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EXHIBIT 10.5
April_, 1998
Lochaven Federal Savings and
Loan Association
Board of Directors
Xx. Xxxxxxxx Xxxxxxxx, Chairman
of the Board
0000 X. Xxxxxx Xxxxxxx Xxxxx
Xxxxxxx, XX 000000
Dear _______________:
This letter will serve to confirm our intentions concerning the proposed
transaction between Republic Bancshares, Inc ("Republic") and Lochaven
Federal Savings and Loan Association ("Lochaven"). Once fully executed by both
parties, this letter supersedes all previous communications from Republic or
representations of Republic regarding the proposed transaction.
The terms of the proposed transaction are as follows:
1. MERGER
(a)(i) Republic will exchange its common stock for all of the 609,094
outstanding shares of the common stock of Lochaven. The stock exchange will be
in connection with a merger of the Lochaven with and into Republic's
wholly-owned subsidiary, Republic Bank ("Bank"). Each share of Lochaven's common
stock shall be converted into shares of Republic's common stock at an exchange
ratio of 0.2776 of a share of Republic's common stock.
(a)(ii) Each holder of shares of Xxxxxxxx's common stock exchanged
pursuant to the Merger who would otherwise have been entitled to receive a
fraction of a share of Republic's common stock (after taking into account all
certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of
Republic Common Stock multiplied by the Market Value of one share of Republic's
common stock on the Effective Date. The Market Value of one share of Republic's
common stock on the Effective Date shall be determined by calculating the
average of the closing prices of Republic's common stock on The Nasdaq National
Market (as reported by The Wall Street Journal or, if not reported thereby, any
other authoritative source selected by Republic) on each of the twenty (20)
consecutive trading days ending on the third business day immediately
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Loan Association
April _____, 1998
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preceding the Effective Date. No such holder will be entitled to dividends,
voting rights or any other rights as a stockholder in respect of any fractional
shares.
(b)(i) On the Effective Date, and assuming the plan under which such
options are issued permits such treatment, Republic shall assume all outstanding
options to purchase Lochaven's common stock, which options were granted pursuant
to Lochaven's customary arrangements consistent with past practice, and each
such option shall cease to represent a right to acquire Xxxxxxxx's common stock
and shall, instead, represent the right to acquire Republic's common stock on
substantially the same terms applicable to Lochaven's options except as
specified below. The number of shares of Republic's common stock to be issued
pursuant to such options shall equal the number of shares of Lochaven's common
stock subject to Lochaven's options multiplied by the Exchange Ratio, provided
that no fractions of shares of Republic's common stock shall be issued and the
number of shares of Republic's common stock to be issued upon the exercise of
Lochaven's options, if a fractional share exists, shall equal the number of
whole shares obtained by rounding to the nearest whole number, giving account to
such fraction. The exercise price for the acquisition of Republic's common stock
shall be the exercise price for each share of Lochaven's common stock subject to
such options divided by the Exchange Ratio, adjusted appropriately to any
rounding to whole shares that may be done. It is intended that the assumption by
Republic of the Lochaven's options shall be undertaken in a manner that will not
constitute a "modification" as defined in Section 424 of the Internal Revenue
Code of 1986, as amended, as to any stock option which is an "incentive stock
option".
(b)(ii) In the event any options described in paragraph 1.(b)(i) are
exercised subsequent to January 1, 1996, the number of outstanding shares of
Lochaven's common stock will be increased from 609,094 to the number resulting
from the exercise of the option.
(c) The merger will be subject to the minimum affirmative vote of the
respective shareholders of the parties required by law.
(d) The merger will be subject to qualification for accounting purposes
as a pooling of interests and for Federal income tax purposes as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended.
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Loan Association
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2. VOTING BY DIRECTORS OF REPUBLIC AND LOCHAVEN
The directors of each party hereto shall agree, subject to their legal
and fiduciary duties, and subject to the terms and conditions of a definitive
agreement of merger, to vote in favor of the agreement.
3. COOPERATION OF LOCHAVEN
Xxxxxxxx and the directors of Lochaven agree to cooperate fully with
Republic to accomplish the merger. Republic and directors of Republic agree to
cooperate fully with Xxxxxxxx to accomplish the merger. Xxxxxxxx permits and
authorizes Republic and Republic permits and authorizes Xxxxxxxx to have bucks
conversations with each institution's regulatory authorities as each
institution deems necessary and desirable to effectuate the proposed
transection.
4. OTHER MATTERS
(a) Subject to applicable laws, any public announcement relating to
the proposed transaction shall be mutually agreed upon and jointly made by
Xxxxxxxx and Republic except to the extent that either party's counsel deems a
disclosure necessary or advisable in order to satisfy such party's legal
disclosure obligations.
(b)(i) Without prior approval of Republic, Lochaven will not pay
bonuses, grant employment agreements or issue stock options to any of Lochaven's
officers, directors or employees.
(b)(ii) Lochaven will notify Republic immediately if any inquiries or
proposals are received by Lochaven regarding any acquisition or purchase of all
or of a substantial portion of the assets of, or of a substantial equity
interest in Lochaven, or any combination involving Xxxxxxxx, other than those
possible negotiations and discussion between officers, directors or agents of
Lochaven, and officers, directors or agents of Republic as contemplated by this
letter of intent. If any such inquiries or proposals are requested from
Lochaven, or if any such negotiations or discussions are sought to be initiated
with Lochaven, Lochaven shall, subject to paragraph (b)(iii) below, instruct the
officers, directors, agents or affiliates of Lochaven to refrain from doing any
of the above.
(b)(iii) Notwithstanding any other provision, nothing herein shall be
construed to require the officers or directors of Lochaven to violate their
fiduciary obligations to the shareholders of Lochaven under applicable law, and
they may and shall act pursuant to their fiduciary obligations without breach
hereunder.
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Loan Association
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(c) To the full extent permitted by law, Xxxxxxxx agrees to provide
Republic and its agents full access to its premises and to all books, records
and reports of examination of Lochaven and to furnish such financial,
operating and other information with respect to Xxxxxxxx as may be necessary
to enable Republic to conduct a due diligence review. All such information
which is not in the public domain will be maintained on a confidential basis
by Republic and its agents unless such information enters the public domain.
(d) To the full extent permitted by law, Republic agrees to provide
Xxxxxxxx and its agents full access to its premises and to all books, records
and reports of examination of Republic as may be necessary to enable Xxxxxxxx
to conduct a due diligence review. All such information which is not in the
public domain will be maintained on a confidential basis by Xxxxxxxx and its
agents unless such information enters the public domain.
(e) Each party hereto, will bear its own costs and expenses in
connection with this transaction, including legal, auditing, travel, telephone
and other expenses.
(f) If a definitive agreement is entered into between the parties it
will provide that either party will be permitted to terminate the agreement if
the effective date of the share exchange does not occur by December 1, 1998.
5. EXECUTION OF AGREEMENT OF MERGER
This non-binding letter of intent represents an agreement in principle
only regarding consummation of the proposed transaction and is conditioned
upon each party's prompt negotiation in good faith of, and agreement to, a
definitive agreement of merger which meets the approval of the boards of
directors of Lochaven and Republic. Both parties to this letter of intent
specifically agree that the consummation of the transaction contemplated hereby
shall not occur unless both parties agree to and execute a formal and definitive
merger agreement, within 45 days of your acceptance of this letter, which
receives applicable regulatory approvals, and that no part of this letter may be
used to force tither party to consummate the proposed transaction contemplated
hereby. Both parties specifically agree that no action or negotiation made
before the execution of the definitive merger agreement will be held to be
binding on either party. This paragraph supersedes all other conflicting
language. This letter of intent will terminate 45 days after the date that it
is accepted by Xxxxxxxx.
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Loan Association
April _____, 1998
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If the foregoing correctly sets forth your understanding, please
execute and return to Republic the enclosed copy of this letter, thereby
signifying assent to the terms and conditions set forth.
Sincerely,
Xxxx X. Xxxxxxxx
Chairman & Chief Executive Officer
Republic Bancahares, Inc.
The undersigned acknowledges as of _____, 1998,
that the foregoing is in accordance with its
understanding and intentions.
Lochaven Federal Savings and Loan Association
By:
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Its
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