EXHIBIT 2.1
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY 20, 0000
XXXXXXX
XXXXXX XXXXX BANCORP, INC.
AND
XXXXXXX VALLEY BANCORP, INC.
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TABLE OF CONTENTS
ARTICLE I
CERTAIN DEFINITIONS
Page No.
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1.01. Certain Definitions............................................ 1
ARTICLE II
THE MERGER
2.01. The Merger..................................................... 12
2.02. Effective Date and Effective Time; Closing..................... 14
ARTICLE III
CONSIDERATION; ELECTION; AND EXCHANGE PROCEDURES
3.01. Effect on Capital Stock........................................ 14
3.02. Election Procedures............................................ 15
3.03. Exchange Procedures............................................ 17
3.04. No Fractional Shares........................................... 20
3.05. Company Options................................................ 20
ARTICLE IV
ACTIONS PENDING ACQUISITION
4.01. Covenants of the Company....................................... 22
4.02. Covenants of Parent............................................ 25
4.03. Transition..................................................... 26
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. Representations and Warranties of the Company.................. 26
5.02. Representations and Warranties of Parent....................... 45
ARTICLE VI
COVENANTS
Page No.
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6.01. Reasonable Best Efforts........................................ 63
6.02. Shareholder Approval........................................... 63
6.03. Registration Statement......................................... 64
6.04. Regulatory Filings............................................. 65
6.05. Public Announcements........................................... 66
6.06. Access; Information............................................ 66
6.07. No Solicitation................................................ 66
6.08. Indemnification................................................ 69
6.09. Employees; Benefit Plans....................................... 71
6.10. The Bank Merger................................................ 73
6.11. Advice of Changes.............................................. 73
6.12. Current Information............................................ 74
6.13. Affiliates..................................................... 74
6.14. Stock Listing.................................................. 74
6.15. Certain Policies............................................... 74
6.16. Section 16 Matters............................................. 75
6.17. Certain Other Agreements....................................... 75
ARTICLE VII
CONDITIONS TO CONSUMMATION
OF THE MERGER
7.01. Conditions to Each Party's Obligation to Effect the Merger..... 77
7.02. Conditions to Obligation of the Company........................ 78
7.03. Conditions to Obligation of Parent............................. 79
7.04. Frustration of Closing Conditions.............................. 79
ARTICLE VIII
TERMINATION
8.01. Termination.................................................... 80
8.02. Effect of Termination and Abandonment.......................... 83
ARTICLE IX
MISCELLANEOUS
Page No.
9.01. Survival....................................................... 85
9.02. Standard....................................................... 85
9.03. Waiver; Amendment.............................................. 85
9.04. Counterparts................................................... 85
9.05. Governing Law.................................................. 86
9.06. Expenses....................................................... 86
9.07. Notices........................................................ 86
9.08. Entire Understanding; No Third Party Beneficiaries............. 87
9.09. Severability................................................... 87
9.10. Enforcement of the Agreement................................... 87
9.11. Interpretation................................................. 88
9.12. Assignment..................................................... 88
9.13. Alternative Structure.......................................... 88
EXHIBIT A Form of Company Shareholder Agreement......................... A-1
EXHIBIT B Form of Parent Shareholder Agreement.......................... B-1
AGREEMENT AND PLAN OF MERGER, dated as of January 20, 2005 (the
"Agreement"), between Willow Grove Bancorp, Inc. ("Parent"), a Pennsylvania
corporation, and Xxxxxxx Valley Bancorp, Inc. (the "Company"), a Pennsylvania
corporation.
RECITALS
WHEREAS, the Boards of Directors of Parent and the Company have
determined that it is in the best interests of their respective companies and
shareholders to consummate the business combination transaction provided for
herein, in which the Company will, subject to the terms and conditions set forth
herein, merge with and into Parent (the "Merger"); and
WHEREAS, as a material inducement to Parent to enter into this
Agreement, and simultaneously with the execution of this Agreement, each
director of the Company is entering into an agreement (the "Company Shareholder
Agreement"), in the form of Exhibit A hereto, pursuant to which such persons
have agreed, among other things, to vote their shares of Company Common Stock
(as defined herein) in favor of this Agreement, and, as a material inducement to
the Company to enter into this Agreement, and simultaneously with the execution
of this Agreement, each director of Parent is entering into an Agreement (the
"Parent Shareholder Agreement"), in the form of Exhibit B hereto, pursuant to
which such persons have agreed, among other things, to vote their shares of
Parent Common Stock (as defined herein) in favor of this Agreement (the Company
Shareholder Agreement and Parent Shareholder Agreement are referred to
collectively as the "Shareholder Agreements"); and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the transactions provided for
herein and also to prescribe certain conditions to the consummation of such
transactions;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein, and
intending to be legally bound hereby, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01. Certain Definitions. The following terms are used in this Agreement
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with the meanings set forth below:
"Acquisition Proposal" means any proposal or offer by any Person or
group of Persons with respect to any of the following: (i) any merger,
consolidation, share exchange, business combination, recapitalization,
liquidation or dissolution or other similar transaction involving the
Company or any Subsidiary of the Company whose assets, individually or in
the aggregate, constitute more than 10% of the consolidated
1
assets of the Company; (ii) any sale, lease, exchange, mortgage, pledge
(except in the ordinary course of business consistent with past practice),
transfer or other disposition of assets (including for this purpose the
outstanding capital stock of any Subsidiary of the Company and the capital
stock of any entity surviving any merger or business combination involving
any Subsidiary of the Company) and/or liabilities that constitute 10% or
more of the assets of the Company and its Subsidiaries taken as a whole in
a single transaction or series of transactions; (iii) any purchase or other
acquisition of or tender offer or exchange offer that if consummated would
result in such Person(s) beneficially owning 25% or more of the outstanding
shares of the common stock of the Company or any Subsidiary of the Company
whose assets, individually or in the aggregate, constitute more than 10% of
the consolidated assets of the Company; or (iv) any public announcement by
any Person (which shall include any regulatory application or notice,
whether in draft or final form) of a proposal, plan or intention to do any
of the foregoing or any agreement to engage in any of the foregoing, in
each case other than (x) the transactions contemplated by this Agreement
and (y) any transaction referred to in clause (i) or (ii) involving only
the Company and one or more of its Subsidiaries, or involving two or more
of its Subsidiaries, provided that any such transaction is not entered into
in violation of the terms of this Agreement.
"Aggregate Cash Consideration" has the meaning set forth in Section
3.03(a).
"Agreement" means this Agreement, as amended or modified from time to
time in accordance with Section 9.03.
"Articles of Merger" has the meaning set forth in Section 2.02(a).
"Average Share Price" means the average of the per share closing sale
prices of the Parent Common Stock on Nasdaq (as reported by an
authoritative source) for the ten trading-day period ending on (and
including) the Determination Date, rounded to the nearest whole cent.
"Bank Merger" means the merger of the Company Bank (as defined herein)
with and into Parent Bank (as defined herein) as set forth in Section 6.10.
"Bank Merger Agreement" has the meaning set forth in Section 6.10.
"Bank Secrecy Act" means the Bank Secrecy Act of 1970, as amended.
"BHC Act" means the Bank Holding Company Act of 1956, as amended.
"Business Day" means Monday through Friday of each week, except a
legal holiday recognized as such by the U.S. Government or any day on which
banking institutions in the Commonwealth of Pennsylvania are authorized or
obligated to close.
"Cancelled Option Holder" has the meaning set forth in Section
3.05(a)(i).
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"Capital Change" has the meaning set forth in Section 3.01(b).
"Cash Consideration" has the meaning set forth in Section 3.01(a).
"Cash Election" and "Cash Election Shares" have the meaning set forth
in Section 3.02(a).
"Certificate" means any certificate which immediately prior to the
Effective Time represented shares of Company Common Stock.
"Change in Recommendation" has the meaning set forth in Section 6.02.
"Closing" and "Closing Date" have the meanings set forth in Section
2.02(b).
"Code" means the Internal Revenue Code of 1986, as amended.
"Community Reinvestment Act" means the Community Reinvestment Act of
1977, as amended.
"Company" has the meaning set forth in the preamble to this Agreement.
"Company Affiliate" has the meaning set forth in Section 6.13.
"Company Articles" means the restated Articles of Incorporation of the
Company.
"Company Bank" means First Financial Bank, a Pennsylvania-chartered
bank and trust company and wholly owned subsidiary of the Company.
"Company Benefit Plans" has the meaning set forth in Section
5.01(p)(i).
"Company Board" means the Board of Directors of the Company.
"Company Bylaws" means the Bylaws of the Company, as amended, as of
the date hereof.
"Company Common Stock" means the common stock, $1.00 par value per
share, of the Company.
"Company Designees" has the meaning set forth in Section 6.17(b).
"Company Disclosure Schedule" has the meaning set forth at the
beginning of Section 5.01.
"Company ERISA Affiliate" has the meaning set forth in Section
5.01(p)(iv).
"Company ERISA Affiliate Plan" has the meaning set forth in Section
5.01(p)(v).
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"Company ESOP" means the Employee Stock Ownership Plan maintained by
the Company Bank.
"Company Financial Advisor" means Boenning & Scattergood, Inc.
"Company Insiders" has the meaning set forth in Section 6.16.
"Company Insurance Policies" has the meaning set forth in Section
5.01(z)(i).
"Company Intellectual Property" has the meaning set forth in Section
5.01(x).
"Company Investment Securities" has the meaning set forth in Section
5.01(t).
"Company Leases" has the meaning set forth in Section 5.01(w)(ii).
"Company Loan Property" has the meaning set forth in Section 5.01(r).
"Company Loans" has the meaning set forth in Section 5.01(v)(i).
"Company Options" means the options to acquire Company Common Stock
issued under the Company Stock Plans.
"Company Pension Plan" has the meaning set forth in Section
5.01(p)(ii).
"Company Preferred Stock" means the preferred stock, $1.00 par value
per share, of the Company.
"Company SEC Reports" has the meaning set forth in Section 5.01(j).
"Company Stock" means the Company Common Stock and the Company
Preferred Stock.
"Company Stock Plans" means the Company's 1993 Stock Option Plan, as
amended, and the Company's 1997 Stock Option Plan, as amended.
"Company Termination Fee" has the meaning set forth in Section
8.02(b).
"Confidentiality Agreement" has the meaning set forth in Section
6.06(b).
"Continuing Option Holder" has the meaning set forth in Section
3.05(a)(ii).
"Contract" shall mean any written or oral agreement, arrangement,
commitment, contract, indenture, instrument, lease, understanding or
undertaking of any kind or character to which a Person is a Party that is
binding on any Person or its capital stock, assets or business.
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"Department" means the Pennsylvania Department of Banking.
"Derivative Transaction" means any swap transaction, option, warrant,
forward purchase or sale transaction, futures transaction, cap transaction,
floor transaction or collar transaction relating to one or more currencies,
commodities, bonds, equity securities, loans, interest rates, catastrophic
events, weather-related events, credit-related events or conditions or any
indexes, or any other similar transaction (including any option with
respect to any of these transactions) or combination of any of these
transactions, including collateralized mortgage obligations or other
similar instruments or any debt or equity instruments evidencing or
embedding any such types of transactions, and any related credit support,
collateral or other similar arrangements related to such transactions.
"Determination Date" means the date on which the last required
approval of a Governmental Authority is obtained with respect to the
Transactions, all statutory waiting periods in respect thereof have expired
and all other conditions to the consummation of the Merger specified in
Article VII hereof (other than the delivery of certificates, opinions and
other instruments and documents to be delivered at the Closing) have been
satisfied or waived.
"Effective Date" has the meaning set forth in Section 2.02(a).
"Effective Time" has the meaning set forth in Section 2.02(a).
"Election Deadline" has the meaning set forth in Section 3.02(b).
"Election Form" has the meaning set forth in Section 3.02(a).
"Election Form Record Date" has the meaning set forth in Section
3.02(a).
"Environmental Laws" means any federal, state or local law,
regulation, order, decree, permit, authorization, opinion or agency
requirement relating to (i) the protection or restoration of the
environment, health, safety, or natural resources, (ii) the handling, use,
presence, disposal, release or threatened release of any Hazardous
Substance or (iii) wetlands, indoor air, pollution, contamination or any
injury or threat of injury to persons or property in connection with any
Hazardous Substance.
"Equal Credit Opportunity Act" means the Equal Credit Opportunity Act,
as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
5
"Exchange Agent" has the meaning set forth in Section 3.02(a).
"Exchange Fund" has the meaning set forth in Section 3.03(a).
"Exchange Ratio" has the meaning set forth in Section 3.01(a).
"Fair Housing Act" means the Fair Housing Act, as amended.
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Reserve Act" means the Federal Reserve Act, as amended.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System.
"GAAP" means accounting principles generally accepted in the United
States of America.
"Governmental Authority" means any federal, state or local court,
administrative agency or commission or other governmental authority or
instrumentality and any SRO.
"Hazardous Substance" means any substance that is (i) listed,
classified or regulated pursuant to any Environmental Law, (ii) any
petroleum product or by-product, asbestos-containing material,
lead-containing paint or plumbing, polychlorinated biphenyls, radioactive
materials or radon or (iii) any other substance which is the subject of
regulatory action by any Governmental Authority in connection with any
Environmental Law.
"HSR Act" means Section 7A of the Xxxxxxx Act, as added by Title II of
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder.
"Indemnified Party" and "Indemnifying Party" have the meanings set
forth in Section 6.08(a).
"Index Ratio" has the meaning set forth in Section 8.01(i).
"Insurance Amount" has the meaning set forth in Section 6.08(c).
"Intellectual Property" means all patents, trademarks, trade names,
service marks, domain names, database rights, copyrights and any
applications therefore, mask works, technology, know-how, trade secrets,
ideas, algorithms, processes, computer software programs or applications
(in both source code and object code form), and tangible or intangible
proprietary information or material and all other intellectual property or
proprietary rights.
6
"IRS" means the Internal Revenue Service.
"Knowledge" as used with respect to a Person (including references to
such Person being aware of a particular matter) means those facts that are
known, or reasonably should have been known in the course of the
performance of their duties to the Company or Parent, as applicable, by the
executive officers and directors of the Company or Parent, as applicable,
and includes any facts, matters or circumstances set forth in any written
notice from any Governmental Authority received by that Person.
"Lien" means any lien, claim, charge, mortgage, pledge, security
interest, restriction or encumbrance.
"Loans" means any loan, loan agreement, note or borrowing arrangement,
including, without limitation, leases (other than operating leases), credit
enhancements, commitments, guarantees and similar interest-bearing assets.
"Mailing Date" has the meaning set forth in Section 3.02(a).
"Material Adverse Effect" means with respect to a Party (a) any effect
that is material and adverse to the financial position, results of
operations or business of the Party and its Subsidiaries taken as a whole,
or which would materially impair the ability of the Party to perform its
material obligations under this Agreement or the ability of the Party or
its banking subsidiary to consummate the transactions contemplated hereby
on a timely basis; provided, however, that Material Adverse Effect shall
not be deemed to include the impact of (i) changes in banking and similar
laws of general applicability or interpretations thereof by Governmental
Authorities, (ii) changes in GAAP or regulatory accounting requirements
applicable to banks, savings banks, savings and loan holding companies or
bank holding companies generally, (iii) changes in general economic
conditions (including prevailing interest rates, currency exchange rates or
other economic or monetary conditions) affecting banks, savings banks,
savings and loan holding companies or bank holding companies generally,
(iv) any modifications or changes to valuation policies and practices in
connection with the transactions contemplated hereby or restructuring
charges taken in connection with such transactions, in each case in
accordance with GAAP, (v) reasonable expenses incurred in connection with
the transactions contemplated hereby, (vi) with respect to a Party, the
effects of any action or omission taken with the prior consent of the other
Party or required to be taken hereunder and (vii) public disclosure of the
execution and delivery of this Agreement by the Parties.
"Merger" has the meaning ascribed thereto in the recitals to this
Agreement.
"Merger Consideration" has the meaning set forth in Section
3.01(a)(iii).
"Mixed Election" has the meaning set forth in Section 3.02(a).
"Nasdaq" means The Nasdaq National Stock Market.
7
"Nasdaq Bank Average Index" means the average closing values of the
Nasdaq Bank Index for the ten trading-day period ending on (and including)
the Determination Date.
"Nasdaq Bank Starting Index" means $3,223.90, the closing value of the
Nasdaq Bank Index on December 3, 2004.
"National Labor Relations Act" means the National Labor Relations Act,
as amended.
"Non-Election" and "Non-Election Shares" have the meanings set forth
in Section 3.02(a).
"OREO" means property owned and considered other real estate owned by
Parent or the Company or any of their respective Subsidiaries.
"OTS" means the Office of Thrift Supervision.
"Parent" has the meaning set forth in the preamble to this Agreement.
"Parent Acquisition Proposal" means any proposal or offer by any
Person or group of Persons with respect to any of the following: (i) any
merger, consolidation, share exchange, business combination,
recapitalization, liquidation or dissolution or other similar transaction
involving Parent or any Subsidiary of Parent whose assets, individually or
in the aggregate, constitute more than 10% of the consolidated assets of
Parent; (ii) any sale, lease, exchange, mortgage, pledge (except in the
ordinary course of business consistent with past practice), transfer or
other disposition of assets (including for this purpose the outstanding
capital stock of any Subsidiary of Parent and the capital stock of any
entity surviving any merger or business combination involving any
Subsidiary of Parent) and/or liabilities that constitute 10% or more of the
assets of Parent and its Subsidiaries taken as a whole in a single
transaction or series of transactions; (iii) any purchase or other
acquisition of or tender offer or exchange offer that if consummated would
result in such Person(s) beneficially owning 25% or more of the outstanding
shares of the common stock of Parent or any Subsidiary of Parent whose
assets, individually or in the aggregate, constitute more than 10% of the
consolidated assets of Parent; or (iv) any public announcement by any
Person (which shall include any regulatory application or notice, whether
in draft or final form) of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing, in each case
other than (x) the transactions contemplated by this Agreement and (y) any
transaction referred to in clause (i) or (ii) involving only Parent and one
or more of its Subsidiaries, or involving two or more of its Subsidiaries,
provided that any such transaction is not entered into in violation of the
terms of this Agreement.
8
"Parent Articles" means the Articles of Incorporation of Parent.
"Parent Bank" means Willow Grove Bank, a Federally-chartered savings
bank and wholly owned subsidiary of Parent.
"Parent Benefit Plans" has the meaning set forth in Section
5.02(p)(i).
"Parent Board" means the Board of Directors of Parent.
"Parent Bylaws" means the Amended and Restated Bylaws of Parent.
"Parent Common Stock" means the common stock, par value $0.01 per
share, of Parent.
"Parent Designees" has the meaning set forth in Section 6.17(b).
"Parent Disclosure Schedule" has the meaning set forth at the
beginning of Section 5.02.
"Parent ERISA Affiliate" has the meaning set forth in Section
5.02(p)(iv).
"Parent ERISA Affiliate Plan" has the meaning set forth in Section
5.02(p)(v).
"Parent Financial Advisor" means The Blackstone Group L.P.
"Parent Insurance Policies" has the meaning set forth in Section
5.02(y).
"Parent Intellectual Property" has the meaning set forth in Section
5.02(w).
"Parent Investment Securities" has the meaning set forth in Section
5.02(t).
"Parent Leases" has the meaning set forth in Section 5.02(v).
"Parent Loans" has the meaning set forth in Section 5.02(u).
"Parent Loan Property" has the meaning set forth in Section 5.02(r).
"Parent Pension Plan" has the meaning set forth in Section
5.02(p)(ii).
"Parent Preferred Stock" means the preferred stock, par value $0.01
per share, of Parent.
"Parent Ratio" has the meaning set forth in Section 8.01(i).
"Parent SEC Reports" has the meaning set forth in Section 5.02(j).
9
"Parent Stock Plans" means Parent's 1999 Stock Option Plan, 1999
Recognition and Retention Plan and Trust Agreement, 2002 Stock Option Plan
and 2002 Recognition and Retention Plan and Trust Agreement.
"Party" means either the Company or Parent, and "Parties" shall mean
both the Company and Parent.
"PBCL" means the Pennsylvania Business Corporation Law, as amended.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PCIS" means Philadelphia Corporation for Investment Services, a
Pennsylvania corporation, which is a registered securities broker/dealer
and a registered investment adviser which is a wholly owned subsidiary of
the Company.
"Pennsylvania Act" means the Pennsylvania Banking Code of 1965, as
amended.
"Person" means any individual, bank, corporation, partnership,
association, joint-stock company, business trust, limited liability
company, unincorporated organization or other organization or firm of any
kind or nature.
"Proxy Statement/Prospectus" has the meaning set forth in Section
6.03(a).
"Registration Statement" has the meaning set forth in Section 6.03(a).
"Representative" has the meaning set forth in Section 3.02(a).
"Requisite Regulatory Approvals" has the meaning set forth in Section
7.01(b).
"Rights" means, with respect to any Person, warrants, options, rights,
convertible securities and other arrangements or commitments which obligate
the Person to issue or dispose of any of its capital stock or other
ownership interests or which provide payments or benefits measured by the
value of its capital stock.
"SEC" means the Securities and Exchange Commission.
"Section 16 Information" has the meaning set forth in Section 6.16.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Shareholder Agreements" has the meaning ascribed to such term in the
recitals to this Agreement.
"Shortfall Number" has the meaning set forth in Section 3.02(d).
10
"Significant Subsidiary" has the meaning ascribed to such term in Rule
1-02 of Regulation S-X of the SEC.
"SRO" means any self-regulatory organization as defined in Section
3(a)(26) of the Exchange Act.
"Starting Price" means $19.45, the closing price of a share of Parent
Common Stock on December 3, 2004.
"Stock Consideration" has the meaning set forth in Section 3.01(a).
"Stock Conversion Number" has the meaning set forth in Section
3.02(a).
"Stock Election" and "Stock Election Shares" have the meanings set
forth in Section 3.02(a).
"Stock Election Number" has the meaning set forth in Section 3.02(a).
"Subsidiary" means, with respect to any Party, any corporation or
other entity of which a majority of the capital stock or other ownership
interest having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time
directly or indirectly owned by such Party.
"Superior Proposal" means any bona fide written proposal made by a
third party to acquire, directly or indirectly, including pursuant to a
tender offer, exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of the Company Common Stock then
outstanding or all or substantially all of the assets of the Company and
otherwise (i) on terms which the Company Board determines in good faith,
after consultation with its financial advisor(s), to be more favorable from
a financial point of view to the Company's shareholders than the Merger,
(ii) that constitutes a transaction that, in the good faith judgment of the
Company Board, is reasonably likely to be consummated on the terms set
forth, taking into account all legal, financial, regulatory and other
aspects of such proposal, and (iii) for which financing, to the extent
required, is then committed or which, in the good faith judgment of the
Company Board based on written advice, with only customary qualifications,
from a reputable and qualified investment banking firm serving as financial
advisor to the Company, is highly likely to be obtained by such third
party.
"Surviving Bank" has the meaning set forth in Section 6.10.
"Surviving Corporation" has the meaning set forth in Section 2.01(a).
11
"Tax" and "Taxes" mean all federal, state, local or foreign income,
gross income, gains, gross receipts, sales, use, ad valorem, goods and
services, capital, production, transfer, franchise, windfall profits,
license, withholding, payroll, employment, disability, employer health,
excise, estimated, severance, stamp, occupation, property, environmental,
custom duties, unemployment or other taxes of any kind whatsoever, together
with any interest, additions or penalties thereto and any interest in
respect of such interest and penalties.
"Tax Returns" means any return, declaration or other report (including
elections, declarations, schedules, estimates and information returns)
including amended versions of any of the foregoing relating to or required
to be filed in connection with any Taxes required to be filed with the IRS
or any other taxing authority.
"Transferred Employees" has the meaning set forth in Section 6.09(a).
"Transactions" means the Merger, the Bank Merger and any other
transaction contemplated by this Agreement.
"Treasury Stock" means shares of Company Stock held by the Company or
by Parent, in each case other than in a fiduciary (including custodial or
agency) capacity or as a result of debts previously contracted in good
faith.
"Unfunded Pension Liability" has the meaning set forth in Section
5.01(p)(viii).
ARTICLE II
THE MERGER
2.01. The Merger.
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(a) The Merger. Subject to the terms and conditions of this Agreement, at
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the Effective Time, the Company shall merge with and into Parent in accordance
with Section 1921 of the PBCL, the separate corporate existence of the Company
shall cease and Parent shall survive and continue to exist as a corporation
incorporated under the PBCL (Parent, as the surviving corporation in the Merger,
sometimes being referred to herein as the "Surviving Corporation").
(b) Name. The name of the Surviving Corporation shall be "Willow Grove
----
Bancorp, Inc." or such other name as the Parties may mutually agree upon
pursuant to Section 6.17(e).
(c) Articles and Bylaws. Parent Articles as in effect immediately prior
-------------------
to the Effective Time, as may be amended pursuant to Section 6.17(e) solely
to change Parent's name, will be the articles of incorporation of the
Surviving Corporation until further amended in accordance with their terms.
Parent Bylaws as in effect immediately prior to the Effective Time, as
amended in accordance with Section 6.17, shall be the Bylaws of the
Surviving Corporation until further amended in accordance with their terms.
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(d) Directors of the Surviving Corporation. The directors of the
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Surviving Corporation immediately after the Merger shall be the directors
of Parent immediately prior to the Merger together with the seven directors
elected pursuant to Section 6.17(b) hereof, each of whom shall serve until
such time as their successors are duly elected and qualified.
(e) Effect of the Merger. At the Effective Time, the effect of the Merger
--------------------
shall be as provided in Section 1929 of the PBCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of the Company shall vest in
the Surviving Corporation, and all debts, liabilities, obligations,
restrictions, disabilities and duties of the Company shall become the debts,
liabilities, obligations, restrictions, disabilities and duties of the Surviving
Corporation.
(f) Tax Consequences. It is intended that each of the Bank Merger and the
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Merger shall constitute a "reorganization" within the meaning of Section 368(a)
of the Code and that each of this Agreement and the agreement providing for the
Bank Merger shall constitute a "plan of reorganization" for purposes of Sections
354 and 361 of the Code.
(g) Additional Actions. If, at any time after the Effective Time, the
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Surviving Corporation shall consider that any further assignments or assurances
in law or any other acts (except any other act which is inconsistent with any of
the provisions of this Agreement) are necessary or desirable to (i) vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or assets
of the Company acquired or to be acquired by the Surviving Corporation as a
result of, or in connection with, the Merger, or (ii) otherwise carry out the
purposes of this Agreement, the Company, and its proper officers and directors,
shall be deemed to have granted to the Surviving Corporation an irrevocable
power of attorney to execute and deliver all such proper deeds, assignments and
assurances in law and to do all acts necessary or proper to vest, perfect or
confirm title to and possession of such rights, properties or assets in the
Surviving Corporation and otherwise to carry out the purposes of this Agreement,
and the proper officers and directors of the Surviving Corporation are fully
authorized in the name of the Surviving Corporation or otherwise to take any and
all such action.
13
2.02. Effective Date and Effective Time; Closing.
------------------------------------------
(a) Subject to the satisfaction or waiver of the conditions set forth in
Article VII (other than those conditions that by their nature are to be
satisfied at the consummation of the Merger, but subject to the fulfillment or
waiver of those conditions), the Parties shall cause articles of merger relating
to the Merger (the "Articles of Merger") to be filed with the Secretary of State
of the Commonwealth of Pennsylvania pursuant to the PBCL on (i) a date selected
by Parent after such satisfaction or waiver which is no later than the later of
(A) five Business Days following such satisfaction or waiver and (B) the first
month end following such satisfaction or waiver or (ii) such other date to which
the parties may mutually agree in writing. The Merger provided for herein shall
become effective upon such filing or on such date as may be specified therein.
The date of such filing or such later effective date is herein called the
"Effective Date." The "Effective Time" of the Merger shall be the time of such
filing or as set forth in such filing.
(b) A closing (the "Closing") shall take place immediately prior to the
Effective Time at 10:00 a.m., Eastern Time, at the principal offices of Parent
in Maple Xxxx, Pennsylvania, or at such other place, at such other time, or on
such other date as the Parties may mutually agree upon (such date, the "Closing
Date"). At the Closing, there shall be delivered to Parent and the Company the
opinions, certificates and other documents required to be delivered under
Article VII hereof.
ARTICLE III
CONSIDERATION; ELECTION AND EXCHANGE PROCEDURES
3.01. Effect on Capital Stock.
-----------------------
(a) At the Effective Time, automatically by virtue of the Merger and
without any action on the part of any Person:
(i) each share of Parent Common Stock that is issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
and shall be unchanged by the Merger;
(ii) each share of Company Common Stock held as Treasury Stock
immediately prior to the Effective Time shall be cancelled and retired at
the Effective Time and no consideration shall be issued in exchange
therefor; and
(iii) each outstanding share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than Treasury
Stock) shall become and be converted into, as provided in and subject to
the limitations set forth in this Agreement, the right to receive at the
election of the holder thereof, as provided in Section 3.02, (i) 1.4823
shares (the "Exchange Ratio") of Parent Common Stock (the "Stock
Consideration") or (ii) $27.90 in cash, without interest (the "Cash
Consideration"). The Stock Consideration and the Cash Consideration are
sometimes referred to herein collectively as the "Merger Consideration."
14
(b) The Exchange Ratio shall be subject to appropriate adjustments in the
event that, subsequent to the date of this Agreement but prior to the Effective
Time, the outstanding Parent Common Stock shall have been increased, decreased,
changed into or exchanged for a different number of shares or securities through
stock dividend, stock split, reverse stock split or other like changes in
Parent's capitalization (a "Capital Change"). In addition, if Parent enters into
an agreement pursuant to which shares of Parent Common Stock would be converted,
prior to the Effective Time, into shares or other securities or obligations of
another corporation, proper provision shall be made in such agreement, so that
each Company shareholder shall be entitled to receive at the Effective Time such
number of shares or other securities or amount of obligations of such other
corporation as such shareholder would be entitled to receive if the Effective
Time had occurred immediately prior to the consummation of such conversion.
3.02. Election Procedures.
-------------------
(a) An election form and other appropriate and customary transmittal
materials (which shall specify that delivery shall be effected, and risk of loss
and title to Certificates shall pass, only upon proper delivery of such
Certificates to an unaffiliated bank or trust company designated by Parent and
reasonably satisfactory to the Company (the "Exchange Agent")) in such form as
the Company and Parent shall mutually agree (the "Election Form"), shall be
mailed no later than ten days prior to the anticipated Effective Time or on such
earlier date as Parent and the Company may mutually agree (the "Mailing Date")
to each holder of record of Company Common Stock as of five Business Days prior
to the Mailing Date (the "Election Form Record Date"). Each Election Form shall
permit each holder of record of Company Common Stock as of the Election Form
Record Date (or in the case of nominee record holders, the beneficial owner
through proper instructions and documentation) to (i) elect to receive the Cash
Consideration for all of such holder's shares (a "Cash Election"), (ii) elect to
receive the Stock Consideration for all of such holder's shares (a "Stock
Election"), (iii) elect to receive the Cash Consideration with respect to some
of such holder's shares and the Stock Consideration with respect to such
holder's remaining shares (a "Mixed Election") or (iv) make no election with
respect to the receipt of the Cash Consideration or the Stock Consideration (a
"Non-Election"), provided that, notwithstanding any other provision of this
Agreement, other than paragraph (e) of this Section 3.02, 64.76% of the total
number of shares of Company Common Stock issued and outstanding at the Effective
Time, excluding any Treasury Stock (the "Stock Conversion Number"), shall be
converted into the Stock Consideration and the remaining outstanding shares of
Company Common Stock shall be converted into the Cash Consideration. Holders of
record of shares of Company 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 Company Common Stock held by that
Representative for a particular beneficial owner. Shares of Company Common Stock
as to which a Cash Election has been made (including pursuant to a Mixed
Election) are referred to herein as "Cash Election Shares." Shares of Company
15
Common Stock as to which a Stock Election has been made (including pursuant to a
Mixed Election) are referred to herein as "Stock Election Shares." Shares of
Company Common Stock as to which no election has been made are referred to
herein as "Non-Election Shares." The aggregate number of shares of Company
Common Stock with respect to which a Stock Election has been made is referred to
herein as the "Stock Election Number."
(b) To be effective as an election, a properly completed Election Form
shall be submitted to the Exchange Agent on or before 5:00 p.m., New York City
time, on the 20th calendar day following but not including the Mailing Date (or
such other time and date as Parent and the Company may mutually agree) (the
"Election Deadline").
(c) An Election Form shall be deemed properly completed only if
accompanied by one or more Certificates (or customary affidavits and
indemnification regarding the loss or destruction of such Certificates or the
guaranteed delivery of such Certificates) representing all shares of Company
Common Stock covered by such Election Form, together with duly executed
transmittal materials included with the Election Form. If a holder of Company
Common Stock either (i) does not submit a properly completed Election Form in a
timely fashion or (ii) revokes the holder's Election Form prior to the Election
Deadline, the shares of Company Common Stock held by such holder shall be
designated Non-Election Shares. 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. Neither Parent nor the Exchange Agent shall be under any
obligation to notify any Person of any defect in an Election Form.
(d) Within five Business Days after the later to occur of the Election
Deadline or the Effective Time, Parent shall cause the Exchange Agent to effect
the allocation among holders of Company Common Stock of rights to receive the
Cash Consideration and the Stock 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 Consideration, and each holder
of Stock Election Shares will be entitled to receive the Stock
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 Consideration;
16
(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 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 Consideration and each holder of
Non-Election Shares shall receive the Stock 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 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 Consideration, and each holder of Cash
Election Shares shall receive the Stock 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 Consideration.
(e) If the tax opinions referred to in Section 7.01(e) cannot be rendered
because the counsel charged with providing such opinions reasonably determine
that the Merger may not satisfy the continuity of interest requirements
applicable to reorganizations under Section 368(a) of the Code, then Parent
shall reduce the number of shares of Company Common Stock converted into the
Cash Consideration and correspondingly increase the number of shares of Company
Common Stock converted into the Stock Consideration by the minimum amount
necessary to enable such tax opinion to be rendered (the fair market value of
which, at the Effective Time, shall equal the reduction in Cash Consideration).
3.03. Exchange Procedures.
-------------------
(a) Immediately prior to the Effective Time, for the benefit of the
holders of Certificates, (i) Parent shall reserve for issuance a sufficient
number of shares of Parent Common Stock and deliver to the Exchange Agent
certificates evidencing such number of shares of Parent Common Stock issuable
and (ii) Parent shall deliver, or cause Parent Bank to deliver, to the Exchange
Agent an amount of cash sufficient to pay the aggregate amount of cash payable
17
pursuant to this Article III in exchange for Certificates (the "Aggregate Cash
Consideration") (such cash and certificates for shares of Parent Common Stock,
together with any dividends or distributions with respect thereto, are
hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall not be
entitled to vote or exercise any rights of ownership with respect to the shares
of Parent 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.
(b) As soon as practicable after the Effective Time, and provided that
the Company has delivered, or caused to be delivered, to the Exchange Agent all
information which is necessary for the Exchange Agent to perform its obligations
as specified herein, the Exchange Agent shall mail to each holder of record of a
Certificate or Certificates who has not previously surrendered such Certificate
or Certificates with an Election Form, a form of letter of transmittal (which
shall 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) and instructions for use in effecting the surrender of the Certificates
in exchange for the Merger Consideration into which the shares of Company Common
Stock represented by such Certificate or Certificates shall have been converted
pursuant to Sections 3.01 and 3.02 of this Agreement. Upon proper surrender of a
Certificate for exchange and cancellation to the Exchange Agent, together with a
properly completed letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor, as applicable,
(i) a certificate representing that number of shares of Parent Common Stock (if
any) to which such former holder of Company Common Stock shall have become
entitled pursuant to this Agreement, (ii) a check representing that amount of
cash (if any) to which such former holder of Company Common Stock shall have
become entitled pursuant to this Agreement and/or (iii) a check representing the
amount of cash (if any) payable in lieu of a fractional share of Parent Common
Stock which such former holder has the right to receive in respect of the
Certificate surrendered pursuant to this Agreement, and the Certificate so
surrendered shall forthwith be cancelled. Until surrendered as contemplated by
this Section 3.03(b), each Certificate (other than Certificates representing
Treasury Stock) shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Merger Consideration
provided in Sections 3.01 and 3.02 and any unpaid dividends and distributions
thereon as provided in paragraph (c) of this Section 3.03. No interest shall be
paid or accrued on any cash constituting Merger Consideration (including any
cash in lieu of fractional shares) and any unpaid dividends and distributions,
if any, payable to holders of Certificates.
(c) No dividends or other distributions with a record date after the
Effective Time with respect to Parent Common Stock shall be paid to the holder
of any unsurrendered Certificate until the holder thereof shall surrender such
Certificate in accordance with this Section 3.03. After the surrender of a
Certificate in accordance with this Section 3.03, the record holder thereof
shall be entitled to receive any such dividends or other distributions, without
any interest thereon, which theretofore had become payable with respect to
shares of Parent Common Stock represented by such Certificate.
18
(d) The Exchange Agent and Parent, as the case may be, shall not be
obligated to deliver cash and/or a certificate or certificates representing
shares of Parent Common Stock to which a holder of Company Common Stock would
otherwise be entitled as a result of the Merger until such holder surrenders the
Certificate or Certificates representing the shares of Company Common Stock for
exchange as provided in this Section 3.03, or, in default thereof, an
appropriate affidavit of loss and indemnity agreement and/or a bond in an amount
as may be required in each case by Parent. If any certificates evidencing shares
of Parent Common Stock are to be issued in a name other than that in which the
Certificate evidencing Company Common Stock surrendered in exchange therefor is
registered, it shall be a condition of the issuance thereof that the Certificate
so surrendered shall be properly endorsed or accompanied by an executed form of
assignment separate from the Certificate and otherwise in proper form for
transfer and that the person requesting such exchange pay to the Exchange Agent
any transfer or other tax required by reason of the issuance of a certificate
for shares of Parent Common Stock in any name other than that of the registered
holder of the Certificate surrendered or otherwise establish to the satisfaction
of the Exchange Agent that such tax has been paid or is not payable.
(e) At and after the Effective Time, the stock transfer books of the
Company shall be closed and there shall be no transfers on the stock transfer
books of the Company of the shares of Company Stock which were issued and
outstanding immediately prior to the Effective Time. At the Effective Time,
holders of Company Stock shall cease to be, and shall have no rights as,
shareholders of the Company other than to receive the consideration provided
under this Article III. On or after the Effective Time, any Certificates
presented to Parent or the Exchange Agent shall be cancelled and exchanged for
certificates representing shares of Parent Common Stock and/or the payment of
cash as provided herein.
(f) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of the Company for six months after the Effective Time (as well as
any proceeds from any investment thereof) shall be delivered by the Exchange
Agent to Parent. Any shareholders of Company who have not theretofore complied
with Section 3.03(b) shall thereafter look only to Parent for the Merger
Consideration deliverable in respect of each share of Company Common Stock such
shareholder holds as determined pursuant to this Agreement, in each case without
any interest thereon. If outstanding Certificates for shares of Company Common
Stock are not surrendered or the payment for them is not claimed prior to the
date on which such shares of Parent Common Stock or cash would otherwise escheat
to or become the property of any governmental unit or agency, the unclaimed
items shall, to the extent permitted by abandoned property and any other
applicable law, become the property of Parent (and to the extent not in its
possession shall be delivered to it), free and clear of all claims or interest
of any Person previously entitled to such property. Neither the Exchange Agent
nor any party to this Agreement shall be liable to any holder of stock
represented by any Certificate for any consideration paid to a public official
pursuant to applicable abandoned property, escheat or similar laws. Parent and
the Exchange Agent shall be entitled to rely upon the stock transfer books of
the Company to establish the identity of those persons entitled to receive the
Merger Consideration specified in this Agreement, which books shall be
conclusive with respect thereto. In the event of a dispute with respect to
ownership of stock represented by any Certificate, Parent 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.
19
(g) Parent (through the Exchange Agent, if applicable) shall be entitled
to deduct and withhold from any amounts otherwise payable pursuant to this
Agreement to any holder of shares of Company Common Stock such amounts as Parent
is required to deduct and withhold under applicable law. Any amounts so withheld
shall be treated for all purposes of this Agreement as having been paid to the
holder of Company Common Stock in respect of which such deduction and
withholding was made by Parent.
(h) Notwithstanding any other provision of this Agreement to the
contrary, Certificates surrendered for exchange by any Company Affiliate shall
not be exchanged for certificates representing shares of Parent Common Stock to
which such Company Affiliate may be entitled pursuant to the terms of this
Agreement until Parent has received a written agreement from such person as
specified in Section 6.13.
3.04. No Fractional Shares. Notwithstanding any other provision of this
--------------------
Agreement to the contrary, neither certificates nor scrip for fractional shares
of Parent Common Stock shall be issued in the Merger. Each holder who otherwise
would have been entitled to a fraction of a share of Parent Common Stock shall
receive in lieu thereof cash (without interest) in an amount determined by
multiplying the fractional share interest to which such holder would otherwise
be entitled (after taking into account all shares of the Company Common Stock
owned by such holder at the Effective Time) by the Average Share Price. No such
holder shall be entitled to dividends, voting rights or any other rights in
respect of any fractional share.
3.05. Company Options.
---------------
(a) At the Effective Time, each Company Option which is outstanding
and unexercised immediately prior thereto, whether or not then vested or
exercisable, will, at the election of the individual holders of the Company
Options be either:
(i) cancelled and all rights thereunder be extinguished ("Cancelled
Option Holder"), in consideration for which the Company shall make payment
immediately prior to the Effective Time an amount determined by multiplying
(A) the number of shares of Company Common Stock underlying such Company
Option by (B) an amount equal to the excess (if any) of (1) the Cash
Consideration, over (2) the exercise price per share of such Company
Option; or
20
(ii) converted automatically into an option to purchase shares of
Parent Common Stock ("Continuing Option Holder") and Parent shall assume
each such Company Option so converted, in accordance with the terms of the
applicable Company Stock Option Plan and stock option or other agreement by
which it is evidenced except that from and after the Effective Time:
(A) the number of shares to be subject to the new option shall be
equal to the product of the number of shares of Company Common Stock
subject to the Company Option immediately prior to the Effective Time
and the Exchange Ratio, provided that any fractional shares of Parent
Common Stock resulting from such multiplication shall be rounded to
the nearest whole share;
(B) the exercise price per share of Parent Common Stock under the
new option shall be equal to the exercise price per share of Company
Common Stock under the Company Option divided by the Exchange Ratio,
provided that such exercise price shall be rounded up to the nearest
cent;
(C) The term or duration of the new option shall be the same as
that of the Company Option;
(D) Parent and the Compensation Committee of its Board of
Directors shall be substituted for the Company and the committee of
the Company's Board of Directors (including, if applicable, the
entire Board of Directors of the Company) administering the Company
Stock Option Plans; and
(E) each Company Option assumed by Parent may be exercised solely
for shares of Parent Common Stock.
(b) In order for any Continuing Option Holder to have his or her Company
Options converted into an option to purchase Parent Common Stock as set forth in
Section 3.05(a) or for a Cancelled Option Holder to have his or her Company
Option converted into the right to receive cash, such Continuing Option Holder
or Cancelled Option Holder shall have executed a written election with respect
to such conversion or cancellation no later than the Effective Time, which
written election shall be in such form as shall be prescribed by Parent and
reasonably satisfactory to the Company. Parent shall send such election form to
optionees no later than the time it sends Election Forms to Company
shareholders. No payment shall be made to a Cancelled Option Holder unless and
until such holder has executed and delivered the foregoing written election. In
the event any holder of a Company Option fails to make an election within the
time frame set forth herein, the Company Option held thereby shall automatically
be converted at the Effective Time into an option to purchase Parent Common
Stock in the amount and at the exercise price as calculated pursuant to Section
3.05(a)(ii) hereof.
21
(c) Within five Business Days after the Effective Time, Parent shall file
a registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), with respect to the shares of Parent
Common Stock subject to the options referred to in paragraph (a) (ii) of this
Section 3.05 and shall use its reasonable best efforts to maintain the current
status of the prospectus or prospectuses contained therein for so long as such
options remain outstanding in the case of a Form S-8 or, in the case of a Form
S-3, until the shares subject to such options may be sold without a further
holding period under Rule 144 under the Securities Act.
ARTICLE IV
ACTIONS PENDING ACQUISITION
4.01. Covenants of the Company. 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
Parent, the Company shall, and shall cause its Subsidiaries to, carry on their
respective businesses in the ordinary course consistent with past practice and
consistent with prudent banking practice and in compliance in all material
respects with all applicable laws and regulations. The Company will use its
reasonable best efforts to (x) preserve its business organization and that of
its Subsidiaries, (y) keep available to itself and Parent the present services
of the current officers and employees of the Company and its Subsidiaries and
(z) preserve for itself and Parent the goodwill of the customers of the Company
and its Subsidiaries and others with whom business relationships exist. Without
limiting the generality of the foregoing, and except as set forth in Section
4.01 of the Company Disclosure Schedule or as otherwise expressly contemplated
or permitted by this Agreement or consented to in writing by Parent, the Company
shall not, and shall not permit any of its Subsidiaries to:
(a) Capital Stock. Other than pursuant to the exercise of Company Options
-------------
set forth in Section 5.01(b) of the Company Disclosure Schedule, (i) issue, sell
or otherwise permit to become outstanding, or authorize the creation of, any
additional shares of capital stock or any Rights or (ii) permit any additional
shares of capital stock to become subject to grants of employee or director
stock options or other Rights.
(b) Dividends and Other Distributions. Make, declare, pay or set aside
---------------------------------
for payment any dividend on or in respect of, or declare or make any
distribution on any shares of its capital stock, other than (i) regular
quarterly cash dividends by the Company on the Company Common Stock at a rate
not in excess of the regular quarterly cash dividend declared prior to the date
of this Agreement on the Company Common Stock, provided that after the date of
this Agreement the Company shall coordinate the declaration of any dividends in
respect of the Company Common Stock and the record dates and payment dates
relating thereto with Parent's declaration of regular quarterly dividends on
Parent Common Stock and the record dates and payment dates relating thereto, it
being the intention of the Parties that holders of Company Common Stock shall
not receive two dividends, or fail to receive one dividend, for any quarter with
respect to their shares of Company Common Stock and any shares of Parent Common
Stock any such holders receive in exchange therefor in the Merger, (ii)
dividends paid by any Subsidiary of the Company to the Company or to any
wholly-owned Subsidiary of the Company and (iii) dividends paid to the holders
of trust preferred securities issued by affiliated trusts, in each case in the
ordinary course of business consistent with past practice.
22
(c) Compensation; Employment Agreements, Etc. Enter into or amend or
----------------------------------------
renew any employment, consulting, severance or similar agreements or
arrangements with any director, officer or employee of the Company or its
Subsidiaries or grant any salary or wage increase or increase any employee
benefit or pay any incentive or bonus payments, except for normal individual
increases in compensation to employees (other than any employee who is party to
an employment agreement or a change-in-control agreement) in the ordinary course
of business consistent with past practice.
(d) Hiring. Hire any person as an employee of the Company or any of its
------
Subsidiaries or promote any employee, except (i) to satisfy contractual
obligations existing as of the date hereof and set forth on Schedule 4.01(d) of
the Company Disclosure Schedule and (ii) persons whose employment is terminable
at the will of the Company or a Subsidiary of the Company, as applicable.
(e) Benefit Plans. Enter into, establish, adopt, amend, modify or
-------------
terminate (except (i) as may be required by or to make consistent with
applicable law, subject to the provision of prior written notice to and
consultation with respect thereto with Parent, or (ii) to satisfy contractual
obligations existing as of the date hereof and set forth on Schedule 4.01(e) of
the Company Disclosure Schedule), any pension, retirement, supplemental
executive retirement, stock option, stock purchase, savings, profit sharing,
deferred compensation, consulting, bonus, group insurance or other employee
benefit, incentive or welfare contract, plan or arrangement, or any trust
agreement (or similar arrangement) related thereto, in respect of any current or
former director, officer or employee of the Company or its Subsidiaries or take
any action to accelerate the vesting or exercisability of stock options,
restricted stock or other compensation or benefits payable thereunder.
(f) Transactions with Affiliates. Except pursuant to agreements or
----------------------------
arrangements in effect on the date hereof, pay, loan or advance any amount to,
or sell, transfer or lease any properties or assets (real, personal or mixed,
tangible or intangible) to, or enter into any agreement or arrangement with, any
of its officers or directors or any of their immediate family members or any
affiliates or associates (as such terms are defined under the Exchange Act) of
any of its officers or directors other than compensation in the ordinary course
of business consistent with past practice.
(g) Acquisitions. Acquire (other than by way of foreclosures or
------------
acquisitions of control in a bona fide fiduciary capacity or in satisfaction of
debts previously contracted in good faith, in each case in the ordinary and
usual course of business consistent with past practice) all or a substantial
portion of the assets, business, deposits or properties of any other entity.
(h) Governing Documents. Amend the Company Articles or Company Bylaws or
-------------------
the articles of incorporation or bylaws (or equivalent documents) of any
Subsidiary of the Company.
23
(i) Contracts. Except in the ordinary course of business consistent with
---------
past practice, and except for normal renewals without materially adverse
changes, additions or deletions of terms, enter into, amend, modify or terminate
any material Contract.
(j) Banking Operations. Enter into any new material line of business;
------------------
change its material lending, investment, underwriting, risk and asset liability
management and other material banking and operating policies, except as required
by applicable law, regulation or policies imposed by any Governmental Authority;
or file any application or make any contract with respect to branching or site
location or branching or site relocation.
(k) Derivatives Transactions. Enter into any Derivatives Transactions,
------------------------
except in the ordinary course of business consistent with past practice.
(l) Indebtedness. Incur any indebtedness for borrowed money, other than
------------
in the ordinary course of business consistent with past practice.
(m) Investment Securities. Acquire (other than by way of foreclosures or
---------------------
acquisitions in a bona fide fiduciary capacity or in satisfaction of debts
previously contracted in good faith, in each case in the ordinary course of
business consistent with past practice) any debt security or equity investment
that is not rated investment grade or better or which would be considered "high
risk" securities under applicable regulatory pronouncements, in each case
purchased in the ordinary course of business consistent with past practice.
(n) Taxes. Except as may be required by applicable laws or regulations,
-----
make or change any material Tax election, file any material amended Tax Return,
enter into any material closing agreement, settle or compromise any material
liability with respect to Taxes, or consent to any extension or waiver of the
limitation period applicable to any material Tax claim or assessment.
(o) Compliance with Agreements. Knowingly commit any act or omission
--------------------------
which constitutes a material breach or default by the Company or any of its
Subsidiaries under any agreement with any Governmental Authority or under any
material Contract to which any of them is a party or by which any of them or
their respective properties is bound.
(p) Reorganization. Knowingly take any action that would, or would
--------------
be reasonably expected to, prevent either the Merger or the Bank Merger from
qualifying as a "reorganization" within the meaning of Section 368(a) of the
Code.
(q) Adverse Actions. Knowingly take any action or fail to take any action
---------------
that is intended or is reasonably likely to result in (i) any of its
representations and warranties set forth in this Agreement being or becoming
untrue in any material respect at any time at or prior to the Effective Time,
(ii) any of the conditions to the Merger set forth in Article VII not being
satisfied or (iii) a material violation of any provision of this Agreement,
except in each case as may be required by applicable law or regulation.
24
(r) Commitments. Enter into any contract with respect to, or otherwise
-----------
agree or commit to do, any of the foregoing.
4.02. Covenants of Parent. During the period from the date of this
-------------------
Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or with the prior written consent of
the Company, Parent shall, and shall cause its Subsidiaries to, carry on their
respective businesses in the ordinary course consistent with past practice and
consistent with prudent banking practice and in compliance in all material
respects with all applicable laws and regulations. Parent will use its
reasonable best efforts to (x) preserve its business organization and that of
its Subsidiaries, and (y) preserve for itself and the Company the goodwill of
the customers of Parent and its Subsidiaries and others with whom business
relationships exist. From the date hereof until the Effective Time, except as
expressly contemplated or permitted by this Agreement, without the prior written
consent of the Company, Parent will not, and will cause each of its Subsidiaries
not to:
(a) Reorganization. Knowingly take any action that would, or would be
--------------
reasonably expected to, prevent either the Merger or the Bank Merger from
qualifying as a "reorganization" within the meaning of Section 368(a) of the
Code.
(b) Adverse Actions. Knowingly take any action or fail to take any action
---------------
that is intended or is reasonably likely to result in (i) any of its
representations and warranties set forth in this Agreement being or becoming
untrue in any material respect at any time at or prior to the Effective Time,
(ii) any of the conditions to the Merger set forth in Article VII not being
satisfied or (iii) a material violation of any provision of this Agreement,
except, in each case, as may be required by applicable law or regulation.
(c) Governing Documents. Amend Parent Articles or Parent Bylaws in a
-------------------
manner that would adversely affect the economic benefits of the Merger to the
holders of Company Common Stock.
(d) Acquisitions. Acquire (other than by way of foreclosures or
------------
acquisitions of control in a bona fide fiduciary capacity or in satisfaction of
debts previously contracted in good faith, in each case in the ordinary and
usual course of business consistent with past practice) all or a substantial
portion of the assets, business, deposits or properties of any other entity.
(e) Commitments. Enter into any contract with respect to, or otherwise
-----------
agree or commit to do, any of the foregoing.
25
4.03. Transition. Commencing following the date hereof, Parent and the
----------
Company shall, and shall cause their respective Subsidiaries to, cooperate with
respect to the integration of their respective businesses, operations and
organizations following consummation of the Merger and the Bank Merger in an
effort to realize at the earliest practicable time following the Effective Time
the synergies, operating efficiencies and other benefits expected to be realized
by Parent as a result of the consummation of such transactions.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Representations and Warranties of the Company. Except as set forth in
---------------------------------------------
a disclosure schedule delivered by the Company to Parent (the "Company
Disclosure Schedule") prior to the date hereof (which sets forth, among other
things, items the disclosure of which is necessary or appropriate either in
response to an express provision of this Agreement or as an exception to one or
more of its representations and warranties set forth below or its covenants in
Article IV or VI, provided, that (i) no such item is required to be set forth in
the Company Disclosure Schedule as an exception to any representation or
warranty of the Company if its absence would not be reasonably likely to result
in the related representation or warranty being deemed untrue or incorrect under
the standard set forth in Section 9.02 and (ii) the mere inclusion of an item in
the Company Disclosure Schedule as an exception to a representation or warranty
shall not be deemed an admission by the Company that such item represents a
material exception or fact, event or circumstance or that such item is or would
be reasonably likely to result in a Material Adverse Effect with respect to the
Company), the Company hereby represents and warrants to Parent as follows:
(a) Corporate Organization. The Company is duly organized and validly
----------------------
existing under the laws of the Commonwealth of Pennsylvania and is duly licensed
or qualified to do business in each jurisdiction where its ownership or leasing
of property or assets or the conduct of its business requires it to be so
licensed or qualified. The Company has all requisite corporate power and
authority necessary for it to own or lease its properties and assets and to
carry on its business as now conducted. The Company is duly registered as a bank
holding company under the BHC Act. The Company Articles and Company Bylaws,
copies of which have been delivered or made available to Parent, are true,
complete and correct copies of such documents as in effect as of the date of
this Agreement.
(b) Company Capital Stock.
---------------------
(i) The authorized capital stock of the Company consists solely of
10,000,000 shares of Company Common Stock, of which 5,150,329 shares are
outstanding as of the date hereof, and 5,000,000 shares of Company
Preferred Stock, of which no shares are outstanding as of the date hereof.
As of the date hereof, 612 shares of the Company Common Stock were held in
treasury by the Company or otherwise directly or indirectly
26
owned (other than in a fiduciary capacity) by the Company and no shares of
Company Stock were reserved for issuance, other than 819,966 shares of
Company Common Stock reserved for issuance pursuant to the Company Stock
Plans, including 687,455 shares reserved for issuance upon the exercise of
Company Options outstanding as of the date hereof, in accordance with their
terms. The outstanding shares of Company Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable, and
none of the outstanding shares of Company Common Stock have been issued in
violation of the preemptive rights of any Person. Except as set forth
above, as of the date of this Agreement, there are no shares of Company
Stock reserved for issuance, the Company does not have any Rights
outstanding with respect to Company Stock and the Company does not have any
commitment to authorize, issue or sell any Company Stock or Rights.
(ii) Section 5.01(b) of the Company Disclosure Schedule sets forth as
of the date hereof, and shall be updated to set forth as of the Effective
Date, for each outstanding Company Option, the name of the grantee, the
date of the grant, the type of grant, the status of the option grant as
qualified or non-qualified under Section 422 of the Code, the number of
shares of Company Common Stock subject to each option and award, the
vesting schedule, the number of shares of Company Common Stock subject to
options that are currently exercisable and the exercise price per share.
(c) Subsidiaries; Equity Investments.
--------------------------------
(i) (A) Section 5.01(c)(i) of the Company Disclosure Schedule lists
the name, jurisdiction of incorporation and record and beneficial owners of
the outstanding shares of capital stock for each direct or indirect
Subsidiary of the Company, (B) the Company owns, directly or indirectly,
all the issued and outstanding equity securities of each of its
Subsidiaries, (C) no equity securities of any of its Subsidiaries are or
may become required to be issued (other than to the Company or any of its
wholly-owned Subsidiaries) by reason of any Right or otherwise, (D) there
are no contracts, commitments, understandings or arrangements by which any
of its Subsidiaries is or may be bound to sell or otherwise transfer any of
its equity securities (other than to the Company or any of its wholly-owned
Subsidiaries), (E) there are no contracts, commitments, understandings, or
arrangements relating to the Company's rights to vote or to dispose of such
securities and (F) all the equity securities of the Company's Subsidiaries
held by the Company or its Subsidiaries are fully paid and nonassessable
and are owned by the Company or its Subsidiaries free and clear of any
Liens.
(ii) Each of the Company's Subsidiaries (A) has been duly organized
and is validly existing under the laws of the jurisdiction of its
organization, (B) has all requisite corporate power and authority necessary
for it to own or lease its properties and assets and to carry on its
business as now conducted and (C) is duly licensed or qualified to do
business in each jurisdiction where its ownership or leasing of property or
the conduct of its business requires it to be so licensed or qualified. The
articles of incorporation, bylaws and similar governing documents of each
of the Company's Subsidiaries, copies of which have been delivered or made
available to Parent, are true, complete and correct copies of such
documents as in effect as of the date of this Agreement.
27
(iii) The Company Bank is the only Subsidiary of the Company that is
an insured depository institution. The deposit accounts of the Company Bank
are insured by the FDIC to the maximum extent provided by applicable law,
and the Company Bank has paid all deposit insurance premiums and
assessments required by applicable laws and regulations.
(iv) Except for securities and other interests held in a fiduciary
capacity and beneficially owned by third parties or taken in consideration
of debts previously contracted and for securities listed in Section 5.01(t)
of the Company Disclosure Schedule, the Company does not own beneficially,
directly or indirectly, or have any Right with respect to, any equity
securities or similar interests of any Person or any interest in a
partnership or joint venture of any kind other than its Subsidiaries and
stock in the Federal Home Loan Bank of Pittsburgh.
(d) Authority; No Violation.
-----------------------
(i) The Company has the corporate power and authority to execute,
deliver and perform its obligations under this Agreement and, subject to
receipt of all necessary consents and approvals of Governmental Authorities
and the approval of the Company's shareholders of this Agreement, to
consummate the transactions contemplated hereby. Subject to the approval of
this Agreement by the shareholders of the Company, this Agreement and the
transactions contemplated hereby have been authorized by all necessary
corporate action of the Company and the Company Board on or prior to the
date hereof. The Company Board has directed that this Agreement be
submitted to the Company's shareholders for approval at a meeting of such
shareholders and, except for the approval and adoption of this Agreement by
the affirmative vote of the holders of a majority of the votes cast at a
meeting of the Company's shareholders at which a quorum is present, no
other vote of the shareholders of the Company is required by law, the
Company Articles, the Company Bylaws or otherwise to approve this Agreement
and the transactions contemplated hereby. The Company has duly executed and
delivered this Agreement and, assuming due authorization, execution and
delivery by Parent, this Agreement is a valid and legally binding
obligation of the Company, enforceable in accordance with its terms (except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general
equity principles).
28
(ii) Subject to receipt, or the making, of the consents, approvals,
waivers and filings referred to in Section 5.01(e) and the expiration of
related waiting periods, the execution, delivery and performance of this
Agreement by the Company, and the consummation of the transactions
contemplated hereby do not and will not (A) constitute a breach or
violation of, or a default under, the articles of incorporation or bylaws
(or similar governing documents) of the Company or any of its Subsidiaries,
(B) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to the Company or any of its
Subsidiaries, or any of their respective properties or assets or (C)
violate, conflict with, result in a breach of any provision of or the loss
of any benefit under, constitute a default (or an event which, with notice
or lapse of time, or both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under, accelerate
the performance required by, or result in the creation of any Lien upon any
of the respective properties or assets of the Company or any of its
Subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, contract,
agreement or other instrument or obligation to which the Company or any of
its Subsidiaries is a party, or by which they or any of their respective
properties or assets may be bound or affected.
(e) Consents and Approvals. No consents or approvals of, or waivers by,
----------------------
or filings or registrations with, any Governmental Authority or with any third
party are required to be made or obtained by the Company or any of its
Subsidiaries in connection with the execution, delivery or performance by the
Company of this Agreement, or to consummate the transactions contemplated
hereby, except for (i) filings of applications or notices with, and consents,
approvals or waivers by, as applicable, the Federal Reserve Board, the OTS, the
Department, and the NASD, (ii) any required filing under the HSR Act, (iii)
filings with the SEC and state securities authorities, as applicable, in
connection with the submission of this Agreement to the shareholders of the
Company and Parent, respectively, for approval and the issuance of Parent Common
Stock in the Merger, (iv) the filing of Articles of Merger with the Secretary of
State of the Commonwealth of Pennsylvania pursuant to the PBCL, and the filing
of Articles of Combination with the OTS and the Pennsylvania Secretary of State
with respect to the Bank Merger, (v) the approval of this Agreement by the
holders of the outstanding shares of Company Common Stock and by the holders of
the outstanding shares of Parent Common Stock and (vi) as set forth in Section
5.01(e) of the Company Disclosure Schedule. As of the date hereof, the Company
is not aware of any reason why the consents and approvals set forth above and
referred to in Section 7.01(b) will not be received in a timely manner and
without the imposition of a condition, restriction or requirement of the type
described in the proviso clause in such section.
(f) Financial Statements. The Company has previously made available to
--------------------
Parent copies of (i) the statements of financial condition of the Company and
its Subsidiaries as of June 30, 2004 and 2003, and the related consolidated
statements of operations, changes in stockholders' equity and comprehensive
income, and cash flows for the fiscal years 2002 through 2004, inclusive, as
included in the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 2004 filed with the SEC under the Exchange Act, accompanied by the
audit report of KPMG LLP, independent public accountants with respect to the
Company, and (ii) the unaudited statement of financial condition of the Company
and its Subsidiaries as of September 30, 2004 and the related unaudited
consolidated statements of operations, other comprehensive income and cash flows
for the three-month period then ended as included in the
29
Company's Quarterly Report on Form 10-Q for the period ended September 30, 2004
filed with the SEC under the Exchange Act. The September 30, 2004 consolidated
statement of condition of the Company (including the related notes, where
applicable) fairly presents the consolidated financial position of the Company
and its Subsidiaries as of the date thereof, and the other financial statements
referred to in this Section 5.01(f) (including the related notes, where
applicable) fairly present, and the financial statements to be filed by the
Company with the SEC after the date of this Agreement will fairly present
(subject, in the case of the unaudited statements, to recurring audit
adjustments normal in nature and amount), the results of the consolidated
operations and consolidated financial position of the Company and its
Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth; each of such statements (including the related notes, where
applicable) complies, and the financial statements to be filed by the Company
with the SEC after the date of this Agreement will comply, with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto; and each of such statements (including the related notes,
where applicable) has been, and the financial statements to be filed by the
Company with the SEC after the date of this Agreement will be, prepared in
accordance with GAAP consistently applied during the periods involved, except as
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q. KPMG LLP has not resigned or been dismissed as
independent public accountants of the Company as a result of or in connection
with any disagreements with the Company on a matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure.
(g) Undisclosed Liabilities; Corporate Records.
------------------------------------------
(i) Except for (i) those liabilities and obligations that are fully
reflected (in a footnote or otherwise) or reserved for in the consolidated
financial statements of the Company included in, or are otherwise disclosed
in, its Annual Report on Form 10-K for the year ended June 30, 2004, as
filed with the SEC prior to the date of this Agreement, (ii) liabilities
incurred since June 30, 2004 in the ordinary course of business consistent
with past practice and (iii) liabilities that would not, individually or in
the aggregate, have a Material Adverse Effect on the Company, the Company
and its Subsidiaries do not have, and since June 30, 2004, the Company and
its Subsidiaries have not incurred (except as permitted by Section 4.01),
any liabilities or obligations of any nature whatsoever (whether accrued,
absolute, contingent or otherwise and whether or not required to be
reflected in the Company's financial statements in accordance with GAAP).
(ii) The books and records of the Company and its Subsidiaries have
been and are being maintained in accordance with GAAP and any other
applicable legal and accounting requirements and reflect only actual
transactions. The minute books of the Company and each of its Subsidiaries
contain true, complete and accurate records of all meetings and other
corporate actions held or taken since June 30, 2001 of their respective
shareholders and boards of directors (including committees of their
respective boards of directors).
30
(h) Absence of Certain Changes or Events. Except as reflected in the
------------------------------------
Company's unaudited balance sheet as of September 30, 2004, since June 30, 2004,
there has been no change or development or combination of changes or
developments which, individually or in the aggregate, has had or is reasonably
likely to have a Material Adverse Effect on the Company.
(i) Disclosure Controls and Procedures. Since not later than August 29,
----------------------------------
2002, the Company has had in place "disclosure controls and procedures" (as
defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) designed and
maintained to ensure that (i) all information (both financial and non-financial)
required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the rules and forms of the SEC and (ii) all such
information is accumulated and communicated to the Company's management as
appropriate to allow timely decisions regarding required disclosure and to make
the certifications of the Chief Executive Officer and Chief Financial Officer of
the Company required under the Exchange Act with respect to such reports. In
addition, the Company and its Subsidiaries have devised and maintain a system of
internal accounting controls sufficient to provide reasonable assurances
regarding the reliability of financial reporting and the presentation of
financial statements for external purposes in accordance with GAAP. The Company
has disclosed, based on its most recent evaluation prior to the date hereof, to
the Company's auditors and the audit committee of the Company Board, (i) any
significant weaknesses or deficiencies in the design or operation of its
internal controls which could adversely affect in any material respect the
Company's ability to record, process, summarize and report financial data and
(ii) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal controls, and
the Company has made available to Parent a summary of any such disclosure made
by management to the Company's auditors and the audit committee of the Company
Board since June 30, 2002. None of the Company's or its Subsidiaries' records,
systems, controls, data or information are recorded, stored, maintained,
operated or otherwise wholly or partly dependent on or held by any means
(including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and therefrom)
are not under the exclusive ownership and direct control of the Company or its
Subsidiaries or accountants.
(j) SEC Reports. The Company has previously made available to Parent a
-----------
true, correct and complete copy of each (i) final registration statement,
prospectus, report, schedule and definitive proxy statement filed since June 30,
2001 by the Company with the SEC pursuant to the Securities Act or the Exchange
Act, in each case as amended or supplemented (collectively, the "Company SEC
Reports") and (ii) communication mailed by the Company to its shareholders since
June 30, 2001, and no such registration statement, prospectus, report, schedule,
proxy statement or communication contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
in which they were made, not misleading. The
31
Company has timely filed all Company SEC Reports and other documents required to
be filed by it under the Securities Act and the Exchange Act, and, as of their
respective dates, all Company SEC Reports complied with the published rules and
regulations of the SEC with respect thereto. No executive officer of the Company
has failed in any respect to make the certifications required of him or her
under Section 302 or 906 of the Xxxxxxxx-Xxxxx Act of 2002 and no enforcement
action has been initiated, or to the Knowledge of the Company is threatened,
against the Company by the SEC relating to disclosures contained in any Company
SEC Reports.
(k) Regulatory Matters.
------------------
(i) The Company and each of its Subsidiaries have timely filed all
reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file
since June 30, 2001 with any Governmental Authority, and have paid all fees
and assessments due and payable in connection therewith. Except for normal
examinations conducted by any Governmental Authority in the regular course
of the business of the Company and its Subsidiaries, no Governmental
Authority has initiated any proceeding, or to the Knowledge of the Company,
investigation into the business or operations of the Company or any of its
Subsidiaries, since June 30, 2001. There is no unresolved violation,
criticism, or exception by any Governmental Authority with respect to any
report or statement relating to any examinations of the Company or any of
its Subsidiaries. The Company Bank is "well capitalized" as defined in
applicable laws and regulations, and the Company Bank has a Community
Reinvestment Act rating of "satisfactory" or better.
(ii) Neither the Company nor any of its Subsidiaries nor any of any
of their respective properties is a party to or is subject to any order,
decree, agreement, memorandum of understanding or similar arrangement with,
or a commitment letter or similar submission to, or supervisory letter
from, any Governmental Authority, other than those generally applicable to
bank holding companies, Pennsylvania chartered banks, registered
broker-dealers or investment advisers and their affiliates. Neither the
Company nor any of its Subsidiaries has been advised by, or has any
Knowledge of facts which could give rise to an advisory notice by, any
Governmental Authority that such Governmental Authority is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such order, decree, agreement, memorandum of understanding,
commitment letter, supervisory letter or similar submission.
(l) Legal Proceedings.
-----------------
(i) Section 5.01(l)(i) of the Company Disclosure Schedule contains a
true and correct summary description as of the date hereof of any pending
or, to the Company's Knowledge, threatened legal, administrative, arbitral
or other proceedings, claims, actions or governmental or regulatory
investigations of any nature against the Company or any of its
Subsidiaries, including the venue, the parties thereto, the subject matter
thereof and the amount of damages claimed or other remedies sought.
32
(ii) Except as set forth in Section 5.01(l)(ii) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a
party to any, and there are no pending or, to the Company's Knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against
the Company or any of its Subsidiaries in which, to the Knowledge of the
Company, there is a reasonable probability of any material recovery against
or other Material Adverse Effect on the Company.
(m) Compliance with Laws. Each of the Company and its Subsidiaries:
--------------------
(i) is in compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders
or decrees and all SRO rules, regulations, orders and policy statements, in
each case as applicable thereto or to the employees conducting such
businesses, including, without limitation, the Equal Credit Opportunity
Act, the Fair Housing Act, the Community Reinvestment Act, the Home
Mortgage Disclosure Act, the Bank Secrecy Act, the Xxxxxxxx-Xxxxx Act of
2002, the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001 and all other
applicable fair lending and fair housing laws or other laws relating to
discrimination;
(ii) has all permits, licenses, authorizations, orders and approvals
of, and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to own
or lease their properties and to conduct their businesses as presently
conducted; all such permits, licenses, certificates of authority, orders
and approvals are in full force and effect and, to the Company's Knowledge,
no suspension or cancellation of any of them is threatened; and
(iii) has received, since June 30, 2001, no notification or
communication from any Governmental Authority (A) asserting that the
Company or any of its Subsidiaries is not in compliance with any of the
statutes, regulations or ordinances which such Governmental Authority
enforces or (B) threatening to revoke any license, franchise, permit or
governmental authorization (nor, to the Company's Knowledge, do any grounds
for any of the foregoing exist).
(n) Certain Contracts; Defaults.
---------------------------
(i) Except as set forth in Section 5.01(n)(i) of the Company
Disclosure Schedule and documents entered into pursuant to the terms of
this Agreement or for documents filed as exhibits to the Company's SEC
documents, neither the Company nor any of its Subsidiaries is a party to,
bound by or subject to any Contract as of the date hereof (A) with respect
to the employment of any directors, officers, employees or consultants, (B)
which would entitle any present or former director, officer, employee or
33
agent of the Company or its Subsidiaries to indemnification from the
Company or its Subsidiaries (other than the indemnity provisions in the
Company Bylaws and comparable provisions in the bylaws of the Company's
Subsidiaries), (C) which is a "material contract" (as defined in Item
601(b)(10) of Regulation S-K of the SEC) to be performed after the date of
this Agreement that has not been filed or incorporated by reference in the
Company SEC Reports, (D) which materially restricts the conduct of any
business by the Company or any of its Subsidiaries or upon consummation of
the Merger would materially restrict the ability of the Surviving
Corporation to engage in any business in which a savings and loan holding
company may lawfully engage under the Home Owners' Loan Act, as amended or
(E) any Contract, other than a Loan or a Derivative Transaction but
including data processing, software programming and licensing contracts,
that involves expenditures or receipts by the Company or any of its
Subsidiaries in excess of $250,000 per year. The Company has previously
delivered or made available to Parent true, complete and correct copies of
each such document.
(ii) Each Contract to which the Company or any of its Subsidiaries is
a party, by which any of its respective assets, business or operations may
be bound or affected, or under which it or its respective assets, business
or operations receives benefits, is a valid and legally binding obligation
of the Company or a Subsidiary of the Company, as applicable, and to the
Knowledge of the Company, the other party or parties thereto, enforceable
in accordance with its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or affecting
creditor's rights or by general equity principles). Neither the Company nor
any of its Subsidiaries is in default under any Contract to which it is a
party, by which its respective assets, business or operations may be bound
or affected, or under which it or its respective assets, business or
operations receives benefits, 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.
(o) Brokers. Neither the Company nor any Subsidiary of the Company nor
-------
any of their respective officers or directors has employed any broker or finder
or incurred any liability for any broker's fees, commissions or finder's fees in
connection with the transactions contemplated hereby, except that the Company
has engaged, and will pay a fee or commission to, the Company Financial Advisor
in accordance with the terms of a letter agreement between the Company Financial
Advisor and the Company, a true, complete and correct copy of which has been
previously delivered by the Company to Parent.
34
(p) Employee Benefit Plans.
----------------------
(i) All benefit and compensation plans, contracts, policies or
arrangements covering current or former employees of the Company and its
Subsidiaries and current or former directors of the Company and its
Subsidiaries, including, but not limited to, "employee benefit plans"
within the meaning of Section 3(3) of ERISA and deferred compensation,
stock option, stock purchase, stock appreciation rights, stock based
incentive and bonus plans (the "Company Benefit Plans"), are identified in
Section 5.01(p)(i) of the Company Disclosure Schedule. The Company has
delivered or made available to Parent prior to the date of this Agreement
true, correct and complete copies of the following documents: (A) each of
the Company Benefit Plans, (B) all trust agreements or other funding
arrangements for the Company Benefit Plans (including insurance Contracts)
and all amendments thereto (all of which are disclosed in Section
5.01(p)(i) of the Company Disclosure Schedule), (C) with respect to any
such Company Benefit Plans or amendments, the most recent determination
letters and all rulings, opinion letters (and any pending requests for
rulings or letters), information letters or advisory opinions issued by the
IRS, the United States Department of Labor or the PBGC, (D) annual reports
or returns, audited or unaudited financial statements, actuarial valuations
and reports and summary annual reports prepared for any Company Benefit
Plans with respect to the last three plan years and (E) the most recent
summary plan descriptions and any material modifications thereto.
(ii) All Company Benefit Plans are in all material respects in
compliance with the applicable terms of ERISA, the Code and any other
applicable laws and regulations. Each Company Benefit Plan which is an
"employee pension benefit plan" within the meaning of Section 3(2) of ERISA
(a "Company Pension Plan") and which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter
from the IRS covering all changes in Tax laws prior to the Economic Growth
and Tax Relief Reconciliation Act of 2001 and, to the Company's Knowledge,
there are no circumstances that would reasonably be expected to result in
revocation of any such favorable determination letter or the loss of the
qualification of such Company Pension Plan under Section 401(a) of the
Code. Each trust created under any Company Benefit Plan subject to ERISA
has been determined to be exempt from Tax under Section 501(a) of the Code
and, to the Company's Knowledge, there are no circumstances that would
reasonably be expected to result in revocation of such exemption.
(iii) There is no pending or, to the Company's Knowledge, threatened
litigation relating to the Company Benefit Plans. Neither the Company nor
any of its Subsidiaries has engaged in a transaction with respect to any
Company Benefit Plan or Company Pension Plan that, assuming the taxable
period of such transaction expired as of the date hereof or the Effective
Date, would reasonably be expected to subject the Company or any of its
Subsidiaries to a Tax or penalty imposed by either Section 4975 of the Code
or Section 502(i) of ERISA.
35
(iv) No liability under Subtitle C or D of Title IV of ERISA has been
or is reasonably expected to be incurred by the Company or any of its
Subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan" (which for purpose hereof includes the Financial
Institutions Retirement Fund) within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by any of them, or the
single-employer plan of any entity which is considered one employer with
the Company under Section 4001 of ERISA or Section 414 of the Code (a
"Company ERISA Affiliate"). Neither the Company nor any of its Subsidiaries
has incurred in the six years prior to the date hereof, and neither expects
to incur, any withdrawal liability with respect to a multiple employer plan
under Subtitle E of Title IV of ERISA (regardless of whether based on
contributions of an ERISA Affiliate). No notice of a "reportable event,"
within the meaning of Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived, has been required to be filed for any
Company Pension Plan or by any Company ERISA Affiliate within the 12-month
period ending on the date hereof or, to the Company's Knowledge, will be
required to be filed in connection with the transactions contemplated by
this Agreement. None of the Company, any of its Subsidiaries, or any
Company ERISA Affiliate has ever participated in, maintained, sponsored,
contributed to or incurred a liability (actual or contingent) with respect
to a multiemployer plan (within the meaning of Section 4001 of ERISA).
(v) All contributions required to be made under the terms of any
Company Benefit Plan have been timely made or have been reflected on the
financial statements of the Company included in the Company SEC Reports to
the extent required by the terms of any such Company Benefit Plan and to
the extent required by GAAP and there is no Lien, nor is there expected to
be a Lien, under Section 412(n) of the Code or Section 302(f) of ERISA or
Tax under Section 4971 of the Code imposed against any Company Benefit
Plan. Neither any Company Pension Plan nor any single-employer plan of a
Company ERISA Affiliate (a "Company ERISA Affiliate Plan") has an
"accumulated funding deficiency" (whether or not waived) within the meaning
of Section 412 of the Code or Section 302 of ERISA and, to the Knowledge of
the Company, no ERISA Affiliate has an outstanding funding waiver. Neither
the Company nor any of its Subsidiaries has provided, or is required to
provide, security to any Company Pension Plan or to any single-employer
plan of a Company ERISA Affiliate pursuant to Section 401(a)(29) of the
Code.
(vi) Except as set forth in Section 5.01(p)(vi) of the Company
Disclosure Schedule, none of the execution of this Agreement, shareholder
approval of this Agreement or consummation of the transactions contemplated
hereby will (either alone or in conjunction with any other event) (A)
result in any payment (including, without limitation, severance,
unemployment compensation, an "excess parachute payment" (within the
meaning of Section 280G of the Code), forgiveness of indebtedness or
otherwise) becoming due to any director or any employee of the Company or
any of its Subsidiaries under any Company Benefit Plan, (B) accelerate the
time of payment or vesting or trigger any payment or funding (through a
grantor trust or otherwise) of
36
compensation or benefits under, increase the amount payable or trigger any
other material obligation pursuant to, any of the Company Benefit Plans
(except as provided by Section 3.05(a)(i)), (C) result in any breach or
violation of, or a default under, any Company Benefit Plan, (D) limit or
restrict the ability to merge, amend or terminate any Company Benefit Plan
or (E) result in any payment which may be nondeductible for federal income
tax purposes pursuant to Sections 162(m) or 280G of the Code and the
regulations issued thereunder.
(vii) Neither the Company nor any of its Subsidiaries is a
"fiduciary" within the meaning of that term as defined under ERISA with
respect to any "employee benefit plan" (within the meaning of Section 3(3)
of ERISA), other than an employee benefit plan which covers solely the
employees and independent contractors of the Company and its Subsidiaries.
(viii) Except as reflected in Section 5.01(p)(viii) of the Company
Disclosure Schedule, no Company Pension Plan or Company ERISA Affiliate
Plan (including for the purpose of this subsection, the Financial
Institutions Retirement Fund) that is subject to Title IV of ERISA has any
"Unfunded Pension Liability." For purpose of this Agreement, Unfunded
Pension Liability shall mean, as of any determination date, the amount, if
any, by which the present value of all benefit liabilities (as that term is
defined in Section 4001(a)(16) of ERISA) of a plan subject to Title IV of
ERISA exceeds the fair market value of all assets of such plan, all
determined using the actuarial assumptions that would be used by the PBGC
in the event of a termination of the plan on such determination date.
(ix) Except as reflected in Section 5.01(p)(ix) of the Company
Disclosure Schedule, there are no pending or threatened claims, actions or
lawsuits, other than routine claims for benefits in the ordinary course,
asserted or instituted against (i) any Company Benefit Plan or its assets,
(ii) any Company ERISA Affiliate with respect to any plan that is subject
to Section 412 of the Code, or (iii) any fiduciary with respect to any
Company Benefit Plan or Company ERISA Affiliate Plan for which the Company,
its Subsidiaries, or any Company ERISA Affiliate may be directly or
indirectly liable, through indemnification obligations or otherwise.
(x) Except as reflected in Section 5.01(p)(x) of the Company
Disclosure Schedule, within the last six years, neither the Company, any
Subsidiary, nor any Company ERISA Affiliate has transferred any assets or
liabilities of a Company Benefit Plan or Company ERISA Affiliate Plan that
was subject to Title IV of ERISA which had, at the date of such transfer,
an Unfunded Pension Liability or has engaged in a transaction which may be
subject to Section 4069 of ERISA. No event has occurred which would result
in any liability under Sections 4063, 4064, 4071 or 4243 of ERISA, and
neither the Company, any of its Subsidiaries or any Company ERISA Affiliate
has any outstanding liability under Title IV of ERISA with respect to any
Company Benefit Plan or Company ERISA Affiliate Plan.
37
(xi) Neither the Company, any Subsidiary, nor any Company ERISA
Affiliate has engaged, directly or indirectly, in a non-exempt prohibited
transaction (as defined in Section 4975 of the Code or Section 406 of
ERISA) in connection with any employee benefit plan within the meaning of
Section 3(3) of ERISA.
(xii) Except as reflected in Section 5.01(p)(xii) of the Company
Disclosure Schedule, no Company Benefit Plan that is a non-tax qualified
deferred compensation plan has any unfunded liability.
(xiii) Neither the Parent nor its affiliates will have (i) an
obligation to make contribution(s) to any multiemployer plan (as defined in
Section 3(37) of ERISA), or (ii) any Withdrawal Liability within the
meaning of Sections 4201 and 4204 of ERISA (whether imposed and not yet
paid or calculated assuming a complete or partial withdrawal of the
Company, any Subsidiary, or any Company ERISA Affiliate as of such date not
yet imposed) which it would not have had if it had not entered into the
transactions described in this Agreement.
(xiv) Each Company Benefit Plan that provides welfare benefits has
been operated in compliance with all requirements of Sections 601 through
609 of ERISA and Section 4980B of the Code and regulations thereunder,
relating to the continuation of coverage under certain circumstances in
which coverage would otherwise cease. Neither the Company, any Subsidiary,
nor any Company ERISA Affiliate has contributed to a nonconforming group
health plan (as defined under Code Section 5000(c)) and no Company ERISA
Affiliate has incurred a tax under Section 5000(a) of the Code which could
become a liability of the Company, any Subsidiary, or any Company ERISA
Affiliate. Except as reflected in Section 5.01(p)(xiv) of the Company
Disclosure Schedule, neither the Company, any of its Subsidiaries nor any
Company ERISA Affiliate maintains, sponsors or provides, or has maintained,
sponsored or provided, post-retirement medical benefits, post-retirement
death benefits or other post-retirement welfare benefits to its current
employees or former employees, except as required by Section 4980B of the
Code or under the continuation of coverage provisions of the law of any
state or locality, and at the sole expense of the participant or the
beneficiary of the participant.
(xv) Subject to applicable law and the provisions of this Agreement,
the Company and its Subsidiaries may amend or terminate any retiree health
or life benefit under any Company Benefit Plan at any time without
incurring any liability thereunder. The Company and its Subsidiaries have
complied with the requirements of the Health Insurance Portability and
Accountability Act of 1996 with respect to each Company Benefit Plan that
provides welfare benefits. Neither the Company nor its Subsidiaries
maintain any plan which is an "employee welfare benefit plan" (as such term
is defined under Section 3(1) of ERISA) that has provided any "disqualified
benefit" (as such term is defined in Section 4976(b) of the Code) with
respect to which an excise tax could be imposed under Section 4976 of the
Code.
38
(q) Labor Matters. Neither the Company nor any of its Subsidiaries is
-------------
party to or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is the
Company or any of its Subsidiaries the subject of a proceeding asserting that it
has committed an unfair labor practice (within the meaning of the National Labor
Relations Act) or seeking to compel the Company or any of its Subsidiaries to
bargain with any labor organization as to wages or conditions of employment, nor
is there any strike or other labor dispute involving it or any of its
Subsidiaries pending or, to the Company's Knowledge, threatened, nor is the
Company or any of its Subsidiaries aware of any activity involving its employees
seeking to certify a collective bargaining unit or engaging in other
organizational activity.
(r) Environmental Matters. (i) The Company and its Subsidiaries are in
---------------------
compliance with applicable Environmental Laws; (ii) to the Company's Knowledge,
no real property (including buildings or other structures) currently or formerly
owned or operated by the Company or any of its Subsidiaries, or any property in
which the Company or any of its Subsidiaries has held a security interest, Lien
or a fiduciary or management role ("Company Loan Property"), has been
contaminated with, or has had any release of, any Hazardous Substance except in
compliance with Environmental Laws; (iii) to the Company's Knowledge, neither
the Company nor any of its Subsidiaries could be deemed under applicable law to
be the owner or operator of, or has participated in the management regarding
Hazardous Substances of, any Company Loan Property which has been contaminated
with, or has had any release of, any Hazardous Substance except in compliance
with Environmental Laws; (iv) to the Company's Knowledge, neither the Company
nor any of its Subsidiaries has any liability for any Hazardous Substance
disposal or contamination on any third party property; (v) neither the Company
nor any of its Subsidiaries has received any notice, demand letter, claim or
request for information alleging any violation of, or liability under, any
Environmental Law; (vi) neither the Company nor any of its Subsidiaries is
subject to any order, decree, injunction or other agreement with any
Governmental Authority or any third party relating to any Environmental Law; and
(vii) to the Company's Knowledge, there are no circumstances or conditions
(including the presence of asbestos, underground storage tanks, lead products,
polychlorinated biphenyls, prior manufacturing operations, dry-cleaning, or
automotive services) involving the Company or any of its Subsidiaries, any
currently or formerly owned or operated property, or any Company Loan Property,
that could reasonably be expected to result in any claims, liability or
investigations against the Company or any of its Subsidiaries, result in any
restrictions on the ownership, use, or transfer of any property pursuant to any
Environmental Law or adversely affect the value of any Company Loan Property.
(s) Tax Matters.
-----------
(i)(A) All Tax Returns required to be filed (taking into account any
extensions of time within which to file) by or with respect to the Company
and its Subsidiaries have been timely filed, (B) all such Tax Returns are
accurate and complete, (C) all Taxes shown to be due on the Tax Returns
referred to in clause (A) have been timely paid in full or have been
adequately reserved for in accordance with GAAP, (D) the United States
39
federal, state and local income Tax Returns referred to in clause (A) have
been examined by the IRS or the appropriate taxing authority for the
periods set forth in Section 5.01(s) of the Company Disclosure Schedule or
the period for assessment of the Taxes in respect of which such Tax Returns
were required to be filed has expired, (E) all deficiencies asserted or
assessments made as a result of examinations conducted by any taxing
authority have been paid in full, except any such amount as is being
contested in good faith and has been adequately reserved for in accordance
with GAAP, (F) no material issues have been raised by the relevant taxing
authority in connection with any audit, action, suit or proceeding which is
currently pending with respect to any of the Tax Returns referred to in
clause (A), (G) neither the Company nor any of its Subsidiaries has agreed
to any currently effective waiver of any statute of limitation with respect
to the assessment or collection of any Taxes of the Company or any of its
Subsidiaries and (H) there are no liens for taxes (other than taxes not yet
due and payable) upon the assets of the Company or any of its Subsidiaries.
(ii) The Company has made available to Parent true and correct copies
of the federal, state and local income Tax Returns filed by the Company and
its Subsidiaries for each of the three most recent fiscal years ended on or
before June 30, 2004.
(iii) Neither the Company nor any of its Subsidiaries is a party to
any "listed transaction" as defined in Treasury Regulation Section
1.6011-4(b)(2).
(iv) Neither the Company nor any of its Subsidiaries is a party to
any Tax allocation or sharing agreement (other than an agreement with a
group the common parent of which is the Company or any predecessor of the
Company), is or has been a member of an affiliated group filing
consolidated or combined Tax Returns (other than a group the common parent
of which is or was the Company or any predecessor of the Company) or
otherwise has any liability for the Taxes of any Person (other than the
Company and its Subsidiaries).
(v) No closing agreements, private letter rulings, technical advice
memoranda or similar agreement or rulings have been entered into or issued
by any taxing authority with respect to the Company or any of its
Subsidiaries within the past five years.
(vi) Neither the Company nor any of its Subsidiaries has been
required to include in income any adjustment pursuant to Section 481 of the
Code by reason of a voluntary change in accounting method initiated by the
Company or any of its Subsidiaries, and the IRS has not initiated or
proposed in writing any such adjustment or change in accounting method that
would result in an adjustment in the taxable income of the Company or any
of its Subsidiaries.
(vii) Neither the Company nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments under which would
not reasonably be expected to be deductible as a result of the limitations
under Section 162(m) of the Code and the regulations issued thereunder.
40
(viii) (A) No Tax is required to be withheld pursuant to Section 1445
of the Code as a result of the Merger and (B) all Taxes that the Company or
any of its Subsidiaries is or was required by law to withhold or collect
have been duly withheld or collected and, to the extent required by
applicable law, have been paid to the proper Governmental Authority or
other Person.
(ix) As of the date hereof, neither the Company nor any of its
Subsidiaries has taken or agreed to take any action, failed to take any
action or is aware of any fact or circumstance that is reasonably likely to
prevent or impede the Bank Merger or the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code or the
opinion of tax counsel referred to in Section 7.01(e) from being obtained
on a timely basis.
(x) Neither the Company nor any of its Subsidiaries has been a
"distributing corporation" or a "controlled corporation" in a distribution
intended to qualify under Section 355(a) of the Code within the past five
years.
(t) Investment Securities. Section 5.01(t) of the Company Disclosure
---------------------
Schedule sets forth a true, correct and complete list of the investment
securities and mortgage backed securities held for sale and held for investment
by the Company and its Subsidiaries, (the "Company Investment Securities") as of
December 31, 2004, as well as, with respect to such securities, their respective
book and market values (or estimated market values) and coupon rates. Except for
pledges to secure public and trust deposits, Federal Home Loan Bank advances and
repurchase agreements entered into in arms'-length transactions in the ordinary
course of business with customary commercial terms and conditions and other
pledges required by law, none of the Company Investment Securities is subject to
any restriction (contractual, statutory or otherwise) that would materially
impair the ability of the entity holding any such investment security to freely
dispose of such investment security at any time. Except as set forth in Section
5.01(t) of the Company Disclosure Schedule, no Company Investment Security held
by the Company or any of its Subsidiaries, were it to be a Loan held by the
Company or any of its Subsidiaries, would be classified as "Special Mention,"
"Substandard," "Doubtful," "Loss," "Classified," "Criticized," "Credit Risk
Assets," "Concerned Loans," "Watch List" or words of similar import.
(u) Derivative Transactions.
-----------------------
(i) All Derivative Transactions entered into by the Company or any of
its Subsidiaries or for the account of any of its customers were entered
into in accordance with applicable laws, rules, regulations and regulatory
policies of any Governmental Authority, and in accordance with the
investment, securities, commodities, risk management and other policies,
practices and procedures employed by the Company and
41
its Subsidiaries, and were entered into with counterparties believed at the
time to be financially responsible and able to understand (either alone or
in consultation with their advisers) and to bear the risks of such
Derivative Transactions. The Company and its Subsidiaries have duly
performed all of their obligations under the Derivative Transactions to the
extent that such obligations to perform have accrued, and, to the Knowledge
of the Company, there are no breaches, violations or defaults or
allegations or assertions of such by any party thereunder.
(ii) Except as set forth in Section 5.01(u)(ii) of the Company
Disclosure Schedule, no Derivative Transaction, were it to be a Loan held
by the Company or any of its Subsidiaries, would be classified as "Special
Mention," "Substandard," "Doubtful," "Loss," "Classified," "Criticized,"
`Credit Risk Assets," "Concerned Loans," "Watch List" or words of similar
import. The financial position and results of operations of the Company and
its Subsidiaries on a consolidated basis under or with respect to each such
Derivative Transaction have been reflected in the books and records of the
Company and such Subsidiaries in accordance with GAAP consistently applied,
and, except set forth in Section 5.01(u)(ii) of the Company Disclosure
Schedule, as of the date hereof, no open exposure of the Company or any of
its Subsidiaries with respect to any such instrument (or with respect to
multiple instruments with respect to any single counterparty) exceeds
$250,000.
(v) Loans; Nonperforming and Classified Assets.
------------------------------------------
(i) Except as set forth in Section 5.01(v)(i) of the Company
Disclosure Schedule, as of the date hereof, neither the Company nor any of
its Subsidiaries is a party to any written or oral (A) Loan of the Company
or any Company Subsidiary (collectively, the "Company Loans") under the
terms of which the obligor was, as of December 31, 2004, over sixty days
delinquent in payment of principal or interest or to the Knowledge of the
Company in default of any other provision, or (B) Company Loan with any
director, executive officer or five percent or greater shareholder of the
Company or any of its Subsidiaries, or to the Knowledge of the Company, any
Person controlling, controlled by or under common control with any of the
foregoing. Section 5.01(v)(i) of the Company Disclosure Schedule identifies
(A) each Company Loan that as of December 31, 2004 was classified as
"Special Mention," "Substandard," "Doubtful," "Loss," "Classified,"
"Criticized," "Credit Risk Assets," "Concerned Loans," "Watch List" or
words of similar import by the Company, any Company Subsidiary or any bank
examiner, together with the principal amount of and accrued and unpaid
interest on each such Company Loan and the identity of the borrower
thereunder, and (B) each asset of the Company or any Company Subsidiary
that as of December 31, 2004 was classified as OREO and the book value
thereof as of such date.
42
(ii) Each Company Loan (A) is evidenced by notes, agreements or other
evidences of indebtedness that are true, genuine and what they purport to
be, (B) to the extent secured, has been secured by valid Liens which have
been perfected and (C) to the Knowledge of the Company, is a legal, valid
and binding obligation of the obligor named therein, enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
(iii) The loan documents with respect to each Company Loan were in
material compliance with applicable laws and regulations and the Company's
lending policies at the time of origination or acquisition of such Company
Loans and are complete and correct.
(iv) Neither the Company nor any of its Subsidiaries is a party to a
ny agreement or arrangement with (or otherwise obligated to) any Person
which obligates the Company or any of its Subsidiaries to repurchase from
any such Person any Company Loan or other asset of the Company or any of
its Subsidiaries.
(w) Tangible Properties and Assets.
------------------------------
(i) Section 5.01(w)(i) of the Company Disclosure Schedule sets forth
a true, correct and complete list of all real property owned by the Company
or any Company Subsidiary. Except for properties and assets disposed of in
the ordinary course of business or as permitted by this Agreement, each of
the Company and the Company Subsidiaries has good title to, valid leasehold
interests in or otherwise legally enforceable rights to use all of the real
property, personal property and other assets (tangible or intangible),
used, occupied and operated or held for use by it in connection with its
business as presently conducted in each case, free and clear of any Lien,
except for (A) statutory Liens for amounts not yet delinquent and (B) Liens
that, individually and in the aggregate, are not material in character,
amount or extent, or do not materially detract from the value and do not
materially interfere with the present use, occupancy or operation of any
material asset.
(ii) Section 5.01(w)(ii) of the Company Disclosure Schedule sets
forth a true, correct and complete schedule of all leases, subleases,
licenses and other agreements under which each of the Company or any
Company Subsidiary uses or occupies or has the right to use or occupy, now
or in the future, real property (the "Company Leases"). Each Company Lease
is a valid and binding obligation of the Company or its applicable
Subsidiary and is in full force and effect and, as of the date hereof,
neither the Company nor any Company Subsidiary has received a written
notice of, and otherwise has no Knowledge of, any default or termination
(prior to expiration of the term) with respect to any Company Lease. There
has not occurred any event and no condition exists that would constitute a
termination event or a material breach by the Company or any Company
Subsidiary of, or material default by the Company or any Company Subsidiary
in, the performance of any covenant, agreement or condition contained in
any Company Lease, and to the Company's Knowledge, no lessor under a
Company Lease is in material breach or default in the performance of any
material covenant, agreement or condition contained in such Company Lease.
The Company and the Company Subsidiaries have paid all rents and other
charges to the extent due under the Company Leases.
43
(x) Intellectual Property. The Company and its Subsidiaries own or have a
---------------------
valid license to use all Intellectual Property used in or held for use in the
conduct of the business of the Company or any of its Subsidiaries (the "Company
Intellectual Property") and the Company Intellectual Property constitutes all of
the Intellectual Property necessary to carry on the business of the Company and
its Subsidiaries as currently conducted. The Company Intellectual Property owned
by the Company or any of its Subsidiaries, and to the Knowledge of the Company,
all other Company Intellectual Property, is valid and enforceable and has not
been cancelled, forfeited, expired or abandoned, and neither the Company nor any
of its Subsidiaries has received notice challenging the validity or
enforceability of any Company Intellectual Property. To the Knowledge of the
Company, the conduct of the business of the Company and its Subsidiaries does
not violate, misappropriate or infringe upon the Intellectual Property rights of
any Person.
(y) Fiduciary Accounts. The Company and each of its Subsidiaries has
------------------
properly administered all accounts for which it acts as a fiduciary, including
but not limited to accounts for which it serves as a trustee, agent, custodian,
personal representative, guardian, conservator or investment advisor, in
accordance with the terms of the governing documents and applicable laws and
regulations. Neither the Company nor any of its Subsidiaries, nor to the
Knowledge of the Company or any of its Subsidiaries, any of their respective
directors, officers or employees, has committed any breach of trust with respect
to any fiduciary account and the records for each such fiduciary account are
true and correct and accurately reflect the assets of such fiduciary account.
(z) Insurance.
---------
(i) Section 5.01(z)(i) of the Company Disclosure Schedule identifies
all of the material insurance policies, binders, or bonds currently
maintained by the Company or any of its Subsidiaries, other than
credit-life policies (the "Company Insurance Policies"), including the
insurer, policy numbers and any pending claims thereunder involving more
than $100,000. The Company and its Subsidiaries are insured with reputable
insurers against such risks and in such amounts as the management of the
Company reasonably has determined to be prudent in accordance with industry
practices. All Company Insurance Policies are in full force and effect, the
Company and its Subsidiaries are not in material default thereunder and all
claims thereunder have been filed in due and timely fashion.
(ii) Section 5.01(z)(ii) of the Company Disclosure Schedule sets
forth a true and correct summary description of all bank-owned life
insurance owned by the Company or any of its Subsidiaries. The value of
such bank-owned life insurance is fairly and accurately reflected in the
Company financial statements included in the Company SEC Reports in
accordance with GAAP consistently applied.
44
(aa) Transactions with Affiliates. All "covered transactions" between the
----------------------------
Company Bank and an "affiliate" within the meaning of Sections 23A and 23B of
the Federal Reserve Act have been in compliance with such provisions and the
regulations of the Federal Reserve Board thereunder.
(bb) Fairness Opinion. Prior to the execution of this Agreement, the
----------------
Company Board has received the written opinion of the Company Financial Advisor
to the effect that as of the date hereof, and based upon and subject to the
matters set forth therein, the Merger Consideration is fair to the holders of
Company Common Stock from a financial point of view. Such opinion has not been
amended or rescinded as of the date of this Agreement.
(cc) Company Information. The information relating to the Company and its
-------------------
Subsidiaries to be provided by the Company or its representatives in writing for
inclusion in the Proxy Statement/Prospectus, the Registration Statement, any
filing pursuant to Rule 165 or Rule 425 under the Securities Act or Rule 14a-12
under the Exchange Act, or in any other document filed with any other
Governmental Authority in connection herewith, will not 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 in which they are made,
not misleading. The Proxy Statement/Prospectus (except for such portions thereof
as relate to or are supplied by Parent or any of its Subsidiaries) will comply
as to form in all material respects with the provisions of the Exchange Act.
(dd) Disclosure. The representations and warranties contained in this
----------
Section 5.01 are true, correct and complete and do not omit to state any
material fact necessary in order to make the statements and information
contained in this Section 5.01 not misleading under the circumstances.
5.02 Representations and Warranties of Parent. Except as set forth in a
----------------------------------------
disclosure schedule delivered by Parent to the Company (the "Parent Disclosure
Schedule") prior to the date hereof (which sets forth, among other things, items
the disclosure of which is necessary or appropriate either in response to an
express provision of this Agreement or as an exception to one or more of its
representations and warranties set forth below or its covenants in Article IV or
VI, provided, that (i) no such item is required to be set forth in Parent
Disclosure Schedule as an exception to any representation or warranty of Parent
if its absence would not be reasonably likely to result in the related
representation or warranty being deemed untrue or incorrect under the standard
set forth in Section 9.02 and (ii) the mere inclusion of an item in Parent
Disclosure Schedule as an exception to a representation or warranty shall not be
deemed an admission by Parent that such item represents a material exception or
fact, event or circumstance or that such item is or would be reasonably likely
to result in a Material Adverse Effect with respect to Parent), Parent hereby
represents and warrants to the Company as follows:
45
(a) Corporate Organization. Parent is duly organized and validly existing
----------------------
under the laws of the Commonwealth of Pennsylvania. Parent is duly licensed or
qualified to do business and is in good standing in each jurisdiction where its
ownership or leasing of property or assets or the conduct of its business
requires it to be so licensed or qualified. Parent has all requisite corporate
power and authority necessary for it to own or lease its properties and assets
and to carry on its business as it is now conducted. Parent is duly registered
as a savings and loan holding company under the Home Owners Loan Act, as
amended. Parent Articles and Parent Bylaws, copies of which have been delivered
or made available to the Company, are true, complete and correct copies of such
documents as in effect as of the date of this Agreement.
(b) Parent Capital Stock. The authorized capital stock of Parent consists
--------------------
solely of 40,000,000 shares of Parent Common Stock, of which 9,785,105 shares
were outstanding as of the date hereof, and 5,000,000 shares of Parent Preferred
Stock, of which no shares are outstanding as of the date hereof. As of the date
hereof, 1,647,363 shares of Parent Common Stock were held in treasury by Parent
or otherwise directly or indirectly owned (other than in a fiduciary capacity)
by Parent and no shares of Parent Common Stock were reserved for issuance, other
than pursuant to the terms of this Agreement and 1,126,155 shares of Parent
Common Stock reserved for issuance pursuant to Parent Stock Plans, including
977,076 shares reserved for issuance upon the exercise of options outstanding as
of the date hereof, in accordance with their terms. The outstanding shares of
Parent Common Stock have been duly authorized and validly issued and are fully
paid and non-assessable, and none of the outstanding shares of Parent Common
Stock have been issued in violation of the preemptive rights of any Person. As
of the date hereof, there are no Rights authorized, issued or outstanding with
respect to the capital stock of Parent and Parent does not have any Contract to
authorize, issue or sell any shares of Parent Common Stock, Parent Preferred
Stock or Rights, except for (i) shares of Parent Common Stock issuable pursuant
to Parent Stock Plans and upon exercise or vesting of Rights granted pursuant
thereto and (ii) by virtue of this Agreement. At the Effective Time, the shares
of Parent Common Stock to be issued in exchange for shares of Company Common
Stock in the Merger will be duly authorized, validly issued, fully paid and
nonassessable and the issuance thereof is not subject to any preemptive right.
(c) Subsidiaries; Equity Investments.
--------------------------------
(i) (A) Section 5.02(c)(i) of Parent Disclosure Schedule lists the
name, jurisdiction of incorporation and record and beneficial owners of the
outstanding shares of capital stock for each direct or indirect Subsidiary
of Parent, (B) Parent owns, directly or indirectly, all the issued and
outstanding equity securities of each of its Subsidiaries, (C) no equity
securities of any of its Subsidiaries are or may become required to be
issued (other than to Parent or any of its wholly owned Subsidiaries) by
reason of any Right or otherwise, (D) there are no contracts, commitments,
understandings or arrangements by which any of its Subsidiaries is or may
be bound to sell or otherwise transfer any of its equity securities (other
than to Parent or any of its wholly owned Subsidiaries), (E) there are no
contracts, commitments, understandings, or arrangements relating to
Parent's rights to vote or to dispose of such securities and (F) all the
equity securities of Parent's Subsidiaries held by Parent or its
Subsidiaries are fully paid and nonassessable and are owned by Parent or
its Subsidiaries free and clear of any Liens.
46
(ii) Each of Parent's Subsidiaries (A) has been duly organized and is
validly existing under the laws of the jurisdiction of its organization,
(B) has all requisite corporate power and authority necessary for it to own
or lease its properties and assets and to carry on its business as now
conducted and (C) is duly licensed or qualified to do business in each
jurisdiction where its ownership or leasing of property or the conduct of
its business requires it to be so licensed or qualified. The articles of
incorporation, bylaws and similar governing documents of each Subsidiary of
Parent, copies of which have been delivered or made available to the
Company, are true, complete and correct copies of such documents as in
effect as of the date of this Agreement.
(iii) Parent Bank is the only Subsidiary of Parent that is an insured
depository institution. The deposit accounts of Parent Bank are insured by
the FDIC to the maximum extent provided by applicable law, and Parent Bank
has paid all deposit insurance premiums and assessments required by
applicable laws and regulations.
(iv) Except for securities and other interests held in a fiduciary
capacity and beneficially owned by third parties or taken in consideration
of debts previously contracted and for securities listed in Section 5.02(t)
of the Parent Disclosure Schedule, Parent does not own beneficially,
directly or indirectly, or have any Right with respect to, any equity
securities or similar interests of any Person or any interest in a
partnership or joint venture of any kind other than its Subsidiaries and
stock in the Federal Home Loan Bank of Pittsburgh.
(d) Authority; No Violation.
-----------------------
(i) Parent has the corporate power and authority to execute, deliver
and perform its obligations under this Agreement and, subject to receipt of
all necessary consents and approvals of Governmental Authorities, to
consummate the transactions contemplated hereby. This Agreement and the
transactions contemplated hereby have been authorized by all necessary
corporate action of Parent and Parent Board on or prior to the date hereof.
Parent Board has directed that this Agreement be submitted to Parent's
shareholders for approval at a meeting of such shareholders and, except for
the approval and adoption of this Agreement by the affirmative vote of the
holders of a majority of the votes cast at a meeting of Parent's
shareholders at which a quorum is present, no other vote of the
shareholders of Parent is required by law, Parent Articles, Parent Bylaws
or otherwise to approve this Agreement and the transactions contemplated
hereby. Parent has duly executed and delivered this Agreement, and assuming
due authorization, execution and delivery by the Company, this Agreement is
a valid and legally binding obligation of Parent enforceable in accordance
with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors'
rights or by general equity principles).
47
(ii) Subject to receipt, or the making, of the consents, approvals,
waivers and filings referred to in Section 5.02(e) and expiration of the
related waiting periods, the execution, delivery and performance of this
Agreement by Parent, and the consummation of the transactions contemplated
hereby do not and will not (A) constitute a breach or violation of, or a
default under, the articles of incorporation or bylaws (or similar
governing documents) of Parent or any of its Subsidiaries, (B) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree
or injunction applicable to Parent or any of its Subsidiaries, or any of
their respective properties or assets or (C) violate, conflict with, result
in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a
right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any Lien upon any of the
respective properties or assets of Parent or any of its Subsidiaries under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, contract, agreement or other
instrument or obligation to which Parent or any of its Subsidiaries is a
party, or by which they or any of their respective properties or assets may
be bound or affected.
(e) Consents and Approvals. No consents or approvals of, or waivers by,
----------------------
or filings or registrations with, any Governmental Authority or with any third
party are required to be made or obtained by Parent and any of its Subsidiaries
in connection with the execution, delivery or performance by Parent of this
Agreement, or to consummate the transactions contemplated hereby, except for (i)
filings of applications or notices with, and consents, approvals or waivers by,
as applicable, the Federal Reserve Board, the OTS, the Department and the NASD,
(ii) any required filing under the HSR Act, (iii) filings with the SEC and state
securities authorities, as applicable, in connection with the submission of this
Agreement to the shareholders of Parent and the Company, respectively, for
approval and the issuance of Parent Common Stock in the Merger, (iv) the filing
of a notification of listing of additional shares with the Nasdaq, (v) the
filing of Articles of Merger with the Secretary of State of the Commonwealth of
Pennsylvania pursuant to the PBCL and the Articles of Combination with the OTS
and the Pennsylvania Secretary of State and (vi) the approval of this Agreement
by the holders of the outstanding shares of Parent Common Stock and by the
holders of outstanding shares of Company Common Stock. As of the date hereof,
Parent is not aware of any reason why the consents and approvals set forth above
and referred to in Section 7.01(b) will not be received in a timely manner and
without the imposition of a condition, restriction or requirement of the type
described in the proviso clause in such section.
48
(f) Financial Statements. Parent has previously made available to the
--------------------
Company copies of (i) the consolidated statements of financial condition of
Parent and its Subsidiaries as of June 30, 2004 and 2003, and the related
consolidated statements of income, changes in shareholders' equity and
comprehensive income and cash flows for the fiscal years 2002 through 2004,
inclusive, as included in Parent's Annual Report on Form 10-K for the fiscal
year ended June 30, 2004 filed with the SEC under the Exchange Act, accompanied
by the audit report of KPMG LLP, independent public accountants with respect to
Parent, and (ii) the unaudited consolidated statements of financial condition of
Parent and its Subsidiaries as of September 30, 2004 and the related unaudited
consolidated statements of operations and cash flows for the three-month period
then ended as included in Parent's Quarterly Report on Form 10-Q for the period
ended September 30, 2004 filed with the SEC under the Exchange Act. The June 30,
2004 consolidated balance sheet of Parent (including the related notes, where
applicable) fairly presents the consolidated financial position of Parent and
its Subsidiaries as of the date thereof, and the other financial statements
referred to in this Section 5.02(f) (including the related notes, where
applicable) fairly present, and the financial statements to be filed by Parent
with the SEC after the date of this Agreement will fairly present (subject, in
the case of the unaudited statements, to recurring audit adjustments normal in
nature and amount), the results of the consolidated operations and consolidated
financial position of Parent and its Subsidiaries for the respective fiscal
periods or as of the respective dates therein set forth; each of such statements
(including the related notes, where applicable) complies, and the financial
statements to be filed by Parent with the SEC after the date of this Agreement
will comply, with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto; and each of such
statements (including the related notes, where applicable) has been, and the
financial statements to be filed by Parent with the SEC after the date of this
Agreement will be, prepared in accordance with GAAP consistently applied during
the periods involved, except as indicated in the notes thereto or, in the case
of unaudited statements, as permitted by Form 10-Q. KPMG LLP has not resigned or
been dismissed as independent public accountants of Parent as a result of or in
connection with any disagreements with Parent on a matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure.
(g) Undisclosed Liabilities; Corporate Records.
------------------------------------------
(i) Except for (i) those liabilities and obligations that are fully
reflected (in a footnote or otherwise) or reserved for in the consolidated
financial statements of Parent included in, or are otherwise disclosed in,
its Annual Report on Form 10-K for the year ended June 30, 2004, as filed
with the SEC prior to the date of this Agreement, (ii) liabilities incurred
since June 30, 2004 in the ordinary course of business consistent with past
practice and (iii) liabilities that would not, individually or in the
aggregate, have a Material Adverse Effect on Parent, Parent and its
Subsidiaries do not have, and since June 30, 2004, Parent and its
Subsidiaries have not incurred any liabilities or obligations of any nature
whatsoever (whether accrued, absolute, contingent or otherwise and whether
or not required to be reflected in Parent's financial statements in
accordance with GAAP).
49
(ii) The books and records of Parent and its Subsidiaries have been
and are being maintained in accordance with GAAP and any other applicable
legal and accounting requirements and reflect only actual transactions. The
minute books of Parent and each of its Subsidiaries contain true, complete
and accurate records of all meetings and other corporate actions held or
taken since June 30, 2001 of their respective shareholders and boards of
directors (including committees of their respective boards of directors).
(h) Absence of Certain Changes or Events. Except as reflected in Parent's
------------------------------------
unaudited balance sheet as of September 30, 2004, since June 30, 2004, there has
been no change or development or combination of changes or developments which,
individually or in the aggregate, has had or is reasonably likely to have a
Material Adverse Effect on Parent.
(i) Disclosure Controls and Procedures. Since not later than August 29,
----------------------------------
2002, Parent has had in place "disclosure controls and procedures" (as defined
in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) designed and maintained to
ensure that (i) all information (both financial and non-financial) required to
be disclosed by Parent in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the SEC and (ii) all such
information is accumulated and communicated to Parent's management as
appropriate to allow timely decisions regarding required disclosure and to make
the certifications of the Chief Executive Officer and Chief Financial Officer of
Parent required under the Exchange Act with respect to such reports. In
addition, Parent and its Subsidiaries have devised and maintain a system of
internal accounting controls sufficient to provide reasonable assurances
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with GAAP. Parent has
disclosed, based on its most recent evaluation prior to the date hereof, to
Parent's auditors and the audit committee of Parent Board, (i) any significant
weaknesses or deficiencies in the design or operation of its internal controls
which could adversely affect in any material respect Parent's ability to record,
process, summarize and report financial data and (ii) any fraud, whether or not
material, that involves management or other employees who have a significant
role in Parent's internal controls, and Parent has made available to the Company
a summary of any such disclosure made by management to Parent's auditors and the
audit committee of Parent Board since June 30, 2002. None of Parent's or its
Subsidiaries' records, systems, controls, data or information are recorded,
stored, maintained, operated or otherwise wholly or partly dependent on or held
by any means (including any electronic, mechanical or photographic process,
whether computerized or not) which (including all means of access thereto and
therefrom) are not under the exclusive ownership and direct control of Parent or
its Subsidiaries' or its accountants.
(j) SEC Reports. Parent has previously made available to the Company a
-----------
true, correct and complete copy of each (i) final registration statement,
prospectus, report, schedule and definitive proxy statement filed since June 30,
2001 by Parent with the SEC pursuant to the Securities Act or the Exchange Act,
in each case as amended or supplemented (collectively, the "Parent SEC
Reports"), and (ii) communication mailed by Parent to its shareholders since
June 30, 2001, and no such registration statement, prospectus, report, schedule,
proxy statement or communication contained any untrue statement of a material
fact or omitted to state any material
50
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading.
Parent has timely filed all Parent SEC Reports and other documents required to
be filed by it under the Securities Act and the Exchange Act, and, as of their
respective dates, all Parent SEC Reports complied with the published rules and
regulations of the SEC with respect thereto. No executive officer of Parent has
failed in any respect to make the certifications required of him or her under
Section 302 or 906 of the Xxxxxxxx-Xxxxx Act of 2002 and no enforcement action
has been initiated, or to the Knowledge of Parent is threatened, against Parent
by the SEC relating to disclosures contained in any Parent SEC Reports.
(k) Regulatory Matters.
------------------
(i) Parent and each of its Subsidiaries have timely filed all
reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file
since June 30, 2001 with any Governmental Authority, and have paid all fees
and assessments due and payable in connection therewith. Except for normal
examinations conducted by any Governmental Authority in the regular course
of the business of Parent and its Subsidiaries, no Governmental Authority
has initiated any proceeding, or to the Knowledge of Parent, investigation
into the business or operations of Parent or any of its Subsidiaries, since
June 30, 2001. There is no unresolved violation, criticism, or exception by
any Governmental Authority with respect to any report or statement relating
to any examinations of Parent or any of its Subsidiaries. Each of Parent
and Parent Bank is "well capitalized" as defined in applicable laws and
regulations, and Parent Bank has a Community Reinvestment Act rating of
"satisfactory" or better.
(ii) Neither Parent nor any of its Subsidiaries nor any of any of
their respective properties is a party to or is subject to any order,
decree, agreement, memorandum of understanding or similar arrangement with,
or a commitment letter or similar submission to, or supervisory letter
from, any Governmental Authority, other than those generally applicable to
savings and loan holding companies, savings associations and their
affiliates. Neither Parent nor any of its Subsidiaries has been advised by,
or has any Knowledge of facts which could give rise to an advisory notice
by, any Governmental Authority that such Governmental Authority is
contemplating issuing or requesting (or is considering the appropriateness
of issuing or requesting) any such order, decree, agreement, memorandum of
understanding, commitment letter, supervisory letter or similar submission.
(l) Legal Proceedings.
-----------------
(i) Section 5.02(l)(i) of Parent Disclosure Schedule contains a true
and correct summary description as of the date hereof of any pending or, to
Parent's Knowledge, threatened legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory investigations
of any nature against Parent or any of its Subsidiaries, including the
venue, the parties thereto, the subject matter thereof and the amount of
damages claimed or other remedies sought.
51
(ii) Except as set forth in Section 5.02(l)(ii) of Parent Disclosure
Schedule, neither Parent nor any of its Subsidiaries is a party to any, and
there are no pending or, to Parent's Knowledge, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against Parent or
any of its Subsidiaries in which, to the Knowledge of Parent, there is a
reasonable probability of any material recovery against or other Material
Adverse Effect on Parent.
(m) Compliance with Laws. Each of Parent and its Subsidiaries:
--------------------
(i) is in compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders
or decrees applicable thereto or to the employees conducting such
businesses, including, without limitation, the Equal Credit Opportunity
Act, the Fair Housing Act, the Community Reinvestment Act, the Home
Mortgage Disclosure Act, the Bank Secrecy Act, the Xxxxxxxx-Xxxxx Act of
2002, the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001 and all other
applicable fair lending and fair housing laws or other laws relating to
discrimination;
(ii) has all permits, licenses, authorizations, orders and approvals
of, and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to own
or lease their properties and to conduct their businesses as presently
conducted; all such permits, licenses, certificates of authority, orders
and approvals are in full force and effect and, to Parent's Knowledge, no
suspension or cancellation of any of them is threatened; and
(iii) has received, since June 30, 2001, no notification or
communication from any Governmental Authority (A) asserting that Parent or
any of its Subsidiaries is not in compliance with any of the statutes,
regulations or ordinances which such Governmental Authority enforces or (B)
threatening to revoke any license, franchise, permit or governmental
authorization (nor, to Parent's Knowledge, do any grounds for any of the
foregoing exist).
(n) Certain Contracts; Defaults.
---------------------------
(i) Except as set forth in Section 5.02(n)(i) of Parent Disclosure
Schedule and documents entered into pursuant to the terms of this Agreement
or for documents filed as exhibits to Parent's SEC documents, neither
Parent nor any of its Subsidiaries is a party to, bound by or subject to
any Contract as of the date hereof (A) with respect to the employment of
any directors, officers, employees or consultants, (B) which would entitle
any present or former director, officer, employee or agent of Parent or its
Subsidiaries to indemnification from Parent or its Subsidiaries (other than
the indemnity provisions in Parent Articles and Parent Bylaws and
comparable provisions in
52
the charter, articles of incorporation or bylaws of Parent's Subsidiaries),
(C) which is a "material contract" (as defined in Item 601(b)(10) of
Regulation S-K of the SEC) to be performed after the date of this Agreement
that has not been filed or incorporated by reference in Parent's SEC
Reports, (D) which materially restricts the conduct of any business by
Parent or any of its Subsidiaries or upon consummation of the Merger would
materially restrict the ability of the Surviving Corporation to engage in
any business in which a savings and loan holding company may lawfully
engage under the Home Owners' Loan Act, as amended or (E) any Contract,
other than a Loan or a Derivative Transaction but including data
processing, software programming and licensing contracts, that involves
expenditures or receipts by Parent or any of its Subsidiaries in excess of
$250,000 per year. Parent has previously delivered or made available to the
Company true, complete and correct copies of each such document.
(ii) Each Contract to which Parent or any of its Subsidiaries is a
party, by which any of its respective assets, business or operations may be
bound or affected, or under which it or its respective assets, business or
operations receives benefits, is a valid and legally binding obligation of
Parent or a Subsidiary of Parent, as applicable, and to the Knowledge of
Parent, the other party or parties thereto, enforceable in accordance with
its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditor's
rights or by general equity principles). Neither Parent nor any of its
Subsidiaries is in default under any Contract to which it is a party, by
which its respective assets, business or operations may be bound or
affected, or under which it or its respective assets, business or
operations receives benefits, 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.
(o) Brokers. Except with respect to the fees to be paid to Parent
-------
Financial Advisor, none of Parent, any Subsidiary of Parent or any of their
respective directors or officers has incurred any liability for any broker's
fees, commissions or finder's fees in connection with of the transactions
contemplated hereby for which the Parent, any of its Subsidiaries or any of
their respective directors or officers would be liable.
(p) Employee Benefit Plans.
----------------------
(i) All benefit and compensation plans, contracts, policies or
arrangements covering current or former employees of Parent and its
Subsidiaries and current or former directors of Parent and its
Subsidiaries, including, but not limited to, "employee benefit plans"
within the meaning of Section 3(3) of ERISA and deferred compensation,
stock option, stock purchase, stock appreciation rights, stock based
incentive and bonus plans (the "Parent Benefit Plans"), are identified in
Section 5.02(p)(i) of Parent Disclosure Schedule. Parent has delivered or
made available to Parent prior to the date of this Agreement true, correct
and complete copies of the following documents: (A) each of
53
Parent Benefit Plans, (B) all trust agreements or other funding
arrangements for Parent Benefit Plans (including insurance Contracts) and
all amendments thereto (all of which are disclosed in Section 5.02(p)(i) of
Parent Disclosure Schedule), (C) with respect to any such Parent Benefit
Plans or amendments, the most recent determination letters and all rulings,
opinion letters (and any pending requests for rulings or letters),
information letters or advisory opinions issued by the IRS, the United
States Department of Labor or the PBGC, (D) annual reports or returns,
audited or unaudited financial statements, actuarial valuations and reports
and summary annual reports prepared for any Parent Benefit Plans with
respect to the last three plan years and (E) the most recent summary plan
descriptions and any material modifications thereto.
(ii) All Parent Benefit Plans are in all material respects in
compliance with the applicable terms of ERISA, the Code and any other
applicable laws and regulations. Each Parent Benefit Plan which is an
"employee pension benefit plan" within the meaning of Section 3(2) of ERISA
(a "Parent Pension Plan") and which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter
from the IRS covering all changes in Tax laws prior to the Economic Growth
and Tax Relief Reconciliation Act of 2001 and, to Parent's Knowledge, there
are no circumstances that would reasonably be expected to result in
revocation of any such favorable determination letter or the loss of the
qualification of such Parent Pension Plan under Section 401(a) of the Code.
Each trust created under any Parent Benefit Plan subject to ERISA has been
determined to be exempt from Tax under Section 501(a) of the Code and, to
Parent's Knowledge, there are no circumstances that would reasonably be
expected to result in revocation of such exemption.
(iii) There is no pending or, to Parent's Knowledge, threatened
litigation relating to Parent Benefit Plans. Neither Parent nor any of its
Subsidiaries has engaged in a transaction with respect to any Parent
Benefit Plan or Parent Pension Plan that, assuming the taxable period of
such transaction expired as of the date hereof or the Effective Date, would
reasonably be expected to subject Parent or any of its Subsidiaries to a
Tax or penalty imposed by either Section 4975 of the Code or Section 502(i)
of ERISA.
(iv) No liability under Subtitle C or D of Title IV of ERISA has been
or is reasonably expected to be incurred by Parent or any of its
Subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan" (which for purpose hereof includes the Financial
Institutions Retirement Fund) within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by any of them, or the
single-employer plan of any entity which is considered one employer with
Parent under Section 4001 of ERISA or Section 414 of the Code (a "Parent
ERISA Affiliate"). Neither Parent nor any of its Subsidiaries has incurred
in the six years prior to the date hereof, and neither expects to incur,
any withdrawal liability with respect to a multiple employer plan under
Subtitle E of Title IV of ERISA (regardless of whether based on
contributions of an ERISA Affiliate). No notice of a "reportable event,"
within the meaning of Section
54
4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Parent Pension Plan or by any
Parent ERISA Affiliate within the 12-month period ending on the date hereof
or, to Parent's Knowledge, will be required to be filed in connection with
the transactions contemplated by this Agreement. None of Parent, any of its
Subsidiaries, or any Parent ERISA Affiliate has ever participated in,
maintained, sponsored, contributed to or incurred a liability (actual or
contingent) with respect to a multiemployer plan (within the meaning of
Section 4001 of ERISA).
(v) All contributions required to be made under the terms of any
Parent Benefit Plan have been timely made or have been reflected on the
financial statements of Parent included in Parent's SEC Reports to the
extent required by the terms of any such Parent Benefit Plan and to the
extent required by GAAP and there is no Lien, nor is there expected to be a
Lien, under Section 412(n) of the Code or Section 302(f) of ERISA or Tax
under Section 4971 of the Code imposed against any Parent Benefit Plan.
Neither any Parent Pension Plan nor any single-employer plan of a Parent
ERISA Affiliate (a "Parent ERISA Affiliate Plan") has an "accumulated
funding deficiency" (whether or not waived) within the meaning of Section
412 of the Code or Section 302 of ERISA and, to the Knowledge of Parent, no
ERISA Affiliate has an outstanding funding waiver. Neither Parent nor any
of its Subsidiaries has provided, or is required to provide, security to
any Parent Pension Plan or to any single-employer plan of a Parent ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(vi) Neither Parent nor any of its Subsidiaries is a "fiduciary"
within the meaning of that term as defined under ERISA with respect to any
"employee benefit plan" (within the meaning of Section 3(3) of ERISA),
other than an employee benefit plan which covers solely the employees and
independent contractors of Parent and its Subsidiaries.
(vii) Except as reflected in Section 5.02(p)(vii) of the Parent
Disclosure Schedule, no Parent Pension Plan or Parent ERISA Affiliate Plan
(including for the purpose of this subsection, the Financial Institutions
Retirement Fund) that is subject to Title IV of ERISA has any "Unfunded
Pension Liability."
(viii) Except as reflected in Section 5.02(p)(viii) of the Parent
Disclosure Schedule, there are no pending or threatened claims, actions or
lawsuits, other than routine claims for benefits in the ordinary course,
asserted or instituted against (i) any Parent Benefit Plan or its assets,
(ii) any Parent ERISA Affiliate with respect to any plan that is subject to
Section 412 of the Code, or (iii) any fiduciary with respect to any Parent
Benefit Plan or Parent ERISA Affiliate Plan for which Parent, its
Subsidiaries, or any Parent ERISA Affiliate may be directly or indirectly
liable, through indemnification obligations or otherwise.
55
(ix) Except as reflected in Section 5.02(p)(ix) of the Parent
Disclosure Schedule, within the last six years, neither Parent, any
Subsidiary, nor any Parent ERISA Affiliate has transferred any assets or
liabilities of a Parent Benefit Plan or Parent ERISA Affiliate Plan that
was subject to Title IV of ERISA which had, at the date of such transfer,
an Unfunded Pension Liability or has engaged in a transaction which may be
subject to Section 4069 of ERISA. No event has occurred which would result
in any liability under Sections 4063, 4064, 4071 or 4243 of ERISA, and
neither Parent, any of its Subsidiaries or any Parent ERISA Affiliate has
any outstanding liability under Title IV of ERISA with respect to any
Parent Benefit Plan or Parent ERISA Affiliate Plan.
(x) Neither Parent, any Subsidiary, nor any Parent ERISA Affiliate
has engaged, directly or indirectly, in a non-exempt prohibited transaction
(as defined in Section 4975 of the Code or Section 406 of ERISA) in
connection with any employee benefit plan within the meaning of Section
3(3) of ERISA.
(xi) Except as reflected in Section 5.02(p) of the Parent Disclosure
Schedule, no Parent Benefit Plan that is a non-tax qualified deferred
compensation plan has any unfunded liability.
(xii) Each Parent Benefit Plan that provides welfare benefits has
been operated in compliance with all requirements of Sections 601 through
609 of ERISA and Section 4980B of the Code and regulations thereunder,
relating to the continuation of coverage under certain circumstances in
which coverage would otherwise cease. Neither Parent, any Subsidiary, nor
any Parent ERISA Affiliate has contributed to a nonconforming group health
plan (as defined under Code Section 5000(c)) and no Parent ERISA Affiliate
has incurred a tax under Section 5000(a) of the Code. Except as reflected
in Section 5.02(p)(xii) of the Parent Disclosure Schedule, neither Parent,
any of its Subsidiaries nor any Parent ERISA Affiliate maintains, sponsors
or provides, or has maintained, sponsored or provided, post-retirement
medical benefits, post-retirement death benefits or other post-retirement
welfare benefits to its current employees or former employees, except as
required by Section 4980B of the Code or under the continuation of coverage
provisions of the law of any state or locality, and at the sole expense of
the participant or the beneficiary of the participant.
(xiii) Subject to applicable law and the provisions of this
Agreement, Parent and its Subsidiaries may amend or terminate any retiree
health or life benefit under any Parent Benefit Plan at any time without
incurring any liability thereunder. Parent and its Subsidiaries have
complied with the requirements of the Health Insurance Portability and
Accountability Act of 1996 with respect to each Parent Benefit Plan that
provides welfare benefits. Neither Parent nor its Subsidiaries maintain any
plan which is an "employee welfare benefit plan" (as such term is defined
under Section 3(1) of ERISA) that has provided any "disqualified benefit"
(as such term is defined in Section 4976(b) of the Code) with respect to
which an excise tax could be imposed under Section 4976 of the Code.
56
(q) Labor Matters. Neither Parent nor any of its Subsidiaries is a party
-------------
to or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is
Parent or any of its Subsidiaries the subject of a proceeding asserting that it
has committed an unfair labor practice (within the meaning of the National Labor
Relations Act) or seeking to compel Parent or any of its Subsidiaries to bargain
with any labor organization as to wages or conditions of employment, nor is
there any strike or other labor dispute involving it or any of its Subsidiaries
pending or, to Parent's Knowledge, threatened, nor is Parent or any of its
Subsidiaries aware of any activity involving its employees seeking to certify a
collective bargaining unit or engaging in other organizational activity.
(r) Environmental Matters. (i) Parent and its Subsidiaries are in
---------------------
compliance with applicable Environmental Laws; (ii) to Parent's Knowledge, no
real property (including buildings or other structures) currently or formerly
owned or operated by Parent or any of its Subsidiaries, or any property in which
Parent or any of its Subsidiaries has held a security interest, Lien or a
fiduciary or management role ("Parent Loan Property"), has been contaminated
with, or has had any release of, any Hazardous Substance except in compliance
with Environmental Laws; (iii) to Parent's Knowledge, neither Parent nor any of
its Subsidiaries could be deemed under applicable law to be the owner or
operator of, or has participated in the management regarding Hazardous
Substances of, any Parent Loan Property which has been contaminated with, or has
had any release of, any Hazardous Substance except in compliance with
Environmental Laws; (iv) to Parent's Knowledge, neither Parent nor any of its
Subsidiaries has any liability for any Hazardous Substance disposal or
contamination on any third party property; (v) neither Parent nor any of its
Subsidiaries has received any notice, demand letter, claim or request for
information alleging any violation of, or liability under, any Environmental
Law; (vi) neither Parent nor any of its Subsidiaries is subject to any order,
decree, injunction or other agreement with any Governmental Authority or any
third party relating to any Environmental Law; and (vii) to Parent's Knowledge,
there are no circumstances or conditions (including the presence of asbestos,
underground storage tanks, lead products, polychlorinated biphenyls, prior
manufacturing operations, dry-cleaning, or automotive services) involving Parent
or any of its Subsidiaries, any currently or formerly owned or operated
property, or any Parent Loan Property, that could reasonably be expected to
result in any claims, liability or investigations against Parent or any of its
Subsidiaries, result in any restrictions on the ownership, use, or transfer of
any property pursuant to any Environmental Law or adversely affect the value of
any Parent Loan Property.
(s) Tax Matters.
-----------
(i)(A) All Tax Returns required to be filed (taking into account any
extensions of time within which to file) by or with respect to Parent and
its Subsidiaries have been timely filed, (B) all such Tax Returns are
accurate and complete, (C) all Taxes shown to be due on the Tax Returns
referred to in clause (A) have been timely paid in full or have been
adequately reserved for in accordance with GAAP, (D) the United States
federal, state and local income Tax Returns referred to in clause (A) have
been examined by the IRS or the appropriate taxing authority for the
periods set forth in Section 5.02(s) of
57
Parent Disclosure Schedule or the period for assessment of the Taxes in
respect of which such Tax Returns were required to be filed has expired,
(E) all deficiencies asserted or assessments made as a result of
examinations conducted by any taxing authority have been paid in full,
except any such amount as is being contested in good faith and has been
adequately reserved for in accordance with GAAP, (F) no material issues
have been raised by the relevant taxing authority in connection with any
audit, action, suit or proceeding which is currently pending with respect
to any of the Tax Returns referred to in clause (A), (G) neither Parent nor
any of its Subsidiaries has agreed to any currently effective waiver of any
statute of limitation with respect to the assessment or collection of any
Taxes of Parent or any of its Subsidiaries and (H) there are no liens for
taxes (other than taxes not yet due and payable) upon the assets of Parent
or any of its Subsidiaries.
(ii) Parent has made available to the Company true and correct copies
of the federal, state and local income Tax Returns filed by Parent and its
Subsidiaries for each of the three most recent fiscal years ended on or
before June 30, 2004.
(iii) Neither Parent nor any of its Subsidiaries is a party to any
"listed transaction" as defined in Treasury Regulation Section
1.6011-4(b)(2).
(iv) Neither Parent nor any of its Subsidiaries is a party to any Tax
allocation or sharing agreement (other than an agreement with a group the
common parent of which is Parent or any predecessor of Parent), is or has
been a member of an affiliated group filing consolidated or combined Tax
Returns (other than a group the common parent of which is or was Parent or
any predecessor of Parent) or otherwise has any liability for the Taxes of
any Person (other than Parent and its Subsidiaries).
(v) No closing agreements, private letter rulings, technical advice
memoranda or similar agreement or rulings have been entered into or issued
by any taxing authority with respect to Parent or any of its Subsidiaries
within the past five years.
(vi) Neither Parent nor any of its Subsidiaries has been required to
include in income any adjustment pursuant to Section 481 of the Code by
reason of a voluntary change in accounting method initiated by Parent or
any of its Subsidiaries, and the IRS has not initiated or proposed in
writing any such adjustment or change in accounting method that would
result in an adjustment in the taxable income of the Parent or any of its
Subsidiaries.
(vii) Neither Parent nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments under which would
not reasonably be expected to be deductible as a result of the limitations
under Section 162(m) of the Code and the regulations issued thereunder.
58
(viii) (A) No Tax is required to be withheld pursuant to Section 1445
of the Code as a result of the Merger and (B) all Taxes that Parent or any
of its Subsidiaries is or was required by law to withhold or collect have
been duly withheld or collected and, to the extent required by applicable
law, have been paid to the proper Governmental Authority or other Person.
(ix) As of the date hereof, neither Parent nor any of its
Subsidiaries has taken or agreed to take any action, failed to take any
action or is aware of any fact or circumstance that is reasonably likely to
prevent or impede the Bank Merger or the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code or the
opinion of tax counsel referred to in Section 7.01(e) from being obtained
on a timely basis.
(x) Neither Parent nor any of its Subsidiaries has been a
"distributing corporation" or a "controlled corporation" in a distribution
intended to qualify under Section 355(a) of the Code within the past five
years.
(t) Investment Securities. Section 5.02(t) of Parent Disclosure Schedule
---------------------
sets forth a true, correct and complete list of the investment securities and
mortgage backed securities held for sale and held for investment by Parent and
its Subsidiaries, (the "Parent Investment Securities") as of December 31, 2004,
as well as, with respect to such securities, their respective book and market
values (or estimated market values) and coupon rates. Except for pledges to
secure public and trust deposits, Federal Home Loan Bank advances and repurchase
agreements entered into in arms'-length transactions in the ordinary course of
business with customary commercial terms and conditions and other pledges
required by law, none of Parent Investment Securities is subject to any
restriction (contractual, statutory or otherwise) that would materially impair
the ability of the entity holding any such investment security to freely dispose
of such investment security at any time. Except as set forth in Section 5.02(t)
of Parent Disclosure Schedule, no Parent Investment Security held by Parent or
any of its Subsidiaries, were it to be a Loan held by Parent or any of its
Subsidiaries, would be classified as "Special Mention," "Substandard,"
"Doubtful," "Loss," "Classified," "Criticized," "Credit Risk Assets," "Concerned
Loans," "Watch List" or words of similar import.
(u) Loans; Nonperforming and Classified Assets.
------------------------------------------
(i) Except as set forth in Section 5.02(u)(i) of Parent Disclosure
Schedule, as of the date hereof, neither Parent nor any of its Subsidiaries
is a party to any written or oral (A) Loan of Parent or any Parent
Subsidiary (collectively, the "Parent Loans") under the terms of which the
obligor was, as of December 31, 2004, over sixty days delinquent in payment
of principal or interest or to the Knowledge of Parent in default of any
other provision, or (B) Parent Loan with any director, executive officer or
five percent or greater shareholder of Parent or any of its Subsidiaries,
or to the Knowledge of Parent, any Person controlling, controlled by or
under common control with any of the foregoing. Section 5.02(u)(i) of
Parent Disclosure Schedule identifies (A) each Parent Loan that as of
December 31, 2004 was classified as "Special Mention," "Substandard,"
"Doubtful,"
59
"Loss," "Classified," "Criticized," "Credit Risk Assets," "Concerned
Loans," "Watch List" or words of similar import by Parent, any Parent
Subsidiary or any OTS examiner, together with the principal amount of and
accrued and unpaid interest on each such Parent Loan and the identity of
the borrower thereunder, and (B) each asset of Parent or any Parent
Subsidiary that as of December 31, 2004 was classified as OREO and the book
value thereof as of such date.
(ii) Each Parent Loan (A) is evidenced by notes, agreements or other
evidences of indebtedness that are true, genuine and what they purport to
be, (B) to the extent secured, has been secured by valid Liens which have
been perfected and (C) to the Knowledge of Parent, is a legal, valid and
binding obligation of the obligor named therein, enforceable in accordance
with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(iii) The loan documents with respect to each Parent Loan were in
material compliance with applicable laws and regulations and Parent's
lending policies at the time of origination or acquisition of such Parent
Loans and are complete and correct.
(iv) Neither Parent nor any of its Subsidiaries is a party to any
agreement or arrangement with (or otherwise obligated to) any Person which
obligates Parent or any of its Subsidiaries to repurchase from any such
Person any Parent Loan or other asset of Parent or any of its Subsidiaries.
(v) Tangible Properties and Assets.
------------------------------
(i) Section 5.02(v)(i) of Parent Disclosure Schedule sets forth a
true, correct and complete list of all real property owned by Parent or any
Parent Subsidiary. Except for properties and assets disposed of in the
ordinary course of business or as permitted by this Agreement, each of
Parent and the Parent Subsidiaries has good title to, valid leasehold
interests in or otherwise legally enforceable rights to use all of the real
property, personal property and other assets (tangible or intangible),
used, occupied and operated or held for use by it in connection with its
business as presently conducted in each case, free and clear of any Lien,
except for (A) statutory Liens for amounts not yet delinquent and (B) Liens
that, individually and in the aggregate, are not material in character,
amount or extent, or do not materially detract from the value and do not
materially interfere with the present use, occupancy or operation of any
material asset.
(ii) Section 5.02(v)(ii) of Parent Disclosure Schedule sets forth a
true, correct and complete schedule of all leases, subleases, licenses and
other agreements under which each of Parent or any Parent Subsidiary uses
or occupies or has the right to use or occupy, now or in the future, real
property (the "Parent Leases"). Each Parent Lease is a valid and binding
obligation of Parent or its applicable Subsidiary and is in full force and
effect and, as of the date hereof, neither Parent nor any Parent Subsidiary
has received a
60
written notice of, and otherwise has no Knowledge of, any default or
termination (prior to expiration of the term) with respect to any Parent
Lease. There has not occurred any event and no condition exists that would
constitute a termination event or a material breach by Parent or any Parent
Subsidiary of, or material default by Parent or any Parent Subsidiary in,
the performance of any covenant, agreement or condition contained in any
Parent Lease, and to Parent's Knowledge, no lessor under a Parent Lease is
in material breach or default in the performance of any material covenant,
agreement or condition contained in such Parent Lease. Parent and Parent
Subsidiaries have paid all rents and other charges to the extent due under
Parent Leases.
(w) Intellectual Property. Parent and its Subsidiaries own or have a
---------------------
valid license to use all Intellectual Property used in or held for use in the
conduct of the business of Parent or any of its Subsidiaries (the "Parent
Intellectual Property") and the Parent Intellectual Property constitutes all of
the Intellectual Property necessary to carry on the business of Parent and its
Subsidiaries as currently conducted. The Parent Intellectual Property owned by
Parent or any of its Subsidiaries, and to the Knowledge of Parent, all other
Parent Intellectual Property, is valid and enforceable and has not been
cancelled, forfeited, expired or abandoned, and neither Parent nor any of its
Subsidiaries has received notice challenging the validity or enforceability of
any Parent Intellectual Property. To the Knowledge of Parent, the conduct of the
business of Parent and its Subsidiaries does not violate, misappropriate or
infringe upon the Intellectual Property rights of any Person.
(x) Fiduciary Accounts. Parent and each of its Subsidiaries has properly
------------------
administered all accounts for which it acts as a fiduciary, including but not
limited to accounts for which it serves as a trustee, agent, custodian, personal
representative, guardian, conservator or investment advisor, in accordance with
the terms of the governing documents and applicable laws and regulations.
Neither Parent nor any of its Subsidiaries, nor to the Knowledge of Parent or
any of its Subsidiaries, any of their respective directors, officers or
employees, has committed any breach of trust with respect to any fiduciary
account and the records for each such fiduciary account are true and correct and
accurately reflect the assets of such fiduciary account.
(y) Insurance.
---------
(i) Section 5.02(y)(i) of Parent Disclosure Schedule identifies all
of the material insurance policies, binders, or bonds currently maintained
by Parent or any of its Subsidiaries, other than credit-life policies (the
"Parent Insurance Policies"), including the insurer, policy numbers and any
pending claims thereunder involving more than $100,000. Parent and its
Subsidiaries are insured with reputable insurers against such risks and in
such amounts as the management of Parent reasonably has determined to be
prudent in accordance with industry practices. All Parent Insurance
Policies are in full force and effect, Parent and its Subsidiaries are not
in material default thereunder and all claims thereunder have been filed in
due and timely fashion.
61
(ii) Section 5.02(y)(ii) of Parent Disclosure Schedule sets forth a
true and correct summary description of all bank-owned life insurance owned
by Parent or any of its Subsidiaries. The value of such bank-owned life
insurance is fairly and accurately reflected in the Parent financial
statements included in Parent SEC Reports in accordance with GAAP
consistently applied.
(z) Transactions with Affiliates. All "covered transactions" between
----------------------------
Parent Bank and an "affiliate" within the meaning of Sections 23A and 23B of the
Federal Reserve Act have been in compliance with such provisions and the
regulations of the Federal Reserve Board thereunder.
(aa) Parent Information. The information relating to Parent and its
------------------
Subsidiaries to be provided by Parent or its representatives in writing for
inclusion in the Proxy Statement/Prospectus, the Registration Statement, any
filing pursuant to Rule 165 or Rule 425 under the Securities Act or Rule 14a-12
under the Exchange Act, or in any other document filed with any other
Governmental Authority in connection herewith, will not 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 in which they are made,
not misleading. The Registration Statement will comply as to form in all
material respects with the provisions of the Securities Act.
(bb) Financial Ability. On the Effective Date and through the date of
-----------------
payment of the Aggregate Cash Consideration, Parent will have all funds
necessary to complete the Merger and pay the Aggregate Cash Consideration.
(cc) Fairness Opinion. Prior to the execution of this Agreement, Parent
----------------
Board has received the written opinion of Parent Financial Advisor to the effect
that as of the date hereof, and based upon and subject to the matters set forth
therein, the Merger Consideration to be paid by Parent is fair from a financial
point of view to Parent. Such opinion has not been amended or rescinded as of
the date of this Agreement.
(dd) Derivative Transactions.
-----------------------
(i) All Derivative Transactions entered into by Parent or any of its
Subsidiaries or for the account of any of its customers were entered into
in accordance with applicable laws, rules, regulations and regulatory
policies of any Governmental Authority, and in accordance with the
investment, securities, commodities, risk management and other policies,
practices and procedures employed by Parent and its Subsidiaries, and were
entered into with counterparties believed at the time to be financially
responsible and able to understand (either alone or in consultation with
their advisers) and to bear the risks of such Derivative Transactions.
Parent and its Subsidiaries have duly performed all of their obligations
under the Derivative Transactions to the extent that such obligations to
perform have accrued, and, to the Knowledge of Parent, there are no
breaches, violations or defaults or allegations or assertions of such by
any party thereunder.
62
(ii) Except as set forth in Section 5.01(dd)(ii) of Parent Disclosure
Schedule, no Derivative Transaction, were it to be a Loan held by Parent or
any of its Subsidiaries, would be classified as "Special Mention,"
"Substandard," "Doubtful," "Loss," "Classified," "Criticized," `Credit Risk
Assets," "Concerned Loans," "Watch List" or words of similar import. The
financial position and results of operations of Parent and its Subsidiaries
on a consolidated basis under or with respect to each such Derivative
Transaction have been reflected in the books and records of Parent and such
Subsidiaries in accordance with GAAP consistently applied, and, except set
forth in Section 5.01(dd)(ii) of Parent Disclosure Schedule, as of the date
hereof, no open exposure of Parent or any of its Subsidiaries with respect
to any such instrument (or with respect to multiple instruments with
respect to any single counterparty) exceeds $250,000.
(ee) Disclosure. The representations and warranties contained in this
----------
Section 5.02 are true, correct and complete and do not omit to state any
material fact necessary in order to make the statements and information
contained in this Section 5.02 not misleading under the circumstances.
ARTICLE VI
COVENANTS
6.01 Reasonable Best Efforts. Subject to the terms and conditions of this
-----------------------
Agreement, each Party to this Agreement agrees to 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, proper or advisable under applicable
laws, so as to permit consummation of the Merger promptly as practicable and the
consummation of the Bank Merger immediately subsequent to the Merger, and
otherwise to enable consummation of the Merger and the Bank Merger, including
the satisfaction of the conditions set forth in Article VII hereof, and shall
cooperate fully with the other Party hereto to that end, provided, however, that
a Party shall not be obligated to take any action pursuant to the foregoing if
it would or would be reasonably expected to result in a condition or restriction
on the Surviving Corporation having an effect of the type referred to in the
proviso clause in Section 7.01(b).
6.02 Shareholder Approval.
--------------------
(a) The Company agrees to take, in accordance with applicable law and the
Company Articles and Company Bylaws, all action necessary to convene as promptly
as practicable after the Registration Statement is declared effective a special
meeting of its shareholders to consider and vote upon the approval of this
Agreement and any other matters required to be approved by the Company's
shareholders in order to permit consummation of the transactions contemplated
hereby, and except with the prior approval of Parent, no other matters shall be
submitted for the approval of the Company shareholders at such meeting. The
Company Board shall at all times prior to and during such meeting recommend
approval of this Agreement and any other matters
63
required to be approved by the Company's shareholders in order to permit
consummation of the transactions contemplated hereby, and shall take all
reasonable lawful action to solicit such approval by its shareholders; provided
that nothing in this Agreement shall prevent the Company Board from withholding,
withdrawing, amending or modifying such recommendation (a "Change in
Recommendation") if the Company Board determines, after consultation with its
outside counsel, that such action is legally required in order for the directors
to comply with their fiduciary duties to the Company shareholders under
applicable law; provided further that Section 6.07 shall govern a Change in
Recommendation in the circumstances described therein. Notwithstanding anything
contained in this Agreement to the contrary, this Agreement shall be submitted
to the shareholders of the Company for their approval at a meeting held in
accordance with this Section 6.02 and nothing contained herein shall be deemed
to relieve the Company of such obligation.
(b) Parent agrees to take, in accordance with applicable law and the
Parent Articles and Parent Bylaws, all action necessary to convene as promptly
as practicable after the Registration Statement is declared effective a special
meeting of its shareholders to consider and vote upon the approval of this
Agreement and any other matters required to be approved by Parent's shareholders
in order to permit consummation of the transactions contemplated hereby, and
except with the prior approval of the Company, no other matters shall be
submitted for the approval of Parent shareholders at such meeting. The Parent
Board shall at all times prior to and during such meeting recommend approval of
this Agreement and any other matters required to be approved by Parent's
shareholders in order to permit consummation of the transactions contemplated
hereby, and shall take all reasonable lawful action to solicit such approval by
its shareholders.
6.03. Registration Statement.
----------------------
(a) Parent agrees to prepare and file a registration statement on Form
S-4 or other applicable form (as may be amended, the "Registration Statement")
with the SEC in connection with the issuance of Parent Common Stock in the
Merger (including the proxy statement and prospectus and other proxy
solicitation materials constituting a part thereof (the "Proxy
Statement/Prospectus") and all related documents). The Company shall prepare and
furnish such information relating to it and its directors, officers and
shareholders as may be reasonably required in connection with the
above-referenced documents based on its Knowledge of and access to the
information required for said documents, and the Company, and its legal,
financial and accounting advisors, shall have the right to review in advance and
reasonably approve such Registration Statement prior to its filing. The Company
agrees to reasonably cooperate with Parent and Parent's counsel and accountants
in requesting and obtaining appropriate opinions, consents and letters from its
financial advisors and independent auditor in connection with the Registration
Statement and the Proxy Statement/Prospectus. Provided that the Company has
reasonably cooperated in all material respects as described above, Parent agrees
to promptly file, or cause to be filed, the Registration Statement and the Proxy
Statement/Prospectus with the SEC. Each of the Company and Parent agrees to use
its reasonable best efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as
64
reasonably practicable after the filing thereof. Parent also agrees to use its
reasonable best efforts to obtain all necessary state securities law or "blue
sky" permits and approvals required to carry out the transactions contemplated
by this Agreement. After the Registration Statement is declared effective under
the Securities Act, Parent and the Company shall promptly mail the Proxy
Statement/Prospectus to their respective shareholders.
(b) Parent agrees to advise the Company, promptly after Parent receives
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop order
or the suspension of the qualification of Parent Common Stock for offering or
sale in any jurisdiction, of the initiation or, to the extent Parent is aware
thereof, threat of any proceeding for any such purpose, or of any request by the
SEC for the amendment or supplement of the Registration Statement or for
additional information.
6.04 Regulatory Filings.
------------------
(a) Each of Parent and the Company and their respective Subsidiaries
shall cooperate and use their respective reasonable best efforts to prepare all
documentation, to effect all filings and to obtain all permits, consents,
approvals and authorizations of all third parties and Governmental Authorities
necessary to consummate the transactions contemplated by this Agreement (which
applications shall include an application by Parent Bank to be filed with the
OTS in order to exercise trust powers); and provided that the Company has
reasonably cooperated in all material respects as described above, any initial
filings with Governmental Authorities shall be made by Parent as promptly as
reasonably practicable after the date hereof. Each of Parent and the Company
shall have the right to review in advance, and to the extent practicable each
shall consult with the other, in each case subject to applicable laws relating
to the exchange of information, with respect to all material written information
submitted to any Governmental Authority or third party in connection with the
transactions contemplated hereby. In exercising the foregoing right, each of
Parent and the Company agrees to act reasonably and as promptly as practicable.
Each of Parent and the Company agrees that it shall consult with the other Party
with respect to the obtaining of all material permits, consents, approvals and
authorizations of all Governmental Authorities and third parties necessary or
advisable to consummate the transactions contemplated hereby, and each of Parent
and the Company shall keep the other Party apprised of the status of material
matters relating to completion of the transactions contemplated hereby.
(b) Each of Parent and the Company agrees, upon request, to furnish the
other Party with all information concerning itself, its Subsidiaries, directors,
officers and shareholders and such other matters as may be reasonably necessary
or advisable in connection with any filing, notice or application made by or on
behalf of such other Party or any of its Subsidiaries to any third party or
Governmental Authority in connection with this Agreement and the transactions
contemplated hereby.
65
6.05 Public Announcements. The Company and Parent shall consult with each
--------------------
other before issuing any press release, other public statement or broadly
distributed internal communication with respect to this Agreement or the
transactions contemplated hereby and shall not issue any such press release or
make any such public statement or broadly distributed internal communication
without the prior consent of the other Party, which shall not be unreasonably
withheld; provided, however, that Parent or the Company may, without the prior
consent of the other Party (but after such consultation, to the extent
practicable in the circumstances), issue such press release or make such public
statements as may upon the advice of outside counsel be required by law or the
requirements of the SEC or Nasdaq. The Company and Parent shall cooperate to
develop all public announcement materials and make appropriate management
available at presentations related to the transactions contemplated hereby as
reasonably requested by the other Party.
6.06 Access; Information.
-------------------
(a) Each of the Parties agrees that upon reasonable notice and subject to
applicable laws relating to the exchange of information, it shall afford the
other Party and its officers, employees, counsel, accountants and other
authorized representatives such access during normal business hours throughout
the period prior to the Effective Time to the books, records (including, without
limitation, Tax Returns and work papers of independent auditors), properties and
personnel of Parent or the Company, as the case may be, and its Subsidiaries and
to such other information relating to Parent or the Company, as the case may be,
or its Subsidiaries as such Party may reasonably request and, during such
period, each Party shall furnish promptly to the other Party all information
concerning the business, properties and personnel of Parent or the Company, as
the case may be, or its Subsidiaries as such Party may reasonably request.
(b) All information furnished by Parent or the Company to the other Party
pursuant to Section 6.06(a) shall be subject to, and the other Party shall hold
all such information in confidence in accordance with, the provisions of the
Confidentiality Agreement, dated as of September 1, 2004, between the Company
and Parent (the "Confidentiality Agreement").
(c) No investigation by a Party of the business and affairs of the other
Party shall affect or be deemed to modify or waive any representation, warranty,
covenant or agreement in this Agreement, or the conditions to the obligations of
the Party to consummate the Merger.
6.07. No Solicitation.
---------------
(a) From the date of this Agreement through the Effective Time, the
Company shall not, nor shall it permit any of its Subsidiaries to, nor shall it
authorize or permit any of its or its Subsidiaries' directors, officers or
employees or any investment banker, financial advisor, attorney, accountant or
other representative retained by it or any of its Subsidiaries to, directly or
indirectly through another Person, (i) solicit, initiate or encourage (including
by way of furnishing information or assistance), or take any other action
designed to facilitate or that is likely to result in, any inquiries or the
making of any proposal that constitutes, or is reasonably
66
likely to lead to, any Acquisition Proposal, (ii) enter into any agreement with
respect to an Acquisition Proposal, (iii) participate in any discussions or
negotiations regarding any Acquisition Proposal or (iv) make or authorize any
statement or recommendation in support of any Acquisition Proposal. If, and only
to the extent that, (i) the approval of this Agreement by the Company's
shareholders has not occurred, (ii) the Company Board reasonably determines in
good faith, after consultation with its outside legal counsel, that such action
would be required in order for directors of the Company to comply with their
respective fiduciary duties under applicable law in response to a bona fide,
written Acquisition Proposal not solicited in violation of this Section 6.07(a)
that the Company Board believes in good faith is a Superior Proposal and (iii)
the Company provides notice to Parent of its decision to take such action in
accordance with the requirements of Section 6.07(b), the Company may (1) furnish
information with respect to the Company to any Person making such an Acquisition
Proposal pursuant to a customary confidentiality agreement (as determined by the
Company after consultation with its outside legal counsel) on terms
substantially similar to, and no less favorable to the Company than, the terms
contained in any such agreement between the Company and Parent, (2) participate
in discussions or negotiations regarding such an Acquisition Proposal and (3)
authorize any statement or recommendation in support of such an Acquisition
Proposal and effect a Change in Recommendation.
(b) The Company shall notify Parent promptly (but in no event later than
24 hours) after receipt of any Acquisition Proposal, or any material
modification of or material amendment to any Acquisition Proposal, or any
request for nonpublic information relating to the Company or any of its
Subsidiaries or for access to the properties, books or records of the Company or
any Subsidiary by any Person that informs the Company Board or a member of the
senior management of the Company or any Subsidiary that it is considering
making, or has made, an Acquisition Proposal. Such notice to Parent shall be
made orally and in writing, and shall indicate the identity of the Person making
the Acquisition Proposal or intending to make or considering making an
Acquisition Proposal or requesting non-public information or access to the books
and records of the Company or any Subsidiary, and the material terms of any such
Acquisition Proposal and any modification or amendment to such Acquisition
Proposal. The Company shall keep Parent fully informed, on a current basis, of
any material changes in the status and any material changes or modifications in
the terms of any such Acquisition Proposal, indication or request. The Company
also shall promptly, and in any event within 24 hours, notify Parent, orally and
in writing, if it enters into discussions or negotiations concerning any
Acquisition Proposal in accordance with Section 6.07(a).
(c) From the date of this Agreement through the Effective Time, Parent
shall not, nor shall it permit any of its Subsidiaries to, nor shall it
authorize or permit any of its or its Subsidiaries' directors, officers or
employees or any investment banker, financial advisor, attorney, accountant or
other representative retained by it or any of its Subsidiaries to, directly or
indirectly through another Person, (i) solicit, initiate or encourage (including
by way of furnishing information or assistance), or take any other action
designed to facilitate or that is likely to result in, any inquiries or the
making of any proposal that constitutes, or is reasonably
67
likely to lead to, any Parent Acquisition Proposal, (ii) enter into any
agreement with respect to a Parent Acquisition Proposal, (iii) participate in
any discussions or negotiations regarding any Parent Acquisition Proposal or
(iv) make or authorize any statement or recommendation in support of any Parent
Acquisition Proposal. If, and only to the extent that, the Parent Board
reasonably determines in good faith, after consultation with its outside legal
counsel, that such action would be appropriate in response to a bona fide,
written Parent Acquisition Proposal not solicited in violation of this Section
6.07(c) and Parent provides notice to the Company of its decision to take such
action in accordance with the requirements of Section 6.07(d), Parent may (1)
furnish information with respect to Parent to any Person making such a Parent
Acquisition Proposal pursuant to a customary confidentiality agreement (as
determined by Parent after consultation with its outside legal counsel) on terms
substantially similar to, and no less favorable to Parent than, the terms
contained in any such agreement between the Company and Parent, (2) enter into
an agreement with respect to a Parent Acquisition Proposal, (3) participate in
discussions or negotiations regarding such a Parent Acquisition Proposal and (4)
authorize any statement or recommendation in support of such a Parent
Acquisition Proposal.
(d) Parent shall notify the Company promptly (but in no event later than
24 hours) after receipt of any Parent Acquisition Proposal, or any material
modification of or material amendment to any Parent Acquisition Proposal, or any
request for nonpublic information relating to Parent or any of its Subsidiaries
or for access to the properties, books or records of Parent or any Subsidiary by
any Person that informs Parent Board or a member of the senior management of
Parent or any Subsidiary that it is considering making, or has made, a Parent
Acquisition Proposal. Such notice to the Company shall be made orally and in
writing, and shall indicate the identity of the Person making the Parent
Acquisition Proposal or intending to make or considering making a Parent
Acquisition Proposal or requesting non-public information or access to the books
and records of Parent or any Subsidiary, and the material terms of any such
Parent Acquisition Proposal and any modification or amendment to such Parent
Acquisition Proposal. Parent shall keep the Company fully informed, on a current
basis, of any material changes in the status and any material changes or
modifications in the terms of any such Parent Acquisition Proposal, indication
or request. Parent also shall promptly, and in any event within 24 hours, notify
the Company, orally and in writing, if it enters into discussions or
negotiations concerning any Parent Acquisition Proposal in accordance with
Section 6.07(c). Parent shall provide written notice to the Company at least
three business days in advance of its intention to enter into an agreement
implementing any Parent Acquisition Proposal. Not later than three business days
after receipt of such notice from Parent, the Company shall provide notice to
Parent in writing whether it consents to Parent's entering into an agreement
implementing any Parent Acquisition Proposal.
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(e) Each of the Parties and their respective Subsidiaries shall
immediately cease and cause to be terminated any existing discussions or
negotiations with any Persons (other than the other Party) conducted heretofore
with respect to any of the foregoing, and shall use reasonable best efforts to
cause all Persons other than the other Party who have been furnished
confidential information regarding such Party in connection with the
solicitation of or discussions regarding an Acquisition Proposal or a Parent
Acquisition Proposal, as the case may be, within the 12 months prior to the date
hereof promptly to return or destroy such information. Each of the Parties agree
not to, and to cause their respective Subsidiaries not to, release any third
party from the confidentiality and standstill provisions of any agreement to
which such Party or its Subsidiaries is or may become a party, and shall
immediately take all steps necessary to terminate any approval that may have
been heretofore given under any such provisions authorizing any person to make
an Acquisition Proposal or a Parent Acquisition Proposal, as the case may be.
(f) Each of the Parties shall ensure that their respective directors,
officers, employees, agents and representatives (including any investment
bankers, financial advisors, attorneys, accountants or other retained
representatives) of such Party or its Subsidiaries are aware of the restrictions
described in this Section 6.07 as reasonably necessary to avoid violations
thereof. It is understood that any violation of the restrictions set forth in
this Section 6.07 by any director, officer, employee, agent or representative
(including any investment banker, financial advisor, attorney, accountant or
other retained representative) of a Party or its Subsidiaries, at the direction
or with the consent of such Party or its Subsidiaries, shall be deemed to be a
breach of this Section 6.07 by such Party.
(g) Nothing contained in this Agreement shall prevent a Party or its
Board of Directors from complying with Rule 14d-9 and Rule 14e-2 under the
Exchange Act with respect to an Acquisition Proposal or Parent Acquisition
Proposal, as the case may be, provided that such rules will in no way eliminate
or modify the effect that any action pursuant to such rules would otherwise have
under this Agreement.
6.08 Indemnification.
---------------
(a) After the Effective Time, Parent (the "Indemnifying Party") shall
indemnify and hold harmless each present and former director, officer and
employee of the Company or a Company Subsidiary, as applicable, determined as of
the Effective Time (the "Indemnified Parties") against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, arising in whole or in part out of or pertaining to the fact that he or
she was a director, officer, employee, fiduciary or agent of the Company or any
Company Subsidiary or is or was serving at the request of the Company or any of
the Company Subsidiaries as a director, officer, employee, fiduciary or agent of
another corporation, partnership, joint venture, trust or other enterprise,
including without limitation matters related to the negotiation, execution and
performance of this Agreement or any of the transactions contemplated hereby, to
the fullest extent and on the same terms (including, without limitation,
advancement of expenses) which such Indemnified Parties would be entitled under
the Company Articles and Company Bylaws or equivalent documents of any Company
Subsidiary, as applicable in each case as in effect on the date hereof. Without
limiting the foregoing, Parent also agrees that limitations on liability
existing in favor of the Indemnified Parties as provided in the Company Articles
and Company Bylaws or similar governing documents of the Company Bank and any
other Subsidiary of the Company as in effect on the date hereof with respect to
matters occurring prior to the Effective Time shall survive the Merger and the
Bank Merger and shall continue in full force and effect from and after the
Effective Time.
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(b) Any Indemnified Party wishing to claim indemnification under this
Section 6.08, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure to
so notify shall not relieve the Indemnifying Party of any liability it may have
to such Indemnified Party except to the extent that such failure actually
prejudices the Indemnifying Party. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) the Indemnifying Party shall have the right to assume the defense
thereof and the Indemnifying Party shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with the defense
thereof, except that if the Indemnifying Party elects not to assume such defense
or counsel for the Indemnified Parties advises that there are issues which raise
conflicts of interest between the Indemnifying Party and the Indemnified
Parties, the Indemnified Parties may retain counsel which is reasonably
satisfactory to the Indemnifying Party, and the Indemnifying Party shall pay,
promptly as statements therefor are received, the reasonable fees and expenses
of such counsel for the Indemnified Parties (which may not exceed one firm in
any jurisdiction), (ii) the Indemnifying Party and the Indemnified Parties will
cooperate reasonably in the defense of any such matter, (iii) the Indemnifying
Party shall not be liable for any settlement effected without its prior written
consent, which shall not be unreasonably withheld or delayed, and (iv) the
Indemnifying Party shall have no obligation hereunder to the extent that
indemnification of an Indemnified Party in the manner contemplated hereby is
prohibited by applicable laws and regulations or by an applicable federal or
state banking agency or a court of competent jurisdiction.
(c) Prior to the Effective Time, Parent shall use its reasonable best
efforts to cause the persons serving as directors and officers of the Company
immediately prior to the Effective Time to be covered by the directors' and
officers' liability insurance policy maintained by the Company (provided that
Parent may substitute therefor policies of at least the same coverage and
amounts containing comparable terms and conditions as such policy or single
premium tail coverage with policy limits equal to the Company's existing
coverage limits and which is not less advantageous to such directors and
officers) for a six-year period following the Effective Time with respect to
acts or omissions occurring prior to the Effective Time which were committed by
such directors and officers in their capacities as such, provided that in no
event shall Parent be required to expend for any one year an amount in excess of
200% of the current annual amount expended by the Company to maintain such
insurance (the "Insurance Amount"), and further provided that if Parent is
unable to maintain or obtain the insurance called for by this Section 6.08(c) as
a result of the preceding provision, Parent shall use its reasonable best
efforts to obtain as much comparable insurance as is available for the Insurance
Amount.
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(d) If Parent or any of its successors or assigns shall consolidate with
or merge into any other entity and shall not be the continuing or surviving
entity of such consolidation or merger or shall transfer all or substantially
all of its assets to any other entity, then and in each case, proper provision
shall be made so that the successors and assigns of Parent shall assume the
obligations set forth in this Section 6.08.
(e) The provisions of this Section 6.08 shall survive the Merger and the
Bank Merger, and are intended to be for the benefit of, and shall be enforceable
by, each Indemnified Party and his or her heirs and representatives.
6.09 Employees; Benefit Plans.
------------------------
(a) Prior to the Effective Time, Parent shall take all reasonable action
so that employees of the Company and its Subsidiaries who become employees of
Parent and its Subsidiaries (the "Transferred Employees") shall be entitled to
participate, effective as soon as administratively practicable following the
Effective Time, in each of the Parent Benefit Plans to the same extent as
similarly-situated employees of Parent and its Subsidiaries, and the employees
of PCIS will be eligible to participate in the Parent Benefit Plans (it being
understood that inclusion of the employees of the Company and its Subsidiaries
in Parent Benefit Plans may occur at different times with respect to different
plans and that any grants to any former employee of the Company or its
Subsidiaries under any Parent Stock Plan shall be discretionary with Parent).
Notwithstanding the foregoing, Parent may determine to continue any of the
employee benefit plans, programs or arrangements of the Company or any of its
Subsidiaries for Transferred Employees in lieu of offering participation in
Parent Benefit Plans providing similar benefits (e.g., medical and
hospitalization benefits), to terminate any of such benefit plans, or to merge
any such benefit plans with Parent Benefit Plans, provided the result is the
provision of benefits to Transferred Employees that are substantially similar to
the benefits provided to the employees of Parent and Parent Bank generally. At
the request of Parent, the Company and its Subsidiaries shall take all necessary
action to cause its defined benefit pension plan to be frozen immediately prior
to the Effective Time. Parent shall cause each Parent Benefit Plan, including
the Parent Employee Stock Ownership Plan, in which Transferred Employees are
eligible to participate to recognize, for purposes of determining eligibility to
participate in and the vesting of benefits (but not for accrual of benefits)
under Parent Benefit Plans the service of such Transferred Employees with the
Company and its Subsidiaries to the same extent as such service was credited for
such purpose by the Company; provided, however, that such service shall not be
recognized to the extent that such recognition would result in a duplication of
benefits. The Company Designees shall be entitled to participate, effective as
of the Effective Time, in each of the Parent Benefit Plans that the Parent
Designees participate in, but shall not be credited for their past service
provided to the Company or any of its Subsidiaries in any respect thereto.
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(b) If Transferred Employees become eligible to participate in a medical,
dental, health or disability plan of Parent or its Subsidiaries, Parent shall
cause each such plan to (i) waive any preexisting condition limitations to the
extent such conditions are covered under the applicable medical, health, dental
or disability plans of Parent, (ii) honor under such plans any deductible,
co-payment and out-of-pocket expenses incurred by the employees and their
beneficiaries during the portion of the plan year that includes the Effective
Time prior to such participation and (iii) waive any waiting period limitation
or evidence of insurability requirement which would otherwise be applicable to
such employee on or after the Effective Time, in each case to the extent such
employee had satisfied any similar limitation or requirement under an analogous
Company Benefit Plan prior to the Effective Time.
(c) An employee of the Surviving Corporation or any of its Subsidiaries
who was an employee of Parent or the Company or any of their respective
Subsidiaries immediately prior to the Effective Time (other than in each case
any employee who is party to an employment agreement or a severance or
change-in-control agreement) whose employment terminates other than for "cause"
during the one-year period following the Effective Time shall be entitled to
receive severance payments from Parent or its Subsidiaries equal in amount to
one week's base pay for each full year such employee was employed by Parent or
the Company or their respective Subsidiaries or any successor or predecessor
thereto, provided such terminated employee had at least two years of credited
service and subject to a minimum of two weeks' severance and a maximum of 26
weeks' severance. For purposes of this Section 6.09(c), "cause" shall mean
termination because of the employee's personal dishonesty, 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 violations).
(d) The Surviving Corporation shall honor, or cause to be honored, in
accordance with their terms, all vested or accrued benefit obligations to, and
contractual rights of, current and former employees and directors of the Company
and its Subsidiaries, including without limitation any benefits or rights
arising as a result of the Merger (either alone or in combination with any other
event), which are identified in Section 5.01(p)(i) of the Company Disclosure
Schedule, other than the contractual rights which are superseded by the new
employment and severance agreements being entered into pursuant to Section
6.17(a) hereof.
(e) The Company shall take all necessary action to cause the Company ESOP
to be terminated as of the Effective Time. The Merger Consideration received by
the Company ESOP trustee with respect to any unallocated shares of Company
Common Stock shall be allocated as earnings to the accounts of all participants
in the Company ESOP, in accordance with the Company ESOP's terms and conditions
in effect as of the date of this Agreement, to the maximum extent permitted
under the Code and applicable law. The accounts of all participants and
beneficiaries in the Company ESOP immediately prior to the Effective Time shall
become fully vested as of the Effective Time. As soon as practicable after the
date hereof, but in no event later than 60 days after the date of this
Agreement, the Company shall file or cause to be filed all necessary documents
with the IRS for a determination letter for termination of the Company ESOP as
of the Effective Time, with a copy to be provided to Parent and its counsel. As
soon as practicable after the later of the Effective Time or the receipt of a
favorable determination letter for termination from the IRS, the account
balances in the Company ESOP shall be distributed to participants and
beneficiaries or transferred to an eligible individual retirement account as a
participant or beneficiary may direct. The dollar amount of the contributions to
the Company ESOP from the date hereof through the Effective Date shall not
exceed the amount of the contributions to the Company ESOP for the corresponding
period in calendar 2004 unless otherwise required by law.
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(f) Except as otherwise provided in this Section 6.09, nothing contained
in this Section 6.09 shall be interpreted as preventing the Surviving
Corporation from amending, modifying or terminating any Company Benefit Plan,
Parent Benefit Plan or other contracts, arrangements, commitments or
understandings in accordance with their terms and applicable law.
6.10. The Bank Merger. Parent and the Company agree to take all action
---------------
necessary and appropriate to cause the Company Bank to merge with and into
Parent Bank with Parent Bank surviving such Bank Merger (the "Surviving Bank")
in accordance with applicable laws and regulations, it being the intention of
the Parties that the Bank Merger be consummated as promptly as practicable upon
consummation of the Merger. The agreement setting forth the terms of the merger
of the Company Bank with and into Parent Bank (the "Bank Merger Agreement") and
the related Articles of Combination, shall contain terms that are normal and
customary in light of the transactions contemplated hereby, including but not
limited to those set forth in Section 6.17, and such additional terms as are
necessary to carry out the purposes of this Agreement.
6.11. Advice of Changes. Parent and the Company shall promptly advise the
-----------------
other Party of any change or event having, or which could be reasonably expected
to have, a Material Adverse Effect on it or which it believes would, or which
could reasonably be expected to, cause or constitute a material breach of any of
its representations, warranties or covenants contained herein; provided that a
failure to comply with this Section 6.11 shall not constitute the failure of any
condition set forth in Article VII to be satisfied, or give rise to any right of
termination under Section 8.01(d) or (e), unless the underlying Material Adverse
Effect or material breach would independently result in the failure of a
condition set forth in Article VII to be satisfied or the right to terminate
this Agreement under Section 8.01(d) or (e), as the case may be. From time to
time prior to the Effective Time (and on a date prior to the Closing Date
mutually agreed to by the Parties), each of Parent and the Company will
supplement or amend its Disclosure Schedules (other than those referred to in
Section 6.17, which may not be modified without the prior written consent of the
other Party hereto) delivered in connection with the execution of this Agreement
to reflect any matter which, if existing, occurring or known at the date of this
Agreement, would have been required to be set forth or described in such
Disclosure Schedules or which is necessary to correct any information in such
Disclosure Schedules which has been rendered materially inaccurate thereby. No
supplement or amendment to such Disclosure Schedules shall have any effect for
the purpose of determining the accuracy of the representations and warranties of
the Company and Parent contained in Article V in order to determine the
fulfillment of the conditions set forth in Sections 7.02(a) or 7.03(a) hereof,
respectively, or the compliance by the Company and Parent with their respective
covenants and agreements contained herein.
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6.12. Current Information. During the period from the date of this
-------------------
Agreement to the Effective Time, the Parties will cause one or more of its
designated representatives to confer on a regular and frequent basis with
representatives of the other Party and to report the general status of the
ongoing operations of Parent or the Company, as the case may be, and its
Subsidiaries. Without limiting the foregoing, each of the Parties agrees to
provide the other Party (or make available in the case of documents filed with
the SEC) (i) within ten Business Days following the close of each calendar month
between the date hereof and the Effective Time (20 Business Days in the case of
the month of June), a consolidated statement of financial condition at the end
of such month and comparative consolidated statements of operations for such
month and the same month in the prior year, (ii) a copy of each report filed by
Parent or the Company, as the case may be, and its Subsidiaries with a
Governmental Authority within three Business Days following the filing thereof
and (iii) monthly updates of the information required to be set forth in Section
5.01(v)(i) of the Company Disclosure Schedule or Section 5.02(u)(i) of the
Parent Disclosure Schedule, as the case may be. Each of the Parties will
promptly notify the other Party of any material change in the normal course of
business or in the operation of the properties of such Party or any of its
Subsidiaries and of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or the institution
or the threat of significant litigation involving such Party or any of its
Subsidiaries, and will keep the other Party fully informed of such events.
6.13. Affiliates. The Company shall use its reasonable best efforts to
----------
identify those persons who may be deemed to be "affiliates" of the Company
within the meaning of Rule 145 promulgated by the SEC under the Securities Act
(the "Company Affiliates") and to cause each person so identified to deliver to
Parent as soon as practicable, and in any event prior to the Closing Date, a
written agreement with respect to compliance with the requirements of Rule 145
under the Securities Act in connection with the sale or other transfer of Parent
Common Stock received in the Merger, which agreement shall be substantially in
the form of Exhibit 6.13 hereto.
6.14. Stock Listing. Parent shall provide appropriate notice to the Nasdaq
-------------
to list the additional shares of Parent Common Stock to be issued in the Merger.
6.15. Certain Policies. Prior to the Effective Date, each of the Company
----------------
and its Subsidiaries shall, consistent with GAAP, the rules and regulations of
the SEC and applicable banking laws and regulations, modify or change its loan
reserve, OREO, accrual, reserve, tax, litigation and real estate valuation
policies and practices (including loan classifications and levels of reserves)
so as to be applied on a basis that is consistent with that of Parent; provided,
however, that no such modifications or changes need be made prior to the
satisfaction of the conditions set forth in Sections 7.01(a) and 7.01(b); and
further provided that in any event, no accrual or reserve made by the Company or
any of its Subsidiaries pursuant to this Section 6.15 shall constitute or be
deemed to be a breach, violation of or failure to satisfy any representation,
warranty, covenant, agreement, condition or other provision of this Agreement or
otherwise be considered in determining whether any such breach, violation or
failure to satisfy shall have occurred. The recording of any such adjustments
shall not be deemed to imply any misstatement of previously furnished financial
statements or information and shall not be construed as concurrence of the
Company or its management with any such adjustments.
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6.16. Section 16 Matters. Parent and the Company agree that, in order to
------------------
most effectively compensate and retain Company Insiders (as defined below) in
connection with the Merger, both prior to and after the Effective Time, it is
desirable that the Company Insiders not be subject to a risk of liability under
Section 16(b) of the Exchange Act to the fullest extent permitted by applicable
law in connection with the conversion of shares of Company Common Stock into
shares of Parent Common Stock and/or of Company Options into options to acquire
Parent Common Stock, and for that compensatory and retentive purpose agree to
the provisions of this Section 6.16. Assuming that the Company delivers to
Parent the Section 16 Information (as defined below) in a timely fashion, Parent
Board, or a committee of non-employee directors thereof (as such term is defined
for purposes of Rule 16b-3(d) under the Exchange Act), shall adopt a resolution
providing that the receipt by Company Insiders of Parent Common Stock in
exchange for shares of Company Common Stock and/or of options to acquire Parent
Common Stock in exchange for Company Options pursuant to the Merger and to the
extent such securities are listed in the Section 16 Information, are intended to
be exempt from liability pursuant to Section 16(b) under the Exchange Act.
"Section 16 Information" shall mean information accurate in all material
respects regarding the Company Insiders, the number of shares of Company Common
Stock and/or Company Options held by each such Company Insider and expected to
be exchanged for Parent Common Stock or options to acquire Parent Common Stock
in the Merger and the number and description of the Company Options held by each
such Company Insider; provided that the requirement for a description of any
Company Options shall be deemed to be satisfied if copies of all Company Stock
Plans, and forms of agreements evidencing grants thereunder, under which such
Company Options have been granted have been made available to Parent. "Company
Insiders" shall mean those officers and directors of the Company who are subject
to the reporting requirements of Section 16(a) of the Exchange Act and who are
listed in the Section 16 Information.
6.17. Certain Other Agreements.
------------------------
(a) Concurrently with the execution of this Agreement by the Company and
Parent, Parent and Parent Bank shall enter into new employment agreements to be
effective as of the Effective Date with the persons named in Section 6.17(a)(i)
of the Parent Disclosure Schedule. Parent and Parent Bank intend to offer to
enter into new severance agreements to be effective as of the Effective Date
with the persons named in Section 6.17(a)(ii) of the Parent Disclosure Schedule.
The forms of such employment and severance agreements are included in Section
6.17(a) of the Parent Disclosure Schedule.
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(b) Following the date of this Agreement and prior to the Effective Time,
Parent shall take all action necessary to increase the size of its Board of
Directors by one person to ten (10) members and to fill the vacancy created
thereby. In addition, Parent shall take all action necessary to further increase
the size of the Board of Directors of the Surviving Corporation to seventeen
(17) effective as of the Effective Time, consisting of the ten members of the
Board of Directors of Parent immediately prior to the Effective Time (the
"Parent Designees") and seven (7) members from the Company's Board of Directors
as set forth in Section 6.17(b)(i) of the Company Disclosure Schedule (the
"Company Designees") (the Parties hereto agree that Section 6.17(b)(i) of the
Company Disclosure Schedule shall be delivered to Parent within 10 business days
of the date of this Agreement). The directors from the Company Board of
Directors shall be allocated among the three classes of the Board of Directors
of the Surviving Corporation as set forth in Section 6.17(b)(i) of the Company
Disclosure Schedule. For three years following the Effective Time, the size of
the Board of Directors of the Surviving Corporation and the size of each class
of directors shall not be changed without the approval of a majority of each of
the (i) Parent Designees and (ii) Company Designees. In the event of the death,
disability, resignation, removal or retirement of any of the Parent Designees or
the Company Designees within the three-year period subsequent to the Effective
Time, the Parties agree that the then remaining Parent Designees or Company
Designees, as the case may be, shall be responsible for identifying successors
to serve the remaining term of the departing Parent Designee or Company
Designee, as the case may be (any such successors to the Parent Designees or the
Company Designees, and any of their successors, shall also be considered for the
purposes hereof to be "Parent Designees" or "Company Designees," as the case may
be). In addition, the Company Designees shall have proportional representation
(or representation as close to proportional as possible) on the Executive,
Audit, Compensation, Nominating and Corporate Governance and any other major
committees of the Board of Directors of the Surviving Corporation for a period
of three years following the Effective Time. Parent's current Chairman of the
Board, Xxxxxxx X. Xxxxxx, shall be succeeded in such position by the current
Vice Chairman of Parent's Board of Directors, Xxxxxxxx X. Xxxxxx (or her
successor who shall be a Parent Designee), upon Xx. Xxxxxx'x relinquishing the
title of Chairman of the Board, which is scheduled to occur as of June 30, 2005,
and Xx. Xxxxxx, or her successor, will serve as Chairman of the Board of the
Surviving Corporation for at least three years thereafter. Parent's Board of
Directors shall also take all necessary action following the date of this
Agreement to cause the persons specified in Section 6.17(b)(ii) of the Company
Disclosure Schedule to be appointed to the offices of the Surviving Corporation
specified in such Schedule. The persons serving as directors of Parent and the
Surviving Corporation, as the case may be, also shall constitute the members of
the Board of Directors of Parent Bank subsequent to the date of this Agreement
and for not less than three years subsequent to the Effective Time. On or prior
to the Effective Time, Parent shall amend its Bylaws in the form set forth in
Section 6.17(b)(ii) of the Parent Disclosure Schedule, which Bylaw amendments
shall not be further amended during the three-year period following the
Effective Time without the affirmative vote of a majority of each of (i) the
Parent Designees and (ii) the Company Designees.
(c) For not less than three years subsequent to the Bank Merger, the
offices of Parent Bank immediately prior to the Effective Time shall be operated
as the "Willow Grove Division" of the Surviving Bank and the offices of the
Company Bank immediately prior to the Effective Time and shall be operated as
the "First Financial Division" of the Surviving Bank.
76
(d) Prior to the Effective Time, the Company shall use its best efforts
to obtain supplemental indentures with the trustees of the outstanding floating
rate junior subordinated deferrable interest debentures to evidence the
succession of Parent as of the Effective Time. The form of the supplemental
indenture shall be reasonably acceptable to Parent, and Parent agrees to assume
the covenants, agreements and obligations of the Company under such indentures.
(e) The Parties hereto will cooperate after the date of this Agreement,
and shall retain such third party advisors as they shall mutually agree upon, in
order to identify mutually agreeable new names for the Surviving Corporation and
the Surviving Bank which new names shall become effective as of the Effective
Time or as soon thereafter as is practicable. Parent and Parent Bank shall take
all necessary and appropriate action, including but not limited to amending the
Parent Articles and the Charter of Parent Bank, in order to implement the name
changes referred to herein as of the Effective Time or as soon thereafter as is
practicable.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.01. Conditions to Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligation of each of the Parties hereto to consummate the Merger is
subject to the fulfillment or, to the extent permitted by applicable law,
written waiver by the Parties hereto prior to the Closing Date of each of the
following conditions:
(a) Shareholder Approval. This Agreement shall have been duly approved by
--------------------
the requisite votes of the holders of outstanding shares of Company Common Stock
and the holders of outstanding shares of Parent Common Stock.
(b) Regulatory Approvals. Other than the filings provided for in Section
--------------------
2.02(a), all authorizations, consents, permits, orders or approvals of, or
declarations or filings with, any Governmental Authority which are necessary for
the consummation of the Merger and the Bank Merger (including Parent Bank's
application to exercise trust powers) shall have been filed, have occurred or
been obtained and be in full force and effect and all statutory waiting periods
in respect thereof shall have expired (all such authorizations, consents,
orders, approvals, declarations and filings and the lapse of all such waiting
periods being referred to as the "Requisite Regulatory Approvals"), provided
that no such Requisite Regulatory Approval shall contain any condition,
restriction or requirement which would have, or would be reasonably expected to
have, a Material Adverse Effect on the Company or the Surviving Corporation.
(c) No Injunctions or Restraints; Illegality. No judgment, order,
----------------------------------------
injunction or decree (whether temporary, preliminary or permanent) issued by any
court or agency of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger or the Bank Merger shall
be in effect. No statute, rule, regulation, order, injunction or decree (whether
temporary, preliminary or permanent) shall have been enacted, entered,
promulgated or enforced by any Governmental Authority that prohibits, restricts
or makes illegal the consummation of the Merger or the Bank Merger.
77
(d) Registration Statement; Blue Sky Laws. The Registration Statement
-------------------------------------
shall have become effective under the Securities Act and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC and not withdrawn. Parent shall have received all required
approvals by state securities or "blue sky" authorities with respect to the
Merger.
(e) Tax Opinions.
------------
(i) Parent shall have received an opinion of Elias, Matz, Xxxxxxx &
Xxxxxxx L.L.P., dated the Effective Date, in form and substance reasonably
satisfactory to Parent, based upon facts, representations and assumptions set
forth in such opinion, to the effect that, for federal income tax purposes, each
of the Bank Merger and the Merger will qualify as a reorganization within the
meaning of Section 368(a) of the Code.
(ii) The Company shall have received an opinion of Cozen X'Xxxxxx, dated
the Effective Date, in form and substance reasonably satisfactory to the
Company, based upon facts, representations and assumptions set forth in such
opinion, to the effect that, for federal income tax purposes, each of the Bank
Merger and the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code.
(iii) In rendering such opinions, Elias, Matz, Xxxxxxx & Xxxxxxx L.L.P. and
Cozen X'Xxxxxx may require and shall be entitled to rely upon customary
representations contained in certificates of officers of Parent and the Company
and other persons, reasonably satisfactory in form and substance to such
counsel.
(iv) Each Party shall have had the opportunity to review the tax opinion
of the other Party's legal counsel, including the representations, covenants, or
other matters in reliance on which the opinions are being rendered, and shall be
reasonably satisfied with the completeness and accuracy of said opinions.
7.02. Conditions to Obligation of the Company. The obligation of the
---------------------------------------
Company to consummate the Merger is also subject to the fulfillment or written
waiver by the Company prior to the Closing Date of each of the following
conditions:
(a) Representations and Warranties. Subject to the standard set forth in
------------------------------
Section 9.02, the representations and warranties of Parent set forth in this
Agreement shall be true and correct as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date (except that
representations and warranties that by their terms speak specifically as of the
date of this Agreement or some other date shall be true and correct as of such
date). The Company shall have received a certificate, dated the Closing Date,
signed on behalf of Parent by the Chief Executive Officer and the Chief
Financial Officer of Parent to such effect.
78
(b) Performance of Obligations of Parent. Parent shall have performed in
------------------------------------
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and the Company shall have received a
certificate, dated the Closing Date, signed on behalf of Parent by the Chief
Executive Officer and the Chief Financial Officer of Parent to such effect.
(c) Deposit of Merger Consideration. Parent shall have deposited with the
-------------------------------
Exchange Agent the Merger Consideration to be paid to holders of the Company
Common Stock pursuant to Article III hereof.
(d) Other Actions. Parent shall have furnished the Company with such
-------------
certificates of its officers or others and such other documents to evidence
fulfillment of the conditions set forth in Sections 7.01 and 7.02 as the Company
may reasonably request.
7.03. Conditions to Obligation of Parent. The obligation of Parent to
----------------------------------
consummate the Merger is also subject to the fulfillment or written waiver by
Parent prior to the Closing Date of each of the following conditions:
(a) Representations and Warranties. Subject to the standard set forth in
------------------------------
Section 9.02, the representations and warranties of the Company set forth in
this Agreement shall be true and correct as of the date of this Agreement and as
of the Closing Date as though made on and as of the Closing Date (except that
representations and warranties that by their terms speak specifically as of the
date of this Agreement or some other date shall be true and correct as of such
date). Parent shall have received a certificate, dated the Closing Date, signed
on behalf of the Company by the Chief Executive Officer and the Chief Financial
Officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
-----------------------------------------
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Parent shall have
received a certificate, dated the Closing Date, signed on behalf of the Company
by the Chief Executive Officer and the Chief Financial Officer of the Company to
such effect.
(c) Other Actions. The Company shall have furnished Parent with such
-------------
certificates of its officers or others and such other documents to evidence
fulfillment of the conditions set forth in Sections 7.01 and 7.03 as Parent may
reasonably request.
7.04. Frustration of Closing Conditions. Neither Parent nor the Company may
---------------------------------
rely on the failure of any condition set forth in Section 7.01, 7.02 or 7.03, as
the case may be, to be satisfied if such failure was caused by such Party's
breach of its obligation to use reasonable best efforts to consummate the Merger
or the Bank Merger and the other transactions contemplated by this Agreement, as
required by Section 6.01.
79
ARTICLE VIII
TERMINATION
8.01. Termination. This Agreement may be terminated, and the transactions
-----------
contemplated hereby may be abandoned:
(a) Mutual Consent. At any time prior to the Effective Time, by the
--------------
mutual consent of Parent and the Company if the Board of Directors of each so
determines by vote of a majority of the members of its entire Board.
(b) No Regulatory Approval. By the Company or Parent, if its Board of
----------------------
Directors so determines by a vote of a majority of the members of its entire
Board, in the event any Requisite Regulatory Approval shall have been denied by
final, nonappealable action by such Governmental Authority or a Governmental
Authority shall have requested the permanent withdrawal of an application
therefor.
(c) No Shareholder Approval. By the Board of Directors of either Parent
-----------------------
or the Company (provided that the terminating Party shall not be in material
breach of any of its obligations under Section 6.02), if the approval of the
shareholders of Parent or the Company required for the consummation of the
Merger shall not have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of such shareholders or at any adjournment
or postponement thereof.
(d) Breach of Representations and Warranties. By the Board of Directors
----------------------------------------
of either Parent or the Company (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant or other agreement
contained herein) if there shall have been a material breach of any of the
representations or warranties set forth in this Agreement by the other Party,
which breach is not cured within 30 days following written notice to the Party
committing such breach, or which breach, by its nature, cannot be cured prior to
the Closing; provided, however, that neither Party shall have the right to
terminate this Agreement pursuant to this Section 8.01(d) unless the breach of
representation or warranty, together with all other such breaches, would entitle
the party receiving such representation or warranty not to consummate the Merger
hereby under Section 7.02(a) (in the case of a breach of a representation or
warranty by Parent) or Section 7.03(a) (in the case of a breach of a
representation or warranty by the Company).
80
(e) Breach of Covenants. By the Board of Directors of either Parent or
-------------------
the Company (provided that the terminating Party is not then in material breach
of any representation, warranty, covenant or other agreement contained herein)
if there shall have been a material breach of any of the covenants or agreements
set forth in this Agreement by the other Party, which breach shall not have been
cured within 30 days following receipt by the breaching Party of written notice
of such breach from the other Party hereto, or which breach, by its nature,
cannot be cured prior to the Closing; provided, however, that neither Party
shall have the right to terminate this Agreement pursuant to this Section
8.01(e) unless the breach of covenant or agreement, together with all other such
breaches, would entitle the Party receiving the benefit of such covenant or
agreement not to consummate the Merger under Section 7.02(b) in the case of a
breach of a covenant or agreement by Parent or Section 7.03(b) in the case of a
breach of a covenant or agreement by the Company.
(f) Delay. By the Board of Directors of either Parent or the Company if
-----
the Merger shall not have been consummated on or before November 30, 2005,
unless the failure of the Closing to occur by such date shall be due to a
material breach of this Agreement by the Party seeking to terminate this
Agreement.
(g) Failure to Recommend. By the Board of Directors of Parent, at any
--------------------
time prior to the meeting of shareholders of the Company contemplated by Section
6.02(a), if the Company shall have (i) failed to recommend approval and adoption
of this Agreement at such meeting of shareholders, or withdrawn, modified or
qualified (or proposed to withdraw, modify or qualify) such recommendation in
any manner adverse to Parent, or taken any other action (other than terminating
this Agreement in accordance with the provisions of this Article VIII) or made
any other statement in connection with such meeting of shareholders materially
inconsistent with such recommendation (or resolved to take any such action),
whether or not permitted by the terms of this Agreement, or (ii) materially
breached its obligations under this Agreement by reason of a failure to call the
meeting of its shareholders contemplated by Section 6.02 or failed to prepare
and mail to its shareholders the Proxy Statement/Prospectus in accordance with
Section 6.03, provided that Parent has complied with its obligations under
Sections 6.02 and 6.03 in all material respects and no event has occurred which
gives the Company the right to terminate this Agreement pursuant to Section
8.01(b), 8.01(d), 8.01(e), 8.01(f), 8.01(h), 8.01(i), 8.01(j) or 8.01(k). By the
Board of Directors of the Company, at any time prior to the meeting of
shareholders of Parent contemplated by Section 6.02(b), if Parent shall have (i)
failed to recommend approval and adoption of this Agreement at such meeting of
shareholders, or withdrawn, modified or qualified (or proposed to withdraw,
modify or qualify) such recommendation in any manner adverse to the Company, or
taken any other action (other than terminating this Agreement in accordance with
the provisions of this Article VIII) or made any other statement in connection
with such meeting of shareholders materially inconsistent with such
recommendation (or resolved to take any such action), whether or not permitted
by the terms of this Agreement, or (ii) materially breached its obligations
under this Agreement by reason of a failure to call the meeting of its
shareholders contemplated by Section 6.02(b) or failed to prepare and mail to
its shareholders the Proxy Statement/Prospectus in accordance with Section 6.03,
provided that the Company has complied with its obligations under Sections 6.02
and 6.03 in all material respects and no event has occurred which gives Parent
the right to terminate this Agreement pursuant to Section 8.01(b), 8.01(d),
8.01(e), 8.01(f), 8.01(h), 8.01(j) or 8.01(k). For the purpose of this Section
8.01(g), a Party who has provided written notice to the other Party to terminate
this Agreement in accordance with Section 8.01(k) shall not, during the 30 day
period after such notice is given (or such shorter period in the event the items
referenced in such notice have been cured prior to the end of the 30 day
period), be deemed to have failed to recommend approval and adoption of this
Agreement or to have withdrawn, modified or qualified its recommendation or
taken or failed to take any action which could provide a basis for the other
Party to terminate this Agreement pursuant to this Section 8.01(g).
81
(h) Certain Tender or Exchange Offers.
---------------------------------
(i) By the Board of Directors of Parent if a tender offer or exchange
offer for 25% or more of the outstanding shares of the Company Common Stock
is commenced (other than by Parent or a Subsidiary thereof), and the Board
of Directors of the Company recommends that shareholders of the Company
tender their shares in such tender offer or exchange offer or otherwise
fails to recommend that such shareholders reject such tender offer or
exchange offer within the 10 business day period specified in Rule 14e-2(a)
under the Exchange Act.
(ii) By the Board of Directors of Company if a tender offer or
exchange offer for 25% or more of the outstanding shares of the Parent
Common Stock is commenced, and the Board of Directors of Parent recommends
that shareholders of Parent tender their shares in such tender offer or
exchange offer or otherwise fails to recommend that such shareholders
reject such tender offer or exchange offer within ten business days period
specified in Rule 14e-2(a) under the Exchange Act, provided, however, that
such termination by the Company under this clause must occur not later than
the earlier to occur of (A) six business days after such recommendation by
Parent is made public with respect to Parent Common Stock or (B) within
five business days after the end of the 10 business day period specified in
Rule 14e-2(a) under the Exchange Act if the Board of Directors of Parent
fails to make a recommendation that Parent shareholders reject such a
tender offer or exchange offer.
(i) Average Share Price Value. By the Company, if the Company Board so
-------------------------
determines by the vote of a majority of all of its members, at any time during
the three-day period commencing with the Determination Date, if both the
following conditions are satisfied:
(1) the Average Share Price shall be less than 75.0% of the Starting
Price (as the same may be adjusted to reflect any Capital Change); and
(2) (i) the number obtained by dividing the Average Share Price by
the Starting Price (such number being referred to herein as the "Parent
Ratio") shall be less than (ii) the number obtained by dividing the Nasdaq
Bank Average Index by the Nasdaq Bank Starting Index and subtracting 0.15
from the quotient in this clause (2)(ii) (such number being referred to
herein as the "Index Ratio").
82
(j) Parent Acquisition Proposal.
---------------------------
(1) By the Company on or prior to the date it has delivered notice to
Parent pursuant to Section 6.07(d) that it does not consent to Parent's
entering into an agreement implementing any Parent Acquisition Proposal.
(2) By Parent in the event (i) the Company has provided Parent with
notice pursuant to Section 6.07(d) that it does not consent to Parent's
entering into an agreement implementing any Parent Acquisition Proposal but
the Company has not terminated this Agreement pursuant to clause (1) of
this Section 8.01(j) or (ii) the Company has not provided any notice
required of it pursuant to 6.07(d).
(k) Material Adverse Effect. By the Board of Directors of either Parent
-----------------------
or the Company (provided that the terminating Party is not then in material
breach of any representation, warranty, covenant or other agreement contained
herein) if there has been any change or development or combination of changes or
developments which, individually or in the aggregate, has had or is reasonably
likely to have a Material Adverse Effect on the other Party, which Material
Adverse Effect is not cured within 30 days following written notice to the Party
which has experienced the Material Adverse Effect, or which Material Adverse
Effect, by its nature, cannot be cured prior to the Closing.
8.02. Effect of Termination and Abandonment.
-------------------------------------
(a) In the event of termination of this Agreement and the abandonment of
the Merger pursuant to this Article VIII, no Party to this Agreement shall have
any liability or further obligation to any other Party hereunder except (i) as
set forth in this Section 8.02 and Section 9.01 and (ii) that termination will
not relieve a breaching Party from liability for any willful breach of any
covenant, agreement, representation or warranty of this Agreement giving rise to
such termination.
(b) In recognition of the efforts, expenses and other opportunities
foregone by Parent while structuring and pursuing the Merger, the Parties hereto
agree that the Company shall pay to Parent a fee of $6.0 million (the "Company
Termination Fee") if this Agreement is terminated as follows:
(i) if this Agreement is terminated by Parent pursuant to Section
8.01(g) or (h), then the Company shall pay the Company Termination Fee to
Parent on or before the fifth Business Day following such termination;
(ii) if (A) this Agreement is terminated by Parent or by the Company
pursuant to Section 8.01(c) as a result of the failure of the Company's
shareholders to approve this Agreement and (B) at any time after the date
of this Agreement an Acquisition Proposal with respect to the Company shall
have been publicly announced and not withdrawn prior to the meeting of
shareholders of the Company contemplated by Section 6.02, or any
83
Person shall have publicly announced, communicated or made known an
intention, whether or not conditional, to make an Acquisition Proposal and
shall not have publicly withdrawn such announcement, communication or
intention prior to the meeting of shareholders of the Company contemplated
by Section 6.02, and if within 18 months after such termination of this
Agreement the Company or a Subsidiary of the Company enters into a
definitive agreement with respect to, or consummates a transaction which is
the subject of, an Acquisition Proposal, then the Company shall pay to
Parent the Company Termination Fee on the earlier of the date of execution
of such agreement or consummation of such transaction; and
(iii) If (A) this Agreement is terminated by either Parent or the
Company pursuant to Section 8.01(f) or by Parent pursuant to Section
8.01(e), (B) at any time after the date of this Agreement and before such
termination an Acquisition Proposal with respect to the Company shall have
been publicly announced, or any Person shall have publicly announced,
communicated or made known, or communicated or made known to the senior
management of the Company, an intention, whether or not conditional, to
make an Acquisition Proposal, (C) following the occurrence of an event
specified in clause (B), the Company shall have intentionally breached (and
not cured after notice thereof) any of its representations, warranties,
covenants or agreements set forth in this Agreement, which breach shall
have materially contributed to the failure of the Effective Time to occur
prior to the termination of this Agreement, and (D) if within 18 months
after such termination of this Agreement the Company or a Subsidiary of the
Company enters into a definitive agreement with respect to, or consummates
a transaction which is the subject of, an Acquisition Proposal, then the
Company shall pay to Parent the Company Termination Fee on the earlier of
the date of execution of such agreement or consummation of such
transaction.
Any amount that becomes payable pursuant to this Section 8.02(b) shall be
paid by wire transfer of immediately available funds to an account designated by
Parent.
(c) In the event this Agreement is terminated pursuant to Section 8.01(c)
by reason of shareholders of Parent not approving this Agreement at a duly held
meeting of such shareholders, then Parent shall pay to the Company within five
business days of such termination, an amount not exceeding $500,000 as
reimbursement for the documented out-of-pocket expenses incurred by the Company
in connection with the transactions contemplated by this Agreement.
(d) The Company and Parent agree that the agreement contained in
paragraph (b) of this Section 8.02 is an integral part of the transactions
contemplated by this Agreement, that without such agreement Parent would not
have entered into this Agreement and that such amounts do not constitute a
penalty or liquidated damages in the event of a breach of this Agreement by the
Company. If the Company fails to pay Parent the amounts due under paragraph (b)
above within the time periods specified therein, the Company shall pay the costs
84
and expenses (including reasonable legal fees and expenses) incurred by Parent
in connection with any action in which Parent prevails, including the filing of
any lawsuit, taken to collect payment of such amounts, together with interest on
the amount of any such unpaid amounts at the prime lending rate prevailing
during such period as published in The Wall Street Journal, calculated on a
daily basis from the date such amounts were required to be paid until the date
of actual payment.
(d) Notwithstanding anything to the contrary contained herein, the
Company shall be obligated, subject to the terms of this Section 8.02, to pay
only one Company Termination Fee.
ARTICLE IX
MISCELLANEOUS
9.01. Survival. No representations, warranties, agreements and covenants
--------
contained in this Agreement shall survive the Effective Time (other than
agreements or covenants contained herein that by their express terms are to be
performed after the Effective Time) or the termination of this Agreement if this
Agreement is terminated prior to the Effective Time (other than Sections
6.06(b), 6.08, 6.17(b), 6.17(c), 8.02 and, excepting Section 9.13 hereof, this
Article IX, which shall survive any such termination). Notwithstanding anything
in the foregoing to the contrary, no representations, warranties, agreements and
covenants contained in this Agreement shall be deemed to be terminated or
extinguished so as to deprive a Party hereto or any of its affiliates of any
defense at law or in equity which otherwise would be available against the
claims of any Person, including without limitation any shareholder or former
shareholder.
9.02. Standard. No representation or warranty of a Party contained in
--------
Section 5.01 or 5.02, as applicable, 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 or absence of any fact, circumstance or event
unless such fact, circumstance or event, individually or taken together with all
other facts, circumstances or events inconsistent with any representation or
warranty contained in Section 5.01 or 5.02, as applicable, has had or would be
reasonably likely to have a Material Adverse Effect on such Party (disregarding
for purposes of this Section 9.02 any materiality or Material Adverse Effect
qualification contained in any representation or warranty).
9.03. Waiver; Amendment. Prior to the Effective Time, any provision of this
-----------------
Agreement may be (i) waived by the Party benefited by the provision or (ii)
amended or modified at any time, by an agreement in writing among the Parties
hereto executed in the same manner as this Agreement, except that after a
meeting of shareholders of a Party contemplated by Section 6.02, no amendment
shall be made which by law requires further approval by the shareholders of such
Party without obtaining such approval.
9.04. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to constitute an original.
85
9.05. Governing Law. This Agreement shall be governed by, and interpreted
-------------
in accordance with, the laws of the Commonwealth of Pennsylvania applicable to
contracts made and to be performed entirely within such State.
9.06 Expenses. Each of Parent and the Company will bear all expenses
--------
incurred by it in connection with this Agreement and the transactions
contemplated hereby, including fees and expenses of its own financial
consultants, accountants and counsel, provided that the expense of printing and
mailing the Proxy Statement/Prospectus and the registration fee to be paid to
the SEC in connection with the Registration Statement shall be borne equally by
Parent and the Company, and provided further that nothing contained herein shall
limit a Party's rights to recover any liabilities or damages arising out of
another Party's willful breach of any provision of this Agreement.
9.07. Notices. All notices, requests and other communications hereunder to
-------
a Party shall be in writing and shall be deemed given if personally delivered,
mailed by registered or certified mail (return receipt requested) or sent by
reputable courier service to such Party at its address set forth below or such
other address as such Party may specify by notice to the parties hereto.
If to the Company to:
Xxxxxxx Valley Bancorp, Inc.
000 X. Xxxxxxxxx Xxx.
Xxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx
President and Chief Executive Officer
Fax: (000) 000-0000
With a copy to:
Cozen X'Xxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx, Esq.
Fax: (000) 000-0000
86
If to Parent to:
Willow Grove Bancorp, Inc.
Welsh and Xxxxxxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxxxxxx X. Xxxxxxx Xx.
President and Chief Executive Officer
Fax: (000) 000-0000
With a copy to:
Elias, Matz, Xxxxxxx & Xxxxxxx L.L.P.
12th Floor, The Xxxxxx Building
000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq. or
Xxxx X. Xxxxxxxxx, Esq.
Fax: (000) 000-0000
9.08. Entire Understanding; No Third Party Beneficiaries. This Agreement
--------------------
(including the Exhibits and Disclosure Schedules hereto), together with
Shareholder Agreements and the Confidentiality Agreement, represent the entire
understanding of the parties hereto and thereto with reference to the
transactions contemplated hereby and this Agreement and the Shareholder
Agreements supersede any and all other oral or written agreements heretofore
made, other than the Confidentiality Agreement. Nothing in this Agreement,
expressed or implied, is intended to confer upon any Person, other than the
Parties hereto or their respective successors, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as provided in
Section 6.08.
9.09. Severability. Except to the extent that application of this Section
------------
9.09 would have a Material Adverse Effect on the Company or Parent, any term or
provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable. In all such cases, the Parties shall use their reasonable best
efforts to substitute a valid, legal and enforceable provision which, insofar as
practicable, implements the original purposes and intents of this Agreement.
9.10. Enforcement of the Agreement. The Parties hereto agree that
----------------------------
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that a Party shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which it may be entitled at law or in equity.
87
9.11. Interpretation. When a reference is made in this Agreement to
--------------
Sections, Exhibits or Schedules, such reference shall be to a Section of, or
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and are not part of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." The phrases "the date of this
Agreement," "the date hereof" and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to January 20, 2005.
9.12. Assignment. No Party may assign either this Agreement or any of its
----------
rights, interests or obligations hereunder without the prior written approval of
the other Party. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the Parties hereto and their
respective successors and permitted assigns.
9.13. Alternative Structure. Notwithstanding any provision of this
---------------------
Agreement to the contrary, Parent may at any time modify the structure of the
Merger and/or the Bank Merger subject to the prior written consent of the
Company, which consent shall not be unreasonably withheld or delayed, provided
that (i) the Merger consideration to be paid to the holders of Company Common
Stock pursuant to Article III hereof is not thereby changed in kind or reduced
in amount as a result of such modification, (ii) there are no adverse tax
consequences to the shareholders of the Company as a result of such
modification, (iii) there are no adverse tax consequences to Parent or the
Company as a result of such modification and (iv) such modification will not
jeopardize or materially delay receipt of any required approvals of Governmental
Authorities or otherwise impede or materially delay consummation of the Merger.
[Signature page follows]
88
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
WILLOW GROVE BANCORP, INC.
By:
------------------------------------------------
Name: Xxxxxxxxx X. Xxxxxxx Xx.
Title: President and Chief Executive Officer
XXXXXXX VALLEY BANCORP, INC.
By:
------------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
89
EXHIBIT A
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (the "Agreement"), dated as of January 20, 2005, by
and between _______________________________, a shareholder ("Shareholder") of
Xxxxxxx Valley Bancorp, Inc. (the "Company"), a Pennsylvania corporation, and
Willow Grove Bancorp, Inc. ("Parent"), a Pennsylvania corporation. All
capitalized terms used herein and not defined herein shall have the meanings
assigned thereto in the Merger Agreement (defined below).
WHEREAS, Parent and the Company are simultaneously entering into an
Agreement and Plan of Merger, dated as of the date hereof (as may be amended
from time to time pursuant to its terms, the "Merger Agreement"), pursuant to
which the Company will merge with and into Parent on the terms and conditions
set forth therein (the "Merger") and, in connection therewith, each outstanding
share of Company Common Stock will be converted into the right to receive the
Stock Consideration or the Cash Consideration, subject to the terms, limitations
and conditions of the Merger Agreement; and
WHEREAS, Shareholder owns the shares of Company Common Stock identified on
Annex I hereto (such shares, together with all shares of Company Common Stock
subsequently acquired by Shareholder during the term of this Agreement, being
referred to as the "Shares"); and
WHEREAS, in order to induce Parent to enter into the Merger Agreement,
Shareholder, solely in such Shareholder's capacity as a shareholder of the
Company and not in any other capacity, has agreed to enter into and perform this
Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
1. Agreement to Vote Shares. Shareholder agrees that at any meeting of
------------------------
the shareholders of the Company, or in connection with any written consent
of the shareholders of the Company at which a proposal of the type set
forth in clause (ii) below is presented for consideration by the
shareholders of the Company, Shareholder shall:
(i) appear at each such meeting or otherwise cause the Shares to be
counted as present thereat for purposes of calculating a quorum; and
(ii) vote (or cause to be voted), in person or by proxy, all the
Shares (whether acquired heretofore or hereafter) that are beneficially
owned by Shareholder or as to which Shareholder has, directly or
indirectly, the right to vote or direct the voting, (x) in favor of
adoption and approval of the Merger Agreement and the Merger; (y) against
any action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the
Company contained in the Merger Agreement or of Shareholder contained in
this Agreement; and (z) against any Acquisition Proposal or any other
action, agreement or transaction that is intended, or could reasonably be
expected, to materially impede, interfere or be inconsistent with, delay,
postpone, discourage or materially and adversely affect consummation of the
Merger or this Agreement.
A-1
2. No Transfers. After the date hereof and prior to the special
------------
meeting of the Company shareholders held to consider and vote upon approval
of the Merger Agreement, Shareholder agrees not to, directly or indirectly,
sell, transfer, pledge, assign or otherwise dispose of, or enter into any
contract, option, commitment or other arrangement or understanding with
respect to the sale, transfer, pledge, assignment or other disposition of,
any of the Shares if such sale, transfer, pledge, assignment or disposition
could occur prior to such meeting, except the following transfers shall be
permitted: (i) transfers by will or operation of law, in which case this
Agreement shall bind the transferee, subject to applicable law, (ii)
transfers pursuant to any pledge agreement, subject to the pledgee agreeing
in writing to be bound by the terms of this Agreement, (iii) transfers in
connection with estate and tax planning purposes, including transfers to
relatives, trusts and charitable organizations, subject to the transferee
agreeing in writing to be bound by the terms of this Agreement, (iv)
transfers to any other shareholder of the Company who has executed a copy
of this Agreement on the date hereof with respect to some or all of the
Shares held by such shareholder, (v) transfers or dispositions to the
Company for the surrender or delivery of Shares for the payment of the
exercise price of outstanding stock options, the payment or withholding of
applicable taxes in connection with the exercise of outstanding stock
options or any other surrender or deemed surrender of Shares in connection
with the exercise of outstanding stock options to purchase shares of
Company Common Stock and (vi) such transfers as Parent may otherwise permit
in its sole discretion. Any transfer or other disposition in violation of
the terms of this Section 2 shall be null and void.
3. Representations and Warranties of Shareholder. Shareholder
---------------------------------------------
represents and warrants to and agrees with Parent as follows:
A. Capacity. Shareholder has all requisite capacity and authority to
--------
enter into and perform his, her or its obligations under this Agreement.
B. Binding Agreement. This Agreement constitutes the valid and legally
-----------------
binding obligation of Shareholder, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
C. Non-Contravention. The execution and delivery of this Agreement by
-----------------
Shareholder does not, and the performance by Shareholder of his, her or its
obligations hereunder and the consummation by Shareholder of the
transactions contemplated hereby will not, violate or conflict with, or
constitute a default under, any agreement, instrument, contract or other
obligation or any order, arbitration award, judgment or decree to which
Shareholder is a party or by which Shareholder is bound, or any statute,
rule or regulation to which Shareholder is subject or, in the event that
Shareholder is a corporation, partnership, trust or other entity, any
charter, bylaw or other organizational document of Shareholder.
D. Ownership of Shares. Shareholder has good title to all of the
-------------------
Shares as of the date hereof, and, except as set forth on Annex I hereto,
the Shares are so owned free and clear of any liens, security interests,
charges or other encumbrances.
A-2
4. Specific Performance and Remedies. Shareholder acknowledges that it
---------------------------------
will be impossible to measure in money the damage to Parent if Shareholder
fails to comply with the obligations imposed by this Agreement and that, in
the event of any such failure, Parent will not have an adequate remedy at
law or in equity. Accordingly, Shareholder agrees that injunctive relief or
other equitable remedy, in addition to remedies at law or in damages, is
the appropriate remedy for any such failure and will not oppose the
granting of such relief on the basis that Parent has an adequate remedy at
law. Shareholder agrees that Shareholder will not seek, and agrees to waive
any requirement for, the securing or posting of a bond in connection with
Parent's seeking or obtaining such equitable relief. In addition, after
discussing the matter with Shareholder, Parent shall have the right to
inform any third party that Parent reasonably believes to be, or to be
contemplating, participating with Shareholder or receiving from Shareholder
assistance in violation of this Agreement, of the terms of this Agreement
and of the rights of Parent hereunder, and that participation by any such
persons with Shareholder in activities in violation of Shareholder's
agreement with Parent set forth in this Agreement may give rise to claims
by Parent against such third party.
5. Term of Agreement; Termination.
------------------------------
A. The term of this Agreement shall commence on the date hereof.
B. This Agreement shall terminate at the Effective Time of the Merger
or the earlier of (i) at any time prior to consummation of the Merger by
the written consent of the parties hereto and (ii) termination of the
Merger Agreement in accordance with its terms. Upon such termination, no
party shall have any further obligations or liabilities hereunder;
provided, however, such termination shall not relieve any party from
liability for any willful breach of this Agreement prior to such
termination.
6. Entire Agreement. This Agreement supersedes all prior agreements,
----------------
written or oral, among the parties hereto with respect to the subject
matter hereof and contains the entire agreement among the parties with
respect to the subject matter hereof. This Agreement may not be amended,
supplemented or modified, and no provisions hereof may be modified or
waived, except by an instrument in writing signed by each party hereto. No
waiver of any provisions hereof by either party shall be deemed a waiver of
any other provisions hereof by any such party, nor shall any such waiver be
deemed a continuing waiver of any provision hereof by such party. No party
hereto may assign any rights or obligations hereunder to any other person,
except as required by Section 2 or upon the prior written consent of each
other party. Nothing in this Agreement, expressed or implied, is intended
to or shall confer upon any other person or entity, other than the parties
hereto or their respective successors, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
7. Notices. Notices may be provided to Parent and Shareholder in the
-------
manner specified in the Merger Agreement, with all notices to Shareholder
being provided to him or her at the address set forth in Annex I hereto.
A-3
8. Miscellaneous.
-------------
A. Severability. If any provision of this Agreement or the application
------------
of such provision to any person or circumstances shall be held invalid or
unenforceable by a court of competent jurisdiction, such provision or
application shall be unenforceable only to the extent of such invalidity or
unenforceability, and the remainder of the provision held invalid or
unenforceable and the application of such provision to persons or
circumstances, other than the party as to which it is held invalid, and the
remainder of this Agreement, shall not be affected.
B. Capacity. The covenants contained herein shall apply to Shareholder
--------
solely in his or her capacity as a shareholder of the Company, and no
covenant contained herein shall apply to Shareholder in his or her capacity
as a director, officer or employee of the Company or in any other fiduciary
capacity. Nothing contained in this Agreement shall be deemed to apply to,
or limit in any manner, the obligations of Shareholder to comply with his
or her fiduciary duties as a director of the Company.
C. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
D. Headings. All Section headings herein are for convenience of
--------
reference only and are not part of this Agreement, and no construction or
reference shall be derived therefrom.
E. Choice of Law. This Agreement shall be deemed a contract made
-------------
under, and for all purposes shall be construed in accordance with, the laws
of the Commonwealth of Pennsylvania, without reference to its conflicts of
law principles.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
WILLOW GROVE BANCORP, INC.
By:
---------------------------------------------
Name: Xxxxxxxxx X. Xxxxxxx Xx.
Title: President and Chief Executive Officer
SHAREHOLDER:
-------------------------------------------------
(Signature)
A-4
ANNEX I
SHAREHOLDER AGREEMENT
Shares of Company
Common Stock
Beneficially Owned
Name and Address of (exclusive of unexercised Options on Company
Shareholder stock options) Common Stock
------------------- ------------------------- ------------------
A-5
EXHIBIT B
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (the "Agreement"), dated as of January 20, 2005, by
and between _______________________________, a shareholder ("Shareholder") of
Willow Grove Bancorp, Inc. ("Parent"), a Pennsylvania corporation, and Xxxxxxx
Valley Bancorp, Inc. (the "Company"), a Pennsylvania corporation. All
capitalized terms used herein and not defined herein shall have the meanings
assigned thereto in the Merger Agreement (defined below).
WHEREAS, Parent and the Company are simultaneously entering into an
Agreement and Plan of Merger, dated as of the date hereof (as may be amended
from time to time pursuant to its terms, the "Merger Agreement"), pursuant to
which the Company will merge with and into Parent on the terms and conditions
set forth therein (the "Merger") and, in connection therewith, each outstanding
share of Company Common Stock will be converted into the right to receive the
Stock Consideration or the Cash Consideration, subject to the terms, limitations
and conditions of the Merger Agreement; and
WHEREAS, Shareholder owns the shares of Parent Common Stock identified on
Annex I hereto (such shares, together with all shares of Parent Common Stock
subsequently acquired by Shareholder during the term of this Agreement, being
referred to as the "Shares"); and
WHEREAS, in order to induce the Company to enter into the Merger Agreement,
Shareholder, solely in such Shareholder's capacity as a shareholder of Parent
and not in any other capacity, has agreed to enter into and perform this
Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
1. Agreement to Vote Shares. Shareholder agrees that at any meeting of
------------------------
the shareholders of Parent, or in connection with any written consent of
the shareholders of Parent at which a proposal of the type set forth in
clause (ii) below is presented for consideration by the shareholders of
Parent, Shareholder shall:
(i) appear at each such meeting or otherwise cause the Shares to be
counted as present thereat for purposes of calculating a quorum; and
(ii) vote (or cause to be voted), in person or by proxy, all the
Shares (whether acquired heretofore or hereafter) that are beneficially
owned by Shareholder or as to which Shareholder has, directly or
indirectly, the right to vote or direct the voting, (x) in favor of
adoption and approval of the Merger Agreement and the Merger; (y) against
any action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of Parent
contained in the Merger Agreement or of Shareholder contained in this
Agreement; and (z) against any action, agreement or transaction that is
intended, or could reasonably be expected, to materially impede, interfere
or be inconsistent with, delay, postpone discourage or materially and
adversely affect consummation of the Merger or this Agreement.
B-1
2. No Transfers. After the date hereof and prior to the special
------------
meeting of Parent shareholders held to consider and vote upon approval of
the Merger Agreement, Shareholder agrees not to, directly or indirectly,
sell, transfer, pledge, assign or otherwise dispose of, or enter into any
contract, option, commitment or other arrangement or understanding with
respect to the sale, transfer, pledge, assignment or other disposition of,
any of the Shares if such sale, transfer, pledge, assignment or disposition
could occur prior to such meeting, except the following transfers shall be
permitted: (i) transfers by will or operation of law, in which case this
Agreement shall bind the transferee, subject to applicable law, (ii)
transfers pursuant to any pledge agreement, subject to the pledgee agreeing
in writing to be bound by the terms of this Agreement, (iii) transfers in
connection with estate and tax planning purposes, including transfers to
relatives, trusts and charitable organizations, subject to the transferee
agreeing in writing to be bound by the terms of this Agreement, (iv)
transfers to any other shareholder of Parent who has executed a copy of
this Agreement on the date hereof with respect to some or all of the Shares
held by such shareholder, (v) transfers or dispositions to Parent for the
surrender or delivery of Shares for the payment of the exercise price of
outstanding stock options, the payment or withholding of applicable taxes
in connection with the exercise of outstanding stock options or any other
surrender or deemed surrender of Shares in connection with the exercise of
outstanding stock options to purchase shares of Parent Common Stock and
(vi) such transfers as the Company may otherwise permit in its sole
discretion. Any transfer or other disposition in violation of the terms of
this Section 2 shall be null and void.
3. Representations and Warranties of Shareholder. Shareholder
---------------------------------------------
represents and warrants to and agrees with the Company as follows:
A. Capacity. Shareholder has all requisite capacity and authority to
--------
enter into and perform his, her or its obligations under this Agreement.
B. Binding Agreement. This Agreement constitutes the valid and legally
-----------------
binding obligation of Shareholder, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
C. Non-Contravention. The execution and delivery of this Agreement by
-----------------
Shareholder does not, and the performance by Shareholder of his, her or its
obligations hereunder and the consummation by Shareholder of the
transactions contemplated hereby will not, violate or conflict with, or
constitute a default under, any agreement, instrument, contract or other
obligation or any order, arbitration award, judgment or decree to which
Shareholder is a party or by which Shareholder is bound, or any statute,
rule or regulation to which Shareholder is subject or, in the event that
Shareholder is a corporation, partnership, trust or other entity, any
charter, bylaw or other organizational document of Shareholder.
D. Ownership of Shares. Shareholder has good title to all of the
-------------------
Shares as of the date hereof, and, except as set forth on Annex I hereto,
the Shares are so owned free and clear of any liens, security interests,
charges or other encumbrances.
B-2
4. Specific Performance and Remedies. Shareholder acknowledges that it
---------------------------------
will be impossible to measure in money the damage to the Company if
Shareholder fails to comply with the obligations imposed by this Agreement
and that, in the event of any such failure, the Company will not have an
adequate remedy at law or in equity. Accordingly, Shareholder agrees that
injunctive relief or other equitable remedy, in addition to remedies at law
or in damages, is the appropriate remedy for any such failure and will not
oppose the granting of such relief on the basis that the Company has an
adequate remedy at law. Shareholder agrees that Shareholder will not seek,
and agrees to waive any requirement for, the securing or posting of a bond
in connection with the Company's seeking or obtaining such equitable
relief. In addition, after discussing the matter with Shareholder, the
Company shall have the right to inform any third party that the Company
reasonably believes to be, or to be contemplating, participating with
Shareholder or receiving from Shareholder assistance in violation of this
Agreement, of the terms of this Agreement and of the rights of the Company
hereunder, and that participation by any such persons with Shareholder in
activities in violation of Shareholder's agreement with the Company set
forth in this Agreement may give rise to claims by the Company against such
third party.
5. Term of Agreement; Termination.
------------------------------
A. The term of this Agreement shall commence on the date hereof.
B. This Agreement shall terminate at the Effective Time of the Merger
or the earlier of (i) at any time prior to consummation of the Merger by
the written consent of the parties hereto and (ii) termination of the
Merger Agreement in accordance with its terms. Upon such termination, no
party shall have any further obligations or liabilities hereunder;
provided, however, such termination shall not relieve any party from
liability for any willful breach of this Agreement prior to such
termination.
6. Entire Agreement. This Agreement supersedes all prior agreements,
----------------
written or oral, among the parties hereto with respect to the subject
matter hereof and contains the entire agreement among the parties with
respect to the subject matter hereof. This Agreement may not be amended,
supplemented or modified, and no provisions hereof may be modified or
waived, except by an instrument in writing signed by each party hereto. No
waiver of any provisions hereof by either party shall be deemed a waiver of
any other provisions hereof by any such party, nor shall any such waiver be
deemed a continuing waiver of any provision hereof by such party. No party
hereto may assign any rights or obligations hereunder to any other person,
except as required by Section 2 or upon the prior written consent of each
other party. Nothing in this Agreement, expressed or implied, is intended
to or shall confer upon any other person or entity, other than the parties
hereto or their respective successors, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
7. Notices. Notices may be provided to the Company and Shareholder in
-------
the manner specified in the Merger Agreement, with all notices to
Shareholder being provided to him or her at the address set forth in Annex
I hereto.
B-3
8. Miscellaneous.
-------------
A. Severability. If any provision of this Agreement or the application
------------
of such provision to any person or circumstances shall be held invalid or
unenforceable by a court of competent jurisdiction, such provision or
application shall be unenforceable only to the extent of such invalidity or
unenforceability, and the remainder of the provision held invalid or
unenforceable and the application of such provision to persons or
circumstances, other than the party as to which it is held invalid, and the
remainder of this Agreement, shall not be affected.
B. Capacity. The covenants contained herein shall apply to Shareholder
--------
solely in his or her capacity as a shareholder of Parent, and no covenant
contained herein shall apply to Shareholder in his or her capacity as a
director, officer or employee of Parent or in any other fiduciary capacity.
Nothing contained in this Agreement shall be deemed to apply to, or limit
in any manner, the obligations of Shareholder to comply with his or her
fiduciary duties as a director of Parent.
C. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
D. Headings. All Section headings herein are for convenience of
--------
reference only and are not part of this Agreement, and no construction or
reference shall be derived therefrom.
E. Choice of Law. This Agreement shall be deemed a contract made
-------------
under, and for all purposes shall be construed in accordance with, the laws
of the Commonwealth of Pennsylvania, without reference to its conflicts of
law principles.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
XXXXXXX VALLEY BANCORP, INC.
By:
----------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
SHAREHOLDER:
-------------------------------------------------
(Signature)
B-4
ANNEX I
SHAREHOLDER AGREEMENT
Shares of Parent
Common Stock
Beneficially Owned
Name and Address of (exclusive of unexercised Options on Parent
Shareholder stock options) Common Stock
------------------- ------------------------- ------------------
B-5
