AGREEMENT AND PLAN OF MERGER
between
FIDELITY BANCORP, INC.
and
CARNEGIE FINANCIAL CORPORATION
dated as of October 10, 2001
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS..............................................................................................1
ARTICLE II
THE MERGER...............................................................................................6
2.1 The Merger...................................................................................6
2.2 Effective Time; Closing......................................................................6
2.3 Treatment of Capital Stock...................................................................6
2.4 Election and Proration Procedures ...........................................................7
2.5 Exchange Procedures.........................................................................10
2.6 Options and Restricted Stock................................................................12
2.7 Dissenting Shares...........................................................................12
2.8 Additional Actions..........................................................................13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
AND SELLER BANK.........................................................................................13
3.1 Capital Structure...........................................................................13
3.2 Organization, Standing and Authority of Seller..............................................13
3.3 Ownership of Seller Subsidiary..............................................................14
3.4 Organization, Standing and Authority of Seller Bank.........................................14
3.5 Authorized and Effective Agreement..........................................................14
3.6 Securities Documents and Regulatory Reports.................................................16
3.7 Financial Statements........................................................................16
3.8 Material Adverse Change.....................................................................16
3.9 Environmental Matters.......................................................................17
3.10 Tax Matters.................................................................................17
3.11 Legal Proceedings...........................................................................18
3.12 Compliance with Laws........................................................................18
3.13 Certain Information.........................................................................19
3.14 Employee Benefit Plans......................................................................19
3.15 Certain Contracts...........................................................................20
3.16 Brokers and Finders.........................................................................21
3.17 Insurance...................................................................................21
3.18 Properties..................................................................................21
3.19 Labor.......................................................................................22
3.20 Allowance for Loan Losses...................................................................22
3.21 Material Interests of Certain Persons.......................................................22
3.22 Fairness Opinion............................................................................22
3.23 Disclosures.................................................................................23
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3.24 No Undisclosed Liabilities..................................................................23
3.25 Loan Portfolio..............................................................................23
3.26 Investment Portfolio........................................................................23
3.27 Interest Rate Risk Management Instruments...................................................23
3.28 Interim Events..............................................................................24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER.................................................................24
4.1 Organization, Standing and Authority of Buyer...............................................24
4.2 Ownership of Buyer Subsidiaries.............................................................25
4.3 Organization, Standing and Authority of Buyer Subsidiaries..................................25
4.4 Authorized and Effective Agreement..........................................................25
4.5 Securities Documents and Regulatory Reports.................................................26
4.6 Financial Statements........................................................................27
4.7 Material Adverse Change.....................................................................27
4.8 Legal Proceeding............................................................................27
4.9 Certain Information.........................................................................27
4.10 Brokers and Finders.........................................................................28
4.11 Disclosures.................................................................................28
4.12 Financial Resources.........................................................................28
ARTICLE V
COVENANTS...............................................................................................28
5.1 Reasonable Best Efforts.....................................................................28
5.2 Shareholder Meeting.........................................................................28
5.3 Regulatory Matters..........................................................................29
5.4 Investigation and Confidentiality...........................................................30
5.5 Press Releases..............................................................................30
5.6 Business of the Parties.....................................................................31
5.7 Certain Actions.............................................................................34
5.8 Current Information.........................................................................34
5.9 Indemnification; Insurance..................................................................34
5.10 Employees and Employee Benefit Plans........................................................35
5.11 Bank Merger.................................................................................38
5.12 Conforming Entries..........................................................................38
5.13 Integration of Policies.....................................................................39
5.14 Disclosure Supplements......................................................................39
5.15 Failure to Fulfill Conditions...............................................................39
5.16 Transaction Expenses of Seller..............................................................39
5.17 Voting Agreement............................................................................40
5.18 Registration of Buyer Common Stock .........................................................40
5.19 Affiliate Letters...........................................................................41
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ARTICLE VI
CONDITIONS PRECEDENT....................................................................................41
6.1 Conditions Precedent - Buyer and Seller.....................................................41
6.2 Conditions Precedent - Seller...............................................................42
6.3 Conditions Precedent - Buyer................................................................43
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT.......................................................................44
7.1 Termination.................................................................................44
7.2 Effect of Termination.......................................................................45
7.3 Survival of Representations, Warranties and Covenants.......................................46
7.4 Waiver......................................................................................47
7.5 Amendment or Supplement.....................................................................47
ARTICLE VIII
MISCELLANEOUS...........................................................................................47
8.1 Entire Agreement............................................................................47
8.2 No Assignment...............................................................................47
8.3 Notices.....................................................................................48
8.4 Alternative Structure.......................................................................49
8.5 Interpretation..............................................................................49
8.6 Counterparts................................................................................49
8.7 Governing Law...............................................................................49
8.8 Severability................................................................................49
8.9 Standard of Materiality.....................................................................49
ATTACHMENTS
Appendix A ..............................................................Plan of Merger for Company Merger
Appendix B .................................................................Plan of Merger for Bank Merger
Exhibit 2.6(a).........................................................Stock Option Cancellation Agreement
Exhibit 2.6(b).....................................................Restricted Stock Cancellation Agreement
Exhibit 5.10(b)......................................................Severance Benefit to Certain Officers
Exhibit 5.10(c)...............................................................Form of Employment Agreement
Exhibit 5.10(d)...............................................Form of Acknowledgment and Release Agreement
Exhibit 5.10 (k).............................................................Form of Non-Compete Agreement
Exhibit 5.17..............................................................................Voting Agreement
Exhibit 5.19..............................................................................Affiliate Letter
Exhibit 6.2(e)..................................................................Opinion of Buyer's Counsel
Exhibit 6.3(g).................................................................Opinion of Seller's Counsel
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AGREEMENT AND PLAN OF MERGER
WHEREAS, the Boards of Directors of Buyer and Seller (all terms as
defined in Article I hereof) have determined to consummate certain business
combination transactions subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of such inducements and of the mutual
covenants and agreements contained herein, Buyer and Seller (as defined in
Article I) hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Act of God" shall mean an act occasioned exclusively by forces of
nature without the interference of any human agency.
"Agreement" shall mean this Agreement and Plan of Merger dated as of
October 10, 2001 between Buyer and Seller.
"Articles of Merger" shall mean the articles of merger to be filed with
the Pennsylvania Secretary of State with respect to the Company Merger.
"Bank Merger" shall mean the contemplated merger of Seller Bank into
Buyer Bank, with Buyer Bank surviving.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"BIF" shall mean the Bank Insurance Fund administered by the FDIC or
any successor thereto.
"Buyer" shall mean Fidelity Bancorp, Inc., a Pennsylvania corporation.
"Buyer Bank" shall mean Fidelity Savings Bank (doing business as
Fidelity Bank), a Pennsylvania-chartered stock savings bank and wholly owned
subsidiary of Buyer.
"Buyer Common Stock" shall mean the common stock, par value $.01 per
share, of Buyer.
"Buyer Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Buyer as of September
30, 2000 and 1999 and the consolidated income statements and statements of
changes in equity and cash flows (including related notes and schedules, if any)
of Buyer for the three years ended September 30, 2000, as filed by Buyer in its
Securities Documents, and (ii) the consolidated balance sheets (including
related notes and schedules, if any) of Buyer and the consolidated income
statements and statements of
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changes in equity and cash flows (including related notes and schedules, if any)
of Buyer included in Securities Documents filed by Buyer with respect to the
periods ended subsequent to September 30, 2000.
"Cash Merger Consideration" shall mean $14.75 in cash without interest
for each share of Seller Common Stock.
"Cause" shall mean termination because of the employee's personal
dishonesty in the conduct of his duties, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties or willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or final cease-and-desist order.
"Certificate" shall mean any certificate which prior to the Effective
Time represented shares of Seller Common Stock.
"Closing" shall mean the closing of the Company Merger at a time and
place reasonably selected by Buyer following the satisfaction or waiver of all
conditions to the Company Merger.
"Closing Date" shall mean the date on which the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company Merger" shall mean the contemplated Merger of Seller into
Buyer, with Buyer surviving.
"CRA" shall mean the Community Reinvestment Act.
"Department" shall mean the Pennsylvania Department of Banking.
"Dissenting Shares" shall mean any shares of Seller Common Stock whose
holder becomes entitled to the payment of the fair value of such shares under
the PBCL.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the time of the filing of the Articles of
Merger, or such later time as may be specified in the Articles of Merger.
"Environmental Claim" shall mean any written notice from any
Governmental Entity or third party alleging potential liability (including
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on, or resulting from the presence, or
release into the environment, of any Materials of Environmental Concern.
"Environmental Laws" shall mean 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 (i) the protection, preservation or restoration
of the environment (including air, water vapor, surface water, groundwater,
drinking
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water supply, surface soil, subsurface soil, plant and animal life or any other
natural resource), and/or (ii) the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of Materials of Environment Concern. The term Environmental Law
includes (i) the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. ss.9601, et seq; the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. ss.6901, et seq; the Clean Air Act, as
amended, 42 U.S.C. ss.7401, et seq; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. ss.1251, et seq; the Toxic Substances Control Act, as
amended, 15 U.S.C. ss.9601, et seq; the Emergency Planning and Community Right
to Know Act, 42 U.S.C. ss.1101, et seq; the Safe Drinking Water Act, 42 U.S.C.
ss.300f, et seq; and all comparable state and local laws, and (ii) any common
law (including common law that may impose strict liability) that may impose
liability or obligations for injuries or damages due to, or threatened as a
result of, the presence of or exposure to any Materials of Environmental
Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" shall mean an exchange agent designated by Buyer, who
shall be reasonably acceptable to Seller.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"Federal Reserve Board" or "FRB" shall mean the Board of Governors of
the Federal Reserve System.
"FHLB" shall mean the Federal Home Loan Bank of Pittsburgh.
"GAAP" shall mean generally accepted accounting principles.
"Governmental Entity" shall mean any federal or state court,
administrative agency or commission or other governmental authority or
instrumentality.
"Include" shall mean "include without limitation."
"Insider Loans" shall mean loans from Seller or Seller Bank to any
executive officer or director of Seller or Seller Bank or any associate or
related interest of any such person.
"IRC" shall mean the Internal Revenue Code of 1986, as amended.
"IRS" shall mean the Internal Revenue Service or any successor thereto.
"Market Value" shall mean the average of the last reported sales prices
per share of Buyer Common Stock as reported on the NASDAQ Exchange Composite
Transactions Tape (as reported in The Wall Street Journal, or, if not reported
thereby, another authoritative source as chosen by
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Buyer) for the fifteen consecutive full trading days (provided that if Buyer
Common Stock does not trade in each such day, then only that number of days in
which Buyer Common Stock is traded within such fifteen day period shall be
utilized in calculating the Market Value) immediately preceding one week prior
to the Closing Date.
"Material Adverse Effect" shall mean, with respect to any Party, any
effect that is material and adverse to the financial condition, results of
operations or business of that Party and its Subsidiaries taken as whole, or
that materially impairs the ability of any Party to consummate the Merger,
provided, however, that Material Adverse Effect shall not be deemed to include
the impact of (a) changes in laws and regulations or interpretations thereof
that are generally applicable to the banking or savings industries, (b) changes
in GAAP that are generally applicable to the banking or savings industries, (c)
expenses incurred in connection with the transactions contemplated hereby, (d)
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 (e) changes attributable to or
resulting from changes in general economic conditions, including changes in the
prevailing level of interest rates.
"Materials of Environmental Concern" shall mean pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products and any
other materials regulated under Environmental Laws.
"Merger" shall mean the Company Merger, the Bank Merger and the other
transactions contemplated by this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OTS" shall mean the Office of Thrift Supervision
"Parties" shall mean Buyer and Seller.
"PBCL" shall mean the Pennsylvania Business Corporation Law of 1988, as
amended.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Proxy Statement" shall mean the proxy statement to be delivered to
shareholders of Seller in connection with the solicitation of their approval of
this Agreement and the transactions contemplated hereby.
"Rights" shall mean warrants, options, rights, convertible securities
and other arrangements or commitments which obligate an entity to issue or
dispose of any of its capital stock or other ownership interests.
"SAIF" shall mean the Savings Association Insurance Fund administered
by the FDIC or any successor thereto.
"SEC" shall mean the Securities and Exchange Commission.
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"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars,
proxy statements, registration statements and all similar documents filed, or
required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the SEC promulgated thereunder.
"Seller" shall mean Carnegie Financial Corporation, a Pennsylvania
corporation.
"Seller Bank" shall mean Carnegie Savings Bank, a federally-chartered
stock savings bank and wholly owned subsidiary of Seller.
"Seller Common Stock" shall mean the common stock, par value $.10 per
share, of Seller.
"Seller Defined Benefit Plan" shall mean any Seller Employee Plan
constituting an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA.
"Seller Employee Plans" shall mean all stock option, employee stock
purchase and stock bonus plans, qualified pension, stock ownership or
profit-sharing plans, any deferred compensation, supplemental retirement plan,
director retirement plan, consultant, bonus or group insurance contract or any
other incentive, health and welfare or employee benefit plan or agreement
maintained for the benefit of employees or former employees of Seller or Seller
Bank, whether written or oral.
"Seller ESOP" shall mean the employee stock ownership plan of Seller,
as in effect as of the date hereof.
"Seller Financial Statements" shall mean (i) the consolidated
statements of financial condition (including related notes and schedules, if
any) of Seller as of December 31, 2000 and 1999 and the consolidated statements
of income, shareholders' equity and cash flows (including related notes and
schedules, if any) of Seller for the two years ended December 31, 2000 as filed
by Seller in its Securities Documents, and (ii) the consolidated statements of
financial condition of Seller (including related notes and schedules, if any)
and the consolidated statements of income, shareholders' equity and cash flows
(including related notes and schedules, if any) of Seller included in the
Securities Documents filed by Seller with respect to the periods ended
subsequent to December 31, 2000.
"Seller Options" shall mean the 15,709 granted and outstanding options
to purchase shares of Seller Common Stock at an exercise price of $8.50/share
issued pursuant to Seller's Stock Option Plan.
"Seller Preferred Stock" shall mean the shares of serial preferred
stock, par value $.01 per share, of Seller.
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"Seller Restricted Stock" shall mean Seller Common Stock subject to
restrictions pursuant to Seller's Restricted Stock Plan.
"Seller SEP" shall mean Seller's tax qualified defined contribution
plan other than the Seller ESOP.
"Seller Supplemental Retirement Plan" shall mean any supplemental
retirement plan for the benefit of any Seller officer, director, former director
or employee.
"Stock Merger Consideration" shall mean the number of shares of Buyer
Common Stock equal to the result obtained by dividing $14.75 by the Market
Value, as such term is defined herein, rounded to the nearest one-thousandth
decimal point.
"Subsidiary" and "Significant Subsidiary" shall have the meanings set
forth in Rule 1-02 of Regulation S-X of the SEC.
"Takeover Proposal" shall have the meaning set forth in Section 7.2
hereof.
"Termination Event" shall have the meaning set forth in Section 7.2
hereof.
ARTICLE II
THE MERGER
2.1 The Merger
----------
Subject to the terms and conditions of this Agreement, at the Effective
Time, Seller in the Company Merger shall be merged into Buyer in accordance with
the provisions of Section 1921 of the PBCL, and the separate corporate existence
of Seller shall cease. Buyer shall be the surviving corporation of the Company
Merger, and shall continue its corporate existence under the laws of the
Commonwealth of Pennsylvania. The name of the surviving corporation shall be as
stated in the Articles of Incorporation of Buyer immediately prior to the
Effective Time. The Articles of Incorporation and Bylaws of Buyer in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
and Bylaws of the surviving corporation until thereafter amended in accordance
with applicable law. Immediately following the Company Merger, Seller Bank shall
in the Bank Merger merge with Buyer Bank, with Buyer Bank surviving.
2.2 Effective Time; Closing
-----------------------
The Company Merger shall become effective at the Effective Time. The
Articles of Merger shall be filed as soon after the Closing as is practicable.
2.3 Treatment of Capital Stock
--------------------------
Subject to the provisions of this Agreement, at the Effective Time,
automatically by virtue of the Company Merger and without any action on the part
of any shareholder:
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(a) each share of Buyer's common stock shall continue unchanged as the
same share of Buyer's common stock;
(b) each share of Seller Common Stock issued and outstanding (224,776
shares) immediately prior to the Effective Time (other than Dissenting Shares
and unvested shares of Seller Restricted Stock) shall, by virtue of the Company
Merger, and without any action of any kind by any person or entity, be converted
into, at the election of the holder as provided in and subject to the
limitations set forth in this Agreement, the right to receive either the Cash
Merger Consideration or the Stock Merger Consideration; provided, however, that
each share of Seller Common Stock which is owned beneficially or of record by
Seller (including treasury shares) or Buyer or any of their respective
Subsidiaries (other than shares held in a fiduciary capacity for the benefit of
third parties or as a result of debts previously contracted) shall be canceled
and retired without consideration or conversion. The Cash Merger Consideration
and the Stock Merger Consideration are sometimes referred to herein collectively
as the "Merger Consideration".
(c) Notwithstanding any other provision of this Agreement, no fraction
of a share of Buyer Common Stock and no certificates or scrip therefor will be
issued in the Merger; instead, Buyer shall pay to each holder of Seller Common
Stock who would otherwise be entitled to a fraction of a share of Buyer Common
Stock an amount in cash, rounded to the nearest cent, determined by multiplying
such fraction by the Market Value.
2.4 Election and Proration Procedures
---------------------------------
(a) An election form ("Election Form") and other appropriate and
customary transmittal materials, which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of such Certificates to the Exchange Agent in such form as
Seller and Buyer shall mutually agree shall be mailed not more than 45 days nor
fewer than 30 days prior to the Closing Date to each holder of record of shares
of Seller Common Stock (other than holders of Dissenting Shares or shares of
Seller Common Stock to be canceled as provided in Section 2.3(b)) as of a record
date as close as practicable to the date of mailing and mutually agreed to by
Buyer and Seller. The Exchange Agent will use its best efforts to make the
Election Form available to the persons who become shareholders of Seller during
the period between such record date and the Closing Date.
(b) Each Election Form shall entitle the holder of more than 100 shares
of Seller Common Stock (or the beneficial owner through appropriate and
customary documentation and instructions) to (i) elect to receive the Cash
Merger Consideration for all of such holder's shares (a "Cash Election"), (ii)
elect to receive the Stock Merger Consideration for all of such holder's shares
(a "Stock Election"), or (iii) make no election or to indicate that such holder
has no preference as to the receipt of the Cash Merger Consideration or the
Stock Merger Consideration (a "Non-Election"). At the election of the Buyer, all
or part of the holders of 100 shares or less of Seller Common Stock may
automatically be required to receive all Cash Merger Consideration. Holders of
record of shares of Seller Common Stock who hold such shares as nominees,
trustees or in other representative capacities (a "Representative") may submit
multiple Election Forms, provided that such Representative certifies that each
such Election Form covers all the shares of Seller Common Stock held by that
Representative for a particular beneficial owner. Shares of Seller Common Stock
as
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to which a Cash Election has been made are referred to herein as "Cash Election
Shares." Shares of Seller Common Stock as to which a Stock Election has been
made are referred to herein as "Stock Election Shares." Shares of Seller Common
Stock as to which no election has been made are referred to as "Non-Election
Shares." The aggregate number of shares of Seller Common Stock with respect to
which a Stock Election has been made is referred to herein as the "Stock
Election Number."
(c) To be effective, a properly completed Election Form shall be
submitted to the Exchange Agent on or before 5:00 p.m. Eastern time on the fifth
business day immediately preceding the Closing Date (or such other time and date
as Seller and Buyer may mutually agree) (the "Election Deadline"). An election
shall have been properly made only if the Exchange Agent shall have actually
received a properly completed Election Form by the Election Deadline. An
Election Form shall be deemed properly completed only if accompanied by one or
more Certificates (or customary affidavits and, if required by Buyer pursuant to
Section 2.5(i), indemnification regarding the loss or destruction of such
Certificates or the guaranteed delivery of such Certificates) representing all
shares of Seller Common Stock covered by such Election Form, together with duly
executed transmittal materials included with the Election Form. Any Seller
shareholder may at any time prior to the Election Deadline change his election
by written notice received by the Exchange Agent prior to the Election Deadline
accompanied by a properly completed and signed revised Election Form. Any Seller
shareholder may, at any time prior to the Election Deadline, revoke his election
by written notice received by the Exchange Agent prior to the Election Deadline
or by withdrawal prior to the Election Deadline of his Certificates, or of the
guarantee of delivery of such Certificates, previously deposited with the
Exchange Agent. All elections shall be revoked automatically if the Exchange
Agent is notified in writing by Buyer and Seller that this Agreement has been
terminated. If a shareholder either (i) does not submit a properly completed
Election Form by the Election Deadline, or (ii) revokes its Election Form prior
to the Election Deadline, the shares of Seller Common Stock held by such
shareholder shall be designated Non-Election Shares. Buyer shall cause the
Certificates representing Seller Common Stock described in (ii) to be promptly
returned without charge to the person submitting the Election Form upon written
request to that effect from the person who submitted the Election Form. Subject
to the terms of this Agreement and of the Election Form, the Exchange Agent
shall have reasonable discretion to determine whether any election, revocation
or change has been properly or timely made and to disregard immaterial defects
in any Election Form, and any good faith decisions of the Exchange Agent
regarding such matters shall be binding and conclusive.
(d) Notwithstanding any other provision contained in this Agreement, no
more than 55% and no less than 50.1% of the total number of shares of Seller
Common Stock outstanding at the Effective Time, (the final number falling within
such range being the "Stock Conversion Number"), shall be converted into the
Stock Merger Consideration and the remaining outstanding shares of Seller Common
Stock shall be converted into the Cash Merger Consideration (in each case,
excluding (i) shares of Seller Common Stock to be canceled as provided in
Section 2.3(b) and (ii) Dissenting Shares (the shares remaining outstanding
after such exclusion constituting, for purposes of this Agreement, the
"Outstanding Seller Shares")); provided, however, that for federal income tax
purposes, it is intended that the Merger will qualify as a reorganization under
the provisions of Section 368(a) of the IRC and, notwithstanding anything to the
contrary contained herein, in order that the Merger will not fail to satisfy
continuity of interest requirements under applicable federal
8
income tax principles relating to reorganizations under Section 368(a) of the
IRC, as reasonably determined by counsel to Buyer and Seller, Buyer shall
increase the number of outstanding Seller shares that will be converted into the
Stock Merger Consideration and reduce the number of outstanding Seller shares
that will be converted into the right to receive the Cash Merger Consideration.
(e) Within five business days after the later to occur of the Election
Deadline or the Closing Date, Buyer shall cause the Exchange Agent to effect the
allocation among holders of Seller Common Stock of rights to receive the Cash
Merger Consideration and the Stock Merger Consideration as follows:
(i) If the Stock Election Number exceeds the Stock Conversion
Number, then all Cash Election Shares and all Non-Election Shares shall be
converted into the right to receive the Cash Merger Consideration, and each
holder of Stock Election Shares will be entitled to receive the Stock Merger
Consideration in respect of that number of Stock Election Shares equal to the
product obtained by multiplying (x) the number of Stock Election Shares held by
such holder by (y) a fraction, the numerator of which is the Stock Conversion
Number and the denominator of which is the Stock Election Number, with the
remaining number of such holder's Stock Election Shares being converted into the
right to receive the Cash Merger Consideration;
(ii) If the Stock Election Number is less than the Stock
Conversion Number (the amount by which the Stock Conversion Number exceeds the
Stock Election Number being referred to herein as the "Shortfall Number"), then
all Stock Election Shares shall be converted into the right to receive the Stock
Merger Consideration and the Non-Election Shares and Cash Election Shares shall
be treated in the following manner:
(A) if the Shortfall Number is less than or equal to the number of Non-
Election Shares, then all Cash Election Shares shall be converted into the right
to receive the Cash Merger Consideration and each holder of Non-Election Shares
shall receive the Stock Merger Consideration in respect of that number of
Non-Election Shares equal to the product obtained by multiplying (x) the number
of Non-Election Shares held by such holder by (y) a fraction, the numerator of
which is the Shortfall Number and the denominator of which is the total number
of Non-Election Shares, with the remaining number of such holder's Non-Election
Shares being converted into the right to receive the Cash Merger Consideration;
or
(B) if the Shortfall Number exceeds the number of Non-Election Shares,
then all Non-Election Shares shall be converted into the right to receive the
Stock Merger Consideration, and each holder of Cash Election Shares shall
receive the Stock Merger Consideration in respect of that number of Cash
Election Shares equal to the product obtained by multiplying (x) the number of
Cash Election Shares held by such holder by (y) a fraction, the numerator of
which is the amount by which (1) the Shortfall Number exceeds (2) the total
number of Non-Election Shares and the denominator of which is the total number
of Cash Election Shares, with the remaining number of such holder's Cash
Election Shares being converted into the right to receive the Cash Merger
Consideration.
9
For purposes of this Section 2.4(e), if Buyer is obligated to increase
the number of Outstanding Seller Shares to be converted into shares of Buyer
Common Stock as a result of the application of the last clause of Section 2.4(d)
above, then the higher number shall be substituted for the Stock Conversion
Number in the calculations set forth in this Section 2.4(e).
2.5 Exchange Procedures
-------------------
(a) Appropriate transmittal materials ("Letter of Transmittal") in a
form satisfactory to Buyer and Seller shall be mailed as soon as practicable
after the Closing Date to each holder of record of Seller Common Stock as of the
Closing Date who did not previously submit a completed Election Form. A Letter
of Transmittal will be deemed properly completed only if accompanied by
certificates representing all shares of Seller Common Stock to be converted
thereby.
(b) At and after the Closing Date, each Certificate (except as
specifically set forth in Section 2.3(b) shall represent only the right to
receive the Merger Consideration.
(c) At the Effective Time, Buyer shall make available to the Exchange
Agent, for the benefit of the holders of shares of Seller Common Stock, for
exchange in accordance with this Section 2.5, an amount of cash sufficient to
pay the aggregate Cash Merger Consideration and the aggregate amount of cash in
lieu of fractional shares to be paid pursuant to Section 2.3(c), and Buyer shall
reserve for issuance with its transfer agent and registrar a sufficient number
of shares of Buyer Common Stock to provide for payment of the aggregate Stock
Merger Consideration.
(d) The Letter of Transmittal shall (i) specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent, (ii) be in a form and
contain any other provisions as Buyer may reasonably determine and (iii) include
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon the proper surrender of the Certificates to
the Exchange Agent, together with a properly completed and duly executed Letter
of Transmittal, the holder of such Certificates shall be entitled to receive in
exchange therefor (m) a certificate representing that number of whole shares of
Buyer Common Stock that such holder has the right to receive pursuant to Section
2.3(b), if any, and (n) a check in the amount equal to the cash that such holder
has the right to receive pursuant to Section 2.3(b), if any, (including any cash
in lieu of fractional shares, if any, that such holder has the right to receive
pursuant to Section 2.3(c)) and any dividends or other distributions to which
such holder is entitled pursuant to this Section 2.5. Certificates so
surrendered shall forthwith be canceled. As soon as practicable following
receipt of the properly completed Letter of Transmittal and any necessary
accompanying documentation, the Exchange Agent shall distribute Buyer 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 Buyer
Common Stock held by it from time to time hereunder, except that it shall
receive and hold all dividends or other distributions paid or distributed with
respect to such shares for the account of the persons entitled thereto. If there
is a transfer of ownership of any shares of Seller Common Stock not registered
in the transfer records of Seller, the Merger Consideration shall be issued to
the transferee thereof if the Certificates representing such Seller Common Stock
are presented to the Exchange Agent, accompanied by all documents required, in
the reasonable judgment of Buyer and the Exchange Agent, (x) to evidence and
effect such transfer and (y) to evidence that any applicable stock transfer
taxes have been paid.
10
(e) No dividends or other distributions declared or made after the
Effective Time with respect to Buyer Common Stock shall be remitted to any
person entitled to receive shares of Buyer Common Stock hereunder until such
person surrenders his Certificates in accordance with this Section 2.5. Upon the
surrender of such person's Certificates, such person shall be entitled to
receive any dividends or other distributions, without interest thereon, which
theretofore had become payable with respect to shares of Buyer Common Stock
represented by such person's Certificates.
(f) The stock transfer books of Seller shall be closed immediately upon
the Effective Time and from and after the Effective Time there shall be no
transfers on the stock transfer records of Seller of any shares of Seller Common
Stock. If, after the Effective Time, Certificates are presented to Buyer, they
shall be canceled and exchanged for the Merger Consideration deliverable in
respect thereof pursuant to this Agreement in accordance with the procedures set
forth in this Section 2.5.
(g) Any portion of the aggregate amount of cash to be paid pursuant to
Section 2.3, any dividends or other distributions to be paid pursuant to this
Section 2.5 or any proceeds from any investments thereof that remains unclaimed
by the shareholders of Seller for six months after the Effective Time shall be
repaid by the Exchange Agent to Buyer upon the written request of Buyer. After
such request is made, any shareholders of Seller who have not theretofore
complied with this Section 2.5 shall look only to Buyer for the Merger
Consideration deliverable in respect of each share of Seller Common Stock such
shareholder holds, as determined pursuant to Section 2.3 of this Agreement,
without any interest thereon. If outstanding Certificates are not surrendered
prior to the date on which such payments would otherwise escheat to or become
the property of any governmental unit or agency, the unclaimed items shall, to
the extent permitted by any abandoned property, escheat or other applicable
laws, become the property of Buyer (and, to the extent not in its possession,
shall be paid over to it), free and clear of all claims or interest of any
person previously entitled to such claims. Notwithstanding the foregoing,
neither the Exchange Agent nor any party to this Agreement (or any affiliate
thereof) shall be liable to any former holder of Seller Common Stock for any
amount delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(h) Buyer and the Exchange Agent shall be entitled to rely upon
Seller's stock transfer books to establish the identity of those persons
entitled to receive the Merger Consideration, which books shall be conclusive
with respect thereto. In the event of a dispute with respect to ownership of
stock represented by any Certificate, Buyer and the Exchange Agent shall be
entitled to deposit any Merger Consideration represented thereby in escrow with
an independent third party and thereafter be relieved with respect to any claims
thereto.
(i) If any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such Certificate
to be lost, stolen or destroyed and, if required by the Exchange Agent, the
posting by such person of a bond in such amount as the Exchange Agent may direct
as indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the Merger Consideration deliverable in respect thereof
pursuant to Section 2.3.
11
(j) Buyer shall be entitled to deduct and withhold from consideration
otherwise payable pursuant to this Agreement to any holder of Certificates, such
amounts as it is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by Buyer, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the Certificates in respect of which such deduction and withholding
was made.
2.6 Options and Restricted Stock
----------------------------
(a) At the Effective Time, each Seller Option (15,709) granted and
outstanding to an eligible individual (an "Optionee") under Seller's Stock
Option Plan shall be cancelled and extinguished in consideration and exchange
for the right to receive a cash payment equal to the Cash Merger Consideration
less $8.50 (the applicable option exercise price per share), less applicable
federal and state tax withholding obligations of the Optionee ("Cash-out"). Such
Cash-out shall be paid as of the Effective Time by Seller to the Optionee
following receipt by Seller of a Cancellation Agreement, in form and substance
similar to Exhibit 2.6(a), delivered by the Optionee to Seller.
(b) At the Effective Time, each awarded but unvested share of Seller
Restricted Stock under Seller's Restricted Stock Plan shall be cancelled and
extinguished in consideration and exchange for the right to receive a cash
payment from Seller equal to the Cash Merger Consideration for each such share
of Seller Restricted Stock, subject to applicable federal and state tax
withholding obligations of Seller, together with accumulated but undistributed
dividends on such Seller Restricted Stock following receipt by Seller Bank of a
Cancellation Agreement, in form and substance similar to Exhibit 2.6(b),
delivered by the Restricted Stock Recipient to Seller Bank.
2.7 Dissenting Shares
-----------------
(a) Any holders of Dissenting Shares shall be entitled to payment for
such shares only to the extent permitted by and in accordance with the
provisions of the PBCL; provided, however, that if, in accordance with the PBCL,
any holder of Dissenting Shares shall forfeit such right to payment of the fair
value of such shares, such shares shall thereupon be deemed to have been
converted into and to have become exchangeable for, as of the Effective Time,
the right to receive the Merger Consideration. Dissenting Shares shall not,
after the Effective Time, be entitled to vote for any purpose or receive any
dividends or other distributions and shall be entitled only to such rights as
are afforded in respect of Dissenting Shares pursuant to the PBCL.
(b) Seller shall give Buyer (i) prompt notice of any written objections
to the Company Merger and any written demands for the payment of the fair value
of any shares, withdrawals of such demands, and any other instruments served
pursuant to the PBCL received by Seller and (ii) the opportunity to participate
in all negotiations and proceedings with respect to such demands under the PBCL.
Seller shall not voluntarily make any payment with respect to any demands for
payment of fair value and shall not, except with the prior written consent of
Buyer, settle or offer to settle any such demands.
(c) No more than 7% of the outstanding shares of Seller Common Stock
shall be Dissenting Shares.
12
2.8 Additional Actions
------------------
If, at any time after the Effective Time, Buyer 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 Buyer its
right, title or interest in, to or under any of the rights, properties or assets
of Seller acquired or to be acquired by Buyer as a result of, or in connection
with, the Merger, or (ii) otherwise carry out the purposes of this Agreement,
Seller and its proper officers and directors shall be deemed to have granted to
Buyer 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 Buyer and otherwise to carry out the purposes of this Agreement;
and the proper officers and directors of Buyer are fully authorized in the name
of Seller or otherwise to take any and all such action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND SELLER BANK
Seller and Seller Bank represent and warrant to Buyer as follows:
3.1 Capital Structure
-----------------
The authorized capital stock of Seller consists of 4,000,000 shares of
Seller Common Stock and 2,000,000 shares of Seller Preferred Stock. As of the
date hereof, 224,776 shares of Seller Common Stock are outstanding (including
3,886 shares of Seller Restricted Stock held by Seller's Restricted Stock Plan),
13,274 shares of Seller Common Stock are held in treasury, and no shares of
Seller Preferred Stock have been issued. All outstanding shares of Seller Common
Stock have been duly authorized and validly issued and are fully paid and
nonassessable, and none of the outstanding shares of Seller Common Stock have
been issued in violation of the preemptive rights of any person, firm or entity.
Except for (i) Seller Options to acquire not more than 15,709 shares of Seller
Common Stock as of the date hereof, as set forth on Schedule 3.14(j) hereto, and
(ii) 3,886 unvested shares of Seller Restricted Stock as of the date hereof as
set forth on Schedule 3.1(ii) hereto, there are no Rights authorized, issued or
outstanding with respect to the capital stock of Seller as of the date hereof.
3.2 Organization, Standing and Authority of Seller
----------------------------------------------
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania, with full corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as now conducted, and Seller is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
licensing or qualification. Seller is a savings and loan holding company under
the SLHCA and subject to the regulation and supervision by the OTS. Seller has
heretofore delivered to Buyer true and complete copies of the Articles of
Incorporation and Bylaws of Seller as in effect as of the date hereof.
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3.3 Ownership of Seller Subsidiary
------------------------------
Schedule 3.3 sets forth the name, jurisdiction of incorporation and
percentage of ownership of Seller Bank as Seller's only Significant Subsidiary.
Except for (x) capital stock of Seller Bank, (y) securities and other interests
held in a fiduciary capacity and beneficially owned by third parties or taken in
consideration of debts previously contracted and (z) securities and other
interests which are set forth on Schedule 3.3, Seller does not own or have the
right to acquire, directly or indirectly, any outstanding capital stock or other
voting securities or ownership interests of any corporation, bank, savings
association, partnership, joint venture or other organization, other than
investment securities representing not more than 5% of any entity. The
outstanding shares of capital stock or other ownership interests of Seller Bank
has been duly authorized and validly issued, are fully paid and nonassessable,
and are directly owned by Seller free and clear of all liens, claims,
encumbrances, charges, pledges, restrictions or rights of third parties of any
kind whatsoever. No rights are authorized, issued or outstanding with respect to
the capital stock or other ownership interests of Seller Bank, and there are no
agreements, understandings or commitments relating to the right of Seller to
vote or to dispose of such capital stock or other ownership interests.
3.4 Organization, Standing and Authority of Seller Bank
---------------------------------------------------
Seller Bank is a federally-chartered stock savings bank duly organized,
validly existing and in good standing with full power and authority to own or
lease all of its properties and assets and to carry on its business as now
conducted, and Seller Bank is duly licensed or qualified to do business and is
in good standing in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such licensing or
qualification. The deposit accounts of Seller Bank are insured by the FDIC to
the maximum extent permitted by the FDIA and Seller Bank has paid all deposit
insurance premiums and assessments required by the FDIA and the regulations
thereunder. Seller has heretofore delivered to Buyer true and complete copies of
the Charter and Bylaws of Seller Bank as in effect as of the date hereof.
3.5 Authorized and Effective Agreement
----------------------------------
(a) Seller has all requisite power and authority to enter into this
Agreement and (subject to receipt of all necessary governmental approvals and
the approval of Seller's shareholders of this Agreement and subject to the
amendment of Seller's Articles of Incorporation and to the amendment of the
Charter of Seller Bank, if necessary, with respect to acquisitions of more than
10% of the outstanding shares of Seller and Seller Bank) to perform all of its
respective obligations hereunder. The execution and delivery of this Agreement
and the completion of the transactions contemplated hereby have been deemed
advisable by the Board and duly authorized and approved by all necessary
corporate action in respect thereof on the part of Seller, except for the
approval of this Agreement by Seller's shareholders. This Agreement has been
duly and validly executed and delivered by Seller and, assuming due
authorization, execution and delivery by Buyer, constitutes a legal, valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms, subject, as to enforceability, to bankruptcy, insolvency and other laws
of general applicability relating to or affecting creditors' rights and to
general equity principles and except to the extent such enforceability may be
limited by laws relating to safety and soundness of insured depository
institutions as set forth in 12 USC 1818(6) or by the appointment of a
conservator by the FDIC.
14
(b) Neither the execution and delivery of this Agreement nor completion
of the transactions contemplated hereby, nor compliance by Seller with any of
the provisions hereof and subject to the amendment of Seller's Articles of
Incorporation and to the amendment of the Charter of Seller Bank, if necessary,
with respect to acquisitions of more than 10% of the outstanding shares of
Seller and Seller Bank (i) does or will conflict with or result in a breach of
any provisions of the Articles of Incorporation or Bylaws of Seller or the
equivalent documents of Seller Bank, (ii) violate, conflict with or result in a
breach of any term, condition or provision of, or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or give rise to any right of termination, cancellation or acceleration
with respect to, or result in the creation of any lien, charge or encumbrance
upon any property or asset of Seller or Seller Bank pursuant to, any material
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which Seller or Seller Bank is a party, or by
which any of their respective properties or assets may be bound or affected, or
(iii) subject to receipt of all required governmental and shareholder approvals,
violates any order, writ, injunction, decree, statute, rule or regulation
applicable to Seller or Seller Bank.
(c) To the best knowledge of Seller, and subject to the amendment of
Seller's Articles of Incorporation and to the amendment of the Charter of Seller
Bank, if necessary, with respect to acquisitions of more than 10% of the
outstanding shares of Seller and Seller Bank, except for (i) the filing of
applications and notices with and the approvals of the OTS, the FDIC and FRB,
(ii) the filing of applications with the Department and the approvals of the
Department, (iii) the filing and clearance of the Proxy Statement relating to
the meeting of shareholders of Seller to be held pursuant to Section 5.2 hereof
with the SEC, (iv) the approval of this Agreement and the transactions
contemplated hereby by the requisite vote of the shareholders of Seller, (v) the
filing of Articles of Combination with the OTS and Articles of Merger with the
Department in connection with the Bank Merger, (vi) the filing of Articles of
Merger with the Secretary of State of the Commonwealth of Pennsylvania in
connection with the Company Merger, and (vii) review of the Merger by the DOJ
under federal antitrust laws, no consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are necessary
on the part of Seller or Seller Bank in connection with (x) the execution and
delivery by Seller of this Agreement and the completion of the transactions
contemplated hereby, or (y) the Merger. Seller, as the sole shareholder of
Seller Bank, has taken all necessary shareholder action to approve the Bank
Merger.
(d) As of the date hereof, neither Seller nor Seller Bank is aware of
any reasons relating to Seller or Seller Bank (including CRA compliance) why all
consents and approvals shall not be procured from all Governmental Entities
having jurisdiction over the Merger as shall be necessary for the completion of
the Merger and the continuation by Buyer after the Effective Time of the
business of each of Seller and Seller Bank, respectively, as such business is
carried on immediately prior to the Effective Time, free of any conditions or
requirements which could materially impair the value of Seller or Seller Bank to
Buyer.
15
3.6 Securities Documents and Regulatory Reports
-------------------------------------------
(a) For the period commencing July 1, 1998, Seller has timely filed
with the SEC and the NASD all Securities Documents required by the Securities
Laws and such Securities Documents complied in all material respects with the
Securities Laws and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) For the period commencing July 1, 1998, each of Seller and Seller
Bank has duly filed with the OTS, FDIC, and any other applicable federal banking
authority, as the case may be, the reports required to be filed under applicable
laws and regulations and such reports were in all material respects complete and
accurate and in compliance with the requirements of applicable laws and
regulations. In connection with the most recent examinations of Seller and
Seller Bank by the OTS and the FDIC, neither Seller nor Seller Bank was required
to correct or change any action, procedure or proceeding which Seller or Seller
Bank believes has not been corrected or changed as required.
3.7 Financial Statements
--------------------
(a) Seller has previously delivered or made available to Buyer accurate
and complete copies of the Seller Financial Statements, which are accompanied by
the audit report of S.R. Xxxxxxxxx, independent certified public accountants
with respect to Seller. The Seller Financial Statements, as well as the Seller
Financial Statements to be delivered pursuant to Section 5.8 hereof, fairly
present or will fairly present, as the case may be, the consolidated financial
condition of Seller as of the respective dates set forth therein, and the
consolidated income, changes in shareholders' equity and cash flows of Seller
for the respective periods or as of the respective dates set forth therein.
(b) Each of the Seller Financial Statements referred to in Section
3.7(a) has been or will be, as the case may be, prepared in accordance with GAAP
consistently applied during the periods involved, except as stated therein. The
audits of Seller have been conducted in all material respects in accordance with
generally accepted auditing standards. The books and records of Seller and
Seller Bank are being maintained in compliance with applicable legal and
accounting requirements, and such books and records accurately reflect all
dealings and transactions in respect of the business, assets, liabilities and
affairs of Seller and Seller Bank.
(c) Except and to the extent (i) reflected, disclosed or provided for
in the Seller Financial Statements, (ii) of liabilities since incurred in the
ordinary course of business and (iii) of liabilities incurred in connection with
completion of the transactions contemplated by this Agreement, neither Seller
nor Seller Bank has any liabilities, whether absolute, accrued, contingent or
otherwise.
3.8 Material Adverse Change
-----------------------
Since January 1, 2001, except as set forth on Schedule 3.8 hereto, (i)
Seller and Seller Bank have conducted their respective businesses in the
ordinary and usual course (excluding the incurrence
16
of expenses in connection with this Agreement and the transactions contemplated
hereby) and (ii) no event has occurred or circumstance arisen that, in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect on
Seller.
3.9 Environmental Matters
---------------------
(a) Seller and Seller Bank are in compliance with all Environmental
Laws. Neither Seller nor Seller Bank has received any communication alleging
that Seller or Seller Bank is not in such compliance and, to the best knowledge
of Seller, there are no present circumstances that would prevent or interfere
with the continuation of such compliance.
(b) None of the properties owned, leased or operated by Seller or
Seller Bank has been or is in violation of or liable under any Environmental
Law.
(c) There are no past or present actions, activities, circumstances,
conditions, events or incidents that could reasonably form the basis of any
Environmental Claim or other claim or action or governmental investigation that
could result in the imposition of any liability arising under any Environmental
Law against Seller or Seller Bank or against any person or entity whose
liability for any Environmental Claim Seller or Seller Bank has or may have
retained or assumed either contractually or by operation of law.
(d) Except in the ordinary course of its loan underwriting activities,
and except as set forth on Schedule 3.9(d) hereto, Seller has not conducted any
environmental studies or real estate tests during the past five years with
respect to any properties owned by it or by Seller Bank as of the date hereof.
3.10 Tax Matters
-----------
(a) Seller and Seller Bank have timely filed all federal, state and
local (and, if applicable, foreign) income, franchise, bank, excise, real
property, personal property and other tax returns required by applicable law to
be filed by them (including estimated tax returns, income tax returns,
information returns and withholding and employment tax returns) and have paid,
or where payment is not required to have been made, have set up an adequate
reserve or accrual for the payment of, all taxes required to be paid in respect
of the periods covered by such returns and, as of the Effective Time, will have
paid, or where payment is not required to have been made, will have set up an
adequate reserve or accrual for the payment of, all material taxes for any
subsequent periods ending on or prior to the Effective Time. Neither Seller nor
Seller Bank will have any material liability for any such taxes in excess of the
amounts so paid or reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by Seller and its Subsidiaries are complete and accurate in all material
respects. Neither Seller nor Seller Bank is delinquent in the payment of any
tax, assessment or governmental charge or has requested any extension of time
within which to file any tax returns in respect of any fiscal year or portion
thereof. The federal, state and local income tax returns of Seller and Seller
Bank have not been audited by the applicable tax authorities during the past ten
years. There are currently no agreements in effect with respect to
17
Seller or Seller Bank to extend the period of limitations for the assessment or
collection of any tax. As of the date hereof, no audit, examination or
deficiency or refund litigation with respect to any such return is pending or,
to the best of Seller's knowledge, threatened.
(c) Except as set forth on Schedule 3.10(c), neither Seller nor Seller
Bank (i) is a party to any agreement providing for the allocation or sharing of
taxes, (ii) is required to include in income any adjustment pursuant to Section
481(a) of the Code by reason of a voluntary change in accounting method
initiated by Seller or Seller Bank (nor does Seller have any knowledge that the
IRS has proposed any such adjustment or change of accounting method) or (iii)
has filed a consent pursuant to Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply.
3.11 Legal Proceedings
-----------------
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of Seller, that are
unasserted or threatened against Seller or Seller Bank or against any asset,
interest or right of Seller or Seller Bank, or against any officer, director or
employee of either of them. Neither Seller nor Seller Bank is a party to any
order, judgment or decree that would have a Material Adverse Effect.
3.12 Compliance with Laws
--------------------
(a) Each of Seller and Seller Bank has all permits, licenses,
certificates of authority, orders and approvals of, and has made all filings,
applications and registrations with, all Governmental Entities that are required
in order to permit it to carry on its business as it is presently being
conducted; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and will not be adversely affected by
virtue of the completion of the Merger; and to the best knowledge of Seller, no
suspension or cancellation of any of the same is threatened.
(b) Except as set forth on Schedule 3.12(b), neither Seller nor Seller
Bank is in violation of its respective Articles of Incorporation, Charter or
Bylaws, or of any applicable federal, state or local law or ordinance or any
order, rule or regulation of any Governmental Entity (including all banking
(including all regulatory capital requirements), truth-in-lending, usury, fair
credit reporting, consumer protection, securities, municipal securities, safety,
health, environmental, zoning, anti- discrimination, antitrust, and wage and
hour laws, ordinances, orders, rules and regulations), or in default with
respect to any order, writ, injunction or decree of any court, or in default
under any order, license, regulation or demand of any Governmental Entity; and
neither Seller nor Seller Bank has received any notice or communication from any
Governmental Entity asserting that Seller or Seller Bank is in violation of any
of the foregoing. Except as set forth on Schedule 3.12(b), neither Seller nor
Seller 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 savings banks or holding companies
thereof issued by Governmental Entities), and neither of them has received any
written communication requesting that it enter into any of the foregoing.
18
3.13 Certain Information
-------------------
None of the information relating to Seller and Seller Bank supplied or
to be supplied by them for inclusion in the Proxy Statement, as of the date such
Proxy Statement is mailed to shareholders of Seller and up to and including the
date of the meeting of shareholders to which such Proxy Statement relates, will
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided that information as of a later
date shall be deemed to modify information as of an earlier date.
3.14 Employee Benefit Plans
----------------------
(a) Schedule 3.14 lists all Seller Employee Plans, complete and
accurate copies of which have been delivered to Buyer (including amendments and
agreements relating thereto) together with, in the case of tax-qualified plans,
(i) the most recent actuarial and financial reports prepared with respect
thereto, (ii) the most recent annual reports filed with any Governmental Entity
with respect thereto, and (iii) all rulings and determination letters and any
open requests for rulings or letters that pertain thereto.
(b) Seller, Seller Bank, any Seller Defined Benefit Plan or, to the
best of Seller's knowledge, any fiduciary of a Seller Defined Benefit Plan, have
incurred no material liability to the PBGC or the IRS with respect to any Seller
Defined Benefit Plan. To the best of Seller's knowledge, no reportable event
under Section 4043(b) of ERISA has occurred with respect to any Seller Defined
Benefit Plan.
(c) Neither Seller nor Seller 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) A favorable determination letter has been issued by the IRS with
respect to each Seller Defined Benefit Plan or Seller Employee Plans, including
Seller ESOP, which is intended to qualify under Section 401 of the Code to the
effect that such Seller Defined Benefit Plan and Seller Employee Plans,
including Seller ESOP, is qualified under Section 401 of the Code, and the trust
associated with such Seller Defined Benefit Plan and Seller Employee Plans,
including Seller ESOP, is tax exempt under Section 501 of the Code. No such
letter has been revoked or, to the best of Seller's knowledge, is threatened to
be revoked, and Seller does not know of any ground on which such revocation may
be based. Neither Seller nor Seller Bank has any liability under any such Seller
Defined Benefit Plan and Seller Employee Plans, including Seller ESOP, that is
not reflected in the Seller Financial Statements, other than liabilities
incurred in the ordinary course of business in connection therewith subsequent
to the date thereof.
(e) No transaction prohibited by Section 406 of ERISA (and not exempt
under Section 408 of ERISA or Section 4975 of the Code or pursuant to a class or
administrative exemption granted under those sections) has occurred with respect
to any Seller Employee Plan which would result in the imposition, directly or
indirectly, of an excise tax under Section 4975 of the Code or otherwise have a
Material Adverse Effect on Seller.
19
(f) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to the
date hereof, and full payment will be so made (or proper accruals will be so
established) of all contributions which are required for periods after the date
hereof and prior to the Effective Time, under the terms of each Seller Employee
Plan or ERISA; except as disclosed in the Seller Financial Statements, no
accumulated funding deficiency (as defined in Section 302 of ERISA or Section
412 of the Code), whether or not waived, exists with respect to any Seller
Defined Benefit Plan, and except as set forth on Schedule 3.14(f), there is no
"unfunded current liability" (as defined in Section 412 of the Code) with
respect to any Seller Defined Benefit Plan.
(g) The Seller Employee Plans have 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. All contributions required
to be made to Seller Employee Plans at the date hereof have been made, and all
contributions required to be made to Seller Employee Plans as of the Effective
Time will have been made as of such date.
(h) There are no pending or, to the best knowledge of Seller,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of Seller Employee Plans or any trust related thereto or any
fiduciary thereof.
(i) Neither Seller nor Seller Bank has made any payments, or is or has
been a party to any agreement or any Seller Employee Plan, that under any
circumstances could obligate it or its successor to make payments or deemed
payments, that are not or will not be deductible because of Sections 162(m) or
280G of the Code.
(j) Except as disclosed at Schedule 3.14(j), there are no stock options
to acquire Seller Common Stock that have been awarded to any individuals under
Seller's Stock Option Plan that are outstanding as of the date of executing this
Agreement or the Effective Time.
(k) Schedule 3.14(k) contains information with respect to any financial
reporting accruals established with respect to any Seller Supplemental
Retirement Plan and a schedule of all participants under any such plans, the
projected benefits obligations of such participants as of the date of such
financial reporting accruals, and the estimated payments to be made to each
participant upon termination of such plan in accordance with Section 5.10(i)
hereof.
3.15 Certain Contracts
-----------------
(a) Except as set forth on Schedule 3.15 hereto, neither Seller nor
Seller 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 any
agreement, indenture or other instrument, relating to the borrowing of money by
Seller or Seller Bank (other than in the case of Seller Bank deposits, FHLB
advances, federal funds purchased and securities sold under agreements to
repurchase in the ordinary course of business) or the guarantee by Seller or
Seller Bank of any obligation, other than by Seller Bank in the ordinary course
of its banking business, (ii) any agreement, arrangement or commitment relating
to the employment of a consultant or the employment, election or retention in
office of any
20
present or former director, officer or employee of Seller or Seller Bank, (iii)
any agreement, arrangement or understanding (other than as set forth in this
Agreement) pursuant to which any payment (whether of severance pay or otherwise)
became or may become due to any director, officer or employee of Seller or
Seller Bank upon execution of this Agreement or upon or following completion of
the transactions contemplated by this Agreement (either alone or in connection
with the occurrence of any additional acts or events); (iv) any agreement,
arrangement or understanding pursuant to which Seller or Seller Bank is
obligated to indemnify any director, officer, employee or agent of Seller or
Seller Bank, other than as set forth in Seller Employee Plans and in the
Articles of Incorporation, Bylaws or other governing documents of Seller and
Seller Bank; (v) any agreement, arrangement or understanding to which Seller or
Seller Bank is a party or by which any of the same is bound which limits the
freedom of Seller or Seller 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; or (vii) any agreement, arrangement or understanding which would be
required to be filed as an exhibit to Seller's Annual Report on Form 10-KSB
under the Exchange Act and which has not been so filed.
(b) Neither Seller nor Seller Bank is in default or in non-compliance
under any contract, agreement, commitment, arrangement, lease, insurance policy
or other instrument to which it is a party or by which its assets, business or
operations may be bound or affected, whether entered into in the ordinary course
of business or otherwise and whether written or oral, and there has not occurred
any event that with the lapse of time or the giving of notice, or both, would
constitute such a default or non-compliance.
3.16 Brokers and Finders
-------------------
Except for the agreement with Capital Resources Group, Inc., as set
forth on Schedule 3.16 hereto, neither Seller nor Seller Bank nor any of their
respective directors, officers or employees, has employed any broker or finder
or incurred any liability for any broker or finder fees or commissions in
connection with the transactions contemplated hereby.
3.17 Insurance
---------
Each of Seller and Seller Bank is insured for reasonable amounts with
financially sound and reputable insurance companies against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured and has maintained all insurance required by
applicable laws and regulations.
3.18 Properties
----------
All real and personal property owned by Seller or Seller Bank or
presently used by either of them in its respective business is in good condition
(ordinary wear and tear excepted) and is sufficient to carry on the business of
Seller and Seller Bank in the ordinary course of business consistent with their
past practices. Seller has good and marketable title free and clear of all
liens, encumbrances, charges, defaults or equities (other than equities of
redemption under applicable foreclosure laws) to all of its properties and
assets, real and personal, except (i) liens for current taxes
21
not yet due or payable, (ii) pledges to secure deposits and other liens incurred
in the ordinary course of its banking business, (iii) such imperfections of
title, easements and encumbrances, if any, as are de minimis in character,
amount or extent and (iv) as reflected in the Seller Financial Statements. All
real and personal property which is material to Seller's business on a
consolidated basis and leased or licensed by Seller or Seller Bank is held
pursuant to leases or licenses which are valid and enforceable in accordance
with their respective terms and such leases will not terminate or lapse prior to
the Effective Time. All improved real property owned by Seller or Seller Bank is
in compliance with all applicable zoning laws.
3.19 Labor
-----
No work stoppage involving Seller or Seller Bank is pending or, to the
best knowledge of Seller, threatened. Neither Seller nor Seller Bank is involved
in or, to the best knowledge of Seller, threatened with or affected by, any
labor dispute, arbitration, lawsuit or administrative proceeding involving the
employees of Seller or Seller Bank. Employees of Seller and Seller Bank are not
represented by any labor union nor are any collective bargaining agreements
otherwise in effect with respect to such employees, and to the best of Seller's
knowledge, there have been no efforts to unionize or organize any employees of
Seller or Seller Bank during the past five years.
3.20 Allowance for Loan Losses
-------------------------
The allowance for loan losses reflected on Seller's consolidated
statement of financial condition included in the Seller Financial Statements is,
and will be in the case of subsequently delivered the Seller Financial
Statements, in the opinion of Seller's management, adequate in all material
respects as of their respective dates under the requirements of GAAP to provide
for reasonably anticipated losses on outstanding loans, net of recoveries. The
real estate owned, if any, reflected in the Seller Financial Statements is, and
will be in the case of subsequently delivered the Seller Financial Statements,
carried at the lower of cost or fair value, less estimated costs to sell, as
required by GAAP.
3.21 Material Interests of Certain Persons
-------------------------------------
(a) No officer or director of Seller, Seller Bank or any "associate"
(as such term is defined in Rule 14a-1 under the Exchange Act) or related
interest of any such person has any material interest in any material contract
or property (real or personal, tangible or intangible), used in, or pertaining
to, the business of Seller or Seller Bank.
(b) Except as set forth on Schedule 3.21(b), there are no Insider Loans
as of the date hereof.
3.22 Fairness Opinion
----------------
Seller has received an opinion from Capital Resources Group, Inc. to
the effect that, as of the date hereof, the Merger Consideration to be received
by shareholders of Seller pursuant to this Agreement is fair, from a financial
point of view, to such shareholders.
22
3.23 Disclosures
-----------
None of the representations and warranties of Seller or any of the
written information or documents furnished or to be furnished by Seller to Buyer
in connection with or pursuant to this Agreement or the completion of the
transactions contemplated hereby, when considered as a whole, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
3.24 No Undisclosed Liabilities
--------------------------
Seller and Seller Bank do not have any liability, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due, including
any liability for taxes (and there is no past or present fact, situation,
circumstance, condition or other basis for any present or future action, suit or
proceeding, hearing, charge, complaint, claim or demand against Seller or Seller
Bank giving rise to any such liability) required in accordance with generally
accepted accounting principles to be reflected in an audited consolidated
balance sheet of Seller, except and to the extent (i) reflected, disclosed or
provided for in the Seller Financial Statements, (ii) of liabilities since
incurred in the ordinary course of business and (iii) of liabilities incurred in
connection with completion of the transactions contemplated by this Agreement.
3.25 Loan Portfolio
--------------
(i) All loans and discounts shown on the Seller Financial Statements or
which were entered into after the date of the most recent balance sheet included
in the Seller Financial Statements were and shall be made for good, valuable and
adequate consideration in the ordinary course of the business of Seller and
Seller Bank, in accordance with sound banking practices, and are not subject to
any known defenses, set-offs or counter-claims, including any such as are
afforded by usury or truth in lending laws, except as may be provided by
bankruptcy, solvency or similar laws or by general principles of equity, (ii)
the notes or other evidence of indebtedness evidencing such loans in all forms
of pledges, mortgages and other collateral documents and security agreements are
and shall be in force, valid, true and genuine and what they purport to be, and
(iii) except as set forth on Schedule 3.25(iii), Seller and Seller Bank have
complied and shall prior to the Effective Time comply with all laws and
regulations relating to such loans.
3.26 Investment Portfolio
--------------------
All investment securities held by Seller or Seller Bank, as reflected
in the consolidated balance sheets of Seller included in the Seller Financial
Statements, are carried in accordance with GAAP, specifically including but not
limited to, FAS 115.
3.27 Interest Rate Risk Management Instruments
-----------------------------------------
Schedule 3.27 sets forth any interest rate swaps, caps, floors, option
agreements or other interest rate risk management arrangements or agreements,
whether entered into for the account of
23
Seller or Seller Bank or for the account of a customer of Seller or Seller Bank.
All such arrangements and agreements were entered into in the ordinary course of
business and in accordance with prudent banking practice and applicable rules,
regulations and policies and with counter parties believed to be financially
responsible at the time and are legal, valid and binding obligations of Seller
or Seller Bank in force in accordance with their terms (subject to the
provisions of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws effecting the enforceability of creditors rights
generally from time to time and effect, and equitable principles relating to the
granting of specific performance and other equitable remedies as a matter of
judicial discretion), and are in full force and effect. Seller and Seller Bank
have duly performed all of their obligations thereunder to the extent that such
obligations to perform have accrued; and, to Seller's knowledge, there are no
breaches, violations or defaults or allegations or assertions of such by any
party thereunder.
3.28 Interim Events
--------------
Since January 1, 2001, except as set forth on Schedule 3.28, neither
Seller nor Seller Bank have paid or declared any dividend or made any other
distribution to shareholders or taken any action which if taken after the date
hereof would require the prior written consent of Buyer pursuant to Section 5.6
hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 Organization, Standing and Authority of Buyer
---------------------------------------------
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania, with full corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as now conducted, and Buyer is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
licensing or qualification. Buyer is a bank holding company under the BHCA and
subject to the regulations of the Federal Reserve Board. Buyer has heretofore
delivered to Seller true and complete copies of the Articles of Incorporation
and Bylaws of Buyer as in effect as of the date hereof.
24
4.2 Ownership of Buyer Subsidiaries
-------------------------------
Schedule 4.2 sets forth the name, jurisdiction of incorporation and
percentage ownership of each direct or indirect Buyer Subsidiary and identifies
Buyer Bank as Buyer's only Significant Subsidiary. The outstanding shares of
capital stock or other ownership interests of each Buyer Subsidiary have been
duly authorized and validly issued, are fully paid and nonassessable, and are
directly owned by Buyer free and clear of all liens, claims, encumbrances,
charges, pledges, restrictions or rights of third parties of any kind
whatsoever. No Rights are authorized, issued or outstanding with respect to the
capital stock or other ownership interests of Buyer Subsidiaries and there are
no agreements, understandings or commitments relating to the right of Buyer to
vote or to dispose of such capital stock or other ownership interests.
4.3 Organization, Standing and Authority of Buyer Subsidiaries
----------------------------------------------------------
Each of the Buyer Subsidiaries is a savings bank, corporation or
partnership duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is organized, with full power and authority to
own or lease all of its properties and assets and to carry on its business as
now conducted, and each of the Buyer Subsidiaries is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
licensing or qualification. The deposit accounts of Buyer Bank are insured by
the FDIC to the maximum extent permitted by the FDIA and Buyer Bank has paid all
deposit insurance premiums and assessments required by the FDIA and the
regulations thereunder. Buyer has heretofore delivered to Seller true and
complete copies of the Articles of Incorporation and Bylaws of Buyer Bank as in
effect as of the date hereof.
4.4 Authorized and Effective Agreement
----------------------------------
(a) Buyer has all requisite power and authority to enter into this
Agreement and (subject to receipt of all necessary governmental approvals) to
perform all of its respective obligations hereunder. The execution and delivery
of this Agreement and the completion of the transactions contemplated hereby
have been deemed advisable by the Boards of Directors of Buyer and Buyer Bank
and duly authorized and approved by all necessary corporate action in respect
thereof on the part of Buyer and Buyer Bank. This Agreement has been duly and
validly executed and delivered by Buyer and, assuming due authorization,
execution and delivery by Seller, constitutes a legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms,
subject, as to enforceability, to bankruptcy, insolvency and other laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
(b) Neither the execution and delivery of this Agreement nor completion
of the transactions contemplated hereby, nor compliance by Buyer with any of the
provisions hereof (i) does or will conflict with or result in a breach of any
provisions of the Articles of Incorporation or Bylaws of Buyer or the equivalent
documents of any Buyer Subsidiary, (ii) violate, conflict with or result in a
breach of any term, condition or provision of, or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or give rise to any right of termination, cancellation or acceleration
with respect to, or result in the creation of any lien, charge or encumbrance
upon any property or asset of Buyer or any Buyer Subsidiary pursuant to, any
material
25
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which Buyer or any Buyer Subsidiary is a
party, or by which any of their respective properties or assets may be bound or
affected, or (iii) subject to receipt of all required governmental approvals,
violates any order, writ, injunction, decree, statute, rule or regulation
applicable to Buyer or any Buyer Subsidiary.
(c) To the best knowledge of Buyer, except for (i) the filing of
applications and/or notices with and the approvals of the OTS, the FDIC and the
FRB, (ii) the filing of applications with the Department and the approvals of
the Department, (iii) the filing of Articles of Merger with the Secretary of
State of the Commonwealth of Pennsylvania in connection with the Company Merger,
(iv) the filing of Articles of Combination with the OTS and Articles of Merger
with the Department in connection with the Bank Merger, and (v) review of the
Merger by the DOJ under federal antitrust laws, no consents or approvals of or
filings or registrations with any Governmental Entity or with any third party
are necessary on the part of Buyer, or Buyer Bank in connection with (x) the
execution and delivery by Buyer of this Agreement, and the completion of the
transactions contemplated hereby, or (y) the Merger. Buyer, as sole shareholder
of Buyer Bank, has taken all necessary shareholder action to approve the Bank
Merger.
(d) As of the date hereof, neither Buyer nor Buyer Bank is aware of any
reasons relating to Buyer or Buyer Bank (including CRA compliance) why all
consents and approvals shall not be procured from all Governmental Entities
having jurisdiction over the Merger as shall be necessary for completion of the
Merger and continuation by Buyer after the Effective Time of the business of
each of Seller and Seller Bank, respectively, as such business is carried on
immediately prior to the Effective Time, free of any conditions or requirements
which could impair the value of Seller or Seller Bank to Buyer.
4.5 Securities Documents and Regulatory Reports
--------------------------------------------
(a) Since October 1, 1998, Buyer has timely filed with the SEC and the
NASD all Securities Documents required by the Securities Laws and such
Securities Documents complied in all material respects with the Securities Laws
and did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) Each of Buyer and Buyer Bank has since October 1, 1998, duly filed
with the Federal Reserve Board, FDIC, the Department and any other applicable
federal or state banking authority, as the case may be, the reports required to
be filed under applicable laws and regulations and such reports were in all
material respects complete and accurate and in compliance with the requirements
of applicable laws and regulations. In connection with the most recent
examinations of Buyer and Buyer Bank by the Federal Reserve Board, FDIC, and
Department, neither Buyer nor Buyer Bank was required to correct or change any
action, procedure or proceeding which Buyer or Buyer Bank believes has not been
corrected or changed as required.
26
4.6 Financial Statements
--------------------
(a) Buyer has previously delivered or made available to Seller accurate
and complete copies of the Buyer Financial Statements, which are accompanied by
the audit reports of KPMG, independent certified public accountants with respect
to Buyer. The Buyer Financial Statements fairly present the consolidated
financial condition of Buyer as of the respective dates set forth therein, and
the consolidated income, changes in equity and cash flows of Buyer for the
respective periods or as of the respective dates set forth therein.
(b) Each of the Buyer Financial Statements referred to in Section
4.6(a) has been prepared in accordance with GAAP consistently applied during the
periods involved, except as stated therein. The audits of Buyer have been
conducted in accordance with generally accepted auditing standards. The books
and records of Buyer and the Buyer Subsidiaries are being maintained in
compliance with applicable legal and accounting requirements, and all such books
and records accurately reflect all dealings and transactions in respect of the
business, assets, liabilities and affairs of Buyer and its Subsidiaries.
(c) Except to the extent (i) reflected, disclosed or provided for in
the Buyer Financial Statements, (ii) of liabilities since incurred in the
ordinary course of business and (iii) of liabilities incurred in connection with
completion of the transaction contemplated by this Agreement, neither Buyer nor
any Buyer Subsidiary has any liabilities, whether absolute, accrued, contingent
or otherwise.
4.7 Material Adverse Change
-----------------------
Since September 30, 2000, (i) Buyer and its Subsidiaries have conducted
their respective businesses in the ordinary and usual course (excluding the
incurrence of expenses in connection with this Agreement and the transactions
contemplated hereby) and (ii) no event has occurred or circumstance arisen that,
in the aggregate, has had or is reasonably likely to have a Material Adverse
Effect on Buyer.
4.8 Legal Proceedings
-----------------
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of Buyer, that are
unasserted or threatened against Buyer or any of its Subsidiaries or against any
asset, interest or right of Buyer or any of its Subsidiaries, or against any
officer, director or employee of any of them. Neither Buyer nor any Buyer
Subsidiary is a party to any order, judgment or decree.
4.9 Certain Information
-------------------
None of the information relating to Buyer and its Subsidiaries supplied
or to be supplied by them for inclusion in the Proxy Statement, as of the date
such Proxy Statement is mailed to shareholders of Seller and up to and including
the date of the meeting of shareholders to which such Proxy Statement relates,
will contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were
27
made, not misleading, provided that information as of a later date shall be
deemed to modify information as of an earlier date.
4.10 Brokers and Finders
-------------------
Neither Buyer nor any Buyer Subsidiary, nor any of their respective
directors, officers or employees, has employed any broker or finder or incurred
any liability for any broker or finder fees or commissions in connection with
the transactions contemplated hereby.
4.11 Disclosures
-----------
None of the representations and warranties of Buyer or any of the
written information or documents furnished or to be furnished by Buyer to Seller
in connection with or pursuant to this Agreement or the completion of the
transactions contemplated hereby, when considered as a whole, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
4.12 Financial Resources
-------------------
Buyer has the financial wherewithal and has, or will have prior to the
Effective Time, sufficient internal funds to perform its obligations under this
Agreement. Buyer and Buyer Bank are, and will be immediately following the
Merger, in material compliance with all applicable capital, debt and financial
and non-financial regulations of state and federal banking agencies having
jurisdiction over them.
ARTICLE V
COVENANTS
5.1 Reasonable Best Efforts
-----------------------
Subject to the terms and conditions of this Agreement, each of Seller
and Buyer (i) shall use its reasonable best efforts in good faith to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary or advisable under applicable laws and regulations so as to permit and
otherwise enable completion of the Merger as promptly as reasonably practicable,
and (ii) shall cooperate fully with each other to that end. If necessary to
complete Bank Merger, Seller, as sole shareholder of Seller Bank, shall cause
Seller Bank to amend its Charter to facilitate the completion of the Bank Merger
prior to the Effective Time.
5.2 Shareholder Meeting
-------------------
Seller shall take all action necessary to properly call and convene a
meeting of its shareholders as soon as practicable after the date hereof to
consider and vote upon this Agreement and the transactions contemplated hereby,
and Seller shall use its best efforts to hold such meeting within 90 days of the
date of this Agreement. The Board of Directors of Seller will recommend that the
shareholders of Seller approve this Agreement and the transactions contemplated
hereby, provided
28
that the Board of Directors of Seller 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, has
determined that the making of such recommendation, or the failure to withdraw,
modify or change such recommendation, would constitute a breach of the fiduciary
duties of such directors under applicable law.
5.3 Regulatory Matters
------------------
(a) The parties hereto shall promptly cooperate with each other in the
preparation and filing of Buyer's Registration Statement and the Proxy Statement
relating to the meeting of shareholders of Seller to be held pursuant to Section
5.2 of this Agreement. Each of Buyer and Seller shall use its reasonable best
efforts to have Buyer's Registration Statement and the Proxy Statement approved
for mailing in definitive form as promptly as practicable and thereafter Seller
shall promptly mail to its shareholders the Proxy Statement.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file within thirty (30) days
after the date hereof or as soon thereafter as is reasonably practicable, all
necessary documentation, to effect all applications, notices, petitions and
filings, and to obtain as promptly as practicable all permits, consents,
approvals and authorizations of all Governmental Entities and third parties
which are necessary or advisable to consummate the transactions contemplated by
this Agreement. Buyer and Seller shall have the right to review in advance, and
to the extent practicable each will consult with the other on, in each case
subject to applicable laws relating to the exchange of information, all the
information which appears in any filing made with or written materials submitted
to any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto shall act reasonably and as promptly as practicable.
The parties hereto agree that they will consult with each other with respect to
the obtaining of all permits, consents, approvals and authorizations of all
third parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein. The parties hereto agree that they will use their
reasonable best efforts to cause the Closing Date to occur by March 1, 2002.
(c) Buyer and Seller shall, upon request, furnish each other with all
information concerning themselves, their respective Subsidiaries, directors and
officers, the shareholders of Seller and such other matters as may be reasonably
necessary or advisable in connection with any statement, filing, notice or
application made by or on behalf of Buyer, Buyer Bank, Seller or Seller Bank to
any Governmental Entity in connection with the transactions contemplated hereby.
(d) Buyer and Seller shall promptly furnish each other with copies of
written communications received by Buyer or Seller, as the case may be, or any
of their respective Subsidiaries from, or delivered by any of the foregoing to,
any Governmental Entity in respect of the transactions contemplated hereby.
29
5.4 Investigation and Confidentiality
---------------------------------
(a) The Seller shall permit the Buyer and its representatives
reasonable access to its properties and personnel, and shall disclose and make
available to the Buyer, upon the Buyer's reasonable request, all books, papers
and records relating to the assets, stock ownership, properties, operations,
obligations and liabilities of Seller and Seller Bank, including, but not
limited to, all books of account (including the general ledger), tax records,
minute books of meetings of boards of directors (and any committees thereof) and
shareholders, organizational documents, bylaws, material contracts and
agreements, filings with any regulatory authority, accountants' work papers,
litigation files, loan files, plans affecting employees, and any other business
activities or prospects in which the Buyer may have a reasonable interest,
provided that such access and any such reasonable request shall be reasonably
related to the transactions contemplated hereby and, in the reasonable opinion
of Seller providing such access, not unduly interfere with normal operations.
Seller and Seller Bank shall make their respective directors, officers,
employees and agents and authorized representatives (including counsel and
independent public accountants) available to confer with the Buyer and its
representatives, provided that such access shall be reasonably related to the
transactions contemplated hereby and shall not unduly interfere with normal
operations. Representatives of Buyer or Buyer Bank shall be given notice of and
shall be entitled to attend meetings of the Boards of Directors of Seller and
Seller Bank after the date hereof, provided that the Chairman of such meetings
shall be entitled to exclude such representatives of Buyer or Buyer Bank from
discussions at such meetings, if the Board of Directors determines, consistent
with the exercise of its fiduciary duties, that it is in the best interests of
Seller and its shareholders to exclude such representatives.
(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 completion of
the transactions contemplated hereby and, if such transactions shall not occur,
the party receiving the information shall either destroy or return to the party
which furnished such information all documents or other materials containing,
reflecting or referring to such information, shall use its best efforts to keep
confidential all such information, and shall not directly or indirectly use such
information for any competitive or other commercial purposes. The obligation to
keep such information confidential shall continue for five years from the date
the proposed transactions are abandoned but shall not apply to (i) any
information which (x) the party receiving the information can establish was
already in its possession prior to the disclosure thereof by the party
furnishing the information; (y) was then generally known to the public; or (z)
became known to the public through no fault of the party receiving the
information; or (ii) disclosures pursuant to a legal requirement or in
accordance with an order of a court of competent jurisdiction, provided that the
party which is the subject of any such legal requirement or order shall use its
best efforts to give the other party at least ten business days prior notice
thereof.
5.5 Press Releases
--------------
Buyer and Seller agree that they will not issue any press release
related to this Agreement or the transactions contemplated hereby, without first
consulting with the other party as to the form and substance of public
disclosures which may relate to the transactions contemplated by this Agreement,
provided, however, that nothing contained herein shall prohibit either party,
following notification to the other party, from making any disclosure which is
required by law or regulation.
30
5.6 Business of the Parties
-----------------------
(a) During the period from the date of this Agreement and continuing
until the Effective Time, except as expressly contemplated or permitted by this
Agreement or with the prior written consent of Buyer, Seller and Seller Bank
shall carry on their respective businesses in the ordinary course consistent
with past practice. During such period, Seller also will use all reasonable
efforts to (x) preserve its business organization and that of Seller Bank
intact, (y) keep available to itself and Buyer the present services of the
employees of Seller and Seller Bank and (z) preserve for itself and Buyer the
goodwill of the customers of Seller and Seller Bank and others with whom
business relationships exist. Without limiting the generality of the foregoing,
except with the prior written consent of Buyer, which consent shall not be
unreasonably withheld, or as expressly contemplated hereby, between the date
hereof and the Effective Time, Seller shall not, and shall cause Seller Bank not
to:
(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of Seller Common Stock, except for a regular annual
cash dividend at a rate not in excess of the result obtained by
prorating the most recently paid rate, $0.20 per share, for the number
of full months elapsed since the end of the last annual period for
which a dividend was paid (i.e., the year ended December 31, 2000);
provided, however, that nothing contained herein shall be deemed to
affect the ability of Seller Bank to pay dividends on its capital stock
to Seller;
(ii) issue any shares of its capital stock, other than upon
exercise of Seller Options referred to in Section 3.1 hereof; issue,
grant, modify or authorize any Rights; purchase any shares of Seller
Common Stock; or effect any recapitalization, reclassification, stock
dividend, stock split or like change in capitalization;
(iii) amend its Articles of Incorporation, Charter, Bylaws or
similar organizational documents, unless such amendment shall be
necessary to complete the Company Merger or Bank Merger; impose, or
suffer the imposition, on any share of stock or other ownership
interest held by Seller in a Subsidiary of any lien, charge or
encumbrance or permit any such lien, charge or encumbrance to exist; or
waive or release any material right or cancel or compromise any
material debt or claim;
(iv) except as may be required by law, increase the rate of
compensation of any of its directors, officers or employees, or pay or
agree to pay any bonus or severance to, or provide any other new
employee benefit or incentive to, any of its directors, officers or
employees, provided that Seller may pay bonuses at the Effective Time
as provided under Section 5.10(h) hereof;
(v) enter into or, except as may be required by law and for
amendments contemplated by Section 5.10 hereof, modify any Seller
Employee Plan 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 any Seller Defined Benefit Plan, Seller SEP or the
Seller
31
ESOP (other than as required by law or regulation or in a manner and
amount consistent with past practices or as required by the Plan
documents);
(vi) originate or purchase any loan in excess of $100,000 with
respect to loans secured by one- to four-family properties and in
excess of $200,000 with respect to loans secured by commercial
properties; provided, however, that Seller may originate or purchase
loans in excess of the aforementioned limits with the prior approval,
in writing, of Buyer;
(vii) enter into (w) any transaction, agreement, arrangement
or commitment not made in the ordinary course of business, (x) any
agreement, indenture or other instrument relating to the borrowing of
money by Seller or Seller Bank or guarantee by Seller or Seller Bank of
any such obligation, except in the case of Seller Bank for deposits,
FHLB advances, federal funds purchased and securities sold under
agreements to repurchase in the ordinary course of business consistent
with past practice, (y) any agreement, arrangement or commitment
relating to the employment of an employee or consultant, or amend any
such existing agreement, arrangement or commitment, provided that
Seller and Seller Bank may employ an employee in the ordinary course of
business if the employment of such employee is terminable by Seller or
Seller Bank at will without liability, other than as required by law;
or (z) any contract, agreement or understanding with a labor union;
(viii) change its method of accounting in effect for the year
ended December 31, 2001, except as required by changes in laws or
regulations or GAAP, or change any of its methods of reporting income
and deductions for federal income tax purposes from those employed in
the preparation of its federal income tax return for such year, except
as required by changes in laws or regulations;
(ix) make any expenditures in excess of $5,000 individually or
$10,000 in the aggregate, other than (a) in the ordinary course of
business, (b) in connection with the transactions contemplated by this
Agreement, (c) pursuant to binding commitments that are listed on
Schedule 5.6(ix), and are existing on the date hereof, and (d)
expenditures necessary to maintain existing assets in good repair; or
(e) enter into any new lease or lease renewal of real property or any
new lease or lease renewal of personal property;
(x) except with respect to renewals of locations existing on
the date of this Agreement, file any applications or make any contract
with respect to branching or site location or relocation;
(xi) acquire in any manner whatsoever (other than to realize
upon collateral for a defaulted loan) control over or any equity
interest in any business or entity;
(xii) enter or agree to enter into any agreement or
arrangement granting any preferential right to purchase any of its
assets or rights or requiring the consent of any party to the transfer
and assignment of any such assets or rights;
32
(xiii) except as necessitated in the reasonable opinion of
Seller due to changes in interest rates, and in accordance with safe
and sound banking practices, change or modify in any material respect
any of its lending or investment policies, except to the extent
required by law or an applicable regulatory authority;
(xiv) except as necessitated in the reasonable opinion of
Seller due to changes in interest rates, and in accordance with safe
and sound banking practices, enter into any futures contract, option
contract, interest rate caps, interest rate floors, interest rate
exchange agreement or other agreement for purposes of hedging the
exposure of its interest-earning assets and interest-bearing
liabilities to changes in market rates of interest;
(xv) take any action that would result in any of the
representations and warranties of Seller contained in this Agreement
not to be true and correct in any material respect at the Effective
Time or that would cause any of the conditions of Sections 6.1 or 6.3
hereof not to be satisfied;
(xvi) take any action that would materially impede or delay
the completion of the transactions contemplated by this Agreement or
the ability of Buyer or Seller to perform its covenants and agreements
under this Agreement; or
(xvii) materially increase or decrease the rate of interest
paid on time deposits, or on certificates of deposit, except in a
manner and pursuant to policies consistent with past practices or to
reflect changes in market interest rates; or
(xviii) agree to do any of the foregoing.
(b) Seller shall promptly notify Buyer in writing of the occurrence of
any matter or event known to and directly involving Seller, which would not
include any changes in conditions that affect the banking industry generally,
that would have, either individually or in the aggregate, a Material Adverse
Effect on Seller.
(c) Except with the prior written consent of Seller or as expressly
contemplated hereby, between the date hereof and the Effective Time, Buyer shall
not, and shall cause each Buyer Subsidiary not to:
(i) take any action that would result in any of the
representations and warranties of Buyer contained in this Agreement not
to be true and correct in any material respect at the Effective Time or
that would cause any of the conditions of Sections 6.1 or 6.2 hereof
not to be satisfied;
(ii) take any action that would materially impede or delay the
completion of the transactions contemplated by this Agreement or the
ability of Buyer or Seller to perform its covenants and agreements
under this Agreement; or
(iii) agree to do any of the foregoing.
33
5.7 Certain Actions
---------------
Seller shall not, and shall cause Seller Bank not to, solicit or
encourage inquiries or proposals with respect to, furnish any information
relating to, or participate in any negotiations or discussions concerning, any
acquisition, purchase of all or a substantial portion of the assets of, or any
equity interest in, Seller or Seller Bank (other than with Buyer or an affiliate
thereof), provided, however, that the Board of Directors of Seller may furnish
such information or participate in such negotiations or discussions if such
Board of Directors, after having consulted with and considered the written
opinion of outside counsel, has determined that the failure to do the same is
likely to constitute a breach of fiduciary duties of such directors under
applicable law. Seller will promptly inform Buyer orally and in writing of any
such request for information or of any such negotiations or discussions,
identifying the parties thereto and any proposed terms thereof, as well as
instruct its and Seller Bank's directors, officers, representatives and agents
to refrain from taking any action prohibited by this Section.
5.8 Current Information
-------------------
(a) During the period from the date hereof to the Effective Time,
Seller shall, upon the request of Buyer, cause one or more of its designated
representatives to confer on a monthly or more frequent basis with
representatives of Buyer regarding Seller's financial condition, operations and
business and matters relating to the completion of the transactions contemplated
hereby. As soon as reasonably available, but in no event more than two business
days after filing, Seller will deliver to Buyer all reports filed by it under
the Exchange Act subsequent to the date hereof. Seller also will deliver to
Buyer each thrift financial report or similar report filed by it or Seller Bank
with the OTS concurrently with the filing of such report. Within fifteen (15)
days after the end of each month, Seller will deliver to Buyer its monthly Board
reports of the unaudited balance sheet and unaudited statement of income,
without related notes, for such month prepared in accordance with GAAP for each
of Seller and Seller Bank.
(b) During the period from the date hereof to the Effective Time, Buyer
shall, upon the request of Seller, cause one or more of its designated
representatives to confer on a monthly or more frequent basis with
representatives of Seller regarding Buyer's financial condition, operations and
business and matters relating to the completion of the transactions contemplated
hereby. As soon as reasonably available, but in no event more than five business
days after filing, Buyer will deliver to Seller all reports filed by it under
the Exchange Act subsequent to the date hereof. Within fifteen (15) days after
the end of each month, Buyer will deliver to Seller its monthly Board reports of
the unaudited balance sheet and unaudited statement of income, without related
notes, for such month prepared in accordance with GAAP for each of Buyer and
Buyer Bank.
5.9 Indemnification; Insurance
--------------------------
(a) From and after the Effective Time, Buyer agrees for a period of six
years, to indemnify and hold harmless the past and present directors and
officers of Seller and Seller Bank (the "Indemnified Parties") for all acts or
omissions occurring at or prior to the Effective Time to the same extent such
persons are indemnified and held harmless under the respective Articles of
Incorporation, Charter or Bylaws of Seller and Seller Bank in the form in effect
at the date of this Agreement, and
34
such duties and obligations shall continue in full force and effect for so long
as they would (but for the Merger) otherwise survive and continue in full force
and effect. Without limiting the foregoing, all limitations of liability
existing in favor of the Indemnified Parties in the Articles of Incorporation,
Charter or Bylaws of Seller or Seller Bank as of the date hereof, to the extent
permissible under applicable law as of the date hereof, arising out of matters
existing or occurring at or prior to the Effective Time, shall survive the
Merger and shall continue in full force and effect. Buyer will provide, or cause
to be provided, for a period of not less than three years from and after the
Effective Time, an insurance and indemnification policy that provides the
officers and directors of Seller and Seller Bank immediately prior to the
Effective Time coverage no less favorable than as currently provided by Seller
to such officers and directors. At the request of Buyer, Seller shall use
reasonable efforts to procure the insurance coverage referred to in the
preceding sentence prior to the Effective Time.
(b) In the event that Buyer or any of its respective successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case the successors and assigns of such
entity shall assume the obligations set forth in this Section 5.9, which
obligations are expressly intended to be for the irrevocable benefit of, and
shall be enforceable by, each director and officer covered hereby.
5.10 Employees and Employee Benefit Plans
------------------------------------
(a) Former full time employees of Seller or Seller Bank who remain
employed by Buyer or Buyer Bank will be eligible to participate in the Buyer's
benefit plans, other than the Buyer's employee stock ownership plan, on the
earliest date permitted by such plan, with credit for years of service with
Seller or any of its Subsidiaries for the purpose of eligibility and vesting
(but not for the purpose of accrual of benefits or allocation of employer
contributions). Former full time employees of Seller or Seller Bank who remain
employed by Buyer or Buyer Bank will be eligible to participate in the Buyer's
employee stock ownership plan on the earliest date required by ERISA ("Entry
Date"), with credit for years of service with Seller or Seller Bank for the
purpose of eligibility and vesting on and after the Entry Date (but not for the
purpose of accrual of benefits or allocation of employer contributions).
(b) Except as set forth in Exhibit 5.10(b), to the extent that Buyer or
a Buyer Subsidiary terminates the employment of any Seller or Seller Bank
employee other than for Cause within one year following the Closing Date, Buyer
shall, or shall cause a Buyer Subsidiary to, provide severance benefits in a
cash amount equal to such employee's regular salary for a one-week period (as in
effect immediately prior to the Effective Time) multiplied by the total number
of completed calendar years of employment of such employee's employment (up to a
maximum of eight (8) years) at Seller, Buyer or any Subsidiary of either;
provided, however, that in no event shall Buyer or a Buyer Subsidiary have any
obligation to provide severance benefits to Xxxxxxx Xxxxxx other than the
benefits provided under such individual's Employment Agreement with Seller and
Seller Bank, a copy of which is attached to Schedule 5.10(b), nor is Buyer or a
Buyer Subsidiary obliged to provide severance benefits to any other Seller or
Seller Bank employee whose termination of employment occurs due to resignation
or discharge for Cause or who is entitled to severance benefits or the
equivalent thereof under the terms of any other compensation plan or individual
contract with Seller or Seller Bank.
35
Notwithstanding anything to the contrary in this Section 5.10(b), in lieu of any
other severance benefits provided for in this Section 5.10(b), Exhibit 5.10(b)
contains a list of individuals to receive special severance benefits in the
event that their employment is terminated by Buyer or a Buyer Subsidiary absent
Cause, within one year following the Closing Date.
(c) Buyer agrees to cause Buyer Bank to enter into an employment or
non-compete agreement with Xxxxxxx Xxxxxx, a current officer of Seller and
Seller Bank, substantially in the form attached as Exhibit 5.10(c) of this
Agreement. During the term of such employment or non-compete agreement, Xxxxxxx
Xxxxxx will be eligible, as provided in such employment or non-compete
agreement, to participate in Buyer's health insurance program maintained for
Buyer's employees.
(d) It is acknowledged that Seller Bank currently has an outstanding
Employment Agreement with Xxxxxxx Xxxxxx. In accordance with the terms of the
Employment Agreement, on the Effective Date, Seller Bank will pay the
aforementioned individual the lump sum payment provided for under such
Employment Agreement, as set forth at Exhibit 5.10(d), subject to execution of
the Acknowledgment and Release Agreement by the individual substantially in the
form set forth at Schedule 5.10(d), provided that in no event shall such
payments exceed the amount that is tax deductible by Seller or Seller Bank under
Section 280G of the Code.
(e) In the sole discretion of Buyer or a Buyer Subsidiary, as
applicable, payments made by it in full and complete satisfaction of obligations
of Seller or Seller Bank under any Seller Employee Plan (other than any Seller
Employee Plan that is subject to ERISA) or under Section 5.10(b), (c), (d), (h)
or (i) shall be subject to the recipient's delivery to Buyer or a Buyer
Subsidiary, as applicable, of (i) a written acknowledgment signed by such
recipient that the payment or payments and benefits to be made to him is in full
and complete satisfaction of all liabilities and obligations thereunder of
Seller, Seller Bank, Buyer or any Buyer Subsidiary, and each of their respective
affiliates, directors, officers, employees and agents, and (ii) a release by
such recipient of all such parties from further liability in connection with the
particular Seller Employee Plan or this Agreement, as applicable.
(f) Subject to the Code and relevant regulations, as of the Effective
Time or as soon as practicable thereafter, the loan to the Seller ESOP shall be
repaid in full with the cash consideration received from Buyer for the
unallocated shares of Seller Common Stock held in the Seller ESOP or any cash
proceeds from the sale of any Stock Merger Consideration received from the Buyer
for such shares, and any unallocated portion of the consideration remaining
after such repayment shall be allocated to the Seller ESOP accounts of the
employees of Seller and Seller Bank in accordance with the terms of the Seller
ESOP in effect as of the Effective Time. As of the Effective Time, the Seller
ESOP shall be terminated. The current administrator of the Seller ESOP, or
another administrator selected by Buyer (subject to consultation with Seller
ESOP's then current trustee), shall continue to administer the Seller ESOP
subsequent to the Effective Time, and the current Trustee of the Seller ESOP, or
such other trustee(s) selected by Buyer (subject to consultation with Seller
ESOP's then current trustee) or the administrators, shall continue to be the
Trustee subsequent to the Effective Time. Buyer agrees not to amend the Seller
ESOP subsequent to the Effective Time in any manner that would change or expand
the class of persons entitled to receive benefits under the Seller ESOP. The
Parties agree that the Seller ESOP shall be amended to the extent necessary to
receive a
36
favorable determination letter from the IRS as to the tax qualified status of
the Seller ESOP upon its termination under Section 401(a) and 4975(e)(7) of the
Code (the "Final Determination Letter"). Following the receipt of the Final
Determination Letter, distributions of the account balances under the Seller
ESOP shall be made to the ESOP Participants. From and after the date hereof, in
anticipation of such termination and distribution, Buyer and Seller prior to the
Effective Time, and Buyer after the Effective Time, shall use their best efforts
to apply for and obtain a favorable Final Determination Letter from the IRS. In
the event that Buyer and Seller, prior to the Effective Time, and Buyer after
the Effective Time, reasonably determine that the Seller ESOP cannot obtain a
favorable Final Determination Letter, or that the amounts held therein cannot be
so applied, allocated or distributed without causing the Seller ESOP to lose its
tax qualified status, Seller prior to the Effective Time and Buyer after the
Effective Time shall take such action as they may reasonably determine is
necessary to obtain a favorable Final Determination Letter from the IRS and for
the distribution of account balances to the ESOP Participants, provided that the
assets of the Seller ESOP shall be held or paid solely for the benefit of the
ESOP Participants and provided further that in no event shall any portion of the
amounts held in the Seller ESOP revert, directly or indirectly, to Seller or any
affiliate thereof, or to Buyer or any affiliate thereof unless required by the
IRS as a condition to the issuance of a favorable Final Determination Letter.
(g) Seller shall take all necessary steps to cause any Seller SEP and
any Seller Defined Benefit Plan to be terminated on, or before, the Effective
Time; provided, that Seller shall not terminate any Seller Defined Benefit Plan
without approval from the Buyer if the Seller Defined Benefit Plan has an
outstanding underfunded liability. The Parties agree that any Seller SEP and any
Seller Defined Benefit Plan shall be amended to the extent necessary to receive
a favorable determination letter from the IRS as to the tax qualified status of
such plans upon their termination under Section 401(a) of the Code.
(h) As of the Effective Time, all employees of Seller, with the
exception of Xxxxxxx Xxxxxx, and any other officers with employment agreements
or receiving benefits in accordance with Schedule 5.10(b), employed as of the
date of the signing of this Agreement, who remain employed with Seller or Seller
Bank as of the Effective Time, will receive a retention bonus equal to one
week's cash base compensation, in accordance with Schedule 5.10(h).
(i) As of the Effective Time, Buyer or Buyer Bank will assume the
liabilities of the Carnegie Savings Bank Supplemental Retirement Plan for the
Benefit of Xxxxxxx Xxxxxx, dated December 15, 1997 ("SERP"), and will not
terminate the SERP prior to the satisfaction of all liabilities under the SERP,
and will terminate each other Seller Supplemental Retirement Plan between Seller
Bank and any director, retired director, officer, or employee, provided that
such payments to be made upon plan termination shall not be inconsistent with
Schedule 3.14(k) as of the date of this Agreement.
(j) Prior to Seller or Seller Bank making any payments in accordance
with this Section 5.10, Seller or Seller Bank shall furnish Buyer with a
certification by Seller or Seller Bank's tax accountant and related work papers
that such payment will not result in any payments from Seller or Seller Bank to
the recipient that will exceed the amount that is tax deductible to Seller or
Seller Bank under Section 280G of the Code.
37
(k) Notwithstanding anything contained herein to the contrary, Buyer
acknowledges that it is the intention of Buyer and Seller that the officers,
directors and employees of Seller and Seller Bank will receive the full amount
of all benefits contemplated by the employment agreement of the President and/or
by the Seller Employee Plans attached to Schedule 5.10 of this Agreement. Buyer
shall cooperate with Seller to assure that all such benefits are paid subject to
provisions of Section 280G of the Code and other applicable laws. In addition,
Buyer agrees to cause Buyer Bank to enter into a non-compete agreement with Xxxx
Xxxxxx, a current director of Seller and Seller Bank, substantially in the form
attached as Exhibit 5.10(k).
5.11 Bank Merger
-----------
Buyer and Seller shall take, and shall cause their Subsidiaries to
take, all necessary and appropriate actions to make it possible for the Bank
Merger to be authorized, agreed to, and accomplished immediately after the
Company Merger, or at such other time thereafter as may be determined by Buyer
in its sole discretion.
5.12 Conforming Entries
------------------
(a) Seller recognizes that Buyer may have adopted different loan,
accrual and reserve policies (including loan classifications and levels of
reserves for possible loan losses). Subject to applicable laws, from and after
the date of this Agreement to the Effective Time, Seller and Buyer shall consult
and cooperate with each other with respect to conforming the loan, accrual and
reserve policies of Seller and Seller Bank to those policies of Buyer, as
specified in each case in writing to Seller, based upon such consultation and
subject to the conditions in Section 5.12(c) below.
(b) Subject to applicable laws and regulations, Seller and Buyer shall
consult and cooperate with each other with respect to determining, as specified
in a written notice from Buyer to Seller, based upon such consultation and
subject to the conditions in Section 5.12(c) below, the amount and the timing
for recognizing for financial accounting purposes Seller's expenses of the
Merger and the restructuring charges relating to or to be incurred in connection
with the Merger.
(c) Subject to applicable laws and regulations, Seller shall (i)
establish and take such reserves and accruals at such time as Buyer shall
reasonably request to conform Seller's loan, accrual and reserve policies to
Buyer's policies, and (ii) establish and take such accruals, reserves and
charges in order to implement such policies and to recognize for financial
accounting purposes such expenses of the Merger and restructuring charges
related to or to be incurred in connection with the Merger, in each case at such
times as are reasonably requested by Buyer; provided, however, that on the date
such reserves, accruals and charges are to be taken, Buyer shall certify to
Seller that all conditions to Buyer's obligation to consummate the Merger set
forth in Sections 6.1 and 6.3 hereof (other than the delivery of certificates,
opinions and other instruments and documents to be delivered at the Closing or
otherwise to be dated at the Effective Time, the delivery of which shall
continue to be conditions to Buyer's obligation to consummate the Merger) have
been satisfied or waived; and provided, fur ther, that Seller shall not be
required to take any such action that is not consistent with GAAP and regulatory
accounting principles.
38
(d) No reserves, accruals or charges taken in accordance with this
Section 5.12 may be a basis to assert a violation of a breach of a
representation, warranty or covenant of Seller herein.
5.13 Integration of Policies
-----------------------
During the period from the date hereof to the Effective Time, Seller
and Seller Bank shall, and shall cause their directors, officers and employees
to, and shall make all reasonable efforts to cause their respective data
processing service providers to, cooperate and assist Buyer in connection with
an electronic and systematic conversion of all applicable data regarding Seller
to Buyer's system of electronic data processing provided, however, that no such
conversion shall occur until the Effective Time. In furtherance of the
foregoing, Seller shall make reasonable arrangements during normal business
hours to permit representatives of Buyer to train Seller and Seller Bank
employees in Buyer's system of electronic data processing.
5.14 Disclosure Supplements
----------------------
From time to time prior to the Effective Time, each Party shall
promptly supplement or amend any materials delivered to the other Party pursuant
hereto with respect to any matter hereafter arising which, if existing,
occurring or known at the date of this Agreement, would have been required to be
set forth or described in materials delivered to the other Party or which is
necessary to correct any information in such materials which has been rendered
materially inaccurate thereby; no such supplement or amendment to such materials
shall be deemed to have modified the representations, warranties and covenants
of the Parties for the purpose of determining whether the conditions set forth
in Article VI hereof have been satisfied.
5.15 Failure to Fulfill Conditions
-----------------------------
In the event that either of the Parties hereto determines that a
condition to its respective obligations to consummate the transactions
contemplated may not be fulfilled on or prior to the termination of this
Agreement, it will promptly notify the other party. Each Party will promptly
inform the other Party of any facts applicable to it that would be likely to
prevent or materially delay approval of the Merger by any Governmental Entity or
third party or which would otherwise prevent or materially delay completion of
such transactions.
5.16 Transaction Expenses of Seller
------------------------------
(a) For planning purposes, set forth at Schedule 5.16(a) hereto, Seller
has provided Buyer with its estimated budget of transaction-related expenses
reasonably anticipated to be payable by Seller in connection with this Agreement
based on facts and circumstances then currently known, including the fees and
expenses of counsel, accountants, investment bankers and other professionals.
Seller shall use its best efforts to maintain expenses within the budget.
(b) Promptly after the execution of this Agreement, Seller shall ask
all of its attorneys and other professionals to render current and correct
invoices for all unbilled time and disbursements within thirty (30) days. Seller
shall accrue and/or pay all of such amounts as soon as possible.
39
(c) Seller shall cause its professionals to render monthly invoices
within thirty (30) days after the end of each month. Seller shall advise Buyer
monthly of all out-of-pocket expenses which Seller has incurred in connection
with this Agreement.
(d) Seller, in reasonable consultation with Buyer, shall make all
arrangements with respect to the printing and mailing of the Proxy Statement.
5.17 Voting Agreements
-----------------
Each of Seller's directors and officers will enter into and deliver a
voting agreement, a form of which is attached as Exhibit 5.17 hereto, at the
xxxx Xxxxxx and Buyer enter into this Agreement.
5.18 Registration of Buyer Common Stock
----------------------------------
(a) As promptly as reasonably practicable following the date hereof,
Buyer and Seller shall cooperate in preparing mutually acceptable proxy
materials which shall constitute the Proxy Statement-Prospectus relating to the
matters to be submitted to Seller shareholders at Seller's shareholder meeting
(such proxy statement/prospectus, and any amendments or supplements thereto, the
"Proxy Statement-Prospectus") and Buyer shall prepare and file with the SEC a
registration statement on Form S-4 with respect to the issuance of Buyer Common
Stock in the Merger (such Form S-4, and any amendments or supplements thereto,
the "Registration Statement"). The Proxy Statement-Prospectus will be included
as a prospectus in and will constitute a part of the Registration Statement as
Buyer's prospectus. Each of Buyer and Seller shall use reasonable best efforts
to have the Proxy Statement-Prospectus cleared by the SEC, and Buyer shall use
reasonable best efforts to have the Registration Statement declared effective by
the SEC and to keep the Registration Statement effective as long as is necessary
to consummate the Merger and the transactions contemplated thereby. Buyer shall,
as promptly as practicable after receipt thereof, provide Seller copies of any
written comments and advise Seller of any oral comments, with respect to the
Proxy Statement- Prospectus or Registration Statement received from the SEC. The
parties shall cooperate and provide the other with a reasonable opportunity to
review and comment on any amendment or supplement to the Proxy
Statement-Prospectus and the Registration Statement prior to filing such with
the SEC, and Buyer will provide Seller with a copy of all such filings made with
the SEC. Notwithstanding any other provision herein to the contrary, no
amendment or supplement (including by incorporation by reference) to the Proxy
Statement-Prospectus or the Registration Statement shall be made without the
approval of both parties, which approval shall not be unreasonably withheld or
delayed; provided that with respect to documents filed by a party which are
incorporated by reference in the Registration Statement or Proxy
Statement-Prospectus, this right of approval shall apply only with respect to
information relating to the other party or its business, financial condition or
results of operations. Seller will use reasonable best efforts to cause the
Proxy Statement-Prospectus to be mailed to Seller's shareholders as promptly as
practicable after the Registration Statement is declared effective under the
Securities Act. Buyer will advise Seller, promptly after it receives notice
thereof, of the time when the Registration Statement has become effective, the
issuance of any stop order, the suspension of the qualification of the Buyer
Common Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the Proxy
Statement-Prospectus or the Registration Statement. If at any time prior to the
Effective Time any
40
information relating to Buyer or Seller, or any of their respective affiliates,
officers or directors, should be discovered by Buyer or Seller which should be
set forth in an amendment or supplement to any of the Registration Statement or
the Proxy Statement-Prospectus so that any of such documents would not include
any misstatement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, the party which discovers such information shall
promptly notify the other party hereto and, to the extent required by law, rules
or regulations, an appropriate amendment or supplement describing such
information shall be promptly filed with the SEC and disseminated to the
shareholders of Seller.
(b) Buyer shall also take any action required to be taken under any
applicable state securities laws in connection with the Merger and each of
Seller and Buyer shall furnish all information concerning it and the holders of
its Common Stock as may be reasonably requested in connection with any such
action.
(c) Prior to the Effective Time, Buyer shall notify the Nasdaq National
Market of the additional shares of Buyer Common Stock to be issued by Buyer in
exchange for the shares of Seller Common Stock.
5.19 Affiliate Letters
-----------------
Seller shall use its best efforts to cause each director, executive
officer and other person who is an "affiliate" of Seller under Rule 145 of the
Securities Act to deliver to Buyer as soon as practicable and prior to the
mailing of the Proxy Statement-Prospectus executed letter agreements, a form of
which is attached as Exhibit 5.19 hereto, providing that such person will comply
with Rule 145.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent - Buyer and Seller
---------------------------------------
The respective obligations of Buyer and Seller to effect the
transactions contemplated hereby shall be subject to satisfaction of the
following conditions at or prior to the Closing Date.
(a) All corporate action necessary to authorize the execution and
delivery of this Agreement and completion of the Company Merger shall have been
duly and validly taken by Buyer and Seller, including adoption of this Agreement
by the requisite vote of the shareholders of Seller.
(b) All approvals and consents from any Governmental Entity the
approval or consent of which is required for the completion of the Merger shall
have been received and all statutory waiting periods in respect thereof shall
have expired; and Buyer, Buyer Bank, Seller and Seller Bank shall have procured
all other approvals, consents and waivers of each person (other than the
Governmental Entities referred to above) whose approval, consent or waiver is
necessary to the completion of the Merger and the failure of which to obtain
would have the effects set forth in the following proviso
41
clause; provided, however, that no approval or consent referred to in this
Section 6.1(b) shall be deemed to have been received if it shall include any
nonstandard condition or requirement that, in the aggregate, would so materially
reduce the economic or business benefits of the transactions contemplated by
this Agreement to Buyer that had such condition or requirement been known,
Buyer, in its reasonable judgment, would not have entered into this Agreement.
(c) None of Buyer, Buyer Bank, Seller or Seller Bank shall be subject
to any statute, rule, regulation, injunction or other order or decree which
shall have been enacted, entered, promulgated or enforced by any governmental or
judicial authority which prohibits, restricts or makes illegal completion of the
Merger.
(d) No proceeding initiated by any Governmental Entity seeking an
order, injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition preventing the completion
of the Merger shall be pending.
6.2 Conditions Precedent - Seller
-----------------------------
The obligations of Seller to effect the transactions contemplated
hereby shall be subject to satisfaction of the following conditions at or prior
to the Closing Date unless waived by Seller pursuant to Section 7.4 hereof.
(a) The representations and warranties of Buyer set forth in Article IV
hereof shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date, or on the date when made in the case of a representation and warranty
which specifically relates to an earlier date.
(b) Buyer shall have performed in all material respects all obligations
and complied with all covenants required to be performed and complied with by it
pursuant to this Agreement on or prior to the Closing Date.
(c) Buyer shall have delivered to Seller a certificate, dated the date
of the Closing and signed by its President and Chief Executive Officer and by
its Chief Financial Officer, to the effect that the conditions set forth in
Sections 6.2(a) and 6.2(b) have been satisfied.
(d) Buyer shall have furnished Seller with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 6.1 and 6.2 as such conditions relate to Buyer
as Seller may reasonably request.
(e) Seller shall have received an opinion of counsel of Buyer, dated
the Closing Date, in form and substance reasonably satisfactory to Seller,
substantially to the effect set forth in Exhibit 6.2(e) hereto.
(f) Seller shall have received a written fairness opinion of Capital
Resources Group, Inc. dated as of the date of this Agreement, to the effect that
the Merger Consideration is fair to the shareholders of Seller from a financial
point of view.
42
6.3 Conditions Precedent - Buyer
----------------------------
The obligations of Buyer to effect the transactions contemplated hereby
shall be subject to satisfaction of the following conditions at or prior to the
Effective Time unless waived by Buyer pursuant to Section 7.4 hereof.
(a) The representations and warranties of Seller set forth in Article
III hereof shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though made on and as of the
Closing Date, or on the date when made in the case of a representation and
warranty which specifically relates to an earlier date.
(b) Seller shall have performed in all material respects all
obligations and complied with all covenants required to be performed and
complied with by it pursuant to this Agreement on or prior to the Closing Date.
(c) Seller shall have delivered to Buyer a certificate, dated the date
of the Closing and signed by its President and Chief Executive Officer and by
its Chief Financial Officer, to the effect that the conditions set forth in
Sections 6.3(a) and 6.3(b) have been satisfied.
(d) Seller shall have furnished Buyer with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 6.1 and 6.3 as such conditions relate to Seller
as Buyer may reasonably request.
(e) No more than 7% of the outstanding shares of Seller Common Stock
shall be Dissenting Shares.
(f) Seller shall have furnished its shareholders with a copy of Section
1571(d) of the PBCL with the Notice of Meeting informing them of their right to
dissent.
(g) Buyer shall have received an opinion of counsel to Seller, dated
the Closing Date, in form and substance reasonably satisfactory to Buyer,
substantially to the effect set forth in Exhibit 6.3(g) hereto.
(h) Seller shall have provided Buyer with an accounting of all merger
related expenses incurred by it through the Closing Date, including a good faith
estimate of such expenses incurred but as to which invoices have not been
submitted as of the Closing Date. The merger related expenses of Seller other
than printing expenses (which are within the control of Buyer), shall be
reasonable, taking into account normal and customary billing rates, fees and
expenses for similar transactions.
(i) Seller shall have provided Buyer with evidence of the termination
by the OTS on the Closing Date of the supervisory agreement entered into by
Seller with the OTS on April 14, 2000, as set forth on Schedule 3.12(b) hereof
(the "Supervisory Agreement").
43
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 Termination
-----------
This Agreement may be terminated:
(a) at any time on or prior to the Closing Date, by the mutual consent
in writing of the parties hereto;
(b) at any time on or prior to the Closing Date, by Buyer in writing if
Seller has, or by Seller in writing if Buyer has, breached any covenant or
undertaking contained herein or any representation or warranty contained herein,
unless such breach has been cured within 30 days after written notice of such
breach;
(c) at any time, by either Buyer or Seller in writing, (i) if any
application for prior approval of a Governmental Entity which is necessary to
consummate the Merger is denied or withdrawn at the request or recommendation of
the Governmental Entity which must grant such approval, unless within the 30-day
period following such denial or withdrawal a petition for rehearing or an
amended application has been filed with the applicable Governmental Entity,
provided, however, that no Party shall have the right to terminate this
Agreement pursuant to this Section 7(c)(i) if such denial or request or
recommendation for withdrawal shall be due to the failure of the Party seeking
to terminate this Agreement to perform or observe the covenants and agreements
of such Party set forth herein, or (ii) if any Governmental Entity of competent
jurisdiction shall have issued a final nonappealable order enjoining or
otherwise prohibiting the completion of the Merger; or (iii) if the Supervisory
Agreement does not terminate on or prior to the Closing Date.
(d) at any time, by either Buyer or Seller in writing, if the
shareholders of Seller do not approve this Agreement after a vote taken thereon
at a meeting duly called for such purpose (or at any adjournment thereof) unless
the failure of such occurrence shall be due to the failure of the Party seeking
to terminate to perform or observe in any material respect its agreements set
forth herein to be performed or observed by such Party at or before the Closing
Date;
(e) by either Buyer or Seller in writing if the Effective Time has not
occurred by the close of business on June 30, 2002, provided that this right to
terminate shall not be available to any Party whose failure to perform an
obligation in breach of such party's obligations under this Agreement has been
the cause of, or resulted in, the failure of the Merger to be consummated by
such date;
(f) by Seller, if Seller enters into an agreement in respect of a
Takeover Proposal as a result of negotiations permitted by Section 5.7 of this
Agreement;
(g) by Buyer, if the Meeting of Shareholders of Seller has not been
held by January 31, 2002, at which meeting a vote has been taken for the purpose
of approving this Agreement, unless the failure to hold the Meeting of
Shareholders by such date is the result of any war or Act of God; and
44
(h) by Buyer or Seller, by notice of termination given on or before
5:00 p.m. Eastern time on the fifth business day immediately preceding the
Closing Date if there has occurred a greater than 20% change between (i) the
last reported sales prices per share of Buyer Common Stock as of the date of
this Agreement (even if Buyer Common Stock does not trade in on such day) and
(ii) the Market Value; provided, however, that if following such notice of
termination pursuant to this Section 7.1(h), Buyer and Seller mutually agree on
a change to the consideration to be paid pursuant to this Agreement, no
termination shall be deemed to have occurred pursuant to this Section 7.1(h) and
this Agreement shall remain in full force and effect in accordance with its
terms (except the consideration to be paid pursuant to this Agreement shall have
been so modified).
7.2 Effect of Termination
---------------------
(a) Except as set forth below, each of the Parties shall bear and pay
all costs and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel, provided
that notwithstanding anything to the contrary contained in this Agreement,
neither Buyer nor Seller shall be released from any liabilities or damages
arising out of its willful breach of any provision of this Agreement.
(b) As a means of compensating the Parties for the substantial direct
and indirect monetary and other costs incurred and to be incurred in connection
with this Agreement and the transactions contemplated hereby, Seller agrees that
if this Agreement is terminated by the Buyer in accordance with Section 7.1(b)
Seller will upon demand pay to Buyer or Buyer Bank in immediately available
funds all reasonable expenses of Buyer and Buyer Bank in an amount not to exceed
$100,000. Buyer agrees that if this Agreement is terminated by Seller in
accordance with Section 7.1(b), Buyer will upon demand pay to Seller in
immediately available funds all reasonable expenses of Seller and Seller Bank in
an amount not to exceed $100,000. For purposes of this Section 7.2(b), the
expenses of a Party shall include all reasonable out-of-pocket expenses of that
Party (including all fees and expenses of counsel, accountants, financial
advisors and consultants to that Party) incurred by it or on its behalf in
connection with the consummation of the transactions contemplated by this
Agreement.
(c) If this Agreement is terminated by the Buyer or Seller in
accordance with Section 7.1(d), (e), (f) or (g) and prior to such termination a
Termination Event, as defined in paragraph (d) of this Section 7.2, shall have
occurred, Seller will upon demand pay to Buyer or Buyer Bank in immediately
available funds $125,000, inclusive of any other amounts that may otherwise be
due and payable in accordance with Section 7.2 hereunder; provided however, no
such payment shall be due or payable hereunder prior to Seller and/or Seller
Bank either: (1) receiving a publicly announced bona fide offer from a third
party prior to Seller's shareholder meeting, and subsequently failing to receive
shareholder approval of this Agreement, (2) Seller and/or Seller Bank entering
into a written definitive agreement with a third party with respect to a
Takeover Proposal either prior to the meeting of the shareholders of Seller to
approve this Agreement or within 18 months after termination of this Agreement
or (3) within 18 months after the termination of this Agreement any third-party
person or entity acquires 25% or more of Seller Common Stock. "Takeover
Proposal" shall mean any proposal, other than as contemplated by this Agreement,
for a merger or other business combination involving Seller or any Seller
Subsidiary or for the acquisition of a ten percent (10%) or greater equity
interest
45
in Seller or any Seller Subsidiary, or for the purchase, lease or other
acquisition of a substantial portion of the assets of Seller or any Seller
Subsidiary (other than loans or securities sold in the ordinary course of
business).
(d) For purposes of this Agreement, a Termination Event shall mean
either of the following:
(i) Seller or any Seller Subsidiary, without having received Buyer's
prior written consent, shall have entered into a written agreement to engage in
a Takeover Proposal with any person (the term "person" for purposes of this
Agreement having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3)
of the Exchange Act, and the rules and regulations thereunder) other than Buyer
or any affiliate of Buyer (the term "affiliate" for purposes of this Agreement
having the meaning assigned thereto in Rule 405 under the Securities Act) or the
Board of Directors of Seller shall have recommended that the shareholders of
Seller approve or accept any Takeover Proposal with any person other than Buyer
or any affiliate of Buyer; or
(ii) After a bona fide written proposal is made by any person other
than Buyer or any affiliate of Buyer to Seller or its shareholders to engage in
a Takeover Proposal and is publicly disclosed, either (A) Seller shall have
breached any covenant or obligation contained in this Agreement and such breach
would entitle Buyer to terminate this Agreement, (B) the holders of Seller
Common Stock shall not have approved this Agreement at Seller's shareholder
meeting described in Section 5.2 of this Agreement, a proxy statement has not
been mailed to the holders of Seller Common Stock as a result of the Board of
Directors' exercise of its fiduciary duties as set forth in Section 5.2 of this
Agreement, or such shareholder meeting shall not have been held in a timely
manner or shall have been postponed, delayed or enjoined prior to termination of
this Agreement except as a result of a judicial or administrative proceeding or
(C) Seller's Board of Directors shall have (i) withdrawn or modified in a manner
materially adverse to Buyer the recommendation of Seller's Board of Directors
with respect to this Agreement, or announced or disclosed to any third party its
intention to do so or (ii) failed to recommend, in the case of a tender offer or
exchange offer for Seller Common Stock, against acceptance of such tender offer
or exchange offer to its shareholders or takes no position with respect to
acceptance of such tender offer or exchange offer by its shareholders.
(e) In the event that this Agreement is terminated pursuant to Section
7.1 hereof, this Agreement shall become void and have no effect, except that (i)
the provisions relating to confidentiality set forth in Section 5.4(b) and this
Section 7.2, shall survive any such termination and (ii) a termination pursuant
to Section 7.1(b), (c), (d), (e), (f) or (g) shall not relieve the breaching
party from any liability or damages arising out of its willful breach of any
provision of this Agreement giving rise to such termination.
7.3 Survival of Representations, Warranties and Covenants
-----------------------------------------------------
All representations, warranties and covenants in this Agreement or in
any instrument delivered pursuant hereto or thereto shall expire on, and be
terminated and extinguished at, the Effective Time other than covenants that by
their terms are to be performed after the Effective Time (including the
covenants set forth in Sections 2.6, 2.8, 5.9, and 5.10 hereof), provided that
no such representations,
46
warranties or covenants shall be deemed to be terminated or extinguished so as
to deprive Buyer or Seller (or any director, officer or controlling person of
either thereof) of any defense at law or in equity which otherwise would be
available against the claims of any third person, including any shareholder or
former shareholder of either Buyer or Seller.
7.4 Waiver
------
Each Party hereto by written instrument signed by an executive officer
of such party, may at any time (whether before or after approval of this
Agreement by the shareholders of Seller) extend the time for the performance of
any of the obligations or other acts of the other Party hereto and may waive (i)
any inaccuracies of the other party in the representations or warranties
contained in this Agreement or any document delivered pursuant hereto, (ii)
compliance with any of the covenants, undertakings or agreements of the other
Party, (iii) to the extent permitted by law, satisfaction of any of the
conditions precedent to its obligations contained herein or (iv) the performance
by the other Party of any of its obligations set forth herein, provided that any
such waiver granted, or any amendment or supplement pursuant to Section 7.5
hereof executed after shareholders of Seller have approved this Agreement, shall
not modify either the amount or form of the consideration to be provided hereby
to the holders of Seller Common Stock upon completion of the Company Merger or
otherwise materially adversely affect such shareholders without the approval of
the shareholders who would be so affected.
7.5 Amendment or Supplement
-----------------------
This Agreement may be amended or supplemented at any time by mutual
agreement of the Parties hereto, subject to the proviso to Section 7.4 hereof.
Any such amendment or supplement must be in writing and authorized by or under
the direction of the Board of Directors of each of the Parties hereto.
ARTICLE VIII
MISCELLANEOUS
8.1 Entire Agreement
----------------
This Agreement contains the entire agreement among the Parties with
respect to the transactions contemplated hereby and supersedes all prior
arrangements or understandings with respect thereto, written or oral, other than
documents referred to herein and therein. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the Parties hereto
and their respective successors. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the Parties hereto,
and their respective successors, any rights, remedies, obligations or
liabilities other than as set forth in Sections 5.9 and 5.10 hereof.
8.2 No Assignment
-------------
None of the Parties hereto may assign any of its rights or obligations
under this Agreement to any other person, without the consent of the other
Party.
47
8.3 Notices
-------
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally, telecopied
(with confirmation) or sent by overnight mail service or by registered or
certified mail (return receipt requested), postage prepaid, addressed as
follows:
If to Buyer:
Fidelity Bancorp, Inc.
0000 Xxxxx Xxxxxxx
Xxxxxxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxxxx, Chairman of the Board
Fax: 000-000-0000
E-Mail: XXX@XxxxxxxxXxxx-xx.xxx
With a required copy to:
Xxxxxxx Spidi & Xxxxx, PC
0000 Xxx Xxxx Xxxxxx, XX, Xxxxx 000 Xxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Fax: 000-000-0000
E-Mail: xxxx@xxxxxxxxxx.xxx
If to Seller:
Carnegie Financial Corporation
00 Xxxx Xxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxxxx Xxxxxx, President
Fax: 000-000-0000
With a required copy to:
Xxxxx Xxxx & Xxxxxxxxx, XXX
0 Xxxxxx Xxxxxx
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Fax: 000-000-0000
E-Mail: xxxxxxxx@xxxxxxxxx.xxx
48
8.4 Alternative Structure
---------------------
Notwithstanding any provision of this Agreement to the contrary, Buyer
may, with the written consent of Seller, which shall not be unreasonably
withheld, at any time modify the structure of the acquisition of Seller set
forth herein, provided that (i) the consideration to be paid to the holders of
Seller Common Stock is not thereby changed in kind or reduced in amount as a
result of such modification and (ii) such modification will not materially delay
or jeopardize receipt of any required approvals of Governmental Entities or any
other condition to the obligations of Buyer set forth in Sections 6.1 and 6.3
hereof.
8.5 Interpretation
--------------
The captions contained in this Agreement are for reference purposes
only and are not part of this Agreement.
8.6 Counterparts
------------
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.7 Governing Law
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania applicable to agreements made and
entirely to be performed within such jurisdiction.
8.8 Severability
------------
Any term, provision, covenant or restriction contained in this
Agreement held to be invalid, void or unenforceable, shall be ineffective to the
extent of such invalidity, voidness or unenforceability, but neither the
remaining terms, provisions, covenants or restrictions contained in this
Agreement nor the validity or enforceability thereof in any other jurisdiction
shall be affected or impaired thereby. Any term, provision, covenant or
restriction contained in this Agreement that is so found to be so broad as to be
unenforceable shall be interpreted to be as broad as is enforceable.
8.9 Standard of Materiality
-----------------------
No representation or warranty shall be deemed untrue or incorrect, and
no Party shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance unless such
fact, event or circumstance, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or warranty
has had or is reasonably likely to have a Material Adverse Effect on the Party
making such representation or warranty.
49
