SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) February 18, 2000
_____________________________
Pennwood Bancorp, Inc.
_____________________________________________________________________________
(Exact Name of Registrant as Specified in Charter)
Pennsylvania 0-21939 25-1783648
_____________________________________________________________________________
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
683 Lincoln Avenue, Pittsburgh, Pennsylvania 15202
_____________________________________________________________________________
(Address of Principal Executive Offices) (Zip Code)
(412) 761-1234
_____________________________________________________________________________
(Registrant's telephone number, including area code)
Not Applicable
_____________________________________________________________________________
(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS
On February 18, 2000, Fidelity Bancorp, Inc., a Pennsylvania corporation
("Fidelity"), and Pennwood Bancorp, Inc. ("Pennwood") issued a joint press
release announcing the execution of a definitive Agreement and Plan of Merger
dated February 18, 2000 between Pennwood and Fidelity (the "Merger
Agreement"). Under the terms of the Merger Agreement, Pennwood will merge
with a to-be-formed wholly owned subsidiary of Fidelity (the "Merger") with
Pennwood being the survivor thereof. Immediately following the Merger,
Pennwood will merge with and into Fidelity with Fidelity being the survivor,
and Pennwood Savings Bank, a wholly owned subsidiary of Pennwood, will merge
with and into Fidelity Bank, a wholly owned subsidiary of Fidelity.
Pursuant to the Merger Agreement, each issued and outstanding share of
Pennwood common stock, par value $0.01 (other than dissenting shares), shall
be converted into and represent the right to receive $13.10 in cash. However,
any shares of Pennwood common stock owned beneficially or as of record by
either Fidelity or Pennwood or any of their subsidiaries (other than shares
held in a fiduciary capacity for the benefit of third parties or as a result
of debts previously contracted) shall be canceled. Concurrently with the
consummation of the Merger, all unvested stock options and grants of
restricted stock awarded under Pennwood's Stock Option Plan and Recognition
and Retention Plan, respectively, will immediately vest. Each holder of an
option to purchase Pennwood common stock will have the option to (i) convert
such option into an option to purchase shares of Fidelity common stock or (ii)
receive cash in an amount equal to the difference between $13.10 and the
option exercise price. If an option holder elects to convert his or her
Pennwood option, the option holder's converted option will maintain in all
material respects the same economic equivalent position he or she had with the
Pennwood options.
The Merger is intended to qualify as a tax-free reorganization under the
Internal Revenue Code of 1986, as amended. The receipt of cash by the
stockholders of Pennwood will be a taxable event for the stockholders.
Consummation of the Merger is subject to various conditions, including:
(1) receipt of approval by the stockholders of Pennwood; (2) receipt of all
requisite regulatory approvals; and (3) satisfaction of certain other
conditions. Each of the directors of Pennwood has executed a voting
agreement whereby they have agreed, subject to the exercise of their fiduciary
duties, to vote all of the shares of Pennwood common stock they own or over
which they exercise full voting control (excluding shares over which they have
voting control in a fiduciary capacity) in favor of the Merger Agreement.
Under the terms of the Merger Agreement, Fidelity may obtain, within
certain time frames set forth in the Merger Agreement, environmental
investigations of any of the real property owned or leased by Pennwood. In
the event such investigations determine that remedial action is required by
applicable law or recommended or prudent in light of serious life, health or
safety issues, Fidelity may terminate the Merger Agreement if the aggregate
estimated cost of such remedial action exceeds $150,000.
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Under certain circumstances, if the Merger Agreement is terminated by
Fidelity in the manner and for the reasons permitted by the Merger Agreement
before the consummation of the Merger, Pennwood may be required to pay
Fidelity $377,000 in immediately available funds.
The Merger Agreement and the press release announcing the Merger issued
on February 18, 2000 are attached as exhibits to this report and are
incorporated herein by reference. The foregoing summary of the Merger
Agreement does not purport to be complete and is qualified in its entirety by
reference to such agreement.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) and (b) not applicable.
(c) The following exhibits are filed with this report:
Exhibit Number Description
-------------- -----------
2.1 Agreement and Plan of
Merger, dated as of February
18, 2000, between Fidelity
and Pennwood, excluding
exhibits thereto
99.1 Press Release issued on
February 18, 2000 with
respect to the Merger
Agreement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PENNWOOD BANCORP, INC.
Date: February 24, 2000 By: /s/ Paul S. Pieffer
--------------------------
Paul S. Pieffer
President and Chief Executive Officer
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
between
FIDELITY BANCORP, INC.
and
PENNWOOD BANCORP, INC.
dated as of February 18, 2000
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.1 The Corporate Merger and Subsequent Events. . . . . .6
2.2 Effective Time; Closing . . . . . . . . . . . . . . .6
2.3 Treatment of Capital Stock. . . . . . . . . . . . . .7
2.4 Shareholder Rights; Stock Transfers . . . . . . . . .7
2.5 Options and Restricted Stock. . . . . . . . . . . . .7
2.6 Exchange Procedures . . . . . . . . . . . . . . . . .8
2.7 Dissenting Shares . . . . . . . . . . . . . . . . . .9
2.8 Additional Actions. . . . . . . . . . . . . . . . . .9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . 10
3.1 Capital Structure . . . . . . . . . . . . . . . . . 10
3.2 Organization, Standing and Authority of Seller. . . 10
3.3 Ownership of Seller Subsidiaries. . . . . . . . . . 10
3.4 Organization, Standing and Authority of Seller
Subsidiaries. . . . . . . . . . . . . . . . . . . 11
3.5 Authorized and Effective Agreement. . . . . . . . . 11
3.6 Securities Documents and Regulatory Reports . . . . 12
3.7 Financial Statements. . . . . . . . . . . . . . . . 13
3.8 Material Adverse Change . . . . . . . . . . . . . . 13
3.9 Environmental Matters . . . . . . . . . . . . . . . 13
3.10 Tax Matters . . . . . . . . . . . . . . . . . . . . 14
3.11 Legal Proceedings . . . . . . . . . . . . . . . . . 15
3.12 Compliance with Laws. . . . . . . . . . . . . . . . 15
3.13 Certain Information . . . . . . . . . . . . . . . . 15
3.14 Employee Benefit Plans. . . . . . . . . . . . . . . 16
3.15 Certain Contracts . . . . . . . . . . . . . . . . . 17
3.16 Brokers and Finders . . . . . . . . . . . . . . . . 18
3.17 Insurance . . . . . . . . . . . . . . . . . . . . . 18
3.18 Properties. . . . . . . . . . . . . . . . . . . . . 18
3.19 Labor . . . . . . . . . . . . . . . . . . . . . . . 19
3.20 Allowance for Loan Losses . . . . . . . . . . . . . 19
3.21 Year 2000 Compliant . . . . . . . . . . . . . . . . 19
3.22 Material Interests of Certain Persons . . . . . . . 19
3.23 Fairness Opinion. . . . . . . . . . . . . . . . . . 19
3.24 Disclosures . . . . . . . . . . . . . . . . . . . . 20
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3.25 No Undisclosed Liabilities. . . . . . . . . . . . . 20
3.26 Loan Portfolio. . . . . . . . . . . . . . . . . . . 20
3.27 Investment Portfolio. . . . . . . . . . . . . . . . 20
3.28 Interest Rate Risk Management Instruments . . . . . 21
3.29 Interim Events. . . . . . . . . . . . . . . . . . . 21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER. . . . . . . . . . . . 21
4.1 Organization, Standing and Authority of Buyer . . . 21
4.2 Ownership of Buyer Subsidiaries . . . . . . . . . . 21
4.3 Organization, Standing and Authority of Buyer
Subsidiaries. . . . . . . . . . . . . . . . . . . 22
4.4 Authorized and Effective Agreement. . . . . . . . . 22
4.5 Securities Documents and Regulatory Reports . . . . 23
4.6 Financial Statements. . . . . . . . . . . . . . . . 23
4.7 Material Adverse Change . . . . . . . . . . . . . . 24
4.8 Legal Proceedings . . . . . . . . . . . . . . . . . 24
4.9 Certain Information . . . . . . . . . . . . . . . . 24
4.10 Brokers and Finders . . . . . . . . . . . . . . . . 25
4.11 Disclosures . . . . . . . . . . . . . . . . . . . . 25
4.12 Financial Resources . . . . . . . . . . . . . . . . 25
ARTICLE V
COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.1 Reasonable Best Efforts . . . . . . . . . . . . . . 25
5.2 Shareholder Meeting . . . . . . . . . . . . . . . . 25
5.3 Regulatory Matters. . . . . . . . . . . . . . . . . 26
5.4 Investigation and Confidentiality . . . . . . . . . 27
5.5 Press Releases. . . . . . . . . . . . . . . . . . . 27
5.6 Business of the Parties . . . . . . . . . . . . . . 28
5.7 Certain Actions . . . . . . . . . . . . . . . . . . 31
5.8 Current Information . . . . . . . . . . . . . . . . 31
5.9 Indemnification; Insurance. . . . . . . . . . . . . 31
5.10 Advisory Directors After the Company Merger . . . . 32
5.11 Employees and Employee Benefit Plans. . . . . . . . 32
5.12 Company Merger. . . . . . . . . . . . . . . . . . . 34
5.13 Bank Merger . . . . . . . . . . . . . . . . . . . . 34
5.14 Organization of Merger Sub. . . . . . . . . . . . . 35
5.15 Conforming Entries. . . . . . . . . . . . . . . . . 35
5.16 Integration of Policies . . . . . . . . . . . . . . 35
5.17 Disclosure Supplements. . . . . . . . . . . . . . . 36
5.18 Failure to Fulfill Conditions . . . . . . . . . . . 36
5.19 Environmental Reports . . . . . . . . . . . . . . . 36
5.20 Transaction Expenses of Seller. . . . . . . . . . . 37
ARTICLE VI
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . 37
6.1 Conditions Precedent - Buyer and Seller . . . . . . 37
6.2 Conditions Precedent - Seller . . . . . . . . . . . 38
6.3 Conditions Precedent - Buyer. . . . . . . . . . . . 39
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT. . . . . . . . . . . . . . . 40
7.1 Termination . . . . . . . . . . . . . . . . . . . . 40
7.2 Effect of Termination . . . . . . . . . . . . . . . 41
7.3 Survival of Representations, Warranties and
Covenants . . . . . . . . . . . . . . . . . . . . 42
7.4 Waiver. . . . . . . . . . . . . . . . . . . . . . . 42
7.5 Amendment or Supplement . . . . . . . . . . . . . . 43
ARTICLE VIII
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 43
8.1 Entire Agreement. . . . . . . . . . . . . . . . . . 43
8.2 No Assignment . . . . . . . . . . . . . . . . . . . 43
8.3 Notices . . . . . . . . . . . . . . . . . . . . . . 43
8.4 Alternative Structure . . . . . . . . . . . . . . . 44
8.5 Interpretation. . . . . . . . . . . . . . . . . . . 45
8.6 Counterparts. . . . . . . . . . . . . . . . . . . . 45
8.7 Governing Law . . . . . . . . . . . . . . . . . . . 45
8.8 Severability. . . . . . . . . . . . . . . . . . . . 45
8.9 Standard of Materiality . . . . . . . . . . . . . . 45
AGREEMENT AND PLAN OF MERGER
WHEREAS, the Boards of Directors of Buyer and Seller (all terms as
defined in Article I hereof) have determined to consummate certain business
combination transactions subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of such inducements and of the mutual
covenants and agreements contained herein, the Parties hereby agree as
follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Agreement" shall mean this Agreement and Plan of Merger dated as of
February 18, 2000 between Buyer and Seller.
"Articles of Merger" shall mean the articles of merger to be filed with
the Pennsylvania Secretary of State with respect to the Corporate Merger and
the Company Merger.
"Bank Merger" shall mean the contemplated merger of Seller Bank into
Buyer Bank, with Buyer Bank surviving.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"BIF" shall mean the Bank Insurance Fund administered by the FDIC or any
successor thereto.
"Buyer" shall mean Fidelity Bancorp, Inc., a Pennsylvania corporation.
"Buyer Bank" shall mean Fidelity Savings Bank, a Pennsylvania-chartered
stock savings bank and wholly owned subsidiary of Buyer.
"Buyer Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Buyer as of
September 30, 1999 and 1998 and the consolidated income statements and
statements of changes in equity and cash flows (including related notes and
schedules, if any) of Buyer for each of the three years ended September 30,
1999, 1998 and 1997, as filed by Buyer in its Securities Documents, and (ii)
the consolidated balance sheets (including related notes and schedules, if
any) of Buyer and the consolidated income statements and statements of changes
in equity and cash flows (including related notes and schedules, if any) of
Buyer included in Securities Documents filed by Buyer with respect to the
periods ended subsequent to September 30, 1999.
"Cause" shall mean termination because of the employee's personal
dishonesty in the conduct of his duties, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties or willful violation of any law, rule or regulation
(other than traffic violations or similar offenses) or final cease-and-desist
order.
"Certificate" shall mean any certificate which prior to the Effective
Time represented shares of Seller Common Stock
"Closing" shall mean the closing of the Corporate Merger at a time and
place reasonably selected by Buyer following the satisfaction or waiver of all
conditions to the Corporate Merger
"Closing Date" shall mean the date on which the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company Merger" shall mean the contemplated Merger of the Surviving
Corporation into Buyer, with Buyer surviving.
"Corporate Merger" shall mean the merger of Merger Sub into Seller, with
Seller surviving.
"CRA" shall mean the Community Reinvestment Act.
"Department" shall mean the Pennsylvania Department of Banking.
"Dissenting Shares" shall mean any shares of Seller Common Stock whose
holder becomes entitled to the payment of the fair value of such shares under
the PBCL.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the time of the filing of the Articles of
Merger, or such later time as may be specified in the Articles of Merger.
"Environmental Claim" shall mean any written notice from any
Governmental Entity or third party alleging potential liability (including
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on, or resulting from the presence, or
release into the environment, of any Materials of Environmental Concern.
"Environmental Laws" shall mean any federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with any
Governmental Entity relating to (i) the protection, preservation or
restoration of the environment (including air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (ii) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environment Concern.
The term Environmental Law
2
includes (i) 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
1101, et seq; the Safe Drinking Water Act, 42 U.S.C. Section 300f, et seq; and
all comparable state and local laws, and (ii) any common law (including
common law that may impose strict liability) that may impose liability or
obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" shall mean an exchange agent designated by Buyer, who
shall be reasonably acceptable to Seller.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System.
"FHLB" shall mean the Federal Home Loan Bank of Pittsburgh.
"GAAP" shall mean generally accepted accounting principles.
"Governmental Entity" shall mean any federal or state court,
administrative agency or commission or other governmental authority or
instrumentality.
"include" shall mean "include without limitation."
"Insider Loans" shall mean loans from Seller or any Seller Subsidiary to
any executive officer or director of Seller, any Seller Subsidiary or any
associate or related interest of any such person.
"IRS" shall mean the Internal Revenue Service or any successor thereto.
"Material Adverse Effect" shall mean, with respect to any Party, any
effect that is material and adverse to the financial condition, results of
operations or business of that Party and its Subsidiaries taken as whole, or
that materially impairs the ability of any Party to consummate the Merger,
provided, however, that Material Adverse Effect shall not be deemed to include
the impact of (a) changes in laws and regulations or interpretations thereof
that are generally applicable to the banking or savings industries, (b)
changes in GAAP that are generally applicable to the banking or savings
industries, (c) expenses incurred in connection with the transactions
contemplated hereby,
3
(d) actions or omissions of a party (or any of its Subsidiaries) taken with
the prior informed written consent of the other party or parties in
contemplation of the transactions contemplated hereby, or (e) changes
attributable to or resulting from changes in general economic conditions,
including changes in the prevailing level of interest rates.
"Materials of Environmental Concern" shall mean pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products and
any other materials regulated under Environmental Laws.
"Merger" shall mean the Corporate Merger, the other transactions
contemplated by this Agreement, the Company Merger and the Bank Merger.
"Merger Consideration" shall mean $13.10 in cash without interest for
each share of Seller Common Stock.
"Merger Sub" shall mean a Pennsylvania corporation to be organized as a
subsidiary of Buyer.
"Merger Sub Common Stock" shall mean the common stock of Merger Sub.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Parties" shall mean Buyer and Seller.
"PBCL" shall mean the Pennsylvania Business Corporation Law, as amended.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Previously Disclosed" shall mean disclosed in a disclosure schedule
delivered on or prior to the date hereof by the disclosing Party to the other
Party specifically referring to the appropriate section of this Agreement and
describing in reasonable detail the matters contained therein.
"Proxy Statement" shall mean the proxy statement to be delivered to
shareholders of Seller in connection with the solicitation of their approval
of this Agreement and the transactions contemplated hereby.
"Rights" shall mean warrants, options, rights, convertible securities
and other arrangements or commitments which obligate an entity to issue or
dispose of any of its capital stock or other ownership interests.
"SAIF" shall mean the Savings Association Insurance Fund administered by
the FDIC or any successor thereto.
"SEC" shall mean the Securities and Exchange Commission.
4
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars, proxy
statements, registration statements and all similar documents filed, or
required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of
1940, as amended; the Trust Indenture Act of 1939, as amended, and the rules
and regulations of the SEC promulgated thereunder.
"Seller" shall mean Pennwood Bancorp, Inc., a Pennsylvania corporation.
"Seller Bank" shall mean Pennwood Savings Bank, a Pennsylvania-chartered
savings bank and wholly owned subsidiary of Seller.
"Seller Common Stock" shall mean the common stock, par value $.01 per
share, of Seller.
"Seller Defined Benefit Plan" shall mean any Seller Employee Plan
constituting an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA.
"Seller Employee Plans" shall mean all stock option, employee stock
purchase and stock bonus plans, qualified pension or profit-sharing plans, any
deferred compensation, consultant, bonus or group insurance contract or any
other incentive, health and welfare or employee benefit plan or agreement
maintained for the benefit of employees or former employees of Seller, or any
Seller Subsidiary, whether written or oral.
"Seller ESOP" shall mean the employee stock ownership plan of Seller, as
in effect as of the date hereof.
"Seller Financial Statements" shall mean (i) the consolidated statements
of financial condition (including related notes and schedules, if any) of
Seller as of June 30, 1999 and 1998 and the consolidated statements of income,
shareholders' equity and cash flows (including related notes and schedules, if
any) of Seller for each of the three years ended June 30, 1999, 1998 and 1997
as filed by Seller in its Securities Documents, and (ii) the consolidated
statements of financial condition of Seller (including related notes and
schedules, if any) and the consolidated statements of income, shareholders'
equity and cash flows (including related notes and schedules, if any) of
Seller included in the Securities Documents filed by Seller with respect to
the periods ended subsequent to June 30, 1999.
"Seller Options" shall mean options to purchase shares of Seller Common
Stock issued pursuant to Seller's Stock Option Plan.
"Seller Preferred Stock" shall mean the shares of serial preferred
stock, par value $.01 per share, of Seller.
5
"Seller Restricted Stock" shall mean Seller Common Stock subject to
restrictions pursuant to Seller's Recognition and Retention Plan.
"Subsidiary" and "Significant Subsidiary" shall have the meanings set
forth in Rule 1-02 of Regulation S-X of the SEC.
"Surviving Corporation" shall mean Seller after the Corporate Merger.
"Surviving Corporation Common Stock" shall mean the shares of common
stock of the Surviving Corporation.
"Year 2000 Compliant" shall mean that all hardware, firmware, software
and computer systems (i) continue to completely and accurately address,
produce, store and calculate data involving dates beginning with January 1,
2000 and continue not to produce abnormally ending or incorrect results
involving such dates as used in any forward or regression dated based
functions; and (ii) continue to provide that all "date"-related
functionalities and data fields include the indication of century and
millennium, and continue to perform calculations which involve a four-digit
year.
ARTICLE II
THE MERGER
2.1 The Corporate Merger and Subsequent Events
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time, Merger Sub shall be merged into Seller in accordance with the
provisions of Section 1921 of the PBCL, and the separate corporate existence
of Merger Sub shall cease. Seller shall be the Surviving Corporation of the
Corporate Merger, and shall continue its corporate existence under the laws of
the Commonwealth of Pennsylvania. The name of the Surviving Corporation shall
be as stated in the Articles of Incorporation of Seller immediately prior to
the Effective Time. Immediately following the Corporate Merger, (i) the
Surviving Corporation shall merge into Buyer, with Buyer surviving and (ii)
the Seller Bank shall merge with Buyer Bank, with Buyer Bank surviving.
(b) The Articles of Incorporation and Bylaws of Seller as in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
and Bylaws of the Surviving Corporation.
(c) The directors and officers of Merger Sub immediately prior to the
Effective Time shall be the directors and officers of the Surviving
Corporation.
2.2 Effective Time; Closing
The Corporate Merger shall become effective at the Effective Time. The
Articles of Merger shall be filed as soon after the Closing as is practicable.
6
2.3 Treatment of Capital Stock
Subject to the provisions of this Agreement, at the Effective Time,
automatically by virtue of the Corporate Merger and without any action on the
part of any shareholder:
(a) each outstanding share of Merger Sub Common Stock shall
automatically convert into a share of Surviving Corporation Common Stock;
(b) each share of Buyer's common stock shall continue unchanged as the
same share of Buyer's common stock; and
(c) each share of Seller Common Stock issued and outstanding
immediately prior to the Effective Time (other than Dissenting Shares) shall,
by virtue of the Corporate Merger and without any action of any kind by any
person or entity, be converted into the right to receive the Merger
Consideration; provided, however, that each share of Seller Common Stock which
is owned beneficially or of record by Seller (including treasury shares) or
Buyer or any of their respective Subsidiaries (other than shares held in a
fiduciary capacity for the benefit of third parties or as a result of debts
previously contracted) shall be canceled and retired without consideration or
conversion.
2.4 Shareholder Rights; Stock Transfers
At the Effective Time, holders of Seller Common Stock shall cease to be
and shall have no rights as shareholders of Seller, other than to receive the
Merger Consideration for each share of Seller Common Stock held. After the
Effective Time, there shall be no transfers on the stock transfer books of
Seller or the Surviving Corporation of shares of Seller Common Stock and if
Certificates are presented for transfer after the Effective Time, they shall
be delivered to Buyer or the Exchange Agent for cancellation against delivery
of the Merger Consideration. No interest shall be paid on the Merger
Consideration.
2.5 Options and Restricted Stock
At the Effective Time, each outstanding Seller Option granted to an
eligible individual (an "Optionee") under the Seller's Stock Option Plan shall
be, as indicated by the Optionee and subject to Buyer's discretion, converted
into an option to purchase Buyer's common stock ("Buyer Stock Option"),
wherein all material respects each Optionee receiving Buyer Stock Options will
maintain the same economically equivalent position that such Optionee
previously held with Seller Options, and the Buyer Stock Options that
Optionees receive shall be subject to the same terms and conditions that
governed the Seller Option on which it was based, including the length of time
within which the Seller Option may be exercised and for any Seller Options
which are "incentive stock options" (as defined in Section 422 of the Code),
the adjustments shall be and are intended to be effected in a manner which is
consistent with Section 424(a) of the Code. If the Optionee shall elect not
to convert an option to purchase Seller Common Stock to an option to purchase
Buyer's common stock or if Buyer determines not to issue Buyer Stock Options
in exchange for Seller Options, each share
7
of Seller Common Stock under such Seller Options shall be converted into a
right to receive the Merger Consideration less the applicable exercise price
per share.
At the Effective Time, each holder of an unvested share of Seller
Restricted Stock under the Seller's Recognition and Retention Plan shall be
entitled to receive an amount of compensation equal to the Merger
Consideration for each such share of Seller Restricted Stock subject to
applicable federal and state tax withholding obligations of the Seller
together with accumulated but undistributed dividends on such Seller
Restricted Stock.
2.6 Exchange Procedures
(a) No later than five business days following the Effective Time,
Buyer shall cause the Exchange Agent to mail or make available to each holder
of record of any Certificate a notice and letter of transmittal disclosing the
effectiveness of the Corporate Merger and the procedure for exchanging
Certificates for the Merger Consideration. Such letter of transmittal shall
specify that delivery shall be effected and risk of loss and title shall pass
only upon proper delivery of Certificates to the Exchange Agent.
(b) At or prior to the Effective Time, Buyer shall deliver to the
Exchange Agent an amount of cash equal to the aggregate Merger Consideration.
(c) Each holder of any outstanding Certificate (other than holders of
Dissenting Shares) who surrenders such Certificate to the Exchange Agent will,
upon acceptance thereof by the Exchange Agent, be entitled to the Merger
Consideration for each share represented by such Certificate. The Exchange
Agent shall accept Certificates upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly exchange in
accordance with normal exchange practices. Each outstanding Certificate which
is not surrendered to the Exchange Agent shall, except as otherwise herein
provided, evidence ownership of only the right to receive the Merger
Consideration for each share represented by such Certificate.
(d) The Exchange Agent shall not be obligated to deliver the Merger
Consideration until the holder surrenders a Certificate as provided in this
Section 2.6, or, in default thereof, an appropriate affidavit of loss and
indemnity agreement and/or a bond as may be required in each case by the
Exchange Agent. If any check is to be issued in a name other than that in
which the Certificate is registered, it shall be a condition of the issuance
thereof that the Certificate so surrendered shall be properly endorsed or
accompanied by an executed form of assignment separate from the Certificate
and otherwise in proper form for transfer and that the person requesting such
exchange pay to the Exchange Agent any transfer or other tax required by
reason of the issuance of a check in any name other than that of the
registered holder of the certificate surrendered or otherwise establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(e) Any portion of the cash delivered to the Exchange Agent by Buyer
pursuant to Section 2.6(b) that remains unclaimed by the shareholders of
Seller for six months after the Closing Date shall be delivered by the
Exchange Agent to Buyer. Any shareholders of Seller who have not theretofore
complied with Section 2.6(c) shall thereafter look only to Buyer for the
Merger
8
Consideration. If outstanding Certificates are not surrendered or the payment
for them is not claimed prior to the date on which such payment would
otherwise escheat to or become the property of any Governmental Entity, the
unclaimed items shall, to the extent permitted by abandoned property and any
other applicable law, become the property of Buyer (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 Seller Common Stock represented by any Certificate for any consideration
paid to a public official pursuant to applicable abandoned property, escheat
or similar laws. Buyer and the Exchange Agent shall be entitled to rely upon
the stock transfer books of Seller to establish the identity of those persons
entitled to receive the Merger Consideration, which books shall be conclusive
with respect thereto. In the event of a dispute with respect to ownership of
Seller Common Stock represented by any Certificate, Buyer and the Exchange
Agent shall be entitled to deposit any Merger Consideration represented
thereby in escrow with an independent third party and thereafter be relieved
with respect to any claims thereto.
(f) Buyer shall be entitled to deduct and withhold from consideration
otherwise payable pursuant to this Agreement to any holder of Certificates,
such amounts as it is required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by Buyer, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the Certificates in respect of which such deduction
and withholding was made.
2.7 Dissenting Shares
(a) Any holders of Dissenting Shares shall be entitled to payment for
such shares only to the extent permitted by and in accordance with the
provisions of the PBCL; provided, however, that if, in accordance with the
PBCL, any holder of Dissenting Shares shall forfeit such right to payment of
the fair value of such shares, such shares shall thereupon be deemed to have
been converted into and to have become exchangeable for, as of the Effective
Time, the right to receive the Merger Consideration. Dissenting Shares shall
not, after the Effective Time, be entitled to vote for any purpose or receive
any dividends or other distributions and shall be entitled only to such rights
as are afforded in respect of Dissenting Shares pursuant to the PBCL.
(b) Seller shall give Buyer (i) prompt notice of any written
objections to the Corporate Merger and any written demands for the payment of
the fair value of any shares, withdrawals of such demands, and any other
instruments served pursuant to the PBCL received by Seller and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
such demands under the PBCL. Seller shall not voluntarily make any payment
with respect to any demands for payment of fair value and shall not, except
with the prior written consent of Buyer, settle or offer to settle any such
demands.
2.8 Additional Actions
If, at any time after the Effective Time, Buyer shall consider that any
further assignments or assurances in law or any other acts are necessary or
desirable to (i) vest, perfect or confirm, of record
9
or otherwise, in Buyer its right, title or interest in, to or under any of the
rights, properties or assets of Seller acquired or to be acquired by Buyer as
a result of, or in connection with, the Merger, or (ii) otherwise carry out
the purposes of this Agreement, Seller and its proper officers and directors
shall be deemed to have granted to Buyer an irrevocable power of attorney to
execute and deliver all such proper deeds, assignments and assurances in law
and to do all acts necessary or proper to vest, perfect or confirm title to
and possession of such rights, properties or assets in Buyer and otherwise to
carry out the purposes of this Agreement; and the proper officers and
directors of Buyer are fully authorized in the name of Seller or otherwise to
take any and all such action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows, except as Previously
Disclosed:
3.1 Capital Structure
The authorized capital stock of Seller consists of 4,000,000 shares of
Seller Common Stock and 1,000,000 shares of Seller Preferred Stock. As of the
date hereof, 555,539 shares of Seller Common Stock are outstanding (including
21,478 shares of Seller Restricted Stock issued under Seller's Recognition and
Retention Plan), 257,880 shares of Seller Common Stock are held in treasury,
and no shares of Seller Preferred Stock have been issued. All outstanding
shares of Seller Common Stock have been duly authorized and validly issued and
are fully paid and nonassessable, and none of the outstanding shares of Seller
Common Stock has been issued in violation of the preemptive rights of any
person, firm or entity. Except for (i) Seller Options to acquire not more than
81,350 shares of Seller Common Stock as of the date hereof, a schedule of
which has been Previously Disclosed, and (ii) 21,478 unvested shares of Seller
Restricted Stock as of the date hereof, a schedule of which has been
Previously Disclosed, there are no Rights authorized, issued or outstanding
with respect to the capital stock of Seller as of the date hereof.
3.2 Organization, Standing and Authority of Seller
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania, with full
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as now conducted, and Seller is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
its ownership or leasing of property or the conduct of its business requires
such licensing or qualification. Seller is a bank holding company under the
BHCA and subject to the regulation and supervision by the Federal Reserve
Board and the Department. Seller has heretofore delivered to Buyer true and
complete copies of the Articles of Incorporation and Bylaws of Seller as in
effect as of the date hereof.
3.3 Ownership of Seller Subsidiaries
Seller has Previously Disclosed the name, jurisdiction of incorporation
and percentage ownership of each direct or indirect Seller Subsidiary and
identified Seller Bank as its only
10
Significant Subsidiary. Except for (x) capital stock of Seller Subsidiaries,
(y) securities and other interests held in a fiduciary capacity and
beneficially owned by third parties or taken in consideration of debts
previously contracted and (z) securities and other interests which are
Previously Disclosed, Seller does not own or have the right to acquire,
directly or indirectly, any outstanding capital stock or other voting
securities or ownership interests of any corporation, bank, savings
association, partnership, joint venture or other organization, other than
investment securities representing not more than 5% of any entity. The
outstanding shares of capital stock or other ownership interests of each
Seller Subsidiary have been duly authorized and validly issued, are fully paid
and nonassessable, and are directly owned by Seller free and clear of all
liens, claims, encumbrances, charges, pledges, restrictions or rights of third
parties of any kind whatsoever. No rights are authorized, issued or
outstanding with respect to the capital stock or other ownership interests of
Seller Subsidiaries and there are no agreements, understandings or commitments
relating to the right of Seller to vote or to dispose of such capital stock or
other ownership interests.
3.4 Organization, Standing and Authority of Seller Subsidiaries
Each of the Seller Subsidiaries is a savings bank, corporation or
partnership duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is organized with full power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted, and each of the Seller Subsidiaries is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of property or the conduct of
its business requires such licensing or qualification. The deposit accounts of
Seller Bank are insured by the SAIF to the maximum extent permitted by the
FDIA and Seller Bank has paid all deposit insurance premiums and assessments
required by the FDIA and the regulations thereunder. Seller has heretofore
delivered to Buyer true and complete copies of the Articles of Incorporation,
as amended and restated, and Bylaws of Seller Bank as in effect as of the date
hereof.
3.5 Authorized and Effective Agreement
(a) Seller has all requisite power and authority to enter into this
Agreement and (subject to receipt of all necessary governmental approvals and
the approval of Seller's shareholders of this Agreement) to perform all of its
respective obligations hereunder. The execution and delivery of this Agreement
and the completion of the transactions contemplated hereby have been deemed
advisable by the Board and duly authorized and approved by all necessary
corporate action in respect thereof on the part of Seller, except for the
approval of this Agreement by Seller's shareholders. This Agreement has been
duly and validly executed and delivered by Seller and, assuming due
authorization, execution and delivery by Buyer, constitutes a legal, valid and
binding obligation of Seller, enforceable against Seller in accordance with
its terms, subject, as to enforceability, to bankruptcy, insolvency and other
laws of general applicability relating to or affecting creditors' rights and
to general equity principles.
(b) Neither the execution and delivery of this Agreement nor
completion of the transactions contemplated hereby, nor compliance by Seller
with any of the provisions hereof (i) does or will conflict with or result in
a breach of any provisions of the Articles of Incorporation or Bylaws of
Seller or the equivalent documents of any Seller Subsidiary, (ii) violate,
conflict with or
11
result in a breach of any term, condition or provision of, or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of Seller or any Seller
Subsidiary pursuant to, any material note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which
Seller or any Seller Subsidiary is a party, or by which any of their
respective properties or assets may be bound or affected, or (iii) subject to
receipt of all required governmental and shareholder approvals, violates any
order, writ, injunction, decree, statute, rule or regulation applicable to
Seller or any Seller Subsidiary.
(c) To the best knowledge of Seller, except for (i) the filing of
applications and notices with and the approvals of the Federal Reserve Board
and the FDIC, (ii) the filing of applications with the Department and the
approvals of the Department, (iii) the filing and clearance of the Proxy
Statement relating to the meeting of shareholders of Seller to be held
pursuant to Section 5.2 hereof with the SEC, (iv) the approval of this
Agreement and the transactions contemplated hereby by the requisite vote of
the shareholders of Seller, (v) the filing of the Articles of Merger with the
Secretary of State of the Commonwealth of Pennsylvania in connection with the
Corporate Merger, (vi) the filing of Articles of Merger with the Department in
connection with the Bank Merger, and (vii) review of the Merger by the DOJ
under federal antitrust laws, no consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are
necessary on the part of Seller or Seller Bank in connection with (x) the
execution and delivery by Seller of this Agreement and the completion of the
transactions contemplated hereby, or (y) the Merger.
(d) Except as Previously Disclosed, as of the date hereof, neither
Seller nor Seller Bank is aware of any reasons relating to Seller or Seller
Bank (including CRA compliance) why all consents and approvals shall not be
procured from all Governmental Entities having jurisdiction over the Merger as
shall be necessary for the completion of the Merger and the continuation by
Buyer after the Effective Time of the business of each of Seller and Seller
Bank, respectively, as such business is carried on immediately prior to the
Effective Time, free of any conditions or requirements which could materially
impair the value of Seller or Seller Bank to Buyer.
3.6 Securities Documents and Regulatory Reports
(a) Since January 1, 1997, Seller has timely filed with the SEC and
the NASD all Securities Documents required by the Securities Laws and such
Securities Documents complied in all material respects with the Securities
Laws and did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Since January 1, 1997, each of Seller and Seller Bank has duly
filed with the FDIC and any other applicable federal or state banking
authority, as the case may be, the reports required to be filed under
applicable laws and regulations and such reports were in all material respects
complete and accurate and in compliance with the requirements of applicable
laws and regulations. In connection with the most recent examinations of
Seller and Seller Bank by the Federal Reserve Board, FDIC, and the Department,
neither Seller nor Seller Bank was required to correct or change
12
any action, procedure or proceeding which Seller or Seller Bank believes has
not been corrected or changed as required.
3.7 Financial Statements
(a) Seller has previously delivered or made available to Buyer
accurate and complete copies of the Seller Financial Statements, which are
accompanied by the audit reports of KPMG, LLP, independent certified public
accountants with respect to Seller. The Seller Financial Statements, as well
as the Seller Financial Statements to be delivered pursuant to Section 5.8
hereof, fairly present or will fairly present, as the case may be, the
consolidated financial condition of Seller as of the respective dates set
forth therein, and the consolidated income, changes in shareholders' equity
and cash flows of Seller for the respective periods or as of the respective
dates set forth therein.
(b) Each of the Seller Financial Statements referred to in Section
3.7(a) has been or will be, as the case may be, prepared in accordance with
GAAP consistently applied during the periods involved, except as stated
therein. The audits of Seller have been conducted in all material respects in
accordance with generally accepted auditing standards. The books and records
of Seller and the Seller Subsidiaries are being maintained in compliance with
applicable legal and accounting requirements, and such books and records
accurately reflect all dealings and transactions in respect of the business,
assets, liabilities and affairs of Seller and its Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for
in the Seller Financial Statements, (ii) of liabilities since incurred in the
ordinary course of business and (iii) of liabilities incurred in connection
with completion of the transactions contemplated by this Agreement, neither
Seller nor any Seller Subsidiary has any liabilities, whether absolute,
accrued, contingent or otherwise.
3.8 Material Adverse Change
Since June 30, 1999 or as Previously Disclosed, (i) Seller and its
Subsidiaries have conducted their respective businesses in the ordinary and
usual course (excluding the incurrence of expenses in connection with this
Agreement and the transactions contemplated hereby) and (ii) no event has
occurred or circumstance arisen that, in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect on Seller.
3.9 Environmental Matters
(a) To the best of Seller's knowledge, Seller and its Subsidiaries are
in compliance with all Environmental Laws. Neither Seller nor any Seller
Subsidiary has received any communication alleging that Seller or any Seller
Subsidiary is not in such compliance and, to the best knowledge of Seller,
there are no present circumstances that would prevent or interfere with the
continuation of such compliance.
13
(b) To the best of Seller's knowledge, none of the properties owned,
leased or operated by Seller or a Seller Subsidiary has been or is in
violation of or liable under any Environmental Law.
(c) To the best of Seller's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents that could
reasonably form the basis of any Environmental Claim or other claim or action
or governmental investigation that could result in the imposition of any
liability arising under any Environmental Law against Seller or a Seller
Subsidiary or against any person or entity whose liability for any
Environmental Claim Seller or a Seller Subsidiary has or may have retained or
assumed either contractually or by operation of law.
(d) Except in the ordinary course of its loan underwriting activities,
and except as Previously Disclosed, Seller has not conducted any environmental
studies during the past five years with respect to any properties owned by it
or a Seller Subsidiary as of the date hereof.
3.10 Tax Matters
(a) Seller and its Subsidiaries have timely filed all federal, state
and local (and, if applicable, foreign) income, franchise, bank, excise, real
property, personal property and other tax returns required by applicable law
to be filed by them (including estimated tax returns, income tax returns,
information returns and withholding and employment tax returns) and have paid,
or where payment is not required to have been made, have set up an adequate
reserve or accrual for the payment of, all taxes required to be paid in
respect of the periods covered by such returns and, as of the Effective Time,
will have paid, or where payment is not required to have been made, will have
set up an adequate reserve or accrual for the payment of, all material taxes
for any subsequent periods ending on or prior to the Effective Time. Neither
Seller nor any Seller Subsidiary will have any material liability for any such
taxes in excess of the amounts so paid or reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax
returns filed by Seller and its Subsidiaries are complete and accurate in all
material respects. Neither Seller nor any Seller Subsidiary is delinquent in
the payment of any tax, assessment or governmental charge or has requested any
extension of time within which to file any tax returns in respect of any
fiscal year or portion thereof. The federal, state and local income tax
returns of Seller and its Subsidiaries have been audited by the applicable tax
authorities for all periods ended through December 31, 1994 (or are closed to
examination due to the expiration of the applicable statute of limitations)
and no deficiencies for any tax, assessment or governmental charge have been
proposed, asserted or assessed (tentatively or otherwise) against Seller or
any Subsidiary as a result of such audits or otherwise which have not been
settled and paid. There are currently no agreements in effect with respect to
Seller or any Subsidiary to extend the period of limitations for the
assessment or collection of any tax. As of the date hereof, no audit,
examination or deficiency or refund litigation with respect to any such return
is pending or, to the best of Seller's knowledge, threatened.
(c) Neither Seller nor any Seller Subsidiary (i) is a party to any
agreement providing for the allocation or sharing of taxes other than the
agreement between Seller and Seller Bank Previously
14
Disclosed, (ii) is required to include in income any adjustment pursuant to
Section 481(a) of the Code by reason of a voluntary change in accounting
method initiated by Seller or any Subsidiary (nor does Seller have any
knowledge that the IRS has proposed any such adjustment or change of
accounting method) or (iii) has filed a consent pursuant to Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply.
3.11 Legal Proceedings
Except as Previously Disclosed, there are no actions, suits, claims,
governmental investigations or proceedings instituted, pending or, to the best
knowledge of Seller, that are unasserted or threatened against Seller or any
of its Subsidiaries or against any asset, interest or right of Seller or any
of its Subsidiaries, or against any officer, director or employee of any of
them. Neither Seller nor any Seller Subsidiary is a party to any order,
judgment or decree.
3.12 Compliance with Laws
(a) Each of Seller and the Seller Subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, all Governmental Entities that
are required in order to permit it to carry on its business as it is presently
being conducted; all such permits, licenses, certificates of authority, orders
and approvals are in full force and effect and will not be adversely affected
by virtue of the completion of the Merger; and to the best knowledge of
Seller, no suspension or cancellation of any of the same is threatened.
(b) Except as Previously Disclosed, neither Seller nor any Seller
Subsidiary is in violation of its respective Articles of Incorporation,
Charter or Bylaws, or of any applicable federal, state or local law or
ordinance or any order, rule or regulation of any Governmental Entity
(including all banking (including all regulatory capital requirements), truth-
in-lending, usury, fair credit reporting, consumer protection, securities,
municipal securities, safety, health, environmental, zoning, anti-
discrimination, antitrust, and wage and hour laws, ordinances, orders, rules
and regulations), or in default with respect to any order, writ, injunction or
decree of any court, or in default under any order, license, regulation or
demand of any Governmental Entity; and neither Seller nor any Seller
Subsidiary has received any notice or communication from any Governmental
Entity asserting that Seller or any Seller Subsidiary is in violation of any
of the foregoing. Neither Seller nor any Seller Subsidiary is subject to any
regulatory or supervisory cease and desist order, agreement, written
directive, memorandum of understanding or written commitment (other than those
of general applicability to savings banks or holding companies thereof issued
by Governmental Entities), and neither of them has received any written
communication requesting that it enter into any of the foregoing.
3.13 Certain Information
None of the information relating to Seller and its Subsidiaries supplied
or to be supplied by them for inclusion in the Proxy Statement, as of the date
such Proxy Statement is mailed to shareholders of Seller and up to and
including the date of the meeting of shareholders to which such Proxy
Statement relates, will contain any untrue statement of a material fact or
omit to state a
15
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided that
information as of a later date shall be deemed to modify information as of an
earlier date.
3.14 Employee Benefit Plans
(a) Seller has Previously Disclosed all Seller Employee Plans and has
heretofore delivered to Buyer accurate and complete copies of each (including
amendments and agreements relating thereto) together with, in the case of
tax-qualified plans, (i) the most recent actuarial and financial reports
prepared with respect thereto, (ii) the most recent annual reports filed with
any Governmental Entity with respect thereto, and (iii) all rulings and
determination letters and any open requests for rulings or letters that
pertain thereto.
(b) None of Seller, any Seller Subsidiary, any Seller Defined Benefit
Plan or, to the best of Seller's knowledge, any fiduciary of a Seller Defined
Benefit Plan, has incurred any material liability to the PBGC or the IRS with
respect to any Seller Defined Benefit Plan. To the best of Seller's knowledge,
no reportable event under Section 4043(b) of ERISA has occurred with respect
to any Seller Defined Benefit Plan.
(c) Neither Seller nor any Seller Subsidiary participates in or has
incurred any liability under Section 4201 of ERISA for a complete or partial
withdrawal from a multi-employer plan (as such term is defined in ERISA).
(d) A favorable determination letter has been issued by the IRS with
respect to each Seller Defined Benefit Plan or Seller Employee Plans,
including Seller ESOP, which is intended to qualify under Section 401 of the
Code to the effect that such Seller Defined Benefit Plan and Seller Employee
Plans, including Seller ESOP, is qualified under Section 401 of the Code, and
the trust associated with such Seller Defined Benefit Plan and Seller Employee
Plans, including Seller ESOP, is tax exempt under Section 501 of the Code. No
such letter has been revoked or, to the best of Seller's knowledge, is
threatened to be revoked, and Seller does not know of any ground on which such
revocation may be based. Neither Seller nor any Seller Subsidiary has any
liability under any such Seller Defined Benefit Plan and Seller Employee
Plans, including Seller ESOP, that is not reflected in the Seller Financial
Statements, other than liabilities incurred in the ordinary course of business
in connection therewith subsequent to the date thereof.
(e) No transaction prohibited by Section 406 of ERISA (and not exempt
under Section 408 of ERISA or Section 4975 of the Code) has occurred with
respect to any Seller Employee Plan which would result in the imposition,
directly or indirectly, of an excise tax under Section 4975 of the Code or
otherwise have a Material Adverse Effect on Seller.
(f) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to the
date hereof, and full payment will be so made (or proper accruals will be so
established) of all contributions which are required for periods after the
date hereof and prior to the Effective Time, under the terms of each Seller
Employee Plan or ERISA; except as disclosed in the Seller Financial
Statements, no accumulated funding deficiency
16
(as defined in Section 302 of ERISA or Section 412 of the Code), whether or
not waived, exists with respect to any Seller Defined Benefit Plan, and there
is no "unfunded current liability" (as defined in Section 412 of the Code)
with respect to any Seller Defined Benefit Plan.
(g) The Seller Employee Plans have been operated in compliance in all
material respects with the applicable provisions of ERISA, the Code, all
regulations, rulings and announcements promulgated or issued thereunder and
all other applicable governmental laws and regulations. All contributions
required to be made to Seller Employee Plans at the date hereof have been
made, and all contributions required to be made to Seller Employee Plans as of
the Effective Time will have been made as of such date.
(h) There are no pending or, to the best knowledge of Seller,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of Seller Employee Plans or any trust related thereto or any
fiduciary thereof.
(i) Neither Seller nor any Seller Subsidiary has made any payments, or
is or has been a party to any agreement or any Seller Employee Plan, that
under any circumstances could obligate it or its successor to make payments or
deemed payments, that (i) are not or will not be deductible because of
Sections 162(m) or 280G of the Code or (ii) require Buyer or any Buyer
Subsidiary to record any charge or expense therefor (or any tax gross-up
payments) for financial reporting purposes on a post-acquisition basis.
3.15 Certain Contracts
(a) Except as Previously Disclosed, neither Seller nor any Subsidiary
is a party to, is bound or affected by, receives, or is obligated to pay,
benefits under (i) any agreement, arrangement or commitment, including any
agreement, indenture or other instrument, relating to the borrowing of money
by Seller or a Subsidiary (other than in the case of Seller Bank deposits,
FHLB advances, federal funds purchased and securities sold under agreements to
repurchase in the ordinary course of business) or the guarantee by Seller or a
Subsidiary of any obligation, other than by Seller Bank in the ordinary course
of its banking business, (ii) any agreement, arrangement or commitment
relating to the employment of a consultant or the employment, election or
retention in office of any present or former director, officer or employee of
Seller or a Subsidiary, (iii) any agreement, arrangement or understanding
(other than as set forth in this Agreement) pursuant to which any payment
(whether of severance pay or otherwise) became or may become due to any
director, officer or employee of Seller or a Subsidiary upon execution of this
Agreement or upon or following completion of the transactions contemplated by
this Agreement (either alone or in connection with the occurrence of any
additional acts or events); (iv) any agreement, arrangement or understanding
pursuant to which Seller or a Subsidiary is obligated to indemnify any
director, officer, employee or agent of Seller or a Subsidiary, other than as
set forth in Seller Employee Plans and in the Articles of Incorporation,
Bylaws or other governing documents of Seller and its Subsidiaries; (v) any
agreement, arrangement or understanding to which Seller or a Subsidiary is a
party or by which any of the same is bound which limits the freedom of Seller
or a Subsidiary to compete in any line of business or with any person; (vi)
any assistance agreement, supervisory agreement, memorandum of understanding,
consent order, cease and desist order or condition of any regulatory order or
decree
17
with or by the Federal Reserve Board, the FDIC, the Department, or any other
regulatory agency; or (vii) any agreement, arrangement or understanding
which would be required to be filed as an exhibit to Seller's Annual Report on
Form 10-KSB under the Exchange Act and which has not been so filed.
(b) Neither Seller nor any Seller Subsidiary is in default or in non-
compliance under any contract, agreement, commitment, arrangement, lease,
insurance policy or other instrument to which it is a party or by which its
assets, business or operations may be bound or affected, whether entered into
in the ordinary course of business or otherwise and whether written or oral,
and there has not occurred any event that with the lapse of time or the giving
of notice, or both, would constitute such a default or non-compliance.
3.16 Brokers and Finders
Except for Previously Disclosed agreements with FinPro Inc., neither
Seller nor any Seller Subsidiary nor any of their respective directors,
officers or employees, has employed any broker or finder or incurred any
liability for any broker or finder fees or commissions in connection with the
transactions contemplated hereby.
3.17 Insurance
Each of Seller and its Subsidiaries is insured for reasonable amounts
with financially sound and reputable insurance companies against such risks as
companies engaged in a similar business would, in accordance with good
business practice, customarily be insured and has maintained all insurance
required by applicable laws and regulations.
3.18 Properties
All real and personal property owned by Seller or its Subsidiaries or
presently used by any of them in its respective business is in good condition
(ordinary wear and tear excepted) and is sufficient to carry on the business
of Seller and its Subsidiaries in the ordinary course of business consistent
with their past practices. Seller has good and marketable title free and clear
of all liens, encumbrances, charges, defaults or equities (other than equities
of redemption under applicable foreclosure laws) to all of its properties and
assets, real and personal, except (i) liens for current taxes not yet due or
payable, (ii) pledges to secure deposits and other liens incurred in the
ordinary course of its banking business, (iii) such imperfections of title,
easements and encumbrances, if any, as are de minimis in character, amount or
extent and (iv) as reflected in the Seller Financial Statements. All real and
personal property which is material to Seller's business on a consolidated
basis and leased or licensed by Seller or a Subsidiary is held pursuant to
leases or licenses which are valid and enforceable in accordance with their
respective terms and such leases will not terminate or lapse prior to the
Effective Time. All improved real property owned by Seller or its Subsidiaries
is in compliance with all applicable zoning laws.
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3.19 Labor
No work stoppage involving Seller or a Subsidiary is pending or, to the
best knowledge of Seller, threatened. Neither Seller nor a Subsidiary is
involved in or, to the best knowledge of Seller, threatened with or affected
by, any labor dispute, arbitration, lawsuit or administrative proceeding
involving the employees of Seller or a Subsidiary. Employees of Seller and
Seller Subsidiaries are not represented by any labor union nor are any
collective bargaining agreements otherwise in effect with respect to such
employees, and to the best of Seller's knowledge, there have been no efforts
to unionize or organize any employees of Seller or any Seller Subsidiaries
during the past five years.
3.20 Allowance for Loan Losses
The allowance for loan losses reflected on Seller's consolidated
statement of financial condition included in the Seller Financial Statements
is, and will be in the case of subsequently delivered Seller Financial
Statements, in the opinion of Seller's management, adequate in all material
respects as of their respective dates under the requirements of GAAP to
provide for reasonably anticipated losses on outstanding loans, net of
recoveries. The real estate owned reflected in the Seller Financial Statements
is, and will be in the case of subsequently delivered Seller Financial
Statements, carried at the lower of cost or fair value, less estimated costs
to sell, as required by GAAP.
3.21 Year 2000 Compliant
All hardware, firmware, software and computer systems of Seller and its
Subsidiaries are Year 2000 Compliant and shall continue to function in
accordance with their intended purpose without error or interruption during
and after the year 2000.
3.22 Material Interests of Certain Persons
(a) No officer or director of Seller, any Seller Subsidiary or any
"associate" (as such term is defined in Rule 14a-1 under the Exchange Act) or
related interest of any such person has any material interest in any material
contract or property (real or personal, tangible or intangible), used in, or
pertaining to, the business of Seller or any Subsidiary of Seller.
(b) There are no Insider Loans as of the date hereof.
3.23 Fairness Opinion
Seller has received an opinion from FinPro Inc. to the effect that, as
of the date hereof, the consideration to be received by shareholders of Seller
pursuant to this Agreement is fair, from a financial point of view, to such
shareholders.
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3.24 Disclosures
None of the representations and warranties of Seller or any of the
written information or documents furnished or to be furnished by Seller to
Buyer in connection with or pursuant to this Agreement or the completion of
the transactions contemplated hereby, when considered as a whole, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
3.25 No Undisclosed Liabilities
Seller and its Subsidiaries do not have any liability, whether known or
unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due, including any liability for taxes (and there is no past
or present fact, situation, circumstance, condition or other basis for any
present or future action, suit or proceeding, hearing, charge, complaint,
claim or demand against Seller or its Subsidiaries giving rise to any such
liability) required in accordance with generally accepted accounting
principles to be reflected in an audited consolidated balance sheet of Seller,
except and to the extent (i) reflected, disclosed or provided for in the
Seller Financial Statements, (ii) of liabilities since incurred in the
ordinary course of business and (iii) of liabilities incurred in connection
with completion of the transactions contemplated by this Agreement.
3.26 Loan Portfolio
(i) All loans and discounts shown on the Seller Financial Statements or
which were entered into after the date of the most recent balance sheet
included in the Seller Financial Statements were and shall be made for good,
valuable and adequate consideration in the ordinary course of the business of
Seller and its Subsidiaries, in accordance with sound banking practices, and
are not subject to any known defenses, set-offs or counter-claims, including
any such as are afforded by usury or truth in lending laws, except as may be
provided by bankruptcy, solvency or similar laws or by general principles of
equity, (ii) the notes or other evidence of indebtedness evidencing such loans
in all forms of pledges, mortgages and other collateral documents and security
agreements are and shall be in force, valid, true and genuine and what they
purport to be, and (iii) except as Previously Disclosed, Seller and its
Subsidiaries have complied and shall prior to the Effective Time comply with
all laws and regulations relating to such loans.
3.27 Investment Portfolio
All investment securities held by Seller or its Subsidiaries, as
reflected in the consolidated balance sheets of Seller included in the Seller
Financial Statements, are carried in accordance with GAAP, specifically
including but not limited to, FAS 115.
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3.28 Interest Rate Risk Management Instruments
Seller has Previously Disclosed all interest rate swaps, caps, floors,
option agreements or other interest rate risk management arrangements or
agreements, whether entered into for the account of Seller or its Subsidiaries
or for the account of a customer of Seller or one of its Subsidiaries. All
such arrangements and agreements were entered into in the ordinary course of
business and in accordance with prudent banking practice and applicable rules,
regulations and policies and with counter parties believed to be financially
responsible at the time and are legal, valid and binding obligations of Seller
or one of its Subsidiaries in force in accordance with their terms (subject to
the provisions of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws effecting the enforceability of
creditors rights generally from time to time and effect, and equitable
principles relating to the granting of specific performance and other
equitable remedies as a matter of judicial discretion), and are in full force
and effect. Seller and its Subsidiaries have duly performed all of their
obligations thereunder to the extent that such obligations to perform have
accrued; and, to Seller's knowledge, there are no breaches, violations or
defaults or allegations or assertions of such by any party thereunder.
3.29 Interim Events
Since December 31, 1999, except as Previously Disclosed, neither Seller
nor its Subsidiaries have paid or declared any dividend or made any other
distribution to shareholders or taken any action which if taken after the date
hereof would require the prior written consent of Buyer pursuant to Section
5.6 hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows, except as Previously
Disclosed:
4.1 Organization, Standing and Authority of Buyer
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania, with full
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as now conducted, and Buyer is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
its ownership or leasing of property or the conduct of its business requires
such licensing or qualification. Buyer is a bank holding company under the
BHCA and subject to the regulations of the Federal Reserve Board. Buyer has
heretofore delivered to Seller true and complete copies of the Articles of
Incorporation and Bylaws of Buyer as in effect as of the date hereof.
4.2 Ownership of Buyer Subsidiaries
Buyer has Previously Disclosed the name, jurisdiction of incorporation
and percentage ownership of each direct or indirect Buyer Subsidiary and
identified Buyer Bank as its only Significant Subsidiary. The outstanding
shares of capital stock or other ownership interests of each
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Buyer Subsidiary have been duly authorized and validly issued, are fully paid
and nonassessable, and are directly owned by Buyer free and clear of all
liens, claims, encumbrances, charges, pledges, restrictions or rights of third
parties of any kind whatsoever. No Rights are authorized, issued or
outstanding with respect to the capital stock or other ownership interests of
Buyer Subsidiaries and there are no agreements, understandings or commitments
relating to the right of Buyer to vote or to dispose of such capital stock or
other ownership interests.
4.3 Organization, Standing and Authority of Buyer Subsidiaries
Each of the Buyer Subsidiaries is a savings bank, corporation or
partnership duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is organized, with full power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted, and each of the Buyer Subsidiaries is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which its ownership or leasing of property or the conduct of its business
requires such licensing or qualification. The deposit accounts of Buyer Bank
are insured by the FDIC to the maximum extent permitted by the FDIA and Buyer
Bank has paid all deposit insurance premiums and assessments required by the
FDIA and the regulations thereunder. Buyer has heretofore delivered to Seller
true and complete copies of the Articles of Incorporation and Bylaws of Buyer
Bank as in effect as of the date hereof.
4.4 Authorized and Effective Agreement
(a) Buyer has all requisite power and authority to enter into this
Agreement and (subject to receipt of all necessary governmental approvals) to
perform all of its respective obligations hereunder. The execution and
delivery of this Agreement and the completion of the transactions contemplated
hereby have been deemed advisable by the Board and duly authorized and
approved by all necessary corporate action in respect thereof on the part of
Buyer. This Agreement has been duly and validly executed and delivered by
Buyer and, assuming due authorization, execution and delivery by Seller,
constitutes a legal, valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(b) Neither the execution and delivery of this Agreement nor
completion of the transactions contemplated hereby, nor compliance by Buyer
with any of the provisions hereof (i) does or will conflict with or result in
a breach of any provisions of the Articles of Incorporation or Bylaws of Buyer
or the equivalent documents of any Buyer Subsidiary, (ii) violate, conflict
with or result in a breach of any term, condition or provision of, or
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of
Buyer or any Buyer Subsidiary pursuant to, any material note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Buyer or any Buyer Subsidiary is a party, or by which any
of their respective properties or assets may be bound or affected, or (iii)
subject to receipt of all required governmental approvals, violates any order,
writ, injunction, decree, statute, rule or regulation applicable to Buyer or
any Buyer Subsidiary.
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(c) To the best knowledge of Buyer, except for (i) the filing of
applications and notices with and the approvals of the Federal Reserve Board
and the FDIC, (ii) the filing of applications with the Department and the
approvals of the Department, (iii) the filing of the Articles of Merger with
the Secretary of State of the Commonwealth of Pennsylvania in connection with
the Corporate Merger, (iv) the filing of a Articles of Merger with the
Secretary of State of the Commonwealth of Pennsylvania in connection with the
Company Merger, (v) the filing of Articles of Merger with the Department in
connection with the Bank Merger, and (vi) review of the Merger by the DOJ
under federal antitrust laws, no consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are
necessary on the part of Buyer, Merger Sub or Buyer Bank in connection with
(x) the execution and delivery by Buyer of this Agreement, and the completion
of the transactions contemplated hereby, or (y) the Merger.
(d) As of the date hereof, neither Buyer nor Buyer Bank is aware of
any reasons relating to Buyer or Buyer Bank (including CRA compliance) why all
consents and approvals shall not be procured from all Governmental Entities
having jurisdiction over the Merger as shall be necessary for completion of
the Merger and continuation by Buyer after the Effective Time of the business
of each of Seller and Seller Bank, respectively, as such business is carried
on immediately prior to the Effective Time, free of any conditions or
requirements which could impair the value of Seller or Seller Bank to Buyer.
4.5 Securities Documents and Regulatory Reports
(a) Since January 1, 1997, Buyer has timely filed with the SEC and the
NASD all Securities Documents required by the Securities Laws and such
Securities Documents complied in all material respects with the Securities
Laws and did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Each of Buyer and Buyer Bank has since January 1, 1997, duly filed
with the Federal Reserve Board, FDIC, the Department and any other applicable
federal or state banking authority, as the case may be, the reports required
to be filed under applicable laws and regulations and such reports were in all
material respects complete and accurate and in compliance with the
requirements of applicable laws and regulations. In connection with the most
recent examinations of Buyer and Buyer Bank by the Federal Reserve Board,
FDIC, and Department, neither Buyer nor Buyer Bank was required to correct or
change any action, procedure or proceeding which Buyer or Buyer Bank believes
has not been corrected or changed as required.
4.6 Financial Statements
(a) Buyer has previously delivered or made available to Seller
accurate and complete copies of the Buyer Financial Statements, which are
accompanied by the audit reports of KPMG LLP, independent certified public
accountants with respect to Buyer. The Buyer Financial Statements, as well as
the Buyer Financial Statements to be delivered pursuant to Section 5.8 hereof,
fairly present and will fairly present, as the case may be, the consolidated
financial condition of Buyer as of the
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respective dates set forth therein, and the consolidated income, changes in
equity and cash flows of Buyer for the respective periods or as of the
respective dates set forth therein.
(b) Each of the Buyer Financial Statements referred to in Section
4.4(a) has been or will be, as the case may be, prepared in accordance with
GAAP consistently applied during the periods involved, except as stated
therein. The audits of Buyer have been conducted in accordance with generally
accepted auditing standards. The books and records of Buyer and the Buyer
Subsidiaries are being maintained in compliance with applicable legal and
accounting requirements, and all such books and records accurately reflect all
dealings and transactions in respect of the business, assets, liabilities and
affairs of Buyer and its Subsidiaries.
(c) Except to the extent (i) reflected, disclosed or provided for in
the Buyer Financial Statements, (ii) of liabilities since incurred in the
ordinary course of business and (iii) of liabilities incurred in connection
with completion of the transaction contemplated by this Agreement, neither
Buyer nor any Buyer Subsidiary has any liabilities, whether absolute, accrued,
contingent or otherwise.
4.7 Material Adverse Change
Since December 31, 1999, (i) Buyer and its Subsidiaries have conducted
their respective businesses in the ordinary and usual course (excluding the
incurrence of expenses in connection with this Agreement and the transactions
contemplated hereby) and (ii) no event has occurred or circumstance arisen
that, in the aggregate, has had or is reasonably likely to have a Material
Adverse Effect on Buyer.
4.8 Legal Proceedings
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of Buyer, that are
unasserted or threatened against Buyer or any of its Subsidiaries or against
any asset, interest or right of Buyer or any of its Subsidiaries, or against
any officer, director or employee of any of them. Neither Buyer nor any Buyer
Subsidiary is a party to any order, judgment or decree.
4.9 Certain Information
None of the information relating to Buyer and its Subsidiaries supplied
or to be supplied by them for inclusion in the Proxy Statement, as of the date
such Proxy Statement is mailed to shareholders of Seller and up to and
including the date of the meeting of shareholders to which such Proxy
Statement relates, will contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading,
provided that information as of a later date shall be deemed to modify
information as of an earlier date.
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4.10 Brokers and Finders
Except for Previously Disclosed agreements with Ryan, Beck & Co.,
neither Buyer nor any Buyer Subsidiary, nor any of their respective directors,
officers or employees, has employed any broker or finder or incurred any
liability for any broker or finder fees or commissions in connection with the
transactions contemplated hereby.
4.11 Disclosures
None of the representations and warranties of Buyer or any of the
written information or documents furnished or to be furnished by Buyer to
Seller in connection with or pursuant to this Agreement or the completion of
the transactions contemplated hereby, when considered as a whole, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
4.12 Financial Resources
Buyer has the financial wherewithal and has, or will have prior to the
Effective Time, sufficient internal funds to perform its obligations under
this Agreement. Buyer and Buyer Bank are, and will be immediately following
the Merger, in material compliance with all applicable capital, debt and
financial and non-financial regulations of state and federal banking agencies
having jurisdiction over them.
ARTICLE V
COVENANTS
5.1 Reasonable Best Efforts
Subject to the terms and conditions of this Agreement, each of Seller
and Buyer (i) shall use its reasonable best efforts in good faith to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary or advisable under applicable laws and regulations so as to permit
and otherwise enable completion of the Merger as promptly as reasonably
practicable, and (ii) shall cooperate fully with each other to that end. If
necessary to complete Bank Merger, Seller shall cause Seller Bank to amend its
Amended and Restated Articles of Incorporation to facilitate the completion of
the Bank Merger prior to the Effective Time.
5.2 Shareholder Meeting
Seller shall take all action necessary to file the Proxy Statement
within 45 days of the date of this Agreement and to properly call and convene
a meeting of its shareholders as soon as practicable after the date hereof to
consider and vote upon this Agreement and the transactions contemplated
hereby. The Board of Directors of Seller will recommend that the shareholders
of Seller approve this Agreement and the transactions contemplated hereby,
provided that the Board of Directors of Seller may fail to make such
recommendation, or withdraw, modify or change any such recommendation,
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if such Board of Directors, after having consulted with and considered the
advice of outside counsel, has determined that the making of such
recommendation, or the failure to withdraw, modify or change such
recommendation, would constitute a breach of the fiduciary duties of such
directors under applicable law.
5.3 Regulatory Matters
(a) The parties hereto shall promptly cooperate with each other in the
preparation and filing of the Proxy Statement relating to the meeting of
shareholders of Seller to be held pursuant to Section 5.2 of this Agreement.
Each of Buyer and Seller shall use its reasonable best efforts to have the
Proxy Statement approved for mailing in definitive form as promptly as
practicable and thereafter Seller shall promptly mail to its shareholders the
Proxy Statement.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file within 45 days after the
date hereof or as soon thereafter as is reasonably practicable, all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all Governmental Entities and third parties which are
necessary or advisable to consummate the transactions contemplated by this
Agreement. Buyer and Seller shall have the right to review in advance, and to
the extent practicable each will consult with the other on, in each case
subject to applicable laws relating to the exchange of information, all the
information which appears in any filing made with or written materials
submitted to any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing
right, each of the parties hereto shall act reasonably and as promptly as
practicable. The parties hereto agree that they will consult with each other
with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and
each party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein. The parties hereto agree
that they will use their reasonable best efforts to cause the Closing Date to
occur by June 30, 2000.
(c) Buyer and Seller shall, upon request, furnish each other with all
information concerning themselves, their respective Subsidiaries, directors
and officers, the shareholders of Seller and such other matters as may be
reasonably necessary or advisable in connection with any statement, filing,
notice or application made by or on behalf of Buyer, Buyer Bank, Merger Sub,
Seller or Seller Bank to any Governmental Entity in connection with the
transactions contemplated hereby.
(d) Buyer and Seller shall promptly furnish each other with copies of
written communications received by Buyer or Seller, as the case may be, or any
of their respective Subsidiaries from, or delivered by any of the foregoing
to, any Governmental Entity in respect of the transactions contemplated
hereby.
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5.4 Investigation and Confidentiality
(a) The Seller shall permit the Buyer and its representatives
reasonable access to its properties and personnel, and shall disclose and make
available to the Buyer, upon the Buyer's reasonable request, all books, papers
and records relating to the assets, stock ownership, properties, operations,
obligations and liabilities of Seller and Seller Subsidiaries, including, but
not limited to, all books of account (including the general ledger), tax
records, minute books of meetings of boards of directors (and any committees
thereof) and shareholders, organizational documents, bylaws, material
contracts and agreements, filings with any regulatory authority, accountants'
work papers, litigation files, loan files, plans affecting employees, and any
other business activities or prospects in which the Buyer may have a
reasonable interest, provided that such access and any such reasonable request
shall be reasonably related to the transactions contemplated hereby and, in
the reasonable opinion of the Seller providing such access, not unduly
interfere with normal operations. The Seller and its Subsidiaries shall make
their respective directors, officers, employees and agents and authorized
representatives (including counsel and independent public accountants)
available to confer with the Buyer and its representatives, provided that such
access shall be reasonably related to the transactions contemplated hereby and
shall not unduly interfere with normal operations.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be
treated as the sole property of the party furnishing the information until
completion of the transactions contemplated hereby and, if such transactions
shall not occur, the party receiving the information shall either destroy or
return to the party which furnished such information all documents or other
materials containing, reflecting or referring to such information, shall use
its best efforts to keep confidential all such information, and shall not
directly or indirectly use such information for any competitive or other
commercial purposes. The obligation to keep such information confidential
shall continue for five years from the date the proposed transactions are
abandoned but shall not apply to (i) any information which (x) the party
receiving the information can establish was already in its possession prior to
the disclosure thereof by the party furnishing the information; (y) was then
generally known to the public; or (z) became known to the public through no
fault of the party receiving the information; or (ii) disclosures pursuant to
a legal requirement or in accordance with an order of a court of competent
jurisdiction, provided that the party which is the subject of any such legal
requirement or order shall use its best efforts to give the other party at
least ten business days prior notice thereof.
5.5 Press Releases
Buyer agrees it will not issue any press release related to this
Agreement or the transactions contemplated hereby, without first consulting
with Seller as to the form and substance of public disclosures which may
relate to the transactions contemplated by this Agreement, provided, however,
that nothing contained herein shall prohibit either party, following
notification to the other party, from making any disclosure which is required
by law or regulation.
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5.6 Business of the Parties
(a) During the period from the date of this Agreement and continuing
until the Effective Time, except as expressly contemplated or permitted by
this Agreement or with the prior written consent of Buyer, Seller and its
Subsidiaries shall carry on their respective businesses in the ordinary course
consistent with past practice. During such period, Seller also will use all
reasonable efforts to (x) preserve its business organization and that of
Seller Bank intact, (y) keep available to itself and Buyer the present
services of the employees of Seller and Seller Bank and (z) preserve for
itself and Buyer the goodwill of the customers of Seller and Seller Bank and
others with whom business relationships exist. Without limiting the generality
of the foregoing, except with the prior written consent of Buyer or as
expressly contemplated hereby, between the date hereof and the Effective Time,
Seller shall not, and shall cause each Seller Subsidiary not to:
(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any
combination thereof) in respect of Seller Common Stock, except for
one regular quarterly cash dividend at a rate per share of Seller
Common Stock not in excess of $0.075 per share to be paid on or
after April 1, 2000; provided, however, that (I) Seller shall be
allowed to make or pay an additional cash dividend at a rate per
share on Seller Common Stock not in excess of $0.075 per share if
the Closing Date does not occur before September 1, 2000, but only
to the extent that such dividend may be funded out of Seller's
earnings for the quarter ended June 30, 2000; and (II) that
nothing contained herein shall be deemed to affect the ability of
a Subsidiary to pay dividends on its capital stock to Seller;
(ii) issue any shares of its capital stock, other than upon
exercise of Seller Options referred to in Section 3.1 hereof;
issue, grant, modify or authorize any Rights; purchase any shares
of Seller Common Stock; or effect any recapitalization,
reclassification, stock dividend, stock split or like change in
capitalization;
(iii) amend its Articles of Incorporation, Bylaws or similar
organizational documents, unless such amendment shall be necessary
to complete the Corporate Merger, Company Merger, or Bank Merger;
impose, or suffer the imposition, on any share of stock or other
ownership interest held by Seller in a Subsidiary of any lien,
charge or encumbrance or permit any such lien, charge or
encumbrance to exist; or waive or release any material right or
cancel or compromise any material debt or claim;
(iv) increase the rate of compensation of any of its
directors, officers or employees, or pay or agree to pay any bonus
or severance to, or provide any other new employee benefit or
incentive to, any of its directors, officers or employees, except
(i) Seller may pay bonuses that in the aggregate do not exceed
$25,000 to certain key employees, as Previously Disclosed,
provided such bonuses shall not be paid to any employees that
terminate employment prior to the Effective Time, or (ii) as may
be required by law;
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(v) enter into or, except as may be required by law and
for amendments contemplated by Section 5.11 hereof, modify any
Seller Employee Plan or other employee benefit, incentive or
welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or
employees; or make any contributions to any Seller Defined Benefit
Plan or the Seller ESOP (other than as required by law or
regulation or in a manner and amount consistent with past
practices);
(vi) originate or purchase any loan in excess of $250,000
with respect to loans secured by one- to four-family properties
and in excess of $300,000 with respect to loans secured by
commercial properties;
(vii) enter into (w) any transaction, agreement, arrangement
or commitment not made in the ordinary course of business, (x) any
agreement, indenture or other instrument relating to the borrowing
of money by Seller or a Subsidiary or guarantee by Seller or any
Seller Subsidiary of any such obligation, except in the case of
Seller Bank for deposits, FHLB advances, federal funds purchased
and securities sold under agreements to repurchase in the ordinary
course of business consistent with past practice, (y) any
agreement, arrangement or commitment relating to the employment of
an employee or consultant, or amend any such existing agreement,
arrangement or commitment, provided that Seller and Seller Bank
may employ an employee in the ordinary course of business if the
employment of such employee is terminable by Seller or Seller Bank
at will without liability, other than as required by law; or (z)
any contract, agreement or understanding with a labor union;
(viii) change its method of accounting in effect for
the year ended June 30, 1999, except as required by changes in
laws or regulations or GAAP, or change any of its methods of
reporting income and deductions for federal income tax purposes
from those employed in the preparation of its federal income tax
return for such year, except as required by changes in laws or
regulations;
(ix) except as Previously Disclosed, make any expenditures
in excess of $10,000 individually or $25,000 in the aggregate,
other than (a) in the ordinary course of business, (b) in
connection with the transactions contemplated by this Agreement,
(c) pursuant to binding commitments that have been Previously
Disclosed and are existing on the date hereof, and (d)
expenditures necessary to maintain existing assets in good repair;
or enter into any new lease or lease renewal of real property or
any new lease or lease renewal of personal property providing for
annual payments exceeding $5,000;
(x) file any applications or make any contract with
respect to branching or site location or relocation;
(xi) acquire in any manner whatsoever (other than to
realize upon collateral for a defaulted loan) control over or any
equity interest in any business or entity;
29
(xii) enter or agree to enter into any agreement or
arrangement granting any preferential right to purchase any of its
assets or rights or requiring the consent of any party to the
transfer and assignment of any such assets or rights;
(xiii) except as necessitated in the reasonable opinion
of Seller due to changes in interest rates, and in accordance with
safe and sound banking practices, change or modify in any material
respect any of its lending or investment policies, except to the
extent required by law or an applicable regulatory authority;
(xiv) except as necessitated in the reasonable opinion of
Seller due to changes in interest rates, and in accordance with
safe and sound banking practices, enter into any futures contract,
option contract, interest rate caps, interest rate floors,
interest rate exchange agreement or other agreement for purposes
of hedging the exposure of its interest-earning assets and
interest-bearing liabilities to changes in market rates of
interest;
(xv) take any action that would result in any of the
representations and warranties of Seller contained in this
Agreement not to be true and correct in any material respect at
the Effective Time or that would cause any of the conditions of
Sections 6.1 or 6.3 hereof not to be satisfied;
(xvi) take any action that would materially impede or delay
the completion of the transactions contemplated by this Agreement
or the ability of Buyer or Seller to perform its covenants and
agreements under this Agreement; or
(xvii) materially increase or decrease the rate of
interest paid on time deposits, or on certificates of deposit,
except in a manner and pursuant to policies consistent with past
practices or to reflect changes in market interest rates; or
(xviii) agree to do any of the foregoing.
(b) Seller shall promptly notify Buyer in writing of the occurrence of
any matter or event known to and directly involving Seller, which would not
include any changes in conditions that affect the banking industry generally,
that would have, either individually or in the aggregate, a Material Adverse
Effect on Seller.
(c) Except with the prior written consent of Seller or as expressly
contemplated hereby, between the date hereof and the Effective Time, Buyer
shall not, and shall cause each Buyer Subsidiary not to:
(i) take any action that would result in any of the
representations and warranties of Buyer contained in this
Agreement not to be true and correct in any material respect at
the Effective Time or that would cause any of the conditions of
Sections 6.1 or 6.2 hereof not to be satisfied;
30
(ii) take any action that would materially impede or delay the
completion of the transactions contemplated by this Agreement or the
ability of Buyer or Seller to perform its covenants and agreements under
this Agreement; or
(iii) agree to do any of the foregoing.
5.7 Certain Actions
Seller shall not, and shall cause each Seller Subsidiary not to, solicit
or encourage inquiries or proposals with respect to, furnish any information
relating to, or participate in any negotiations or discussions concerning, any
acquisition, purchase of all or a substantial portion of the assets of, or any
equity interest in, Seller or a Subsidiary (other than with Buyer or an
affiliate thereof), provided, however, that the Board of Directors of Seller
may furnish such information or participate in such negotiations or
discussions if such Board of Directors, after having consulted with and
considered the advice of outside counsel, has determined that the failure to
do the same may constitute a breach of fiduciary duties of such directors
under applicable law. Seller will promptly inform Buyer orally and in writing
of any such request for information or of any such negotiations or
discussions, as well as instruct its and its Subsidiaries' directors,
officers, representatives and agents to refrain from taking any action
prohibited by this Section 5.7.
5.8 Current Information
During the period from the date hereof to the Effective Time, Seller
shall, upon the request of Buyer, cause one or more of its designated
representatives to confer on a monthly or more frequent basis with
representatives of Buyer regarding Seller's financial condition, operations
and business and matters relating to the completion of the transactions
contemplated hereby. As soon as reasonably available, but in no event more
than two business days after filing, Seller will deliver to Buyer all reports
filed by it under the Exchange Act subsequent to the date hereof. Seller also
will deliver to Buyer each call report or similar report filed by it with the
FDIC or the Department concurrently with the filing of such call report.
Within 20 days after the end of each month, Seller will deliver to Buyer an
unaudited consolidated balance sheet and an unaudited consolidated statement
of income, without related notes, for such month prepared in accordance with
GAAP.
5.9 Indemnification; Insurance
(a) From and after the Effective Time, Buyer agrees for a period of
six years, to indemnify and hold harmless the past and present directors and
officers of Seller and its Subsidiaries (the "Indemnified Parties") for all
acts or omissions occurring at or prior to the Effective Time to the same
extent such persons are indemnified and held harmless under the respective
Articles of Incorporation, Charter or Bylaws of Seller and its Subsidiaries in
the form in effect at the date of this Agreement, and such duties and
obligations shall continue in full force and effect for so long as they would
(but for the Merger) otherwise survive and continue in full force and effect.
Without limiting the foregoing, all limitations of liability existing in favor
of the Indemnified Parties in the Articles of Incorporation, Charter or Bylaws
of Seller or any Seller Subsidiary as of the date hereof, to the extent
permissible under applicable law as of the date hereof, arising out of matters
existing or occurring at
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or prior to the Effective Time, shall survive the Merger and shall continue
in full force and effect. Buyer will provide, or cause to be provided, for a
period of not less than three years from the Effective Time, an insurance and
indemnification policy that provides the officers and directors of Seller and
its Subsidiaries immediately prior to the Effective Time coverage no less
favorable than as currently provided by Seller to such officers and directors,
to the extent such insurance may be purchased or kept in full force without
any material increase in the cost of the premium currently paid by Buyer for
its directors' and officers' liability insurance (provided that if such
insurance is not available without such a material increase, Buyer will
substitute or cause Seller to substitute therefor to the extent available at
a cost not in excess of 150% of the current annual premium cost of Seller's
existing directors and officers' insurance, single premium tail coverage with
policy limits equal to Seller's existing annual coverage limits). At the
request of Buyer, Seller shall use reasonable efforts to procure the insurance
coverage referred to in the preceding sentence prior to the Effective Time.
(b) In the event that Buyer or any of its respective successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case the successors and assigns of such
entity shall assume the obligations set forth in this Section 5.9, which
obligations are expressly intended to be for the irrevocable benefit of, and
shall be enforceable by, each director and officer covered hereby.
5.10 Advisory Directors After the Company Merger
Buyer agrees to take all action necessary to appoint all the non-
employee individuals on Seller's current Board of Directors, effective as of
the Effective Time, to an advisory board for a period of at least two years.
Buyer shall pay quarterly such advisory board fees as Previously Disclosed
equal to the regular board fees paid to Seller's Board of Directors for the
year ended December 31, 1999.
5.11 Employees and Employee Benefit Plans
(a) Former full time employees of Seller or Seller Bank who remain
employed by Buyer or Buyer Bank will be eligible to participate in the Buyer's
employee stock ownership plan on the earliest date required by ERISA ("Entry
Date"), with credit for years of service with Seller or any of its
Subsidiaries for the purpose of eligibility and vesting on and after the Entry
Date (but not for the purpose of accrual of benefits or allocation of employer
contributions). Former full time employees of Seller or Seller Bank who
remain employed by Buyer or Buyer Bank will be eligible to participate in the
Buyer's benefit plans, other than the Buyer's employee stock ownership plan,
on the earliest date permitted by such plan, with credit for years of service
with Seller or any of its Subsidiaries for the purpose of eligibility and
vesting (but not for the purpose of accrual of benefits or allocation of
employer contributions). Buyer shall cause any and all pre-existing condition
limitations (to the extent such limitations did not apply to a pre-existing
condition under any Seller Employee Plan) and eligibility waiting periods
under group health plans to be waived with respect to such participants and
their eligible dependents.
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(b) To the extent that Buyer or a Buyer Subsidiary terminates the
employment of any Seller or Seller Bank employee other than for Cause within
one year following the Effective Time, Buyer shall, or shall cause a Buyer
Subsidiary to, provide severance benefits in a cash amount equal to such
employee's regular salary for a one-week period (as in effect immediately
prior to the Effective Time) multiplied by the total number of whole years of
such employee's employment (up to a maximum of ten years) at Seller, Buyer and
any Subsidiary of either; provided, however that in no event shall Buyer or a
Buyer Subsidiary have any obligation to provide severance benefits to any
Seller or Seller Bank employee whose termination of employment occurs due to
resignation or discharge for Cause or who is entitled to severance benefits or
the equivalent thereof under the terms of any other compensation plan or
individual contract with Seller or Seller Bank.
(c) Buyer agrees to cause Buyer Bank to offer employment to Messrs.
Paul S. Pieffer and James W. Kihm in positions that would allow such
individuals to maximize their contributions to Buyer Bank. In the event,
however, that Buyer Bank, Mr. Pieffer, or Mr. Kihm decide to terminate their
employment relationship prior to the date one year after the Closing Date,
such terminating employee shall receive a lump sum amount equal to his then
current salary for the remainder of the period which ends one year after the
Closing Date. Messrs. Pieffer and Kihm may elect, at the time of Closing, to
terminate their employment and receive a lump sum amount from Buyer Bank equal
to 100% of such terminating individual's cash base salary paid for the year
ended December 31, 1999.
(d) In the sole discretion of Buyer or a Buyer Subsidiary, as
applicable, payments made by it in full and complete satisfaction of
obligations of Seller or Seller Bank under any Seller Employee Plan or under
Section 5.11(c) shall be subject to the recipient's delivery to Buyer or a
Buyer Subsidiary, as applicable, of (i) a written acknowledgment signed by
such recipient that the payment or payments and benefits to be made to him or
her is in full and complete satisfaction of all liabilities and obligations
thereunder of Seller, Seller Bank, Buyer or any Buyer Subsidiary, and each of
their respective affiliates, directors, officers, employees and agents, and
(ii) a release by such recipient of all such parties from further liability in
connection with the particular Seller Employee Plan or this Agreement, as
applicable.
(e) Subject to the Code and relevant regulations, as of the Effective
Time or as soon as practicable thereafter, the loan to the Seller ESOP shall
be repaid in full with the cash consideration received from Buyer for the
unallocated shares of Seller Common Stock held in the Seller ESOP in the
amount equal to the Merger Consideration multiplied by the number of
unallocated shares of Seller Common Stock held by the Seller ESOP, and any
unallocated portion of the consideration remaining after such repayment shall
be allocated to the Seller ESOP accounts of the employees of Seller and its
Subsidiaries who are participants and beneficiaries (such individuals
hereinafter referred to as the "ESOP Participants") as earnings and not as
"annual additions," in accordance with the terms of the Seller ESOP as
amended. As of the Effective Time, the Seller ESOP shall be terminated. The
current administrator of the Seller ESOP, or another administrator selected by
Buyer (subject to consultation with Seller ESOP's then current trustee), shall
continue to administer the Seller ESOP subsequent to the Effective Time, and
the current Trustee of the Seller ESOP, or such other trustee(s) selected by
Buyer (subject to consultation with Seller ESOP's then current trustee) or the
administrators, shall continue to be the Trustee subsequent to the Effective
Time. Buyer agrees not to amend the Seller ESOP subsequent to the Effective
Time in any manner that would change or
33
expand the class of persons entitled to receive benefits under the Seller
ESOP. The Parties agree that the Seller ESOP shall be amended to the extent
necessary to receive a favorable determination letter from the IRS as to the
tax qualified status of the Seller ESOP upon its termination under Section
401(a) and 4975(e)(7) of the Code (the "Final Determination Letter").
Following the receipt of the Final Determination Letter, distributions of the
account balances under the Seller ESOP shall be made to the ESOP Participants.
From and after the date hereof, in anticipation of such termination and
distribution, Buyer and Seller prior to the Effective Time, and Buyer after
the Effective Time, shall use their best efforts to apply for and obtain a
favorable Final Determination Letter from the IRS. In the event that Buyer
and Seller, prior to the Effective Time, and Buyer after the Effective Time,
reasonably determine that the Seller ESOP cannot obtain a favorable Final
Determination Letter, or that the amounts held therein cannot be so applied,
allocated or distributed without causing the Seller ESOP to lose its tax
qualified status, Seller prior to the Effective Time and Buyer after the
Effective Time shall take such action as they may reasonably determine is
necessary to obtain a favorable Final Determination Letter from the IRS and
for the distribution of account balances to the ESOP Participants, provided
that the assets of the Seller ESOP shall be held or paid solely for the
benefit of the ESOP Participants and provided further that in no event shall
any portion of the amounts held in the Seller ESOP revert, directly or
indirectly, to Seller or any affiliate thereof, or to Buyer or any affiliate
thereof unless required by the IRS as a condition to the issuance of a
favorable Final Determination Letter. All ESOP Participants shall fully vest
and have a nonforfeitable interest in their accounts under the Seller ESOP
determined as of the termination date.
(f) After prior written notice to the Buyer, Seller shall take all
necessary steps to cause the Seller Defined Benefit Plan to be terminated
prior to the Effective Time in accordance with applicable law and in a manner
that will not result in the imposition of any underfunding liability or
responsibility upon Buyer or any of its Subsidiaries; provided, that Seller
shall not terminate the Seller Defined Benefit Plan without approval from the
Buyer if the Seller Defined Benefit Plan has an outstanding underfunded
liability. The Parties agree that the Seller Defined Benefit Plan shall be
amended to the extent necessary to receive a favorable determination letter
from the IRS as to the tax qualified status of the Seller Defined Benefit Plan
upon its termination under Section 401(a) of the Code.
5.12 Company Merger
Buyer and Seller shall take, and shall cause their Subsidiaries to take,
all necessary and appropriate actions to make it possible for the Company
Merger to be authorized, agreed to, and accomplished immediately after the
Corporate Merger, or at such other time as may be determined by Buyer in its
sole discretion.
5.13 Bank Merger
Buyer and Seller shall take, and shall cause their Subsidiaries to take,
all necessary and appropriate actions to make it possible for the Bank Merger
to be authorized, agreed to, and accomplished immediately after the Corporate
Merger, or at such other time thereafter as may be determined by Buyer in its
sole discretion.
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5.14 Organization of Merger Sub
Buyer shall cause Merger Sub to be organized under the PBCL as soon as
practicable hereafter. Following the organization, the Board of Directors of
Merger Sub shall approve this Agreement and the transactions contemplated
hereby, whereupon Merger Sub shall become a party to, and be bound by, this
Agreement, and Buyer shall approve this Agreement in its capacity as the sole
stockholder of Merger Sub.
5.15 Conforming Entries
(a) Seller recognizes that Buyer may have adopted different loan,
accrual and reserve policies (including loan classifications and levels of
reserves for possible loan losses). Subject to applicable laws, from and after
the date of this Agreement to the Effective Time, Seller and Buyer shall
consult and cooperate with each other with respect to conforming the loan,
accrual and reserve policies of Seller and the Seller Subsidiaries to those
policies of Buyer, as specified in each case in writing to Seller, based upon
such consultation and subject to the conditions in Section 5.15(c) below.
(b) Subject to applicable laws and regulations, Seller and Buyer shall
consult and cooperate with each other with respect to determining, as
specified in a written notice from Buyer to Seller, based upon such
consultation and subject to the conditions in Section 5.15(c) below, the
amount and the timing for recognizing for financial accounting purposes
Seller's expenses of the Merger and the restructuring charges relating to or
to be incurred in connection with the Merger.
(c) Subject to applicable laws and regulations, Seller shall (i)
establish and take such reserves and accruals at such time as Buyer shall
reasonably request to conform Seller's loan, accrual and reserve policies to
Buyer's policies, and (ii) establish and take such accruals, reserves and
charges in order to implement such policies and to recognize for financial
accounting purposes such expenses of the Merger and restructuring charges
related to or to be incurred in connection with the Merger, in each case at
such times as are reasonably requested by Buyer; provided, however, that on
the date such reserves, accruals and charges are to be taken, Buyer shall
certify to Seller that all conditions to Buyer's obligation to consummate the
Merger set forth in Sections 6.1 and 6.3 hereof (other than the delivery of
certificates, opinions and other instruments and documents to be delivered at
the Closing or otherwise to be dated at the Effective Time, the delivery of
which shall continue to be conditions to Buyer's obligation to consummate the
Merger) have been satisfied or waived; and provided, further, that Seller
shall not be required to take any such action that is not consistent with GAAP
and regulatory accounting principles.
(d) No reserves, accruals or charges taken in accordance with this
Section 5.15 may be a basis to assert a violation of a breach of a
representation, warranty or covenant of Seller herein.
5.16 Integration of Policies
During the period from the date hereof to the Effective Time, Seller and
Seller Bank shall, and shall cause their directors, officers and employees to,
and shall make all reasonable efforts to cause their respective data
processing service providers to, cooperate and assist Buyer in connection with
an electronic and systematic conversion of all applicable data regarding
Seller to Buyer's system of
35
electronic data processing. In furtherance of the foregoing, Seller shall
make reasonable arrangements during normal business hours to permit
representatives of Buyer to train Seller and Seller Bank employees in Buyer's
system of electronic data processing.
5.17 Disclosure Supplements
From time to time prior to the Effective Time, each party shall promptly
supplement or amend any materials Previously Disclosed and delivered to the
other party pursuant hereto with respect to any matter hereafter arising
which, if existing, occurring or known at the date of this Agreement, would
have been required to be set forth or described in materials Previously
Disclosed to the other party or which is necessary to correct any information
in such materials which has been rendered materially inaccurate thereby; no
such supplement or amendment to such materials shall be deemed to have
modified the representations, warranties and covenants of the parties for the
purpose of determining whether the conditions set forth in Article VI hereof
have been satisfied.
5.18 Failure to Fulfill Conditions
In the event that either of the Parties hereto determines that a
condition to its respective obligations to consummate the transactions
contemplated may not be fulfilled on or prior to the termination of this
Agreement, it will promptly notify the other party. Each Party will promptly
inform the other Party of any facts applicable to it that would be likely to
prevent or materially delay approval of the Merger by any Governmental Entity
or third party or which would otherwise prevent or materially delay completion
of such transactions.
5.19 Environmental Reports
Seller shall have furnished to Buyer before the date of this Agreement
any environmental reports related to any property owned or being used by
Seller. Buyer, at its sole discretion, may obtain, as soon as reasonably
practical, but not later than 30 days after the date hereof (or within ten
days after the acquisition of lease of any real property acquired or leased
after the date hereof), a report of a phase one environmental investigation on
real property owned or leased by Seller or its Subsidiaries (but excluding
space in office or retail and similar establishments leased by Seller or its
subsidiaries for automatic teller machines or bank branch facilities or other
office uses where the space leased comprises less than 20% of the total space
leased to all tenants of such property). If required by the phase one
investigation in Buyer's reasonable opinion, Seller shall provide to Buyer,
within 40 days of the receipt by Seller of the request of Buyer therefor, a
report of a phase two investigation on properties requiring such additional
study. Buyer shall have 5 business days to request Seller to obtain a phase
two investigation report. Buyer shall have 5 business days from the receipt
of any such phase two investigation report to notify Seller of any
dissatisfaction with the contents of such report. Should the cost of taking
all remedial or other corrective actions and measures (i) required by
applicable law or reasonably likely to be required by applicable law, or (ii)
recommended or suggested by such report or reports or prudent in light of
serious life, health or safety concerns, in the aggregate, exceed the sum of
$150,000 as reasonably estimated by an environmental expert retained for such
purpose by Buyer and reasonably acceptable to Seller, or if the cost of such
actions and measures cannot be so reasonably estimated by such expert to be
such amount or less with
36
any reasonable degree of certainty, then Buyer shall have the right pursuant
to Section 7.1 hereof, for a period of ten business days following receipt of
such estimate or indication that the cost of such actions and measures can not
be so reasonably estimated, to terminate this Agreement, which shall be
Buyer's sole remedy in such event. The costs of the phase one and phase two
investigations, if any, shall be borne by Buyer.
5.20 Transaction Expenses of Seller
(a) For planning purposes, the Seller (as Previously Disclosed) has
provided Buyer with its estimated budget of transaction-related expenses
reasonably anticipated to be payable by the Seller in connection with the
Agreement based on facts and circumstances then currently known, including the
fees and expenses of counsel, accountants, investment bankers and other
professionals. The Seller shall promptly notify the Buyer if or when it
determines that it will expect to exceed its budget.
(b) Promptly after the execution of this Agreement, the Seller shall
ask all of its attorneys and other professionals to render current and correct
invoices for all unbilled time and disbursements within 30 days. The Seller
shall accrue and/or pay all of such amounts as soon as possible.
(c) The Seller shall cause its professionals to render monthly
invoices within 30 days after the end of each month. The Seller shall advise
the Buyer monthly of all out-of-pocket expenses which the Seller has incurred
in connection with the Agreement.
(d) The Seller, in reasonable consultation with the Buyer, shall make
all arrangements with respect to the printing and mailing of the Proxy
Statement.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent - Buyer and Seller
The respective obligations of Buyer and Seller to effect the
transactions contemplated hereby shall be subject to satisfaction of the
following conditions at or prior to the Effective Time.
(a) All corporate action necessary to authorize the execution and
delivery of this Agreement and completion of the Corporate Merger shall have
been duly and validly taken by Buyer, Merger Sub and Seller, including
adoption of this Agreement by the requisite vote of the shareholders of
Seller.
(b) All approvals and consents from any Governmental Entity the
approval or consent of which is required for the completion of the Corporate
Merger shall have been received and all statutory waiting periods in respect
thereof shall have expired; and Buyer, Buyer Bank, Seller and Seller Bank
shall have procured all other approvals, consents and waivers of each person
(other than the Governmental Entities referred to above) whose approval,
consent or waiver is necessary to the completion of the Corporate Merger and
the failure of which to obtain would have the effects set forth in the
following proviso clause; provided, however, that no approval or consent
referred to in this
37
Section 6.1(b) shall be deemed to have been received if it shall include any
nonstandard condition or requirement that, in the aggregate, would so
materially reduce the economic or business benefits of the transactions
contemplated by this Agreement to Buyer that had such condition or
requirement been known, Buyer, in its reasonable judgment, would not have
entered into this Agreement.
(c) None of Buyer, Buyer Bank, Merger Sub, Seller or Seller Bank shall
be subject to any statute, rule, regulation, injunction or other order or
decree which shall have been enacted, entered, promulgated or enforced by any
governmental or judicial authority which prohibits, restricts or makes illegal
completion of the Corporate Merger.
(d) No proceeding initiated by any Governmental Entity seeking an
order, injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition preventing the completion
of the Corporate Merger shall be pending.
6.2 Conditions Precedent - Seller
The obligations of Seller to effect the transactions contemplated hereby
shall be subject to satisfaction of the following conditions at or prior to
the Effective Time unless waived by Seller pursuant to Section 7.4 hereof.
(a) The representations and warranties of Buyer set forth in Article
IV hereof shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though made on and as of the
Closing Date, or on the date when made in the case of a representation and
warranty which specifically relates to an earlier date.
(b) Buyer shall have performed in all material respects all
obligations and complied with all covenants required to be performed and
complied with by it pursuant to this Agreement on or prior to the Effective
Time.
(c) Buyer shall have delivered to Seller a certificate, dated the date
of the Closing and signed by its President and Chief Executive Officer and by
its Chief Financial Officer, to the effect that the conditions set forth in
Sections 6.2(a) and 6.2(b) have been satisfied.
(d) Buyer shall have furnished Seller with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 6.1 and 6.2 as such conditions relate to
Buyer as Seller may reasonably request.
(e) Opinion of Counsel. Buyer shall have received an opinion of
counsel, dated the Closing Date, in form and substance reasonably satisfactory
to Seller, substantially to the effect set forth in Exhibit 6.2(e) hereto.
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6.3 Conditions Precedent - Buyer
The obligations of Buyer to effect the transactions contemplated hereby
shall be subject to satisfaction of the following conditions at or prior to
the Effective Time unless waived by Buyer pursuant to Section 7.4 hereof.
(a) The representations and warranties of Seller set forth in Article
III hereof shall be true and correct in all material respects as of the date
of this Agreement and as of the Closing Date as though made on and as of the
Closing Date, or on the date when made in the case of a representation and
warranty which specifically relates to an earlier date.
(b) Seller shall have performed in all material respects all
obligations and complied with all covenants required to be performed and
complied with by it pursuant to this Agreement on or prior to the Effective
Time.
(c) Seller shall have delivered to Buyer a certificate, dated the date
of the Closing and signed by its President and Chief Executive Officer and by
its Chief Financial Officer, to the effect that the conditions set forth in
Sections 6.3(a) and 6.3(b) have been satisfied.
(d) Seller shall have furnished Buyer with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 6.1 and 6.3 as such conditions relate to
Seller as Buyer may reasonably request.
(e) No more than 15% the outstanding shares of Seller Common Stock
shall be Dissenting Shares.
(f) Opinion of Counsel. Buyer shall have received an opinion of
counsel to Seller, dated the Closing Date, in form and substance reasonably
satisfactory to Buyer, substantially to the effect set forth in Exhibit 6.3(f)
hereto.
(g) Merger Related Expense. Seller shall have provided Buyer with an
accounting of all merger related expenses incurred by it through the Closing
Date, including a good faith estimate of such expenses incurred but as to
which invoices have not been submitted as of the Closing Date. The merger
related expenses of Seller other than printing expenses (which are within the
control of Buyer), shall be reasonable, taking into account normal and
customary billing rates, fees and expenses for similar transactions.
(h) Voting Agreements. Each of the Seller's directors have entered
into a voting agreement, a form of which is attached as Exhibit 6.3(h),
hereto.
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ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 Termination
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time, by the mutual
consent in writing of the parties hereto;
(b) at any time on or prior to the Effective Time, by Buyer in writing
if Seller has, or by Seller in writing if Buyer has, breached any covenant or
undertaking contained herein or any representation or warranty contained
herein, unless such breach has been cured within 30 days after written notice
of such breach;
(c) at any time, by either Buyer or Seller in writing, (i) if any
application for prior approval of a Governmental Entity which is necessary to
consummate the Corporate Merger is denied or withdrawn at the request or
recommendation of the Governmental Entity which must grant such approval,
unless within the 25-day period following such denial or withdrawal a petition
for rehearing or an amended application has been filed with the applicable
Governmental Entity, provided, however, that no party shall have the right to
terminate this Agreement pursuant to this Section 7(c)(i) if such denial or
request or recommendation for withdrawal shall be due to the failure of the
party seeking to terminate this Agreement to perform or observe the covenants
and agreements of such party set forth herein, or (ii) if any Governmental
Entity of competent jurisdiction shall have issued a final nonappealable order
enjoining or otherwise prohibiting the completion of the Corporate Merger;
(d) at any time, by either Buyer or Seller in writing, if the
shareholders of Seller do not approve this Agreement after a vote taken
thereon at a meeting duly called for such purpose (or at any adjournment
thereof) unless the failure of such occurrence shall be due to the failure of
the party seeking to terminate to perform or observe in any material respect
its agreements set forth herein to be performed or observed by such party at
or before the Effective Time; and
(e) by either Buyer or Seller in writing if the Effective Time has not
occurred by the close of business on December 31, 2000, provided that this
right to terminate shall not be available to any party whose failure to
perform an obligation in breach of such party's obligations under this
Agreement has been the cause of, or resulted in, the failure of the Corporate
Merger to be consummated by such date.
(f) by Buyer to the extent provided by Section 5.19, by giving timely
written notice thereof to Seller.
For purposes of this Section 7.1, termination by Buyer also shall be
deemed to be termination on behalf of the Merger Sub.
40
7.2 Effect of Termination
(a) Each of the Parties shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel, provided that
notwithstanding anything to the contrary contained in this Agreement, neither
Buyer nor Seller shall be released from any liabilities or damages arising out
of its willful breach of any provision of this Agreement.
(b) In order to induce Buyer, the Buyer Bank and Merger Sub to
enter into this Agreement and as a means of compensating Buyer, the Buyer Bank
and Merger Sub for the substantial direct and indirect monetary and other
costs incurred and to be incurred in connection with this Agreement and the
transactions contemplated hereby, the Seller and Seller Bank agree that if
this Agreement is terminated by the Buyer in accordance with Section 7.1(b)
the Seller will upon demand pay to Buyer or Buyer Bank in immediately
available funds $377,000, inclusive of any other amounts that may otherwise be
due and payable in accordance with Section 7.2 hereunder.
If this Agreement is terminated by the Buyer in accordance with Section
7.1(d) or (e) and prior to such termination a Termination Event, as defined in
paragraph (c) of this Section 7.2, shall have occurred, the Seller will upon
demand pay to Buyer or Buyer Bank in immediately available funds $377,000,
inclusive of any other amounts that may otherwise be due and payable in
accordance with Section 7.2 hereunder; provided however, no such payment shall
be due or payable hereunder prior to the Seller and/or the Seller Bank either
receiving a publicly announced bona fide offer from a third party prior to
the date of Seller's shareholder meeting, which offer is not publicly
withdrawn prior to such meeting, and subsequently failing to receive
shareholder approval of the Agreement or the Seller and/or Seller Bank
entering into a written definitive agreement with a third party with respect
to a Takeover Proposal either prior to the meeting of the shareholders of
Seller to approve the Agreement or within 15 months after termination of the
Agreement or within such 15 month period any third-party person or entity
acquires 25% or more of the Seller Common Stock. "Takeover Proposal" shall
mean any proposal, other than as contemplated by this Agreement, for a merger
or other business combination involving the Seller or any Seller Subsidiary or
for the acquisition of a ten percent (10%) or greater equity interest in
Seller or any Seller Subsidiary, or for the purchase, lease or other
acquisition of a substantial portion of the assets of Seller or any Seller
Subsidiary (other than loans or securities sold in the ordinary course of
business).
(c) For purposes of this Agreement, a Termination Event shall
mean either of the following:
(i) The Seller or any Seller Subsidiary, without having
received Buyer's prior written consent, shall have entered into a written
agreement to engage in a Takeover Proposal with any person (the term "person"
for purposes of this Agreement having the meaning assigned thereto in Sections
3(a)(9) and 13(d)(3) of the Exchange Act, and the rules and regulations
thereunder) other than Buyer or any affiliate of Buyer (the term "affiliate"
for purposes of this Agreement having the meaning assigned thereto in Rule 405
under the Securities Act) or the Board
41
of Directors of the Seller shall have recommended that the shareholders of
the Seller approve or accept any Takeover Proposal with any person other than
Buyer or any affiliate of Buyer; or
(ii) After a bona fide written proposal is made by any
person other than Buyer or any affiliate of Buyer to the Seller or its
shareholders to engage in a Takeover Proposal and is publicly disclosed,
either (A) the Seller shall have breached any covenant or obligation contained
in this Agreement and such breach would entitle Buyer to terminate this
Agreement, or (B) the holders of Seller Common Stock shall not have approved
this Agreement at the Seller's shareholder meeting described in Section 5.2 of
this Agreement, a proxy statement has not been mailed to the holders of Seller
Common Stock as a result of the Board of Directors' exercise of its fiduciary
duties as set forth in Section 5.2 of this Agreement, such shareholder meeting
shall not have been held in a timely manner or shall have been postponed,
delayed or enjoined prior to termination of this Agreement except as a result
of a judicial or administrative proceeding or the Seller's Board of Directors
shall have (i) withdrawn or modified in a manner materially adverse to Buyer
the recommendation of the Seller's Board of Directors with respect to this
Agreement, or announced or disclosed to any third party its intention to do so
or (ii) failed to recommend, in the case of a tender offer or exchange offer
for the Seller Common Stock, against acceptance of such tender offer or
exchange offer to its shareholders or takes no position with respect to
acceptance of such tender offer or exchange offer by its stockholders.
(d) In the event that this Agreement is terminated pursuant to Section
7.1 hereof, this Agreement shall become void and have no effect, except that
(i) the provisions relating to confidentiality set forth in Section 5.4(b) and
this Section 7.2, shall survive any such termination and (ii) a termination
pursuant to Section 7.1(b), (c), (d), or (e) shall not relieve the breaching
party from any liability or damages arising out of its willful breach of any
provision of this Agreement giving rise to such termination.
7.3 Survival of Representations, Warranties and Covenants
All representations, warranties and covenants in this Agreement or in
any instrument delivered pursuant hereto or thereto shall expire on, and be
terminated and extinguished at, the Effective Time other than covenants that
by their terms are to be performed after the Effective Time (including the
covenants set forth in Sections 2.6, 2.8, 5.9, 5.10 and 5.11 hereof), provided
that no such representations, warranties or covenants shall be deemed to be
terminated or extinguished so as to deprive Buyer or Seller (or any director,
officer or controlling person of either thereof) of any defense at law or in
equity which otherwise would be available against the claims of any person,
including any shareholder or former shareholder of either Buyer or Seller.
7.4 Waiver
Each party hereto by written instrument signed by an executive officer
of such party, may at any time (whether before or after approval of this
Agreement by the shareholders of Seller) extend the time for the performance
of any of the obligations or other acts of the other party hereto and may
waive (i) any inaccuracies of the other party in the representations or
warranties contained in this Agreement or any document delivered pursuant
hereto, (ii) compliance with any of the covenants,
42
undertakings or agreements of the other party, (iii) to the extent permitted
by law, satisfaction of any of the conditions precedent to its obligations
contained herein or (iv) the performance by the other party of any of its
obligations set forth herein, provided that any such waiver granted, or any
amendment or supplement pursuant to Section 7.5 hereof executed after
shareholders of Seller have approved this Agreement, shall not modify either
the amount or form of the consideration to be provided hereby to the holders
of Seller Common Stock upon completion of the Corporate Merger or otherwise
materially adversely affect such shareholders without the approval of the
shareholders who would be so affected.
7.5 Amendment or Supplement
This Agreement may be amended or supplemented at any time by mutual
agreement of the Parties hereto, subject to the proviso to Section 7.4 hereof.
Any such amendment or supplement must be in writing and authorized by or under
the direction of the Board of Directors of each of the Parties hereto.
ARTICLE VIII
MISCELLANEOUS
8.1 Entire Agreement
This Agreement contains the entire agreement among the Parties with
respect to the transactions contemplated hereby and supersedes all prior
arrangements or understandings with respect thereto, written or oral, other
than documents referred to herein and therein. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the Parties
hereto and their respective successors. Nothing in this Agreement, expressed
or implied, is intended to confer upon any party, other than the Parties
hereto, and their respective successors, any rights, remedies, obligations or
liabilities other than as set forth in Sections 5.9, 5.10 and 5.11 hereof.
8.2 No Assignment
None of the Parties hereto may assign any of its rights or obligations
under this Agreement to any other person.
8.3 Notices
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally,
telecopied (with confirmation) or sent by overnight mail service or by
registered or certified mail (return receipt requested), postage prepaid,
addressed as follows:
43
If to Buyer:
Fidelity Bancorp, Inc.
1009 Perry Highway
Pittsburgh, PA 15237-2105
Attn: William L. Windisch, President
Fax: 412-364-6504
With a required copy to:
Malizia Spidi & Fisch, PC
1301 K Street, NW, Suite 700 East
Washington, DC 20005
Attn: Samuel J. Malizia, Esq.
Fax: 202-434-4661
E-Mail: [email protected]
If to Seller:
Pennwood Bancorp, Inc.
683 Lincoln Avenue
Bellevue, PA 15202
Attn: Paul S. Pieffer, President
Fax: 412-761-7828
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, NW
Washington, DC 20005
Attn: Raymond A. Tiernan, Esq.
Gerald F. Heupel, Jr., Esq.
Fax: 202-347-2172
8.4 Alternative Structure
Notwithstanding any provision of this Agreement to the contrary, Buyer
may, with the written consent of Seller, which shall not be unreasonably
withheld, at any time modify the structure of the acquisition of Seller set
forth herein, provided that (i) the consideration to be paid to the holders of
Seller Common Stock is not thereby changed in kind or reduced in amount as a
result of such modification and (ii) such modification will not materially
delay or jeopardize receipt of any required approvals of Governmental Entities
or any other condition to the obligations of Buyer set forth in Sections 6.1
and 6.3 hereof.
44
8.5 Interpretation
The captions contained in this Agreement are for reference purposes only
and are not part of this Agreement.
8.6 Counterparts
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.7 Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania applicable to agreements made and
entirely to be performed within such jurisdiction.
8.8 Severability
Any term, provision, covenant or restriction contained in this Agreement
held to be invalid, void or unenforceable, shall be ineffective to the extent
of such invalidity, voidness or unenforceability, but neither the remaining
terms, provisions, covenants or restrictions contained in this Agreement nor
the validity or enforceability thereof in any other jurisdiction shall be
affected or impaired thereby. Any term, provision, covenant or restriction
contained in this Agreement that is so found to be so broad as to be
unenforceable shall be interpreted to be as broad as is enforceable.
8.9 Standard of Materiality
No representation or warranty shall be deemed untrue or incorrect, and
no Party shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance unless such
fact, event or circumstance, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or
warranty has had or is reasonably likely to have a Material Adverse Effect on
the Party making such representation or warranty.
45
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers and their corporate
seal to be hereunto affixed and attested by their officers thereunto duly
authorized, all as of the day and year first above written.
PENNWOOD BANCORP, INC.
Attest:
By:
- ------------------------- ------------------------------
Secretary Paul S. Pieffer, President
FIDELITY BANCORP, INC.
Attest:
By:
- ------------------------- ------------------------------
Secretary William L. Windisch, President
46
EXHIBIT 99.1
FIDELITY 1009 PERRY HIGHWAY*PITTSBURGH, PENNSYLVANIA 15237
Bancorp, Inc. TELEPHONE 412/367-3300*FAX412/364-6504
==============================================================================
______________________________________________________________________________
PRESS RELEASE
______________________________________________________________________________
RELEASE DATE: CONTACT:
February 18, 2000 Fidelity Bancorp, Inc.
William L. Windisch
(412) 367-3300
Pennwood Bancorp, Inc.
Paul S. Pieffer
(412) 761-1234
FIDELITY BANCORP, INC. ANNOUNCES MERGER
WITH PENNWOOD BANCORP, INC
Pittsburgh, Pennsylvania, February 18, 2000: Fidelity Bancorp, Inc.
(NASDAQ -- "FSBI") and Pennwood Bancorp, Inc. ("OTC BB -- "PWBK") jointly
announced today the signing of a Definitive Agreement and Plan of Merger,
whereby Fidelity will acquire all of the outstanding common stock of Pennwood
for $13.10 per share in cash. This represents an acquisition value of
approximately $7.5 million or 113% of Pennwood's stated book value at December
31, 1999. The acquisition is subject to several contingencies, including
approval by the stockholders of Pennwood and receipt of regulatory approval.
Pennwood will be filing a proxy statement and other relevant documents
concerning the merger with the Securities and Exchange Commission ("SEC").
WE URGE INVESTORS TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS
FILED WITH THE SEC BECAUSE THEY CONTAIN IMPORTANT INFORMATION. Investors will
be able to obtain the documents free of charge at the SEC's website,
www.sec.gov. In addition, documents filed with the SEC by Pennwood will be
available free of charge from the Corporate Secretary of Pennwood at 683
Lincoln Avenue, Pittsburgh, PA 15202, telephone (412) 761-1234. Documents
filed with the SEC by Fidelity will be available free of charge from the
Corporate Secretary of Fidelity at 1009 Perry Highway, Pittsburgh, PA 15237,
telephone (412) 367-3300. INVESTORS SHOULD READ THE PROXY STATEMENT
CAREFULLY BEFORE MAKING A DECISION CONCERNING THE MERGER.
FIDELITY
Bancorp, Inc. PRESS RELEASE (Continued)
Pennwood and its directors and its directors and executive officers may
be deemed to be participants in the solicitation of proxies of Pennwood
stockholders to approve the merger. Pennwood's board of directors is composed
of Mary M. Frank, Robert W. Hannan, Michael Kotyk, John B. Mallon, Paul S.
Pieffer, C. Joseph Touhill and H. J. Zoffer. Collectively, the directors and
executive officers at Pennwood may be deemed to beneficially own approximately
24% of Pennwood's common stock. This ownership information is as of December
31, 1999. As a result of consummation of the merger, all stock options and
shares of restricted stock awarded under Pennwood's stock benefit plans will
vest. Holders of Pennwood's stock options will receive cash in an amount
equal to the difference between $13.10 and the option exercise price.
Fidelity Bank, the subsidiary of Fidelity Bancorp, Inc., is a
full-service community bank operating from nine offices in Allegheny and
Butler Counties, Pennsylvania. Pennwood Savings Bank, the subsidiary of
Pennwood Bancorp, Inc., operates from three offices in Pittsburgh and
Kittanning, Pennsylvania. William L. Windisch, President and Chief
Executive Officer of Fidelity, stated, "We are pleased to announce the
acquisition of Pennwood. This will be a positive addition to the Company.
Merging Pennwood into Fidelity will permit us to offer our full line of
financial services to Pennwood customers and the residents and businesses in
their communities. We expect the acquisition to be accretive to earnings
during the first year." Paul S. Pieffer, President and Chief Executive
Officer of Pennwood said, "We are delighted to become part of Fidelity, a
local community-oriented financial institution. We believe the transaction is
in the best interests of our stockholders, customers, and employees. We
believe this merger will provide long term benefits for our customers." At
December 31, 1999, Fidelity had total assets and stockholders' equity of
$497.5 million and $24.7 million, respectively.
