Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 2, 2000
BY AND AMONG
NORTHEAST PENNSYLVANIA FINANCIAL CORP.
NORTHEAST ACQUISITION, INC.
AND
SECURITY OF PENNSYLVANIA FINANCIAL CORP.
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TABLE OF CONTENTS
Page No.
Introductory Statement. . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
The Merger . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Structure of the Merger. . . . . . . . . . .1
Section 1.2. Effect on Shares of Target Common Stock. . .2
Section 1.3. Payment Procedures . . . . . . . . . . . . .2
Section 1.4. Stock Options. . . . . . . . . . . . . . . .4
Section 1.5. Effect on Shares of Acquisition Sub Stock. .5
Section 1.6. Certificate of Incorporation and Bylaws of
the Surviving Corporation. . . . . . . . . .5
Section 1.7. Directors and Officers of the Surviving
Corporation. . . . . . . . . . . . . . . . .5
Section 1.8. Bank Merger. . . . . . . . . . . . . . . . .5
Section 1.9. Alternative Structure. . . . . . . . . . . .5
Section 1.10. Dissenters' Rights . . . . . . . . . . . . .6
ARTICLE II
Representations and Warranties. . . . . . . . . . . . . . .6
Section 2.1. Representations and Warranties of Target . .6
Section 2.2. Representations and Warranties of Acquiror 23
ARTICLE III
Conduct Pending the Merger. . . . . . . . . . . . . . . . 27
Section 3.1. Conduct of Target's Business Prior to the
Effective Time . . . . . . . . . . . . . . 27
Section 3.2. Forbearance by Target. . . . . . . . . . . 28
Section 3.3. Conduct of Acquiror's Business Prior to the
Effective Time . . . . . . . . . . . . . . 31
ARTICLE IV
Covenants. . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.1. Acquisition Proposals. . . . . . . . . . . 31
Section 4.2. Certain Policies and Actions of Target . . 34
Section 4.3. Access and Information . . . . . . . . . . 34
Section 4.4. Certain Filings, Consents and Agreements . 36
Section 4.5. Anti-takeover Provisions . . . . . . . . . 36
Section 4.6. Additional Agreements. . . . . . . . . . . 36
Section 4.7. Publicity. . . . . . . . . . . . . . . . . 36
Section 4.8. Stockholder Meeting. . . . . . . . . . . . 37
Section 4.9. Proxy Statement. . . . . . . . . . . . . . 37
Section 4.10. Notification of Certain Matters. . . . . . 38
Section 4.11. Employees, Directors and Officers. . . . . 38
Section 4.12. Indemnification. . . . . . . . . . . . . . 41
ARTICLE V
Conditions to Consummation. . . . . . . . . . . . . . . . 43
Section 5.1. Conditions to Each Party's Obligations . . 43
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Section 5.2. Conditions to the Obligations of Acquiror. 43
Section 5.3. Conditions to the Obligations of Target. . 44
ARTICLE VI
Termination . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.1. Termination. . . . . . . . . . . . . . . . 45
Section 6.2. Expenses . . . . . . . . . . . . . . . . . 46
Section 6.3. Termination Fee. . . . . . . . . . . . . . 46
Section 6.4. Effect of Termination. . . . . . . . . . . 47
ARTICLE VII
Closing, Effective Date and Effective Time. . . . . . . . 47
Section 7.1. Effective Date and Effective Time. . . . . 47
Section 7.2. Deliveries at the Closing. . . . . . . . . 48
ARTICLE VIII
Certain Other Matters . . . . . . . . . . . . . . . . . . 48
Section 8.1. Certain Definitions; Interpretation. . . . 48
Section 8.2. Survival . . . . . . . . . . . . . . . . . 49
Section 8.3. Waiver; Amendment. . . . . . . . . . . . . 49
Section 8.4. Counterparts . . . . . . . . . . . . . . . 49
Section 8.5. Governing Law. . . . . . . . . . . . . . . 49
Section 8.6. Expenses . . . . . . . . . . . . . . . . . 49
Section 8.7. Notices. . . . . . . . . . . . . . . . . . 49
Section 8.8. Entire Agreement; etc. . . . . . . . . . . 50
Section 8.9. Successors and Assigns; Assignment . . . . 51
Section 8.10 Arbitration. . . . . . . . . . . . . . . . 51
Exhibit A - Plan of Bank Merger
Exhibit B - Consulting and Non-Competition Agreement
Exhibit C - Consulting and Non-Competition Agreement
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AGREEMENT AND PLAN OF MERGER
This is an Agreement and Plan of Merger, dated as of the 2nd day
of June, 2000 ("Agreement"), by and among Northeast Pennsylvania Financial
Corp., a Delaware corporation ("Acquiror"), Northeast Acquisition, Inc., a
Delaware corporation ("Acquisition Sub"), and Security of Pennsylvania
Financial Corp., a Delaware corporation ("Target").
Introductory Statement
The Board of Directors of each of Acquiror and Target (i) has
determined that this Agreement and the business combination and related
transactions contemplated hereby are in the best interests of Acquiror and
Target, respectively, and in the best interests of their respective
stockholders and (ii) has approved, at meetings of each of such Boards of
Directors, this Agreement.
Acquiror and Target desire to make certain representations,
warranties and agreements in connection with the business combination and
related transactions provided for herein and to prescribe various conditions
to such transactions.
Acquisition Sub has been organized as a wholly owned subsidiary of
Acquiror to facilitate the business combination contemplated by this
Agreement.
In connection with the execution and delivery of this Agreement,
and as a condition and inducement to the Acquiror's and Acquisition Sub's
willingness to enter into this Agreement, certain executives of Target are
entering into consulting and non-competition agreements with the Acquiror
(which shall become effective at the Effective Time) in the forms attached as
Exhibits B and C.
In consideration of their mutual promises and obligations
hereunder, the parties hereto adopt and make this Agreement and prescribe the
terms and conditions hereof and the manner and basis of carrying it into
effect, which shall be as follows:
ARTICLE I
THE MERGER
Section 1.1. Structure of the Merger. On the Effective Date
(as defined in Section 7.1), Acquisition Sub will merge with and into Target
("Merger"), pursuant to the provisions of, and with the effect provided in,
the Delaware General Corporation Law ("DGCL"). Upon consummation of the
Merger, the separate corporate existence of Acquisition Sub shall cease.
Target shall be the surviving corporation (hereinafter sometimes referred to
in such capacity as the "Surviving Corporation" or, unless the context
otherwise requires, "Target") in the Merger and shall continue to be governed
by the DGCL, and its separate corporate existence, with all of its rights,
privileges, immunities, powers and franchises, shall continue unaffected by
the Merger. The name of Target, as the Surviving Corporation in the Merger,
shall be Security of Pennsylvania
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Financial Corp. From and after the Effective Time (as defined in Section
7.1), the Surviving Corporation shall possess all of the properties and rights
and be subject to all of the liabilities and obligations of Target and
Acquisition Sub, all as more fully described in the DGCL.
Section 1.2. Effect on Shares of Target Common Stock.
(a) By virtue of the Merger, automatically and without any
action on the part of the holder thereof, each share of common stock, par
value $.01 per share, of Target ("Target Common Stock") that is issued and
outstanding at the Effective Time, other than Excluded Shares (as defined
below), shall cease to be outstanding and shall be converted into and become
the right to receive (subject to adjustment as described below) $17.50 in
cash, without interest thereon (the "Merger Consideration").
"Excluded Shares" shall consist of (i) Dissenters' Shares
(as defined in Section 1.10); (ii) shares held directly or indirectly by
Acquiror (other than shares held in a fiduciary capacity or in satisfaction of
a debt previously contracted) and (iii) shares held by Target as treasury
stock.
(b) As of the Effective Time, each Excluded Share, other than
Dissenters' Shares, shall be canceled and retired and shall cease to exist,
and no exchange or payment shall be made with respect thereto. In addition,
no Dissenters' Shares shall be converted into the Merger Consideration
pursuant to this Section 1.2 but instead shall be treated in accordance with
the procedures set forth in Section 1.10 of this Agreement.
Section 1.3. Payment Procedures.
(a) Appropriate transmittal materials ("Letter of Transmittal")
shall be mailed as soon as reasonably practicable after the Effective Time to
each holder of record of Target Common Stock as of the Effective Time. A
Letter of Transmittal shall be deemed properly completed only if accompanied
by certificates representing all shares of Target Common Stock to be converted
thereby.
(b) At and after the Effective Time, each certificate ("Target
Certificate") previously representing shares of Target Common Stock (except as
specifically set forth in Section 1.2) shall represent only the right to
receive the Merger Consideration multiplied by the number of shares of Target
Common Stock previously represented by the Target Certificate.
(c) Prior to the Effective Time, Acquiror shall deposit, or
shall cause to be deposited, in a segregated account with Northeast
Pennsylvania Trust Co. or another bank or trust company selected by Acquiror
and reasonably acceptable to Target, which shall act as paying agent ("Paying
Agent") for the benefit of the holders of shares of Target Common Stock, for
payment in
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accordance with this Section 1.3, an amount of cash sufficient to pay the
aggregate Merger Consideration to be paid pursuant to Section 1.2 and to pay
the amount required pursuant to Section 1.4.
(d) The Letter of Transmittal shall (i) specify that delivery
shall be effected, and risk of loss and title to the Target Certificates shall
pass, only upon delivery of the Target Certificates to the Paying Agent, (ii)
be in a form and contain any other provisions as Acquiror may reasonably
determine and (iii) include instructions for use in effecting the surrender of
the Target Certificates in exchange for the Merger Consideration. Upon the
proper surrender of the Target Certificates to the Paying Agent, together with
a properly completed and duly executed Letter of Transmittal, the holder of
such Target Certificates shall be entitled to receive in exchange therefor a
check in the amount equal to the cash that such holder has the right to
receive pursuant to Section 1.2. Target Certificates so surrendered shall
forthwith be canceled. As soon as practicable following receipt of the
properly completed Letter of Transmittal and any necessary accompanying
documentation, the Paying Agent shall issue a check as provided herein. If
there is a transfer of ownership of any shares of Target Common Stock not
registered in the transfer records of Target, the Merger Consideration shall
be issued to the transferee thereof if the Target Certificates representing
such Target Common Stock are presented to the Paying Agent, accompanied by all
documents required, in the reasonable judgment of Acquiror and the Paying
Agent, (x) to evidence and effect such transfer and (y) to evidence that any
applicable stock transfer taxes have been paid.
(e) From and after the Effective Time there shall be no
transfers on the stock transfer records of Target of any shares of Target
Common Stock. If, after the Effective Time, Target Certificates are presented
to Acquiror, they shall be canceled and exchanged for the Merger Consideration
deliverable in respect thereof pursuant to this Agreement in accordance with
the procedures set forth in this Section 1.3.
(f) Any portion of the aggregate amount of cash to be paid
pursuant to Section 1.2 that remains unclaimed by the stockholders of Target
for six months after the Effective Time shall be repaid by the Paying Agent to
Acquiror upon the written request of Acquiror. After such request is made, any
stockholders of Target who have not theretofore complied with this Section 1.3
shall look only to Acquiror for the Merger Consideration deliverable in
respect of each share of Target Common Stock such stockholder holds, as
determined pursuant to Section 1.2 of this Agreement, without any interest
thereon. If outstanding Target Certificates are not surrendered prior to the
date on which such payments would otherwise escheat to or become the property
of any governmental unit or agency, the unclaimed items shall, to the extent
permitted by any abandoned property, escheat or other applicable laws, become
the property of Acquiror (and, to the extent not in its possession, shall be
paid over to it), free and clear of all claims or interest of any person
previously entitled to such claims. Notwithstanding the foregoing, neither
the Paying Agent nor any party to this Agreement (or any affiliate thereof)
shall be liable to any former holder of Target Common Stock for any amount
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
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(g) Acquiror and the Paying Agent shall be entitled to rely upon
Target's stock transfer books 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
stock represented by any Target Certificate, Acquiror and the Paying 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.
(h) If any Target Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Target Certificate to be lost, stolen or destroyed and, if required by
the Paying Agent, the posting by such person of a bond in such amount as the
Paying Agent may reasonably direct as indemnity against any claim that may be
made against it with respect to such Target Certificate, the Paying Agent will
issue in exchange for such lost, stolen or destroyed Target Certificate the
Merger Consideration deliverable in respect thereof pursuant to Section 1.2.
Section 1.4. Stock Options.
(a) Except as provided in Section 1.4(b), at the Effective Time,
each option to acquire shares of Target Common Stock (a "Target Option")
granted pursuant to the Target Stock-Based Incentive Plan (the "Target
Incentive Plan") that is then outstanding and unexercised, shall be canceled,
and in lieu thereof the holders of such options shall be paid in cash an
amount equal to the product of (i) the number of shares of Target Common Stock
subject to such option at the Effective Time and (ii) the amount by which the
Merger Consideration exceeds the exercise price per share of such option, net
of any cash which must be withheld under federal and state income and
employment tax requirements. In the event that the exercise price of a Target
Option is greater than the Merger Consideration, then at the Effective Time
such Target Option shall be canceled without any payment made in exchange
therefor. At the Effective Time the Target Incentive Plan shall be deemed
terminated.
(b) Directors and employees of Target who continue to serve as a
director or be employed by Acquiror or a subsidiary of Acquiror may, by
written notice to Acquiror received by Acquiror not less than the day that is
two business days prior to the Closing Date (as defined in Section 7.1), elect
to convert all or any portion of the Target Options held by them into options
("Acquiror Options") to purchase shares of Acquiror's common stock, par value
$.01 per share ("Acquiror Common Stock"). Any such election shall identify
the Target Options to be converted into Acquiror Options and shall become
irrevocable upon receipt by Acquiror of the notice of election. Any
conversion pursuant to this Section 1.4(b) shall be effected by issuing to the
electing individual Acquiror Options to purchase the number of shares of
Acquiror Common Stock (rounded up to the nearest whole share) equal to the
product of (i) the number of shares of Target Common Stock subject to the
Target Options being converted, and (ii) a fraction, the numerator of which is
the per share Merger Consideration and the denominator of which is the average
of the daily closing sales prices of a share of Acquiror Common Stock, as
reported on the American Stock Exchange, for the 15 consecutive trading days
ending with the last trading day before the Effective Date(as
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defined in Section 7.1). The exercise price per share for each share of
Acquiror Common Stock subject to an Acquiror Option issued under this
Section 1.4(b) shall be equal to the product (rounded to the nearest cent) of
the per share exercise price of the Target Option being converted into such
Acquiror Options multiplied by the reciprocal of the fraction described in
Section 1.4(b)(ii) above. Each such Acquiror Option (i) shall be fully vested
and shall be exercisable on the same terms as the related Target Options,
(ii) shall not be subject to any condition, except as may be required under
applicable securities laws, and (iii) shall be evidenced by an Acquiror Option
Agreement in a form to be provided by Acquiror that is reasonably acceptable
to Target, and that shall provide for reasonable registration rights. No
payment shall be made pursuant to Section 1.4(a) with respect to any portion
of a Target Option that is converted into an Acquiror Option as described in
this paragraph.
Section 1.5. Effect on Shares of Acquisition Sub Stock. Each
share of common stock of Acquisition Sub that is issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for one share of the Surviving Corporation.
Section 1.6. Certificate of Incorporation and Bylaws of the
Surviving Corporation. The certificate of incorporation and bylaws of Target
in effect immediately prior to the Effective Time shall be the certificate of
incorporation and bylaws of the Surviving Corporation from and after the
Effective Time until amended in accordance with law.
Section 1.7. Directors and Officers of the Surviving
Corporation. From and after the Effective Time, the directors and officers of
the Surviving Corporation shall consist of the directors and officers of
Acquisition Sub serving immediately prior to the Effective Time, each to hold
office in accordance with the certificate of incorporation and bylaws of the
Surviving Corporation until their respective successors are duly elected or
appointed and qualified.
Section 1.8. Bank Merger. Concurrently with or as soon as
practicable after the execution and delivery of this Agreement, First Federal
Bank ("Acquiror Bank"), a wholly owned subsidiary of Acquiror, and Security
Savings Association of Hazleton ("Target Bank"), a wholly owned subsidiary of
Target, shall enter into the Plan of Bank Merger, in the form attached hereto
as Exhibit A, pursuant to which Target Bank will merge with and into Acquiror
Bank (the "Bank Merger"). The parties hereto intend that the Bank Merger
shall become effective on the Effective Date.
Section 1.9. Alternative Structure. Notwithstanding anything
to the contrary contained in this Agreement, prior to the Effective Time,
Acquiror may specify that the structure of the transactions contemplated by
this Agreement be revised and the parties hereto shall enter into such
alternative transactions as Acquiror may determine to effect the purposes of
this Agreement; provided, however, that such revised structure shall not (i)
alter or change the amount or kind of the Merger Consideration or (ii)
materially impede or delay the receipt of any regulatory approval referred to
in, or the consummation of the transactions contemplated by, this Agreement.
This
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Agreement and any related documents shall be appropriately amended in order to
reflect any such revised structure.
Section 1.10. Dissenters' Rights. Notwithstanding anything to
the contrary contained in this Agreement, shares of Target Common Stock that
are outstanding immediately prior to the Effective Time and that are held by
stockholders who shall have not voted in favor of the Merger or consented
thereto in writing and who properly shall have delivered to Target a written
demand for appraisal of the fair value of such shares in accordance with the
DGCL (collectively, the "Dissenters' Shares") shall not be converted into or
represent the right to receive the Merger Consideration. Such stockholders
instead shall be entitled to receive payment of the fair value of such shares
held by them in accordance with the provisions of the DGCL, except that all
Dissenters' Shares held by stockholders who shall have failed to perfect or
who effectively shall have withdrawn or otherwise lost their dissenters'
rights under the DGCL shall thereupon be deemed to have been converted into
and to have become exchangeable, as of the Effective Time, for the right to
receive, without any interest thereon, the Merger Consideration upon surrender
in the manner provided in Section 1.3, of the Target Certificate or Target
Certificates that, immediately prior to the Effective Time, evidenced such
shares. Target shall give Acquiror (i) prompt notice of any written demands
for appraisal of the fair value of any shares of Target Common Stock,
attempted withdrawals of such demands and any other instruments served
pursuant to the DGCL and received by Target relating to stockholders' rights
of appraisal, and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the DGCL. Target shall
not, except with the prior written consent of Acquiror, voluntarily make any
payment with respect to, or settle or offer to settle, any such demand for
appraisal.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations and Warranties of Target.
Except as set forth in the letter setting forth, among other things, facts and
circumstances and events, the disclosure of which is required or appropriate
in relation to any or all of its respective representations and warranties
(and making specific reference to the Section of this Agreement to which they
relate) (the "Disclosure Letter") delivered by Target to Acquiror prior to the
execution of this Agreement, Target represents and warrants to Acquiror that:
(a) Organization.
(i) Target is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
registered as a savings and loan holding company under the Home Owners' Loan
Act, as amended ("HOLA").
(ii) Target Bank is a savings and loan association duly
organized and validly existing under the laws of the Commonwealth of
Pennsylvania. The deposits of Target Bank are insured by the Savings
Association Insurance Fund ("SAIF") administered by the Federal
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Deposit Insurance Corporation ("FDIC") to the extent provided in the Federal
Deposit Insurance Act, as amended ("FDIA"). Target Bank is a member of the
Federal Home Loan Bank of Pittsburgh ("FHLB").
(iii) Target and Target Bank each has all requisite
corporate power and authority to own, lease and operate its properties and to
conduct the business currently being conducted by it. Target and Target Bank
are each duly qualified or licensed as a foreign corporation to transact
business and are in good standing in each jurisdiction in which the character
of the properties owned or leased by it or the nature of the business
conducted by it makes such qualification or licensing necessary, each of which
jurisdictions is listed in Target's Disclosure Letter, except where the
failure to be so qualified or licensed and in good standing would not have a
Material Adverse Effect on Target.
(b) Subsidiaries.
(i) Target does not, directly or indirectly, own an equity
interest representing 5% or more of any class of the capital stock or other
equity interests in any corporation, partnership, joint venture or other
entity other than Target Bank.
(ii) Target owns of record and beneficially all the capital
stock of Target Bank free and clear of any claims, liens, encumbrances or
restrictions and there are no agreements or understandings with respect to the
voting or disposition of any such shares. The outstanding shares of capital
stock of Target Bank have been validly authorized and are validly issued,
fully paid and nonassessable.
(iii) Target Bank does not hold any shares of its capital
stock in its treasury, and there are not, and on the Effective Time there will
not be, outstanding (A) any options, warrants or other rights with respect to
the capital stock of Target Bank, (B) any securities convertible into or
exchangeable for shares of such capital stock or any other debt or equity
security of Target Bank or (C) any other commitments of any kind for the
issuance of additional shares of capital stock or other debt or equity
security of Target Bank or options, warrants or other rights with respect to
such securities.
(c) Capital Structure.
(i) The authorized capital stock of Target consists of
5,000,000 shares of Target Common Stock, and 1,000,000 shares of preferred
stock, par value $0.01 per share ("Target Preferred Stock").
(ii) As of the date of this Agreement:
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(A) 1,356,885 shares of Target Common Stock are
issued and outstanding, all of which are validly
issued, fully paid and nonassessable;
(B) 158,700 shares of Target Common Stock are
reserved for issuance pursuant to Target Options
under the Target Incentive Plan;
(C) 230,115 shares of Target Common Stock are held
by Target in its treasury; and
(D) no shares of Target Preferred Stock are
outstanding or reserved for issuance.
(iii) As of the date of this Agreement, options to purchase
an aggregate of 134,022 shares of Target Common Stock have been granted. Set
forth in Target's Disclosure Letter is a complete and accurate list of all
outstanding Target Options, including the names of the optionees, dates of
grant, exercise prices, dates of vesting, dates of termination and shares
subject to each grant. Following the Effective Time, no holder of Target
Options will have any right to receive shares of common stock of Acquiror upon
the exercise of Target Options except as provided in Section 1.4.
(iv) As of the date of this Agreement, Target Incentive
Plan holds 63,480 shares of Target Common Stock and awards pursuant to Target
Incentive Plan have been granted with respect to 54,606 of those shares of
Target Common Stock. Set forth in Target's Disclosure Letter is a complete
and accurate list of all outstanding shares of restricted stock awarded,
including the names of the recipients, dates of grant, dates of vesting, dates
of termination and shares subject to each grant.
(v) No bonds, debentures, notes or other indebtedness
having the right to vote on any matters on which stockholders of Target may
vote are issued or outstanding.
(vi) Except as set forth in this Section 2.1(c) or in
Target's Disclosure Letter, as of the date of this Agreement, (A) no shares of
capital stock or other voting securities of Target are issued, reserved for
issuance or outstanding and (B) neither Target nor Target Bank has or is bound
by any outstanding subscriptions, options, warrants, calls, rights,
convertible securities, commitments or agreements of any character obligating
Target or Target Bank to issue, deliver or sell, or cause to be issued,
delivered or sold, any additional shares of capital stock of Target or
obligating Target or Target Bank to grant, extend or enter into any such
option, warrant, call, right, convertible security, commitment or agreement.
As of the date hereof, there are no outstanding contractual obligations of
Target or Target Bank to repurchase, redeem or otherwise acquire any shares of
capital stock of Target or Target Bank.
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(d) Authority.
(i) Target has all requisite corporate power and authority
to enter into this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate actions on the part of the Board of Directors of Target, and no
other corporate proceedings on the part of Target are necessary to authorize
this Agreement or to consummate the transactions contemplated by this
Agreement other than the approval and adoption of this Agreement by the
affirmative vote of the holders of a majority of the outstanding shares of
Target Common Stock at Target's Stockholder Meeting (as defined in Section
4.8). This Agreement has been duly and validly executed and delivered by
Target and constitutes a valid and binding obligation of Target, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally and subject,
as to enforceability, to general principles of equity, whether applied in a
court of law or a court of equity.
(ii) Target Bank has all requisite corporate power and
authority to enter into the Plan of Bank Merger and to consummate the
transactions contemplated thereby. The execution and delivery of the Plan of
Bank Merger and the consummation of the transactions contemplated thereby have
been duly authorized by the Board of Directors of Target Bank and approved by
Target as the sole stockholder of Target Bank. The Plan of Bank Merger, upon
execution and delivery by Target Bank, will be duly and validly executed and
delivered by Target Bank and will constitute a valid and binding obligation of
Target Bank, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity, whether applied in a court of law or a court of equity.
(e) Fairness Opinion. Target has received the written opinion
of Sandler O'Neill & Partners, L.P., to the effect that, as of the date
hereof, the Merger Consideration to be received by Target's stockholders is
fair, from a financial point of view, to such stockholders.
(f) No Violations; Consents.
(i) The execution, delivery and performance of this
Agreement by Target do not, and the consummation of the transactions
contemplated by this Agreement will not, (A) assuming the consents and
approvals referred to in Section 2.1(f)(ii) are obtained and the applicable
waiting periods have expired and the approval of Target's stockholders is
obtained, violate any law, rule or regulation or any judgment, decree, order,
governmental permit or license to which Target or Target Bank (or any of their
respective properties) is subject, (B) violate the certificate of
incorporation or bylaws of Target or the similar organizational documents of
Target Bank or (C) constitute a breach or violation of, or a default under (or
an event which, with due notice or lapse of time or both, would constitute a
default under), or result in the termination of, accelerate the performance
required by, or result in the creation of any lien, pledge, security interest,
charge or
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other encumbrance upon any of the properties or assets of Target or Target
Bank under, any of the terms, conditions or provisions of any note, bond,
indenture, deed of trust, loan agreement or other agreement, instrument or
obligation to which Target or Target Bank is a party, or to which any of their
respective properties or assets may be subject, except, in the case of (C),
for any such breaches, violations or defaults that would not, individually or
in the aggregate, have a Material Adverse Effect on Target.
(ii) Except for (A) the filing of an application with the
Office of Thrift Supervision (the "OTS") under HOLA and approval of such
application, (B) the filing of the Proxy Statement (as defined in Section 4.9)
with the Securities and Exchange Commission ("SEC"), (C) the filing of a
certificate of merger with the Delaware Secretary of State pursuant to the
DGCL and the filing of Articles of Combination with the OTS, and (D) the
filing of any necessary notice or approval of the Pennsylvania Department of
Banking (the "Department"), no consents or approvals of or filings or
registrations with any court, administrative agency or commission or other
governmental authority or instrumentality (each a "Governmental Entity") or
with any third party are necessary in connection with the execution and deliv-
ery by Target of this Agreement or the consummation by Target and Target Bank
of the Merger, the Bank Merger and the other transactions contemplated by this
Agreement, including the Bank Merger. As of the date hereof, the executive
officers and the members of the Boards of Directors of Target and Target Bank
know of no reason pertaining to Target why any of the approvals referred to in
this Section 2.1(f) should not be obtained without the imposition of any
material condition or restriction described in Section 5.1(b).
(g) Reports and Financial Statements.
(i) Target and Target Bank have each timely filed all
material reports, forms, registration statements and proxy or information
statements, together with any amendments required to be made with respect
thereto, that they were required to file since December 31, 1997 with (A) the
FDIC, (B) the OTS, (C) the Department, (D) the National Association of
Securities Dealers, Inc. ("NASD"), and (E) the SEC (collectively, "Target's
Reports") and have paid all fees and assessments due and payable in connection
therewith. As of their respective dates, none of Target's Reports contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. All of Target's Reports filed with the SEC under the Securities
Exchange Act of 1934, as amended ("Exchange Act"), complied in all material
respects with the applicable requirements of the Exchange Act, and the rules
and regulations of the SEC promulgated thereunder.
(ii) Each of the financial statements of Target included in
Target's Reports filed with the SEC complied as to form, as of their
respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto. The financial statements
included in Target's Reports were prepared from the books and records of
Target and Target Bank, fairly present the consolidated financial position of
Target and Target Bank in each case at and as of the dates indicated and the
10
consolidated income, changes in stockholders' equity and cash flows of Target
and Target Bank for the periods indicated, and, except as otherwise set forth
in the notes thereto, were prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied throughout the periods
covered thereby; provided, however, that the unaudited financial statements
for interim periods are subject to normal year-end adjustments (which will not
be material individually or in the aggregate) and lack a statement of changes
in stockholders' equity and complete footnotes.
(h) Absence of Certain Changes or Events. Except as disclosed
in Target's Reports filed with the SEC prior to the date of this Agreement,
since June 30, 1999, (i) Target and Target Bank have not incurred any debt,
liability or obligation of any nature whatsoever (whether accrued, contingent,
absolute or otherwise and whether due or to become due), except in the
ordinary course of their business consistent with past practice, (ii) Target
and Target Bank have conducted their respective businesses only in the
ordinary and usual course of such businesses consistent with their past
practices, (iii) there has not been any event or occurrence that has had a
Material Adverse Effect on Target, (iv) there has been no increase in the
salary, compensation, pension or other benefits payable or to become payable
by Target or Target Bank to any of their respective directors, officers or
employees, other than in conformity with the policies and practices of such
entity in the usual and ordinary course of its business and other than the
award of stock options and/or restricted stock, (v) neither Target nor Target
Bank has paid or made any accrual or arrangement for payment of bonuses or
special compensation of any kind or any severance or termination pay to any of
their directors, officers or employees, other than in conformity with the
policies and practices of such entity in the usual and ordinary course of its
business which, to the extent made or accrued by the date of financial
statements of the entity, are properly recorded on those financial statements,
and (vi) there has been no change in any accounting principles, practices or
methods of Target or Target Bank other than as required by GAAP.
(i) Absence of Claims. No litigation, controversy, claim,
action, suit or other legal, administrative or arbitration proceeding before
any court, governmental agency or arbitrator, other than in connection with
routine foreclosure and collection claims against borrowers, is pending
against Target or Target Bank and, to the knowledge of Target, no such
litigation, controversy, claim, action, suit or proceeding has been
threatened. To the knowledge of Target, there are no investigations, reviews
or inquiries by any court or governmental agency pending or threatened against
Target or Target Bank. There are no judgments, decrees, injunctions or orders
of any Governmental Entity or arbitrator outstanding against Target or Target
Bank.
(j) Absence of Regulatory Actions. Since December 31, 1996,
neither Target nor Target Bank has been a party to any cease and desist order,
written agreement or memorandum of understanding with, or any commitment
letter or similar undertaking to, or has been subject to any action,
proceeding, order or directive by, or has been a recipient of any
extraordinary supervisory letter from any federal or state governmental
authority charged with the supervision or regulation of depository
institutions or depository institution holding companies or engaged in the
insurance of bank deposits ("Government Regulators"), or has adopted any board
resolutions at the request of any Government Regulator, or has been advised by
any Government Regulator that it is
11
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such action, proceeding, order, directive, written
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter, board resolutions or similar undertaking.
(k) Taxes. All federal, state, local and foreign tax returns
required to be filed by or on behalf of Target or Target Bank have been timely
filed or requests for extensions have been timely filed and any such extension
shall have been granted and not have expired, and all such filed returns are
complete and accurate in all material respects. All taxes shown on such
returns, all taxes required to be shown on returns for which extensions have
been granted and all other taxes required to be paid by Target or Target Bank
have been paid in full or adequate provision has been made for any such taxes
on Target's balance sheet (in accordance with GAAP). For purposes of this
Section 2.1(k), the term "taxes" shall include all income, franchise, gross
receipts, real and personal property, real property transfer and gains, wage
and employment taxes. As of the date of this Agreement, there is no audit
examination, deficiency assessment, tax investigation or refund litigation
with respect to any taxes of Target or Target Bank, and no claim has been made
by any authority in a jurisdiction where Target or Target Bank do not file tax
returns that Target or Target Bank is subject to taxation in that
jurisdiction. All taxes, interest, additions and penalties due with respect
to completed and settled examinations or concluded litigation relating to
Target or Target Bank have been paid in full or adequate provision has been
made for any such taxes on Target's consolidated statement of financial
condition (in accordance with GAAP). Neither Target nor Target Bank has
executed an extension or waiver of any statute of limitations on the
assessment or collection of any material tax due that is currently in effect.
Target and Target Bank have withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party, and Target
and Target Bank have timely complied with all applicable information reporting
requirements under Part III, Subchapter A of Chapter 61 of the Internal
Revenue Code of 1986, as amended ("IRC"), and similar applicable state and
local information reporting requirements. Neither Target nor Target Bank (i)
has made an election under Section 341(f) of the IRC, or (ii) has issued or
assumed any obligation under Section 279 of the IRC, any high yield discount
obligation as described in Section 163(i) of the IRC or any
registration-required obligation within the meaning of Section 163(f)(2) of
the IRC that is not in registered form.
(l) Agreements.
(i) Except for this Agreement, Target and Target Bank are
not bound by any material contract (as defined in Item 601(b)(10) of
Regulation S-K promulgated by the SEC), to be performed after the date hereof
that has not been filed with or incorporated by reference in Target's Reports.
(ii) Target's Disclosure Letter lists any contract,
arrangement, commitment or understanding (whether written or oral) to which
Target or Target Bank is a party or is bound:
12
(A) with any executive officer or other key employee
of Target or Target Bank the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a transaction involving
Target or Target Bank of the nature contemplated by this Agreement;
(B) with respect to the employment of any directors,
officers employees or consultants;
(C) with respect to any contract, arrangement,
commitment or understanding (whether written or oral) (including any stock
option plan, phantom stock or stock appreciation rights plan, restricted stock
plan or stock purchase plan) any of the benefits of which will be increased,
or the vesting or payment of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement;
(D) containing covenants that limit the ability of
Target or Target Bank to compete in any line of business or with any person,
or that involve any restriction on the geographic area in which, or method by
which, Target (including any successor thereof) or Target Bank may carry on
their respective businesses (other than as may be required by law or any
regulatory agency);
(E) pursuant to which Target or Target Bank may
become obligated to invest in or contribute capital to any entity;
(F) not fully disclosed in the Target's Reports that
relates to borrowings of money (or guarantees thereof) by Target or Target
Bank, other than in the ordinary course of business; or
(G) except as set forth in Target's Disclosure
Letter, which is a lease or license with respect to any property, real or
personal, whether as landlord, tenant, licensor or licensee, involving a
liability or obligation as obligor in excess of $10,000 on an annual basis.
To the knowledge of Target, each of the agreements and other documents
referenced in Target's Disclosure Letter is a valid, binding and enforceable
obligation of the parties sought to be bound thereby, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity, whether applied in a court of law or a court of equity. Target has
previously made available to Acquiror true and complete copies of each
agreement and other documents referenced in Target's Disclosure Letter.
(iii) Neither Target nor Target Bank is in default under
(and no event has occurred which, with due notice or lapse of time or both,
would constitute a default under) or is in
13
violation of any provision of any note, bond, indenture, mortgage, deed of
trust, loan agreement, lease or other agreement to which it is a party or by
which it is bound or to which any of its respective properties or assets is
subject and, to the knowledge of Target, no other party to any such agreement
(excluding any loan or extension of credit made by Target or Target Bank) is
in default in any respect thereunder.
(iv) Each of Target and Target Bank owns or possesses valid
and binding licenses and other rights to use without payment all patents,
copyrights, trade secrets, trade names, service marks and trademarks used in
its businesses, and neither Target nor Target Bank has received any notice of
conflict with respect thereto that asserts the right of others. Each of
Target and Target Bank has performed all the obligations required to be
performed by it and are not in default under any contract, agreement,
arrangement or commitment relating to any of the foregoing.
(m) Labor Matters. Target and Target Bank are in material
compliance with all applicable laws respecting employment, retention of
independent contractors and employment practices, terms and conditions of
employment and wages and hours, and are not engaged in any unfair labor
practice. Neither Target nor Target Bank is or has ever been a party to, or
is or has ever been bound by, any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization with
respect to its employees, nor is Target or Target Bank the subject of any
proceeding asserting that it has committed an unfair labor practice or seeking
to compel it to bargain with any labor organization as to wages and conditions
of employment nor, to the knowledge of Target, has any such proceeding been
threatened, nor is there any strike, other labor dispute or organizational
effort involving Target or Target Bank pending or threatened.
(n) Employee Benefit Plans.
(i) Target's Disclosure Letter contains a complete and
accurate list of all pension, retirement, stock option, stock purchase, stock
ownership, savings, stock appreciation right, profit sharing, deferred
compensation, consulting, bonus, group insurance, severance and other benefit
plans, contracts, agreements and arrangements, including, but not limited to,
"employee benefit plans," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), incentive and
welfare policies, contracts, plans and arrangements and all trust agreements
related thereto with respect to any present or former directors, officers or
other employees of Target or Target Bank (hereinafter referred to collectively
as the "Target Employee Plans"). Target has previously made available or
delivered to Acquiror true and complete copies of each agreement, plan and
other documents referenced in Target's Disclosure Letter. There has been no
announcement or commitment by Target or Target Bank to create an additional
Target Employee Plan, or to amend any Target Employee Plan, except for
amendments required by applicable law which do not materially increase the
cost of such Target Employee Plan and except as contemplated by Section
4.11(h) hereof. With respect to each Target Employee Plan, Target has
previously made available to Acquiror a true and correct copy of (A) the
annual report on the applicable form of the Form 5500 series filed with the
Internal Revenue Service ("IRS") for the most recent three plan years, if
required to be filed, (B) such Target Employee Plan, including
14
amendments thereto, (C) each trust agreement, insurance contract or other
funding arrangement relating to such Target Employee Plan, including
amendments thereto, (D) the most recent summary plan description and summary
of material modifications thereto for such Target Employee Plan, to the extent
available, if the Target Employee Plan is subject to Title I of ERISA, (E) the
most recent actuarial report or valuation if such Target Employee Plan is a
Target Pension Plan (as defined below) and any subsequent changes to the
actuarial assumptions contained therein and (F) the most recent determination
letter issued by the IRS if such Target Employee Plan is a Target Qualified
Plan (as defined below).
(ii) There is no pending or threatened litigation,
administrative action or proceeding relating to any Target Employee Plan. All
of the Target Employee Plans comply in all material respects with all
applicable requirements of ERISA, the IRC and other applicable laws. There
has occurred no "prohibited transaction" (as defined in Section 406 of ERISA
or Section 4975 of the IRC) with respect to the Target Employee Plans which is
likely to result in the imposition of any penalties or taxes upon Target or
Target Bank under Section 502(i) of ERISA or Section 4975 of the IRC.
(iii) No liability to the Pension Benefit Guaranty
Corporation has been or is expected by Target or Target Bank to be incurred
with respect to any Target Employee Plan which is subject to Title IV of ERISA
("Target Pension Plan"), or with respect to any "single-employer plan" (as
defined in Section 4001(a) of ERISA) currently or formerly maintained by
Target or any entity which is considered one employer with Target under
Section 4001(b)(1) of ERISA or Section 414 of the IRC (an "ERISA Affiliate").
No Target Pension Plan had an "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, as of the last day of the end of
the most recent plan year ending prior to the date hereof; the fair market
value of the assets of each Target Pension Plan exceeds the present value of
the "benefit liabilities" (as defined in Section 4001(a)(16) of ERISA) under
such Target Pension Plan as of the end of the most recent plan year with
respect to the respective Target Pension Plan ending prior to the date hereof,
calculated on the basis of the actuarial assumptions used in the most recent
actuarial valuation for such Target Pension Plan as of the date hereof; and no
notice of a "reportable event" (as defined in Section 4043 of ERISA) for which
the 30-day reporting requirement has not been waived has been required to be
filed for any Target Pension Plan within the 12-month period ending on the
date hereof. Neither Target nor Target Bank has provided, or is required to
provide, security to any Target Pension Plan or to any single-employer plan of
an ERISA Affiliate pursuant to Section 401(a)(29) of the IRC. Neither Target,
Target Bank, nor any ERISA Affiliate has contributed to any "multiemployer
plan," as defined in Section 3(37) of ERISA, on or after September 26, 1980.
(iv) Each Target Employee Plan that is an "employee pension
benefit plan" (as defined in Section 3(2) of ERISA) and which is intended to
be qualified under Section 401(a) of the IRC (a "Target Qualified Plan") has
received a favorable determination letter from the IRS, and Target and Target
Bank are not aware of any circumstances likely to result in revocation of any
such favorable determination letter. Each Target Qualified Plan that is an
"employee stock ownership plan" (as defined in Section 4975(e)(7) of the IRC)
has satisfied all of the applicable
15
requirements of Sections 409 and 4975(e)(7) of the IRC and the regulations
thereunder in all respects and any assets of any such Target Qualified Plan
that are not allocated to participants' individual accounts are pledged as
security for, and may be applied to satisfy, any securities acquisition
indebtedness.
(v) Neither Target nor Target Bank has any obligations for
post-retirement or post-employment benefits under any Target Employee Plan
that cannot be amended or terminated upon 60 days' notice or less without
incurring any liability thereunder, except for coverage required by Part 6 of
Title I of ERISA or Section 4980B of the IRC, or similar state laws, the cost
of which is borne by the insured individuals. With respect to Target or
Target Bank, for the Target Employee Plans listed in Target's Disclosure
Letter, the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will not result in any payment or series
of payments by Target or Target Bank to any person which is an "excess
parachute payment" (as defined in Section 280G of the IRC), increase or secure
(by way of a trust or other vehicle) any benefits payable under any Target
Employee Plan or accelerate the time of payment or vesting of any such
benefit.
(o) Title to Assets. Target's Disclosure Letter contains a
complete and accurate list of all real property owned or leased by Target or
Target Bank, including all properties of Target or Target Bank classified as
"Real Estate Owned" or words of similar import (the "Real Property"). Each of
Target and Target Bank has good and marketable title to its properties and
assets (including any intellectual property asset such as any trademark,
service mark, trade name or copyright) and property acquired in a judicial
foreclosure proceeding or by way of a deed in lieu of foreclosure or similar
transfer whether real or personal, tangible or intangible, in each case free
and clear of any liens, security interests, encumbrances, mortgages, pledges,
restrictions, charges or rights or interests of others, except pledges to
secure deposits and other liens incurred in the ordinary course of business.
Each lease pursuant to which Target or Target Bank is lessee or lessor is
valid and in full force and effect and neither Target nor Target Bank, nor, to
the knowledge of Target, any other party to any such lease is in default or in
violation of any provisions of any such lease. All material tangible
properties of Target and Target Bank are in a good state of maintenance and
repair, conform with all applicable ordinances, regulations and zoning laws
and are considered by Target to be adequate for the current business of Target
and Target Bank. To the knowledge of Target, none of the buildings,
structures or other improvements located on the Real Property encroaches upon
or over any adjoining parcel or real estate or any easement or right-of-way.
(p) Compliance with Laws. Each of Target and Target Bank 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 conducted; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect, and no
suspension or cancellation of any of them is threatened. Since the date of its
incorporation, the corporate affairs of Target have not been conducted in
violation of any law, ordinance, regulation, order, writ, rule, decree or
approval of any Governmental Entity. Neither Target nor Target Bank is in
violation of, is, to the knowledge of Target, under
16
investigation with respect to any violation of, or has been given notice or
been charged with any violation of, any law, ordinance, regulation, order,
writ, rule, decree or condition to approval of any Governmental Entity which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Target.
(q) Fees. Other than financial advisory services performed for
Target by Sandler O'Neill & Partners, L.P. pursuant to an agreement dated May
2, 2000, a true and complete copy of which has been previously delivered to
Acquiror, neither Target nor Target Bank, nor any of their respective
officers, directors, employees or agents, has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions or finder's fees in connection with this Agreement and the
transactions contemplated thereby, and no broker or finder has acted directly
or indirectly for Target or Target Bank in connection with this Agreement or
the transactions contemplated hereby.
(r) Environmental Matters.
(i) With respect to Target and Target Bank:
(A) Each of Target and Target Bank, the
Participation Facilities (as defined below), and, to the knowledge of Target,
the Loan Properties (as defined below) are, and have been, in substantial
compliance with, and are not liable under, all Environmental Laws (as defined
below);
(B) There is no suit, claim, action, demand,
executive or administrative order, directive, investigation or proceeding
pending or, to the knowledge of Target, threatened, before any court,
governmental agency or board or other forum against Target or Target Bank or
any Participation Facility (1) for alleged noncompliance (including by any
predecessor) with, or liability under, any Environmental Law or (2) relating
to the presence of or release into the environment of any Hazardous Material
(as defined below), whether or not occurring at or on a site owned, leased or
operated by Target or Target Bank or any Participation Facility;
(C) To the knowledge of Target, there is no suit,
claim, action, demand, executive or administrative order, directive,
investigation or proceeding pending or threatened before any court,
governmental agency or board or other forum relating to or against any Loan
Property (or Target or Target Bank in respect of such Loan Property) (1)
relating to alleged noncompliance (including by any predecessor) with, or
liability under, any Environmental Law or (2) relating to the presence of or
release into the environment of any Hazardous Material, whether or not
occurring at a Loan Property;
17
(D) To the knowledge of Target, the properties
currently owned or operated by Target or Target Bank (including, without
limitation, soil, groundwater or surface water on or under the properties, and
buildings thereon) are not contaminated with and do not otherwise contain any
Hazardous Material other than as permitted under applicable Environmental Law;
(E) Neither Target nor Target Bank has received any
notice, demand letter, executive or administrative order, directive or request
for information from any Governmental Entity or any third party indicating
that it may be in violation of, or liable under, any Environmental Law;
(F) To the knowledge of Target, there are no
underground storage tanks on, in or under any properties owned or operated by
Target or Target Bank or any Participation Facility and no underground storage
tanks have been closed or removed from any properties owned or operated by
Target or Target Bank or any Participation Facility; and
(G) To the knowledge of Target, during the period of
(1) Target's or Target Bank's ownership or operation of any of their
respective current properties or (2) Target's or Target Bank's participation
in the management of any Participation Facility, there has been no
contamination by or release of Hazardous Materials in, on, under or affecting
such properties. To the knowledge of Target, prior to the period of (1)
Target's or Target Bank's ownership or operation of any of their respective
current properties or (2) Target's or Target Bank's participation in the
management of any Participation Facility, there was no contamination by or
release of Hazardous Material in, on, under or affecting such properties.
(ii) The following definitions apply for purposes of this
Section 2.2(r):
"Loan Property" means any property in which the applicable
party (or a subsidiary of it) holds a security interest and, where required by
the context, includes the owner or operator of such property, but only with
respect to such property.
"Participation Facility" means any facility in which the
applicable party (or a subsidiary of it) participates in the management
(including all property held as trustee or in any other fiduciary capacity)
and, where required by the context, includes the owner or operator of such
property, but only with respect to such property.
"Environmental Law" means (i) any federal, state or local
law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, legal doctrine, order, directive, executive
or administrative order, judgment, decree, injunction, legal requirement or
agreement with any Governmental Entity relating to (A) the protection,
preservation or restoration of the environment (which includes, without
limitation, air, water vapor, surface water, groundwater, drinking water
supply, structures, soil, surface land, subsurface land, plant and animal life
or any other natural resource), or to human health or safety as it relates to
Hazardous Materials, or (B) the
18
exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or
disposal of, Hazardous Materials, in each case as amended and as now in
effect. The term Environmental Law includes all federal, state and local
laws, rules, regulations or requirements relating to the protection of the
environment or health and safety, including, without limitation, (i) the
Federal Comprehensive Environmental Response, Compensation and Liability Act
of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal
Water Pollution Control Act of 1972, the Federal Clean Air Act, the Federal
Clean Water Act, the Federal Resource Conservation and Recovery Act of 1976
(including, but not limited to, the Hazardous and Solid Waste Amendments
thereto and Subtitle I relating to underground storage tanks), the Federal
Solid Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Federal Occupational Safety
and Health Act of 1970 as it relates to Hazardous Materials, the Federal
Hazardous Substances Transportation Act, the Emergency Planning and Community
Right-To-Know Act, the Safe Drinking Water Act, the Endangered Species Act,
the National Environmental Policy Act, the Rivers and Harbors Appropriation
Act or any so-called "Superfund" or "Superlien" law, each as amended and as
now in effect, and (ii) any common law or equitable doctrine (including,
without limitation, injunctive relief and tort doctrines such as negligence,
nuisance, trespass and strict liability) that may impose liability or
obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Hazardous Material.
"Hazardous Material" means any substance (whether solid,
liquid or gas) which is or could be detrimental to human health or safety or
to the environment, currently or hereafter listed, defined, designated or
classified as hazardous, toxic, radioactive or dangerous, or otherwise
regulated, under any Environmental Law, whether by type or by quantity,
including any substance containing any such substance as a component.
Hazardous Material includes, without limitation, any toxic waste, pollutant,
contaminant, hazardous substance, toxic substance, hazardous waste, special
waste, industrial substance, oil or petroleum, or any derivative or by-product
thereof, radon, radioactive material, asbestos, asbestos-containing material,
urea formaldehyde foam insulation, lead and polychlorinated biphenyl.
(s) Loan Portfolio; Allowance; Asset Quality.
(i) With respect to each loan, lease, advance, credit
enhancement, guarantee, other extension of credit, commitment and
interest-bearing asset of Target and Target Bank (collectively, "Loans")
owned by Target or Target Bank in whole or in part:
(A) the note and the related security documents are
each legal, valid and binding obligations of the maker or obligor thereof,
enforceable against such maker or obligor in accordance with their terms;
(B) neither Target nor Target Bank, nor, to the
knowledge of Target, any prior holder of a Loan, has modified the note or any
of the related security documents
19
in any material respect or satisfied, canceled or subordinated the note or any
of the related security documents except as otherwise disclosed by documents
in the applicable Loan file;
(C) Target or Target Bank is the sole holder of
legal and beneficial title to each Loan (or Target's or Target Bank's
applicable participation interest, as applicable), except as otherwise
referenced on the books and records of Target or Target Bank;
(D) the note and the related security documents,
copies of which are included in the Loan files, are true and correct copies of
the documents they purport to be and have not been suspended, amended,
modified, canceled or otherwise changed except as otherwise disclosed by
documents in the applicable Loan file;
(E) there is no litigation or proceeding pending or
threatened relating to the property that serves as security for a Loan that
would have a Material Adverse Effect upon the related Loan; and
(F) with respect to a Loan held in the form of a
participation, the participation documentation is legal, valid, binding and
enforceable in accordance with its terms.
(ii) The allowance for possible loan losses reflected in
Target's audited consolidated statement of financial condition at June 30,
1999 was, and the allowance for possible losses shown on the balance sheets in
Target's Reports for periods ending after June 30, 1999, in the opinion of
management, was or will be adequate, as of the dates thereof, under GAAP.
(iii) Target's Disclosure Letter sets forth a true and
complete listing, as of March 31, 2000, of:
(A) all Loans that have been classified (whether
regulatory or internal) as "Special Mention," "Substandard," "Doubtful,"
"Loss" or words of similar import listed by category, including the amounts
thereof;
(B) Loans (1) that are contractually past due 90
days or more in the payment of principal and/or interest, (2) that are on a
non-accrual status, (3) where the interest rate terms have been reduced and/or
the maturity dates have been extended subsequent to the agreement under which
the Loan was originally created due to concerns regarding the borrower's
ability to pay in accordance with such initial terms, or (4) for which a
specific reserve allocation exists in connection therewith, listed by
category, including the amounts thereof; and
(C) Loans with any director, executive officer or
five percent or greater stockholder of Target or Target Bank or any person,
corporation or enterprise controlling, controlled by or under common control
with any of the foregoing, including the amounts thereof.
20
(iv) Neither Target nor Target Bank is a party to any Loan
that is in violation of any law, regulation or rule of any Governmental
Entity. Any asset of Target or Target Bank that is classified as "Real Estate
Owned" or words of similar import that is included in any non-performing
assets of Target or Target Bank is listed in Target's Disclosure Letter and
is carried net of reserves at the lower of cost or fair value, less estimated
selling costs, based on current independent appraisals or evaluations or
current management appraisals or evaluations; provided, however, that
"current" shall mean subsequent to March 31, 1999.
(t) Deposits. Except as set forth in the Target's Disclosure
Letter, none of the deposits of Target or Target Bank is a "brokered" deposit.
(u) Anti-takeover Provisions Inapplicable. Target and Target
Bank have taken all actions required to exempt Acquiror, Acquisition Sub, the
Agreement, the Merger, the Plan of Bank Merger and the Bank Merger from any
provisions of an antitakeover nature contained in their organizational
documents, and the provisions of any federal or state "anti-takeover," "fair
price," "moratorium," "control share acquisition" or similar laws or
regulations.
(v) Material Interests of Certain Persons. Except as set
forth in the Target's Disclosure Letter, no officer or director of Target, or
any "associate" (as such term is defined in Rule 12b-2 under the Exchange Act)
of any such officer or director, has any material interest in any material
contract or property (real or personal), tangible or intangible, used in or
pertaining to the business of Target or Target Bank.
(w) Insurance. In the opinion of management, Target and Target
Bank are presently insured for amounts deemed reasonable by management against
such risks as companies engaged in a similar business would, in accordance
with good business practice, customarily be insured. All of the insurance
policies and bonds maintained by Target and Target Bank are in full force and
effect, Target and Target Bank are not in default thereunder and all material
claims thereunder have been filed in due and timely fashion.
(x) Investment Securities; Derivatives.
(i) Target's Disclosure Letter sets forth the book and
market value as of March 31, 2000 of the investment securities, mortgage-
backed securities and securities held for sale of Target and Target Bank.
Target's Disclosure Letter sets forth, with respect to such securities,
descriptions thereof, CUSIP numbers, pool face values and coupon rates.
(ii) Except for Federal Home Loan Bank stock, pledges to
secure Federal Home Loan Bank borrowings and restrictions that exist for
securities classified as "held to maturity," none of the investment securities
held by Target or Target Bank is subject to any restriction (contractual or
statutory) that would materially impair the ability of the entity holding such
investment freely to dispose of such investment at any time.
21
(iii) Neither Target nor Target Bank is a party to or has
agreed to enter into an exchange-traded or over-the-counter equity, interest
rate, foreign exchange or other swap, forward, future, option, cap, floor or
collar or any other contract that is a derivative contract (including various
combinations thereof) or owns securities that (A) are referred to generically
as "structured notes," "high risk mortgage derivatives," "capped floating rate
notes" or "capped floating rate mortgage derivatives" or (B) are likely to
have changes in value as a result of interest or exchange rate changes that
significantly exceed normal changes in value attributable to interest or
exchange rate changes.
(y) Indemnification. Except as provided in the certificate of
incorporation or bylaws of Target and the similar governing documents of
Target Bank, neither Target nor Target Bank is a party to any agreement that
provides for the indemnification of any of its present or former directors,
officers, or employees or other persons who serve or served as a director,
officer or employee of another corporation, partnership or other enterprise at
the request of Target and, to the knowledge of Target, there are no claims for
which any such person would be entitled to indemnification under the
certificate of incorporation or bylaws of Target or the similar governing
documents of Target Bank, under any applicable law or regulation or under any
indemnification agreement.
(z) Books and Records. The books and records of Target and
Target Bank on a consolidated basis have been, and are being, maintained in
accordance with applicable legal and accounting requirements and reflect in
all material respects the substance of events and transactions that should be
included therein.
(aa) Corporate Documents. Target has previously furnished or
made available to Acquiror a complete and correct copy of the certificate of
incorporation, bylaws and similar governing documents of Target and Target
Bank, as in effect as of the date of this Agreement. Neither Target nor Target
Bank is in violation of its certificate of incorporation, bylaws or similar
governing documents. The minute books of Target and Target Bank constitute a
complete and correct record of all actions taken by their respective boards of
directors (and each committee thereof) and their stockholders.
(bb) Proxy Statement. The information regarding Target and Target
Bank to be included in the Proxy Statement filed by Target with the SEC under
the Exchange Act will 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 are made, not misleading.
(cc) Community Reinvestment Act Compliance. Target Bank is in
material compliance with the applicable provisions of the Community
Reinvestment Act ("CRA") and the regulations promulgated thereunder, and
Target Bank currently has a CRA rating of satisfactory or better. To the
knowledge of Target, there is no fact or circumstance or set of facts or
circumstances
22
that would cause Target Bank to fail to continue to comply with such
provisions or cause the CRA rating of Target Bank to fall below satisfactory.
(dd) Undisclosed Liabilities. As of the date hereof, neither
Target nor Target Bank has incurred any debt, liability or obligation of any
nature whatsoever (whether accrued, contingent, absolute or otherwise and
whether due or to become due) except for (i) liabilities reflected on or
reserved against in the consolidated financial statements of Target as of June
30, 1999, (ii) liabilities incurred since June 30, 1999 in the ordinary course
of business consistent with past practice that, either alone or when combined
with all similar liabilities, have not had, and would not reasonably be
expected to have, a Material Adverse Effect on Target and (iii) liabilities
incurred for legal, accounting, financial advisory fees and out-of-pocket
expenses in connection with a proposed sale or merger of Target.
(ee) Year 2000 Matters. Target and Target Bank have not
experienced any material data processing or other computer malfunctions
related to processing date information on and after January 1, 2000 and none
of the third party service providers or customers of Target or Target Bank
have reported year 2000 data processing problems to Target that, individually
or in the aggregate, would have a Material Adverse Effect on Target.
(ff) Liquidation Account. Neither the Merger nor the Bank Merger
will result in any payment or distribution payable out of the liquidation
account of Target Bank established in connection with Target Bank's conversion
from mutual to stock form.
Section 2.2. Representations and Warranties of Acquiror.
Except as set forth in the Disclosure Letter delivered by Acquiror to Target
prior to the execution of this Agreement, Acquiror represents and warrants to
Target that:
(a) Organization.
(i) Acquiror is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
registered as a savings and loan holding company under HOLA.
(ii) Acquiror Bank is a federally chartered savings bank
duly organized and validly existing under the laws of the United States of
America. The deposits of Acquiror Bank are insured by the SAIF to the extent
provided in the FDIA. Acquiror Bank is a member of the FHLB.
(iii) Each of Acquiror and Acquiror Bank has all requisite
corporate power and authority to own, lease and operate its properties and to
conduct the business currently being conducted by it. Each of Acquiror and
Acquiror Bank is duly qualified or licensed as a foreign corporation to
transact business and is in good standing in each jurisdiction in which the
character of the properties owned or leased by it or the nature of the
business conducted by it makes such
23
qualification or licensing necessary, except where the failure to be so
qualified or licensed and in good standing would not have a Material Adverse
Effect on Acquiror.
(iv) Acquisition Sub is a corporation duly organized,
validly existing and in good standing under the laws of Delaware, all of the
outstanding capital stock of which is, or prior to the Effective Time will be,
owned directly or indirectly by Acquiror free and clear of any lien, charge or
other encumbrance. From and after its incorporation, Acquisition Sub has not
and will not engage in any activities other than in connection with or as
contemplated by this Agreement.
(b) Authority.
(i) Each of Acquiror and Acquisition Sub has all requisite
corporate power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the consummation
of the transactions contemplated by this Agreement have been duly authorized
by all necessary corporate actions of the Boards of Directors of Acquiror and
Acquisition Sub and no other corporate proceedings on the part of Acquiror or
Acquisition Sub are necessary to authorize this Agreement or to consummate the
transactions contemplated by this Agreement except for the approval of this
Agreement and the Merger by Acquiror as the sole stockholder of Acquisition
Sub. This Agreement has been duly and validly executed and delivered by each
of Acquiror and Acquisition Sub and constitutes a valid and binding obligation
of each of Acquiror and Acquisition Sub, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity, whether applied in a court of law or a court of
equity.
(ii) Acquiror Bank has all requisite corporate power and
authority to enter into the Plan of Bank Merger and to consummate the
transactions contemplated thereby. The execution and delivery of the Plan of
Bank Merger and the consummation of the transactions contemplated thereby have
been duly authorized by the Board of Directors of Acquiror Bank and approved
by Acquiror as the sole stockholder of Acquiror Bank. The Plan of Bank
Merger, upon execution and delivery by Acquiror Bank, will be duly and validly
executed and delivered by Acquiror Bank and will constitute a valid and
binding obligation of Acquiror Bank, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity, whether applied in a court of law or a court of
equity.
(c) No Violations; Consents.
(i) The execution, delivery and performance of this
Agreement by Acquiror do not, and the consummation of the transactions
contemplated hereby will not, constitute (A) assuming the consents and
approvals referred to in Section 2.3(c)(ii) are obtained, a violation of any
law, rule or regulation or any judgment, decree, order, governmental permit or
license to which
24
Acquiror or any of its subsidiaries (or any of their properties) is subject;
(B) a violation of the certificate of incorporation or bylaws of Acquiror or
similar organizational documents of any of its subsidiaries; or (C) a breach
or violation of, or a default under (or an event which, with due notice or
lapse of time or both, would constitute a default under), or result in the
termination of, accelerate the performance required by, or result in the
creation of any lien, pledge, security interest, charge or other encumbrance
upon any of the properties or assets of Acquiror or Acquiror Bank under, any
of the terms, conditions or provisions of any note, bond, indenture, deed of
trust, loan agreement or other agreement, instrument or obligation to which
Acquiror or Acquiror Bank is a party, or to which any of their respective
properties or assets may be subject, except, in the case of (C), for any such
breaches, violations or defaults that wold not, individually or in the
aggregate, have a Material Adverse Effect on Acquiror.
(ii) Except for (A) the filing of an application with the
OTS, under HOLA, and approval of such application, (B) the filing of any
necessary notice or approval of the Department, (C) the approval of the FDIC
under the FDIA, and (D) the filing of a certificate of merger with the
Delaware Secretary of State pursuant to the DGCL and the filing of Articles of
Combination with the OTS, no consents or approvals of or filings or registra-
tions with any Governmental Entity or with any third party are necessary in
connection with the execution and delivery by Acquiror and Acquisition Sub of
this Agreement or the consummation by Acquiror, Acquiror Bank and Acquisition
Sub of the Merger, the Bank Merger and the other transactions contemplated by
this Agreement, including the Bank Merger. As of the date hereof, the
executive officers and members of the Boards of Directors of Acquiror and
Acquiror Bank know of no reason pertaining to Acquiror why any of the
approvals referred to in this Section 2.3(c) should not be obtained without
the imposition of any material condition or restriction described in Section
5.1(b).
(d) Absence of Claims. No litigation, proceeding, controversy,
claim, action or suit or other legal, administrative or arbitration proceeding
before any court, governmental agency or arbitrator is pending or has been
threatened against Acquiror or any of its subsidiaries that would reasonably
be expected to prevent, delay or adversely affect Acquiror's or Acquiror
Bank's ability to consummate, or which seeks to prohibit the consummation of,
the transactions contemplated by this Agreement.
(e) Absence of Regulatory Actions. Since December 31, 1996,
neither Acquiror nor any of its subsidiaries has been a party to any cease and
desist order, written agreement or memorandum of understanding with, or any
commitment letter or similar undertaking to, or has been subject to any
action, proceeding, order or directive by, or has been a recipient of any
extraordinary supervisory letter from any Government Regulator, or has adopted
any board resolutions at the request of any Government Regulator, or has been
advised by any Government Regulator that it is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting)
any such action, proceeding, order, directive, written agreement, memorandum
of understanding, extraordinary supervisory letter, commitment letter, board
resolutions or similar undertaking.
25
(f) Proxy Statement. The information regarding Acquiror and
Acquiror Bank to be supplied by Acquiror for inclusion in the Proxy Statement
will 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 are made,
not misleading.
(g) Community Reinvestment Act Compliance. Acquiror Bank is in
material compliance with the applicable provisions of the CRA and the
regulations promulgated thereunder, and Acquiror Bank currently has a CRA
rating of satisfactory or better. To the knowledge of Acquiror Bank, there is
no fact or circumstance or set of facts or circumstances that would cause
Acquiror Bank to fail to continue to comply with such provisions or cause the
CRA rating of Acquiror Bank to fall below satisfactory.
(h) Financing. Acquiror will have available to it, at the
Effective Time, immediately available funds necessary to pay the aggregate
Merger Consideration and will use such funds for such purpose subject to the
conditions of this Agreement. Acquiror and Acquiror Bank are, and will be
immediately following the Merger, in material compliance with all applicable
capital, debt and financial and nonfinancial regulations of federal banking
agencies having jurisdiction over them.
(i) Reports and Financial Statements.
(i) Acquiror and Acquiror Bank have each timely filed all
material reports, together with any amendments required to be made with
respect thereto, that it was required to file since December 31, 1997 with the
SEC, the NASD, the FDIC and the OTS (collectively, "Acquiror's Reports"). As
of their respective dates, none of Acquiror's Reports contained any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading. All of
Acquiror's Reports complied in all material respects with the applicable
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder.
(ii) Each of the financial statements of Acquiror included
in Acquiror's Reports filed with the SEC complied as to form, as of their
respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto. The financial statements
included in Acquiror's Reports were prepared from the books and records of
Acquiror and its subsidiaries, fairly present the consolidated financial
position of Acquiror and its subsidiaries in each case at and as of the dates
indicated and the consolidated results of operations, retained earnings and
cash flows of Acquiror and its subsidiaries for the periods indicated, and,
except as otherwise set forth in the notes thereto, were prepared in
accordance with GAAP consistently applied throughout the periods covered
thereby; provided, however, that the unaudited financial statements for
interim periods are subject
26
to normal year-end adjustments (which will not be material individually or in
the aggregate) and lack a statement of changes in stockholders' equity and
complete footnotes.
(j) Undisclosed Liabilities. Except as disclosed in Acquiror's
reports filed with the SEC prior to the date of this Agreement, since
September 30, 1999, neither Acquiror nor any of its subsidiaries has incurred
any debt, liability or obligation of any nature whatsoever (whether accrued,
contingent, absolute or otherwise and whether due or to become due) other than
in the ordinary of business consistent with past practice or that, either
alone or when combined with all similar liabilities, would reasonably be
expected to prevent or delay Acquiror from consummating the transactions
contemplated by this Agreement.
(k) Absence of Certain Changes or Events. Except as disclosed
in Acquiror's Reports filed with the SEC prior to the date of this Agreement,
since September 30, 1999, (i) Acquiror and Acquiror Bank have not incurred any
debt, liability or obligation of any nature whatsoever (whether accrued,
contingent, absolute or otherwise and whether due or to become due), except in
the ordinary course of their business consistent with past practice, (ii)
Acquiror and Acquiror Bank have conducted their respective businesses only in
the ordinary and usual course of such businesses consistent with their past
practices, (iii) there has not been any event or occurrence that has had a
Material Adverse Effect on Acquiror and (iv) there has been no change in any
accounting principles, practices or methods of Acquiror or Acquiror Bank other
than as required by GAAP.
(l) Compliance with Laws. Each of Acquiror and Acquiror Bank
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 conducted; all such permits, licenses,
certificates of authority, orders and approvals are in full force and effect,
and no suspension or cancellation of any of them is threatened. Since the date
of its incorporation, the corporate affairs of Acquiror have not been
conducted in violation of any law, ordinance, regulation, order, writ, rule,
decree or approval of any Governmental Entity. Neither Acquiror nor Acquiror
Bank is in violation of, is, to the knowledge of Acquiror, under investigation
with respect to any violation of, or has been given notice or been charged
with any violation of, any law, ordinance, regulation, order, writ, rule,
decree or condition to approval of any Governmental Entity which, individually
or in the aggregate, would reasonably be expected to have a Material Adverse
Effect on Acquiror.
ARTICLE III
CONDUCT PENDING THE MERGER
Section 3.1. Conduct of Target's Business Prior to the
Effective Time. Except as expressly provided in this Agreement, during the
period from the date of this Agreement to the Effective Time, Target shall,
and shall cause Target Bank to (i) conduct its business in the regular,
ordinary and usual course consistent with past practice, (ii) maintain and
preserve intact its business organization, properties, leases, employees and
advantageous business relationships and retain the
27
services of its officers and key employees, (iii) take no action which would
adversely affect or delay the ability of Target or Acquiror to perform their
respective covenants and agreements on a timely basis under this Agreement,
(iv) take no action which would adversely affect or delay the ability of
Target, Target Bank, Acquiror or Acquiror Bank to obtain any necessary
approvals, consents or waivers of any Governmental Entity required for the
transactions contemplated hereby or which would reasonably be expected to
result in any such approvals, consents or waivers containing any material
condition or restriction, (v) take no action that results in or is reasonably
likely to have a Material Adverse Effect on Target or Target Bank, (vi)
maintain insurance in such amounts and against such risks and losses as are
customary for companies engaged in a similar business, (vii) confer on a
regular and frequent basis with one or more representatives of Acquiror to
discuss, subject to applicable law, material operational matters and the
general status of the ongoing operations of Target and Target Bank, (viii)
promptly notify Acquiror of any material change in its business, properties,
assets, condition (financial or otherwise) or results of operations, and (ix)
promptly provide Acquiror with copies of all filings made by Target or Target
Bank with any state or federal court, administrative agency, commission or
other Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
Section 3.2. Forbearance by Target. Without limiting the
covenants set forth in Section 3.1 hereof, except as otherwise provided in
this Agreement and except to the extent required by law or regulation or any
Governmental Entity, during the period from the date of this Agreement to the
Effective Time, Target shall not, and shall not permit Target Bank to, without
the prior consent of Acquiror, which consent shall not be unreasonably
withheld:
(a) other than in the ordinary course of business consistent
with past practice, incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity (it being
understood and agreed that incurrence of indebtedness in the ordinary course
of business shall include, without limitation, the creation of deposit
liabilities, purchases of Federal funds, advances from the FHLB, sales of
certificates of deposit and entering into repurchase agreements);
(b) (i) adjust, split, combine or reclassify any capital
stock;
(ii) make, declare or pay any dividend, or make any other
distribution on, or directly or indirectly redeem,
purchase or otherwise acquire, any shares of its
capital stock or any securities or obligations
convertible (whether currently convertible or
convertible only after the passage of time or the
occurrence of certain events) into or exchangeable for
any shares of its capital stock. Notwithstanding the
foregoing, Target may continue to pay to its
stockholders a regular quarterly cash dividend at a
rate not in excess of $0.05 per share of Target Common
Stock;
28
(iii) grant any stock options or stock appreciation
rights, make any awards of restricted stock
under Target Incentive Plan or grant any
individual, corporation or other entity any
right to acquire any shares of its capital
stock; or
(iv) issue any additional shares of capital stock or any
securities or obligations convertible or excisable for
any shares of its capital stock except pursuant to the
exercise of Target Options outstanding as of the date
hereof;
(c) sell, transfer, mortgage, encumber or otherwise dispose of
any of its material properties or assets to any individual, corporation or
other entity, or cancel, release or assign any indebtedness to any such person
or any claims held by any such person, except pursuant to contracts or
agreements in force at the date of this Agreement;
(d) except pursuant to contracts or agreements in force at the
date hereof or as permitted by this Agreement, make any equity investment,
either by purchase of stock or securities, contributions to capital, property
transfers, or purchase of any property or assets of any other individual,
corporation or entity other than the FHLB;
(e) enter into, amend, terminate or, except as set forth in
Target's Disclosure Letter, renew any contract or agreement, or make any
change in any of its leases or contracts, other than with respect to those
involving aggregate payments of less than $10,000 per annum or the provision
of goods or services with a market value of less than $10,000 per annum, and
other than contracts or agreements covered by Section 3.2(f);
(f) make, renegotiate, renew, increase, extend, modify or
purchase any loan, lease (credit equivalent), advance, credit enhancement or
other extension of credit, or make any commitment in respect of any of the
foregoing, except (i) in conformity with existing lending practices in amounts
not to exceed an aggregate of $300,000 with respect to any individual borrower
or (ii) loans or advances as to which Target has a binding obligation to make
such loans or advances as of the date hereof;
(g) except for loans or extensions of credit made on terms
generally available to the public, make or increase any loan or other
extension of credit, or commit to make or increase any such loan or extension
of credit, to any director or executive officer of Target or Target Bank, or
any entity controlled, directly or indirectly, by any of the foregoing, other
than renewals of existing loans or commitments to loan;
(h) (i) except as otherwise permitted in Section 4.11 hereof,
or as may be required by law, or as may be required
pursuant to commitments existing on the date hereof as
set forth in Target's Disclosure Letter, increase in
any manner the compensation or fringe benefits of any
of
29
its officers or directors or prior to January 1, 2001,
of its other employees, or pay or agree to pay any
pension, bonus, severance, retirement allowance or
contribution not required by any existing plan or
agreement to any such employees, officers or
directors;
(ii) become a party to, amend or commit itself to any
pension, retirement, profit-sharing or welfare benefit
plan or agreement or employment agreement with or for
the benefit of any employee or director;
(iii) voluntarily accelerate the vesting of, or the lapsing
of restrictions with respect to, any stock options or
other stock-based compensation;
(iv) elect to any senior executive office any person who is
not a member of the senior executive officer team of
Target as of the date of this Agreement or nominate to
the Board of Directors of Target any person who is not
a member of the Board of Directors of Target as of the
date of this Agreement, or hire any employee with
annual compensation in excess of $25,000; or
(v) change the title of the position held by any officer;
(i) settle any claim, action or proceeding involving money
damages in excess of $50,000 or the imposition of any material restriction on
the operations of Target or Target Bank;
(j) amend its certificate of incorporation or its bylaws;
(k) other than in the ordinary course of business consistent
with past practice and Target Bank's investment policy, in individual amounts
not to exceed $1.0 million, make any investment either by purchase of stock or
securities, contributions to capital, property transfers, or purchase of any
property or assets of any other person; or materially restructure or
materially change its investment securities portfolio, through purchases,
sales or otherwise, or the manner in which the portfolio is classified or
reported; provided, however, that the reinvestment in investments permissible
under this Section 3.2 of proceeds from the maturity, redemption of, or
receipt of periodic payments on investment securities permissible under
paragraph (l) below shall not be considered a material change or
restructuring.
(l) make any investment in any debt security, including
municipal securities, mortgage-backed and mortgage-related securities, other
than U.S. government and U.S. government agency securities with final
maturities not greater than five years that are purchased in the ordinary
course of business consistent with past practice;
(m) make any capital expenditures other than expenditures
necessary to maintain existing assets in good repair or to make payment of
necessary taxes;
30
(n) establish or commit to the establishment of any new branch
or other office facilities or file any application to relocate or terminate
the operation of any banking office;
(o) take any action that is intended or expected to result in
any of its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time prior to the Effective
Time, or in any of the conditions to the Merger set forth in Article V not
being satisfied or in a violation of any provision of this Agreement;
(p) engage in any transaction that is not in the usual and
ordinary course of business and consistent with past practices;
(q) implement or adopt any change in its accounting principles,
practices or methods, other than as may be required by GAAP or regulatory
guidelines; or
(r) agree to take, make any commitment to take, or adopt any
resolutions of its Board of Directors in support of, any of the actions
prohibited by this Section 3.2.
Any request by Target or response thereto by Acquiror shall be made in
accordance with the notice provisions of Section 8.7 and shall note that it is
a request or response pursuant to this Section 3.2.
Section 3.3. Conduct of Acquiror's Business Prior to the
Effective Time. Except as expressly provided in this Agreement, during the
period from the date of this Agreement to the Effective Time, Acquiror shall,
and shall cause its subsidiaries to (i) take no action which would adversely
affect or delay the ability of Acquiror or Acquiror Bank to perform their
respective covenants and agreements on a timely basis under this Agreement,
(ii) take no action which would adversely affect or delay the ability of
Acquiror, Acquiror Bank or Target to obtain any necessary approvals, consents
or waivers of any Governmental Entity required for the transactions
contemplated hereby or which would reasonably be expected to result in any
such approvals, consents or waivers containing any material condition or
restriction and (iii) take no action that is intended or expected to result in
any of its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time prior to the Effective
Time, or in any of the conditions to the Merger set forth in Article V not
being satisfied or in violation of this Agreement.
ARTICLE IV
COVENANTS
Section 4.1. Acquisition Proposals.
(a) From and after the date hereof until the termination of this
Agreement, neither Target nor any of its officers, directors, employees,
representatives, agents or affiliates (including, without limitation, any
investment banker, financial advisor, attorney or accountant retained by
31
Target or Target Bank), will, directly or indirectly, initiate, solicit or
knowingly encourage (including by way of furnishing non-public information or
assistance), or facilitate knowingly, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal (as defined below), or enter into or maintain or continue
discussions or negotiate with any person or entity in furtherance of such
inquiries or to obtain an Acquisition Proposal or agree to or endorse any
Acquisition Proposal, or authorize or permit any of its officers, directors or
employees or Target Bank or any investment banker, financial advisor,
attorney, accountant or other representative retained by Target Bank to take
any such action; provided, however, that nothing contained in this Section 4.1
shall prohibit Target or the Board of Directors of Target from:
(i) furnishing information to, or entering into
discussions or negotiations with, any person or entity
that makes an unsolicited written, bona fide proposal
to acquire Target pursuant to a merger, consolidation,
share exchange, business combination, tender or
exchange offer or other similar transaction, if, and
only to the extent that:
(A) the Board of Directors of Target, after
consultation with and based upon the advice of
independent legal counsel, determines in good
faith after taking into account various legal,
financial and regulatory aspects of the proposal
and the person making such proposal that such
proposal (x) if accepted, is reasonably likely
to be consummated, and (y) if consummated, is
reasonably likely to result in a transaction
that is more favorable to Target's stockholders,
from a financial point of view, than the
transactions contemplated by the Agreement (such
proposal being referred to herein as a "Superior
Proposal"); and
(B) prior to furnishing such information to, or
entering into discussions or negotiations with,
such person or entity, Target:
(1) provides prompt notice to Acquiror to the
effect that it is furnishing information
to, or entering into discussions or
negotiations with, such person or entity;
and
(2) receives from such person or entity an
executed confidentiality agreement in
reasonably customary form;
32
(ii) complying with Rule 14e-2 promulgated under the
Exchange Act with regard to a tender or exchange
offer; or
(iii) failing to make or withdrawing or modifying its
recommendation and entering into a Superior
Proposal if there exists a Superior Proposal and
the Board of Directors of Target, after
consultation with independent legal counsel,
determines in good faith that such action is
necessary for the Board of Directors of Target
to comply with its fiduciary duties to
stockholders under applicable law.
Target shall notify Acquiror orally and in writing of any Acquisition Proposal
(including, without limitation, the terms and conditions of any such
Acquisition Proposal and the identity of the person making such Acquisition
Proposal) as promptly as practicable (but, in any event, no later than 24
hours) after the receipt thereof and shall keep Acquiror informed of the
status and details of any such Acquisition Proposal.
(b) For purposes of this Agreement, "Acquisition Proposal" shall
mean any of the following (other than the transactions contemplated hereunder)
involving Target or Target Bank:
(i) any merger, consolidation, share exchange, business
combination, or other similar transaction;
(ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition, directly or indirectly, by
merger, consolidation, business combination, share
exchange, joint venture or otherwise or of 10% or more
of the assets of Target or Target Bank, taken as a
whole, in a single transaction or series of
transactions;
(iii) any tender offer or exchange offer for 25% or
more of the outstanding shares of capital stock
of Target or the filing of a registration
statement under the Securities Act of 1933, as
amended, in connection therewith;
(iv) any transaction in which such person shall acquire
beneficial ownership (as such term is defined in Rule
13d-3 under the Exchange Act), or the right to acquire
beneficial ownership of any "group" (as such term is
defined under the Exchange Act) which shall have been
formed which beneficially owns or has the right to
acquire beneficial ownership of, 15% or more of the
outstanding voting capital stock of Target; or
(v) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement
to engage in any of the foregoing.
33
Section 4.2. Certain Policies and Actions of Target. At the
request of Acquiror, Target shall cause Target Bank to modify and change its
loan, litigation and real estate valuation policies and practices (including
loan classifications and levels of reserves) and investment and
asset/liability management policies and practices after the date on which all
regulatory and stockholder approvals required to consummate the transactions
contemplated hereby are received, and after receipt of written confirmation
from Acquiror that it is not aware of any fact or circumstance that would
prevent completion of the Merger, and prior to the Effective Time; provided,
however, that Target shall not be required to take such action more than 7
calendar days prior to the Effective Date; and provided, further, that such
modifications or changes in policies and procedures are not prohibited by GAAP
or any applicable laws and regulations. Target's representations, warranties
and covenants contained in this Agreement shall not be deemed to be untrue or
breached in any respect for any purpose as a consequence of any modifications
or changes undertaken solely on account of Section 4.2.
Section 4.3. Access and Information.
(a) Upon reasonable notice, Target shall (and shall cause Target
Bank to) afford Acquiror and its representatives (including, without
limitation, directors, officers and employees of Acquiror and its affiliates
and counsel, accountants and other professionals retained by Acquiror) such
reasonable access during normal business hours throughout the period prior to
the Effective Time to the books, records (including, without limitation, tax
returns and work papers of independent auditors), contracts, properties,
personnel and to such other information relating to Target and Target Bank as
Acquiror may reasonably request; provided, however, that no investigation
pursuant to this Section 4.3 shall affect or be deemed to modify any
representation or warranty made by Target in this Agreement. In furtherance,
and not in limitation of the foregoing, Target shall make available to
Acquiror all information necessary and appropriate for the preparation and
filing of all real property and real estate transfer tax returns and reports
required by reason of the Merger or the Bank Merger.
(b) Target shall provide Acquiror with true, correct and
complete copies of all financial and other information relating to the
business or operations of Target or Target Bank that is provided to directors
of Target and Target Bank in connection with meetings of their Boards of
Directors or committees thereof; provided, however, that not withstanding the
foregoing, Target shall not be required to provide Acquiror with any
information regarding an Acquisition Proposal except as required by Section
4.1.
(c) As soon as reasonably available, but in no event more than
45 days after the end of each fiscal quarter (and 90 days in the case of the
fourth fiscal quarter), Target shall deliver to Acquiror its Quarterly and
Annual Reports, as filed with the SEC under the Exchange Act. Target shall
deliver to Acquiror any Current Reports on Form 8-K promptly after filing such
reports with the SEC and shall provide Acquiror with a copy of any press
release promptly after such release is made available to the public.
34
(d) Acquiror will not, and will cause its representatives not
to, use any information obtained pursuant to this Section 4.3 for any purpose
unrelated to the consummation of the transactions contemplated by this
Agreement. Subject to the requirements of applicable law, Acquiror will keep
confidential, and will cause its representatives to keep confidential, all
information and documents obtained pursuant to this Section 4.3 unless such
information (i) was already known to Acquiror or an affiliate of Acquiror,
other than pursuant to a confidentiality agreement or other confidential
relationship, (ii) becomes available to Acquiror or an affiliate of Acquiror
from other sources not known by such party to be bound by a confidentiality
agreement or other obligation of secrecy, (iii) is disclosed with the prior
written approval of Target or (iv) is or becomes readily ascertainable from
published information or trade sources.
(e) During the period of time beginning on the day application
materials to obtain the requisite regulatory approvals for the Merger are
initially filed and continuing to the Effective Time, including weekends and
holidays, Target shall cause Target Bank to provide Acquiror and Acquiror Bank
and their authorized agents and representatives full access to Target Bank
offices after normal business hours for the purpose of installing necessary
wiring and equipment to be utilized by Acquiror Bank after the Effective Time;
provided, that:
(i) reasonable advance notice of each entry shall be given
to Target Bank and Target Bank approves of each entry,
which approval shall not be unreasonably withheld;
(ii) Target Bank shall have the right to have its employees
or contractors present to inspect the work being done;
(iii) to the extent practicable, such work shall be done in
a matter that will not interfere with Target Bank's
business conducted at any affected branch offices;
(iv) all such work shall be done in compliance with all
applicable laws and government regulations, and
Acquiror Bank shall be responsible for the
procurement, at Acquiror Bank's expense, of all
required governmental or administrative permits and
approvals;
(v) Acquiror Bank shall maintain appropriate insurance
satisfactory to Target Bank in connection with any
work done by Acquiror Bank's agents and
representatives pursuant to this Section 4.3;
(vi) Acquiror Bank shall reimburse Target Bank for any
material out-of-pocket costs or expenses reasonably
incurred by Target Bank in connection with this
undertaking; and
35
(vii) in the event this Agreement is terminated in
accordance with Article VI hereof, Acquiror Bank,
within a reasonable time period and at its sole cost
and expense, will restore such offices to their
condition prior to the commencement of any such
installation.
Section 4.4. Certain Filings, Consents and Agreements.
(a) As soon as practicable after the date hereof, Acquiror and
Acquiror Bank shall use their reasonable best efforts to prepare and file all
necessary applications, notices and filings to obtain all permits, consents,
approvals and authorizations of all Governmental Entities that are necessary
or advisable to consummate the transactions contemplated by this Agreement,
including the Bank Merger. Target shall, upon request, furnish Acquiror with
all information concerning Target, Target Bank, and Target's directors,
officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with any application, notice or filing
made by or on behalf of Acquiror to any Governmental Entity in connection with
the transactions contemplated by this Agreement and the Plan of Bank Merger.
(b) As soon as practicable after the date hereof, each of the
parties hereto shall, and they shall cause their respective subsidiaries to,
use its best efforts to obtain any consent, authorization or approval of any
third party that is required to be obtained in connection with the Merger and
the Bank Merger.
Section 4.5. Anti-takeover Provisions. Target and Target
Bank shall take all steps required by any relevant federal or state law or
regulation or under any relevant agreement or other document to exempt or
continue to exempt Acquiror, Acquiror Bank, Acquisition Sub, the Agreement,
the Plan of Bank Merger, the Merger and the Bank Merger from any provisions of
an antitakeover nature contained in Target's or Target Bank's certificates of
incorporation and bylaws, or similar governing documents, and the provisions
of any federal or state antitakeover laws.
Section 4.6. Additional Agreements. Subject to the terms
and conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take promptly, or cause to be taken promptly, all
actions and to do promptly, or cause to be done promptly, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including the Merger (and if the Plan of Bank Merger is executed, the Bank
Merger), as expeditiously as possible, including using efforts to obtain all
necessary actions or non-actions, extensions, waivers, consents and approvals
from all applicable Governmental Entities, effecting all necessary
registrations, applications and filings (including, without limitation,
filings under any applicable state securities laws) and obtaining any required
contractual consents and regulatory approvals.
Section 4.7. Publicity. The initial press release
announcing this Agreement shall be a joint press release and thereafter Target
and Acquiror shall consult with each other in issuing any press releases or
otherwise making public statements with respect to the Merger and any other
36
transaction contemplated hereby and in making any filings with any
governmental entity or with any national securities exchange with respect
thereto.
Section 4.8. Stockholder Meeting. Target shall take all
action necessary, in accordance with applicable law and its certificate of
incorporation and bylaws, to convene a meeting of its stockholders
("Stockholder Meeting") as promptly as practicable for the purpose of
considering and voting on the approval and adoption of this Agreement, the
Merger and the other transactions provided for in this Agreement. Except to
the extent legally required for the discharge by the Board of Directors of its
fiduciary duties as advised by such Board's counsel, the Board of Directors of
Target shall (i) recommend at the Stockholder Meeting that the stockholders
vote in favor of and approve the transactions provided for in this Agreement
and (ii) use its reasonable best efforts to solicit such approvals.
Section 4.9. Proxy Statement.
(a) For the purposes of holding the Stockholder Meeting,
Acquiror and Target shall prepare and Target shall file with the SEC as soon
as practicable after the date hereof, a proxy statement satisfying the
applicable requirements in all material respects of the Exchange Act and the
rules and regulations thereunder (such proxy statement in the form mailed by
Target to Target stockholders, the "Proxy Statement"). Each of Acquiror and
Target shall use all reasonable efforts to cause the Proxy Statement to be
cleared by the SEC as promptly as practicable after such filing, and Target
shall use all reasonable efforts to cause the Proxy Statement to be mailed to
Target's stockholders as promptly as practicable after the Proxy Statement is
cleared by the SEC. The Proxy Statement shall be approved by Target's Board
of Directors.
(b) No amendment or supplement to the Proxy Statement will be
made by Target without Acquiror's approval, which approval will not be
unreasonably withheld. Target shall notify Acquiror promptly of the receipt
of any comments of the SEC with respect to the Proxy Statement and of any
requests by the SEC for any amendment or supplement thereto or for additional
information and shall provide promptly to Acquiror copies of all
correspondence between Target or any representative of Target and the SEC.
Target shall give Acquiror and its counsel the opportunity to review and
comment on all amendments and supplements to the Proxy Statement and all
responses to requests for additional information and replies to comments prior
to their being filed with, or sent to, the SEC.
(c) Target and Acquiror shall promptly notify the other party if
at any time it becomes aware that the Proxy Statement contains any untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading. In such
event, Target and Acquiror shall cooperate with each other in the preparation
of a supplement or amendment to such Proxy Statement which corrects such
misstatement or omission and Target shall mail an amended Proxy Statement to
Target's stockholders.
37
Section 4.10. Notification of Certain Matters. Target shall
give prompt notice to Acquiror of: (i) any event or notice of, or other
communication relating to, a default or event that, with notice or lapse of
time or both, would become a default, received by Target or Target Bank
subsequent to the date of this Agreement and prior to the Effective Time,
under any contract material to the financial condition, properties, businesses
or results of operations of Target and Target Bank taken as a whole to which
Target or Target Bank is a party or is subject; and (ii) any event, condition,
change or occurrence which individually or in the aggregate has, or which, so
far as reasonably can be foreseen at the time of its occurrence, is reasonably
likely to result in a Material Adverse Effect with respect to Target or which
would have been required to be disclosed by Target on a schedule to this
Agreement had such event, condition, change or occurrence been known at the
time such party delivered its disclosure schedules; provided, however, that no
notice provided pursuant to this Section 4.10 shall affect or be deemed to
modify any representation or warranty made herein. Each of Target and
Acquiror shall give prompt notice to the other party of any (i) notice or
other communication from any third party alleging that the consent of such
third party is or may be required in connection with any of the transactions
contemplated by this Agreement and (ii) the occurrence or non-occurrence of
any fact or event which would be reasonably likely to cause any representation
or warranty contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the Effective Time or to
cause any covenant, condition or agreement under this Agreement not to be
complied with or satisfied in all material respects.
Section 4.11. Employees, Directors and Officers.
(a) All persons who are employees of Target Bank immediately
prior to the Effective Time and whose employment is not specifically
terminated at or prior to the Effective Time (a "Continuing Employee") shall,
at the Effective Time, become employees of Acquiror Bank; provided, however,
that in no event shall any of Target's employees be officers of Acquiror Bank,
or have or exercise any power or duty conferred upon such an officer, unless
and until duly elected or appointed to such position in accordance with the
bylaws of Acquiror Bank. All of the Continuing Employees shall be employed at
the will of Acquiror Bank and no contractual right to employment shall inure
to such employees because of this Agreement.
(b) As of the Effective Time, each Target employee who is a
participant in the Target Pension Plan shall become fully vested in his or her
accrued benefit in the Target Pension Plan and the Target Pension Plan will
either be merged into the pension plan of Acquiror Bank (the "Acquiror Bank
Pension Plan") effective as of a date following the Effective Time selected by
Acquiror Bank or, if so elected by Acquiror Bank, terminated immediately prior
to, on, or after the Effective Time. The determination as to whether the
Target Pension Plan shall be terminated or merged into the Acquiror Bank
Pension Plan shall be made by Acquiror Bank. Effective as of the date of the
merger of the Target Pension Plan into the Acquiror Bank Pension Plan, if
applicable, or the termination of the Target Pension Plan (or the Effective
Time, if subsequent to such termination), if applicable, Continuing Employees
who are then participating in the Target Pension Plan shall become
participants in the Acquiror Bank Pension Plan. If the Target Pension Plan is
terminated, the service with Target and Target Bank shall not be recognized
for purposes of benefit
38
accrual under the Acquiror Bank Pension Plan. Except as set forth above in
this paragraph, once a Continuing Employee becomes a participant in the
Acquiror Bank Pension Plan, such Continuing Employee's service with Target and
Target Bank shall be treated as service with Acquiror Bank for purposes of
determining eligibility, vesting and benefit accrual, to the extent that such
recognition of service would not result in a duplication of benefits.
(c) Immediately following the Effective Time, each Continuing
Employee shall be eligible to participate in the Acquiror Bank 401(k) Plan
and, subject to Section 4.11(b), the Acquiror Bank Pension Plan, on the same
basis as any newly hired employee of Acquiror Bank (it being understood that
inclusion of eligible Continuing Employees in the Acquiror Bank 401(k) Plan
may occur at different times with respect to different employees); provided,
however, that except as otherwise provided for in this paragraph, for purposes
of determining eligibility and vesting for purposes of the Acquiror Bank
401(k) Plan, each eligible Continuing Employee's service with Target and
Target Bank shall be treated as service with Acquiror Bank to the extent that
such recognition of service would not result in a duplication of benefits.
(d) As of the Effective Time, Acquiror shall make available
employer-provided health insurance to each Continuing Employee on the same
basis as it provides such coverage to Acquiror employees except that any pre-
existing condition, eligibility waiting period or other limitations or
exclusions otherwise applicable under such plans to new employees shall not
apply to a Continuing Employee or their covered dependents who were covered
(without such limitation) under a similar Target plan on the Effective Date of
the Merger.
(e) As of the Effective Time, participation in the Acquiror Bank
Long-Term Disability Plan, Life Insurance Program and Employee Assistance
Program shall be made available to each Continuing Employee on the same basis
as Acquiror provides to Acquiror Bank employees, except that service with
Target and Target Bank by such Continuing Employees shall be considered as
service with Acquiror Bank for purposes of any eligibility waiting period or
other limitation or exclusions otherwise applicable under such plans.
(f) After the Effective Time, Continuing Employees shall be
eligible to participate in Acquiror Bank's bonus incentive plans, commencing
at the beginning of the next bonus payout period commencing after the
Effective Time, on the same basis as other employees of Acquiror Bank.
(g) Continuing Employees shall retain their unused vacation and
sick leave to which they were entitled at Target Bank for use at Acquiror Bank
in accordance with the practices and policies of Acquiror Bank. Effective on
the later of January 1, 2001 or the beginning of the first calendar quarter
after the Effective Time, Continuing Employees shall be entitled to
participate in Acquiror Bank's vacation and sick leave plans on the same basis
as Acquiror Bank employees, and such Continuing Employees shall be credited
with their service with Target and Target Bank for purposes of the level of
vacation and sick leave benefits to which they would be entitled. Employees
of Target Bank whose employment is terminated at or prior to the Effective
Time shall be entitled
39
to receive payment for accrued but unused personal, vacation and sick leave to
the same extent as they would be entitled to such payment by Target Bank upon
termination of employment or year end. Target's Disclosure Letter sets forth
the number of personal days, sick days and vacation days that each such
employee is expected to accrue during 2000.
(h) The Target Employee Stock Ownership Plan ("Target ESOP")
shall be amended to provide for its termination as of the Effective Time and
all ESOP Participants shall fully vest and have a nonforfeitable interest in
their accounts under the Target ESOP as of the termination date. In
connection with its termination, the Target ESOP, as amended, shall provide
that the trustee shall use cash consideration received from Acquiror for the
unallocated shares of Target Common Stock held in the Target ESOP to repay the
loan to the Target ESOP in full and that any unallocated portion of the
consideration remaining after repayment of the loan to the Target ESOP shall
be allocated to the accounts of participants and beneficiaries (such
individuals hereinafter referred as the "ESOP Participants") as earnings and
not as "annual additions." Acquiror agrees not to amend the Target ESOP
subsequent to the Effective Time in any manner that would change or expand the
class of persons entitled to receive benefits under the Target ESOP. From and
after the date hereof, in anticipation of such termination, Acquiror and
Target shall use their best efforts to apply for and obtain a favorable
determination letter from the IRS as to the tax-qualified status of the Target
ESOP upon its termination under Sections 401(a) and 4975(e)(7) of the Code
(the "Final Determination Letter") and may amend the Target ESOP to the extent
necessary to do so. Following the receipt of the Final Determination Letter,
distributions of the account balances under the Target ESOP shall be made
promptly to the ESOP Participants. In the event that Acquiror and Target,
prior to the Effective Time, and Acquiror after the Effective Time, reasonably
determine that the Target ESOP cannot obtain favorable Final Determination
Letter, or that the amounts held therein cannot be allocated or distributed in
accordance with the terms of the Target ESOP, as amended, without causing the
Target ESOP to lose its tax-qualified status, Target prior to the Effective
Time and Acquiror after the Effective Time shall take such action as they may
reasonably determine with respect to the allocation and distribution of
account balances to the ESOP Participants, provided that the assets of the
Target 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 Target ESOP revert, directly or indirectly, to Target or
any affiliate thereof, or to Acquiror or any affiliate thereof. The current
administrator of the Target ESOP, or another administrator selected by Target,
shall continue to administer the Target ESOP subsequent to the Effective
Time, and the current Trustee of the Target ESOP, or such other trustee(s)
selected by Target or the administrators, shall continue to be the Trustee
subsequent to the Effective Time, until all assets have been distributed from
the plan. Continuing Employees shall have no right to participate in Acquiror
Bank's ESOP, except to the extent that such participation would be required
under applicable law.
(i) Except as otherwise provided in this Agreement, Acquiror
agrees to honor in accordance with their terms the plans, contracts,
arrangements, commitments or understandings disclosed in Section 4.11(i) of
Target's Disclosure Letter, including with respect to benefits which vest or
are otherwise accrued or payable as a result of the consummation of the
transactions contemplated by this Agreement. Acquiror acknowledges and agrees
that the receipt of all required
40
regulatory approvals for consummation of the Merger constitutes a change in
control for purposes of the plans, contracts, arrangements, commitments or
understandings, which specifically provide that such action constitutes a
change in control, and which are disclosed in Section 4.11(i) of Target's
Disclosure Letter. Set forth in Target's Disclosure Letter in reasonable
detail are estimates of the payments and benefits due under Target's
employment agreements, change in control agreements and severance plan. It is
intended by Acquiror and Target that the procedures and methodologies used in
preparing such estimates shall be followed in determining the actual payments
or benefits due under such agreements as of the Effective Time.
(j) Subject to Section 1.4(b),Target shall use its best efforts
to obtain from each holder of a Target Option and to deliver to Acquiror at or
before the Closing (as defined in Section 7.1) an agreement to the
cancellation of such holder's Target Options in exchange for a cash payment as
described in Section 1.4.
(k) The employees of Security may be paid bonuses immediately
prior to the Effective Time which in the aggregate shall not exceed $20,000.
Such bonuses, on an individual basis, shall be determined by Target.
(l) Acquiror agrees to use its best efforts to cause three
members of Target's Board of Directors as disclosed in Target's Disclosure
Letter to be appointed as directors of Acquiror Bank as of the Effective Time
(such appointments to be evenly distributed among classes of Acquiror Bank
directors).
(m) Acquiror agrees to use its best efforts to cause one member
of Target's Board of Directors as disclosed in Target's Disclosure Letter to
be appointed as a director of Northeast Pennsylvania Trust Co. as of the
Effective Time.
Section 4.12. Indemnification.
(a) From and after the Effective Time, Acquiror (and any
successor) agrees to indemnify and hold harmless each present and former
director and officer of Target and Target Bank and each officer or employee of
Target and Target Bank that is serving or has served as a director, trustee,
officer, employee or agent of another entity expressly at Target's request or
direction (each, an "Indemnified Party"), against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, amounts paid in
settlement, losses, claims, damages or liabilities (collectively, "Costs")
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, administrative or investigative, arising out of
matters existing or occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement), whether asserted or claimed
prior to, at or after the Effective Time, and to advance any such Costs to
each Indemnified Party as they are from time to time incurred, in each case to
the fullest extent such Indemnified Party would have been permitted to be
indemnified as a director, officer or employee of Target and Target Bank under
the Certificate of Incorporation, Articles of Incorporation or Bylaws of the
Target and
41
Target Bank (in the form in effect as of the date of the Agreement) and under
the DGCL (as in effect at the Effective Time).
(b) Any Indemnified Party wishing to claim indemnification under
Section 4.12(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify Acquiror thereof, but the failure to so
notify shall not relieve Acquiror of any liability it may have hereunder to
such Indemnified Party if such failure does not materially and substantially
prejudice Acquiror. In the event of any such claim, action, suit, proceeding
or investigation: (i) Acquiror shall have the right to assume the defense
thereof with counsel reasonably acceptable to the Indemnified Party and
Acquiror shall not be liable to such Indemnified Party for any legal expenses
of other counsel subsequently incurred by such Indemnified Party in connection
with the defense thereof, except that if Acquiror does not elect to assume
such defense within a reasonable time or counsel for the Indemnified Party at
any time advises that there are issues which raise conflicts of interest
between Acquiror and the Indemnified Party (and counsel for Acquiror does not
disagree), the Indemnified Party may retain counsel satisfactory to such
Indemnified Party, and Acquiror shall remain responsible for the reasonable
fees and expenses of such counsel as set forth above, to be paid promptly as
statements therefor are received; provided, however, that Acquiror shall be
obligated pursuant to this paragraph (b) to pay for only one firm of counsel
for all Indemnified Parties in any one jurisdiction with respect to any given
claim, action, suit, proceeding or investigation unless the use of one counsel
for such Indemnified Parties would present such counsel with a conflict of
interest; (ii) the Indemnified Party will reasonably cooperate in the defense
of any such matter; and (iii) Acquiror shall not be liable for any settlement
effected by an Indemnified Party without its prior written consent, which
consent may not be withheld unless such settlement is unreasonable in light of
such claims, actions, suits, proceedings or investigations against, or
defenses available to, such Indemnified Party.
(c) Acquiror shall pay all reasonable Costs, including
attorneys' fees, that may be incurred by any Indemnified Party in successfully
enforcing the indemnity and other obligations provided for in this Section
4.12 to the fullest extent permitted by law. The rights of each Indemnified
Party hereunder shall be in addition to any other rights such Indemnified
Party may have under applicable law.
(d) Acquiror shall maintain Target's existing directors and
officers' insurance policy (or provide a policy providing comparable coverage
and amounts on terms no less favorable to the persons currently covered by
Target's existing policy, including Acquiror's existing policy if its meets
the foregoing standard) covering persons who are currently covered by such
insurance for a period of three years after the Effective Date; provided,
however, that Acquiror shall not be required to expend annually for such
insurance amounts in excess of 150% of the per annum premiums paid by Target
for the policy year that includes the date of this Agreement, and provided
further, that if the annual premiums for such insurance exceed such 150%
amount, then Acquiror shall be obligated to obtain the most advantageous
coverage of directors' and officers' insurance obtainable for a cost not
exceeding such 150% amount, and provided that the officers and directors
42
of Target may be required to make applications and provide customary
representations and warranties to Acquiror's insurance carrier for the purpose
of obtaining such insurance.
(e) In the event Acquiror or any of its successors or assigns
(i) consolidates with or merges into any other person or entity and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers or conveys all or substantially all of its properties
and assets to any person or entity, then, and in each such case, to the extent
necessary, proper provision shall be made so that the successors and assigns
of Acquiror assume the obligations set forth in this Section 4.12.
(f) The provisions of this Section 4.12 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and his or
her representatives.
ARTICLE V
CONDITIONS TO CONSUMMATION
Section 5.1. Conditions to Each Party's Obligations. The
respective obligations of each party to effect the Merger, the Bank Merger and
any other transactions contemplated by this Agreement shall be subject to the
satisfaction of the following conditions:
(a) Stockholder Approval. This Agreement shall have been
approved by the requisite vote of Target's stockholders in accordance with
applicable laws and regulations.
(b) Regulatory Approvals. All approvals, consents or waivers of
any Governmental Entity required to permit consummation of the transactions
contemplated by this Agreement shall have been obtained and shall remain in
full force and effect, and all statutory waiting periods shall have expired;
provided, however, that none of such approvals, consents or waivers shall
contain any condition or requirement that would so materially and adversely
impact the economic or business benefits to Acquiror of the transactions
contemplated hereby that, had such condition or requirement been known,
Acquiror would not, in its reasonable judgment, have entered into this
Agreement.
(c) No Injunctions or Restraints; Illegality. No party hereto
shall be subject to any order, decree or injunction of a court or agency of
competent jurisdiction that enjoins or prohibits the consummation of the
Merger or the Bank Merger and no Governmental Entity shall have instituted any
proceeding for the purpose of enjoining or prohibiting the consummation of the
Merger, the Bank Merger, or any transactions contemplated by this Agreement.
No statute, rule or regulation shall have been enacted, entered, promulgated
or enforced by any Governmental Entity which prohibits, restricts or makes
illegal consummation of the Merger or the Bank Merger.
Section 5.2. Conditions to the Obligations of Acquiror. The
obligations of Acquiror to effect the Merger, the Bank Merger and any other
transactions contemplated by this Agreement shall be further subject to the
satisfaction of the following additional conditions:
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(a) Representations and Warranties; Performance of Obligations.
Each of the obligations of Target required to be performed by it at or prior
to the Closing pursuant to the terms of this Agreement shall have been duly
performed and complied with in all material respects and the representations
and warranties of Target contained in this Agreement shall be true and correct
in all material respects, subject to Section 2.1, as of the date of this
Agreement and as of the Effective Time as though made at and as of the
Effective Time (except as to any representation or warranty which specifically
relates to an earlier date), and Acquiror shall have received a certificate to
the foregoing effect signed by the chief executive officer and the chief
financial or principal accounting officer of Target.
(b) Third Party Consents. Target shall have obtained the
consent or approval of each person (other than the governmental approvals or
consents referred to in Section 5.1(b)) whose consent or approval shall be
required in order to permit the succession by Acquiror to any obligation,
right or interest of Target under any loan or credit agreement, note,
mortgage, indenture, lease, license or other agreement or instrument to which
Target or Target Bank is a party or is otherwise bound, except those for which
failure to obtain such consents and approvals would not, individually or in
the aggregate, have a Material Adverse Effect on Acquiror or upon the
consummation of the transactions contemplated hereby.
(c) Dissenters' Shares. On the Closing Date, Dissenters' Shares
shall not constitute more than 15% of the outstanding shares of Target Common
Stock.
(d) Good Standing and Other Certificates. Acquiror shall have
received certificates (such certificates to be dated as of a day as close as
practicable to the Closing Date) from appropriate authorities as to the
corporate existence of Target and Target Bank and such other documents and
certificates to evidence fulfillment of the conditions set forth in Sections
5.1 and 5.2 as Acquiror may reasonably require.
Section 5.3. Conditions to the Obligations of Target. The
obligations of Target to effect the Merger, the Bank Merger and any other
transactions contemplated by this Agreement shall be further subject to the
satisfaction of the following additional conditions:
(a) Representations and Warranties; Performance of Obligations.
Each of the obligations of Acquiror required to be performed by it at or prior
to the Closing pursuant to the terms of this Agreement shall have been duly
performed and complied with in all material respects and the representations
and warranties of Acquiror contained in this Agreement shall be true and
correct in all material respects, subject to Section 2.1, as of the date of
this Agreement and as of the Effective Time as though made at and as of the
Effective Time (except as to any representation or warranty which specifically
relates to an earlier date), and Target shall have received a certificate to
the foregoing effect signed by the chief executive officer and the chief
financial or principal accounting officer of Acquiror.
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(b) Deposit of Merger Consideration. Acquiror shall have
deposited with the Paying Agent sufficient cash to pay the aggregate Merger
Consideration and Target shall have received a certificate from the Paying
Agent to such effect.
(c) Good Standing and Other Certificates. Target shall have
received certificates (such certificates to be dated as of a day as close as
practicable to the Closing Date) from appropriate authorities as to the
corporate existence of Acquiror and such other documents and certificates to
evidence fulfillment of the conditions set forth in Sections 5.1 and 5.3 as
Target may reasonably require.
ARTICLE VI
TERMINATION
Section 6.1. Termination. This Agreement may be terminated,
and the Merger abandoned, at or prior to the Effective Date, either before or
after any requisite stockholder approval:
(a) by the mutual consent of Acquiror and Target in a written
instrument, if the Board of Directors of each so determines by vote of a
majority of the members of its entire Board; or
(b) by either Acquiror or Target, in the event of the failure of
the stockholders of Target to approve the Agreement at the Stockholder
Meeting; provided, however, that Target shall only be entitled to terminate
the Agreement pursuant to this clause if it has complied in all material
respects with its obligations under Section 4.8 and Section 4.9; or
(c) by either Acquiror or Target, if either (i) any approval,
consent or waiver of a governmental agency required to permit consummation of
the transactions contemplated hereby shall have been denied or (ii) any
governmental authority of competent jurisdiction shall have issued a final,
unappealable order enjoining or otherwise prohibiting consummation of the
transactions contemplated by this Agreement; or
(d) by either Acquiror or Target, in the event that the Merger
is not consummated by December 31, 2000, unless the failure to so consummate
by such time is due to the breach of any representation, warranty or covenant
contained in this Agreement by the party seeking to terminate; or
(e) by either Acquiror or Target (provided that the party
seeking termination is not then in material breach of any representation,
warranty, covenant or other agreement contained herein), in the event of (i) a
failure to perform or comply by the other party with any covenant or agreement
of such other party contained in this Agreement, which failure or non-
compliance is material in the context of the transactions contemplated by this
Agreement, or (ii) any inaccuracies, omissions or breach in the
representations, warranties, covenants or agreements of the other party
contained in this Agreement the circumstances as to which either individually
or in the aggregate
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have, or reasonably could be expected to have, a Material Adverse Effect on
such other party; in either case which has not been or cannot be cured within
30 calendar days after written notice thereof is given by the party seeking to
terminate to such other party; or
(f) by Acquiror, if the Board of Directors of Target does not
publicly recommend in the Proxy Statement that stockholders approve and adopt
this Agreement and the Merger or if, after recommending in the Proxy Statement
that stockholders approve and adopt this Agreement and the Merger, the Board
of Directors of Target shall have withdrawn, qualified or revised such
recommendation in any respect materially adverse to Acquiror, the Target shall
have breached its obligations under Section 4.1 or a tender offer or exchange
offer for 20% or more of the outstanding shares of stock of the Target is
commenced and the Board of Directors of the Target fails to recommend against
acceptance of such tender offer or exchange offer by its stockholders
(including by taking no position with respect to the acceptance of such tender
offer or exchange offer by its stockholders).
Section 6.2. Expenses. (a) Except as set forth in Section
6.3, all expenses incurred in connection with this Agreement and the
transactions contemplated by this Agreement shall be paid by the party
incurring such expenses, whether or not the Merger or any other transaction is
consummated. "Expenses," as used in this Agreement, shall include all
reasonable out-of-pocket expenses (including, without limitation, all fees and
expenses of counsel, accountants, investment bankers, experts and consultants
to a party hereto and its affiliates) incurred or accrued by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement, the preparation,
printing, filing and mailing of the Proxy Statement, the solicitation of
stockholder approvals (including, without limitation, any advertising
expenses), any required filings and all other matters related to the closing
of the Merger and the other transactions contemplated by this Agreement.
Section 6.3. Termination Fee. In recognition of the efforts,
expenses and other opportunities foregone by Acquiror while structuring the
Merger, the parties hereto agree that:
(a) Target shall pay to Acquiror a termination fee of three
hundred thousand dollars ($300,000) in cash on demand if, within 12 months
after the date of this Agreement, after a bona fide proposal is made after the
date of this Agreement by a third party to Target or its stockholders to
engage in an Acquisition Transaction (as defined in Section 8.1), which bona
fide proposal has not been publicly and irrevocably withdrawn prior to the
stockholder meeting, any of the following occur:
(i) Target shall have willfully breached any covenant or
obligation contained in this Agreement and such breach would entitle Acquiror
to terminate the Agreement;
(ii) the stockholder meeting shall not have been held or
shall have been canceled prior to termination of the Agreement, or, if such
bona fide proposal is made public and
46
has not been publicly withdrawn prior to such stockholder meeting, the
stockholders of Target shall not have approved the Agreement at the
stockholder meeting; or
(iii) Target's Board of Directors shall have withdrawn or
modified in a manner adverse to Acquiror the recommendation of Target's Board
of Directors with respect to the Agreement; and
(b) Target shall pay to Acquiror a termination fee of nine
hundred thousand dollars ($900,000), in cash on demand if, during a period of
18 months after the date hereof, Target or Target Bank, without having
received Acquiror's prior written consent, shall have entered into an
agreement to engage in an Acquisition Transaction (as defined in Section 8.1)
with any person other than Acquiror or any of its Subsidiaries or the Board of
Directors of Target shall have recommended that the stockholders of Acquiror
approve or accept an Acquisition Transaction with any person other than
Acquiror or any of its Subsidiaries. Any fee payable to Acquiror pursuant to
this Section 6.3(b) shall be reduced dollar for dollar to the extent that any
fee is actually paid pursuant to Section 6.3(a). Notwithstanding the
foregoing, Target shall not be obligated to pay to Acquiror the termination
fee described in Section 6.3(a) or Section 6.3(b) in the event that at or
prior to such time as such fee becomes payable (i) Acquiror and Target validly
terminate this Agreement pursuant to Section 6.1(a), (ii) Acquiror or Target
validly terminates this Agreement pursuant to Sections 6.1(c) or 6.1(d),
(iii) Target validly terminates this Agreement pursuant to Section 6.1(e), or
(iv) Target validly terminates this Agreement pursuant to Section 6.1(b) prior
to the time an Acquisition Proposal (as defined in Section 4.1(b)) has been
made.
Section 6.4. Effect of Termination. In the event of
termination of this Agreement by either Acquiror or Target prior to the
consummation of the Merger as provided in Section 6.1, this Agreement shall
forthwith become void and, subject to Section 6.3, have no effect and there
shall be no liability on the part of any party hereto or their respective
officers and directors, except (i) the obligations of the parties under
Sections 4.3 (with respect to confidentiality), and 8.6 shall survive any
termination of this Agreement and (ii) that notwithstanding anything to the
contrary contained in this Agreement, no party shall be relieved or released
from any liabilities or damages arising out of its willful breach of any
provision of this Agreement.
ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME
Section 7.1. Effective Date and Effective Time. The closing
of the transactions contemplated hereby ("Closing") shall take place at the
offices of Muldoon, Murphy & Faucette LLP, 5101 Wisconsin Avenue, N.W.,
Washington, DC 20016, unless another place is agreed to by Acquiror and
Target, on a date designated by Acquiror ("Closing Date") that is no later
than the later of October 5, 2000 or 14 days following the date on which the
expiration of the last applicable waiting period in connection with notices to
and approvals of governmental authorities shall occur and all conditions to
the consummation of this Agreement are satisfied or waived (excluding
conditions that, by their nature, cannot be satisfied until the Closing Date),
or on such other date as may be agreed to by the parties. Prior to the
Closing Date, Acquisition Sub and Target shall execute a certificate of merger
in accordance with all appropriate legal requirements, which shall be filed as
47
required by law on the Closing Date, and the Merger provided for therein shall
become effective upon such filing or on such date as may be specified in such
certificate of merger. The date of such filing or such later effective date
as specified in the certificate of merger is herein referred to as the
"Effective Date." The "Effective Time" of the Merger shall be as set forth in
the certificate of merger.
Section 7.2. Deliveries at the Closing. Subject to the
provisions of Articles V and VI, on the Closing Date there shall be delivered
to Acquiror and Target the documents and instruments required to be delivered
under Article V.
ARTICLE VIII
CERTAIN OTHER MATTERS
Section 8.1. Certain Definitions; Interpretation. As used in
this Agreement, the following terms shall have the meanings indicated:
"Acquisition Transaction" means any of the following (other than the
transactions contemplated hereunder) involving Target or any of its
Subsidiaries: (i) any merger, consolidation, share exchange, business
combination, or other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 25% or more of its
consolidated assets in a single transaction or series of transactions; or
(iii) any tender offer or exchange offer for 25% or more of the outstanding
shares of its capital stock or the filing of a registration statement under
the Securities Act in connection therewith;
"material" means material to Acquiror or Target (as the case may be)
and its respective subsidiaries, taken as a whole.
"Material Adverse Effect" means an effect which is material and
adverse to the business, financial condition or results of operations of Target
and Target Bank taken as a whole or Acquiror and its subsidiaries taken as a
whole, as the case may be; provided, however, that any such effect resulting
from any (i) changes in laws, rules or regulations or GAAP or regulatory
accounting requirements or interpretations thereof that apply to Target and
Target Bank or Acquiror and Acquiror Bank, as the case may be, or to
similarly situated financial and/or depository institutions, (ii) changes in
economic conditions affecting financial institutions generally, including but
not limited to, changes in the general level of market interest rates, (iii)
expenses incurred in connection with the transactions contemplated hereby, or
(iv) actions or omissions of a party (or any of its subsidiaries) taken with
the prior written consent of the other party or parties in contemplation of
the transactions contemplated hereby shall not be considered in determining
if a Material Adverse Effect has occurred.
"knowledge" shall mean, with respect to a party hereto, actual
knowledge of any of the members of the Board of Directors of that party or any
officer of that party with the title ranking not less than senior vice
president.
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"person" includes an individual, corporation, limited liability
company, partnership, association, trust or unincorporated organization.
When a reference is made in this Agreement to Sections or Exhibits,
such reference shall be to a Section of, or Exhibit to, this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for ease of reference only and shall not affect the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed followed by the
words "without limitation." Any singular term in this Agreement shall be deemed
to include the plural, and any plural term the singular. Any reference to
gender in this Agreement shall be deemed to include any other gender.
Section 8.2. Survival. Only those agreements and covenants of
the parties that are by their terms applicable in whole or in part after the
Effective Time, including Sections 1.3, 1.4, 4.3, 4.11 and 4.12 of this
Agreement, shall survive the Effective Time. All other representations,
warranties, agreements and covenants shall be deemed to be conditions of the
Agreement and shall not survive the Effective Time.
Section 8.3. Waiver; Amendment. Prior to the Effective Time,
any provision of this Agreement may be (i) waived in writing by the party
benefitted by the provision or (ii) amended or modified at any time (including
the structure of the transaction) by an agreement in writing between the parties
hereto except that, after the vote by the stockholders of Target, no amendment
or modification may be made that would reduce the amount or alter or change the
kind of consideration to be received by holders of Target Common Stock or
contravene any provision of the DGCL or the Pennsylvania and federal banking
laws, rules and regulations.
Section 8.4. Counterparts. This Agreement may be executed in
counterparts each of which shall be deemed to constitute an original, but all of
which together shall constitute one and the same instrument.
Section 8.5. Governing Law. This Agreement shall be governed
by, and interpreted in accordance with, the laws of the State of Delaware,
without regard to conflicts of laws principles.
Section 8.6. Expenses. Each party hereto will bear all expenses
incurred by it in connection with this Agreement and the transactions
contemplated hereby.
Section 8.7. Notices. All notices, requests, acknowledgments
and other communications hereunder to a party shall be in writing and shall be
deemed to have been duly given when delivered by hand, overnight courier or
facsimile transmission (confirmed in writing) to such party at its address or
facsimile number set forth below or such other address or facsimile transmission
as such party may specify by notice (in accordance with this provision) to the
other party hereto.
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If to Target, to:
Security of Pennsylvania Financial Corp.
31 W. Broad Street
Hazleton, Pennsylvania 18201
Attn: Richard C. Laubach
Facsimile: (570) 455-9803
With copies to:
John P. Soukenik, Esq.
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
12th Floor
Washington, D.C. 20005
Facsimile: (202) 393-0105
If to Acquiror, to:
Northeast Pennsylvania Financial Corp.
12 E. Broad Street
Hazleton, Pennsylvania 18201
Attn: E. Lee Beard
Facsimile: (570) 459-3734
With copies to:
Douglas P. Faucette, Esq.
Thomas J. Haggerty, Esq.
Muldoon, Murphy & Faucette LLP
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Facsimile: (202) 966-9409
Section 8.8. Entire Agreement; etc. This Agreement, together
with the Plan of Bank Merger, any Exhibit and the Disclosure Letters, represents
the entire understanding of the parties hereto with reference to the
transactions contemplated hereby and supersedes any and all other oral or
written agreements heretofore made. All terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Except for Sections 1.3,
1.4, 4.11 and 4.12, which confer rights on the parties described therein,
nothing in this Agreement is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
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Section 8.9. Successors and Assigns; Assignment. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided, however, that this
Agreement may not be assigned by either party hereto without the written consent
of the other party.
Section 8.10 Arbitration. Any dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration, conducted before a panel of three arbitrators sitting in a
location to be mutually agreed upon by Acquiror and Target within fifty (50)
miles from the location of Acquiror and Target, in accordance with the rules of
the American Arbitration Association then in effect. Judgment may be entered on
the arbitrator's award in any court having jurisdiction.
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In Witness Whereof, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
NORTHEAST PENNSYLVANIA
FINANCIAL CORP.
By:
-------------------------------------
President and Chief Executive Officer
NORTHEAST ACQUISITION, INC.
By:
-------------------------------------
President and Chief Executive Officer
SECURITY OF PENNSYLVANIA
FINANCIAL CORP.
By:
-------------------------------------
President and Chief Executive Officer
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