreement")
with the Company. The Merger Agreement provides for the merger of the Company
with and into the Acquiror (the "Merger") and the conversion of outstanding
shares of Company Common Stock into Acquiror Common Stock or cash in accordance
with the terms therein set forth.
In order to induce Keystone to enter into the Merger Agreement, and
intending to be legally bound hereby, the undersigned represents, warrants and
agrees that at the meeting of the Company's shareholders contemplated by Section
5.2 of the Merger Agreement and any adjournment thereof the undersigned will, in
person or by proxy, vote or cause to be voted in favor of the Merger Agreement
and the Merger the shares of Company Common Stock beneficially owned by the
undersigned individually or, to the extent of the undersigned's proportionate
voting interest, jointly with other persons, as well as (to the extent of the
undersigned's proportionate voting interest) any other shares of Company Common
Stock over which the undersigned may hereafter acquire beneficial ownership in
such capacities (collectively, the "Shares"). Subject to the final paragraph of
this agreement, the undersigned further agrees that he will use his best efforts
to cause any other shares of Company Common Stock over which he has or shares
voting power to be voted in favor of the Merger Agreement and the Merger.
The undersigned further represents, warrants and agrees that until the
earlier of (i) the consummation of the Merger or (ii) the termination of the
Merger Agreement in accordance with its terms, the undersigned will not,
directly or indirectly:
(a) vote any of the Shares, or cause or permit any of the Shares to
be voted, in favor of any other merger, consolidation, plan of liquidation,
sale of assets, reclassification or other transaction involving the Company
or First Federal Savings Bank of Western Maryland (the "Bank") which would
have the effect of any person,
other than the Acquiror or an affiliate of the Acquiror, acquiring control
over the Company, the Bank or any substantial portion of the assets of the
Company or the Bank. As used herein, the term "control" means (1) the
ability to direct the voting of 10% or more of the outstanding voting
securities of a person having ordinary voting power in the election of
directors or in the election of any other body having similar functions or
(2) the ability to direct the management and policies of a person, whether
through ownership of securities, through any contract, arrangement or
understanding or otherwise.
(b) sell or otherwise transfer any of the Shares, or cause or permit
any of the Shares to be sold or otherwise transferred (i) pursuant to any
tender offer, exchange offer or similar proposal made by any person other
than the Acquiror or an affiliate of the Acquiror, (ii) to any person known
by the undersigned to be seeking to obtain control of the Company, the Bank
or any substantial portion of the assets of the Company or the Bank or to
any other person (other than the Acquiror or an affiliate of the Acquiror)
under circumstances where such sale or transfer may reasonably be expected
to assist a person seeking to obtain such control or (iii) for the
principal purpose of avoiding the obligations of the undersigned under this
agreement.
It is understood and agreed that this agreement relates solely to the
capacity of the undersigned as a shareholder or other beneficial owner of the
Shares and is not in any way intended to affect the exercise by the undersigned
of the undersigned's responsibilities as a director or officer of the Company or
the Bank. It is further understood and agreed that the term "Shares" shall not
include any securities beneficially owned by the undersigned as a trustee or
fiduciary, and that this agreement is not in any way intended to affect the
exercise by the undersigned of the undersigned's fiduciary responsibility in
respect of any such securities.
Very truly yours
------------------------------
Name:
Accepted and Agreed to:
KEYSTONE FINANCIAL, INC.
By:
------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
2
Name of Director:
---------------------------------------------------------
Shares of Company Common Stock
Beneficially Owned
as of November 26, 1996
Name(s) of Capacity of Director's Number of
Record Owner(s) Beneficial Ownership Shares
--------------- ---------------------- ---------
