1
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of July 21, 1999
("Agreement"), between ESB Financial Corporation ("ESB"), a Pennsylvania
corporation headquartered in Ellwood City, Pennsylvania, and SHS Bancorp, Inc.
("SHS"), a Pennsylvania corporation headquartered in Pittsburgh, Pennsylvania.
WITNESSETH:
WHEREAS, the Boards of Directors of ESB and SHS 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 SHS with and into ESB 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 ESB's willingness to enter into
this Agreement, (i) SHS is concurrently entering into a Stock Option Agreement
with ESB (the "Stock Option Agreement"), in substantially the form attached
hereto as Exhibit A, pursuant to which SHS is granting to ESB the option to
purchase shares of SHS Common Stock (as defined herein) under certain
circumstances and (ii) certain stockholders of SHS are concurrently entering
into a Stockholder Agreement with ESB (the "Stockholder Agreement"), in
substantially the form attached hereto as Exhibit B, pursuant to which, among
other things, such stockholders agree to vote their shares of SHS Common Stock
in favor of this Agreement and the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.01. THE MERGER. Subject to the terms and conditions of this Agreement
and the Agreement of Merger, dated as of the date hereof, between ESB and SHS, a
copy of which is attached hereto as Appendix A, at the Effective Time (as
defined in Section 1.02 hereof), SHS shall be merged with and into ESB in
accordance with Chapter 19, Subchapter C of the Pennsylvania Business
Corporation Law ("PBCL") (the "Merger"), with ESB as the surviving corporation
2
(hereinafter sometimes called the "Surviving Corporation"). Each share of common
stock, par value $.01 per share, of SHS ("SHS Common Stock") outstanding
immediately prior to the Effective Time (other than shares as to which
dissenters' rights have been asserted and duly perfected in accordance with
Pennsylvania law (the "SHS Dissenting Shares") and shares held by SHS (including
treasury shares) or ESB or any of their respective wholly-owned subsidiaries)
shall, by virtue of the Merger and without any further action by the holder
thereof, be converted into and represent the right to receive shares of common
stock, par value $.01 per share, of ESB ("ESB Common Stock") or $17.80 in cash
("Merger Consideration"), as provided in Section 1.03 hereof and subject to the
terms, conditions, limitations and procedures set forth in this Agreement and
the Agreement of Merger.
1.02. EFFECTIVE TIME. The Merger shall become effective on the date and
at the time that Articles of Merger are filed with the Secretary of State of the
Commonwealth of Pennsylvania pursuant to Section 1927 of the PBCL, unless a
later date and time is specified as the effective time in such Articles of
Merger ("Effective Time"). A closing (the "Closing") shall take place
immediately prior to the Effective Time at 10:00 a.m., on the fifth business day
following the receipt of all necessary regulatory or governmental approvals and
consents and the expiration of all statutory waiting periods in respect thereof
and the satisfaction or waiver, to the extent permitted hereunder, of the
conditions to the consummation of the Merger specified in Article V of this
Agreement (other than the delivery of certificates, opinions and other
instruments and documents to be delivered at the Closing), at the offices of
ESB, 000 Xxxxxxxx Xxxxxx, Xxxxxxx Xxxx, Xxxxxxxxxxxx, 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 ESB and SHS the opinions,
certificates and other documents required to be delivered under Article V
hereof.
1.03 CONVERSION OF SHARES. At the Effective Time, by virtue of the
Merger and without any action on the part of a holder of shares of SHS Common
Stock:
(a) Each share of ESB Common Stock that is issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding and
shall be unchanged by the Merger.
(b) All shares of SHS Common Stock owned by SHS (including treasury
shares) or ESB or any of their respective wholly-owned subsidiaries, in each
case other than in a fiduciary capacity, shall be canceled and retired and shall
not represent capital stock of the Surviving Corporation and shall not be
exchanged for shares of ESB Common Stock, cash or other consideration.
(c) (1) Subject to Sections 1.04, 1.05, 1.08 and 1.09 each share of
SHS Common Stock issued and outstanding at the Effective Time (other than shares
to be canceled in accordance with Section 1.03(b)) shall be converted into, and
shall be canceled in exchange for, the right to receive, at the election of the
holder thereof:
(i) 1.30 shares, subject to Section 6.01(f) hereof (the
"Exchange Ratio"), of ESB Common Stock (the "Per Share Stock
Consideration"), or
2
3
(ii) a cash amount equal to $17.80 per share of SHS Common Stock
(the "Per Share Cash Consideration").
(2) For purposes of this Agreement, the "Aggregate Cash
Consideration" shall amount to the product of the number of shares of SHS
Common Stock (other than SHS Common Stock owned by SHS (including
treasury shares) or ESB) outstanding at the Effective Time times .40
times $17.80.
1.04 ELECTION AND EXCHANGE PROCEDURES
(a) The parties shall designate an exchange agent to act as agent (the
"Exchange Agent") for purposes of conducting the election procedure and the
exchange procedure as described in Sections 1.04 and 1.05. No later than 30 days
prior to the anticipated Effective Time, or on such earlier date as ESB and SHS
shall mutually agree (the "Mailing Date"), ESB shall cause the Exchange Agent to
mail an election form in such form as ESB and SHS shall mutually agree (the
"Election Form") to each holder of record of SHS Common Stock as of five
business days prior to the Mailing Date ("Election Form Record Date"). Each
Election Form shall permit the holder (or in the case of nominee record holders,
the beneficial owner through proper instructions and documentation) (i) to elect
to receive ESB Common Stock with respect to all such holder's SHS Common Stock
as hereinabove provided (the "Stock Election Shares"), (ii) to elect to receive
cash with respect to all such holder's SHS Common Stock as hereinabove provided
(the "Cash Election Shares"), or (iii) to indicate that such holder makes no
such election with respect to such holder's shares of SHS Common Stock (the
"No-Election Shares"). Any shares of SHS Common Stock with respect to which the
holder thereof shall not, as of the Election Deadline, have made such an
election by submission to the Exchange Agent of an effective, properly completed
Election Form shall be deemed to be No-Election Shares. Any SHS Dissenting
Shares shall be deemed to be Cash Election Shares, and with respect to such
shares the holders thereof shall in no event be classified as Reallocated Stock
Shares (as hereinafter defined).
ESB shall make available up to two separate Election Forms, or such
additional Election Forms as ESB may permit, to all persons who become holders
(or beneficial owners) of SHS Common Stock between the Election Form Record Date
and close of business on the business day prior to the Election Deadline. ESB
shall provide to the Exchange Agent all information reasonably necessary for it
to perform as specified herein.
No later than seven business days following the Effective Time, ESB shall
cause the Exchange Agent to mail or make available to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented issued and outstanding shares of SHS Common Stock (i) a notice and
letter of transmittal (which shall specify that delivery shall be effected and
risk of loss and title to the certificates theretofore representing shares of
SHS Common Stock shall pass only upon proper delivery of such certificates to
the Exchange Agent) advising such holder of the effectiveness of the Merger and
the procedure for surrendering to the Exchange Agent such certificate or
certificates which immediately prior to the Effective Time represented issued
and
3
4
outstanding shares of SHS Common Stock in exchange for the consideration set
forth in Section 1.03(c) hereof deliverable pursuant to this Agreement.
(b) The term "Election Deadline" shall mean 5:00 p.m., Eastern Time,
on the 20th day following but not including the date of mailing of the Election
Form or such other date as ESB and SHS shall mutually agree upon.
(c) Any election to receive ESB Common Stock or cash shall have been
properly made only if the Exchange Agent shall have actually received a properly
completed Election Form by the Election Deadline. Any Election Form may be
revoked or changed by the person submitting such Election Form to the Exchange
Agent by written notice to the Exchange Agent only if such notice is actually
received by the Exchange Agent at or prior to the Election Deadline. The
Exchange Agent shall have reasonable discretion to determine when any election,
modification or revocation is received and whether any such election,
modification or revocation has been properly made.
(d) Prior to the Effective Time, the Exchange Agent shall effect the
allocation among holders of SHS Common Stock of rights to receive ESB Common
Stock or cash in the Merger in accordance with the Election Forms as follows:
(i) If the number of Cash Election Shares times the Per Share
Cash Consideration is less than the Aggregate Cash Consideration, then:
(1) all Cash Election Shares (subject to Section 1.08
with respect to SHS Dissenting Shares) will be converted into the
right to receive cash,
(2) the Exchange Agent will select first from among the
holders of No-Election Shares and then (if necessary) will
allocate among the holders of Stock Election Shares (by the method
of allocation described below), a sufficient number of Stock
Election Shares ("Reallocated Cash Shares") such that the sum of
the number of Cash Election Shares plus the number of Reallocated
Cash Shares times the Per Share Cash Consideration equals the
Aggregate Cash Consideration, and all Reallocated Cash Shares will
be converted into the right to receive cash, and
(3) the No-Election Shares and Stock Election Shares
which are not Reallocated Cash Shares will be converted into the
right to receive ESB Common Stock.
(ii) If the number of Cash Election Shares times the Per Share
Cash Consideration is greater than the Aggregate Cash Consideration,
then:
(1) all Stock Election Shares and all No-Election Shares
will be converted into the right to receive ESB Common Stock,
4
5
(2) the Exchange Agent will allocate among the holders
of Cash Election Shares (by the method of allocation described
below), a sufficient number of Cash Election Shares (excluding any
SHS Dissenting Shares) ("Reallocated Stock Shares") such that the
number of remaining Cash Election Shares (including SHS Dissenting
Shares) times the Per Share Cash Consideration equals the
Aggregate Cash Consideration, and all Reallocated Stock Shares
shall be converted into the right to receive ESB Common Stock, and
(3) the Cash Election Shares (subject to Section 1.08
with respect to SHS Dissenting Shares) which are not Reallocated
Stock Shares will be converted into the right to receive cash.
(iii) If the number of Cash Election Shares (including SHS
Dissenting Shares) times the Per Share Cash Consideration is equal to the
Aggregate Cash Consideration, then subparagraphs (d)(i) and (ii) above
shall not apply and all No-Election Shares and all Stock Election Shares
will be converted into the right to receive ESB Common Stock.
(e) In the event that the Exchange Agent is required pursuant to
Section 1.04(d)(i)(2) to designate from among all Stock Election Shares the
Reallocated Cash Shares to receive cash, each holder of Stock Election Shares
shall be allocated a pro rata portion of the remainder of the total Reallocated
Cash Shares less the number of No Election Shares which are Reallocated Cash
Shares. In the event the Exchange Agent is required pursuant to Section
1.04(d)(ii)(2) to designate from among all holders of Cash Election Shares the
Reallocated Stock Shares to receive ESB Common Stock, each holder of Cash
Election Shares shall be allocated a pro rata portion of the total Reallocated
Stock Shares.
(f) At the Effective Time, ESB shall issue to the Exchange Agent the
number of shares of ESB Common Stock issuable and the amount of cash payable in
the Merger (which shall be held by the Exchange Agent in trust for the holders
of SHS Common Stock and invested only in deposit accounts of a Federal Deposit
Insurance Corporation ("FDIC") insured institution, direct obligations of the
U.S. Government or obligations issued or guaranteed by an agency thereof which
carry the full faith and credit of the United States). No later than ten (10)
days after receipt of a properly completed letter of transmittal, the Exchange
Agent shall distribute ESB 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 ESB Common Stock held by it from time to time
hereunder, except that it shall receive and hold all dividends or other
distributions paid or distributed with respect to such shares for the account of
the persons entitled thereto.
(g) After the completion of the foregoing allocation, each holder of
an outstanding certificate or certificates which prior thereto represented
shares of SHS Common Stock who surrenders such certificate or certificates to
the Exchange Agent will, upon acceptance thereof by the Exchange Agent, be
entitled to a certificate or certificates representing the number of full shares
of ESB Common Stock or the amount of cash into which the aggregate number of
shares of SHS
5
6
Common Stock previously represented by such certificate or certificates
surrendered shall have been converted pursuant to this Agreement and, if such
holder's shares of SHS Common Stock have been converted into ESB Common Stock,
any other distribution theretofore paid with respect to ESB Common Stock
issuable in the Merger, in each case without interest. 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 normal exchange practices. Each outstanding
certificate which prior to the Effective Time represented SHS 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 of the number
of shares of ESB Common Stock or the right to receive the amount of cash into
which such SHS Common Stock shall have been converted. After the Effective Time,
there shall be no further transfer on the records of SHS of certificates
representing shares of SHS Common Stock and if such certificates are presented
to SHS for transfer, they shall be canceled against delivery of certificates for
ESB Common Stock or cash as hereinabove provided. No dividends which have been
declared will be remitted to any person entitled to receive shares of ESB Common
Stock under this Section 1.04 until such person surrenders the certificate or
certificates representing SHS Common Stock, at which time such dividends shall
be remitted to such person, without interest.
(h) ESB shall not be obligated to deliver cash and/or a certificate or
certificates representing shares of ESB Common Stock to which a holder of SHS
Common Stock would otherwise be entitled as a result of the Merger until such
holder surrenders the certificate or certificates representing the shares of SHS
Common Stock for exchange as provided in this Section 1.04, or, in default
thereof, an appropriate affidavit of loss and indemnity agreement and/or a bond
as may be required in each case by ESB. If any certificates evidencing shares of
ESB Common Stock are to be issued in a name other than that in which the
certificate evidencing SHS 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 or accompanied by an executed form of
assignment separate from the certificate 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 ESB 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.
(i) Any portion of the shares of ESB Common Stock and cash delivered
to the Exchange Agent by ESB pursuant to Section 1.04(f) that remains unclaimed
by the shareholders of SHS for six months after the Effective Time (as well as
any proceeds from any investment thereof) shall be delivered by the Exchange
Agent to ESB. Any shareholders of SHS who have not theretofore complied with
Section 1.04(g) shall thereafter look only to ESB for the consideration
deliverable in respect of each share of SHS Common Stock such shareholder holds
as determined pursuant to this Agreement without any interest thereon. If
outstanding certificates for shares of SHS Common Stock are not surrendered or
the payment for them is not claimed prior to the date on which such shares of
ESB Common Stock or cash would otherwise escheat to or become the property of
any
6
7
governmental unit or agency, the unclaimed items shall, to the extent permitted
by abandoned property and any other applicable law, become the property of ESB
(and to the extent not in its possession shall be delivered to it), free and
clear of all claims or interest of any person previously entitled to such
property. Neither the Exchange Agent nor any party to this Agreement shall be
liable to any holder of stock represented by any certificate for any
consideration paid to a public official pursuant to applicable abandoned
property, escheat or similar laws. ESB and the Exchange Agent shall be entitled
to rely upon the stock transfer books of SHS to establish the identity of those
persons entitled to receive 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, ESB 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.
1.05 NO FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, neither certificates nor scrip for fractional shares of ESB Common
Stock shall be issued in the Merger. Each holder who otherwise would have been
entitled to a fraction of a share of ESB Common Stock shall receive in lieu
thereof cash (without interest) in an amount determined by multiplying the
fractional share interest to which such holder would otherwise be entitled by
$13.69. No such holder shall be entitled to dividends, voting rights or any
other rights in respect of any fractional share.
1.06 STOCK OPTIONS.
(a) Immediately before the Effective Time, each option with respect to
SHS Common Stock (a "SHS Stock Option") that has been issued pursuant to SHS's
1998 Stock Option Plan and is outstanding and exercisable at the Effective Time
shall be canceled and converted into the right to receive from ESB, subject to
required withholding taxes, if any, at the election of the optionholder (x) cash
in an amount equal to the difference between the exercise price of such SHS
Stock Option and the Per Share Cash Consideration for each share of SHS Common
Stock subject to such SHS Stock Option or (y) an option to purchase shares of
ESB Common Stock in an amount and at an exercise price determined as provided
below (and otherwise subject to the terms of SHS's 1998 Stock Option Plan):
(1) the number of shares of ESB Common Stock to be subject to
the new option shall be equal to the product of the number of shares of
SHS Common Stock subject to the original option and the Exchange Ratio,
provided that any fractional shares of ESB Common Stock resulting from
such multiplication shall be rounded down to the nearest share; and
(2) the exercise price per share of ESB Common Stock under the
new option shall be equal to the exercise price per share of SHS Common
Stock under the original option divided by the Exchange Ratio, provided
that such exercise price shall be rounded up to the nearest cent.
7
8
The duration and other terms of the new option shall be the same as the original
option, except that all references to SHS shall be deemed to be references to
ESB.
(b) Within thirty (30) business days after the Effective Time, ESB
shall file with the Securities and Exchange Commission (the "SEC") a
registration statement on an appropriate form under the Securities Act of 1933,
as amended (the "Securities Act") with respect to the shares of ESB Common Stock
subject to options to acquire ESB Common Stock issued pursuant to Section
1.06(a) hereof, and shall use its reasonable best efforts to maintain the
current status of the prospectus contained therein, as well as comply with
applicable state securities or "blue sky" laws, for so long as such options
remain outstanding.
1.07 WITHHOLDING RIGHTS. ESB (through the Exchange Agent, if
applicable) shall be entitled to deduct and withhold from any amounts otherwise
payable pursuant to this Agreement to any holder of shares of SHS Common Stock
such amounts as ESB is required under the Internal Revenue Code of 1986, as
amended ("Code") or any provision of state, local or foreign tax law to deduct
and withhold with respect to the making of such payment. Any amounts so withheld
shall be treated for all purposes of this Agreement as having been paid to the
holder of SHS Common Stock in respect of which such deduction and withholding
was made by ESB.
1.08 DISSENTING SHARES. Each outstanding share of SHS Common Stock the
holder of which has perfected his right to dissent under the PBCL and has not
effectively withdrawn or lost such right as of the Effective Time shall not be
converted into or represent a right to receive shares of ESB Common Stock or
cash hereunder, and the holder thereof shall be entitled only to such rights as
are granted by the PBCL. SHS shall give ESB prompt notice upon receipt by SHS of
any such written demands for payment of the fair value of such shares of SHS
Common Stock and of withdrawals of such demands and any other instruments
provided pursuant to the PBCL (any shareholder duly making such demand being
hereinafter called a "Dissenting Shareholder"). Any payments made in respect of
SHS Dissenting Shares shall be made by ESB. If any Dissenting Shareholder shall
effectively withdraw or lose (through failure to perfect or otherwise) his right
to such payment at or prior to the Effective Time, such holder's shares of SHS
Common Stock shall be converted into a right to receive cash or ESB Common Stock
in accordance with the applicable provisions of this Agreement. If such holder
shall effectively withdraw or lose (through failure to perfect or otherwise) his
right to such payment after the Effective Time, each share of SHS Common Stock
of such holder shall be converted on a share by share basis into either the
right to receive cash or ESB Common Stock as ESB shall determine.
1.09 ANTI-DILUTION PROVISIONS. The Exchange Ratio and the Per Share
Stock Consideration shall be subject to appropriate adjustments in the event
that, subsequent to the date of this Agreement but prior to the Effective Time,
the outstanding shares of ESB Common Stock shall have been increased, decreased,
changed into or exchanged for a different number or kind of shares or securities
through reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split or other like changes in ESB's capitalization.
Nothing contained herein shall be deemed to permit any action which may be
proscribed by this Agreement.
8
9
1.10 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 rights, title
or interest in, to or under any of the rights, properties or assets of SHS
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, SHS 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 SHS
or otherwise to take any and all such action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SHS
References to "SHS Disclosure Schedules" shall mean all of the disclosure
schedules required by this Article II, dated as of the date hereof and
referenced to the specific sections and subsections of Article II of this
Agreement, which have been delivered by SHS to ESB. SHS hereby represents and
warrants to ESB as follows as of the date hereof:
2.01. CORPORATE ORGANIZATION.
(a) SHS is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania. SHS has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted and is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which the nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed, qualified
or in good standing would not have a material adverse effect on the business,
operations, assets or financial condition of SHS and Spring Hill Savings Bank,
F.S.B. ("Spring Hill Bank") taken as a whole. SHS is registered as a thrift
holding company under the Home Owners' Loan Act, as amended ("HOLA"). SHS
Disclosure Schedule 2.01(a) sets forth true and complete copies of the Articles
of Incorporation or other governing instrument and Bylaws of SHS and Spring Hill
Bank as in effect on the date hereof.
(b) The only direct or indirect subsidiary of SHS is Spring Hill Bank.
Spring Hill Bank (i) is duly organized and is validly existing under the laws of
its jurisdiction of incorporation, (ii) has the corporate power and authority to
own or lease all of its properties and assets and to conduct its business as it
is now being conducted, and (iii) is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which the nature of the business
conducted by it or the character
9
10
or location of the properties and assets owned or leased by it makes such
licensing or qualification necessary, except where the failure to be so
licensed, qualified or in good standing would not have a material adverse effect
on the business, operations, assets or financial condition of SHS and Spring
Hill Bank taken as a whole. Each of SHS and Spring Hill Bank has satisfied in
all material respects all commitments, financial or otherwise, as may have been
agreed upon with their appropriate thrift regulatory agencies. Except as set
forth in SHS Disclosure Schedule 2.01(b) and other than Spring Hill Bank, SHS
does not own or control, directly or indirectly, greater than a 5% equity
interest in any corporation, company, association, partnership, joint venture or
other entity.
2.02. CAPITALIZATION. The authorized capital stock of SHS consists of
10,000,000 shares of SHS Common Stock, of which 767,962 are issued and
outstanding and 51,988 shares are held in treasury as of the date hereof, and
5,000,000 shares of preferred stock, of which no shares are issued and
outstanding as of the date hereof. All issued and outstanding shares of capital
stock of SHS, and all issued and outstanding shares of capital stock of Spring
Hill Bank, have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights. All of the outstanding shares of
capital stock of Spring Hill Bank are owned by SHS free and clear of any liens,
encumbrances, charges, restrictions or rights of third parties of any kind
whatsoever, and, except for options granted to ESB pursuant to the Option
Agreement and for options to purchase 79,045 shares of SHS Common Stock which
have been granted pursuant to SHS's 1998 Stock Option Plan, and which are
outstanding, none of SHS or Spring Hill Bank has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the transfer, purchase or issuance of any shares of
capital stock of SHS or Spring Hill Bank or any securities representing the
right to purchase or otherwise receive any shares of such capital stock or any
securities convertible into or representing the right to purchase or subscribe
for any such stock.
2.03. AUTHORITY; NO VIOLATION.
(a) Subject to the approval of this Agreement and the Agreement of
Merger and the transactions contemplated hereby and thereby by the stockholders
of SHS, SHS has full corporate power and authority to execute and deliver this
Agreement and the Agreement of Merger and to consummate the transactions
contemplated hereby and thereby in accordance with the terms hereof and thereof.
The execution and delivery of this Agreement and the Agreement of Merger and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly approved by the Board of Directors of SHS. Except for the approval
of SHS's stockholders of this Agreement and the Agreement of Merger, no other
corporate proceedings on the part of SHS are necessary to consummate the
transactions so contemplated. This Agreement and the Agreement of Merger have
been duly and validly executed and delivered by SHS and constitute valid and
binding obligations of SHS, enforceable against it in accordance with and
subject to their terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, and except that the availability of equitable remedies (including,
without limitation, specific performance) is within the discretion of the
appropriate court.
10
11
(b) None of the execution and delivery of this Agreement and the
Agreement of Merger by SHS, nor the consummation by SHS of the transactions
contemplated hereby and thereby in accordance with the terms hereof and thereof,
or compliance by SHS with any of the terms or provisions hereof or thereof, will
(i) violate any provision of the Articles of Incorporation or other governing
instrument or Bylaws of SHS or Spring Hill Bank, (ii) assuming that the consents
and approvals set forth below are duly obtained, violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to SHS or Spring Hill Bank or any of their respective properties or
assets, or (iii) except as disclosed in SHS Disclosure Schedule 2.03(b),
violate, conflict with, result in a breach of any provisions of, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of, accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or other encumbrance upon any of the respective properties or
assets of SHS or Spring Hill Bank under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which SHS or Spring Hill
Bank is a party, or by which any of their respective properties or assets may be
bound or affected, except, with respect to (ii) and (iii) above, such as
individually or in the aggregate will not have a material adverse effect on the
business, operations, assets or financial condition of SHS and Spring Hill Bank
taken as a whole and which will not prevent or delay the consummation of the
transactions contemplated hereby. Except as set forth in SHS Disclosure Schedule
2.03(b) and for consents and approvals of or filings or registrations with or
notices to the Securities and Exchange Commission ("Commission"), the Secretary
of State of the Commonwealth of Pennsylvania, the Office of Thrift Supervision
("OTS") and the stockholders of SHS, no consents or approvals of or filings or
registrations with or notices to any federal, state, municipal or other
governmental or regulatory commission, board, agency, or non-governmental third
party are required on behalf of SHS in connection with (a) the execution and
delivery of this Agreement and the Agreement of Merger by SHS and (b) the
consummation by SHS of the Merger and the other transactions contemplated hereby
and by the Agreement of Merger.
2.04. FINANCIAL STATEMENTS.
(a) SHS has previously delivered to ESB copies of the consolidated
statements of financial condition of SHS as of December 31, 1998, 1997 and 1996
and the related consolidated statements of income, changes in stockholders'
equity and cash flows for the years ended December 31, 1998, 1997 and 1996 in
each case accompanied by the audit reports of S.R. Snodgross, A.C., independent
public accountants, as well as the unaudited consolidated statement of financial
condition of SHS as of March 31, 1999 and the related unaudited consolidated
statement of income, changes in stockholders' equity and cash flows for the
three months ended March 31, 1999 and 1998. The consolidated statements of
financial condition of SHS referred to herein (including the related notes,
where applicable), as well as the consolidated financial statements contained in
the reports of SHS to be delivered by SHS pursuant to Section 4.04 hereof,
fairly present or will fairly present, as the case
11
12
may be, the consolidated financial condition of SHS as of the respective dates
set forth therein, and the related consolidated statements of income, changes in
stockholders' equity and cash flows (including the related notes, where
applicable) fairly present or will fairly present, as the case may be, the
results of the consolidated operations, changes in stockholders' equity and cash
flows of SHS for the respective periods or as of the respective dates set forth
therein (it being understood that SHS's interim financial statements are not
audited and are not prepared with related notes but reflect all adjustments
which are, in the opinion of SHS, necessary for a fair presentation of such
financial statements).
(b) Each of the financial statements referred to in this Section 2.04
(including the related notes, where applicable) has been or will be, as the case
may be, prepared in accordance with generally accepted accounting principles
consistently applied during the periods involved. The books and records of SHS
and Spring Hill Bank are being maintained in material compliance with applicable
legal and accounting requirements and reflect only actual transactions.
(c) Except to the extent reflected, disclosed or reserved against in
the consolidated financial statements referred to in the first sentence of
Section 2.04(a) or the notes thereto or liabilities incurred since March 31,
1999 in the ordinary course of business and consistent with past practice,
neither SHS nor Spring Hill Bank has any obligation or liability, whether
absolute, accrued, contingent or otherwise, material to the business,
operations, assets or financial condition of SHS and Spring Hill Bank taken as a
whole.
2.05. ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) There has not been any material adverse change in the business,
operations, assets or financial condition of SHS and Spring Hill Bank taken as a
whole since March 31, 1999, other than: (i) any such effect attributable to or
resulting from any change in banking or similar laws, rules or regulations of
general applicability to banks, thrift institutions or their holding companies
or interpretations thereof by courts or governmental authorities; (ii) changes
in generally accepted accounting principles that are generally applicable to the
banking or savings industries; (iii) expenses incurred in connection with the
transactions contemplated hereby; (iv) 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
(v) changes attributable to or resulting from changes in general economic
conditions, including changes in the prevailing level of interest rates. To the
best knowledge of SHS, no fact or condition exists which SHS believes will cause
such a material adverse change in the future.
(b) Neither SHS nor Spring Hill Bank has taken or permitted any of the
actions set forth in Section 4.02 hereof between March 31, 1999 and the date
hereof.
2.06. LEGAL PROCEEDINGS. Except as disclosed in SHS Disclosure Schedule
2.06, neither SHS or Spring Hill Bank is a party to any, and there are no
pending or, to the best knowledge of SHS, threatened legal, administrative,
arbitration or other proceedings, claims, actions or governmental investigations
of any nature against SHS or Spring Hill Bank, except such proceedings, claims,
actions or governmental investigations which in the good faith judgment of SHS
will not have a material adverse effect on the business, operations, assets or
financial condition
12
13
of SHS and the Spring Hill Bank taken as a whole. Neither SHS or Spring Hill
Bank is a party to any order, judgment or decree which materially adversely
affects the business, operations, assets or financial condition of SHS and
Spring Hill Bank taken as a whole.
2.07. TAXES AND TAX RETURNS.
(a) Each of SHS and Spring Hill Bank, or the affiliated, combined or
unitary group (within the meaning of applicable federal income tax law) of which
any such corporation is or was a member, as the case may be (individually an
"Affiliate" and collectively, "Affiliates"), has duly filed (and until the
Effective Time will so file) all returns, declarations, reports, information
returns and statements ("Returns") required to be filed or sent by or with
respect to them in respect of any Taxes (as hereinafter defined), and has duly
paid (and until the Effective Time will so pay) all Taxes due and payable other
than Taxes or other charges which (i) are being contested in good faith (and
disclosed in writing to ESB) and (ii) have not finally been determined. SHS and
its Affiliates have established (and until the Effective Time will establish) on
their books and records reserves that are adequate for the payment of all Taxes
not yet due and payable, whether or not disputed, accrued or applicable. Except
as set forth in SHS Disclosure Schedule 2.07(a), (i) the federal income tax
returns of SHS and its Affiliates have been examined by the Internal Revenue
Service ("IRS") (or are closed to examination due to the expiration of the
applicable statute of limitations), and (ii) the Pennsylvania income tax returns
of SHS and its Affiliates have been examined by applicable authorities (or are
closed to examination due to the expiration of the statute of limitations), and
in the case of both (i) and (ii) no deficiencies were asserted as a result of
such examinations which have not been resolved and paid in full. There are no
audits or other administrative or court proceedings presently pending nor any
other disputes pending, or claims asserted for, Taxes or assessments upon SHS or
any of its Affiliates, nor has SHS or any of its Affiliates given any currently
outstanding waivers or comparable consents regarding the application of the
statute of limitations with respect to any Taxes or Returns.
(b) Except as set forth in SHS Disclosure Schedule 2.07(b), none of
SHS or any of its Affiliates (i) has requested any extension of time within
which to file any Return which Return has not since been filed, (ii) is a party
to any agreement providing for the allocation or sharing of Taxes, (iii) 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 SHS or
any Affiliate (nor does SHS have any knowledge that the IRS has proposed any
such adjustment or change of accounting method), or (iv) has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply.
(c) For purposes of this Agreement, "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including, without limitation, all
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment (including
withholding, payroll and employment taxes required to be withheld with respect
to income paid to employees), excise, estimated, severance, stamp, occupation,
property or other taxes, customs duties, fees, assessments or charges of any
kind whatsoever, together with any interest and
13
14
any penalties, additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign) upon SHS or any of its Affiliates.
2.08. EMPLOYEE BENEFIT PLANS.
(a) Each employee benefit plan or arrangement of SHS or Spring Hill
Bank which is an "employee benefit plan" within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), is
listed in SHS Disclosure Schedule 2.08(a) ("SHS Plans"). SHS has previously
furnished to ESB true and complete copies of each of the SHS Plans together with
(i) the most recent actuarial and financial reports prepared with respect to any
qualified SHS Plans, (ii) the most recent annual reports filed with any
government agency, and (iii) all rulings and determination letters and any open
requests for rulings or letters that pertain to any qualified SHS Plans.
(b) Each SHS Plan has been operated in compliance in all material
respects with the applicable provisions of ERISA, the Code, all regulations,
rulings and announcements promulgated or issued thereunder, and all other
applicable governmental laws and regulations.
(c) Neither SHS nor Spring Hill Bank 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) The present value of all accrued benefits under each of the SHS
Plans subject to Title IV of ERISA did not, as of the latest valuation date of
each such Plan, exceed the then current value of the assets of such plans
allocable to such accrued benefits, based upon the actuarial and accounting
assumptions currently utilized for such SHS Plans.
(e) Neither SHS nor Spring Hill Bank, nor, to the best knowledge of
SHS, any trustee, fiduciary or administrator of an SHS Plan or any trust created
thereunder, has engaged in a "prohibited transaction," as such term is defined
in Section 4975 of the Code, which could subject SHS or Spring Hill Bank, or, to
the best knowledge of SHS, any trustee, fiduciary or administrator thereof, to
the tax or penalty on prohibited transactions imposed by said Section 4975.
(f) Except as disclosed on SHS Disclosure Schedule 2.08(f), no SHS
Plan or any trust created thereunder has been terminated, nor have there been
any "reportable events" with respect to any SHS Plan, as that term is defined in
Section 4043(b) of ERISA.
(g) No SHS Plan or any trust created thereunder has incurred any
"accumulated funding deficiency," as such term is defined in Section 302 of
ERISA.
(h) Each of the SHS Plans which is intended to be a qualified plan
within the meaning of Section 401(a) of the Code has been determined by the IRS
to be so qualified, and SHS is not aware of any fact or circumstance which would
adversely affect the qualified status of any such Plan.
14
15
2.09. SECURITIES DOCUMENTS AND REGULATORY REPORTS.
(a) SHS has previously delivered or made available to ESB a complete
copy of each final registration statement, prospectus, annual, quarterly or
current report and definitive proxy statement or other communication (other than
general advertising materials) filed pursuant to the Securities Act of 1933, as
amended ("1933 Act"), or the Securities Exchange Act of 1934, as amended ("1934
Act"), or mailed by SHS to its stockholders as a class since January 1, 1997,
and each such final registration statement, prospectus, annual, quarterly or
current report and definitive proxy statement or other communication, as of its
date, complied in all material respects with all applicable statutes, rules and
regulations 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 made 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.
(b) SHS and Spring Hill Bank has duly filed with the OTS and the FDIC
in correct form the monthly, quarterly and annual reports required to be filed
under applicable laws and regulations, and SHS has delivered or made available
to ESB accurate and complete copies of such reports. SHS Disclosure Schedule
2.09(b) lists all examinations of SHS or Spring Hill Bank conducted by the
applicable thrift regulatory authorities since January 1, 1996 and the dates of
any responses thereto submitted by SHS. In connection with the most recent
examinations of SHS or Spring Hill Bank by the applicable thrift regulatory
authorities, neither SHS nor Spring Hill Bank was required to correct or change
any action, procedure or proceeding which SHS or Spring Hill Bank believes has
not been now corrected or changed as required.
2.10. SHS INFORMATION. None of the information relating to SHS and
Spring Hill Bank to be provided by SHS or Spring Hill Bank for use in (i) the
Registration Statement on Form S-4 to be filed by ESB in connection with the
issuance of shares of ESB Common Stock pursuant to the Merger, as amended or
supplemented (or on any successor or other appropriate form) ("Form S-4"), will,
at the time the Form S-4 becomes effective, 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/prospectus contained in the Form S-4,
as amended or supplemented, and to be delivered to stockholders of SHS in
connection with the solicitation of their approval of this Agreement, the
Agreement of Merger and the transactions contemplated hereby and thereby ("Proxy
Statement/Prospectus"), as of the date(s) such Proxy Statement/Prospectus is
mailed to stockholders of SHS and up to and including the date(s) of the meeting
of stockholders to which such Proxy Statement/Prospectus 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.
15
16
2.11. COMPLIANCE WITH APPLICABLE LAW.
(a) Each of SHS and Spring Hill Bank 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 have a material adverse effect on the business, operations, assets
or financial condition of SHS and Spring Hill Bank taken as a whole; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect; and to the best knowledge of SHS and Spring Hill Bank, no
suspension or cancellation of any of the same is threatened.
(b) Neither SHS nor Spring Hill Bank is in violation of its respective
Articles of Incorporation or other governing instrument 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, securities, municipal securities,
safety, health, 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 have a material adverse effect on the business,
operations, assets or financial condition of SHS and Spring Hill Bank taken as a
whole; and neither SHS nor Spring Hill Bank has received any notice or
communication from any federal, state or local governmental authority asserting
that SHS or Spring Hill Bank is in violation of any of the foregoing which could
have a material adverse effect on the business, operations, assets or financial
condition of SHS and Spring Hill Bank taken as a whole. Neither SHS nor Spring
Hill Bank 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 issued by
governmental authorities), and none of them has received any written
communication requesting that they enter into any of the foregoing.
2.12. DEPOSIT INSURANCE AND OTHER REGULATORY MATTERS.
(a) The deposit accounts of Spring Hill Bank are insured by the
Savings Association Insurance Fund administered by the FDIC to the maximum
extent permitted by the Federal Deposit Insurance Act, as amended ("FDIA"), and
Spring Hill Bank has paid all premiums and assessments required by the FDIA and
the regulations thereunder.
(b) Spring Hill Bank is a member in good standing of the Federal Home
Loan Bank ("FHLB") of Pittsburgh and owns the requisite amount of stock in the
FHLB of Pittsburgh.
(c) Spring Hill Bank is a "qualified thrift lender," as such term is
defined in the HOLA and the regulations thereunder.
16
17
(d) Spring Hill Bank has at all times qualified as a "domestic
building and loan association," as such term is defined in Section 7701(a)(19)
of the Code, for purposes of Section 593 of the Code.
2.13. CERTAIN CONTRACTS.
(a) Except as disclosed in SHS Disclosure Schedule 2.13(a), neither
SHS nor Spring Hill Bank 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 SHS or Spring Hill Bank or the guarantee
by SHS or Spring Hill Bank of any obligation, (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 or officer of
SHS or Spring Hill Bank, (iii) any contract, agreement or understanding with a
labor union, (iv) 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 SHS or Spring Hill Bank 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), (v) any agreement, arrangement or
understanding to which SHS or Spring Hill Bank is a party or by which any of the
same is bound which limits the freedom of SHS or Spring Hill Bank 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 SHS's
Annual Report on Form 10-K (or Form 10-KSB) under the 1934 Act and which has not
been so filed, or (viii) any other agreement, arrangement or understanding to
which SHS or Spring Hill Bank is a party and which is material to the business,
operations, assets or financial condition of SHS and Spring Hill Bank taken as a
whole (excluding loan agreements or agreements relating to deposit accounts), in
each of the foregoing cases whether written or oral.
(b) Neither SHS nor Spring Hill Bank is in default or in
non-compliance, which default or non-compliance would have a material adverse
effect on the business, operations, assets or financial condition of SHS and
Spring Hill Bank taken as a whole or the transactions contemplated hereby, 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.
2.14. PROPERTIES AND INSURANCE.
(a) All real and personal property owned by SHS or Spring Hill Bank or
presently used by any of them in their respective business is in an adequate
condition (ordinary wear and tear
17
18
excepted) and is sufficient to carry on the business of SHS and Spring Hill Bank
in the ordinary course of business consistent with their past practices. SHS and
Spring Hill Bank have good and, as to owned real property, marketable title to
all material assets and properties, whether real or personal, tangible or
intangible, reflected in SHS's consolidated statement of financial condition as
of March 31, 1999, or owned and acquired subsequent thereto (except to the
extent that such assets and properties have been disposed of for fair value in
the ordinary course of business since March 31, 1999), subject to no
encumbrances, liens, mortgages, security interests or pledges, except (i) those
items that secure liabilities that are reflected in said consolidated statement
of financial condition or the notes thereto or have been incurred in the
ordinary course of business after the date of such consolidated statement of
financial condition, (ii) statutory liens for amounts not yet delinquent or
which are being contested in good faith, (iii) such encumbrances, liens,
mortgages, security interests, pledges and title imperfections that are not in
the aggregate material to the business, operations, assets or financial
condition of SHS and Spring Hill Bank taken as a whole, and (iv) with respect to
owned real property, title imperfections noted in title reports prior to the
date hereof. SHS and Spring Hill Bank as lessees have the right under valid and
subsisting leases to occupy, use, possess and control all property leased by
them in all material respects as presently occupied, used, possessed and
controlled by SHS and Spring Hill Bank and the consummation of the transactions
contemplated hereby and by the Agreement of Merger will not affect any such
right. SHS Disclosure Schedule 2.14(a) sets forth an accurate listing of each
lease pursuant to which SHS or Spring Hill Bank acts as lessor or lessee,
including the expiration date and the terms of any renewal options which relate
to the same.
(b) The business operations and all insurable properties and assets of
SHS and Spring Hill Bank are insured for their benefit against all risks which,
in the reasonable judgment of the management of SHS, should be insured against,
in each case under valid, binding and enforceable policies or bonds issued by
insurers of recognized responsibility, in such amounts with such deductibles and
against such risks and losses as are in the opinion of the management of SHS
adequate for the business engaged in by SHS and Spring Hill Bank. As of the date
hereof, neither SHS nor Spring Hill Bank has received any notice of cancellation
or notice of a material amendment of any such insurance policy or bond or is in
default under such policy or bond, no coverage thereunder is being disputed and
all material claims thereunder have been filed in a timely fashion.
2.15. ENVIRONMENTAL MATTERS. For purposes of this Agreement, the
following terms shall have the indicated meaning:
"Environmental Law" 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 Hazardous Substances. The term
Environmental Law includes without limitation (1) the Comprehensive
Environmental Response,
18
19
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
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 11001, 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 Hazardous Substance.
"Hazardous Substance" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law, whether by type or by
quantity, including any regulated material containing any such substance as a
component. Hazardous Substances include without limitation petroleum (including
crude oil or any fraction thereof), asbestos, radioactive material, and
polychlorinated biphenyls.
"Loan Portfolio Properties and Other Properties Owned" means those
properties owned, leased or operated by SHS or Spring Hill Bank or those
properties which serve as collateral for loans owned by SHS or Spring Hill Bank.
(a) To the best knowledge of SHS and Spring Hill Bank, neither SHS nor
Spring Hill Bank has been or is in violation of or liable under any
Environmental Law, except any such violations or liabilities which would not
singly or in the aggregate have a material adverse effect on the business,
operations, assets or financial condition of SHS and Spring Hill Bank taken as a
whole.
(b) To the best knowledge of SHS and Spring Hill Bank, none of the
Loan Portfolio Properties and Other Properties Owned by SHS or Spring Hill Bank
has been or is in violation of or liable under any Environmental Law, except any
such violations or liabilities which singly or in the aggregate would not have a
material adverse effect on the business, operations, assets or financial
condition of SHS and the Spring Hill Bank taken as a whole.
(c) To the best knowledge of SHS and Spring Hill Bank, there are no
actions, suits, demands, notices, claims, investigations or proceedings pending
or threatened relating to the liability of the Loan Portfolio Properties and
Other Properties Owned by SHS or Spring Hill Bank under any Environmental Law,
including without limitation any notices, demand letters or requests for
information from any federal or state environmental agency relating to any such
liabilities under or violations of Environmental Law, except such which would
not have or result in a material adverse effect on the business, operations,
assets or financial condition of SHS and Spring Hill Bank taken as a whole.
2.16. ALLOWANCE FOR LOAN LOSSES AND REAL ESTATE OWNED. The allowance for
loan losses reflected on SHS's consolidated statements of financial condition
included in the consolidated
19
20
financial statements referred to in Section 2.04 hereof is, or will be in the
case of subsequently delivered financial statements, as the case may be, in the
opinion of SHS's management adequate in all material respects as of their
respective dates under the requirements of generally accepted accounting
principles to provide for reasonably anticipated losses on outstanding loans net
of recoveries. The real estate owned reflected on the consolidated statements of
financial condition included in the consolidated financial statements referred
to in Section 2.04 hereof is, or will be in the case of subsequently delivered
financial statements, as the case may be, carried at the lower of cost or fair
value, or the lower of cost or net realizable value, as required by generally
accepted accounting principles.
2.17. MINUTE BOOKS. Since January 1, 1996, the minute books of SHS and
Spring Hill Bank contain complete and accurate records of all meetings and other
corporate action held or taken by their respective Boards of Directors
(including committees of their respective Boards of Directors) and stockholders.
2.18. AFFILIATE TRANSACTIONS.
(a) Except as disclosed in SHS Disclosure Schedule 2.18(a) or in SHS's
proxy statements, and except as specifically contemplated by this Agreement,
since January 1, 1997, neither SHS nor Spring Hill Bank has engaged in or agreed
to engage in (whether in writing or orally) any transaction with any "affiliated
person" or "affiliate" of Spring Hill Bank, as such terms are defined in 12
C.F.R. Section 561.5 and 12 C.F.R. Section 563.41, respectively.
(b) SHS Disclosure Schedule 2.18(b) sets forth the name and number of
shares of SHS Common Stock owned as of the date hereof beneficially or of record
by any persons SHS considers to be affiliates of SHS ("SHS Affiliates") as that
term is defined for purposes of Rule 145 under the 1933 Act.
2.19. BROKER FEES. Except as set forth in SHS Disclosure Schedule 2.19,
none of SHS, Spring Hill Bank or any of the respective directors or officers of
such companies has employed any consultant, broker or finder or incurred any
liability for any consultant's, broker's or finder's fees or commissions in
connection with any of the transactions contemplated by this Agreement.
2.20. YEAR 2000 COMPLIANCE. All hardware, firmware, software and
computer systems owned, used or licensed by SHS and Spring Hill Bank, including
but not limited to system and application programs, files, data bases and
computer services, are Year 2000 Compliant (as defined below) and shall
continue to function in accordance with their intended purpose without material
error or material interruption during and after the Year 2000. For purposes of
this Agreement, "Year 2000 Compliant" means that the hardware, firmware,
software and computer systems (i) will correctly and accurately address,
produce, store, process and calculate data involving dates beginning with
January 1, 2000 and will not produce abnormally ending or incorrect results
involving such dates as used in any forward or regression dated based
functions; (ii) will provide that all "date"-related functionalities and data
fields include the indication, or provide for the interpretation, of
20
21
century and millennium, and will perform calculations which involve a four-digit
year; and (iii) will be interoperable with other Year 2000 Compliant hardware or
software owned, used or licensed by SHS and Spring Hill Bank which may deliver
records to, receive records from or otherwise interact with such hardware or
software in the course of processing records or data.
2.21. DISCLOSURES. No representation or warranty contained in Article II
of this Agreement, and no statement contained in the SHS Disclosure Schedules,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ESB
References to "ESB Disclosure Schedules" shall mean all of the disclosure
schedules required by this Article III, dated as of the date hereof and
referenced to the specific sections and subsections of Article III of this
Agreement, which have been delivered by ESB to SHS. ESB hereby represents and
warrants to SHS as follows as of the date hereof:
3.01. CORPORATE ORGANIZATION.
(a) ESB is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania. ESB has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted and is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which the nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed, qualified
or in good standing would not have a material adverse effect on the business,
operations, assets or financial condition of ESB and the ESB Subsidiaries (as
defined below) taken as a whole. ESB is registered as a thrift holding company
under the HOLA. ESB Disclosure Schedule 3.01(a) sets forth true and complete
copies of the Articles of Incorporation or other governing instrument and Bylaws
of ESB and the ESB Subsidiaries as in effect on the date hereof.
(b) The only direct or indirect subsidiaries of ESB are ESB Bank, FSB
("ESB Bank"), Amsco, Inc., PennFirst Financial Services, Inc., PennFirst Capital
Trust I, THF, Inc., ESB Bank Building Associates (a limited partnership),
XxXxxxxxx Place (a limited partnership), Madison Xxxxx (a limited partnership)
and Shady Park II Townhouse Associates (a limited partnership) (together the
"ESB Subsidiaries"). Each of the ESB Subsidiaries (i) is duly organized and
validly existing or in good standing under the laws of its respective
jurisdiction of incorporation, (ii) has the corporate power and authority to own
or lease all of its properties and assets and to conduct its business as it is
now being conducted, and (iii) is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which the nature of the business
conducted by it or the character or location of the properties and assets owned
or leased by it makes such licensing or qualification
21
22
necessary, except where the failure to be so licensed, qualified or in good
standing would not have a material adverse effect on the business, operations,
assets or financial condition of ESB and the ESB Subsidiaries taken as a whole.
Each of ESB and ESB Bank has satisfied in all material respects all commitments,
financial or otherwise, as may have been agreed upon with their appropriate
thrift regulatory agencies. Other than the ESB Subsidiaries, ESB does not own or
control, directly or indirectly, greater than a 5% equity interest in any
corporation, company, association, partnership, joint venture or other entity.
3.02. CAPITALIZATION. The authorized capital stock of ESB consists of
10,000,000 shares of ESB Common Stock, of which 6,337,755 are issued and
outstanding and 1,121,955 shares which are held in treasury as of the date
hereof, and 5,000,000 shares of preferred stock, par value $.01 per share, of
which no shares are issued and outstanding as of the date hereof. All issued and
outstanding shares of capital stock of ESB, and all issued and outstanding
shares of capital stock of each of the ESB Subsidiaries, have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights. All of the outstanding shares of capital stock of each of the
ESB Subsidiaries are owned by ESB free and clear of any liens, encumbrances,
charges, restrictions or rights of third parties of any kind whatsoever, and,
except for options to purchase 464,083 shares of ESB Common Stock which have
been granted pursuant to ESB's 1997 Stock Option Plan, 1992 Stock Incentive Plan
or Ellwood Federal Savings Bank's 1990 Stock Option Plan (or options granted by
ESB pursuant thereto after the date hereof), none of ESB or any of the ESB
Subsidiaries has or is bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
transfer, purchase or issuance of any shares of capital stock of ESB or any of
the ESB Subsidiaries or any securities representing the right to purchase or
otherwise receive any shares of such capital stock or any securities convertible
into or representing the right to purchase or subscribe for any such stock.
3.03. AUTHORITY; NO VIOLATION.
(a) ESB has full corporate power and authority to execute and deliver
this Agreement and the Agreement of Merger and to consummate the transactions
contemplated hereby and thereby in accordance with the terms hereof and thereof.
The execution and delivery of this Agreement and the Agreement of Merger and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly approved by the Board of Directors of ESB and no other corporate
proceedings on the part of ESB are necessary to consummate the transactions so
contemplated. This Agreement and the Agreement of Merger have been duly and
validly executed and delivered by ESB and constitute valid and binding
obligations of ESB, enforceable against it in accordance with and subject to
their terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, and except that the availability of equitable remedies (including,
without limitation, specific performance) is within the discretion of the
appropriate court.
(b) None of the execution and delivery of this Agreement and the
Agreement of Merger by ESB, nor the consummation by ESB of the transactions
contemplated hereby and thereby in
22
23
accordance with the terms hereof and thereof, or compliance by ESB with any of
the terms or provisions hereof or thereof, will (i) violate any provision of the
Articles of Incorporation or other governing instrument or Bylaws of ESB or any
of the ESB Subsidiaries, (ii) assuming that the consents and approvals set forth
below are duly obtained, violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to ESB or any of the ESB
Subsidiaries or any of their respective properties or assets, or (iii) violate,
conflict with, result in a breach of any provisions of, constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, result in the termination of, accelerate the performance
required by, or result in the creation of any lien, security interest, charge or
other encumbrance upon any of the respective properties or assets of ESB or any
of the ESB Subsidiaries under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which ESB or any of the ESB Subsidiaries is a
party, or by which any of their respective properties or assets may be bound or
affected, except, with respect to (ii) and (iii) above, such as individually or
in the aggregate will not have a material adverse effect on the business,
operations, assets or financial condition of ESB and the ESB Subsidiaries taken
as a whole and which will not prevent or delay the consummation of the
transactions contemplated hereby. Except for consents and approvals of or
filings or registrations with or notices to the Commission, the Secretary of
State of the Commonwealth of Pennsylvania and the OTS, no consents or approvals
of or filings or registrations with or notices to any federal, state, municipal
or other governmental or regulatory commission, board, agency or
non-governmental third party are required on behalf of ESB in connection with
(a) the execution and delivery of this Agreement and the Agreement of Merger by
ESB and (b) the consummation by ESB of the transactions contemplated hereby and
by the Agreement of Merger.
3.04. FINANCIAL STATEMENTS.
(a) ESB has previously delivered to SHS copies of the consolidated
statements of financial condition of ESB as of December 31, 1998, 1997 and 1996,
and the related consolidated statements of income, changes in stockholders'
equity and cash flows for the years ended December 31, 1998, 1997 and 1996 in
each case accompanied by the audit reports of KPMG LLP, independent public
accountants, as well as the unaudited consolidated statement of financial
condition of ESB as of March 31, 1999 and the related unaudited consolidated
statements of income, changes in stockholders' equity and cash flows for the
three months ended March 31, 1999 and 1998. The consolidated statements of
financial condition of ESB referred to herein (including the related notes,
where applicable), as well as the consolidated financial statements contained in
the reports of ESB to be delivered by ESB pursuant to Section 4.04 hereof,
fairly present or will fairly present, as the case may be, the consolidated
financial condition of ESB as of the respective dates set forth therein, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows (including the related notes, where applicable) fairly present or
will fairly present, as the case may be, the results of the consolidated
operations, changes in stockholders' equity and cash flows of ESB for the
respective periods or as of the respective dates set forth therein (it being
understood that ESB's interim financial statements are not audited and are not
prepared with related notes but reflect all adjustments which are, in the
opinion of ESB, necessary for a fair presentation of such financial statements).
23
24
(b) Each of the financial statements referred to in this Section 3.04
(including the related notes, where applicable) has been or will be, as the case
may be, prepared in accordance with generally accepted accounting principles
consistently applied during the periods involved. The books and records of ESB
and the ESB Subsidiaries are being maintained in material compliance with
applicable legal and accounting requirements and reflect only actual
transactions.
(c) Except to the extent reflected, disclosed or reserved against in
the consolidated financial statements referred to in the first sentence of this
Section 3.04 or the notes thereto or liabilities incurred since March 31, 1999
in the ordinary course of business and consistent with past practice, none of
ESB or any of the ESB Subsidiaries has any obligation or liability, whether
absolute, accrued, contingent or otherwise, material to the business,
operations, assets or financial condition of ESB and the ESB Subsidiaries taken
as a whole.
3.05. ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) There has not been any material adverse change in the business,
operations, assets or financial condition of ESB and the ESB Subsidiaries taken
as a whole since March 31, 1999, other than: (i) any such effect attributable to
or resulting from any change in banking or similar laws, rules or regulations of
general applicability to banks, thrift institutions or their holding companies
or interpretations thereof by courts or governmental authorities; (ii) changes
in generally accepted accounting principles that are generally applicable to the
banking or savings industries; (iii) expenses incurred in connection with the
transactions contemplated hereby; (iv) 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
(v) changes attributable to or resulting from changes in general economic
conditions, including changes in the prevailing level of interest rates. To the
best knowledge of ESB, no fact or condition exists which ESB believes will cause
such a material adverse change in the future.
(b) ESB has not taken or permitted any of the actions set forth in
Section 4.04 hereof between March 31, 1999 and the date hereof.
3.06. LEGAL PROCEEDINGS. None of ESB or any of the ESB Subsidiaries is a
party to any, and there are no pending or, to the best knowledge of ESB,
threatened legal, administrative, arbitration or other proceedings, claims,
actions or governmental investigations of any nature against ESB or any of the
ESB Subsidiaries, except such proceedings, claims actions or governmental
investigations which in the good faith judgment of ESB will not have a material
adverse effect on the business, operations, assets or financial condition of ESB
and the ESB Subsidiaries taken as a whole. None of ESB or any of the ESB
Subsidiaries is a party to any order, judgment or decree which materially
adversely affects the business, operations, assets or financial condition of ESB
and the ESB Subsidiaries taken as a whole.
24
25
3.07. TAXES AND TAX RETURNS.
(a) Each of ESB and the ESB Subsidiaries, or the affiliated, combined
or unitary group (within the meaning of applicable federal income tax law) of
which any such corporation is or was a member, as the case may be (individually
an "Affiliate" and collectively, "Affiliates"), has duly filed (and until the
Effective Time will so file) all returns, declarations, reports, information
returns and statements ("Returns") required to be filed or sent by or with
respect to them in respect of any Taxes, and has duly paid (and until the
Effective Time will so pay) all Taxes due and payable other than Taxes or other
charges which (i) are being contested in good faith (and disclosed in writing to
SHS and (ii) have not finally been determined. ESB and its Affiliates have
established (and until the Effective Time will establish) on their books and
records reserves that are adequate for the payment of all Taxes not yet due and
payable, whether or not disputed, accrued or applicable. Except as set forth in
ESB Disclosure Schedule 3.07(a), (i) the federal income tax returns of ESB and
its Affiliates have been examined by the IRS (or are closed to examination due
to the expiration of the applicable statute of limitations), and (ii) the
Pennsylvania income tax returns of ESB and its Affiliates have been examined by
applicable authorities (or are closed to examination due to the expiration of
the statute of limitations), and in the case of both (i) and (ii) no
deficiencies were asserted as a result of such examinations which have not been
resolved and paid in full. There are no audits or other administrative or court
proceedings presently pending nor any other disputes pending, or claims asserted
for, Taxes or assessments upon ESB or any of its Affiliates, nor has ESB or any
of its Affiliates given any currently outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Returns.
(b) Except as set forth in ESB Disclosure Schedule 3.07(b), none of
ESB or any of its Affiliates (i) has requested any extension of time within
which to file any Return which Return has not since been filed, (ii) is a party
to any agreement providing for the allocation or sharing of Taxes, (iii) 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 ESB or
any Affiliate (nor does ESB have any knowledge that the IRS has proposed any
such adjustment or change of accounting method), or (iv) has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply.
3.08. EMPLOYEE BENEFIT PLANS.
(a) Each employee benefit plan or arrangement of ESB or either of the
ESB Subsidiaries which is an "employee benefit plan" within the meaning of
Section 3(3) of the ERISA, is listed in ESB Disclosure Schedule 3.08(a) ("ESB
Plans"). ESB has previously furnished or made available to SHS true and complete
copies of each of the ESB Plans together with (i) the most recent actuarial and
financial reports prepared with respect to any qualified ESB Plans, (ii) the
most recent annual reports filed with any government agency, and (iii) all
rulings and determination letters and any open requests for rulings or letters
that pertain to any qualified ESB Plans.
25
26
(b) Each ESB Plan has been operated in compliance in all material
respects with the applicable provisions of ERISA, the Code, all regulations,
rulings and announcements promulgated or issued thereunder, and all other
applicable governmental laws and regulations.
(c) Neither ESB nor any ESB 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) The present value of all accrued benefits under each of the ESB
Plans subject to Title IV of ERISA did not, as of the latest valuation date of
each such Plan, exceed the then current value of the assets of such plans
allocable to such accrued benefits, based upon the actuarial and accounting
assumptions currently utilized for such ESB Plans.
(e) Neither ESB nor any of the ESB Subsidiaries, nor, to the best
knowledge of ESB, any trustee, fiduciary or administrator of a ESB Plan or any
trust created thereunder, has engaged in a "prohibited transaction," as such
term is defined in Section 4975 of the Code, which could subject ESB or any of
the ESB Subsidiaries, or, to the best knowledge of ESB, any trustee, fiduciary
or administrator thereof, to the tax or penalty on prohibited transactions
imposed by said Section 4975.
(f) No ESB Plan or any trust created thereunder has been terminated,
nor have there been any "reportable events" with respect to any ESB Plan, as
that term is defined in Section 4043(b) of ERISA.
(g) No ESB Plan or any trust created thereunder has incurred any
"accumulated funding deficiency," as such term is defined in Section 302 of
ERISA.
(h) Each of the ESB Plans which is intended to be a qualified plan
within the meaning of Section 401(a) of the Code has been determined by the IRS
to be so qualified, and ESB is not aware of any fact or circumstance which would
adversely affect the qualified status of any such Plan.
3.09. SECURITIES DOCUMENTS AND REGULATORY REPORTS.
(a) ESB has previously delivered or made available to SHS a complete
copy of each final registration statement, prospectus, annual, quarterly or
current report and definitive proxy statement or other communication (other than
general advertising materials) filed pursuant to the 1933 Act or the 1934 Act or
mailed by ESB to its stockholders as a class since January 1, 1997, and each
such final registration statement, prospectus, annual, quarterly or current
report and definitive proxy statement or other communication, as of its date,
complied in all material respects with all applicable statutes, rules and
regulations 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 made 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.
26
27
(b) ESB and each of the ESB Subsidiaries has duly filed with the OTS
and the FDIC in correct form the monthly, quarterly and annual reports required
to be filed under applicable laws and regulations, and ESB has delivered or made
available to SHS accurate and complete copies of such reports. ESB Disclosure
Schedule 3.09(b) lists all examinations of ESB or of the ESB Subsidiaries
conducted by the applicable thrift regulatory authorities since January 1, 1996
and the dates of any responses thereto submitted by ESB. In connection with the
most recent examinations of ESB or the ESB Subsidiaries by the applicable thrift
regulatory authorities, neither ESB nor any ESB Subsidiary was required to
correct or change any action, procedure or proceeding which ESB or such ESB
Subsidiary believes has not been now corrected or changed as required.
3.10. ESB INFORMATION. None of the information relating to ESB and the
ESB Subsidiaries to be contained in (i) the Form S-4 will, at the time the Form
S-4 becomes effective, 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/Prospectus, as of the date(s) such Proxy Statement/Prospectus is
mailed to stockholders of SHS and up to and including the date(s) of the meeting
of stockholders to which such Proxy Statement/Prospectus 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.
3.11. COMPLIANCE WITH APPLICABLE LAW.
(a) ESB and each of the ESB 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 have a material adverse effect on the business, operations, assets
or financial condition of ESB and the ESB Subsidiaries taken as a whole; all
such permits, licenses, certificates of authority, orders and approvals are in
full force and effect; and to the best knowledge of ESB and the ESB
Subsidiaries, no suspension or cancellation of any of the same is threatened.
(b) Neither ESB nor any of the ESB Subsidiaries is in violation of its
respective Articles of Incorporation or other governing instrument 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, securities, municipal securities,
safety, health, 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 have a material adverse effect on the business,
operations, assets or financial condition of ESB and the ESB Subsidiaries taken
as a whole; and neither ESB nor any ESB Subsidiary has received any notice or
communication from any federal, state or local governmental
27
28
authority asserting that ESB or any ESB Subsidiary is in violation of any of the
foregoing which could have a material adverse effect on the business,
operations, assets or financial condition of ESB and the ESB Subsidiaries taken
as a whole. Neither ESB nor any ESB 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 issued by governmental authorities), and none of
them has received any written communication requesting that they enter into any
of the foregoing.
3.12. DEPOSIT INSURANCE AND OTHER REGULATORY MATTERS.
(a) The deposit accounts of ESB Bank are insured by the Savings
Association Insurance Fund administered by the FDIC to the maximum extent
permitted by the FDIA, and ESB Bank has paid all premiums and assessments
required by the FDIA and the regulations thereunder.
(b) ESB Bank is a member in good standing of the FHLB of Pittsburgh
and owns the requisite amount of stock in the FHLB of Pittsburgh.
(c) ESB Bank is a "qualified thrift lender," as such term is defined
in the HOLA and the regulations thereunder.
(d) ESB Bank has at all times qualified as a "domestic building and
loan association," as such term is defined in Section 7701(a)(19) of the Code,
for purposes of Section 593 of the Code.
3.13. PROPERTIES AND INSURANCE.
(a) All real and personal property owned by ESB or any of the ESB
Subsidiaries or presently used by any of them in their respective business is in
an adequate condition (ordinary wear and tear excepted) and is sufficient to
carry on the business of ESB and the ESB Subsidiaries in the ordinary course of
business consistent with their past practices. ESB and the ESB Subsidiaries have
good and, as to owned real property, marketable title to all material assets and
properties, whether real or personal, tangible or intangible, reflected in ESB's
consolidated statement of financial condition as of March 31, 1999, or owned and
acquired subsequent thereto (except to the extent that such assets and
properties have been disposed of for fair value in the ordinary course of
business since March 31, 1999), subject to no encumbrances, liens, mortgages,
security interests or pledges, except (i) those items that secure liabilities
that are reflected in said consolidated statement of financial condition or the
notes thereto or have been incurred in the ordinary course of business after the
date of such consolidated statement of financial condition, (ii) statutory liens
for amounts not yet delinquent or which are being contested in good faith, (iii)
such encumbrances, liens, mortgages, security interests, pledges and title
imperfections that are not in the aggregate material to the business,
operations, assets or financial condition of ESB and the ESB Subsidiaries taken
as a whole, and (iv) with respect to owned real property, title imperfections
noted in title reports prior to the date hereof. ESB and the ESB Subsidiaries as
lessees have the right under valid and subsisting leases to occupy, use, possess
and control all property leased by them in all material respects as presently
28
29
occupied, used, possessed and controlled by ESB and the ESB Subsidiaries and the
consummation of the transactions contemplated hereby and by the Agreement of
Merger will not affect any such right.
(b) The business operations and all insurable properties and assets of
ESB and the ESB Subsidiaries are insured for their benefit against all risks
which, in the reasonable judgment of the management of ESB, should be insured
against, in each case under valid, binding and enforceable policies or bonds
issued by insurers of recognized responsibility, in such amounts with such
deductibles and against such risks and losses as are in the opinion of the
management of ESB adequate for the business engaged in by ESB and the ESB
Subsidiaries. As of the date hereof, neither ESB nor either of the ESB
Subsidiaries has received any notice of cancellation or notice of a material
amendment of any such insurance policy or bond or is in default under such
policy or bond, no coverage thereunder is being disputed and all material claims
thereunder have been filed in a timely fashion.
3.14. ENVIRONMENTAL MATTERS.
(a) To the best knowledge of ESB and the ESB Subsidiaries, neither ESB
nor any of the ESB Subsidiaries has been or is in violation of or liable under
any Environmental Law, except any such violations or liabilities which would not
singly or in the aggregate have a material adverse effect on the business,
operations, assets or financial condition of ESB and ESB Subsidiaries taken as a
whole.
(b) To the best knowledge of ESB and the ESB Subsidiaries, none of the
Loan Portfolio Properties and Other Properties Owned by ESB or the ESB
Subsidiaries has been or is in violation of or liable under any Environmental
Law, except any such violations or liabilities which singly or in the aggregate
would not have a material adverse effect on the business, operations, assets or
financial condition of ESB and the ESB Subsidiaries taken as a whole.
(c) To the best knowledge of ESB and the ESB Subsidiaries, there are
no actions, suits, demands, notices, claims, investigations or proceedings
pending or threatened relating to the liability of the Loan Portfolio Properties
and Other Properties Owned by ESB or the ESB Subsidiaries under any
Environmental Law, including without limitation any notices, demand letters or
requests for information from any federal or state environmental agency relating
to any such liabilities under or violations of Environmental Law, except such
which would not have or result in a material adverse effect on the business,
operations, assets or financial condition of ESB and the ESB Subsidiaries taken
as a whole.
3.15. ALLOWANCE FOR LOAN LOSSES AND REAL ESTATE OWNED. The allowance for
loan losses reflected on ESB's consolidated statements of financial condition
included in the consolidated financial statements referred to in Section 3.04
hereof is, or will be in the case of subsequently delivered financial
statements, as the case may be, in the opinion of ESB's management adequate in
all material respects as of their respective dates under the requirements of
generally accepted
29
30
accounting principles to provide for reasonably anticipated losses on
outstanding loans net of recoveries. The real estate owned reflected on the
consolidated statements of financial condition included in the consolidated
financial statements referred to in Section 3.04 hereof is, or will be in the
case of subsequently delivered financial statements, as the case may be, carried
at the lower of cost or fair value, or the lower of cost or net realizable
value, as required by generally accepted accounting principles.
3.16. MINUTE BOOKS. Since January 1, 1996, the minute books of ESB and
the ESB Subsidiaries contain complete and accurate records of all meetings and
other corporate action held or taken by their respective Boards of Directors
(including committees of their respective Boards of Directors) and stockholders.
3.17. BROKER FEES. Except as set forth in ESB Disclosure Schedule 3.17,
neither ESB nor any of its directors or officers has employed any consultant,
broker or finder or incurred any liability for any consultant's, broker's or
finder's fees or commissions in connection with any of the transactions
contemplated by this Agreement.
3.18. YEAR 2000 COMPLIANCE. All hardware, firmware, software and
computer systems owned, used or licensed by ESB and ESB Subsidiaries, including
but not limited to system and application programs, files, data bases and
computer services, are Year 2000 Compliant (as defined below) and shall continue
to function in accordance with their intended purpose without material error or
material interruption during and after the Year 2000. For purposes of this
Agreement, "Year 2000 Compliant" means that the hardware, firmware, software and
computer systems (i) will correctly and accurately address, produce, store,
process and calculate data involving dates beginning with January 1, 2000 and
will not produce abnormally ending or incorrect results involving such dates as
used in any forward or regression dated based functions; (ii) will provide that
all "date"-related functionalities and data fields include the indication, or
provide for the interpretation, of century and millennium, and will perform
calculations which involve a four-digit year; and (iii) will be interoperable
with other Year 2000 Compliant hardware or software owned, used or licensed by
ESB and ESB Bank which may deliver records to, receive records from or otherwise
interact with such hardware or software in the course of processing records or
data.
3.19. DISCLOSURES. No representation or warranty contained in Article
III of this Agreement, and no statement contained in the ESB Disclosure
Schedules, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein or therein not
misleading.
ARTICLE IV
COVENANTS OF THE PARTIES
4.01. CONDUCT OF THE BUSINESS OF SHS. During the period from the date
hereof to the Effective Time, SHS shall, and shall cause Spring Hill Bank to,
conduct its businesses and engage
30
31
in transactions permitted hereunder or only in the ordinary course and
consistent with past practice, except with the prior written consent of ESB,
which consent shall not be unreasonably withheld. SHS shall use its best efforts
to (i) preserve its business organization and that of Spring Hill Bank intact,
(ii) keep available to itself and ESB the present services of the employees of
SHS and Spring Hill Bank, and (iii) preserve for itself and ESB the goodwill of
the customers of itself and Spring Hill Bank and others with whom business
relationships exist.
4.02. NEGATIVE COVENANTS OF SHS. SHS agrees that from the date hereof to
the Effective Time, except as otherwise approved by ESB in writing or as
permitted or required by this Agreement, SHS will not, nor will SHS permit
Spring Hill Bank to:
(i) change any provision of the Articles of Incorporation or other
governing instrument or Bylaws of SHS or Spring Hill Bank;
(ii) except for the issuance of SHS Common Stock pursuant to the
present terms of stock options which are outstanding as of the date hereof (and
identified on SHS Disclosure Schedule 4.02) and compliance with the terms of the
Option Agreement of even date herewith, change the number of shares of its
authorized or issued capital stock or issue or grant any option, warrant, call,
commitment, subscription, award, right to purchase or agreement of any character
relating to the authorized or issued capital stock of SHS or Spring Hill Bank,
or any securities convertible into shares of such capital stock, or split,
combine or reclassify any shares of its capital stock, or redeem or otherwise
acquire any shares of such capital stock;
(iii) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
the capital stock of SHS or Spring Hill Bank, except for regular quarterly cash
dividends not in excess of $0.07 per share of SHS Common Stock; provided,
however, SHS shall coordinate the declaration of any dividends in respect of the
SHS Common Stock and the record dates and payment dates relating thereto with
that of the ESB Common Stock, it being the intention of the parties that the
holders of ESB Common Stock or SHS Common Stock shall not receive more than one
dividend, or fail to receive one dividend, for any single calendar quarter with
respect to their shares of ESB Common Stock and/or SHS Common Stock and any
shares of ESB Common Stock any holder of SHS Common Stock receives in exchange
therefor in the Merger.
(iv) grant any severance or termination pay (other than pursuant to
binding contracts of SHS in effect on the date hereof and disclosed to ESB on
SHS Disclosure Schedule 2.13(a)), to, or enter into or amend any employment,
consulting or compensation agreement with, any of its directors, officers or
employees; or award any increase in compensation or benefits to its directors,
officers or employees, except, in the case of officers or employees, such as may
be granted in the ordinary course of business and consistent with past practices
and policies and except certain bonuses, which shall not exceed $50,000 in the
aggregate, which may, upon the mutual consent of ESB and SHS, be paid on or
subsequent to the Effective Time to the employees identified on SHS Schedule
Disclosure Schedule 4.02 (iv) (provided that such employees agree in writing
that the
31
32
amount of any severance payments which otherwise would become due to such
employees will be reduced by the amount of any bonus payments received
hereunder);
(v) enter into or modify (except as may be required by applicable law
or as may be required by Section 4.13(f)(2) hereof, with the prior written
consent of ESB, which shall not be unreasonably withheld) any pension,
retirement, stock option, stock purchase, stock grant, stock appreciation right,
savings, profit sharing, deferred compensation, 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; or make any contributions to the employee
stock ownership plan of SHS ("SHS ESOP") or any other defined contribution plan
or any defined benefit pension or retirement plan other than in the ordinary
course of business consistent with past practice except that payments
customarily made by SHS to the SHS ESOP at the end of a period may be made prior
to the end of such period;
(vi) sell or dispose of any significant assets or incur any significant
liabilities other than in the ordinary course of business consistent with past
practices and policies, or acquire in any manner whatsoever (other than to
realize upon collateral for a defaulted loan) any business or entity;
(vii) make any capital expenditures in excess of $25,000 in the
aggregate, other than pursuant to binding commitments existing on the date
hereof, other than expenditures necessary to maintain existing assets in good
repair and other than as set forth in SHS Disclosure Schedule 4.02(vii);
(viii) except as set forth on SHS Disclosure Schedule 4.02(viii), file
any applications or make any contract with respect to branching or site location
or relocation;
(ix) make any material change in its accounting methods or practices,
other than changes required by generally accepted accounting principles, or
change any of its methods of reporting income and deductions for federal income
tax purposes, except as required by changes in laws or regulations;
(x) change its lending, investment, deposit or asset and liability
management or other banking policies in any material respect except as may be
required by applicable law;
(xi) engage in any transaction with an "affiliated person" or
"affiliate," in each case as defined in Section 2.18(a) hereof;
(xii) enter into any futures contract, option or other agreement or take
any other action for purposes of hedging the exposure of its interest-earning
assets and interest-bearing liabilities to changes in market rates of interest;
32
33
(xiii) take any action that would result in any of its representations
and warranties contained in Article II of this Agreement not being true and
correct in any material respect at the Effective Time; or
(xiv) agree to do any of the foregoing.
4.03. NO SOLICITATION. Neither SHS nor Spring Hill Bank shall, nor shall
SHS or Spring Hill Bank authorize or permit any of its directors, officers or
employees or any investment banker, financial advisor, attorney, accountant or
other representative of SHS or Spring Hill Bank to, directly or indirectly,
encourage or solicit or hold discussions or negotiations with, or provide any
information to, any person, entity or group (other than ESB) concerning any
merger, sale of substantial assets or liabilities not in the ordinary course of
business, sale of shares of capital stock or similar transactions involving SHS
or Spring Hill Bank (an "Acquisition Transaction"); provided, however, that SHS
may provide information in connection with an unsolicited possible Acquisition
Transaction if the Board of Directors of SHS, after receiving advice of counsel,
determines in the exercise of its fiduciary responsibilities that such
information should be furnished. SHS will promptly communicate to ESB the terms
of any proposal which it may receive in respect of any such Acquisition
Transaction and shall provide ESB with copies of (i) any written legal advice
provided to the Board of Directors of SHS, (ii) all such written inquiries or
proposals and (iii) an accurate and complete written synopsis of all such oral
inquiries or proposals.
4.04. NEGATIVE COVENANTS OF ESB. ESB agrees that from the date hereof to
the Effective Time, except as otherwise approved by SHS in writing or as
permitted or required by this Agreement, ESB will not:
(i) take any action which can reasonably be expected to adversely
affect or delay the ability of ESB or SHS to perform its covenants and
agreements on a reasonably timely basis under this Agreement or to consummate
the transactions contemplated under this Agreement;
(ii) declare or pay any special cash distributions in respect of any of
its capital stock in excess of $1.00 per share, provided, however, that ESB
shall be permitted to continue to declare and pay its regular quarterly
dividends; or
(iii) agree to do any of the foregoing.
4.05. CURRENT INFORMATION. During the period from the date hereof to the
Effective Time, each party will 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 business, operations,
prospects, assets and financial condition 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 (other than
the last quarter of each calendar year) ending after the date of this Agreement,
each party will deliver to the other party its quarterly report on Form 10-Q (or
Form 10-QSB) under the 1934 Act, and, as soon as reasonably available, but in no
event more than 90 days
33
34
after the end of each fiscal year, each party will deliver to the other party
its Annual Report on Form 10-K (or Form 10-KSB). Within 25 days after the end of
each month, each party shall provide the other party with a copy of the Thrift
Financial Report filed with the OTS.
4.06. ACCESS TO PROPERTIES AND RECORDS; CONFIDENTIALITY.
(a) SHS shall permit ESB and its representatives reasonable access to
its properties and those of Spring Hill Bank, and shall disclose and make
available to ESB all books, papers and records relating to the assets,
properties, operations, obligations and liabilities of SHS and Spring Hill Bank,
including, but not limited to, all books of account (including the general
ledger), tax records, minute books of directors' and stockholders' meetings,
organizational documents, bylaws, material contracts and agreements, filings
with any regulatory authority, accountants' work papers, litigation files
(except as necessary to preserve attorney-client privilege), plans affecting
employees, and any other business activities or prospects in which ESB may have
a reasonable interest. Neither SHS nor Spring Hill Bank shall be required to
provide access to or to disclose information where such access or disclosure
would violate or prejudice the rights of any customer or would contravene any
law, rule, regulation, order or judgment. SHS will use its best efforts to
obtain waivers of any such restriction and in any event make appropriate
substitute disclosure arrangements under circumstances in which the restrictions
of the preceding sentence apply. SHS and Spring Hill Bank shall make their
respective directors, officers, employees and agents and authorized
representatives (including counsel and independent public accountants) available
to confer with ESB and its representatives, provided that such access shall be
reasonably related to the transactions contemplated hereby and not unduly
interfere with normal operations. Similar access shall be provided by ESB to SHS
and its representatives to the extent necessary to enable SHS to satisfy its due
diligence obligations with respect to ESB.
(b) 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 Merger and, if such Merger shall not occur, the party receiving the
information shall, at the request of the party which furnished such information,
either return to the party which furnished such information or destroy all
documents or other materials containing, reflecting or referring to such
information; shall use its best effort to keep confidential all such
information; shall use such information only for the purpose of consummating the
transactions contemplated by this Agreement; and shall not directly or
indirectly use such information for any competitive or commercial purposes. The
obligation to keep such information confidential shall continue for three years
from the date the proposed Merger is abandoned but shall not apply to (i) any
information which (A) the party receiving the information can establish by
convincing evidence was already in its possession prior to the disclosure
thereof to it by the party furnishing the information; (B) was then generally
known to the public; (C) became known to the public through no fault of the
party receiving the information; or (D) was disclosed to the party receiving the
information by a third party not bound by an obligation of confidentiality; or
(ii) disclosures pursuant to a legal requirement or in accordance with an order
of a court of competent jurisdiction.
34
35
(c) From the date hereof until the earlier of the Effective Time or
the termination of this Agreement in accordance with the terms hereof, SHS may
invite one person (to be designated by ESB) to attend all meetings of the Board
of Directors of SHS and Spring Hill Bank.
4.07. REGULATORY MATTERS.
(a) The parties hereto will cooperate with each other and use their
best efforts to prepare all necessary documentation (including without
limitation the Form S-4 and the Proxy Statement/Prospectus), to effect all
necessary filings and to obtain all necessary permits, consents, approvals and
authorizations of all third parties and governmental bodies necessary to
consummate the transactions contemplated by this Agreement as soon as
practicable. The parties shall each have the right to review and approve in
advance all information relating to the other, as the case may be, and any of
their respective subsidiaries, which appears in any filing made with, or written
material submitted to, any third party or governmental body in connection with
the transactions contemplated by this Agreement.
(b) Each of the parties will furnish each other with all information
concerning themselves, their subsidiaries, directors, officers and stockholders
and such other matters as may be necessary or advisable in connection with any
statement or application made by or on behalf of them, or any of their
respective subsidiaries to any governmental body in connection with the Merger
and the other transactions, applications or filings contemplated by this
Agreement.
(c) Each of the parties will promptly furnish each other with copies
of written communications received by them or any of their respective
subsidiaries from, or delivered by any of the foregoing to, any governmental
body in connection with the Merger and the other transactions, applications or
filings contemplated by this Agreement.
4.08. APPROVAL OF STOCKHOLDERS. SHS will (a) take all steps (including,
without limitation, the preparation of the Form S-4 and Proxy
Statement/Prospectus in accordance with all applicable requirements) necessary
to duly call, give notice of, convene and hold a meeting of its stockholders as
soon as reasonably practicable, but in no event earlier than October 31, 1999,
for the purposes of securing the approval of such stockholders of this Agreement
and the Agreement of Merger, (b) recommend to its stockholders the approval of
this Agreement and the Agreement of Merger and the transactions contemplated
hereby and thereby, and use its best efforts to obtain, as promptly as
practicable, such approval, provided however, that the Board of Directors of SHS
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 advice of outside counsel experienced in such matters, 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, and (c) cooperate and consult
with ESB with respect to the foregoing matters.
35
36
4.09. FURTHER ASSURANCES. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all reasonable action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
satisfy the conditions to closing contained herein and to consummate and make
effective the transactions contemplated by this Agreement and the Agreement of
Merger. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement shall take all such
necessary action. Nothing in this section shall be construed to require any
party to participate in any threatened or actual legal, administrative or other
proceedings (other than proceedings, actions or investigations to which it is a
party or subject or threatened to be made a party or subject) in connection with
consummation of the transactions contemplated by this Agreement unless such
party shall consent in advance and in writing to such participation and the
other party agrees to reimburse and indemnify such party for and against any and
all costs and damages related thereto.
4.10. DISCLOSURE SUPPLEMENTS. From time to time prior to the Effective
Time, each party will promptly supplement or amend its respective Disclosure
Schedules delivered pursuant hereto with respect to any matter hereafter arising
which, if existing, occurring or known as of the date hereof, would have been
required to be set forth or described in such Schedules or which is necessary to
correct any information in such Schedules which has been rendered inaccurate
thereby. No supplement or amendment to such Schedules shall have any effect for
the purpose of determining satisfaction of the conditions set forth in Article V
or the compliance by SHS with the covenants set forth in Section 4.01 hereof.
4.11. PUBLIC ANNOUNCEMENTS. The parties hereto shall approve in advance
the substance of and cooperate with each other in the development and
distribution of all news releases and other public disclosures with respect to
this Agreement or any of the transactions contemplated hereby, except as may be
otherwise required by law or regulation and as to which the parties releasing
such information have used their best efforts to discuss with the other parties
in advance.
4.12. 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 hereby cannot be fulfilled on or prior
to March 31, 2000 and that it will not waive that condition, it will promptly
notify the other party. ESB and SHS will promptly inform the other of any facts
applicable to them, or their respective directors or officers, that would be
likely to prevent or materially delay approval of the Merger by any governmental
authority or which would otherwise prevent or materially delay completion of the
Merger.
4.13. CERTAIN POST-MERGER AGREEMENTS.
The parties hereto agree to the following arrangements following the
Effective Time:
(a) Operations of Spring Hill Bank. Following the Merger, ESB may, in
its sole discretion, determine to merge or consolidate Spring Hill Bank with ESB
Bank.
36
37
(b) Boards of Directors of ESB Bank. At the Effective Time, the number
of directors of ESB Bank shall be increased by two and ESB Bank shall nominate
and elect two current directors of SHS (the identity of the directors to be
nominated and elected as set forth on ESB Disclosure Schedule 4.13(b)) as a
director of ESB Bank for a term of not less than three years. In addition, at
the time of the merger of Spring Hill Bank and ESB Bank, the two remaining
non-employee directors of SHS and Spring Hill Bank who have not been elected to
the Board of Directors of ESB Bank will be appointed to a newly created Spring
Hill Bank Advisory Board for a period of not less than two years. Each advisory
board member shall receive for their services an annual retainer of $7,100, paid
in equal quarterly installments of $1,775, and a fee for each quarterly meeting
attended of $475. The provisions of this Section 4.13(b) are intended to be for
the benefit of, and shall be enforceable by, members of the Board of Directors
of SHS.
(c) Board of Directors of Spring Hill Bank. Effective as of the
Effective Time, Xxxxxxx Xxxxxx, a director of ESB, shall be elected to the Board
of Directors of Spring Hill Bank.
(d) Officers and Employees of SHS and Spring Hill Bank. Xxxxxx X.
Xxxxxxx shall serve as President and Chief Executive Officer of Spring Hill Bank
and Xxxxxxx X. Xxxxxx shall serve as Executive Vice President and Chief
Financial Officer of Spring Hill Bank until the merger of Spring Hill Bank and
ESB Bank. Upon the merger of Spring Hill Bank and ESB Bank, ESB will appoint
Xxxxxx X. Xxxxxxx as a Senior Vice President of ESB and ESB Bank and Xxxxxxx X.
Xxxxxx as a Vice President of ESB Bank. Xx. Xxxxxxx will receive a salary and
benefits commensurate to that of other comparable officers of ESB and ESB Bank
at not less than his current base salary. As a Senior Vice President, Xx.
Xxxxxxx will be provided a company car and a change in control agreement in the
form included in ESB Disclosure Schedule 4.13(d). Xx. Xxxxxx will receive a
salary and benefits commensurate to that of other comparable officers of ESB
Bank at not less than his current base salary.
(e) Employment, Severance and Change in Control Agreements. ESB shall
honor all existing employee agreements, severance or change in control
agreements or plans of SHS and Spring Hill Bank, in effect as of the date of
this Agreement, each of which is disclosed on SHS Disclosure Schedule 4.13(e),
which schedule describes and quantifies in reasonable detail the maximum amount
of payments and benefits which could become due and payable to each such person
(assuming the Merger is consummated on or before December 31, 1999) under the
agreements or plans as a result of a termination of employment and/or a change
in control of SHS or Spring Hill Bank.
(f) Employee Benefit Plans.
(1) Subject to the provisions of this Section 4.13, all employees of
SHS or Spring Hill Bank immediately prior to the Effective Time who are employed
by ESB, ESB Bank or Spring Hill Bank (the "Employers") immediately following the
Effective Time ("Transferred Employees") will be covered by Employers' employee
benefit plans on substantially the same basis as any employee of the Employers
in a comparable position. Notwithstanding the foregoing, ESB may determine to
continue any of the SHS benefit plans for Transferred Employees in lieu of
offering participation in
37
38
the Employers' benefit plans providing similar benefits (e.g., medical and
hospitalization benefits), to terminate any of SHS's benefit plans, or to merge
any such benefit plans with the Employers' benefit plans, provided the result is
the provision of benefits to Transferred Employees that are substantially
similar to the benefits provided to the Employers' employees generally. Except
as specifically provided in this Section 4.13 and as otherwise prohibited by
law, Transferred Employees' service with SHS or Spring Hill Bank shall be
recognized as service with the Employers for purposes of eligibility to
participate and vesting, if applicable (but not for purposes of benefit accrual)
under the Employers' benefit plans, subject to applicable break-in-service
rules. ESB agrees that any pre-existing condition, limitation or exclusion in
its medical, long-term disability and life insurance plans shall not apply to
Transferred Employees or their covered dependents who are covered under a
medical or hospitalization indemnity plan maintained by SHS or Spring Hill Bank
on the Effective Time and who then change coverage to the Employers' medical or
hospitalization indemnity health plan at the time such Transferred Employees are
first given the option to enroll. Notwithstanding anything herein to the
contrary, after the Effective Time, (x) any amendment to, or grant of additional
benefits under, any SHS or Spring Hill Bank benefit plan, including stock based
plans, which continues to exist subsequent to the Effective Time, shall require
the prior consent of ESB, and (y) ESB may cause any of the SHS or Spring Hill
Bank benefit plans which continue to exist, including stock based plans, to be
amended in order to provide that employees of ESB or ESB Bank may be
participants in such plans.
(2) After the Effective Time, but not prior to January 1, 2000, the
SHS ESOP may, at ESB's discretion, be combined with the ESB employee stock
ownership plan ("ESB ESOP"); provided, however, that prior to any such
combination of the SHS ESOP and the ESB ESOP, the parties shall take all
necessary action in order to amend the SHS ESOP in order to ensure that any such
combination or the Merger does not accelerate (other than as required by law or
regulation) or materially increase the benefits available to the participants in
the SHS ESOP. Notwithstanding anything herein to the contrary, the parties
hereto will take all necessary action to amend the SHS ESOP in order to provide
that the Merger will not accelerate (other than as required by law or
regulation) or materially increase the benefits available to any participant in
the SHS ESOP, provided, however, that SHS may amend the SHS ESOP to permit, if
the Effective Time is on or prior to December 31, 1999, SHS to make its fourth
quarter contribution to the SHS ESOP as of the Effective Time and to delete the
provision of the SHS ESOP which requires a participant to be an employee on the
last day of the plan year in order to share in the allocation of the employer's
contributions for the 1999 plan year.
(g) Indemnification. ESB shall indemnify and hold harmless each
present and former director, officer and employee of SHS and Spring Hill Bank
determined as of the Effective Time (the "Indemnified Parties") against any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of matters
existing or occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time (collectively, "Claims"), to
the fullest extent to which such Indemnified Parties were entitled under
Pennsylvania law, the Articles of Incorporation and Bylaws of SHS or Spring Hill
Bank as in effect on the date hereof.
38
39
Any Indemnified Party wishing to claim indemnification under this Section
4.13(g), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify ESB, but the failure to so notify shall not
relieve ESB of any liability it may have to such Indemnified Party if such
failure does not materially prejudice ESB. In the event of any such claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) ESB shall have the right to assume the defense thereof and
ESB 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 ESB elects not to
assume such defense or counsel for the Indemnified Parties advises that there
are issues which raise conflicts of interest between ESB and the Indemnified
Parties, the Indemnified Parties may retain counsel which is reasonably
satisfactory to ESB, and ESB 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), (ii) the Indemnified Parties will cooperate in the defense of any
such matter, and (iii) ESB shall not be liable for any settlement effected
without its prior written consent, which consent shall not be withheld
unreasonably.
In the event that ESB or any of its respective successors or assigns (i)
consolidates with or merges into any other entity 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
entity, then, and in each such case, the successors and assigns of such entity
shall assume the obligations set forth in this Section 4.13(g), which
obligations are expressly intended to be for the irrevocable benefit of, and
shall be enforceable by, each of the Indemnified Parties.
(h) Insurance. ESB and ESB Bank shall maintain a directors' and
officers' liability insurance policy covering the Indemnified Parties Costs in
connection with any Claims for a period of three (3) years after the Effective
Time if such policy can be obtained at annual premiums no greater than 150% of
the annual premium of the directors' and officers' liability insurance
maintained by SHS and Spring Hill Bank as of the date hereof.
ARTICLE V
CLOSING CONDITIONS
5.01. CONDITIONS TO THE PARTIES' OBLIGATIONS UNDER THIS AGREEMENT. The
respective obligations of the parties under this Agreement shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) All necessary regulatory or governmental approvals and consents
(including without limitation any required approval of the OTS required to
consummate the transactions contemplated hereby) shall have been obtained
without any non-standard term or condition which would materially impair the
value of SHS and the Spring Hill Bank to ESB; all conditions required to be
satisfied prior
39
40
to the Effective Time by the terms of such approvals and consents shall have
been satisfied; and all waiting periods in respect thereof shall have expired.
(b) All corporate action necessary to authorize the execution and
delivery of this Agreement and consummation of the transactions contemplated
hereby and by the Agreement of Merger shall have been duly and validly taken by
ESB and SHS, including approval by the requisite vote of the stockholders of SHS
of this Agreement and the Agreement of Merger.
(c) No order, judgment or decree shall be outstanding against a party
hereto or a third party that would have the effect of preventing completion of
the Merger; no suit, action or other proceeding shall be pending or threatened
by any governmental body in which it is sought to restrain or prohibit the
Merger; and no suit, action or other proceeding shall be pending before any
court or governmental agency in which it is sought to restrain or prohibit the
Merger or obtain other substantial monetary or other relief against one or more
of the parties hereto in connection with this Agreement and which ESB or SHS
determines in good faith, based upon the advice of their respective counsel,
makes it inadvisable to proceed with the Merger because any such suit, action or
proceeding has a significant potential to be resolved in such a way as to
deprive the party electing not to proceed of any of the material benefits to it
of the Merger.
(d) The Form S-4 shall have become effective under the 1933 Act, and
ESB 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 ESB 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 parties shall have received, in form and substance reasonably
satisfactory to them (x) an opinion of Elias, Matz, Xxxxxxx & Xxxxxxx L.L.P. to
the effect that, for federal income tax purposes, the Merger will qualify as a
"reorganization" under Section 368(a) of the Code; no taxable gain will be
recognized by ESB or SHS (i) upon the transfer of SHS's assets to ESB in
exchange for ESB Common Stock, cash and the assumption of SHS's liabilities or
(ii) upon the distribution of such ESB Common Stock and cash to SHS stockholders
and (y) an opinion of Breyer & Associates PC to such effect and to the effect
that (i) no gain or loss will be recognized by the shareholders of SHS who
receive ESB Common Stock in exchange for their SHS Common Stock in the Merger;
(ii) the tax basis of a shareholder in the ESB Common Stock received in the
Merger in exchange for his or her SHS Common Stock will be the same as the tax
basis of the SHS Common Stock surrendered in exchange therefor; and (iii) the
holding period of the shares of ESB Common Stock received in the Merger will
include the holding period of the shares of SHS Common Stock surrendered
therefor, provided that such SHS Common Stock was held as a capital asset by
such shareholder, provided, however, that in the event either of such counsel
believes that the Merger will not qualify as a reorganization under Section
368(a) of the Code, ESB shall have the right but not the obligation to increase
the aggregate stock consideration as necessary to cause the transaction to
qualify for such tax treatment.
40
41
5.02. CONDITIONS TO THE OBLIGATIONS OF ESB UNDER THIS AGREEMENT. The
obligations of ESB under this Agreement shall be further subject to the
satisfaction, at or prior to the Effective Time, of the following conditions,
any one or more of which may be waived by ESB:
(a) Each of the obligations of SHS required to be performed by it at
or prior to the Closing pursuant to the terms of this Agreement shall have been
duly performed and complied with in all material respects and the
representations and warranties of SHS contained in this Agreement shall have
been true and correct as of the date hereof and as of the Effective Time as
though made at and as of the Effective Time, except (i) as to any representation
or warranty which specifically relates to an earlier date or (ii) where the
facts which caused the failure of any representation or warranty to be so true
and correct would not, either individually or in the aggregate, constitute a
material adverse change in the business, operations, assets or financial
condition of SHS and Spring Hill Bank taken as a whole, other than: (i) any such
effect attributable to or resulting from any change in banking or similar laws,
rules or regulations of general applicability to banks, thrift institutions or
their holding companies or interpretations thereof by courts or governmental
authorities; (ii) changes in generally accepted accounting principles that are
generally applicable to the banking or savings industries; (iii) expenses
incurred in connection with the transactions contemplated hereby; (iv) 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 (v) changes attributable to or resulting
from changes in general economic conditions, including changes in the prevailing
level of interest rates, and ESB shall have received a certificate to that
effect signed by the President and Chief Executive Officer of SHS.
(b) All permits, consents, waivers, clearances, approvals and
authorizations of all regulatory or governmental authorities or third parties
which are necessary in connection with the consummation of the Merger shall have
been obtained, and none of such permits, consents, waivers, clearances,
approvals and authorizations shall contain any non-standard term or condition
which would materially impair the value of SHS and Spring Hill Bank to ESB.
(c) Holders of SHS Common Stock who dissent from the Merger pursuant
to Chapter 15, Subchapter D of the PBCL by meeting the requirements set forth in
the PBCL shall not hold more than 20% of the SHS Common Stock immediately prior
to the Effective Time.
(d) Each stockholder of SHS who is a SHS Affiliate shall have executed
and delivered a commitment and undertaking to the effect that (i) such
stockholder will dispose of the shares of ESB Common Stock received by him in
connection with the Merger only in accordance with the provisions of paragraph
(d) of Rule 145 under the 1933 Act; (ii) such stockholder will not dispose of
any of such shares until ESB has received an opinion of counsel acceptable to it
that such proposed disposition is in compliance with the provisions of paragraph
(d) of Rule 145 under the 1933 Act, which opinion shall be rendered promptly
following counsel's receipt of such stockholder's written notice of its
intention to sell shares of ESB Common Stock; and (iii) the certificates
representing said shares may bear a legend referring to the foregoing
restrictions.
41
42
(e) SHS shall have furnished ESB with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in this Section 5.02 as ESB may reasonably request.
5.03. CONDITIONS TO THE OBLIGATIONS OF SHS UNDER THIS AGREEMENT. The
obligations of SHS under this Agreement shall be further subject to the
satisfaction, at or prior to the Effective Time, of the following conditions,
any one or more of which may be waived by SHS:
(a) Each of the obligations of ESB required to be performed by it at
or prior to the Closing pursuant to the terms of this Agreement shall have been
duly performed and complied with in all material respects and the
representations and warranties of ESB contained in this Agreement shall have
been true and correct as of the date hereof and as of the Effective Time as
though made at and as of the Effective Time, except (i) as to any representation
or warranty which specifically relates to an earlier date or (ii) where the
facts which caused the failure of any representation or warranty to be so true
and correct would not, either individually or in the aggregate, constitute a
material adverse change in the business, operations, assets or financial
condition of ESB and the ESB Subsidiaries taken as a whole, and SHS shall have
received a certificate to that effect signed by the President and Chief
Executive Officer of ESB.
(b) ESB shall have furnished SHS with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in this Section 5.03 as SHS may reasonably request.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER, ETC.
6.01. TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of this Agreement and the
Agreement of Merger by the stockholders of SHS:
(a) by mutual written consent of the parties hereto;
(b) by ESB or SHS (i) if the Effective Time shall not have occurred on
or prior to Xxxxx 00, 0000 xx (xx) if a vote of the stockholders of SHS is taken
and such stockholders fails to approve this Agreement and the Agreement of
Merger at the meeting of stockholders (or any adjournment thereof) of SHS
contemplated by Section 4.08 hereof; unless the failure of such occurrence shall
be due to the failure of the party seeking to terminate this Agreement to
perform or observe its agreements set forth herein to be performed or observed
by such party at or before the Effective Time;
(c) by ESB or SHS upon written notice to the other 30 or more days
after the date upon which any application for a regulatory or governmental
approval necessary to consummate the
42
43
Merger and the other transactions contemplated hereby shall have been denied or
withdrawn at the request or recommendation of the applicable regulatory agency
or governmental authority, unless within such 30-day period a petition for
rehearing or an amended application is filed or noticed, or 30 or more days
after any petition for rehearing or amended application is denied;
(d) by ESB in writing if SHS has, or by SHS in writing if ESB has,
breached (i) any covenant or undertaking contained herein or in the Agreement of
Merger, or (ii) any representation or warranty contained herein, which breach
would have a material adverse effect on the business, operations, assets or
financial condition of SHS and Spring Hill Bank or ESB and the ESB Subsidiaries,
as applicable, taken as a whole, or upon the consummation of the transactions
contemplated hereby, in any case if such breach 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; provided that
it is understood and agreed that either party may terminate this Agreement on
the basis of any such material breach of any representation or warranty
contained herein, notwithstanding any qualification therein relating to the
knowledge of the other party;
(e) by ESB or SHS in writing, if any of the applications for prior
approval referred to in Section 4.07 hereof are denied or are approved
contingent upon the satisfaction of any non-standard condition or requirement
which, in the reasonable opinion of the Board of Directors of ESB, would
materially impair the value of SHS and Spring Hill Bank to ESB, and the time
period for appeals and requests for reconsideration has run.
(f) by SHS, if its Board of Directors so determines by a vote of a
majority of the members of its entire Board, at any time during the five-day
period commencing with the Determination Date if both of the following
conditions are satisfied:
(i) the number obtained by dividing the Average Closing Price
by the Starting Price (the "ESB Ratio") shall be less than .80; and
(ii) the ESB Ratio shall be less than the number obtained by
dividing the Final Index Value by the Index Value on the Starting Date
and subtracting 0.20 from the quotient in this clause (ii) (such number
being referred to herein as the "Index Ratio");
subject, however, to the following three sentences. If SHS elects to exercise
its termination right pursuant to this Section 6.01(f), it shall give written
notice to ESB (provided that such notice of election to terminate may be
withdrawn at any time within the aforementioned five-day period). During the
five-day period commencing with its receipt of such notice, ESB shall have the
option to increase the Exchange Ratio (calculated to the nearest one
one-thousandth) to equal the lesser of (x) a number (rounded to the nearest
thousandth) obtained by dividing (A) the product of the Starting Price, 0.80 and
the Exchange Ratio (as then in effect) by (B) the Average Closing Price and (y)
a number (rounded to the nearest one one-thousandth) obtained by dividing (A)
the product of the Index Ratio and the Exchange Ratio (as then in effect) by (B)
the ESB Ratio. If ESB so elects within such five-day period, it shall give
prompt written notice to SHS of such election and the revised Exchange Ratio,
whereupon no termination shall have occurred pursuant to this Section 6.01(f)
and
43
44
this Agreement shall remain in effect in accordance with its terms (except as
the Exchange Ratio shall have been so modified).
For purposes of this Section 6.01(f), the following terms shall have the
meanings indicated:
"Average Closing Price" shall mean the average of the closing
prices of a share of ESB Common Stock on the Nasdaq Stock Market's
National Market (as reported in The Wall Street Journal, or if not
reported therein, in another authoritative source) during the period of
20 consecutive trading days ending on the trading day prior to the
Determination Date, rounded to the nearest whole cent.
"Determination Date" shall mean the date on which the last
required approval of a Governmental Entity is obtained with respect to
the Merger, without regard to any requisite waiting period in respect
thereof.
"Final Index Value" shall mean the average of the Index Values for
the 20 consecutive trading days ending on the trading day prior to the
Determination Date.
"Index Value," on a given date, shall mean the index value on such
date of the SNL Thrift Index, as such index value is reported by SNL
Securities on such date.
"Starting Date" shall mean the last trading day immediately
preceding the date of the first public announcement of entry into this
Agreement.
"Starting Price" shall mean the closing price of a share of ESB
Common Stock on the Nasdaq Stock Market's National Market (as reported in
The Wall Street Journal, or if not reported therein, in another
authoritative source) on the Starting Date.
6.02. EFFECT OF TERMINATION. In the event of termination of this
Agreement by either ESB or SHS as provided above, this Agreement shall forthwith
become void (other than Sections 4.05(b) and 7.01 hereof, which shall remain in
full force and effect) and there shall be no further liability on the part of
the parties or their respective officers or directors except for the liability
of the parties under Sections 4.05(b) and 7.01 hereof and except for liability
for any breach of this Agreement.
6.03. AMENDMENT, EXTENSION AND WAIVER. Subject to applicable law, at any
time prior to the consummation of the Merger, whether before or after approval
thereof by the stockholders of SHS, the parties may (a) amend this Agreement and
the Agreement of Merger, (b) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (c) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, or (d) waive compliance with any of the
agreements or conditions contained herein; provided, however, that after any
approval of the Merger by the stockholders of SHS, there may not be, without
further approval of such stockholders, any amendment or waiver of this Agreement
or the Agreement of Merger which modifies either the amount or the form of the
Merger Consideration to be delivered to stockholders of SHS. This Agreement and
the Agreement of Merger may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto. Any
44
45
agreement on the part of a party hereto to any extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party, but such waiver or failure to insist on strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
ARTICLE VII
MISCELLANEOUS
7.01. EXPENSES.
(a) All costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby (including without limitation legal,
accounting, investment banking and printing expenses) shall be borne by the
party incurring such costs and expenses, provided that ESB shall bear all costs
of printing, mailing and filing the Form S-4 and Proxy Statement/Prospectus and
all other registration and filing fees relating to the Merger.
(b) Notwithstanding any provision in this Agreement to the contrary,
in the event that either of the parties shall default in its obligations
hereunder, the non-defaulting party may pursue any remedy available at law or in
equity to enforce its rights and shall be paid by the defaulting party for all
damages, costs and expenses, including without limitation legal, accounting,
investment banking and printing expenses, incurred or suffered by the
non-defaulting party in connection herewith or in the enforcement of its rights
hereunder.
7.02. SURVIVAL. The respective representations, warranties and covenants
of the parties to this Agreement shall not survive the Effective Time but shall
terminate as of the Effective Time, except for the provisions of Section 4.13
hereof.
7.03. NOTICES. All notices or other communications hereunder shall be in
writing and shall be deemed given if delivered personally, sent by overnight
express or mailed by prepaid registered or certified mail (return receipt
requested) or by cable, telegram or telex addressed as follows:
(a) If to ESB, to:
ESB Financial Corporation
000 Xxxxxxxx Xxxxxx
Xxxxxxx Xxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxxxxxx X. Xxxxxxxx
00
00
Copy to:
Elias, Matz, Xxxxxxx and Xxxxxxx L.L.P.
000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
(b) If to SHS, to:
SHS Bancorp, Inc.
Xxx Xxxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Copy to:
Breyer & Associates PC
0000 Xxx Xxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxx X. Xxxxxx, Xx., Esq.
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
7.04. PARTIES IN INTEREST. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other party and, except as otherwise
expressly provided herein, that nothing in this Agreement is intended to confer,
expressly or by implication, upon any other person any rights or remedies under
or by reason of this Agreement.
7.05. COMPLETE AGREEMENT. This Agreement and the Agreement of Merger,
including the documents and other writings referred to herein or therein or
delivered pursuant hereto or thereto, contain the entire agreement and
understanding of the parties with respect to their subject matter and shall
supersede all prior agreements and understandings between the parties, both
written and oral, with respect to such subject matter. There are no
restrictions, agreements, promises, representations, warranties, covenants or
undertakings between the parties other than those expressly set forth herein or
therein.
7.06. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
46
47
7.07. GOVERNING LAW. This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania, without giving effect to the principles of
conflicts of laws thereof.
7.08. HEADINGS. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, ESB and SHS have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
ESB FINANCIAL CORPORATION
Attest:
/s/ Xxxxx X. Xxxxx By: /s/ Xxxxxxxxx X. Xxxxxxxx
----------------------------------- -------------------------------------
Xxxxx X. Xxxxx Xxxxxxxxx X. Xxxxxxxx
Senior Vice President of Operations President and Chief Executive Officer
and Secretary
SHS BANCORP, INC.
Attest:
/s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------- -------------------------------------
Xxxxxx X. Xxxxxxx Xxxxxx X. Xxxxxxx
Secretary President and Chief Executive Officer
47
48
APPENDIX A
AGREEMENT OF MERGER
This Agreement of Merger is dated as of July 21, 1999, by and between ESB
Financial Corporation ("ESB"), a Pennsylvania corporation, and SHS Bancorp, Inc.
("SHS"), a Pennsylvania corporation.
W I T N E S S E T H:
WHEREAS, ESB and SHS have entered into an Agreement and Plan of
Reorganization, dated as of the date hereof (the "Reorganization Agreement");
and
WHEREAS, pursuant to the Reorganization Agreement and this Agreement of
Merger, and subject to the terms and conditions set forth therein and herein,
SHS shall be merged with and into ESB, with ESB the surviving corporation of
such merger;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Reorganization Agreement, the parties
hereto do mutually agree as follows:
ARTICLE I
DEFINITIONS
Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
1.1 "EFFECTIVE TIME" shall mean the date and time at which the Merger
contemplated by this Agreement of Merger becomes effective as provided in
Section 2.2 of this Agreement of Merger.
1.2 "SHS COMMON STOCK" shall mean the common stock, par value $.01 per
share, of SHS.
1.3 "MERGER" shall refer to the merger of SHS with and into ESB as
provided in Section 2.1 of this Agreement of Merger.
1.4 "MERGING CORPORATIONS" shall collectively refer to ESB and SHS.
1.5 "ESB COMMON STOCK" shall mean the common stock, par value $.01 per
share, of ESB.
49
1.6 "STOCKHOLDER MEETING" shall mean the meeting of the stockholders
of SHS held pursuant to Section 4.07 of the Agreement.
1.7 "SURVIVING CORPORATION" shall mean ESB as the surviving
corporation of the Merger.
ARTICLE II
TERMS OF THE MERGER
2.1 THE MERGER. Subject to the terms and conditions set forth in the
Reorganization Agreement, at the Effective Time, SHS shall be merged with and
into ESB pursuant to Chapter 19, Subchapter C of the Pennsylvania Business
Corporation Law ("PBCL"). ESB shall be the Surviving Corporation of the Merger
and shall continue to be governed by the laws of the Commonwealth of
Pennsylvania. At the Effective Time, the separate existence and corporate
organization of SHS shall cease, and ESB shall thereupon and thereafter possess
all the rights, privileges, powers and franchises of a public as well as of a
private nature of each of SHS and ESB; and be subject to all the restrictions,
disabilities and duties of each of SHS and ESB; and all and singular, the
rights, privileges, powers and franchises of each of SHS and ESB, and all
property, real, personal and mixed, and all debts due to either SHS or ESB on
whatever account, as well for stock subscriptions and all other things in action
or belonging to each of SHS and ESB shall be vested in the Surviving
Corporation; and all property, rights, privileges, powers and franchises, and
all and every other interest shall be thereafter as effectually the property of
the Surviving Corporation as they were of, respectively, SHS and ESB, and the
title to any real estate vested by deed or otherwise, under the laws of the
Commonwealth of Pennsylvania or elsewhere in either SHS or ESB shall not revert
or be in any way impaired by reason of the Merger, but all rights of creditors
and all liens upon any property of either of SHS or ESB shall be preserved
unimpaired, and all debts, liabilities and duties of SHS and ESB shall
thenceforth attach to the Surviving Corporation and may be enforced against it
to the same extent as if said debts, liabilities and duties had been incurred or
contracted by it.
2.2 EFFECTIVE TIME. The Merger shall become effective on the date and
at the time that Articles of Merger are executed and filed with the Secretary of
State of the Commonwealth of Pennsylvania pursuant to Section 1927 of the PBCL,
unless a later date and time is specified as the Effective Time in such Articles
of Merger.
2.3 NAME OF THE SURVIVING CORPORATION. The name of the Surviving
Corporation shall be "ESB Financial Corporation."
2.4 ARTICLES OF INCORPORATION. On and after the Effective Time, the
Articles of Incorporation of ESB shall be the Articles of Incorporation of the
Surviving Corporation until amended in accordance with applicable law.
2.5 BYLAWS. On and after the Effective Time, the Bylaws of ESB shall
be the Bylaws of the Surviving Corporation until amended in accordance with
applicable law.
2
50
ARTICLE III
CONVERSION OF SHARES
3.1 CONVERSION OF SHS COMMON STOCK AND OPTIONS TO PURCHASE SHS COMMON
STOCK.
(a) Subject to Section 3.2 hereof, each share of SHS Common Stock
outstanding immediately prior to the Effective Time, other than (i) shares held
by SHS (including treasury shares) or ESB or any of their respective wholly
owned subsidiaries and (ii) SHS Dissenting Shares (as hereinafter defined),
shall be converted into the number of shares of ESB Common Stock equal to the
Exchange Ratio (as defined in the Reorganization Agreement) or $17.80 in cash in
accordance with the terms of Section 1.03 of the Reorganization Agreement.
(b) Notwithstanding any other provision hereof, no fractional shares
of ESB Common Stock shall be issued to holders of SHS Common Stock. In lieu
thereof, each holder of shares of SHS Common Stock entitled to a fraction of a
share of ESB Common Stock shall, at the time of surrender of the certificate or
certificates representing such holder's shares, receive an amount of cash in
accordance with the terms of Section 1.05 of the Reorganization Agreement. No
such holder shall be entitled to dividends, voting rights or any other rights in
respect of any fractional share.
(c) At or immediately prior to the Effective Time, each option to
purchase SHS Common Stock issued pursuant to SHS's 1998 Stock Option Plan shall
be cancelled, and each holder of any such option, whether or not then vested or
exercisable, shall be entitled to receive from ESB at the election of the
optionholder either a new option to acquire shares of ESB Common Stock or a cash
amount determined in accordance with Section 1.06 of the Reorganization
Agreement. The payment of the consideration referred to in this Section 3.1(c)
to holders of options to purchase SHS Common Stock shall be subject to the
execution by any such holder of such instruments of cancellation as ESB may
reasonable deem appropriate.
3.2 EXCHANGE OF CERTIFICATES FOR STOCK AND/OR CASH.
After the Effective Time, each holder of a certificate for theretofore
outstanding shares of SHS Common Stock, shall be surrendered and exchanged for
cash or stock consideration in the manner provided in Section 1.04 of the
Reorganization Agreement.
3.3 DISSENTING SHARES. Notwithstanding anything in this Agreement of
Merger to the contrary, shares of SHS Common Stock which are outstanding
immediately prior to the Effective Time and which are held by stockholders
(other than ESB or any wholly-owned subsidiary thereof) who shall not have voted
such shares in favor of the Agreement and this Agreement of Merger and who shall
have satisfied all of the applicable requirements of Chapter 15, Subchapter D of
the PBCL ("SHS Dissenting Shares"), shall not be converted into the right to
receive, or be exchangeable for, shares of ESB Common Stock or cash as set forth
in Section 3.1 hereof, but the holders thereof shall be entitled to payment of
the fair value of such shares in accordance with said section of the PBCL,
3
51
subject to the procedures and the conditions specified in such provision of the
PBCL, unless and until such holders shall have failed to perfect or shall have
effectively withdrawn or lost their right to appraisal and payment under such
law. If any such holder shall have failed to perfect or shall have effectively
withdrawn or lost such right of appraisal, the shares of SHS Common Stock held
by such holder shall thereupon be deemed to have been converted into the right
to receive, or be exchangeable at the Effective Time for, cash as provided in
1.08 of the Reorganization Agreement. ESB hereby agrees to make, or cause to be
made, payment in cash for any Dissenting Shares.
3.4 ESB COMMON STOCK. Each share of ESB Common Stock issued and
outstanding immediately prior to the Effective Time shall, on and after the
Effective Time, continue to be issued and outstanding as an identical share of
ESB Common Stock.
ARTICLE IV
MISCELLANEOUS
4.1 CONDITIONS PRECEDENT. The respective obligations of each party
under this Agreement of Merger shall be subject to the satisfaction, or waiver
by the party permitted to do so, of the conditions set forth in Article V of the
Reorganization Agreement.
4.2 TERMINATION. This Agreement of Merger shall be terminated
automatically without further act or deed of either of the parties hereto in the
event of the termination of the Reorganization Agreement in accordance with
Section 6.01 thereof.
4.3 AMENDMENTS. To the extent permitted by the PBCL, this Agreement of
Merger may be amended by a subsequent writing signed by each of the parties
hereto upon the approval of the Board of Directors of each of the parties
hereto; provided, however, that the provisions of Article III of this Agreement
of Merger relating to the consideration to be paid for the shares of SHS Common
Stock shall not be amended after the meeting of stockholders of SHS so as to
modify either the amount or the form of such consideration or to otherwise
materially adversely affect the shareholders of SHS without the approval of the
stockholders of SHS.
4.4 SUCCESSORS. This Agreement of Merger shall be binding on the
successors of ESB and SHS.
4
52
IN WITNESS WHEREOF, ESB and SHS have caused this Agreement of Merger to
be executed by their duly authorized officers as of the day and year first above
written.
ESB FINANCIAL CORPORATION
Attest:
/s/ Xxxxx X. Xxxxx By: /s/ Xxxxxxxxx X. Xxxxxxxx
----------------------------------- -------------------------------------
Xxxxx X. Xxxxx Xxxxxxxxx X. Xxxxxxxx
Senior Vice President of Operations President and Chief Executive Officer
and Secretary
SHS BANCORP, INC.
Attest:
/s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------- -------------------------------------
Xxxxxx X. Xxxxxxx Xxxxxx X. Xxxxxxx
Secretary President and Chief Executive Officer
5
