Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of August 23, 2001
("Agreement"), among Peoples Community Bancorp, Inc. ("Bancorp"), a Delaware
corporation, Peoples Community Bank (the "Bank"), a federally-chartered
savings bank and a wholly-owned subsidiary of Bancorp, Kenwood Bancorp, Inc.
("KBI"), a Delaware corporation, and Kenwood Savings Bank ("Kenwood Savings"),
an Ohio-chartered savings association and wholly-owned subsidiary of KBI.
WITNESSETH:
WHEREAS, the Boards of Directors of Bancorp, the Bank, KBI and Kenwood
Savings have determined that it is in the best interests of their respective
companies and their stockholders to consummate the business combination
transactions provided for herein; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby; and
WHEREAS, as a condition and inducement to the willingness of Bancorp to
enter into this Agreement, the directors and executive officers of KBI (the
"KBI Stockholders") are concurrently entering into a Stockholder Agreement
with Bancorp (the "Stockholder Agreement"), in substantially the form attached
hereto as Exhibit A, pursuant to which, among other things, such directors
agree to vote their shares of KBI Common Stock (as defined below) in favor of
this Agreement and the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger. Subject to the terms and conditions of this Agreement
and subject to and in accordance with an Agreement of Merger, a copy of which
is attached hereto as Exhibit B (the "Agreement of Merger"), between KBI and
KBI Acquisition Corp. ("Interim"), a Delaware corporation to be formed as a
wholly-owned subsidiary of the Bank in connection with the transactions
contemplated hereby, at the Effective Time (as defined in Section 1.05
hereof), Interim shall be merged with and into KBI in accordance with Section
251 of the Delaware General Corporation Law ("DGCL") (the "Merger"), with KBI
as the surviving corporation (hereinafter
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sometimes called the "Surviving Corporation"). Simultaneously with or as soon
as practicable after the Merger, the Surviving Corporation shall be merged
with and liquidated into the Bank (the "Liquidation") in accordance with a
Plan of Complete Liquidation, the form of which is attached hereto as Exhibit
C. Simultaneously with or immediately following consummation of the
Liquidation, the parties hereto will cause Kenwood Savings to be merged with
and into the Bank, with the Bank as the resulting institution (the "Bank
Merger").
1.02 Effect of the Merger. As of the Effective Time (as defined in
Section 1.05 hereof), the Surviving Corporation shall be considered the same
business and corporate entity as each of KBI and Interim and thereupon and
thereafter, all the property, rights, powers and franchises of each of KBI and
Interim shall vest in the Surviving Corporation and the Surviving Corporation
shall be subject to and be deemed to have assumed all of the debts,
liabilities, obligations and duties of each of KBI and Interim and shall have
succeeded to all of each of their relationships, fiduciary or otherwise, as
fully and to the same extent as if such property rights, privileges, powers,
franchises, debts, obligations, duties and relationships had been originally
acquired, incurred or entered into by the Surviving Corporation. In addition,
any reference to either of KBI and Interim in any contract or document,
whether executed or taking effect before or after the Effective Time, shall be
considered a reference to the Surviving Corporation if not inconsistent with
the other provisions of the contract or document; and any pending action or
other judicial proceeding to which either of KBI and Interim is a party, shall
not be deemed to have abated or to have discontinued by reason of the Merger,
but may be prosecuted to final judgment, order or decree in the same manner as
if the Merger had not been made; or the Surviving Corporation may be
substituted as a party to such action or proceeding, and any judgment, order
or decree may be rendered for or against it that might have been rendered for
or against either of KBI and Interim if the Merger had not occurred. At the
Effective Time, the directors and officers of the Surviving Corporation shall
be the persons designated in Section 1.04.
1.03 Certificate of Incorporation and Bylaws. As of the Effective
Time, the Certificate of Incorporation and Bylaws of KBI shall be the
Certificate of Incorporation and Bylaws of the Surviving Corporation until
otherwise amended as provided by law.
1.04 Directors and Officers. As of the Effective Time, the directors
and officers of Interim shall become the directors and officers of the
Surviving Corporation. If requested by Bancorp, the directors of KBI and/or
Kenwood Savings shall resign as of the Effective Time.
1.05 Effective Time. The Merger shall become effective upon the
occurrence of the filing of a Certificate of Merger with the Secretary of
State of the State of Delaware, unless a later date and time is specified as
the effective time in such Certificate of Merger ("Effective Time"). A
closing (the "Closing") shall take place immediately prior to the Effective
Time at 10:00 a.m., on the fifth business day following the receipt of all
necessary regulatory or governmental approvals and consents and the expiration
of all statutory waiting periods in respect thereof and the satisfaction or
waiver, to the extent permitted hereunder, of the conditions to the
consummation of the Merger specified in Article V of this Agreement (other
than the delivery of certificates and other instruments
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and documents to be delivered at the Closing), at the offices of Bancorp or
at such other place, at such other time, or on such other date as the parties
may mutually agree upon. At the Closing, there shall be delivered to Bancorp,
the Bank, KBI and Kenwood Savings the certificates and other documents required
to be delivered under Article V hereof.
1.06 Modification of Structure. Notwithstanding any provision of this
Agreement to the contrary, Bancorp, with the prior written consent of KBI,
which consent shall not be unreasonably withheld, may elect, subject to the
filing of all necessary applications and the receipt of all required
regulatory approvals, to modify the structure of the transactions contemplated
hereby so long as (i) there are no material adverse federal income tax
consequences to the stockholders of KBI as a result of such modification, (ii)
the consideration to be paid to holders of KBI Common Stock (as defined below)
under this Agreement is not thereby changed in kind or reduced in amount
solely because of such modification and (iii) such modification will not be
likely to materially delay or jeopardize receipt of any required regulatory
approvals or impair or prevent the satisfaction of any conditions to the
Closing.
1.07 Conversion of KBI Common Stock and Options. As of the Effective
Time, each share of common stock, par value $0.01 per share, of KBI (the "KBI
Common Stock"), issued and outstanding immediately prior to the Effective Time
(other than shares (i) as to which dissenters' rights have been asserted and
duly perfected in accordance with the DGCL ("Dissenting Shares"), and (ii)
held by KBI (including treasury shares) or Bancorp or the Bank other than in a
fiduciary capacity, which shares shall be cancelled) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be cancelled
and by operation of law be converted into and represent the right to receive
from Bancorp, $25.22 in cash (the "Merger Consideration"). At or immediately
prior to the Effective Time, each outstanding option to purchase KBI Common
Stock issued by KBI and as described on Disclosure Schedule 2.02 ("KBI
Option"), shall be cancelled, and each holder of any such KBI Option, whether
or not then vested or exercisable, shall be entitled to receive at the
Effective Time for each KBI Option an amount determined by multiplying (i) the
excess of the Merger Consideration over the applicable exercise price per
share of such option by (ii) the number of shares of KBI Common Stock subject
to such KBI Option ("Option Consideration"). The payment of the Option
Consideration referred to in the immediately preceding sentence to holders of
KBI Options shall be subject to the execution by any such holder of such
instruments of cancellation as Bancorp may reasonably deem appropriate. The
aggregate consideration to be paid for the conversion of all outstanding
shares of KBI Common Stock and the cancellation of all KBI Options is
hereinafter referred to as the "Aggregate Merger Consideration."
1.08 Exchange Procedures
(a) As of the Effective Time, Bancorp shall deposit in trust with an
exchange agent designated by Bancorp and reasonably acceptable to KBI (the
"Exchange Agent") cash in an amount equal to the Aggregate Merger
Consideration. No later than five business days following the Effective Time,
Bancorp shall cause the Exchange Agent to mail or make available to each
holder of record of a certificate or certificates which immediately prior to
the Effective Time represented
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issued and outstanding shares of KBI Common Stock a notice and letter of
transmittal (which shall specify that delivery shall be effected and risk of
loss and title to the certificates theretofore representing shares of KBI
Common Stock shall pass only upon proper delivery of such certificates to the
Exchange Agent) advising such holder of the effectiveness of the Merger and
the procedure for surrendering to the Exchange Agent such certificate or
certificates which immediately prior to the Effective Time represented issued
and outstanding shares of KBI Common Stock in exchange for the consideration
set forth in Section 1.07 hereof deliverable in respect thereof pursuant to
this Agreement. Within five business days following receipt of surrendered
certificates and a properly completed letter of transmittal, the Exchange
Agent shall deliver the Merger Consideration to each former KBI stockholder.
The Exchange Agent shall accept such certificates upon compliance with such
reasonable terms and conditions as the Exchange Agent may impose to effect an
orderly exchange thereof in accordance with normal exchange practices.
(b) Each outstanding certificate which prior to the Effective Time
represented KBI Common Stock (other than Dissenting Shares) and which is not
surrendered to the Exchange Agent in accordance with the procedures provided
for herein shall, except as otherwise herein provided, until duly surrendered
to the Exchange Agent, be deemed to evidence the right to receive the Merger
Consideration. After the Effective Time, there shall be no further transfer
on the records of KBI of certificates representing shares of KBI Common Stock
and if such certificates are presented to KBI for transfer, they shall be
cancelled against delivery of the Merger Consideration as hereinabove
provided.
(c) Bancorp shall not be obligated to deliver the Merger Consideration
to which a holder of KBI Common Stock would otherwise be entitled as a result
of the Merger until such holder surrenders the certificate or certificates
representing the shares of KBI Common Stock for exchange as provided in this
Section 1.08, or, in lieu thereof, an appropriate affidavit of loss and
indemnity agreement and/or a bond as may be required in each case by Bancorp.
If payment of the Merger Consideration is to be made in a name other than that
in which the certificate evidencing KBI 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 payment pay to
the Exchange Agent in advance, any transfer or other tax required by reason of
the payment 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.
(d) Any portion of the Merger Consideration delivered to the Exchange
Agent by Bancorp pursuant to Section 1.07 that remains unclaimed by the
stockholders of KBI for six months after the Effective Time (as well as any
proceeds from any investment thereof) shall be delivered by the Exchange Agent
to Bancorp. Any stockholders of KBI who have not exchanged their shares of
KBI Common Stock for the Merger Consideration in accordance with this
Agreement shall thereafter look only to Bancorp for the consideration
deliverable in respect of each share of KBI Common Stock such stockholder
holds as determined pursuant to this Agreement without any interest thereon.
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If outstanding certificates for shares of KBI Common Stock are not surrendered
or the payment for them is not claimed prior to the date on which payment of
the Merger Consideration 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 Bancorp (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. Bancorp and the
Exchange Agent shall be entitled to rely upon the stock transfer books of KBI
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, Bancorp and the Exchange Agent shall be
entitled to deposit any consideration represented thereby in escrow with an
independent third party and thereafter be relieved with respect to any claims
thereto.
1.09 Withholding Rights. Bancorp (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 KBI
Common Stock such amounts as Bancorp is required under the Internal Revenue
Code of 1986, as amended ("Code") or any provision of state, local or foreign
tax law to deduct and withhold with respect to the making of such payment.
Any amounts so withheld shall be treated for all purposes of this Agreement as
having been paid to the holder of KBI Common Stock in respect of which such
deduction and withholding was made by Bancorp.
1.10 Dissenting Shares. Each outstanding shares of KBI Common Stock
the holder of which has perfected his right to dissent under the DGCL and has
not effectively withdrawn or lost such rights as of the Effective Time shall
not be converted into or represent a right to receive the Merger
Consideration, and the holder thereof shall be entitled only to such rights as
are granted by the DGCL. KBI shall give Bancorp prompt notice upon receipt by
KBI of any such written demands for payment of their fair value of such shares
of KBI Common Stock and of withdrawals of such demands and any other
instruments provided pursuant to the DGCL (any stockholder duly making such
demand being hereinafter called a "Dissenting Stockholder"). Any payments
made in respect of Dissenting Shares shall be made by Bancorp. If any
Dissenting Stockholder shall effectively withdraw or lose (through failure to
perfect or otherwise) his right to such payment at or prior to the Effective
Time, such holder's shares of KBI Common Stock shall be converted into a right
to receive the Merger Consideration in accordance with the applicable
provisions of this Agreement.
1.11 Additional Actions. If at any time after the Effective Time the
Surviving Corporation shall consider that any further assignments or
assurances in law or any other acts are necessary or desirable to (i) vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation its
rights, title or interest in, to or under any of the rights, properties or
assets of KBI 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, KBI and its proper officers and directors shall be
deemed to have granted to the Surviving Corporation an irrevocable power of
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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 KBI or otherwise to take any and all such
action.
1.12 Interim Shares. Each outstanding share of common stock of
Interim, $.01 par value per share ("Interim Common Stock"), on the Effective
Time shall be converted automatically and without any action on the part of
the holder thereof into an equal number of shares of the Surviving
Corporation, which shall constitute all of the outstanding common stock of the
Surviving Corporation.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF KBI
AND KENWOOD SAVINGS
References to "KBI Disclosure Schedules" shall mean all of the
disclosure schedules required by this Article II and Article IV hereof, dated
as of the date hereof and referenced to the specific sections and subsections
of this Agreement, which have been delivered by KBI to Bancorp. KBI and
Kenwood Savings hereby represent and warrant to Bancorp and the Bank as
follows as of the date hereof:
2.01 Corporate Organization.
(a) KBI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. KBI has the corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as it is now being conducted and is duly licensed or qualified to
do business and is in good standing in each jurisdiction in which the nature
of the business conducted by it or the character or location of the properties
and assets owned or leased by it makes such licensing or qualification
necessary, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect (as defined below). KBI is
registered as a savings and loan holding company under the Home Owners' Loan
Act ("HOLA"). KBI Disclosure Schedule 2.01(a) sets forth true and complete
copies of the Certificate of Incorporation and Bylaws of KBI as in effect on
the date hereof.
For the purposes of this Agreement, the term "Material Adverse Effect"
shall mean any effect that (i) is material and adverse to the financial
condition, results of operations or business of KBI and Kenwood Savings,
either individually or considered as one enterprise or (ii) materially impairs
the ability of KBI and/or Kenwood Savings to consummate the transactions
contemplated by this Agreement and the Agreement of Merger, provided, however,
that the term "Material Adverse Effect" shall not be deemed to include (i) the
impact of changes in (a) laws, regulations, or policies
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of any Federal or state court, administrative agency, commission or other
governmental authority or interpretations thereof; or (b) generally accepted
accounting principles, that in each case are generally applicable to the
banking industry, or (ii) actions taken or to be taken by KBI upon the written
request of Bancorp pursuant to this Agreement or the Agreement of Merger.
(b) The only direct or indirect subsidiary of KBI is Kenwood Savings.
Disclosure Schedule 2.01(b)(i) sets forth true and complete copies of the
Charter and Bylaws of Kenwood Savings as in effect on the date hereof.
Kenwood Savings (i) is duly organized, validly existing and in good standing
under the laws of the State of Ohio, (ii) has the corporate power and
authority to own or lease all of its properties and assets, and (iii) is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed, qualified or in good standing would not have a Material Adverse
Effect. KBI and Kenwood Savings have satisfied in all material respects all
commitments, financial or otherwise, as may have been agreed upon with their
state and/or federal regulatory agencies. Other than Kenwood Savings and
except as set forth in KBI Disclosure Schedule 2.01(b)(ii), KBI does not own
or control, directly or indirectly, greater than a 5% equity interest in any
corporation, company, association, partnership, joint venture or other entity.
2.02 Capitalization. The authorized capital stock of KBI consists of
4,000,000 shares of KBI Common Stock, of which 287,747 are issued and
outstanding as of the date hereof, and 1,000,000 shares of preferred stock, of
which no shares are issued and outstanding. All issued and outstanding shares
of capital stock of KBI have been duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights. Except for an
aggregate of 13,366 shares of KBI Common Stock issuable upon exercise of stock
options granted pursuant to KBI's 1992 Directors' Stock Option Plan and its
1996 Stock Option Plan, 1992 Stock Incentive Plan (collectively, the "Stock
Option Plans"), and rights which have been distributed to stockholders of KBI
pursuant to KBI's Stockholder Protection Rights Agreement, KBI does not have
and is not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the transfer, purchase
or issuance of any shares of capital stock of KBI or any securities
representing the right to purchase or otherwise receive any shares of such
capital stock or any securities convertible into or representing the right to
purchase or subscribe for any such stock. Disclosure Schedule 2.02 lists each
option outstanding as of the date hereof under the Stock Option Plans, and
further indicating the name of the grantee, the date of grant and the
respective exercise price with respect thereto.
2.03 Authority; No Violation.
(a) Subject to the approval of this Agreement by the stockholders of
KBI, KBI and Kenwood Savings have full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby in accordance with the terms hereof. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly approved by the boards of
directors of KBI and Kenwood
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Savings. Except for the adoption by KBI's stockholders of this Agreement, no
other corporate proceedings on the part of KBI or Kenwood Savings are
necessary to consummate the Merger. This Agreement has been duly and validly
executed and delivered by KBI and Kenwood Savings and constitutes the valid
and binding obligation of KBI and Kenwood Savings, enforceable against them
in accordance with and subject to its terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally, and except that the availability of
equitable remedies (including, without limitation, specific performance) is
within the discretion of the appropriate court.
(b) Subject to the approval of this Agreement by the stockholders of
KBI, KBI has full corporate power and authority to execute and deliver the
Agreement of Merger and to consummate the transactions contemplated thereby in
accordance with the terms thereof. The execution and delivery of the
Agreement of Merger by KBI and the consummation of the transactions
contemplated thereby have been duly and validly approved by the Board of
Directors of KBI. The Agreement of Merger, upon its execution and delivery by
KBI, will constitute a valid and binding obligation of KBI, enforceable
against it in accordance with and subject to its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally, and except that the availability
of equitable remedies (including, without limitation, specific performance) is
within the discretion of the appropriate court.
(c) None of the execution and delivery of this Agreement by KBI and
Kenwood Savings, the execution and delivery of the Agreement of Merger by KBI,
the consummation by KBI and Kenwood Savings of the transactions contemplated
hereby in accordance with the terms hereof, the consummation by KBI of the
transactions contemplated by the Agreement of Merger in accordance with the
terms thereof, compliance by KBI and Kenwood Savings with any of the terms or
provisions hereof or compliance by KBI with any terms or provisions of the
Agreement of Merger, will (i) violate any provision of the Certificate of
Incorporation, Charter or Bylaws of KBI or Kenwood Savings, (ii) assuming that
the consents and approvals set forth below are duly obtained, violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to KBI or Kenwood Savings or any of their respective
properties or assets, or (iii) except as disclosed in Disclosure Schedule
2.03(c), violate, conflict with, result in a breach of any provisions of,
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in the creation of any lien,
security interest, charge or other encumbrance upon any of the properties or
assets of KBI or Kenwood Savings under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which KBI or Kenwood
Savings are a party, or by which any of their respective properties or assets
may be bound or affected, except, with respect to (ii) and (iii) above, such
as individually or in the aggregate will not have a Material Adverse Effect
and which will not prevent or delay the consummation of the transactions
contemplated hereby. Except as set forth in Disclosure Schedule 2.03(c) and
for consents and approvals of or filings or registrations with or notices to
the Office of Thrift Supervision ("OTS"), the Division of Financial
Institutions ("DFI") of the Ohio Department of Commerce, the Secretary of
State of the State of Delaware, and the
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stockholders of KBI, no consents or approvals of or filings or registrations
with or notices to any federal, state, municipal or other governmental or
regulatory commission, board, agency, or non-governmental third party are
required on behalf of KBI in connection with (a) the execution and delivery of
this Agreement by KBI and Kenwood Savings or the execution and delivery of the
Agreement of Merger by KBI, and (b) the completion by KBI and Kenwood Savings
of the transactions contemplated hereby or the completion by KBI of the
transactions contemplated by the Agreement of Merger.
(d) As of the date hereof, neither KBI nor Kenwood Savings is aware of
any reasons relating to KBI or Kenwood Savings why all consents and approvals
shall not be procured from all regulatory agencies having jurisdiction over
the transactions contemplated by this Agreement as shall be necessary for
consummation of the transactions contemplated hereby.
(e) Effective prior to execution of this Agreement, KBI has taken all
action necessary under KBI's Stockholder Protection Rights Agreement so that
execution of this Agreement and consummation of the transactions contemplated
herein shall not result in the grant of any rights to any person under KBI's
Stockholder Protection Rights Agreement or enable or require any of the rights
thereunder to be exercised, distributed or triggered.
2.04 Financial Statements.
(a) KBI has previously delivered to Bancorp copies of the consolidated
statements of financial condition of KBI as of September 30, 2000 and 1999 and
the related consolidated statements of operations, comprehensive income
(loss), stockholders' equity and cash flows for the years ended September 30,
2000, 1999 and 1998, in each case accompanied by the audit report of Clark,
Schaefer, Xxxxxxx & Co., independent public accountants, as well as the
unaudited consolidated statements of financial condition of KBI as of June 30,
2001 and the related unaudited consolidated statements of operations,
comprehensive income (loss), cash flows and stockholders' equity for the nine
months ended June 30, 2001 and 2000. The consolidated balance sheets of KBI
referred to herein, as well as the financial statements to be delivered
pursuant to Section 4.04 hereof, (including the related notes, where
applicable) fairly present or will fairly present, as the case may be, the
consolidated financial condition of KBI as of the respective dates set forth
therein, and the related consolidated statements of income, stockholders'
equity and cash flows (including the related notes, where applicable) fairly
present or will fairly present, as the case may be, the results of the
consolidated income, stockholders' equity and cash flows of KBI for the
respective periods or as of the respective dates set forth therein (it being
understood that KBI's interim financial statements are not audited and are not
prepared with all related notes but have been, or will be, prepared in
compliance with all applicable legal and regulatory accounting requirements
and reflect all adjustments which are, in the opinion of KBI, necessary for a
fair presentation of such financial statements).
(b) Each of the audited financial statements referred to in this
Section 2.04 (including the related notes, where applicable) has been prepared
in accordance with generally accepted accounting
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principles consistently applied during the periods involved. The books and
records of KBI are being maintained in material compliance with applicable
legal and accounting requirements.
(c) Except to the extent reflected, disclosed or reserved against in
the consolidated financial statements referred to in the first sentence of
Section 2.04(a) or the notes thereto, and except for liabilities incurred
since June 30, 2001 in the ordinary course of business and consistent with
past practice, KBI does not have any obligation or liability, whether
absolute, accrued, contingent or otherwise, material to the business, results
of operations, assets or financial condition of KBI and Kenwood Savings taken
as a whole.
2.05 Absence of Certain Changes or Events. Except as set forth in KBI
Disclosure Schedule 2.09, since June 30, 2001, (i) KBI and Kenwood Savings
have conducted their businesses in the ordinary and usual course and (ii) no
event has occurred or circumstances arisen that, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect.
2.06 Legal Proceedings. Except as disclosed in KBI Disclosure Schedule
2.06, neither KBI or Kenwood Savings is a party to any, and there are no
pending or, to the best knowledge of KBI and Kenwood Savings, threatened
legal, administrative, arbitration or other proceedings, claims, actions or
governmental investigations of any nature against KBI or Kenwood Savings,
except such proceedings, claims, actions or governmental investigations which
in the good faith judgment of KBI and Kenwood Savings will not have a Material
Adverse Effect. Neither KBI nor Kenwood Savings is a party to any order,
judgment or decree which has or could reasonably be expected to have a
Material Adverse Effect.
2.07 Taxes and Tax Returns.
(a) KBI and Kenwood Savings have duly filed (and until the Effective
Time will so file) all returns, declarations, reports, information returns
and statements ("Returns") required to be filed or sent by or with respect to
them in respect of any Taxes (as hereinafter defined), and have duly paid (and
until the Effective Time will so pay) all Taxes due and payable other than
Taxes or other charges which (i) are being contested in good faith (and
disclosed in writing to Bancorp) and (ii) have not finally been determined.
KBI has established (and until the Effective Time will establish) on its books
and records reserves that are adequate for the payment of all Taxes not yet
due and payable for periods ending on or prior to the Effective Time, whether
or not disputed or accrued. Except as set forth in KBI Disclosure Schedule
2.07(a), (i) the federal income tax returns of KBI have been examined by the
Internal Revenue Service ("IRS") (or are closed to examination due to the
expiration of the applicable statute of limitations), and (ii) the Ohio income
tax returns of KBI have been examined by applicable authorities (or are closed
to examination due to the expiration of the statute of limitations), and in
the case of both (i) and (ii) no deficiencies were asserted as a result of
such examinations which have not been resolved and paid in full. There are no
audits or other administrative or court proceedings presently pending nor any
other disputes pending, or claims asserted for, Taxes or assessments upon KBI
or Kenwood Savings, nor has KBI given any currently
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outstanding waivers or comparable consents regarding the application of the
statute of limitations with respect to any Taxes or Returns.
(b) Except as set forth in KBI Disclosure Schedule 2.07(b), KBI (i)
has not requested any extension of time within which to file any Return which
Return has not since been filed, (ii) is not a party to any agreement
providing for the allocation or sharing of Taxes, (iii) is not required to
include in income any adjustment pursuant to Section 481(a) of the Code, by
reason of a voluntary change in accounting method initiated by KBI (nor does
KBI have any knowledge that the IRS has proposed any such adjustment or change
of accounting method), or (iv) has not filed a consent pursuant to Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply.
(c) For purposes of this Agreement, "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including, without limitation, all
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment (including
withholding, payroll and employment taxes required to be withheld with respect
to income paid to employees), excise, estimated, severance, stamp, occupation,
property or other taxes, customs duties, fees, assessments or charges of any
kind whatsoever, together with any interest and any penalties, additions to
tax or additional amounts imposed by any taxing authority (domestic or
foreign) upon KBI.
2.08 Employee Benefit Plans.
(a) KBI Disclosure Schedule 2.08(a) sets forth all benefit and
compensation plans, contracts, policies or arrangements covering current or
former employees of KBI and Kenwood Savings (the "Employees") and current or
former directors of KBI and Kenwood Savings including, but not limited to,
"employee benefit plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and deferred
compensation, stock option, stock purchase, stock appreciation rights, stock
based, incentive and bonus plans (the "Benefits Plans"). True and complete
copies of all Benefit Plans including, but not limited to, any trust
instruments and insurance contracts forming a part of any Benefit Plans and
all amendments thereto have been provided to Bancorp.
(b) All Benefits Plans other than "multiemployer plans" within the
meaning of Section 3(37) of ERISA, covering Employees, to the extent subject
to ERISA, are in substantial compliance with ERISA. Each Benefit Plan which is
an "employee pension benefit plan" within the meaning of Section 3(2) of ERISA
("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, and KBI
is not aware of any circumstances likely to result in revocation of any such
favorable determination letter or the loss of the qualification of such
Pension Plan under Section 401(a) of the Code. There is no material pending
or, to KBI's knowledge, threatened litigation relating to the Benefits Plans.
Neither KBI nor Kenwood Savings has engaged in a transaction with respect to
any Benefit Plan or Pension Plan that, assuming the taxable period of such
transaction expired as of the date hereof, could subject the KBI
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or Kenwood Savings to a tax or penalty imposed by either Section 4975 of the
Code or Section 502(i) of ERISA in an amount which would be material.
(c) No liability under Subtitle C or D of Title IV of ERISA has been
or is expected to be incurred by KBI or Kenwood Savings with respect to any
ongoing, frozen or terminated "single-employer plan," 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 KBI under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate"). Neither KBI nor Kenwood Savings has incurred, and neither
expects to incur, any withdrawal liability with respect to a multiemployer
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 Pension
Plan or by any ERISA Affiliate within the 12-month period ending on the date
hereof or will be required to be filed in connection with the transactions
contemplated by this Agreement.
(d) All contributions required to be made under the terms of any
Benefit Plan have been timely made or have been reflected on the financial
statements of KBI. Neither any Pension Plan nor any single-employer plan of
an ERISA Affiliate has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code or Section 302 of ERISA
and no ERISA Affiliate has an outstanding funding waiver. Neither KBI nor
Kenwood Savings has provided, or is required to provide, security to any
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Code.
(e) Under each Pension Plan which is a single-employer plan, as of the
last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit liabilities," within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the Pension Plan's most recent actuarial
valuation), did not exceed the then current value of the assets of such
Pension Plan, and there has been no material change in the financial condition
of such Plan since the last day of the most recent plan year.
(f) Neither KBI nor Kenwood Savings has any obligations for retiree
health and life benefits under any Benefit Plan other than as may be required
under Section 4980B of the Code or Part 6 of Title I of ERISA, or under the
continuation of coverage provisions of the laws of any state or locality. KBI
or Kenwood Savings may amend or terminate any such Benefit Plan at any time
without incurring any liability thereunder.
(g) Except as set forth on KBI Disclosure Schedule 2.08(g), none of
the execution of this Agreement, stockholder approval of this Agreement or
consummation of the transactions contemplated hereby will (A) entitle any
employees of KBI or Kenwood Savings to severance pay or any increase in
severance pay upon any termination of employment after the date hereof, (B)
accelerate the time of payment or vesting or trigger any payment or funding
(through a grantor trust or otherwise) of compensation or benefits under,
increase the amount payable or trigger any other material obligation pursuant
to, any of the Benefit Plans, (C) result in any breach or violation of, or
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a default under, any of the Benefit Plans or (D) result in any payment that
would be a "parachute payment" to a "disqualified individual" as those terms
are defined in Section 280G of the Code, without regard to whether such
payment is reasonable compensation for personal services performed or to be
performed in the future.
2.09 Regulatory Reports. Since October 1, 1998, KBI and Kenwood
Savings have duly filed with the OTS and the DFI in correct form the monthly,
quarterly and annual reports required to be filed under applicable laws and
regulations, and KBI has delivered or made available to Bancorp accurate and
complete copies of such reports. KBI Disclosure Schedule 2.09 lists all
examinations of KBI or Kenwood Savings conducted by the applicable regulatory
authorities since October 1, 1998 and the dates of any responses thereto
submitted by KBI or Kenwood Savings. Except as set forth in KBI Disclosure
Schedule 2.09, in connection with the most recent examinations of KBI or
Kenwood Savings by the applicable regulatory authorities, neither KBI nor
Kenwood Savings were required to correct or change any action, procedure or
proceeding which KBI or Kenwood Savings believe has not been now corrected or
changed as required other than corrections or changes which, if not made,
either individually or in the aggregate, would not have a Material Adverse
Effect.
2.10 Compliance with Applicable Law.
(a) KBI and Kenwood Savings have all permits, licenses, certificates
of authority, orders and approvals of, and have made all filings, applications
and registrations with, federal, state, local and foreign governmental or
regulatory bodies that are required in order to permit them to carry on their
respective businesses as they are presently being conducted and the absence of
which could reasonably be expected to have a Material Adverse Effect; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect; and to the best knowledge of KBI and Kenwood Savings, no
suspension or cancellation of any of the same is threatened.
(b) Neither KBI nor Kenwood Savings is in violation of its Certificate
of Incorporation, Charter or Bylaws, or of any applicable federal, state or
local law or ordinance or any order, rule or regulation of any federal, state,
local or other governmental agency or body (including, without limitation, all
banking, securities, municipal securities, safety, health, zoning, anti-
discrimination, antitrust, and wage and hour laws, ordinances, orders, rules
and regulations), or in default with respect to any order, writ, injunction or
decree of any court, or in default under any order, license, regulation or
demand of any governmental agency, any of which violations or defaults could
reasonably be expected to have a Material Adverse Effect, and neither KBI nor
Kenwood Savings has received any notice or communication from any federal,
state or local governmental authority asserting that KBI or Kenwood Savings is
in violation of any of the foregoing which could reasonably be expected to
have a Material Adverse Effect. Neither KBI nor Kenwood Savings is subject to
any regulatory or supervisory cease and desist order, agreement, written
directive, memorandum of understanding or written commitment (other than those
of general applicability to all commercial banks issued by governmental
authorities), and has not received any written communication requesting that
it enter into any of the foregoing.
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2.11 Deposit Insurance. The deposit accounts of Kenwood Savings are
insured by the Savings Association Insurance Fund administered by the Federal
Deposit Insurance Corporation ("FDIC") to the maximum extent permitted by the
Federal Deposit Insurance Act, as amended ("FDIA"), and Kenwood Savings has
paid all premiums and assessments required by the FDIA and the regulations
thereunder.
2.12 Certain Contracts.
(a) Except as disclosed in KBI Disclosure Schedule 2.12(a), neither
KBI nor Kenwood Savings is a party to, is bound by, receives, or is obligated
to pay benefits under, (i) any agreement, arrangement or commitment, including
without limitation, any agreement, indenture or other instrument relating to
the borrowing of money by KBI or Kenwood Savings (other than in the case of
deposits, federal funds purchased and securities sold under agreements to
repurchase in the ordinary course of business) or the guarantee by KBI or
Kenwood Savings of any obligation, (ii) any agreement, arrangement or
commitment relating to the employment of a consultant or the employment,
election or retention in office of any present or former director or officer
of KBI or Kenwood Savings, (iii) any contract, agreement or understanding with
a labor union, (iv) any agreement, arrangement or understanding pursuant to
which any payment (whether of severance pay or otherwise) became or may become
due to any director, officer or employee of KBI or Kenwood Savings upon
execution of this Agreement and the Agreement of Merger or upon or following
consummation of the transactions contemplated by this Agreement or the
Agreement of Merger (either alone or in connection with the occurrence of any
additional acts or events), (v) any agreement, arrangement or understanding to
which KBI or Kenwood Savings is a party or by which any of the same is bound
which limits the freedom of KBI or Kenwood Savings to compete in any line of
business or with any person, or (vi) any other agreement, arrangement or
understanding to which KBI or Kenwood Savings is a party and which is material
to the business, results of operations, assets or financial condition of KBI
and Kenwood Savings taken as a whole (excluding loan agreements or agreements
relating to deposit accounts), in each of the foregoing cases whether written
or oral.
(b) Neither KBI nor Kenwood Savings is in default or in non-compliance
under any contract, agreement, commitment, arrangement, lease, insurance
policy or other instrument to which it is a party or by which its assets,
business or operations may be bound or affected, whether entered into in the
ordinary course of business or otherwise and whether written or oral, which
default or non-compliance would have a Material Adverse Effect, and there has
not occurred any event that with the lapse of time or the giving of notice, or
both, would constitute such a default or non-compliance.
(c) Neither KBI nor Kenwood Savings is a party or has agreed to enter
into an exchange traded or over-the-counter equity, interest rate, foreign
exchange or other swap, forward, future, option, cap, floor or collar or any
other contract that is not included in KBI's audited financial statements at
and for September 30, 2000 and is a derivatives contract (including various
combinations thereof) (each, a "Derivatives Contract") or owns securities that
are referred to
14
generically as "structured notes," "high risk mortgage derivatives," "capped
floating rate notes" or "capped floating rate mortgage derivatives."
2.13 Properties and Insurance.
(a) All real and personal property owned by KBI or Kenwood Savings or
presently used by them in their respective businesses is in adequate condition
(ordinary wear and tear excepted) and is sufficient to carry on the business
of KBI and Kenwood Savings in the ordinary course of business consistent with
their past practices. KBI and Kenwood Savings have good and, as to owned real
property, marketable title to all material assets and properties, whether real
or personal, tangible or intangible, reflected in KBI's consolidated balance
sheet as of June 30, 2001, or owned and acquired subsequent thereto (except to
the extent that such assets and properties have been disposed of for fair
value in the ordinary course of business since June 30, 2001), subject to no
encumbrances, liens, mortgages, securities interests or pledges, except (i)
those items that secure liabilities that are reflected in said consolidated
balance sheet or the notes thereto or have been incurred in the ordinary
course of business after the date of such consolidated balance sheet, (ii)
statutory liens for current taxes not yet due, (iii) such encumbrances, liens,
mortgages, securities interests, pledges and title imperfections that are not
in the aggregate material to the business, results of operations, assets or
financial condition of KBI and Kenwood Savings taken as a whole, and (iv) with
respect to owned real property, title imperfections noted in title reports
prior to the date hereof. KBI and Kenwood Savings as lessees have the right
under valid and subsisting leases to occupy, use, possess and control all
property leased by them in all material respects as presently occupied, used,
possessed and controlled by KBI and Kenwood Savings and the consummation of
the transactions contemplated hereby and by the Agreement of Merger will not
affect any such right in a way that would have a Material Adverse Effect. KBI
Disclosure Schedule 2.13(a) sets forth an accurate listing of each lease
pursuant to which KBI or Kenwood Savings act as lessor or lessee, including
the expiration date and the terms of any renewal options which relate to the
same.
(b) The business operations and all insurable properties and assets
of KBI and Kenwood Savings are insured for its benefit against all risks
which, in the reasonable judgment of the management of KBI and Kenwood
Savings, should be insured against, in each case under valid, binding and
enforceable policies or bonds issued by insurers of recognized responsibility,
in such amounts with such deductibles and against such risks and losses as are
in the opinion of the management of KBI and Kenwood Savings adequate for the
business engaged in by KBI and Kenwood Savings. As of the date hereof,
neither KBI nor Kenwood Savings has received any notice of cancellation or
notice of a material amendment of any such insurance policy or bond or is in
material default under such policy or bond, no coverage thereunder is being
disputed and all material claims thereunder have been filed in a timely
fashion.
2.14 Environmental Matters. For purposes of this Agreement, the
following terms shall have the indicated meaning:
15
"Environmental Law" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any
governmental entity relating to (1) the protection, preservation or
restoration of the environment (including, without limitation, air, water
vapor, surface water, groundwater, drinking water supply, surface soil,
subsurface soil, plant and animal life or any other natural resource), and/or
(2) the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of Hazardous
Substances. The term Environmental Law includes without limitation (1) the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. Section 9601, et seq; the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. Section 6901, et seq; the Clean Air Act, as amended,
42 U.S.C. Section 7401, et seq; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. Section 1251, et seq; the Toxic Substances Control Act, as
amended, 15 U.S.C. Section 9601, et seq; the Emergency Planning and Community
Right to Know Act, 42 U.S.C. Section 11001, et seq; the Safe Drinking Water
Act, 42 U.S.C. Section 300f, et seq; and all comparable state and local laws,
and (2) any common law (including without limitation common law that may impose
strict liability) that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of or exposure to
any Hazardous Substance.
"Hazardous Substance" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law, whether by type or by
quantity, including any regulated material containing any such substance as a
component. Hazardous Substances include without limitation petroleum
(including crude oil or any fraction thereof), asbestos, radioactive material,
and polychlorinated biphenyls.
"Loan Portfolio Properties" means those properties which serve as
collateral for loans owned by KBI or Kenwood Savings.
"Other Properties Owned" means those properties owned, leased or
operated by KBI or Kenwood Savings which are not Loan Portfolio Properties.
(a) Except as set forth in KBI Disclosure Schedule 2.14(a), to the
knowledge of KBI and Kenwood Savings, neither KBI nor Kenwood Savings has been
and are not in violation of or liable under any Environmental Law.
(b) None of the Other Properties Owned is the subject of liability
under, or, to the knowledge of KBI and Kenwood Savings, has been in violation
of, any Environmental Law except any such violations or liabilities which
would not, individually or in the aggregate, have a Material Adverse Effect.
(c) To the knowledge of KBI and Kenwood Savings, none of the Loan
Portfolio Properties has been in violation of, or is the subject of liability
under, any Environmental Law
16
except any such violations or liabilities which would not, individually or in
the aggregate, have a Material Adverse Effect.
(d) There are no actions, suits, demands, notices, claims, investigations
or proceedings pending or, to the knowledge of KBI and Kenwood Savings,
threatened relating to the liability of the Loan Portfolio Properties and
Other Properties Owned under any Environmental Law, including without
limitation any notices, demand letters or requests for information from any
federal or state environmental agency relating to any such liabilities under
or violations of Environmental Law, except such which would not have or result
in a Material Adverse Effect.
(e) KBI Disclosure Schedule 2.14(e) lists (i) any environmental
studies which have been undertaken by, or on behalf of, KBI or Kenwood Savings
with respect to the Other Properties Owned and (ii) and correspondence known
to KBI or Kenwood Savings with respect to the Other Properties Owned and
issues related to Environmental Laws.
2.15 Allowance for Loan Losses and Real Estate Owned. The allowance
for loan losses reflected on KBI's consolidated balance sheets included in the
consolidated financial statements referred to in Section 2.04 hereof is in the
opinion of KBI's management, adequate in all material respects as of their
respective dates under the requirements of generally accepted accounting
principles to provide for reasonably anticipated losses on outstanding loans
net of recoveries. The real estate owned reflected on the consolidated
balance sheets included in the consolidated financial statements referred to
in Section 2.04 hereof is carried at the lower of cost or fair value, or the
lower of cost or net realizable value, as required by generally accepted
accounting principles.
2.16 Minute Books. Since October 1, 1996, the minute books of KBI and
Kenwood Savings contain complete and accurate records of all meetings and
other corporate action held or taken by their Boards of Directors (including
committees of its Board of Directors) and stockholders.
2.17 Broker Fees. Except as set forth in KBI Disclosure Schedule 2.17,
neither KBI nor Kenwood Savings or any of the respective directors or officers
of such companies has employed any consultant, broker or finder or incurred
any liability for any consultant's, broker's or finder's fees or commissions
in connection with any of the transactions contemplated by this Agreement.
2.18 Proxy Statement Information. None of the information relating to
it which is included in the proxy statement distributed by KBI to its
stockholders in order to solicit their approval of this Agreement and the
transactions contemplated hereby ("Proxy Statement"), as of the date such
Proxy Statement is mailed to its stockholders and up to and including the date
of the meeting of its stockholders to which such Proxy Statement relates, will
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, provided that information as of a
later date shall be deemed to modify information as of an earlier date.
17
2.19 Transactions with Affiliates. Except as set forth in KBI
Disclosure Schedule 2.19, there are no existing or pending transactions, nor
are there any agreements or understandings, with any directors, officers or
employees of KBI or Kenwood Savings or any person or entity affiliated with it
(collectively, "Affiliates"), relating to, arising from or affecting KBI and
Kenwood Savings, including, without limitation, any transactions, arrangements
or understandings relating to the purchase or sale of goods or services, the
lending of monies or the sale, lease or use of any assets of KBI or Kenwood
Savings.
2.20 Required Vote; Inapplicability of Antitakeover Statutes; Fairness
Opinion.
(a) This Agreement and the transactions contemplated hereby are
required to be approved on behalf of KBI by the affirmative vote of the
holders of at least a majority of the outstanding shares of the KBI Common
Stock.
(b) No "control share acquisition," "interested stockholder," "fair
price" or other form of antitakeover statute or regulation is applicable to
this Agreement and the transactions contemplated hereby.
(c) KBI has received a written opinion of Xxxxx, Xxxxxxxx & Xxxxx,
Inc., dated the date hereof with respect to the fairness of the Merger
Consideration to be received by the stockholders of KBI pursuant to this
Agreement from a financial point of view.
2.21 Disclosures. No representation or warranty contained in Article
II of this Agreement, and no statement contained in the KBI Disclosure
Schedules, contains any untrue statement of a material fact or omits to state
a material fact necessary in order to make the statements herein or therein
not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BANCORP AND THE BANK
References to "Bancorp Disclosure Schedules" shall mean all of the
disclosure schedules required by this Article III, dated as of the date hereof
and referenced to the specific sections and subsections of Article III of this
Agreement, which have been delivered by Bancorp to KBI. Bancorp and the Bank
hereby represent and warrant to KBI and Kenwood Savings as follows as of the
date hereof:
18
3.01 Corporate Organization.
(a) Bancorp is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Bancorp has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted and is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which the nature of the business conducted by it or the character or location
of the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed, qualified
or in good standing would not have a material adverse effect on the ability of
Bancorp to consummate the transactions contemplated hereby. Bancorp is
registered as a savings and loan holding company under HOLA.
(b) The Bank is duly organized, validly existing and in good standing
under the laws of the United States of America and is a wholly-owned
subsidiary of Bancorp. The Bank (i) has the corporate power and authority to
own or lease all of its properties and assets and to conduct its business as
it is now being conducted and (ii) is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the nature of
the business conducted by it or the character or location of the properties
and assets owned or leased by it makes such licensing or qualification
necessary, except where the failure to be so licensed, qualified or in good
standing would not have a material adverse effect on the ability of Bancorp
and the Bank to consummate the transactions contemplated hereby.
(c) Interim will be at the Effective Time an interim stock corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Interim will not engage in any business other than in
connection with the transactions contemplated by this Agreement and the
Agreement of Merger and Interim will have no material obligations or
liabilities other than its obligations hereunder.
3.02 Authority; No Violation.
(a) Bancorp and the Bank have full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby in accordance with the terms hereof. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly approved by the Board of
Directors of Bancorp and the Bank, and no other corporate proceedings on the
part of Bancorp or the Bank are necessary to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered
by Bancorp and the Bank and constitutes a valid and binding obligation of
Bancorp and the Bank, enforceable against them in accordance with and subject
to its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, and except that the availability of equitable remedies (including,
without limitation, specific performance) is within the discretion of the
appropriate court.
19
(b) At the Effective Time, Interim will have full corporate power and
authority to execute and deliver the Agreement of Merger and to consummate the
transactions contemplated thereby in accordance with the terms thereof. At
the Effective Time, the execution and delivery of the Agreement of Merger by
Interim and the consummation of the transactions contemplated thereby will
have been duly and validly approved by the Board of Directors of Interim and
by Bank as the sole stockholder of Interim, and no other corporate proceedings
on the part of Interim are necessary to consummate the transactions so
contemplated. The Agreement of Merger, upon its execution and delivery by
Interim, will constitute a valid and binding obligation of Interim,
enforceable against it in accordance with and subject to its terms, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally, and except that the
availability of equitable remedies (including, without limitation, specific
performance) is within the discretion of the appropriate court.
(c) None of the execution and delivery of this Agreement by Bancorp
and the Bank, the execution and delivery of the Agreement of Merger by
Interim, the consummation by Bancorp and the Bank of the transactions
contemplated hereby in accordance with the terms hereof, the consummation by
Interim of the transactions contemplated by the Agreement of Merger,
compliance by Bancorp or the Bank with any of terms or provisions hereof or
compliance by Interim with any terms or provisions of the Agreement of Merger,
will (i) violate any provision of the Certificate of Incorporation, Charter or
Bylaws of Bancorp, the Bank or Interim, (ii) assuming that the consents and
approvals set forth below are duly obtained, violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to Bancorp, the Bank or Interim or any of their respective
properties or assets, or (iii) violate, conflict with, result in a breach of
any provisions of, constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, result in the
termination of, accelerate the performance required by, or result in the
creation of any lien, security interest, charge or other encumbrance upon any
of the respective properties or assets of Bancorp, the Bank or Interim under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Bancorp, the Bank or Interim is a party, or by which any
of their respective properties or assets may be bound or affected, except,
with respect to (ii) and (iii) above, such as individually or in the aggregate
will not have a material adverse effect on the business, operations, assets or
financial condition of Bancorp and the Bank taken as a whole and which will
not prevent or delay the consummation of the transactions contemplated hereby.
Except for consents and approvals of or filings or registrations with or
notices to the Secretary of State of the State of Delaware, the DFI and the
OTS, no consents or approvals of or filings or registrations with or notices
to any federal, state, municipal or other governmental or regulatory
commission, board, agency or non-governmental third party are required on
behalf of Bancorp, the Bank and Interim in connection with (a) the execution
and delivery of this Agreement by Bancorp and the Bank or the execution and
delivery of the Agreement of Merger by Interim and (b) the completion by
Bancorp and the Bank of the transactions contemplated hereby or the completion
by Interim of the transactions contemplated by the Agreement of Merger.
20
(d) As of the date hereof, neither Bancorp nor the Bank is aware of
any reasons relating to Bancorp or the Bank why all consents and approvals
shall not be procured from all regulatory agencies having jurisdiction over
the transactions contemplated by this Agreement as shall be necessary for
consummation of the transactions contemplated hereby.
3.03 Financial Statements.
(a) Bancorp has previously delivered to KBI copies of the consolidated
statements of financial condition of Bancorp as of September 30, 2000 and
1999, and the related consolidated statements of earnings, comprehensive
income, stockholders' equity and cash flows for the years ended September 30,
2000, 1999 and 1998, in each case accompanied by the audit report of Xxxxx
Xxxxxxxx LLP, independent certified public accountants, as well as the
unaudited consolidated statement of financial condition of Bancorp as of June
30, 2001, and the related unaudited consolidated statements of earnings,
comprehensive income, stockholders' equity and cash flows for the nine months
ended June 30, 2001 and 2000. The consolidated statements of financial
condition of Bancorp referred to herein, as well as the financial statements
to be delivered pursuant to Section 4.04 hereof (including the related notes,
where applicable) fairly present or will fairly present, as the case may be,
the consolidated financial condition of Bancorp as of the respective dates set
forth therein, and the related consolidated statements of earnings,
stockholders' equity and cash flows (including the related notes, where
applicable) fairly present or will fairly present, as the case may be, the
results of the consolidated earnings, stockholders' equity and cash flows of
Bancorp for the respective periods or as of the respective dates set forth
therein (it being understood that Bancorp's interim financial statements are
not audited and are not prepared with all related notes but reflect all
adjustments which are, in the opinion of Bancorp, necessary for a fair
presentation of such financial statements).
(b) Each of the financial statements referred to in this Section 3.04
(including the related notes, where applicable) has been or will be, as the
case may be, prepared in accordance with generally accepted accounting
principles consistently applied during the periods involved. The books and
records of Bancorp and the Bank are being maintained in material compliance
with applicable legal and accounting requirements and reflect only actual
transactions.
(c) Except to the extent reflected, disclosed or reserved against in
the consolidated financial statements referred to in the first sentence of
this Section 3.03 or the notes thereto or liabilities incurred since June 30,
2001 in the ordinary course of business and consistent with past practice,
neither Bancorp nor the Bank has any obligation or liability, whether
absolute, accrued, contingent or otherwise, which would have a material
adverse effect on the ability of Bancorp and the Bank to consummate the
transactions contemplated hereby.
3.04 Ability to Pay Merger Consideration. Bancorp or the Bank will
have available to it as of the Effective Time sufficient cash to pay the
Aggregate Merger Consideration to stockholders of KBI as set forth in Section
1.07.
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3.05 Legal Proceedings. Neither Bancorp nor the Bank is a party to
any, and there are no pending or, to the best knowledge of Bancorp and the
Bank, threatened legal, administrative, arbitration or other proceedings,
claims, actions or governmental investigations of any nature against Bancorp
or the Bank, except such proceedings, claims actions or governmental
investigations which in the good faith judgment of Bancorp and the Bank will
not have a material adverse effect on the ability of Bancorp and the Bank to
consummate the transactions contemplated hereby.
3.06 Broker Fees. Neither Bancorp nor the Bank, nor any of their
respective directors or officers, has employed any consultant, broker or
finder or incurred any liability for any consultant's, broker's or finder's
fees or commissions in connection with any of the transactions contemplated by
this Agreement.
3.07 Certain Information. None of the information relating to Bancorp
supplied or to be supplied by Bancorp to KBI expressly for inclusion in the
Proxy Statement, as of the date such Proxy Statement is mailed to shareholders
of KBI and up to and including the date of the meeting of shareholders to
which such Proxy Statement relates, will contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
3.08 Disclosures. No representation or warranty contained in Article
III of this Agreement, and no statement contained in the Bancorp Disclosure
Schedules, contains any untrue statement of a material fact or omits to state
a material fact necessary in order to make the statements herein or therein
not misleading.
ARTICLE IV
COVENANTS OF THE PARTIES
4.01 Conduct of the Business of KBI and Kenwood Savings. During the
period from the date hereof to the Effective Time, KBI and Kenwood Savings
shall conduct their respective businesses and engage in transactions permitted
hereunder or only in the ordinary course and consistent with past practice.
KBI and Kenwood Savings shall use all reasonable efforts to (i) preserve their
business organization intact, (ii) keep available for themselves, Bancorp and
the Bank the present services of the employees of KBI and Kenwood Savings, and
(iii) preserve for themselves, Bancorp and the Bank the goodwill of their
customers and others with whom business relationships exist.
4.02 Negative Covenants. KBI agrees that from the date hereof to the
Effective Time, except as otherwise approved by Bancorp in writing or as
permitted or required by this Agreement, KBI will not and KBI will not permit
Kenwood Savings to:
(i) amend or change any provision of its Certificate of Incorporation,
Charter or Bylaws;
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(ii) change the number of shares of its authorized or issued capital
stock (except upon the exercise of KBI options) or issue or grant any option,
warrant, call, commitment, subscription, award, right to purchase or agreement
of any character relating to the authorized or issued capital stock of KBI, or
any securities convertible into shares of such capital stock, or split,
combine or reclassify any shares of its capital stock, or redeem or otherwise
acquire any shares of such capital stock;
(iii) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
the capital stock of KBI;
(iv) grant any severance or termination pay (other than pursuant to
binding contracts, plans, or policies of KBI or Kenwood Savings in effect on
the date hereof and disclosed to Bancorp on KBI Disclosure Schedule 2.12(a))
to, or enter into or amend any employment, consulting or compensation
agreement with, any of its directors, officers or employees; or award any
increase in compensation or benefits to its directors, officers or employees
except for salary increases and bonuses payable to non-officer employees in
the ordinary course of business and consistent with past practices;
(v) enter into or modify (except as may be required by applicable law
or as may be required by Section 4.12 hereof, with the prior written consent
of Bancorp, which shall not be unreasonably withheld) any pension, retirement,
stock option, stock purchase, stock grant, stock appreciation right, savings,
profit sharing, deferred compensation, consulting, bonus, group insurance or
other employee benefit, incentive or welfare contract, plan or arrangement, or
any trust agreement related thereto, in respect of any of its directors,
officers or employees; or make any contributions to any defined contribution
plan or any defined benefit pension or retirement plan other than in the
ordinary course of business consistent with past practice;
(vi) purchase or otherwise acquire, or sell or otherwise dispose of,
any assets or incur any liabilities other than in the ordinary course of
business consistent with past practice and policies;
(vii) enter into any new capital commitments or make any capital
expenditures in excess of $5,000 each other than pursuant to binding
commitments existing on the date hereof, other than expenditures necessary to
maintain existing assets in good repair;
(viii) file any applications or make any contract with respect to
branching or site location or relocation;
(ix) make any material change in its accounting methods or practices,
other than changes required by changes in laws or regulations or generally
accepted accounting principles, or change any of its methods of reporting
income and deductions for federal income tax purposes, except as required by
changes in laws or regulations;
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(x) change its lending, investment, deposit or asset and liability
management or other banking policies in any material respect except as may be
required by applicable law or regulations;
(xi) enter into any futures contract, option or other agreement or take
any other action for purposes of hedging the exposure of its interest-earning
assets and interest-bearing liabilities to changes in market rates of
interest;
(xii) incur any liability for borrowed funds (other than in the case of
deposits, federal funds purchased and securities sold under agreements to
repurchase in the ordinary course of business) or place upon or permit any
lien or encumbrance upon any of its properties or assets, except liens of the
type permitted in the exceptions to Section 2.13(a).
(xiii) acquire in any manner whatsoever (other than to realize upon
collateral for a defaulted loan) any business or entity;
(xiv) engage in any transaction with an Affiliate;
(xv) discharge or satisfy any material lien or encumbrance or pay any
material obligation or liability (absolute or contingent) other than at
scheduled maturity or in the ordinary course of business;
(xvi) enter or agree to enter into any agreement or arrangement granting
any preferential right to purchase any of its assets or rights or requiring
the consent of any party to the transfer and assignment of any such assets or
rights;
(xvii) invest in any investment securities other than United
States government agencies with a term of one (1) year or less or federal
funds;
(xviii) take any action that would result in any of its
representations and warranties contained in Article II of this Agreement not
being true and correct in any material respect at the Effective Time; or
(xix) agree to do any of the foregoing.
4.03 No Solicitation. KBI and Kenwood Savings agree that neither they
nor any of their respective officers or directors shall, and that they shall
direct and use their reasonable best efforts to cause each of their employees,
agents and representatives not to, directly or indirectly, initiate, solicit,
encourage or otherwise facilitate any inquiries or the making of any proposal
or offer with respect to a merger, reorganization, share exchange,
consolidation or similar transaction involving, or any purchase of all or
substantially all of the assets of KBI or more than 9.9% of the outstanding
equity securities of KBI or Kenwood Savings (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal"). KBI and Kenwood
Savings further agree that neither KBI nor Kenwood Savings nor any of their
respective officers and directors shall, and that they shall direct
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and use their reasonable best efforts to cause their employees, agents and
representatives not to, directly or indirectly, engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal;
provided, however, that nothing contained in this Agreement shall prevent KBI
or Kenwood Savings from (A) complying with its disclosure obligations under
federal or state law; (B) providing information in response to a request
therefor by a person who has made an unsolicited bona fide written Acquisition
Proposal if KBI receives from the person so requesting such information an
executed confidentiality agreement; (C) engaging in any negotiations or
discussions with any person who has made an unsolicited bona fide written
Acquisition Proposal or (D) recommending such an Acquisition Proposal to the
Stockholders of KBI, if and only to the extent that, (i) in each such case
referred to in clause (B), (C) or (D) above, the KBI Board of Directors
determines in good faith (after consultation with outside legal counsel) that
such action would be required in order for its directors to comply with their
respective fiduciary duties under applicable law and (ii) in the case referred
to in clause (D) above, the KBI Board of Directors determines in good faith
(after consultation with its financial advisor) that such Acquisition
Proposal, if accepted, is reasonably likely to be consummated, taking into
account all legal, financial and regulatory aspects of the proposal and the
person making the proposal and would, if consummated, result in a transaction
more favorable to KBI's stockholders from a financial point of view than the
Merger. KBI and Kenwood Savings agree that they will immediately cease and
cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any Acquisition
Proposals. KBI and Kenwood Savings agree that they will notify Bancorp
immediately if any such inquiries, proposals or offers are received by, any
such information is requested from, or any such discussions or negotiations
are sought to be initiated or continued with, any of its representatives.
4.04 Current Information. During the period from the date hereof to
the Effective Time, each party will cause one or more of its designated
representatives to confer from time to time, as either party may reasonably
request, with representatives of the other party regarding its business,
operations, prospects, assets and financial condition and matters relating to
the completion of the transactions contemplated hereby. Within 25 days after
the end of each month, each party shall provide the other party with a
consolidated statement of financial condition and a consolidated statement of
earnings, without related notes, for such month prepared in accordance with
past practices. On a weekly basis, KBI and Kenwood Savings shall furnish
Bancorp with a report, in such detail as reasonably requested by Bancorp,
indicating all loans which have been originated, purchased or sold during such
week as well as all applications for loans which have been received for
processing ("pipeline report").
4.05 Access to Properties and Records; Confidentiality.
(a) KBI and Kenwood Savings shall permit Bancorp and its representatives
reasonable access to their properties and shall disclose and make available to
Bancorp all books, papers and records relating to the assets, stock ownership,
properties, operations, obligations and liabilities of KBI and Kenwood Savings,
including, but not limited to, all books of account (including the general
25
ledger), tax records, minute books of directors' and stockholders' meetings,
organizational documents, bylaws, material contracts and agreements, filings
with any regulatory authority, accountants' work papers, litigation files,
plans affecting employees, and any other business activities or prospects in
which Bancorp may have a reasonable interest. KBI and Kenwood Savings shall
not be required to provide access to or to disclose information where such
access or disclosure would violate or prejudice the rights of any customer or
would contravene any law, rule, regulation, order or judgment. KBI and Kenwood
Savings will use their best efforts to obtain waivers of any such restriction
and in any event make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply. KBI
and Kenwood Savings shall make its directors, officers, employees and agents
and authorized representatives (including counsel and independent public
accountants) available to confer with Bancorp and its representatives, provided
that such access shall be reasonably related to the transactions contemplated
hereby and not unduly interfere with normal operations.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be
treated as the sole property of the party furnishing the information until
consummation of the Merger and, if such Merger shall not occur, the party
receiving the information shall, at the request of the party which furnished
such information, either return to the party which furnished such information
or destroy all documents or other materials containing, reflecting or
referring to such information; shall use its best effort to keep confidential
all such information; shall use such information only for the purpose of
consummating the transactions contemplated by this Agreement; and shall not
directly or indirectly use such information for any competitive or commercial
purposes. The obligation to keep such information confidential shall continue
for three years from the date the proposed Merger is abandoned but shall not
apply to (i) any information which (A) the party receiving the information can
establish by convincing evidence was already in its possession prior to the
disclosure thereof to it by the party furnishing the information; (B) was then
generally known to the public; (C) became known to the public through no fault
of the party receiving the information; or (D) was disclosed to the party
receiving the information by a third party not bound by an obligation of
confidentiality; or (ii) disclosures pursuant to a legal requirement or in
accordance with an order of a court of competent jurisdiction.
4.06 Regulatory Matters.
(a) Each of KBI, Kenwood Savings, Bancorp and the Bank shall
cooperate with each other and use their best efforts to prepare all necessary
documentation to effect all necessary filings and to obtain all necessary
permits, consents, approvals and authorizations of all third parties and
governmental bodies necessary to consummate the transactions contemplated by
this Agreement as soon as practicable (the parties hereto shall, in this
context, use their best efforts to consummate the transactions contemplated
hereby on or before December 31, 2001). The parties shall each have the
right to review and approve in advance all information relating to the other,
as the case may be, and any of their respective subsidiaries, which appears in
any filing made with, or written material
26
submitted to, any third party or governmental body in connection with the
transactions contemplated by this Agreement.
(b) Each of the parties will furnish each other with all information
concerning themselves, their directors, officers and stockholders and such
other matters as may be necessary or advisable in connection with any
statement or application made by or on behalf of them to any governmental body
in connection with the Merger and the other transactions, applications or
filings contemplated by this Agreement.
(c) Each of the parties will promptly furnish each other with copies
of written communications received by them from, or delivered by any of the
foregoing to, any governmental body in connection with the Merger and the
other transactions, applications or filings contemplated by this Agreement.
4.07 Approval of Stockholders. KBI will (a) take all steps necessary
to duly call, give notice of, convene and hold a special meeting of its
stockholders as soon as reasonably practicable (but in no event later than
November 15, 2001, provided that any delay past such date caused by Bancorp or
the Bank shall not be treated as noncompliance by KBI or Kenwood with this
Section 4.07) for the purposes of securing the adoption of such stockholders
of this Agreement and the Agreement of Merger (which shall be the only matters
considered at such special meeting), (b) unless the Board of Directors of KBI
makes a good faith determination, upon consideration of the advice of outside
counsel that such recommendation would be deemed to constitute a breach of
their fiduciary duties under applicable Delaware law, recommend to its
stockholders the approval of this Agreement and the Agreement of Merger and
the transactions contemplated hereby and thereby, and use its best efforts to
obtain, as promptly as practicable, such approvals, and (c) cooperate and
consult with Bancorp and the Bank with respect to the foregoing matters.
4.08 Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its best efforts to take,
or cause to be taken, all reasonable action and to do, or cause to be done,
all things necessary, proper or advisable under applicable laws and
regulations to satisfy the conditions to closing contained herein and to
consummate and make effective the transactions contemplated by this Agreement
and the Agreement of Merger. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall take all such necessary action. Nothing in this section shall be
construed to require any party to participate in any threatened or actual
legal, administrative or other proceedings (other than proceedings, actions or
investigations to which it is a party or subject or threatened to be made a
party or subject) in connection with consummation of the transactions
contemplated by this Agreement unless such party shall consent in advance and
in writing to such participation and the other party agrees to reimburse and
indemnify such party for and against any and all costs and damages related
thereto.
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4.09 Disclosure Supplements. From time to time prior to the Effective
Time, each party will promptly supplement or amend its respective Disclosure
Schedules delivered pursuant hereto with respect to any matter hereafter
arising which, if existing, occurring or known as of the date hereof, would
have been required to be set forth or described in such Schedules or which is
necessary to correct any information in such Schedules which has been rendered
inaccurate thereby. No supplement or amendment to such Schedules shall have
any effect for the purpose of determining satisfaction of the conditions set
forth in Article V or the compliance by KBI and Kenwood Savings with the
covenants set forth in Section 4.01 hereof.
4.10 Public Announcements. The parties hereto shall approve in advance
the substance of and cooperate with each other in the development and
distribution of all news releases and other public disclosures with respect to
this Agreement or any of the transactions contemplated hereby, except as may
be otherwise required by law or regulation and as to which the parties
releasing such information have used their best efforts to discuss with the
other parties in advance.
4.11 Failure to Fulfill Conditions. In the event that either of the
parties hereto determines that a condition to its respective obligations to
consummate the transactions contemplated hereby cannot be fulfilled and that
it will not waive that condition, it will promptly notify the other party.
Bancorp and KBI will promptly inform the other of any facts applicable to
them, or their respective directors or officers, that would be likely to
prevent or materially delay approval of the Merger by any governmental
authority or which would otherwise prevent or materially delay completion of
the Merger.
4.12 Certain Post-Merger Agreements.
The parties hereto agree to the following arrangements following the
Effective Time:
(a) Transferred Employees. Subject to the provisions of this Section
4.12, all Employees immediately prior to the Effective Time who are employed
by Bancorp or the Bank immediately following the Effective Time ("Transferred
Employees") will be covered by the employee benefit plans of Bancorp and/or
the Bank on substantially the same basis as any employee of Bancorp and/or the
Bank in a comparable position. Notwithstanding the foregoing, Bancorp may
determine to continue any of the KBI or Kenwood Savings' Benefits Plans for
Transferred Employees in lieu of offering participation in the benefit plans
of Bancorp and/or the Bank providing similar benefits (e.g., medical and
hospitalization benefits), to terminate any of the KBI or Kenwood Savings
Benefits Plans, or to merge any such Benefits Plans with the benefit plans of
Bancorp and/or the Bank, provided the result is the provision of benefits to
Transferred Employees that are substantially similar to the benefits provided
to the employees of Bancorp and/or the Bank generally. Except as specifically
provided in this Section 4.12 and as otherwise prohibited by law, Transferred
Employees' service with KBI or Kenwood Savings shall be recognized as service
with Bancorp or the Bank for purposes of eligibility to participate and
vesting, if applicable (but not for purposes of benefit accrual) under the
benefit plans of Bancorp and/or the Bank subject to applicable break-in-
service rules.
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(b) Health Plans. Bancorp will use its best efforts to cause any pre-
existing condition, limitation or exclusion in its medical, long-term
disability and life insurance plans not apply to Transferred Employees or
their covered dependents who are covered under a medical or hospitalization
indemnity plan maintained by KBI or Kenwood Savings on the Effective Time and
who then change coverage to the Bancorp's or the Bank's medical or
hospitalization indemnity health plan at the time such Transferred Employees
are first given the option to enroll.
(c) Employment, Severance and Change in Control Agreements. Any
officer or employee of KBI or Kenwood Savings who has an employment, severance
or change in control agreement with KBI or Kenwood Savings (each a "Contract
Officer") which is disclosed on KBI Disclosure Schedule 2.12(a) shall receive
as of the Effective Time, the severance or termination payments provided for
in their respective agreements ("Contract Payments") and as described and
quantified in reasonable detail on KBI Disclosure Schedule 4.12(c). As a
condition to receiving their Contract Payments, each Contract Officer shall
sign and deliver to Bancorp a release agreement in the form reasonably
requested by Bancorp.
(d) KBI ESOP. (i) Each participant in the KBI Employee Stock
Ownership Plan ("KBI ESOP") not fully vested will become fully vested in his
or her KBI ESOP account as of the Effective Time. As soon as practicable
after the execution of this Agreement, KBI, Kenwood Savings and Bancorp will
cooperate to cause the KBI ESOP to be amended and other action taken in a
manner reasonably acceptable to KBI and Bancorp, to provide that the KBI ESOP
will terminate upon the Effective Time. Upon the repayment of the KBI ESOP
loan, the remaining shares in the Loan Suspense Account will be allocated (to
the extent permitted by Sections 401(a), 415 or 4975 of the Code and the
applicable laws and regulations including, without limitation, the applicable
provisions of ERISA) to KBI ESOP participants (as determined under the terms
of the KBI ESOP). Between the date hereof and the Effective Time, the
existing KBI ESOP indebtedness shall be paid in the ordinary course of
business and KBI or Kenwood Savings shall make such contributions to the KBI
ESOP as necessary to fund such payments. Any indebtedness of the KBI ESOP
remaining as of the Effective Time shall be repaid from the Trust associated
with the KBI ESOP through application of the Merger Consideration received by
the KBI ESOP. KBI and Bancorp agree that, subject to the conditions described
herein, as soon as practicable after the Effective Time and repayment of the
KBI ESOP loan, participants in the KBI ESOP will receive lump sum
distributions of their KBI ESOP accounts.
(ii) The actions relating to termination of the KBI ESOP will be
adopted conditioned upon the consummation of the Merger and upon receiving a
favorable determination letter from the IRS with regard to the continued
qualification of the KBI ESOP after any required amendments. KBI and Bancorp
will cooperate in submitting appropriate requests for any such determination
letter to the IRS and will use their best efforts to seek the issuance of such
letter as soon as practicable following the date hereof. KBI and Bancorp will
adopt such additional amendments to the KBI ESOP as may be reasonably required
by the IRS as a condition to granting such determination letter provided that
such amendments do not substantially change the terms outlined herein or would
result
29
in a material adverse change in the business, operations, assets, financial
condition or prospects of KBI or Kenwood Savings or result in an additional
material liability to Bancorp or the Bank.
(iii) As of and following the Effective Time, Bancorp shall cause the
KBI ESOP to be maintained for the exclusive benefit of employees and other
persons who were participants or beneficiaries therein prior to the Effective
Time and proceed with termination of the KBI ESOP through distribution of its
assets in accordance with its terms subject to the amendments described herein
and as otherwise may be required to comply with applicable law or to obtain a
favorable determination from the IRS as to the continuing qualified status of
the KBI ESOP, provided, however, that no such distributions of the KBI ESOP
shall occur until a favorable termination ruling has been received from the
IRS.
(e) The Bancorp ESOP. Upon termination of the KBI ESOP and upon
satisfaction of applicable eligibility and service requirements, all
Transferred Employees will be eligible to participate in Bancorp's Employee
Stock Ownership Plan ("ESOP"), however, such Transferred Employees will be
permitted to recognize for purposes of eligibility to participate and vesting
but not for purposes of benefit accrual, such Transferred Employees' service
with KBI.
(f) Indemnification. From and after the Effective Time through the
fifth anniversary of the Effective Time, Bancorp shall indemnify and hold
harmless each present and former director, officer and employee of KBI and
Kenwood Savings determined as of the Effective Time (the "Indemnified
Parties") against any costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages or liabilities (collectively,
"Costs") incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
arising out of matters existing or occurring at or prior to the Effective
Time, whether asserted or claimed prior to, at or after the Effective Time
(collectively, "Claims"), to the fullest extent to which such Indemnified
Parties were entitled under Delaware law, the Certificate of Incorporation,
Charter and Bylaws of KBI and Kenwood Savings as in effect on the date hereof,
provided, however, that all rights to indemnification in respect to any claim
asserted or made within such period shall continue until the final disposition
of such claim.
Any Indemnified Party wishing to claim indemnification under this
Section 4.12(f), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify Bancorp, but the failure to so notify
shall not relieve Bancorp of any liability it may have to such Indemnified
Party if such failure does not materially prejudice Bancorp. In the event of
any such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), (i) Bancorp shall have the right to
assume the defense thereof and Bancorp 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 Bancorp elects not to assume such defense or
counsel for the Indemnified Parties advises that there are issues which raise
conflicts of interest between Bancorp and the Indemnified Parties, the
Indemnified Parties may retain counsel which is reasonably satisfactory to
Bancorp, and Bancorp shall pay, promptly as statements therefor are received,
the reasonable fees and expenses of such counsel for
30
the Indemnified Parties (which may not exceed one firm in any jurisdiction
unless the use of one counsel for such Indemnified Parties would present such
counsel with a conflict of interest), (ii) the Indemnified Parties will
cooperate in the defense of any such matter, and (iii) Bancorp shall not be
liable for any settlement effected without its prior written consent, which
consent shall not be withheld unreasonably.
In the event that Bancorp or any of its respective successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger
or (ii) transfers all or substantially all of its properties and assets to any
person, then, and in each such case, the successors and assigns of such entity
shall assume the obligations set forth in this Section 4.12(f), which
obligations are expressly intended to be for the irrevocable benefit of, and
shall be enforceable by, each of the Indemnified Parties.
(g) Insurance. Bancorp and the Bank shall maintain a directors' and
officers' liability insurance policy covering the Indemnified Parties Costs in
connection with any Claims for a period of three (3) years after the Effective
Time at annual premiums no greater than 125% of the annual premium of the
directors' and officers' liability insurance maintained by KBI and Kenwood
Savings as of the date hereof. With the prior written consent of Bancorp,
such insurance policy may be acquired by KBI prior to the Effective Time.
ARTICLE V
CLOSING CONDITIONS
5.01 Conditions to the Parties' Obligations Under This Agreement. The
respective obligations of the parties under this Agreement shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) All necessary regulatory, governmental or third party approvals,
waivers, clearances, authorizations and consents (including without limitation
the requisite approval and/or non-objection of the OTS and the DFI required to
consummate the transactions contemplated hereby) shall have been obtained
without any term or condition which would materially impair the value of KBI
and Kenwood Savings to Bancorp and the Bank or materially adversely affect the
terms of the Merger as they relate to the stockholders of KBI; all conditions
required to be satisfied prior to the Effective Time by the terms of such
approvals and consents shall have been satisfied; and all waiting periods in
respect thereof shall have expired.
(b) All corporate action necessary to authorize the execution and
delivery of this Agreement and the Agreement of Merger and consummation of the
transactions contemplated hereby and thereby shall have been duly and validly
taken by Bancorp, the Bank, KBI and Kenwood Savings, including approval by the
requisite vote of the stockholders of KBI of this Agreement and the Agreement
of Merger.
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(c) No order, judgment or decree shall be outstanding against a party
hereto or a third party that would have the effect of preventing completion of
the Merger; no suit, action or other proceeding shall be pending or threatened
by any governmental body in which it is sought to restrain or prohibit the
Merger; and no suit, action or other proceeding shall be pending before any
court or governmental agency in which it is sought to restrain or prohibit the
Merger or obtain other substantial monetary or other relief against one or
more of the parties hereto in connection with this Agreement and which
Bancorp, the Bank, KBI or Kenwood Savings determines in good faith, based upon
the advice of their respective counsel, makes it inadvisable to proceed with
the Merger because any such suit, action or proceeding has a significant
potential to be resolved in such a way as to deprive the party electing not to
proceed of any of the material benefits to it of the Merger.
5.02 Conditions to the Obligations of Bancorp and the Bank Under This
Agreement. The obligations of Bancorp and the Bank under this Agreement shall
be further subject to the satisfaction, at or prior to the Effective Time, of
the following conditions, any one or more of which may be waived by Bancorp
and the Bank:
(a) Each of the obligations of KBI and Kenwood Savings required to be
performed by them at or prior to the Closing pursuant to the terms of this
Agreement shall have been duly performed and complied with in all material
respects and the representations and warranties of KBI and Kenwood Savings
contained in this Agreement shall have been true and correct as of the date
hereof and as of the Effective Time as though made at and as of the Effective
Time, except (i) as to any representation or warranty which specifically
relates to an earlier date, or (ii) where the facts which caused the failure
of any representation or warranty to be so true and correct would not, either
individually or in the aggregate, constitute a Material Adverse Effect, and
Bancorp and the Bank shall have received a certificate to that effect signed
by the Executive Vice President and Chief Executive Officer of KBI and Kenwood
Savings.
(b) KBI and Kenwood Savings shall have furnished Bancorp and the Bank
with such certificates of its officers or others and such other documents to
evidence fulfillment of the conditions set forth in this Section 5.02 as
Bancorp and the Bank may reasonably request.
5.03 Conditions to the Obligations of KBI and Kenwood Savings Under
this Agreement. The obligations of KBI and Kenwood Savings under this
Agreement shall be further subject to the satisfaction, at or prior to the
Effective Time, of the following conditions, any one or more of which may be
waived by KBI and Kenwood Savings:
(a) Each of the obligations of Bancorp and the Bank required to be
performed by them at or prior to the Closing pursuant to the terms of this
Agreement shall have been duly performed and complied with in all material
respects and the representations and warranties of Bancorp and the Bank
contained in this Agreement shall have been true and correct as of the date
hereof and as of the Effective Time as though made at and as of the Effective
Time, except (i) as to any representation or warranty which specifically
relates to an earlier date or (ii) where the facts which caused the failure of
any representation or warranty to be so true and correct would not, either
individually or
32
in the aggregate, constitute a material adverse change in the business,
operations, assets or financial condition of Bancorp and the Bank taken as a
whole, and KBI and Kenwood Savings shall have received a certificate to that
effect signed by the President and Chief Executive Officer of Bancorp and the
Bank.
(b) Bancorp and the Bank shall have furnished KBI and Kenwood Savings
with such certificates of its officers or others and such other documents to
evidence fulfillment of the conditions set forth in this Section 5.03 as KBI
and Kenwood Savings may reasonably request.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER, ETC.
6.01 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of this Agreement and
the Agreement of Merger by the stockholders of KBI:
(a) by mutual written consent of the parties hereto;
(b) by Bancorp, the Bank, KBI or Kenwood Savings (i) if the Effective
Time shall not have occurred on or prior to April 30, 2002, or (ii) if a vote
of the stockholders of KBI is taken and such stockholders fail to approve this
Agreement and the Agreement of Merger at the meeting of stockholders (or any
adjournment thereof) of KBI contemplated by Section 4.07 hereof; unless the
failure of such occurrence shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe its agreements set forth herein
to be performed or observed by such party at or before the Effective Time;
(c) by Bancorp or KBI upon written notice to the other 30 or more days
after the date upon which any application for a regulatory or governmental
approval necessary to consummate the Merger and the other transactions
contemplated hereby shall have been denied or withdrawn at the request or
recommendation of the applicable regulatory agency or governmental authority,
unless within such 30-day period a petition for rehearing or an amended
application is filed or noticed, or 30 or more days after any petition for
rehearing or amended application is denied;
(d) by Bancorp or the Bank in writing if KBI or Kenwood Savings has,
or by KBI or Kenwood Savings in writing if Bancorp or the Bank has, breached
(i) any covenant or undertaking contained herein or in the Agreement of
Merger, or (ii) any representation or warranty contained herein, which, in the
case of either (i) or (ii), breach would have a material adverse effect on the
business, operations, assets or financial condition of KBI and Kenwood Savings
taken as a whole or Bancorp and the Bank taken as a whole, or upon the
consummation of the transactions contemplated hereby, in any case if such
breach has not been cured by the earlier of 30 days after the date on which
written notice of such breach is given to the party committing such breach or
the Effective Time;
33
(e) by Bancorp or KBI in writing, if any of the applications for prior
approval referred to in Section 4.06 hereof are denied or are approved
contingent upon the satisfaction of any condition or requirement which, in the
reasonable opinion of the Board of Directors of Bancorp or KBI as applicable,
would materially impair the value of KBI and Kenwood Savings taken as a whole
to Bancorp, or would materially adversely affect the terms of the Merger as
they relate to the Stockholders of KBI and the time period for appeals and
requests for reconsideration has run;
(f) by Bancorp or the Bank in the event of a Termination Event (as
defined in Section 7.01(c) hereof); and
(g) by Bancorp or KBI in the event that the Board of Directors of KBI,
after having consulted with and considered the advice of outside legal
counsel, determines not to recommend to its stockholders the approval of this
Agreement and/or to take the necessary actions to obtain such approval
pursuant to the exception provided in clause (b) of Section 4.07 hereof.
6.02 Effect of Termination. In the event of termination of this
Agreement by Bancorp, the Bank, KBI or Kenwood Savings as provided above, this
Agreement shall forthwith become void (other than Sections 4.05(b) and 7.01
hereof, which shall remain in full force and effect) and there shall be no
further liability on the part of the parties or their respective officers or
directors except for the liability of the parties under Sections 4.05(b) and
7.01 hereof and except for liability for any breach of this Agreement.
6.03 Amendment, Extension and Waiver. Subject to applicable law, at
any time prior to the consummation of the Merger, whether before or after
approval thereof by the stockholders of KBI, the parties may (a) amend this
Agreement and the Agreement of Merger, (b) extend the time for the performance
of any of the obligations or other acts of the other parties hereto, (c) waive
any inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto, or (d) waive compliance with any of
the agreements or conditions contained herein; provided, however, that after
any approval of the Merger by the stockholders of KBI, there may not be,
without further approval of such stockholders, any amendment or waiver of this
Agreement or the Agreement of Merger which modifies the amount of the Merger
Consideration to be delivered to stockholders of KBI. This Agreement and the
Agreement of Merger may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto. Any agreement on the part of
a party hereto to any extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party, but such waiver or
failure to insist on strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
34
ARTICLE VII
MISCELLANEOUS
7.01 Expenses; Termination Fee.
(a) Each party hereto shall bear and pay all costs and expenses
incurred by it in connection with the transactions contemplated by this
Agreement, including fees and expenses of its own financial consultants,
accountants and counsel, provided that in the event of a termination of this
Agreement resulting from a breach of a representation, warranty, covenant or
undertaking, the party committing such breach shall be liable for $300,000 to
the other party, plus the reasonable expenses of the other party without
prejudice to any other rights or remedies as may be available to the non-
breaching party, including without limitation any rights under Section 7.01(b)
hereof.
(b) Notwithstanding any provision in this Agreement to the contrary,
in order to induce Bancorp and the Bank to enter into this Agreement and as a
means of compensating Bancorp and the Bank for the substantial direct and
indirect monetary and other damages and costs incurred and to be incurred in
connection with this Agreement in the event the transactions contemplated
hereby do not occur as a result of a Termination Event (as defined herein),
KBI agrees to pay Bancorp, and Bancorp shall be entitled to payment of, a fee
(the "Fee") of $300,000 upon the occurrence of a Termination Event so long as
the Termination Event occurs prior to a Fee Termination Event (as defined
herein). The parties hereto acknowledge that the actual amount of such
damages and costs would be impracticable or extremely difficult to determine,
and that the sum of $300,000 constitutes a reasonable estimate by the parties
under the circumstance existing as of the date of this Agreement of such
damages and costs. Such payment shall be made to Bancorp in immediately
available funds within five business days after the occurrence of a
Termination Event. A Fee Termination Event shall be the first to occur of the
following: (i) the Effective Time, (ii) 15 months after termination of this
Agreement in accordance with its terms following the first occurrence of a
Preliminary Termination Event (as defined herein), (iii) termination of this
Agreement in accordance with the terms hereof prior to the occurrence of a
Termination Event or a Preliminary Termination Event (other than a termination
of this Agreement by Bancorp pursuant to Section 6.01(d) hereof as a result of
a willful breach of any representation, warranty, covenant or agreement of KBI
or Kenwood Savings) or (iv) 15 months after the termination of this Agreement
by Bancorp pursuant to Section 6.01(d) hereof as a result of a willful breach
of any representation, warranty, covenant or agreement of KBI or Kenwood
Savings.
(c) For purposes of this Agreement, a "Termination Event" shall mean
any of the following events:
(i) KBI, without having received Bancorp's prior written
consent, shall have entered into an agreement to engage in an
Acquisition Transaction with any person (the term "person" for purposes
of this Agreement having the meaning assigned thereto in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended
("Exchange Act"),
35
and the rules and regulations thereunder), other than Bancorp or any
subsidiary of Bancorp, or the Board of Directors of KBI shall have
recommended that the stockholders of KBI approve or accept any Acquisition
Transaction with any person other than Bancorp or any subsidiary of Bancorp;
(ii) any person, other than Bancorp or the Bank, shall have
acquired beneficial ownership (as such term is defined in Rule 13d-3
promulgated under the Exchange Act) of or the right to acquire
beneficial ownership, or any "group" (as such term is defined in Section
13(d)(3) of the Exchange Act) shall have been formed which beneficially
owns or has the right to acquire beneficial ownership of, 25% or more of
the aggregate voting power represented by the outstanding KBI Common
Stock; or
(iii) one or more KBI Stockholders shall have breached his or her
obligations pursuant to the Stockholder Agreement in a manner which
materially adversely affects the ability of KBI to obtain the approval
of the holders of KBI Common Stock of this Agreement or otherwise
materially adversely affects the ability of the parties hereto to
consummate the transactions contemplated hereby.
(d) For purposes of this Agreement, a "Preliminary Termination Event"
shall mean any of the following events:
(i) any person (other than Bancorp or the Bank) shall have
commenced (as such term is defined in Rule 14d-2 under the Exchange
Act), or shall have filed a registration statement under the Securities
Act of 1933, as amended ("Securities Act") with respect to, a tender
offer or exchange offer to purchase any shares of KBI Common Stock such
that, upon consummation of such offer, such person would own or control
10% or more of KBI Common Stock outstanding (such an offer being
referred to herein as a "Tender Offer" and an "Exchange Offer,"
respectively, regardless of whether the provisions of Regulations 14D or
14E under the Exchange Act apply to such Tender Offer or Exchange
Offer);
(ii) (A) the holders of KBI Common Stock shall not have approved
this Agreement at the meeting of such stockholders held for the purpose
of voting on this Agreement, (B) such meeting shall not have been held
or shall have been canceled prior to termination of the Agreement or (C)
KBI's Board of Directors shall have withdrawn or modified in a manner
adverse to Bancorp the recommendation of KBI's Board of Directors with
respect to the Agreement, in each case after any person (other than
Bancorp or the Bank) shall have (x) made, or disclosed an intention to
make, a bona fide proposal to KBI or its stockholders to engage in an
Acquisition Transaction, (y) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect to an
Exchange Offer or (z) filed an application or given notice, whether in
draft or final form, with the appropriate regulatory authorities for
approval to engage in an Acquisition Transaction; or
36
(iii) KBI or Kenwood Savings Bank shall have breached any
representation, warranty, covenant or obligation contained in this
Agreement and such breach would entitle Bancorp to terminate this
Agreement under Section 6.01(d) hereof (without regard to the cure
period provided for therein unless such cure is promptly effected
without jeopardizing consummation of the Merger pursuant to the terms of
this Agreement) after any person (other than Bancorp or the Bank) shall
have (x) made, or disclosed an intention to make, a bona fide proposal
to KBI or its stockholders to engage in an Acquisition Transaction, (y)
commenced a Tender Offer or filed a registration statement under the
Securities Act with respect to an Exchange Offer or (z) filed an
application or given notice, whether in draft or final form, with the
appropriate regulatory authorities for approval to engage in an
Acquisition Transaction.
(e) KBI shall promptly notify Bancorp in writing of the occurrence of
any Preliminary Termination Event or Termination Event.
7.02 Survival. The respective representations, warranties and
covenants of the parties to this Agreement shall not survive the Effective
Time but shall terminate as of the Effective Time, except for the provisions
of Sections 4.12 and 7.01 hereof.
7.03 Notices. All notices or other communications hereunder shall be
in writing and shall be deemed given if delivered personally, sent by
overnight express or mailed by prepaid registered or certified mail (return
receipt requested) or by cable, telegram or telex addressed as follows:
(a) If to Bancorp, to:
Peoples Community Bancorp, Inc.
0000 Xxxx Xxxxxxx Xxxx
Xxxx Xxxxxxx, Xxxx 00000
Attn: Xxxxx X. Xxxxxxxx
President and Chief Executive Officer
Copy to:
Elias, Matz, Xxxxxxx and Xxxxxxx L.L.P.
000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxx X. Xxxxxxxx, Esq.
37
(b) If to KBI, to:
Kenwood Bancorp, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxxxxxxx, Xxxx 00000
Attn: Xxxxxx X. Xxxxx
Executive Vice President and Chief Executive Officer
Copy to:
Xxxxxx Xxxx & Xxxxxx LLP
0000 Xxxxxx Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxx, Esq.
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
7.04 Parties in Interest. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
party hereto without the prior written consent of the other party and, except
as provided in Section 4.12 hereof or as otherwise expressly provided herein,
that nothing in this Agreement is intended to confer, expressly or by
implication, upon any other person any rights or remedies under or by reason
of this Agreement.
7.05 Complete Agreement. This Agreement and the Agreement of Merger,
including the documents and other writings referred to herein or therein or
delivered pursuant hereto or thereto, contain the entire agreement and
understanding of the parties with respect to their subject matter and shall
supersede all prior agreements and understandings between the parties, both
written and oral, with respect to such subject matter. There are no
restrictions, agreements, promises, representations, warranties, covenants or
undertakings between the parties other than those expressly set forth herein
or therein.
7.06 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
7.07 Governing Law. This Agreement shall be governed by the laws of
the State of Delaware, without giving effect to the principles of conflicts of
laws thereof.
7.08 Headings. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
38
IN WITNESS WHEREOF, Bancorp, the Bank, KBI and Kenwood Savings have
caused this Agreement to be executed by their duly authorized officers as of
the day and year first above written.
PEOPLES COMMUNITY BANCORP, INC.
Attest:
/s/ Xxxx Xxxxxxxx By: /s/ Xxxxx X. Xxxxxxxx
------------------------ ---------------------------------------
Secretary Xxxxx X. Xxxxxxxx
President and Chief Executive Officer
PEOPLES COMMUNITY BANK
Attest:
/s/ Xxxx Xxxxxxxx By: /s/ Xxxxx X. Xxxxxxxx
------------------------ ---------------------------------------
Secretary Xxxxx X. Xxxxxxxx
President and Chief Executive Officer
KENWOOD BANCORP, INC.
Attest:
/s/ P. Xxxxxxx Xxxxxxxx By: /s/ Xxxxxx X. Xxxxx
------------------------ ---------------------------------------
Secretary Xxxxxx X. Xxxxx
Executive Vice President and
Chief Executive Officer
KENWOOD SAVINGS BANK
Attest:
/s/ P. Xxxxxxx Xxxxxxxx By: /s/ Xxxxxx X. Xxxxx
------------------------ ---------------------------------------
Secretary Xxxxxx X. Xxxxx
Executive Vice President and
Chief Executive Officer
39
EXHIBIT A
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of August 23, 2001, by and among Peoples
Community Bancorp, Inc. (the "Acquiror"), a Delaware corporation, and certain
stockholders of Kenwood Bancorp (the "Company"), a Delaware corporation, named
on Schedule I hereto in their capacity as individuals (collectively the
"Stockholders").
WITNESSETH:
WHEREAS, the Acquiror and the Company have entered into an Agreement and
Plan of Reorganization, dated as of the date hereof (the "Agreement"), which
is being executed simultaneously with the execution of this Stockholder
Agreement and provides for, among other things, the merger of KBI Acquisition
Corp. ("Interim"), a to-be-formed wholly owned subsidiary of the Acquiror,
with and into the Company (the "Merger"); and
WHEREAS, in order to induce the Acquiror to enter into the Agreement,
each of the Stockholders agrees to, among other things, vote in favor of the
Agreement in his or her capacity as a stockholder of the Company.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements set forth herein and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Ownership of Company Common Stock. Each Stockholder represents
and warrants that the Stockholder has or shares the right to vote and dispose
of the number of shares of common stock of the Company, par value $0.01 per
share ("Company Common Stock"), set forth opposite such Stockholder's name on
Schedule I hereto.
2. Agreements of the Stockholders. Each Stockholder covenants and
agrees that:
(a) such Stockholder shall, at any meeting of the Company's
stockholders called for the purpose, vote, or cause to be voted, all
shares of Company Common Stock in which such stockholder has the right
to vote (whether owned as of the date hereof or hereafter acquired) in
favor of the Agreement and the related Agreement of Merger between
Interim and the Company;
(b) except as otherwise expressly permitted hereby, such
Stockholder shall not, prior to the meeting of the Company's
stockholders referred to in Section 2(a) hereof or the earlier
termination of the Agreement in accordance with its terms, sell, pledge,
transfer or otherwise dispose of the Stockholder's shares of Company
Common Stock; and
(c) such Stockholder shall use his reasonable best efforts to
take or cause to be taken all action, and to do or cause to be done all
things, necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the agreements contemplated
by this Stockholder Agreement.
A-1
Each Stockholder further agrees that the Company's transfer agent shall
be given an appropriate stop transfer order and shall not be required to
register any attempted transfer of shares of Company Common Stock held by each
Stockholder, unless the transfer has been effected in compliance with the
terms of this Stockholder Agreement.
3. Successors and Assigns. A Stockholder may sell, pledge, transfer
or otherwise dispose of his shares of Company Common Stock, provided that,
with respect to any sale, transfer or disposition which would occur on or
before the meeting of the Company's stockholders referred to in Section 2(a)
hereof, such Stockholder obtains the prior written consent of the Acquiror and
that any acquiror of such Company Common Stock expressly agrees in writing to
be bound by the terms of this Stockholder Agreement.
4. Termination. The parties agree and intend that this Stockholder
Agreement be a valid and binding agreement enforceable against the parties
hereto and that damages and other remedies at law for the breach of this
Stockholder Agreement are inadequate. This Stockholder Agreement may be
terminated at any time prior to the consummation of the Merger by mutual
written consent of the parties hereto and shall be automatically terminated in
the event that the Agreement is terminated in accordance with its terms.
5. Notices. Notices may be provided to the Company and the
Stockholders in the manner specified in Section 7.03 of the Agreement, with
all notices to the Stockholders being provided to them at the Company in the
manner specified in such section.
6. Governing Law. This Stockholder Agreement shall be governed by
the laws of the State of Delaware without giving effect to the principles of
conflicts of laws thereof.
7. Counterparts. This Stockholder Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same and
each of which shall be deemed an original.
8. Headings and Gender. The Section headings contained herein are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Stockholder Agreement. Use of the masculine gender
herein shall be considered to represent the masculine, feminine or neuter
gender whenever appropriate.
A-2
IN WITNESS WHEREOF, the Acquiror by a duly authorized officer, and each
of the Stockholders have caused this Stockholder Agreement to be executed as
of the day and year first above written.
PEOPLES COMMUNITY BANCORP, INC.
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
COMPANY STOCKHOLDERS:
/s/ Xxxxxx X. Xxxxxxxx
-----------------------------
Xxxxxx X. Xxxxxxxx
/s/ Xxxxxx X. Xxxxx
-----------------------------
Xxxxxx X. Xxxxx
/s/ Xxxxxx X. Xxxxx
-----------------------------
Xxxxxx X. Xxxxx
/s/ Xxxxxxx X. Xxxx
-----------------------------
Xxxxxxx X. Xxxx
/s/ P. Xxxxxxx Xxxxxxxx
-----------------------------
P. Xxxxxxx Xxxxxxxx
/s/ Xxxxx X. Xxxxxx
-----------------------------
Xxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxxx
-----------------------------
Xxxxxx X. Xxxxxxx
A-3
SCHEDULE I
Number of Shares of
Company Common Stock
Beneficially Owned
Name of Stockholder
__________________________________ ___________________________________________
Xxxxxx X. Xxxxxxxx 7,881
Xxxxxx X. Xxxxx 9,152
Xxxxxx X. Xxxxx 17,808
Xxxxxxx X. Xxxx 19,597
P. Xxxxxxx Xxxxxxxx 4,865
Xxxxx X. Xxxxxx 7,882
Xxxxxx X. Xxxxxxx 2,000
A-4
EXHIBIT B
AGREEMENT OF MERGER OF KBI ACQUISITION CORP.
INTO
KENWOOD BANCORP, INC.
AGREEMENT OF MERGER, dated as of August 23, 2001, by and between KBI
Acquisition Corp. ("Interim"), a Delaware corporation formed by Peoples
Community Bank ("Bank"), a federally chartered savings bank, solely to
facilitate the transactions contemplated by the Reorganization Agreement,
defined below, and Kenwood Bancorp, Inc. ("KBI"), a Delaware corporation.
Interim and KBI are hereinafter sometimes collectively referred to as the
"Merging Corporations."
This Plan of Merger is being entered into pursuant to an Agreement and
Plan of Reorganization, dated as of August 23, 2001 (the "Reorganization
Agreement") by and among Peoples Community Bancorp, Inc. ("Company"), the
Bank, KBI and Kenwood Savings Bank ("Kenwood Savings").
In consideration of the premises, and the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
1.1 "Effective Time" shall mean the time at which the Merger
contemplated by this Plan of Merger becomes effective as provided in Section
1.01 and 1.05 of the Reorganization Agreement.
1.2 "Interim Common Stock" shall mean the common stock, par value $.01
per share, of Interim owned by the Bank.
1.3 "KBI Common Stock" shall mean the common stock, par value $0.01
per share, of KBI.
1.4 The "Merger" shall refer to the merger of Interim with and into
KBI as provided in Section 2.1 of this Plan of Merger.
1.5 "Surviving Corporation" shall refer to KBI as the surviving
corporation of the Merger.
B-1
ARTICLE II
TERMS OF THE MERGER
2.1 The Merger. Subject to the terms and conditions set forth in the
Reorganization Agreement, at the Effective Time, Interim shall be merged with
and into KBI pursuant and subject to the Delaware General Corporation Law
("DGCL"). KBI shall be the Surviving Corporation of the Merger and shall
continue to be governed by the laws of the State of Delaware. At the
Effective Time, the Surviving Corporation shall be considered the same
business and corporate entity as each of the Merging Corporations and
thereupon and thereafter, all the property, rights, powers, and franchises of
each of the Merging Corporations shall vest in the Surviving Corporation and
the Surviving Corporation shall be subject to and be deemed to have assumed
all of the debts, liabilities, obligations and duties of each of the Merging
Corporations and shall have succeeded to all of each of their relationships,
fiduciary or otherwise, as fully and to the same extent as if such property,
rights, privileges, powers, franchises, debts, obligations, duties and
relationships had been originally acquired, incurred or entered into by the
Surviving Corporation. In addition, any reference to either of the Merging
Corporations in any contract or document, whether executed or taking effect
before or after the Effective Time, shall be considered a reference to the
Surviving Corporation if not inconsistent with the other provisions of the
contract or document; and any pending action or other judicial proceeding to
which either of the Merging Corporations is a party, shall not be deemed to
have abated or to have discontinued by reason of the Merger, but may be
prosecuted to final judgment, order or decree in the same manner as if the
Merger had not been made; or the Surviving Corporation may be substituted as a
party to such action or proceeding, and any judgment, order or decree may be
rendered for or against it that might have been rendered for or against either
of the Merging Corporations if the Merger had not occurred.
2.2 Certificate of Incorporation and Bylaws. As of the Effective
Time, the Certificate of Incorporation and Bylaws of KBI shall be the
Certificate of Incorporation and Bylaws of the Surviving Corporation until
otherwise amended as provided by law.
2.3 Directors and Officers of the Surviving Corporation. The
directors and officers of Interim shall become the directors and officers of
the Surviving Corporation as of the Effective Time, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation.
B-2
ARTICLE III
CONVERSION OF SHARES
3.1 Conversion of KBI Common Stock.
As of the Effective Time, each share of KBI Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares held by
KBI (including treasury shares) or the Company or the Bank other than in a
fiduciary capacity, which shares shall be cancelled) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive the Merger Consideration set forth in the
Reorganization Agreement.
3.2 Exchange of Shares. The obligations of the Bank to effectuate the
exchange of the Merger Consideration for the shares of KBI Common Stock shall
be as set forth in Section 1.08 of the Reorganization Agreement.
3.3 Interim Common Stock. Each share of Interim Common Stock which is
issued and outstanding immediately prior to the Effective Time shall be
converted automatically and without any action on the part of the holder
thereof into an equal number of issued and outstanding shares of common stock
of the Surviving Corporation.
ARTICLE IV
MISCELLANEOUS
4.1 Conditions Precedent. The respective obligations of each party
under this Plan of Merger shall be subject to the satisfaction, or waiver by
the party permitted to do so, of the conditions set forth in Article V of the
Reorganization Agreement.
4.2 Termination. This Plan of Merger shall be terminated upon the
termination of the Reorganization Agreement in accordance with Article VI
thereof.
4.3 Amendments. To the extent permitted by law and the Reorganization
Agreement, this Plan of Merger may be amended by a subsequent writing signed
by all of the parties hereto upon the approval of the Board of Directors of
each of the parties hereto.
4.4 Successors. This Plan of Merger shall be binding on the
successors of Interim and KBI.
B-3
IN WITNESS WHEREOF, Interim and KBI have caused this Plan of Merger to
be executed by their duly authorized officers and their corporate seals to be
hereunto affixed as of the date first above written.
KBI ACQUISITION CORP.
Attest:
/s/ Xxxx Xxxxxxxx /s/ Xxxxx X. Xxxxxxxx
----------------------- -------------------------------
Secretary Xxxxx X. Xxxxxxxx
President and Chief Executive Officer
KENWOOD BANCORP, INC.
Attest:
/s/ P. Xxxxxxx Xxxxxxxx /s/ Xxxxxx X. Xxxxx
----------------------- -------------------------------
Secretary Xxxxxx X. Xxxxx
Executive Vice President
and Chief Executive Officer
B-4
Exhibit C
PLAN OF COMPLETE LIQUIDATION
AND DISSOLUTION OF KENWOOD BANCORP, INC.
This Plan of Complete Liquidation and Dissolution (the "Plan") shall
effect the complete liquidation and dissolution of Kenwood Bancorp, Inc. (the
"Company"), a Delaware corporation and wholly owned subsidiary of Peoples
Community Bank, a federal savings bank ("PCB"), in accordance with Section 332
of the Internal Revenue Code of 1986, as amended (the "Code"), and Section 275
of the General Corporation Law of the State of Delaware ("DGCL").
1. Adoption of Plan. As of the date hereof, by unanimous written
consent of PCB, the sole stockholder of the Company, liquidation of the
Company in accordance with this plan and pursuant to Section 275(c) of the
DGCL, has been approved and this Plan has been adopted.
2. Filing of Forms. The officers of PCB are authorized and directed
to execute and file, of cause the Company to execute and file, a United States
Treasury Form 966 pursuant to Section 6043 of the Code within thirty (30) days
after the adoption of this Plan in accordance with Section 1 hereof and such
additional or other forms and reports with and to the Internal Revenue Serve
as may be necessary, desirable or appropriate in connection with the
implementation of this Plan.
3. Dissolution. PCB shall execute and file a Certificate of
Dissolution for the Company in accordance with Section 275 of the DGCL. After
dissolution, the Company shall carry on no business except for the purpose of
winding up its affairs in accordance with Section 278 of the DGCL.
4. Authorization to Officers. The officers of PCB are authorized to
execute and deliver such agreements, conveyances, assignments, transfers,
certificates and other documents and to take such other actions as such
officers may deem necessary, appropriate or desirable in order to carry out
the provisions of this Plan and effect a complete liquidation and dissolution
of the Company in accordance with Section 332 of the Code and Section 275 of
the DGCL.
* * *
Adopted by the duly authorized vote of the Board of Directors of PCB
this ____ day of __________, 2001.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement and
Plan of Merger and Liquidation to be executed by their respective duly
authorized officers as of the day and year first above written.
PEOPLES COMMUNITY BANCORP, INC.
Attest:
By:
----------------------- -------------------------------
Xxxxx X. Xxxxxxxx
President and Chief Executive Officer
KENWOOD BANCORP, INC.
Attest:
---------------------- By: -------------------------------
Chairman, President and
Chief Executive Officer
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