EXHIBIT 99.7
CONFORMED COPY
INVESTMENT AGREEMENT
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THIS AGREEMENT dated as of December 19, 1996 (the "Agreement") between
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KEYSTONE FINANCIAL, INC. ("Keystone") and FINANCIAL TRUST CORP (the
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"Corporation"),
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W I T N E S S E T H:
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WHEREAS, Keystone and the Corporation have, simultaneously with executing
this Agreement, entered into an Agreement and Plan of Reorganization and an
Agreement and Plan of Merger dated as of the date hereof (collectively, the
"Plan"); and
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WHEREAS, as a condition to Keystone's entry into the Plan and in
consideration of such entry, the Corporation has agreed to issue to Keystone, on
the terms and conditions set forth herein, warrants entitling Keystone to
purchase up to an aggregate of 2,113,706 shares (the "Shares") of the
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Corporation's common stock, par value $5.00 per share (the "Common Stock");
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NOW, THEREFORE, in consideration of the execution of the Plan and the
agreements herein contained, Keystone and the Corporation, each intending to be
legally bound, agree as follows:
1. Concurrently with the execution of the Plan and this Agreement, the
Corporation shall issue to Keystone a warrant or warrants in the form of
Attachment A hereto (the "Warrant", which term as used herein shall include any
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warrants issued upon transfer or exchange of the original Warrant or pursuant to
Paragraph 8 of this Agreement) to purchase up to 2,113,706 Shares of the Common
Stock. Each Warrant shall be exercisable at a price per Share of $43.725,
subject to adjustment as therein provided (the "Exercise Price"). So long as the
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Warrant is outstanding and unexercised, the Corporation shall at all times
maintain and reserve, free from preemptive rights, such number of authorized but
unissued or treasury shares of Common Stock as may be necessary so that the
Warrant may be exercised without additional authorization of Common Stock after
giving effect to all other options, warrants, convertible securities and other
rights to acquire shares of Common Stock at the time outstanding. The
Corporation represents and warrants that it has duly authorized the issuance of
the Shares upon exercise of the Warrant and covenants that the Shares issued
upon exercise of the Warrant shall be duly authorized, validly issued and fully
paid and nonassessable and subject to no preemptive rights. The Warrant and the
Shares are hereinafter collectively referred to, from time to time, as the
"Securities".
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So long as the Warrant is owned by Keystone, in no event shall Keystone
exercise the Warrant for a number of shares of Common Stock, which when added to
the number of shares of Common Stock owned or controlled by Keystone (otherwise
than in a fiduciary capacity) would result in Keystone owning or controlling
(otherwise than in a fiduciary capacity) more than 19.9% of the shares of Common
Stock issued and outstanding immediately after giving effect to such exercise.
2. Subject to the terms and conditions hereof, Keystone may exercise or
sell the Warrant, in whole or in part, upon: (i) a willful breach of the Plan by
the Corporation which would permit termination of the Plan by Keystone; (ii) the
failure of the Corporation's shareholders to approve the Plan at a meeting
called for such purpose after the announcement by any person (other than
Keystone or any of its affiliates) of a bona fide offer or proposal to acquire
10% or more of the Common Stock, or to acquire, merge or consolidate with the
Corporation or any FTC Subsidiary, as such term is defined the Plan (hereinafter
called a "Corporation Subsidiary"), or to purchase or acquire all or
substantially all of the assets of the Corporation or any Corporation
Subsidiary; (iii) the acquisition by any person (other than Keystone or any of
its affiliates) after the date of this Agreement of beneficial ownership of 1%
or more of the outstanding
Common Stock if following such acquisition such person would beneficially own
10% or more of the Common Stock, in each case exclusive of shares of Common
Stock sold directly or indirectly to such person by Keystone or any of its
affiliates; (iv) any person (other than Keystone or any of its affiliates) shall
have commenced a bona fide tender or exchange offer, or shall have filed an
application with an appropriate bank regulatory authority with respect to a
publicly announced offer, to purchase or acquire securities of the Corporation
such that, upon consummation of such offer, such person would own, control or
have the right to acquire 10% or more of the Common Stock (before giving effect
to any exercise of the Warrant); or (v) the Corporation or any Corporation
Subsidiary shall have entered into an agreement or other understanding with a
person (other than Keystone or any of its affiliates) for such person to
acquire, merge or consolidate with the Corporation or any Corporation Subsidiary
or to purchase or acquire all or substantially all of the assets of the
Corporation or any Corporation Subsidiary. As used in this Paragraph 2, "person"
and "beneficial ownership" shall have the same meanings as in the Warrant.
Notwithstanding the foregoing, the Corporation shall not be obligated to
issue Shares upon exercise of the Warrant (i) in the absence of any required
governmental or regulatory approval or consent necessary for the Corporation to
issue the Shares or for Keystone to exercise the Warrant or prior to the
expiration or termination of any waiting period required by law or (ii) so long
as any injunction or other order, decree or ruling issued by any federal or
state court of competent jurisdiction is in effect which prohibits the sale or
delivery of the Shares. Keystone's right to exercise the Warrant shall terminate
and be of no further effect, except as to notices of exercise given prior
thereto, upon termination of the Warrant as provided in Paragraph 10 thereof.
Any sale of the Warrant, in whole or in part, or any of the Shares by
Keystone, other than a registered public offering pursuant to Paragraph 3 hereof
or a sale to a majority-owned subsidiary of Keystone, shall be subject to the
right of first refusal of the Corporation (or any assignee or assignees of the
Corporation the identity of whom or which prior to the date thereof has been
given to Keystone) to purchase all, but not less than all, of the portion of the
Warrant or such Shares covered by Keystone's notice of its intention to make
such sale at a price equal to the written offer price which Keystone receives
from a third party (other than a majority-owned subsidiary of Keystone) and
intends to accept. The right of first refusal shall terminate 15 days after
notice of Keystone's intention to sell has been delivered to the Corporation. If
an offer is made for a consideration which in whole or in part consists of other
than cash, the value of the noncash portion of the consideration shall be
determined by a recognized investment banking firm selected jointly by Keystone
and the Corporation, and such determination shall in no event be made later than
the fifth day after notice of Keystone's intention to sell has been delivered to
the Corporation. In the event of the failure or refusal of the Corporation to
purchase the portion of the Warrant or all the Shares covered by Keystone's
notice of intention to sell, Keystone may, within 30 days from the date of such
notice, unless additional time is needed to give notification to or to obtain
approval from any governmental or regulatory authority and, if so required,
within 30 days after the date on which the required notification period has
expired or been terminated or such approval has been obtained and any requisite
waiting period with respect thereto has passed, sell all, but not less than all,
of the portion of the Warrant or such Shares covered by such notice to such
proposed transferee at no less than the price specified and on terms no more
favorable to the buyer than those set forth in the notice.
3. If, at any time after the Warrant may be exercised or sold and on or
before June 30, 1999, the Corporation shall receive a written request therefor
from Keystone, the Corporation shall prepare, file and keep current a shelf
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), covering the Warrant and/or the Shares, and shall use its
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best efforts to cause such registration statement to become effective and remain
current for a period of not more than 245 days. Without the written consent of
Keystone, neither the Corporation nor any other holder of securities of the
Corporation
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(other than any other holder who as of the date hereof has contractual right to
do so) may include securities in such registration statement. The Corporation
shall not be obligated to make effective more than one registration statement
pursuant to this Section 3.
4. If and whenever the Corporation is required by the provisions of
Paragraph 3 hereof to effect the registration of any of the Securities under the
Securities Act, the Corporation will:
(a) prepare and file with the Securities and Exchange Commission (the
"SEC") such amendments to such registration statement and supplements to
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the prospectus contained therein as may be necessary to keep such
registration statement current for a period of not more than 245 days;
(b) furnish to Keystone and to Keystone's underwriters of the
Securities being registered such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus and such
other documents as Keystone or such underwriters may reasonably request in
order to facilitate the public offering of the Securities;
(c) use its best efforts to register or qualify the Securities covered
by such registration statement under such state securities or blue sky laws
of such jurisdictions as Keystone or such underwriters may reasonably
request; provided that the Corporation shall not be required by virtue
hereof to submit to jurisdiction or to furnish a general consent to service
of process in any state;
(d) notify Keystone, promptly after the Corporation shall receive
notice thereof, of the time when such registration statement has become
effective or any supplement or amendment to any prospectus forming a part of
such registration statement has been filed;
(e) notify Keystone promptly of any request by the SEC for the amending
or supplementing of such registration statement or prospectus or for
additional information;
(f) prepare and file with the SEC, promptly upon the request of
Keystone, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for Keystone and the
Corporation, are required under the Securities Act or the rules and
regulations promulgated thereunder in connection with the distribution of
the Securities by Keystone;
(g) prepare and promptly file with the SEC such amendment or supplement
to such registration statement or prospectus as may be necessary to correct
any statements or omissions if, at the time when a prospectus relating to
such Securities is required to be delivered under the Securities Act, any
event shall have occurred as the result of which such prospectus as then in
effect would include an untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in the light of
the circumstances in which they were made, not misleading;
(h) advise Keystone, promptly after it shall receive notice or obtain
knowledge, of the issuance of any stop order by the SEC suspending the
effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best
efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued; and
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(i) at the request of Keystone, furnish on the date or dates provided
for in the underwriting agreement: (i) an opinion or opinions of counsel to
the Corporation for the purposes of such registration, addressed to the
underwriters and to Keystone, covering such matters as such underwriters and
Keystone may reasonably request and as are customarily covered by issuer's
counsel at that time; and (ii) a letter or letters from the independent
certified public accountants of the Corporation, addressed to the
underwriters and to Keystone, covering such matters as such underwriters or
Keystone may reasonably request, in which letters such accountants shall
state (without limiting the generality of the foregoing) that they are
independent certified public accountants within the meaning of the
Securities Act and that, in the opinion of such accountants, the financial
statements and other financial data of the Corporation included in the
registration statement or any amendment or supplement thereto comply in all
material respects with the applicable accounting requirements of the
Securities Act.
5. With respect to the registration requested pursuant to Paragraph 3
hereof, the following fees, costs and expenses shall be borne by the
Corporation: All registration, filing and NASD fees, printing and engraving
expenses, fees and disbursements of the Corporation's counsel and accountants
and all legal fees and disbursements and other expenses of the Corporation to
comply with state securities or blue sky laws of any jurisdictions in which the
Securities to be offered are to be registered or qualified. Fees and
disbursements of counsel and accountants for Keystone, underwriting discounts
and commissions and transfer taxes for Keystone and any other expenses incurred
by Keystone shall be borne by Keystone.
6. In connection with any registration statement:
(a) The Corporation will indemnify and hold harmless Keystone, any
underwriter (as defined in the Securities Act) for Keystone, and each
person, if any, who controls Keystone or such underwriter (within the
meaning of the Securities Act) from and against any and all loss, damage,
liability, cost or expense to which Keystone or any such underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such loss, damage, liability, cost or expense arises out of or is
caused by any untrue statement or alleged untrue statement of any material
fact contained in such registration statement, any prospectus or preliminary
prospectus contained therein or any amendment or supplement thereto, or
arises out of or is based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances in which they were
made, not misleading; provided, however, that the Corporation will not be
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liable in any such case to the extent that any such loss, damage, liability,
cost or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by Keystone, such underwriter or such
controlling person in writing specifically for use in the preparation
thereof.
(b) Keystone will indemnify and hold harmless the Corporation, any
underwriter (as defined in the Securities Act), and each person, if any, who
controls the Corporation or such underwriter (within the meaning of the
Securities Act) from and against any and all loss, damage, liability, cost
or expense to which the Corporation or any such underwriter or controlling
person may become subject under the Securities Act or otherwise, insofar as
such loss, damage, liability, cost or expense arises out of or is caused by
any untrue or alleged untrue statement of any material fact contained in
such registration statement, any prospectus or preliminary prospectus
contained therein or any amendment or supplement thereto, or arises out of
or is based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances in which they were
made, not
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misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was so made in reliance upon and in conformity with written information
furnished by Keystone specifically for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of subparagraph (a) or (b) of this Paragraph 6 of any claim in
writing or of notice of the commencement of any action involving the subject
matter of the foregoing indemnity provisions, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
pursuant to the provisions of said subparagraph (a) or (b), promptly notify
the indemnifying party of the receipt of such claim or notice of the
commencement of such action, but the omission to so notify the indemnifying
party will not relieve it from any liability which it may otherwise have to
any indemnified party hereunder. In case such action is brought against any
indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall have the right to participate in, and,
to the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory
to such indemnified party; provided, however, that if the defendants in any
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action include both the indemnified party and the indemnifying party and
there is a conflict of interest which would prevent counsel for the
indemnifying party from also representing the indemnified party, the
indemnified party or parties shall have the right to select one separate
counsel to participate in the defense of such indemnified party or parties.
After notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party pursuant to the provisions of said
subparagraph (a) or (b) for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof
other than reasonable costs of investigation, unless (i) the indemnified
party shall have employed counsel in accordance with the provisions of the
preceding sentence, (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the notice of the
commencement of the action, or (iii) the indemnifying party has authorized
the employment of counsel for the indemnified party at the expense of the
indemnifying party.
(d) If recovery is not available under the foregoing indemnification
provisions, for any reason other than as specified therein, the parties
entitled to indemnification by the terms thereof shall be entitled to
contribution to liabilities and expenses, except to the extent that
contribution is not permitted under Section 11(f) of the Securities Act. In
determining the amount of contribution to which the respective parties are
entitled, there shall be considered the parties' relative knowledge and
access to information concerning the matter with respect to which the claim
was asserted, the opportunity to correct and/or prevent any statement or
omission, and any other equitable considerations appropriate under the
circumstances. Keystone and the Corporation agree that it would not be
equitable if the amount of such contribution were determined by pro rata or
per capita allocation even if the underwriters and Keystone as a group were
considered a single entity for such purpose.
7. Subject to applicable regulatory restrictions, from and after the date on
which any event described in the second paragraph of this Paragraph 7 occurs,
the Holder as defined in the Warrant (which shall include a former Holder) who
has exercised the Warrant in whole or in part shall have the right to require
the Corporation to redeem some or all of the Shares at a redemption price per
share (the "Redemption Price") equal to the highest of (i) 110% of the Exercise
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Price, (ii) the highest price paid or agreed to be paid for any share of Common
Stock by an Acquiring Person (as defined in the Warrant) during the twelve
months immediately preceding the date notice of the election to require
redemption
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is given by the Holder under the third paragraph of this Paragraph 7 (as
appropriately adjusted to reflect any of the events described in Paragraph 7(A)
of the Warrant) and (iii) in the event of a sale of all or substantially all of
the Corporation's assets, any Corporation Subsidiary or all or substantially all
of any Corporation Subsidiary's assets, (x) the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of the
Corporation as determined by a recognized investment banking firm selected by
such Holder, divided by (y) the number of shares of Common Stock then
outstanding. If the price paid consists in whole or in part of securities or
assets other than cash, the value of such securities or assets shall be their
then current market value as determined by a recognized investment banking firm
selected by the Holder. The Holder's right to require the Corporation to redeem
some or all of the Shares under this Paragraph 7 shall expire at the close of
business on the later of (1) the 180th day following the occurrence of any event
described in the second paragraph of this Paragraph 7 and (2) July 19, 1998.
The redemption rights provided in this Paragraph 7 shall become exercisable
upon the occurrence of any of the following events: (i) the acquisition by any
person (other than Keystone or any subsidiary of Keystone) of beneficial
ownership of 50% or more of the Common Stock (before giving effect to any
exercise of the Warrant) exclusive of shares of Common Stock sold directly or
indirectly to such person by Keystone or (ii) a transaction of the type
specified in Paragraph 2(v) shall have been consummated. As used in this
Paragraph 7 "person" and "beneficial ownership" shall havethe same meanings as
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in the Warrant.
The Holder may exercise its right to require the Corporation to redeem some
or all of the Shares pursuant to this Paragraph 7 by surrendering for such
purpose to the Corporation at its principal office, within the time period
specified in the second preceding paragraph, a certificate or certificates
representing the number of Shares to be redeemed accompanied by a written notice
stating that it elects to require the Corporation to redeem all or a specified
number of such Shares in accordance with the provisions of this Paragraph 7. As
promptly as practicable, and in any event within five business days after the
surrender of such certificates and the receipt of such notice relating thereto,
the Corporation shall deliver or cause to be delivered to the Holder the
applicable Redemption Price for the Shares which it is not then prohibited under
applicable law or regulation from redeeming, and, if the Holder has given the
Corporation notice that less than the full number of Shares evidenced by the
surrendered certificate or certificates are to be redeemed, a new certificate or
certificates, of like tenor, for the number of Shares evidenced by such
surrendered certificate or certificates, less the number of Shares redeemed. To
the extent that the Corporation is prohibited under applicable law or
regulation, or by judicial or administrative action, from redeeming all of the
Shares as to which the Holder has given notice to redeem hereunder, the
Corporation shall immediately notify the Holder and thereafter deliver or cause
to be delivered to the Holder the applicable Redemption Price for such number of
the Shares as it is not prohibited from redeeming within five business days
after the date on which the Corporation is no longer so prohibited; provided,
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however, that, at the option of Keystone, at any time after receipt of such
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notice from the Corporation, the Corporation shall deliver to the Holder a
certificate for such number of the Shares as it is then prohibited from
redeeming, or, at the Holder's option, all the Shares, and the Corporation shall
have no further obligation to redeem such Shares.
8. In the event that the Corporation issues any additional shares of Common
Stock after the date of this Agreement, the Corporation shall issue additional
warrants to Keystone, such that, after such issuance, the number of shares of
Common Stock subject to all warrants hereunder, together with any shares of
Common Stock previously issued pursuant hereto, equals 19.9% of the sum of (1)
the number of shares of Common Stock issued and outstanding following such
issuance and (2) the number of shares of Common Stock subject to all warrants
hereunder. Such additional warrants shall be identical to the Warrant.
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9. The Corporation will not enter into any transaction described in (a), (b)
or (c) of Paragraph 6(A) of the Warrant unless the Acquiring Corporation (as
defined in the Warrant) assumes in writing, in form and substance satisfactory
to the Holder, all the obligations of the Corporation hereunder.
10. If Keystone acquires Shares and, during the period ending on the later
of (1) one year after the date of such acquisition or (2) June 19, 1998 the
merger contemplated by the Plan has not been completed, then, during the thirty-
day period commencing at the expiration of such period the Corporation shall
have the right to repurchase all (but not less than all) of such Shares of
Common Stock so acquired by Keystone and held by Keystone at the time of such
repurchase at a price equal to the sum of (a)(i) the greater of the current
market price or the Exercise Price paid for such Shares, multiplied by (ii) the
number of such Shares so acquired, plus (b) Keystone's after-tax carrying cost.
For the purposes of this calculation, the "current market price" shall mean the
average of the closing sale prices for the Common Stock for the 25 trading days
immediately preceding the repurchase, as quoted on the NASDAQ National Market
System, and Keystone's pre-tax carrying cost shall be equal to interest on the
Exercise Price paid for such Shares so purchased from the date of purchase at
the prime rate of interest established by Mellon Bank, N.A. as in effect
throughout such period, less any dividends received on such Shares so purchased.
11. To the extent that Keystone acquires Shares, and until the Corporation's
rights (if any) to redeem such Shares pursuant to Paragraph 10 of this Agreement
have expired, Keystone agrees to vote such Shares in accordance with the
recommendation of the Board of Directors of the Corporation so long as at least
a majority of such Board of Directors is the same as on the date hereof, except
as to voting in connection with mergers, acquisitions, liquidations or sales or
other dispositions of assets involving the Corporation or any Corporation
Subsidiary, in which instance no such restrictions shall apply, provided,
however, that the covenant contained in this Paragraph 11 shall not apply to any
Holder other than Keystone or one of its subsidiaries.
12. Without limiting the foregoing or any remedies available to Keystone, it
is specifically acknowledged that Keystone would not have an adequate remedy at
law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of the obligations of any person subject to, this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in counterparts by their duly authorized officers and their corporate
seals to be hereunto affixed, all as of the day and year first above written.
[CORPORATE SEAL]
Attest: FINANCIAL TRUST CORP
/s/ Xxxxxx X. Xxxxx By /s/ Xxx X. Xxxxx
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Xxxxxx X. Xxxxx, Xxx X. Xxxxx, Chairman
Secretary and Chief Executive Officer
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[CORPORATE SEAL]
Attest: KEYSTONE FINANCIAL, INC.
/s/ Xxx X. Xxxxx By /s/ Xxxx X. Xxxxxxxx
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Xxx X. Xxxxx, Xxxx X. Xxxxxxxx, President
Secretary and Chief Executive Officer
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ATTACHMENT A
WARRANT
to Purchase up to 2,113,706 Shares of
Common Stock
of
Financial Trust Corp
This is to certify that, for value received, FINANCIAL, INC. ("Keystone") or
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any permitted transferee (Keystone or such transferee hereinafter called the
"Holder") is entitled to purchase, subject to the provisions of this Warrant and
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of the Agreement (as hereinafter defined), from FINANCIAL TRUST CORP (the
"Corporation"), at any time on or after the date hereof, an aggregate of up to
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2,113,706 fully paid and nonassessable shares of common stock, par value $5.00
per share (the "Common Stock"), of the Corporation at a price per share equal to
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$43.725, subject to adjustment as herein provided (the "Exercise Price").
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1. Exercise of Warrant. Subject to the provisions hereof and the limitations
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set forth in Paragraph 2 of an Investment Agreement dated as of December 19,
1996 by and between Keystone and the Corporation (the "Agreement") executed and
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delivered in connection with an Agreement and Plan of Reorganization and an
Agreement and Plan of Merger dated as of December 19, 1996 between Keystone and
the Corporation (collectively, the "Plan"), this Warrant may be exercised at any
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time or from time to time on or after the date hereof. This Warrant shall be
exercised by presentation and surrender hereof to the Corporation at the
principal office of the Corporation, accompanied by (i) a written notice of
exercise, (ii) payment to the Corporation, for the account of the Corporation,
of the Exercise Price for the number of shares of Common Stock specified in such
notice and (iii) a certificate of the Holder specifying the event or events
which have occurred which entitle the Holder to exercise this Warrant. The
Exercise Price for the number of shares of Common Stock specified in the notice
shall be payable in immediately available funds. This Warrant may not be
exercised in part for less than 250,000 shares, except (i) for an initial
exercise resulting in ownership of approximately 5% of the outstanding shares of
Common Stock after giving effect to the exercise, (ii) as limited by applicable
law, regulation or regulatory order or (iii) when this Warrant becomes
exercisable for less than 250,000 shares, the remaining shares for which it is
then exercisable.
Upon such presentation and surrender, the Corporation shall issue promptly
(and within two business days if requested by the Holder) to the Holder or its
assignee, transferee or designee the shares of Common Stock to which the Holder
is entitled hereunder.
If this Warrant should be exercised in part only, the Corporation shall,
upon surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the rights of the Holder thereof to purchase the balance of
the shares of Common Stock purchasable hereunder. Upon receipt by the
Corporation of this Warrant, in proper form for exercise, the Holder shall be
deemed to be the holder of record of the shares of Common Stock issuable upon
such exercise, notwithstanding that the stock transfer books of the Corporation
may then be closed or that certificates representing such shares of Common Stock
shall not then be actually delivered to the Holder. The Corporation shall pay
all expenses, and any and all United States federal, state and local taxes and
other charges, that may be payable in connection with the preparation, issue and
delivery of stock certificates pursuant to this Paragraph 1 in the name of the
Holder or its assignee, transferee or designee.
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2. Reservation of Shares; Preservation of Rights of Holder. The Corporation
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shall at all times while this Warrant is outstanding and unexercised maintain
and reserve, free from preemptive rights, such number of authorized but unissued
or treasury shares of Common Stock as may be necessary so that this Warrant may
be exercised without additional authorization of Common Stock after giving
effect to all other options, warrants, convertible securities and other rights
to acquire shares of Common Stock at the time outstanding. The Corporation
further agrees (i) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder or under the Agreement by the Corporation, (ii) that it will use its
best efforts to take all action (including (A) complying with all premerger
notification, reporting and waiting period requirements specified in 15 U.S.C.
(S)18a and the regulations promulgated thereunder and (B) in the event that
under the Bank Holding Company Act of 1956, the Change in Bank Control Act, the
Pennsylvania Banking Code of 1965 or any other law, prior approval of the Board
of Governors of the Federal Reserve System (the "Board"), the Office of the
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Comptroller of the Currency (the "OCC"), the Federal Deposit Insurance
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Corporation (the "FDIC"), the Pennsylvania Department of Banking (the
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"Department") and/or any other regulatory agency is necessary before this
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Warrant may be exercised, cooperating fully with the Holder in preparing any and
all such applications and providing such information to the Board, the OCC, the
FDIC, the Department and/or any such other regulatory agency as such agencies
may require) in order to permit the Holder to exercise this Warrant and the
Corporation duly and effectively to issue shares of its Common Stock hereunder,
and (iii) that it will promptly take all action necessary to protect the rights
of the Holder against dilution as provided herein.
3. Fractional Shares. The Corporation shall not be required to issue
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fractional shares of Common Stock upon exercise of this Warrant but shall pay
for such fraction of a share in cash or by certified or official bank check in
an amount equal to the product of such fraction of a share and the Exercise
Price.
4. Exchange, Transfer or Loss of Warrant. This Warrant is exchangeable or,
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subject to Paragraph 2 of the Investment Agreement, transferable, without
expense, at the option of the Holder, upon presentation and surrender hereof at
the principal office of the Corporation for other Warrants of different
denominations entitling the Holder to purchase in the aggregate the same number
of shares of Common Stock purchasable hereunder. The term "Warrant" as used
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herein includes any Warrants for which this Warrant may be exchanged. Upon
receipt by the Corporation of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Corporation will
execute and deliver a new Warrant of like tenor and date.
This Warrant may not be exercised or sold except in accordance with the
terms of the Agreement.
5. Redemption. (A) Subject to applicable regulatory restrictions, from and
----------
after the date on which any event described in the second paragraph of Paragraph
7 of the Agreement occurs, the Holder shall have the right to require the
Corporation to redeem this Warrant at a redemption price (the "Redemption
----------
Amount") equal to the highest of (i) the number of shares of Common Stock for
------
which this Warrant is then exercisable (the "Conversion Number") multiplied by
---------- ------
the Exercise Price multiplied by .10, (ii)(x) the highest price paid or agreed
to be paid for any share of Common Stock by the Acquiring Person (as hereinafter
defined) during the twelve months immediately preceding the date notice of the
election to require redemption is given by the Holder under Paragraph 5(B) (such
price to be appropriately adjusted to reflect the effect of any of the events
described in Paragraph 7(A) hereof), less the Exercise Price, multiplied by (y)
the Conversion Number, and (iii) in the event of the sale of all or
substantially
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all of the assets of the Corporation, any Corporation Subsidiary (as defined in
the Agreement) or all or substantially all of the assets of any Corporation
Subsidiary, the Conversion Number multiplied by (x)(I) the sum of (a) the price
paid for such assets, (b) the current market value of the remaining assets of
the Corporation, as determined by a recognized investment banking firm selected
by the Holder, and (c) the Exercise Price multiplied by the Conversion Number,
divided by (II) the sum of the number of shares of Common Stock then outstanding
and the Conversion Number, less (y) the Exercise Price. If, for the purpose of
this calculation or calculating the Assigned Value (as hereinafter defined), the
price paid consists in whole or in part of securities or assets other than cash,
the value of such securities or assets shall be their then current market value
as determined by a recognized investment banking firm selected by the Holder.
The Holder's right to require the Corporation to redeem this Warrant under this
Paragraph 5 shall expire at the close of business on the later of (1) the 180th
day following the occurrence of any event described in the second paragraph of
Paragraph 7 of the Agreement and (2) July 19, 1998.
(B) The Holder of this Warrant may exercise its right to require the
Corporation to redeem this Warrant pursuant to this Paragraph 5 by surrendering
for such purpose to the Corporation, at its principal office, within the period
specified above, this Warrant accompanied by a written notice stating that the
Holder elects to require the Corporation to redeem this Warrant in accordance
with the provisions of this Paragraph 5. As promptly as practicable, and in any
event within ten business days after the surrender of this Warrant and the
receipt of such notice relating thereto, the Corporation shall deliver or cause
to be delivered to the Holder the Redemption Amount therefor or the portion
thereof which it is not then prohibited under applicable law and regulation from
delivering to the Holder.
To the extent that the Corporation is prohibited under applicable law
or regulation, or as a result of administrative or judicial action, from
redeeming this Warrant in full, the Corporation shall immediately notify the
Holder and thereafter deliver or cause to be delivered to the Holder the portion
of the Redemption Amount which it is no longer prohibited from delivering to the
Holder within five business days after the date on which the Corporation is no
longer so prohibited; provided, however, that, at the option of the Holder, at
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any time after receipt of such notice, the Corporation shall deliver to the
Holder a new Warrant evidencing the right of the Holder to purchase that number
of shares of Common Stock obtained by multiplying the Conversion Number in
effect at such time by a fraction, the numerator of which is the Redemption
Amount less the portion thereof (if any) theretofore delivered to the Holder and
the denominator of which is the Redemption Amount, and the Corporation shall
have no further obligation to redeem such new Warrant.
(C) As used in this Warrant the following terms have the meanings
indicated:
(a) "Acquiring Person" shall mean any "Person" (hereinafter
----------------
defined) who or which shall be the "Beneficial Owner" (as hereinafter defined)
of 10% or more of the Common Stock;
(b) A "Person" shall mean any individual, firm, corporation or
------
other entity and include as well any syndicate or group deemed to be a "person"
by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended;
(c) A Person shall be a "Beneficial Owner" of all securities:
----------------
(i) which such Person or any of its "Affiliates" (as
hereinafter defined) or "Associates" (as hereinafter defined) beneficially owns,
directly or indirectly; and
(ii) which such Person or any of its Affiliates or Associates
has (1) the right to acquire (whether such right is exercisable immediately or
only after the passage of time or
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otherwise) pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (2) the right to vote pursuant to any agreement, arrangement or
understanding; and
(d) "Affiliate" and "Associate" shall have the respective meanings
--------- ---------
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
promulgated under the Securities Exchange Act of 1934, as amended, as in effect
on the date of the Agreement.
6. Certain Transactions. (A) In case the Corporation (a) shall consolidate
--------------------
with or merge into any Person, other than the Holder or one of its Affiliates,
and shall not be the continuing or surviving corporation of such consolidation
or merger, (b) shall permit any Person, other than the Holder or one of its
Affiliates, to merge into the Corporation and the Corporation shall be the
continuing or surviving corporation, but, in connection with such merger, the
then outstanding shares of Common Stock shall be changed into or exchanged for
stock or other securities of any other Person or cash or any other property or
shall represent less than 50% of the shares of Common Stock immediately after
giving effect to the merger, or (c) shall sell or otherwise transfer all or
substantially all of its assets, any Corporation Subsidiary or all substantially
all of the any Corporation Subsidiary's assets to any Person, other than the
Holder or one of its Affiliates, then, and in each such case, the agreement
governing such transaction shall make proper provision so that this Warrant
shall (at the option of the Holder, in whole or in part), upon the consummation
of any such transaction and upon the terms and conditions set forth herein, be
converted into, or exchanged for, a warrant, at the option of the Holder, of
either (I) the Acquiring Corporation (as hereinafter defined), (II) any company
which controls the Acquiring Corporation, or (III) in the case of a merger
described in clause (A)(b), the Corporation, in which case such warrant shall be
a newly issued warrant (in any such case, the "Substitute Warrant").
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(B) The following terms have the meanings indicated:
(a) "Acquiring Corporation" shall mean (I) the continuing or
---------------------
surviving corporation of a consolidation or merger with the Corporation (if
other than the Corporation), (II) the corporation merging into the Corporation
in a merger in which the Corporation is the continuing or surviving person and
in connection with which the then outstanding shares of Common Stock are changed
into or exchanged for stock of other securities of any other Person or cash or
any other property or shall represent less than 50% of the shares of Common
Stock immediately after giving effect to the merger, and (III) the transferee of
all or substantially all of the Corporation's assets, any Corporation Subsidiary
or all or substantially all of any Corporation Subsidiary's assets;
(b) "Substitute Common Stock" shall mean the common stock issued
-----------------------
by the issuer of the Substitute Warrant;
(c) "Assigned Value" shall mean the Redemption Price per share of
--------------
Common Stock (as defined in Paragraph 7 of the Agreement) multiplied by
the Conversion Number;
(d) "Average Price" shall mean the average closing price (or if
-------------
unavailable, the average of the daily averages of the closing bid and asked
prices) of a share of Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in no event higher
than the closing price (or average of the closing bid and asked prices) of a
share of Substitute Common Stock on the day preceding such consolidation, merger
or sale; provided that if the Corporation is the issuer of the Substitute
Warrant, the Average Price shall be computed with respect to a share of the
common stock issued by the Person merging into the Corporation or by
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by any company which controls such Person, as the Holder may elect. If the
Average Price cannot be computed as aforesaid because neither closing prices nor
closing bid and asked prices are available for such one-year period, then the
Average Price shall be the average fair market value of a share of Substitute
Common Stock for such period (but in no event higher than the fair market value
on the day preceding such consolidation, merger or sale) as determined by a
recognized investment banking firm selected by Keystone.
(C) The Substitute Warrant shall have the same terms as this Warrant
provided that if the terms of the Substitute Warrant cannot, for legal reasons,
be the same as this Warrant, such terms shall be as similar as possible and in
no event less advantageous to the Holder. The issuer of the Substitute Warrant
shall also enter into an agreement with the then Holder of the Substitute
Warrant in substantially the same form as the Agreement, which shall be
applicable to the Substitute Warrant. For purposes of the Substitute Warrant and
such agreement, any event referred to in Paragraph 2 or Paragraph 7 of the
Agreement shall be deemed to have occurred when it occurred with respect to the
Corporation.
(D) The Substitute Warrant shall be immediately exercisable for such
number of shares of Substitute Common Stock as is equal to the Assigned Value
divided by the Average Price. The exercise price of the Substitute Warrant per
share of Substitute Common Stock shall be equal to the Exercise Price multiplied
by a fraction in which the numerator is the Conversion Number and the
denominator is the number of shares of Substitute Common Stock for which the
Substitute Warrant is exercisable.
(E) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Warrant be exercisable for more than 19.9% of the aggregate of
the outstanding shares of Substitute Common Stock and the shares of Substitute
Common Stock issuable upon exercise of the Substitute Warrant.
7. Adjustment. The number of shares of Common Stock purchasable upon the
----------
exercise of this Warrant and the Exercise Price shall be subject to adjustment
from time to time as provided in this Paragraph 7:
(A)(1) In case the Corporation shall pay or make a dividend or other
distribution on any class of capital stock of the Corporation in Common Stock,
the number of shares of Common Stock purchasable upon exercise of this Warrant
shall be increased by multiplying such number of shares by a fraction of which
the denominator shall be the number of shares of Common Stock outstanding at the
close of business on the day immediately preceding the date of such distribution
and the numerator shall be the sum of such number of shares and the total number
of shares constituting such dividend or other distribution, such increase to
become effective immediately after the opening of business on the day following
such distribution, provided, however, that in no event shall the Warrant be
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exercised for more than 19.9% of the shares of Common Stock issued and
outstanding following such exercise.
(2) In case outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock, the number of shares of Common Stock
purchasable upon exercise of this Warrant at the opening of business on the day
following the day upon which such subdivision becomes effective shall be
proportionately increased, and, conversely, in case outstanding shares of Common
Stock shall each be combined into a smaller number of shares of Common Stock,
the number of shares of Common Stock purchasable upon exercise of this Warrant
at the opening of business on the day following the day upon which such
combination becomes effective shall be proportionately decreased, such increase
or decrease, as the case may be, to become effective immediately after the
opening of business on the day following the day
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upon which such subdivision or combination becomes effective, provided,
--------
however, that in no event shall the Warrant be exercised for more than
-------
19.9% of the shares of Common Stock issued and outstanding following such
exercise.
(3) The reclassification (excluding any transaction in which a
Substitute Warrant would be issued) of Common Stock into securities (other than
Common Stock) and/or cash and/or other consideration shall be deemed to involve
a subdivision or combination, as the case may be, of the number of shares of
Common Stock outstanding immediately prior to such reclassification into the
number or amount of securities and/or cash and/or other consideration
outstanding immediately thereafter and the effective date of such
reclassification shall be deemed to be "the day upon which such subdivision
becomes effective", or "the day upon which such combination becomes effective",
as the case may be, within the meaning of clause (2) above.
(4) The Corporation may make such increases in the number of shares of
Common Stock purchasable upon exercise of this Warrant, in addition to those
required by this subparagraph (A), as shall be determined by its Board of
Directors to be advisable in order to avoid taxation so far as practicable of
any dividend of stock or stock rights or any event treated as such for federal
income tax purposes to the recipients.
(B) Whenever the number of shares of Common Stock purchasable upon
exercise of this Warrant is adjusted as herein provided, the Exercise Price
shall be adjusted by a fraction in which the numerator is equal to the number of
shares of Common Stock purchasable prior to the adjustment and the denominator
is equal to the number of shares of Common Stock purchasable after the
adjustment.
(C) For the purpose of this Paragraph 7, the term "Common Stock" shall
include any shares of the Corporation of any class or series which has no
preference or priority in the payment of dividends or in the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of the Corporation and which is not subject to redemption by the Corporation.
8. Notice. (A) Whenever the number of shares for which this Warrant is
------
exercisable is adjusted as provided in Paragraph 7, the Corporation shall
promptly compute such adjustment and mail to the Holder a certificate, signed by
a principal financial officer of the Corporation, setting forth the number of
shares of Common Stock for which this Warrant is exercisable as a result of such
adjustment, a brief statement of the facts requiring such adjustment and the
computation thereof and when such adjustment will become effective.
(B) Upon the occurrence of any event which results in this Warrant
becoming redeemable, as provided in Paragraph 5, the Corporation shall promptly
notify the Holder of such event; and promptly compute the Redemption Amount and
furnish to the Holder a certificate, signed by a principal financial officer of
the Corporation, setting forth the Redemption Amount and the basis and
computation thereof.
(C) Upon the occurrence of an event which results in this Warrant
becoming convertible into, or exchangeable for, the Substitute Warrant, as
provided in Paragraph 6, the Acquiring Corporation and the Corporation shall
promptly notify the Holder of such event; and, upon receipt from the Holder of
its choice as to the issuer of the Substitute Warrant, the Acquiring Corporation
and the Corporation shall promptly compute the number of shares of Substitute
Common Stock for which the Substitute Warrant is exercisable and furnish to the
Holder a certificate, signed by a principal financial officer of each of the
Acquiring
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Corporation and the Corporation, setting forth the number of shares of
Substitute Common Stock for which the Substitute Warrant is exercisable, a
computation thereof and when such adjustment will become effective.
9. Rights of the Holder. (A) Without limiting the foregoing or any remedies
--------------------
available to the Holder, it is specifically acknowledged that the Holder would
not have an adequate remedy at law for any breach of the provision of this
Warrant and will be entitled to specific performance of the obligations under,
and injunctive relief against actual or threatened violations of the obligations
of any Person subject to, this Warrant.
(B) Except as provided in the third paragraph of Paragraph 1 hereof,
the Holder shall not, by virtue hereof, be entitled to any rights of a
shareholder in the Corporation.
10. Termination. This Warrant and the rights conferred hereby shall
-----------
terminate (i) upon a willful breach of the Agreement by Keystone, (ii) at the
Effective Time of the Merger pursuant to the Plan, (iii) upon a valid
termination of the Plan prior to the occurrence of an event described in
Paragraph 2 of the Agreement or (iv) upon the failure of the shareholders of the
Corporation to approve the Merger by the required vote at a meeting duly called
and held in accordance with the requirements of Section 6.03 of the Agreement
and Plan of Reorganization prior to the occurrence of an event described in
Paragraph 2 of the Agreement and (v) to the extent this Warrant has not
previously been exercised, at the close of business on the later of (A) July 19,
1998 and (B) 12 months after the occurrence of an event described in Paragraph 2
of the Agreement, provided that such termination pursuant to this clause (v)
shall not affect any redemption under Paragraph 5 as to which exercise under
Paragraph 5(B) has previously occurred.
11. Securities Act Representation. The Holder, by acceptance hereof, agrees
-----------------------------
that, unless the shares of Common Stock issuable upon exercise hereof have been
registered under the Securities Act of 1933, as amended, (the "Securities Act")
--------------
and any other applicable securities laws for sale or other disposition by the
Holder, it will deliver to the Corporation upon the exercise hereof a written
representation that it is acquiring the shares of Common Stock issuable upon the
exercise hereof solely for its own account and not with a view to the
distribution thereof within the meaning of the Securities Act and that any
certificate or certificates representing such shares may bear a legend to the
effect that such shares may not be sold except pursuant to an effective
registration statement under the Securities Act or any exemption from
registration thereunder and registration or qualification under any other
applicable securities laws or exemptions therefrom.
12. Governing Law. This Warrant shall be governed by, and interpreted in
-------------
accordance with, the substantive laws of the Commonwealth of Pennsylvania.
Dated: December 19, 1996
[CORPORATE SEAL]
Attest: FINANCIAL TRUST CORP
By
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Xxxxxx X. Xxxxx, Xxx X. Xxxxx, Chairman
Secretary and Chief Executive Officer
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