<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 18, 1997
-----------------
HERITAGE BANCORP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 0-12506 23-2228542
- --------------------------- ----------- ----------------------
(State or other jurisdic- (Commission (I.R.S. Employer
tion of incorporation or File No.) Identification Number)
organization)
120 South Centre Street, Pottsville, Pennsylvania 17901
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(717) 622-2320
- --------------------------------------------------------------------------------
(Former name or address, if changed, since last report)
<PAGE>
ITEM 5 Other Events.
------------
On November 18, 1997, Heritage Bancorp, Inc. ("Heritage") entered into
an Agreement and Plan of Consolidation (the "Consolidation Agreement") with BCB
Financial Services Corporation ("BCB"), pursuant to which BCB and Heritage will
be consolidated (the "Consolidation") into a new as yet to be named Pennsylvania
business corporation ("Holding Company"). The Consolidation Agreement was
approved by the Boards of Directors of both BCB and Heritage on November 18,
1997. A copy of the Press Release announcing the Consolidation Agreement is
filed herewith as Exhibit 99.3.
In the Consolidation, each outstanding share of BCB Common Stock,
$2.50 par value per share ("BCB" Common Stock"), other than perfected dissenting
shares and except as otherwise provided in the Consolidation Agreement, will be
converted into 1.3335 shares of Holding Company Common Stock, $1.00 par value
per share ("Holding Company Common Stock"), and each outstanding share of
Heritage Common Stock, $5.00 par value per share, other than perfected
dissenting shares and except as otherwise provided in the Consolidation
Agreement, will be converted into 1.05 shares of Holding Company Common Stock.
Cash will be paid in lieu of fractional shares. Consummation of the
Consolidation is subject to certain terms and conditions, including, among other
things, approval by various regulatory authorities and BCB and Heritage
shareholders. The foregoing summary of the Consolidation Agreement is qualified
in its entirety by reference to the Consolidation Agreement which is filed
herewith as Exhibit 2 and is incorporated herein by reference.
BCB and Heritage also entered into reciprocal Stock Option Agreements
dated November 18, 1997 (the "Stock option Agreements") pursuant to which (i)
BCB has granted to Heritage an option to purchase, under certain circumstances
set forth in the BCB Stock Option Agreement, up to 690,516 shares of BCB Common
Stock, which represents approximately 19.9% of the number of currently issued
and outstanding shares of BCB Common Stock, at a purchase price per share of
$22.375, subject to adjustment as provided in the Stock Option Agreement; and
(ii) Heritage has granted to BCB an option to purchase, under certain
circumstances set forth in the Heritage Stock Option Agreement, up to 947,041
shares of Heritage Common Stock, which represents approximately 19.9% of the
number of currently issued and outstanding shares of Heritage Common Stock, at a
purchase price per share of $22.875, subject to adjustment as provided in the
Stock Option Agreement. The foregoing summary of the BCB Stock Option Agreement
and the Heritage Stock Option Agreement is qualified in its entirety by
- 2 -
<PAGE>
reference to the Stock Option Agreements which are filed herewith as Exhibit
99.1 and 99.2, respectively, and are incorporated herein by reference.
(c) Exhibits:
2 Agreement and Plan of Consolidation dated as of
November 18, 1997 by and between BCB Financial Services
Corporation and Heritage Bancorp, Inc.
99.1 Stock Option Agreement dated November 18, 1997 by and
between BCB Financial Services Corporation and Heritage
Bancorp, Inc. (BCB Stock Option Agreement)
99.2 Stock Option Agreement dated November 18, 1997 by and
between BCB Financial Services Corporation and Heritage
Bancorp, Inc. (Heritage Stock Option Agreement)
99.3 Press Release issued November 19, 1997.
- 3 -
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
HERITAGE BANCORP, INC.
By: /s/ Allen E. Kiefer
-------------------------------
Allen E. Kiefer
President and CEO
Date: November 24, 1997
- 4 -
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C>
2 Agreement and Plan of Consolidation
dated as of November 18, 1997 by and
between BCB Financial Services
Corporation and Heritage Bancorp, Inc.
99.1 Stock Option Agreement dated November
18, 1997 by and between BCB Financial
Services Corporation and Heritage
Bancorp, Inc.
99.2 Stock Option Agreement dated November
18, 1997 by and between BCB Financial
Services Corporation and Heritage
Bancorp, Inc.
99.3 Press Release issued November 19, 1997.
</TABLE>
<PAGE>
AGREEMENT AND PLAN
OF CONSOLIDATION
between
BCB FINANCIAL SERVICES CORPORATION
and
HERITAGE BANCORP, INC.
November 18, 1997
<PAGE>
AGREEMENT
---------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
BACKGROUND ............................................................. 1
AGREEMENT ............................................................. 1
<CAPTION>
ARTICLE I
THE CONSOLIDATION
-----------------
<S> <C>
Section 1.01 Definitions ............................................. 2
-----------
Section 1.02 The Consolidation ........................................ 7
-----------------
<CAPTION>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF Heritage
------------------------------------------
<S> <C>
Section 2.01 Organization.............................................. 15
------------
Section 2.02 Capitalization............................................ 16
--------------
Section 2.03 Authority; No Violation................................... 17
-----------------------
Section 2.04 Consents.................................................. 18
--------
Section 2.05 Financial Statements...................................... 19
--------------------
Section 2.06 Taxes..................................................... 19
-----
Section 2.07 No Material Adverse Effect................................ 20
--------------------------
Section 2.08 Contracts................................................. 20
---------
Section 2.09 Ownership of Property; Insurance Coverage................. 21
-----------------------------------------
Section 2.10 Legal Proceedings......................................... 22
-----------------
Section 2.11 Compliance With Applicable Law............................ 23
------------------------------
Section 2.12 Information to be Supplied................................ 23
--------------------------
Section 2.13 ERISA..................................................... 24
-----
Section 2.14 Brokers, Finders and Financial Advisors................... 25
---------------------------------------
Section 2.15 Securities Documents...................................... 25
--------------------
Section 2.16 Environmental Matters..................................... 25
---------------------
Section 2.17 Allowance for Loan Losses................................. 26
-------------------------
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
Section 2.18 Related Party Transactions................................ 26
--------------------------
Section 2.19 Loans..................................................... 26
-----
Section 2.20 Accounting for the Consolidation; Reorganization.......... 26
------------------------------------------------
Section 2.21 Fairness Opinion.......................................... 26
----------------
Section 2.22 Quality of Representations................................ 27
--------------------------
<CAPTION>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BCB
-------------------------------------
<S> <C>
Section 3.01 Organization.............................................. 27
------------
Section 3.02 Capitalization............................................ 28
--------------
Section 3.03 Authority; No Violation................................... 29
-----------------------
Section 3.04 Consents.................................................. 30
--------
Section 3.05 Financial Statements...................................... 30
--------------------
Section 3.06 Taxes..................................................... 31
-----
Section 3.07 No Material Adverse Effect................................ 31
--------------------------
Section 3.08 Contracts................................................. 31
---------
Section 3.09 Ownership of Property; Insurance Coverage................. 33
-----------------------------------------
Section 3.10 Legal Proceedings......................................... 34
-----------------
Section 3.11 Compliance With Applicable Law............................ 34
------------------------------
Section 3.12 Information to be Supplied................................ 34
--------------------------
Section 3.13 ERISA..................................................... 35
-----
Section 3.14 Brokers, Finders and Financial Advisors................... 36
---------------------------------------
Section 3.15 Securities Documents...................................... 36
--------------------
Section 3.16 Environmental Matters..................................... 37
---------------------
Section 3.17 Allowance for Loan Losses................................. 37
-------------------------
Section 3.18 Related Party Transactions................................ 37
--------------------------
Section 3.19 Loans..................................................... 37
-----
Section 3.20 Accounting for the Consolidation; Reorganization.......... 38
------------------------------------------------
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
Section 3.21 Fairness Opinion.......................................... 38
----------------
Section 3.22 Quality of Representations................................ 38
--------------------------
<CAPTION>
ARTICLE IV
COVENANTS OF THE PARTIES
------------------------
<S> <C>
Section 4.01 Conduct of Business....................................... 38
-------------------
Section 4.02 Access; Confidentiality................................... 43
-----------------------
Section 4.03 Regulatory Matters and Consents........................... 43
-------------------------------
Section 4.04 Taking of Necessary Action................................ 44
--------------------------
Section 4.05 Indemnification; Insurance................................ 45
--------------------------
Section 4.06 No Other Bids and Related Matters......................... 46
---------------------------------
Section 4.07 Duty to Advise; Duty to Update Disclosure Schedule........ 47
--------------------------------------------------
Section 4.08 Current Information....................................... 47
-------------------
Section 4.09 Undertakings by BCB and Heritage.......................... 48
--------------------------------
Section 4.10 Employee Benefits......................................... 49
-----------------
Section 4.11 Nasdaq Listing............................................ 54
--------------
Section 4.12 Affiliate Letters......................................... 54
-----------------
Section 4.13 Employment and Change in Control Agreements............... 54
-------------------------------------------
Section 4.14 Severance and Vacation Pay................................ 55
--------------------------
Section 4.15 Transition Committee...................................... 55
--------------------
Section 4.16 Voting of Heritage Common Stock Held by Heritage National
---------------------------------------------------------
Bank as Fiduciary.................................................. 56
-----------------
<CAPTION>
ARTICLE V
CONDITIONS
----------
<S> <C>
Section 5.01 Mutual Conditions to the Obligations of Heritage and
----------------------------------------------------
BCB under this Agreement........................................... 56
------------------------
<CAPTION>
ARTICLE VI
TERMINATION, WAIVER AND AMENDMENT
---------------------------------
<S> <C>
Section 6.01 Termination............................................... 58
-----------
Section 6.02 Effect of Termination..................................... 59
---------------------
</TABLE>
(iii)
<PAGE>
ARTICLE VII
MISCELLANEOUS
-------------
<TABLE>
<S> <C>
Section 7.01 Expenses.................................................. 60
--------
Section 7.02 Non-Survival of Representations and Warranties............ 60
----------------------------------------------
Section 7.03 Amendment, Extension and Waiver........................... 60
-------------------------------
Section 7.04 Entire Agreement.......................................... 60
----------------
Section 7.05 No Assignment............................................. 61
-------------
Section 7.06 Notices................................................... 61
-------
Section 7.07 Captions.................................................. 62
--------
Section 7.08 Counterparts.............................................. 62
------------
Section 7.09 Severability.............................................. 62
------------
Section 7.10 Governing Law............................................. 62
-------------
</TABLE>
Exhibit 1-A Heritage's Affiliate Agreement
Exhibit 1-B BCB's Affiliate Agreement
Exhibit 2 Heritage Stock Option Agreement
Exhibit 3 BCB Stock Option Agreement
Exhibit 4 Articles of Consolidation
Exhibit 5 Holding Company Bylaws
Exhibit 6 Form of Opinion of BCB's Counsel
Exhibit 7 Form of Opinion of Heritage's Counsel
Exhibit 8 Matters to be Covered in Tax Opinion of
Counsel to BCB
(iv)
<PAGE>
AGREEMENT
---------
THIS AGREEMENT AND PLAN OF CONSOLIDATION, dated as of November 18, 1997,
is made by and between BCB FINANCIAL SERVICES CORPORATION ("BCB"), a
Pennsylvania corporation, having its principal place of business in Reading,
Pennsylvania, and HERITAGE BANCORP, INC. ("Heritage"), a Pennsylvania
corporation, having its principal place of business in Pottsville, Pennsylvania.
BACKGROUND
----------
1. BCB and Heritage desire to consolidate into a new as yet to be named
Pennsylvania business corporation (the "Holding Company"), in accordance with
the applicable laws of the Commonwealth of Pennsylvania, and in accordance with
the plan of consolidation set forth herein.
2. BCB and Heritage desire that the consolidation of BCB and Heritage
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended, and be accounted for as a pooling-of-interests
under generally accepted accounting principles.
3. As an inducement to BCB's willingness to enter into this Agreement,
(a) certain directors and certain officers of Heritage are concurrently
executing a Letter Agreement in the form attached hereto as Exhibit 1-A, and (b)
Heritage is concurrently granting to BCB an option to acquire, under certain
circumstances, Heritage's common stock (the "BCB Lock-Up Option") pursuant to a
Stock Option Agreement between BCB and Heritage in the form attached hereto as
Exhibit 2.
4. As an inducement to Heritage's willingness to enter into this
Agreement, (a) certain directors and certain officers of BCB are concurrently
executing a Letter Agreement in the form attached hereto as Exhibit 1-B, and (b)
BCB is concurrently granting to Heritage an option to acquire, under certain
circumstances, BCB's common stock (the "Heritage Lock-Up Option") pursuant to a
Stock Option Agreement between Heritage and BCB in the form attached hereto as
exhibit 3.
5. BCB and Heritage desire to provide the terms and conditions
governing the transactions contemplated herein.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, agreements, representations and warranties herein contained, the
parties hereto, intending to be legally bound, do hereby agree as follows:
1
<PAGE>
ARTICLE I
THE CONSOLIDATION
-----------------
Section 1.01 Definitions. As used in this Agreement, the following
-----------
terms shall have the indicated meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
Affiliate means, with respect to any Person, any Person who directly,
---------
or indirectly, through one or more intermediaries, controls, or is controlled
by, or is under common control with, such Person and, without limiting the
generality of the foregoing, includes any executive officer or director of
such Person and any Affiliate of such executive officer or director.
Agreement means this agreement, and any amendment or supplement
---------
hereto, which constitutes a "plan of consolidation" between BCB and Heritage.
Applications means the applications for regulatory approval which are
------------
required by the transactions contemplated hereby.
Articles of Consolidation means the articles of consolidation to be
-------------------------
executed by BCB and Heritage and to be filed in the PDS, in accordance with
the applicable laws of the Commonwealth of Pennsylvania in the form attached
hereto as Exhibit 4.
BCB Common Stock has the meaning given to that term in Section
----------------
3.02(a) of this Agreement.
BCB Disclosure Schedule means a disclosure schedule delivered by BCB
-----------------------
to Heritage pursuant to Article III of this Agreement.
BCB Exchange Ratio shall have the meaning given to such term in
------------------
Section 1.02(e)(i)(A).
BCB Financials means (i) the audited consolidated financial statements
--------------
of BCB as of December 31, 1996 and for the three years ended December 31,
1996, including the notes thereto, and (ii) the unaudited interim
consolidated financial statements of BCB as of each calendar quarter
thereafter included in Securities Documents filed by BCB.
BCB Market Price means, as of any date, the average between the
----------------
closing high bid and low asked prices of a share of BCB Common Stock on the
Nasdaq National Market System (as reported in The Wall Street Journal, or if
-----------------------
not reported therein, in another authoritative source).
2
<PAGE>
BCB Market Value means the average of the BCB Market Prices for the
----------------
twenty (20) consecutive trading days ending on the trading day preceding the
Determination Date.
BCB Lock-Up Option means the option granted to BCB to acquire shares of
------------------
Heritage Common Stock referenced in the recitals to this Agreement.
BCB Options means options to purchase shares of BCB Common Stock granted
-----------
pursuant to the BCB Stock Option Plans.
BCB Regulatory Reports means the annual and quarterly reports of BCB
----------------------
filed with the FRB since December 31, 1996 through the Closing Date, and the
financial reports of Berks County Bank and accompanying schedules for each
calendar quarter, beginning with the quarter ended December 31, 1996, through
the Closing Date.
BCB Stock Option Plans means the BCB 1988 Stock Option Plan, the BCB 1989
----------------------
Stock Option Plan, the BCB 1994 Stock Option Plan and the BCB 1996 Stock Option
Plan.
BCB Subsidiaries means any corporation, 50% or more of the capital stock
----------------
of which is owned, either directly or indirectly, by BCB, except any corporation
the stock of which is held in the ordinary course of the lending activities of a
bank.
BCL means the Pennsylvania Business Corporation Law of 1988, as amended.
---
BHCA means the Bank Holding Company Act of 1956, as amended.
----
Closing Date means the later of April 1, 1998 or the fifth business day
------------
following the satisfaction or waiver, to the extent permitted hereunder, of the
conditions to the consummation of the Consolidation specified in Article V of
this Agreement (other than the delivery of certificates, opinions and other
instruments and documents to be delivered at the Closing), or such other date as
BCB and Heritage may mutually agree.
Consolidation means the consolidation of BCB and Heritage into the
-------------
Holding Company, contemplated by this Agreement.
Dissenting Shares shall have the meaning set forth in Section
-----------------
1.02(e)(i)(E) and Section 1.02(e)(ii)(E) hereof.
DOJ means the United States Department of Justice.
---
3
<PAGE>
Effective Date means the date upon which the Articles of Consolidation
--------------
shall be filed in the PDS, and shall be the same as the Closing Date.
Environmental Law means any federal, state, local or foreign law,
-----------------
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with any
Regulatory Authority relating to (i) the protection, preservation or restoration
of the environment (including, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, surface soil, subsurface soil, plant
and animal life or any other natural resource), and/or (ii) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive or dangerous,
or otherwise regulated, whether by type or by quantity, including any material
containing any such substance as a component.
ERISA means the Employee Retirement Income Security Act of 1974, as
-----
amended.
Exchange Act means the Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations promulgated from time to time thereunder.
FDIA means the Federal Deposit Insurance Act, as amended.
----
FDIC means the Federal Deposit Insurance Corporation.
----
FRB means the Board of Governors of the Federal Reserve System.
---
GAAP means generally accepted accounting principles as in effect at the
----
relevant date.
Heritage Common Stock means the common stock of Heritage described in
---------------------
Section 2.02(a).
Heritage Disclosure Schedule means a disclosure schedule delivered by
----------------------------
Heritage to BCB pursuant to Article II of this Agreement.
Heritage DRIP means the Heritage Dividend Reinvestment and Stock Purchase
-------------
Plan.
Heritage ESOP means the Heritage Employee Stock Ownership Plan with
-------------
401(k) Provisions.
4
<PAGE>
Heritage Exchange Ratio shall have the meaning given to such term in
-----------------------
Section 1.02(e)(ii)(A).
Heritage Financials means (i) the audited consolidated financial
-------------------
statements of Heritage as of December 31, 1996 and for the three years ended
December 31, 1996, including the notes thereto, and (ii) the unaudited interim
consolidated financial statements of Heritage as of each calendar quarter
thereafter included in Securities Documents filed by Heritage.
Heritage Market Price means, as of any date, the average between the
---------------------
closing high bid and low asked prices of a share of Heritage Common Stock on the
Nasdaq National Market System (as reported in The Wall Street Journal, or if not
-----------------------
reported therein, in another authoritative source).
Heritage Market Value means the average of the Heritage Market Prices for
---------------------
the twenty (20) consecutive trading days ending on the trading day preceding the
Determination Date.
Heritage Lock-Up Option means the option granted to Heritage to acquire
-----------------------
shares of BCB Common Stock referenced in the recitals to this Agreement.
Heritage Options means options to purchase shares of Heritage Common
----------------
Stock granted pursuant to the Heritage Stock Option Plans.
Heritage Regulatory Reports means the annual and quarterly reports of
---------------------------
Heritage filed with the FRB since December 31, 1996 through the Closing Date,
and the financial reports of Heritage National Bank to the OCC and accompanying
schedules for each calendar quarter, beginning with the quarter ended December
31, 1996, through the Closing Date.
Heritage Stock Option Plans means the 1995 Stock Incentive Plan and the
---------------------------
1995 Stock Option Plan for Non-Employee Directors and the outstanding options
assumed by Heritage that were issued under option plans of Bankers' Financial
Services Corporation.
Heritage Subsidiaries means any corporation, 50% or more of the capital
---------------------
stock of which is owned, either directly or indirectly, by Heritage, except any
corporation the stock of which is held in the ordinary course of the lending
activities of Heritage National Bank.
Holding Company Common Stock means the common stock, $1.00 par value, of
----------------------------
the Holding Company.
5
<PAGE>
IRC means the Internal Revenue Code of 1986, as amended.
---
IRS means the Internal Revenue Service.
---
Material Adverse Effect shall mean, with respect to BCB or Heritage,
-----------------------
respectively, any effect that is material and adverse to its assets, financial
condition or results of operations on a consolidated basis, provided, however,
that Material Adverse Effect shall not be deemed to include (a) any change in
the value of the respective investment and loan portfolios of BCB or Heritage
resulting from a change in interest rates generally, (b) any change occurring
after the date hereof in any federal or state law, rule or regulation or in
GAAP, which change affects banking institutions generally, including any changes
affecting the Bank Insurance Fund and (c) actions or omissions of a party (or
any of its Subsidiaries) taken with the prior informed written consent of the
other party in contemplation of the transactions contemplated hereby.
NASD means the National Association of Securities Dealers, Inc.
----
OCC means the Office of the Comptroller of the Currency.
---
PDS means the Department of State of the Commonwealth of Pennsylvania.
---
Person means any individual, corporation, partnership, joint venture,
------
association, trust or "group" (as that term is defined in Section 13(d)(3) of
the Exchange Act).
Prospectus/Proxy Statement means the prospectus/proxy statement, together
--------------------------
with any amendments and supplements thereto, to be transmitted to holders of
Heritage Common Stock and BCB Common Stock in connection with the transactions
contemplated by this Agreement.
Registration Statement means the registration statement on Form S-4,
----------------------
including any pre-effective or post-effective amendments or supplements thereto,
as filed with the SEC under the Securities Act with respect to the Holding
Company Common Stock to be issued in connection with the transactions
contemplated by this Agreement.
Regulatory Agreement has the meanings given to that term in Sections 2.11
--------------------
and 3.11 of this Agreement.
Regulatory Authority means any banking agency or department of any
--------------------
federal or state government, including
6
<PAGE>
without limitation the FRB, the FDIC, the OCC, or the respective staffs
thereof.
Rights means warrants, options, rights, convertible securities and other
------
capital stock equivalents which obligate an entity to issue its securities.
SEC means the Securities and Exchange Commission.
---
Securities Act means the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated from time to time thereunder.
Securities Documents means all registration statements, schedules,
--------------------
statements, forms, reports, proxy material, and other documents required to be
filed under the Securities Laws.
Securities Laws means the Securities Act, the Exchange Act, the
---------------
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and in each
case the rules and regulations promulgated from time to time thereunder.
Subsidiary means any corporation or partnership, 50% or more of the
----------
capital stock or partnership interests of which is owned, either directly or
indirectly, by another entity, except any corporation or partnership the stock
or partnership interests of which is held in the ordinary course of the
lending activities of a bank.
Section 1.02 The Consolidation.
-----------------
(a) Closing. The closing will take place at 10:00 a.m. on the Closing
-------
Date at the offices of Stevens & Lee, 111 North Sixth Street, Reading,
Pennsylvania, unless another time and place are agreed to by the parties hereto;
provided, in any case, that all conditions to closing set forth in Article V
(other than the delivery of certificates, opinions and other instruments and
documents to be delivered at the Closing) have been satisfied or waived at or
prior to the Closing Date. On the Closing Date, Heritage and BCB shall cause
the Articles of Consolidation to be duly executed and to be filed in the PDS.
(b) The Consolidation. Subject to the terms and conditions of this
-----------------
Agreement, on the Effective Date, Heritage and BCB shall consolidate into the
Holding Company in accordance with the provisions of the BCL. The Holding
Company shall be the corporation formed as a result of the Consolidation, shall
continue its corporate existence under the laws of the Commonwealth of
Pennsylvania and shall have its headquarters at 601 Penn Street, Reading,
Pennsylvania (the "BCB Operations Center") or such other location in Reading,
Pennsylvania as the
7
<PAGE>
parties may agree. From and after the Effective Date, the Consolidation shall
have the effects set forth in Section 1929 of the BCL.
(c) Holding Company's Articles of Incorporation and Bylaws. On and
------------------------------------------------------
after the Effective Date, the articles of incorporation of the Holding Company
shall be as set forth in the Articles of Consolidation and the Bylaws of the
Holding Company shall be adopted on the Effective Date by the Holding Company's
Board of Directors and shall be in the form attached hereto as Exhibit 5 until
thereafter altered, amended or repealed.
(d) Board of Directors and Officers of the Holding Company, Heritage
----------------------------------------------------------------
National Bank and Berks County Bank Board of Directors and Officers.
- -------------------------------------------------------------------
(i) On the Effective Date, the Board of Directors of the Holding
Company, as the continuing corporation as a result of the Consolidation, shall
consist of thirteen (13) directors to be identified in the Articles of
Consolidation, seven of whom shall be appointed by the BCB Board of Directors
and six of whom shall be appointed by the Heritage Board of Directors. Nelson
R. Oswald shall be the Chairman of the Board of Directors of the Holding Company
and a designee of Heritage shall be appointed Vice Chairman of the Board of
Directors of the Holding Company. Non-employee directors of the Holding Company
shall be paid an annual retainer of $2,000, a fee of $600 per meeting attended
and a fee of $300 per committee meeting attended. In addition, any nonemployee
Vice Chairman shall be entitled to an additional annual retainer of $1,000 per
year.
(ii) On the Effective Date, the executive officers of the Holding
Company shall be:
Nelson R. Oswald - Chairman and Chief
Executive Officer
Allen E. Kiefer - President & Chief
Operating Officer
Robert D. McHugh, Jr. - Executive Vice
President and Chief
Financial Officer
Richard A. Ketner - Executive Vice
President and Chief
Administrative
Officer
(iii) The Board of Directors and officers of Heritage National
Bank shall remain unchanged except that Nelson R. Oswald shall become an officer
and member of the Board of Directors of Heritage National Bank with the title of
Vice Chairman and Robert D. McHugh shall become the Executive Vice
8
<PAGE>
President & Chief Financial Officer of Heritage National Bank. Non-employee
directors of Heritage National Bank shall be paid an annual retainer of $2,000
(unless such director receives a retainer for service as a director of the
Holding Company), a fee of $600 per meeting attended and a fee of $300 per
committee meeting attended.
(iv) The Board of Directors and officers of Berks County Bank
shall remain unchanged except that a designee of Heritage shall become an
officer (if such designee is an employee) and a member of the Board of Directors
of Berks County Bank with the title of Vice Chairman and Richard A. Ketner shall
become an Executive Vice President of Berks County Bank. Non-employee directors
of Berks County Bank shall be paid an annual retainer of $2,000 (unless such
director receives a retainer for service as a director of the Holding Company),
a fee of $600 per meeting attended and a fee of $300 per committee meeting
attended.
(e) Conversion of Shares.
--------------------
(i) BCB Common Stock.
----------------
(A) Subject to the provisions of subparagraphs (B), (C),
(D) and (E) of this Section 1.02(e)(i), each share of BCB Common Stock issued
and outstanding immediately prior to the Effective Date (other than shares of
BCB Common Stock, if any, then owned by BCB or Heritage or any BCB Subsidiary)
shall, on the Effective Date, by reason of the Consolidation and without any
action on the part of the holder thereof, be converted into and become a right
to receive 1.3335 shares of fully paid and nonassessable shares of Holding
Company Common Stock. The exchange ratio set forth in this Section
1.02(e)(i)(A) is hereinafter referred to as the "BCB Exchange Ratio".
(B) Each share of BCB Common Stock (other than trust
account shares or shares acquired in connection with debts previously
contracted ("DPC shares")) owned by Heritage or a Heritage Subsidiary on the
Effective Date, if any, shall be cancelled.
(C) Each share of BCB Common Stock issued and held in
the treasury of BCB or owned by any BCB Subsidiary (other than trust account
shares or DPC shares) as of the Effective Date, if any, shall be cancelled,
and no cash, stock or other property shall be delivered in exchange therefor.
(D) No fraction of a whole share of Holding Company
Common Stock and no scrip or certificates therefor shall be issued in
connection with the Consolidation. Any former holder of BCB Common Stock who
9
<PAGE>
would otherwise be entitled to receive a fraction of a share of Holding Company
Common Stock shall receive, in lieu thereof, cash in an amount equal to such
fraction of a share multiplied by the closing price of the Holding Company
Common Stock on the Nasdaq National Market System on the first day Holding
Company Common Stock is traded after the Effective Date.
(E) Each outstanding share of BCB Common Stock the
holder of which has perfected his right to dissent under the BCL and has not
effectively withdrawn or lost such right as of the Effective Date shall not be
converted into or represent a right to receive shares of Holding Company Common
Stock hereunder, and the holder thereof shall be entitled only to such rights as
are granted by the BCL. BCB shall give Heritage prompt notice upon receipt by
BCB of any such written demands for payment of the fair value of such shares of
BCB Common Stock ("Dissenting Shares") and of withdrawals of such demands and
any other instruments provided pursuant to the BCL (any shareholder duly making
such demand being hereinafter called a "BCB Dissenting Shareholder"). If any BCB
Dissenting Shareholder shall effectively withdraw or lose (through failure to
perfect or otherwise) his right to such payment at any time, such holder's
shares of BCB Common Stock shall be converted into the right to receive Holding
Company Common Stock in accordance with Section 1.02(e)(i)(A) of this Agreement.
Any payments made in respect of Dissenting Shares shall be made by the Holding
Company, as the continuing corporation after the Consolidation.
(ii) Heritage Common Stock.
---------------------
(A) Subject to the provisions of subparagraphs (B), (C),
(D) and (E) of this Section 1.02(e)(ii), each share of Heritage Common Stock
issued and outstanding immediately prior to the Effective Date (other than
shares of Heritage Common Stock, if any, then owned by Heritage or BCB or any
Heritage Subsidiary) shall, on the Effective Date, by reason of the
Consolidation and without any action on the part of the holder thereof, be
converted into and become a right to receive 1.05 shares of fully paid and
nonassessable shares of Holding Company Common Stock. The exchange ratio set
forth in this Section 1.02(e)(ii)(A) is hereinafter referred to as the "Heritage
Exchange Ratio".
(B) Each share of Heritage Common Stock (other than
trust account shares or DPC shares) owned by BCB or a BCB Subsidiary on the
Effective Date, if any, shall be cancelled.
(C) Each share of Heritage Common Stock issued and held
in the treasury of Heritage or owned by any
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Heritage Subsidiary (other than trust account shares or DPC shares) as of the
Effective Date, if any, shall be cancelled, and no cash, stock or other property
shall be delivered in exchange therefor.
(D) No fraction of a whole share of Holding Company
Common Stock and no scrip or certificates therefor shall be issued in connection
with the Consolidation. Any former holder of Heritage Common Stock who would
otherwise be entitled to receive a fraction of a share of Holding Company Common
Stock shall receive, in lieu thereof, cash in an amount equal to such fraction
of a share multiplied by the closing price of the Holding Company Common Stock
on the Nasdaq National Market System on the first day Holding Company Common
Stock is traded after the Effective Date.
(E) Each outstanding share of Heritage Common Stock the
holder of which has perfected his right to dissent under the BCL and has not
effectively withdrawn or lost such right as of the Effective Date shall not be
converted into or represent a right to receive shares of Holding Company Stock
hereunder, and the holder thereof shall be entitled only to such rights as are
granted by the BCL. Heritage shall give BCB prompt notice upon receipt by
Heritage of any such written demands for payment of the fair value of such
shares of Heritage Common Stock ("Dissenting Shares") and of withdrawals of such
demands and any other instruments provided pursuant to the BCL (any shareholder
duly making such demand being hereinafter called a "Heritage Dissenting
Shareholder"). If any Heritage Dissenting Shareholder shall effectively withdraw
or lose (through failure to perfect or otherwise) his right to such payment at
any time, such holder's shares of Heritage Common Stock shall be converted into
the right to receive Holding Company Common Stock in accordance with Section
1.02(e)(ii) of this Agreement. Any payments made in respect of Dissenting Shares
shall be made by the Holding Company, as the continuing corporation after the
Consolidation.
(f) Stock Options.
-------------
(i) On the Effective Date, each Heritage Option and each BCB
Option which is then outstanding, whether or not exercisable, shall cease to
represent a right to acquire shares of Heritage Common Stock or BCB Common
Stock, as the case may be, and shall be converted automatically into an option
to purchase shares of Holding Company Common Stock, and the Holding Company
shall assume each Heritage Option and BCB Option, in accordance with the terms
of the applicable Heritage Stock Option Plan or BCB Stock Option Plan, as the
case may be, and the stock option agreement by which it is evidenced, except
that from and after the Effective Date, (i) the Holding Company and its
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Board of Directors or a duly authorized committee thereof shall be substituted
for Heritage, BCB or their respective Boards of Directors or duly authorized
committee thereof administering such Heritage Stock Option Plan or BCB Stock
Option Plan, as the case may be, (ii) each Heritage Option and BCB Option
assumed by the Holding Company may be exercised solely for shares of the Holding
Company Common Stock, (iii) the number of shares of Holding Company Common Stock
subject to each BCB Option shall be equal to the number of shares of BCB Common
Stock subject to such BCB Option immediately prior to the Effective Date
multiplied by the BCB Exchange Ratio, provided that any fractional shares of
Holding Company Common Stock resulting from such multiplication shall be rounded
down to the nearest share, and (iv) the per share exercise price under each such
BCB Option shall be adjusted by dividing the per share exercise price under each
such BCB Option by the BCB Exchange Ratio, provided that such exercise price
shall be rounded up to the nearest cent, (v) the number of shares of Holding
Company Common Stock subject to each Heritage Option shall be equal to the
number of shares of Heritage Common Stock subject to such Heritage Option
immediately prior to the Effective Date multiplied by the Heritage Exchange
Ratio, provided that any fractional shares of Holding Company Common Stock
resulting from such multiplication shall be rounded down to the nearest share,
and (vi) the per share exercise price under each such Heritage Option shall be
adjusted by dividing the per share exercise price under each such Heritage
Option by the Heritage Exchange Ratio, provided that such exercise price shall
be rounded up to the nearest cent. Notwithstanding clauses (iii), (iv), (v) and
(vi) of the preceding sentence, each BCB Option or Heritage Option which is an
"incentive stock option" shall be adjusted as required by Section 424 of the
IRC, and the regulations promulgated thereunder, so as not to constitute a
modification, extension or renewal of the option within the meaning of Section
424(h) of the IRC. BCB and Heritage agree to take all necessary steps to effect
the foregoing provisions of this Section 1.02(f).
(ii) As soon as practicable after the Effective Date, the Holding
Company shall deliver to each participant in each Heritage Stock Option Plan and
each BCB Stock Option Plan an appropriate notice setting forth such
participant's rights pursuant thereto and the grants subject to such Heritage
Stock Option Plan or BCB Stock Option Plan shall continue in effect on the same
terms and conditions, including without limitation the duration thereof, subject
to the adjustments required by Section 1.02(f)(i) hereof after giving effect to
the Consolidation. Within 30 days after the Effective Date, the Holding Company
shall file a registration statement on Form S-3 or Form S-8, as the case may be
(or any successor or other appropriate forms), with respect to the shares of
Holding Company Common Stock
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subject to such options and shall use its reasonable best efforts to maintain
the current status of the prospectus or prospectuses contained therein for so
long as such options remain outstanding.
(g) Surrender and Exchange of Heritage and BCB Stock Certificates.
-------------------------------------------------------------
(i) Exchange of Certificates. Each holder of shares of
------------------------
Heritage Common Stock or BCB Common Stock who surrenders to the Holding Company
(or its agent) the certificate or certificates representing such shares will be
entitled to receive, as soon as practicable after the Effective Date, in
exchange therefor a certificate or certificates for the number of whole shares
of Holding Company Common Stock into which such holder's shares of Heritage
Common Stock or BCB Common Stock have been converted pursuant to the
Consolidation, together with a check for cash in lieu of any fractional share in
accordance with Section 1.02(e)(i)(D) or Section 1.02(e)(ii)(D) hereof, as the
case may be.
(ii) Rights Evidenced by Certificates. Each certificate for
--------------------------------
shares of Holding Company Common Stock issued in exchange for certificates for
Heritage Common Stock or BCB Common Stock pursuant to Section 1.02(g)(i) hereof
will be dated the Effective Date and be entitled to dividends and all other
rights and privileges pertaining to Holding Company Common Stock from and after
the Effective Date. Until surrendered, each certificate theretofore evidencing
shares of Heritage Common Stock or BCB Common Stock, from and after the
Effective Date, will evidence solely the right to receive certificates for
shares of Holding Company Common Stock pursuant to Section 1.02(g)(i) hereof and
a check for cash in lieu of any fractional share in accordance with Section
1.02(e)(i)(D) or Section 1.02(e)(ii)(D), as the case may be. If certificates for
shares of Heritage Common Stock or BCB Common Stock are exchanged for Holding
Company Common Stock at a date following one or more record dates for the
payment of dividends or of any other distribution on the shares of Holding
Company Common Stock, the Holding Company will pay cash in an amount equal to
dividends theretofore payable on such Holding Company Common Stock and pay or
deliver any other distribution to which holders of shares of Holding Company
Common Stock have theretofore become entitled. Upon surrender of certificates
for shares of Heritage Common Stock or BCB Common Stock in exchange for
certificates for Holding Company Common Stock, the Holding Company also shall
pay any dividends to which such holder of Heritage Common Stock, in the case of
a holder of BCB Common Stock, may be entitled as a result of the declaration of
a dividend on the Heritage Common Stock or BCB Common Stock by Heritage or BCB
in accordance with the terms of this Agreement with a record
13
<PAGE>
date prior to the Effective Date and a payment date after the Effective Date.
No interest will accrue or be payable in respect of dividends or cash otherwise
payable under this Section 1.02(g) upon surrender of certificates for shares of
Heritage Common Stock or BCB Common Stock. Notwithstanding the foregoing, no
party hereto will be liable to any holder of Heritage Common Stock or any holder
of BCB Common Stock, for any amount paid in good faith to a public official or
agency pursuant to any applicable abandoned property, escheat or similar law.
Until such time as certificates for shares of Heritage Common Stock or BCB
Common Stock are surrendered by a BCB or Heritage shareholder to the Holding
Company for exchange, the Holding Company shall have the right to withhold
dividends or any other distributions on the shares of Holding Company Common
Stock issuable to such shareholder.
(iii) Exchange Procedures. Each certificate for shares of Heritage
-------------------
Common Stock delivered for exchange under this Section 1.02(g) must be endorsed
in blank by the registered holder thereof or be accompanied by a power of
attorney to transfer such shares endorsed in blank by such holder. If more than
one certificate is surrendered at one time and in one transmittal package for
the same shareholder account, the number of whole shares of Holding Company
Common Stock for which certificates will be issued pursuant to this Section
1.02(g) will be computed on the basis of the aggregate number of shares
represented by the certificates so surrendered. If shares of Holding Company
Common Stock or payments of cash are to be issued or made to a person other than
the one in whose name the surrendered certificate is registered, the certificate
so surrendered must be properly endorsed in blank, with signature(s) guaranteed,
or otherwise in proper form for transfer, and the person to whom certificates
for shares of Holding Company Common Stock is to be issued or to whom cash is to
be paid shall pay any transfer or other taxes required by reason of such
issuance or payment to a person other than the registered holder of the
certificate for shares of Heritage Common Stock or BCB Common Stock which are
surrendered. As promptly as practicable after the Effective Date, the Holding
Company shall send or cause to be sent to each shareholder of record of Heritage
Common Stock or BCB Common Stock transmittal materials for use in exchanging
certificates representing Heritage Common Stock for certificates representing
Holding Company Common Stock into which the Heritage Common Stock or BCB Common
Stock have been converted in the Consolidation. Certificates representing
shares of Holding Company Common Stock and checks for cash in lieu of fractional
shares shall be mailed to former shareholders of Heritage and BCB as soon as
reasonably possible but in no event later than thirty (30) business days
following the receipt of certificates representing former shares of Heritage
Common Stock or BCB Common Stock duly endorsed or accompanied by the materials
14
<PAGE>
referenced herein and delivered by certified mail, return receipt requested
(but in no event earlier than the second business day following the Effective
Date).
(iv) Closing of Stock Transfer Books; Cancellation of Heritage and
-------------------------------------------------------------
BCB Certificates. Upon the Effective Date, the stock transfer books for
----------------
Heritage Common Stock and BCB Common Stock will be closed and no further
transfers of shares of Heritage Common Stock or BCB Common Stock will
thereafter be made or recognized. All certificates for shares of Heritage
Common Stock and BCB Common Stock surrendered pursuant to this Section 1.02(g)
will be cancelled by the Holding Company.
(h) Anti-Dilution Provisions. If, Heritage or BCB has, at any time
------------------------
after the date hereof and before the Effective Date, (A) issued a dividend in
shares of Heritage Common Stock or BCB Common Stock, (B) combined the
outstanding shares of Heritage Common Stock or BCB Common Stock into a smaller
number of shares, (C) subdivided the outstanding shares of Heritage Common Stock
or BCB Common Stock, or (D) reclassified the shares of Heritage Common Stock or
BCB Common Stock, then the number of shares of Holding Company Common Stock to
be delivered to Heritage or BCB shareholders who are entitled to receive shares
of Holding Company Common Stock in exchange for shares of Heritage Common Stock
or BCB Common Stock shall be adjusted so that each Heritage or BCB shareholder
shall be entitled to receive such number of shares of Holding Company Common
Stock as such shareholder would have been entitled to receive if the Effective
Date had occurred prior to the happening of such event. (By way of
illustration, if BCB or Heritage shall declare a stock dividend of 7% payable
with respect to a record date on or prior to the Effective Date and the
conditions set forth above are satisfied, the BCB Exchange Ratio or the Heritage
Exchange Ratio, as the case may be, shall be adjusted downward by 7%).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF Heritage
------------------------------------------
Heritage hereby represents and warrants to BCB that, except as
specifically set forth in the Heritage Disclosure Schedule delivered to BCB by
----------------------------
Heritage on the date hereof:
Section 2.01 Organization.
------------
(a) Heritage is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania. Heritage is a
bank holding company duly registered under the BHCA. Heritage has the corporate
power and authority to carry on its business and operations as now being
conducted and to own and operate the properties and assets now owned and being
operated by it. Each Heritage Subsidiary is duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its incorporation and
each possesses
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<PAGE>
full corporate power and authority to carry on its respective business and to
own, lease and operate its properties as presently conducted. Neither Heritage
nor any Heritage Subsidiary is required by the conduct of its business or the
ownership or leasing of its assets to qualify to do business as a foreign
corporation in any jurisdiction other than the Commonwealth of Pennsylvania,
except where the failure to be so qualified would not have a Material Adverse
Effect on Heritage.
(b) Heritage National Bank is a national bank duly organized and
validly existing under the laws of the United States. Heritage National Bank
has the corporate power and authority to carry on its business and operations as
now being conducted and to own and operate the properties and assets now owned
and being operated by it.
(c) There are no Heritage Subsidiaries other than Heritage National
Bank.
(d) The deposits of Heritage National Bank are insured by the FDIC
to the extent provided in the FDIA.
(e) The respective minute books of Heritage and Heritage National
Bank and each other Heritage Subsidiary accurately record, in all material
respects, all material corporate actions of their respective shareholders and
boards of directors (including committees).
(f) Prior to the date of this Agreement, Heritage has delivered to
BCB true and correct copies of the articles of incorporation and bylaws of
Heritage and the charter and bylaws of Heritage National Bank as in effect on
the date hereof.
Section 2.02 Capitalization.
--------------
(a) The authorized capital stock of Heritage consists of (a)
10,000,000 shares of common stock, $5.00 par value ("Heritage Common Stock"), of
which, at the date of this agreement, 243,135 shares were issued and held by
Heritage as treasury stock, 4,758,999 shares are outstanding, validly issued,
fully paid and nonassessable and free of preemptive rights, and (b) 10,000,000
shares of preferred stock, $25.00 par value, none of which are issued or
outstanding. Neither Heritage nor Heritage National Bank nor any other Heritage
Subsidiary has or is bound by any subscription, option, warrant, call,
commitment, agreement, plan or other Right of any character relating to the
purchase, sale or issuance or voting of, or right to receive dividends or other
distributions on any shares of Heritage Common Stock, Heritage preferred stock
or any other security of Heritage or any securities representing the right to
vote, purchase or otherwise receive any shares of Heritage Common Stock,
Heritage preferred stock or any other security of Heritage, other than (i)
shares issuable under the BCB Option, (ii) 93,052 shares of Heritage Common
Stock issuable under the Heritage Stock Option
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<PAGE>
Plans, and (iii) pursuant to the Heritage ESOP and the Heritage DRIP.
(b) The authorized capital stock of Heritage National Bank consists of
270,000 shares of common stock, par value $5.00 per share ("Heritage Bank Common
Stock"), of which 270,000 shares are outstanding, validly issued, fully paid,
nonassessable, free of preemptive rights and owned by Heritage. Either Heritage
or Heritage National Bank owns all of the outstanding shares of capital stock of
each Heritage Subsidiary free and clear of all liens, security interests,
pledges, charges, encumbrances, agreements and restrictions of any kind or
nature.
(c) Except as set forth in the Heritage Disclosure Schedule, neither
----------------------------
(i) Heritage, (ii) Heritage National Bank nor (iii) any other Heritage
Subsidiary, owns any equity interest, directly or indirectly, other than
treasury stock, in any other company or controls any other company, except for
equity interests held in the investment portfolios of Heritage Subsidiaries,
equity interests held by Heritage Subsidiaries in a fiduciary capacity, and
equity interests held in connection with the commercial loan activities of
Heritage Subsidiaries. Except as set forth in the Heritage Disclosure Schedule,
----------------------------
there are no subscriptions, options, warrants, calls, commitments, agreements or
other Rights outstanding and held by Heritage or Heritage National Bank with
respect to any other company's capital stock or the equity of any other person.
(d) To the best of Heritage's knowledge, except as disclosed in
Heritage's proxy statement dated March 10, 1997, no person or "group" (as that
term is used in Section 13(d)(3) of the Exchange Act), is the beneficial owner
(as defined in Section 13(d) of the Exchange Act) of 5% or more of the
outstanding shares of Heritage Common Stock.
Section 2.03 Authority; No Violation.
-----------------------
(a) Heritage has full corporate power and authority to execute and
deliver this Agreement and to complete the transactions contemplated hereby.
The execution and delivery of this Agreement by Heritage and the completion by
Heritage of the transactions contemplated hereby have been duly and validly
approved by the Board of Directors of Heritage and, except for approval by the
shareholders of Heritage as required under the BCL, Heritage's articles of
incorporation and bylaws and Nasdaq requirements applicable to it, no other
corporate proceedings on the part of Heritage are necessary to complete the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Heritage and, subject to approval of the shareholders
of Heritage and receipt of the required approvals from Regulatory Authorities
described in Section 3.04 hereof, constitutes the valid and binding obligation
of Heritage, enforceable against Heritage in accordance with its terms,
17
<PAGE>
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and subject, as to enforceability, to general
principles of equity.
(b) (A) The execution and delivery of this Agreement by Heritage, (B)
subject to receipt of approvals from the Regulatory Authorities referred to in
Section 3.04 hereof and Heritage's and BCB's compliance with any conditions
contained therein, the completion of the transactions contemplated hereby, and
(C) compliance by Heritage with any of the terms or provisions hereof, will not
(i) conflict with or result in a breach of any provision of the articles of
incorporation or other organizational document or bylaws of Heritage or any
Heritage Subsidiary; (ii) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to Heritage
or any Heritage Subsidiary or any of their respective properties or assets; or
(iii) violate, conflict with, result in a breach of any provisions of,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of, accelerate the
performance required by, or result in a right of termination or acceleration or
the creation of any lien, security interest, charge or other encumbrance upon
any of the properties or assets of Heritage or any Heritage Subsidiary under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement, commitment or other
instrument or obligation to which Heritage or any Heritage Subsidiary is a
party, or by which they or any of their respective properties or assets may be
bound or affected, except for such violations, conflicts, breaches or defaults
under clause (ii) or (iii) hereof which, either individually or in the
aggregate, will not have a Material Adverse Effect on Heritage.
Section 2.04 Consents. Except for the consents, approvals, filings and
--------
registrations from or with the Regulatory Authorities referred to in Section
3.04 hereof and compliance with any conditions contained therein, and the
approval of this Agreement by the shareholders of Heritage and except as
disclosed in the Heritage Disclosure Schedule, no consents or approvals of, or
----------------------------
filings or registrations with, any public body or authority are necessary, and
no consents or approvals of any third parties are necessary, or will be, in
connection with (a) the execution and delivery of this Agreement by Heritage,
and (b) the completion by Heritage of the transactions contemplated hereby. As
of the date hereof, Heritage has no reason to believe that (i) any required
consents or approvals will not be received or will be received with conditions,
limitations or restrictions unacceptable to it or which would adversely impact
Heritage's ability to complete the transactions contemplated by this Agreement
or that (ii) any public body or authority, the consent or approval of which is
not required or any filing with which is not required, will object to the
completion of the transactions contemplated by this Agreement.
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Section 2.05 Financial Statements.
--------------------
(a) Heritage has made the Heritage Regulatory Reports available to BCB
for inspection. The Heritage Regulatory Reports have been, or will be, prepared
in all material respects in accordance with applicable regulatory accounting
principles and practices throughout the periods covered by such statements, and
fairly present, or will fairly present in all material respects, the financial
position, results of operations and changes in shareholders' equity of Heritage
as of and for the periods ended on the dates thereof, in accordance with
applicable regulatory accounting principles applied on a consistent basis.
(b) Heritage has previously delivered, or will deliver, to BCB the
Heritage Financials. The Heritage Financials have been, or will be, prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered by such statements, except as noted therein, and fairly present, or will
fairly present, the consolidated financial position, results of operations and
cash flows of Heritage as of and for the periods ending on the dates thereof, in
accordance with GAAP applied on a consistent basis, except as noted therein.
(c) At the date of each balance sheet included in the Heritage
Financials or the Heritage Regulatory Reports, neither Heritage nor Heritage
National Bank (as the case may be) had, or will have any liabilities,
obligations or loss contingencies of any nature (whether absolute, accrued,
contingent or otherwise) of a type required to be reflected in such Heritage
Financials or Heritage Regulatory Reports or in the footnotes thereto which are
not fully reflected or reserved against therein or fully disclosed in a footnote
thereto, except for liabilities, obligations and loss contingencies which are
not material in the aggregate and which are incurred in the ordinary course of
business, consistent with past practice and except for liabilities, obligations
and loss contingencies which are within the subject matter of a specific
representation and warranty herein and subject, in the case of any unaudited
statements, to normal, recurring audit adjustments and the absence of footnotes.
Section 2.06 Taxes.
-----
(a) Heritage and the Heritage Subsidiaries are members of the same
affiliated group within the meaning of IRC Section 1504(a). Heritage has duly
filed, and will file, all federal, state and local tax returns required to be
filed by or with respect to Heritage and all Heritage Subsidiaries on or prior
to the Closing Date (all such returns being accurate and correct in all material
respects) and has duly paid or will pay, or made or will make, provisions for
the payment of all federal, state and local taxes which have been incurred by or
are due or claimed to be due from Heritage and any Heritage Subsidiary by any
taxing authority or pursuant to any tax sharing agreement or arrangement
(written or oral) on or prior to the Closing Date
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other than taxes which (i) are not delinquent or (ii) are being contested in
good faith.
(b) No consent pursuant to IRC Section 341(f) has been filed (or will
be filed prior to the Closing Date) by or with respect to Heritage or any
Heritage Subsidiary.
Section 2.07 No Material Adverse Effect. Heritage has not suffered any
--------------------------
Material Adverse Effect since September 30, 1997.
Section 2.08 Contracts.
---------
(a) Except as described in Heritage's proxy statement dated March 10,
1997, and Annual Reports on Form 10-K for the years ended December 31, 1994,
1995 and 1996, previously delivered to BCB, in the footnotes to the audited
consolidated financial statements of Heritage as of December 31, 1996, and for
the three years ended December 31, 1996, or in the Heritage Disclosure Schedule,
----------------------------
neither Heritage nor any Heritage Subsidiary is a party to or subject to: (i)
any employment, consulting or severance contract or arrangement with any past or
present officer, director or employee of Heritage or any Heritage Subsidiary,
except for "at will" arrangements; (ii) any plan, arrangement or contract
providing for bonuses, pensions, options, deferred compensation, retirement
payments, profit sharing or similar arrangements for or with any past or present
officers, directors or employees of Heritage or any Heritage Subsidiary; (iii)
any collective bargaining agreement with any labor union relating to employees
of Heritage or any Heritage Subsidiary; (iv) any agreement which by its terms
limits the payment of dividends by any Heritage Subsidiary; (v) any instrument
evidencing or related to indebtedness for borrowed money whether directly or
indirectly, by way of purchase money obligation, conditional sale, lease
purchase, guaranty or otherwise, in respect of which Heritage or any Heritage
Subsidiary is an obligor to any person, which instrument evidences or relates to
indebtedness other than deposits, repurchase agreements, Federal Home Loan Bank
advances, bankers acceptances and "treasury tax and loan" accounts established
in the ordinary course of business and transactions in "federal funds" or which
contains financial covenants or other restrictions (other than those relating to
the payment of principal and interest when due) which would be applicable on or
after the Closing Date to the Holding Company or any Holding Company Subsidiary;
or (vi) any contract (other than this Agreement) limiting the freedom of any
Heritage Subsidiary to engage in any type of banking or bank-related business
permissible under law.
(b) True and correct copies of agreements, plans, arrangements and
instruments referred to in Section 2.08(a), described in the Heritage proxy
statement dated March 10, 1997 or in a footnote to the Heritage Financials, have
been provided or been made available to BCB on or before the date hereof, and
are
20
<PAGE>
in full force and effect on the date hereof and neither Heritage nor any
Heritage Subsidiary (nor, to the knowledge of Heritage, any other party to any
such contract, plan, arrangement or instrument) has breached any provision of,
or is in default in any respect under any term of, any such contract, plan,
arrangement or instrument which breach has resulted in or will result in a
Material Adverse Effect with respect to Heritage. Except as set forth in the
Heritage Disclosure Schedule, no party to any material contract, plan,
- ----------------------------
arrangement or instrument will have the right to terminate any or all of the
provisions of any such contract, plan, arrangement or instrument as a result of
the transactions contemplated by this Agreement. Except as set forth in the
Heritage Disclosure Schedule, none of the employees (including officers) of
- ----------------------------
Heritage or any Heritage Subsidiary possess the right to terminate their
employment as a result of the execution of this Agreement. Except as set forth
in the Heritage Disclosure Schedule, no plan, employment agreement, termination
----------------------------
agreement, or similar agreement or arrangement to which Heritage or any Heritage
Subsidiary is a party or under which Heritage or any Heritage Subsidiary may be
liable contains provisions which permit an employee or independent contractor to
terminate it without cause and continue to accrue future benefits thereunder.
Except as set forth in the Heritage Disclosure Schedule, no such agreement, plan
----------------------------
or arrangement (i) provides for acceleration in the vesting of benefits or
payments due thereunder upon the occurrence of a change in ownership or control
of Heritage or any Heritage Subsidiary absent the occurrence of a subsequent
event; (ii) provides for benefits which may cause the disallowance of a federal
income tax deduction under IRC Section 280G; or (iii) requires Heritage or any
Heritage Subsidiary to provide a benefit in the form of Heritage Common Stock or
determined by reference to the value of Heritage Common Stock.
Section 2.09 Ownership of Property; Insurance Coverage.
-----------------------------------------
(a) Heritage and the Heritage Subsidiaries have good and, as to real
property, marketable title to all assets and properties owned by Heritage or any
Heritage Subsidiary in the conduct of their businesses, whether such assets and
properties are real or personal, tangible or intangible, including assets and
property reflected in the balance sheets contained in the Heritage Regulatory
Reports and in the Heritage Financials or acquired subsequent thereto (except to
the extent that such assets and properties have been disposed of for fair value,
in the ordinary course of business, since the date of such balance sheets),
subject to no encumbrances, liens, mortgages, security interests or pledges,
except (i) those items which secure repurchase agreements and liabilities for
borrowed money, (ii) statutory liens for amounts not yet delinquent or which are
being contested in good faith and (iii) items permitted under Article IV.
Heritage and the Heritage Subsidiaries, as lessee, have the right under valid
and subsisting leases of real and
21
<PAGE>
personal properties used by Heritage and its Subsidiaries in the conduct of
their businesses to occupy or use all such properties as presently occupied and
used by each of them. Such existing leases and commitments to lease constitute
or will constitute operating leases for both tax and financial accounting
purposes and the lease expense and minimum rental commitments with respect to
such leases and lease commitments are as disclosed in the notes to the Heritage
Financials.
(b) With respect to all agreements pursuant to which Heritage or any
Heritage Subsidiary has purchased securities subject to an agreement to resell,
if any, Heritage or such Heritage Subsidiary, as the case may be, has a valid,
perfected first lien or security interest in the securities or other collateral
securing the repurchase agreement, and the value of such collateral equals or
exceeds the amount of the debt secured thereby.
(c) Heritage and the Heritage Subsidiaries currently maintain
insurance considered by Heritage to be reasonable for their respective
operations and similar in scope and coverage to that maintained by other
businesses similarly engaged. Neither Heritage nor any Heritage Subsidiary has
received notice from any insurance carrier that (i) such insurance will be
cancelled or that coverage thereunder will be reduced or eliminated, or (ii)
premium costs with respect to such policies of insurance will be substantially
increased. There are presently no material claims pending under such policies
of insurance and no notices have been given by Heritage or Heritage National
Bank under such policies. All such insurance is valid and enforceable and in
full force and effect, and within the last three years Heritage has received
each type of insurance coverage for which it has applied and during such periods
has not been denied indemnification for any material claims submitted under any
of its insurance policies.
Section 2.10 Legal Proceedings. Except as disclosed in the Heritage
----------------- --------
Disclosure Schedule, neither Heritage nor any Heritage Subsidiary is a party to
- -------------------
any, and there are no pending or, to the best of Heritage's knowledge,
threatened legal, administrative, arbitration or other proceedings, claims
(whether asserted or unasserted), actions or governmental investigations or
inquiries of any nature (i) against Heritage or any Heritage Subsidiary, (ii) to
which Heritage or any Heritage Subsidiary's assets are or may be subject, (iii)
challenging the validity or propriety of any of the transactions contemplated by
this Agreement, or (iv) which could adversely affect the ability of Heritage to
perform under this Agreement, except for any proceedings, claims, actions,
investigations or inquiries referred to in clauses (i) or (ii) which, if
adversely determined, individually or in the aggregate, could not be reasonably
expected to have a Material Adverse Effect on Heritage.
22
<PAGE>
Section 2.11 Compliance With Applicable Law.
------------------------------
(a) Heritage and Heritage Subsidiaries hold all licenses, franchises,
permits and authorizations necessary for the lawful conduct of their businesses
under, and have complied in all material respects with, applicable laws,
statutes, orders, rules or regulations of any federal, state or local
governmental authority relating to them, other than where such failure to hold
or such noncompliance will neither result in a limitation in any material
respect on the conduct of their businesses nor otherwise have a Material Adverse
Effect on Heritage.
(b) Except as disclosed in the Heritage Disclosure Schedule, neither
----------------------------
Heritage nor any Heritage Subsidiary has received any notification or
communication from any Regulatory Authority (i) asserting that Heritage or any
Heritage Subsidiary is not in compliance with any of the statutes, regulations
or ordinances which such Regulatory Authority enforces; (ii) threatening to
revoke any license, franchise, permit or governmental authorization which is
material to Heritage or any Heritage Subsidiary; (iii) requiring or threatening
to require Heritage or any Heritage Subsidiary, or indicating that Heritage or
any Heritage Subsidiary may be required, to enter into a cease and desist order,
agreement or memorandum of understanding or any other agreement restricting or
limiting, or purporting to restrict or limit, in any manner the operations of
Heritage or any Heritage Subsidiary, including without limitation any
restriction on the payment of dividends; or (iv) directing, restricting or
limiting, or purporting to direct, restrict or limit, in any manner the
operations of Heritage or any Heritage Subsidiary, including without limitation
any restriction on the payment of dividends (any such notice, communication,
memorandum, agreement or order described in this sentence is hereinafter
referred to as a "Regulatory Agreement"). Neither Heritage nor any Heritage
Subsidiary has consented to or entered into any Regulatory Agreement, except as
heretofore disclosed to BCB.
Section 2.12 Information to be Supplied. The information to be supplied
--------------------------
by Heritage for inclusion in the Registration Statement (including the
Prospectus/Proxy Statement) will not, at the time the Registration Statement is
declared effective pursuant to the Securities Act and as of the date the
Prospectus/Proxy Statement is mailed to shareholders of BCB and Heritage and up
to and including the date(s) of the meetings of shareholders of Heritage and BCB
to which such Prospectus/Proxy Statement relates, contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements therein not misleading. The information supplied, or to be
supplied, by Heritage for inclusion in the Applications will, at the time such
documents are filed with any Regulatory Authority and up to and including the
date(s) of the obtainment of any required regulatory approvals or consents, be
accurate in all material aspects.
23
<PAGE>
Section 2.13 ERISA. Heritage has previously delivered or made available
-----
to BCB true and complete copies of all employee pension benefit plans which it
currently maintains within the meaning of ERISA Section 3(2), including profit
sharing plans, employee stock ownership plans, deferred compensation and
supplemental income plans, supplemental executive retirement plans, severance
plans, policies and agreements, group insurance plans, and all other employee
welfare benefit plans within the meaning of ERISA Section 3(1) (including, if
applicable, vacation pay, sick leave, short-term disability, long-term
disability, and medical plans) and all other employee benefit plans, policies,
agreements and arrangements, all of which are set forth in the Heritage
--------
Disclosure Schedule, maintained or contributed to for the benefit of the
- -------------------
employees or former employees (including retired employees) and any
beneficiaries thereof or directors or former directors of Heritage or any
Heritage Subsidiary, together with (i) the most recent actuarial (if any) and
financial reports relating to those plans which constitute "qualified plans"
under IRC Section 401(a), (ii) the most recent annual reports relating to such
plans filed by them, respectively, with any government agency, and (iii) all
rulings and determination letters which pertain to any such plans. To the best
of Heritage's knowledge, neither Heritage, any Heritage Subsidiary nor any
pension plan maintained by Heritage or any Heritage Subsidiary, has incurred,
directly or indirectly, within the past six (6) years any liability under Title
IV of ERISA (including to the Pension Benefit Guaranty Corporation) or to the
IRS with respect to any pension plan qualified under IRC Section 401(a) which
liability has resulted in or will result in a Material Adverse Effect with
respect to Heritage, except liabilities to the Pension Benefit Guaranty
Corporation pursuant to ERISA Section 4007, all of which have been fully paid,
nor has any reportable event under ERISA Section 4043 occurred with respect to
any such pension plan. With respect to each of such plans that is subject to
Title IV of ERISA, the fair market value of the assets under such plan exceeds
the present value of the accrued benefits liability as of the end of the most
recent plan year with respect to such plan calculated on the basis of the actual
assumptions used in the most recent actuarial valuation for such plan. Neither
Heritage nor any Heritage Subsidiary has incurred or is subject to any liability
under ERISA Section 4201 for a complete or partial withdrawal from a multi-
employer plan. To the best of Heritage's knowledge, all "employee benefit
plans," as defined in ERISA Section 3(3), comply and within the past six (6)
years have complied in all material respects with (i) relevant provisions of
ERISA and (ii) in the case of plans intended to qualify for favorable income tax
treatment, provisions of the IRC relevant to such treatment. To the best of
Heritage's knowledge, no prohibited transaction (which shall mean any
transaction prohibited by ERISA Section 406 and not exempt under ERISA Section
408 or any transaction prohibited under IRC Section 4975) has occurred within
the past six (6) years with respect to any employee benefit plan maintained by
Heritage or any Heritage Subsidiary that would result in the imposition,
directly or
24
<PAGE>
indirectly, of an excise tax under IRC Section 4975 or other penalty under ERISA
or the IRC, which, individually or in the aggregate, has resulted in or will
result in a Material Adverse Effect with respect to Heritage. Heritage and the
Heritage Subsidiaries comply with the continuation coverage rules applicable to
its group health plan(s) for covered employees and "qualified beneficiaries" of
covered employees (as defined in IRC Section 4980B(g)) in accordance with the
provisions of IRC Section 4980B(f). Such group health plans are in compliance
with Section 1862(b)(1) of the Social Security Act. Neither Heritage nor any
Heritage Subsidiary is aware of any existing or contemplated audit of any of its
employee benefit plans by the Internal Revenue Service or U.S. Department of
Labor.
Section 2.14 Brokers, Finders and Financial Advisors. Except for
---------------------------------------
Heritage's engagement of McConnell, Budd & Downes, Inc., in connection with the
transactions contemplated by this Agreement, neither Heritage nor any Heritage
Subsidiary, nor any of their respective officers, directors, employees or
agents, has employed any broker, finder or financial advisor in connection with
the transactions contemplated by this Agreement or in connection with any
transaction other than the Consolidation, or, except for its commitments
disclosed in the Heritage Disclosure Schedule, incurred any liability or
----------------------------
commitment for any fees or commissions to any such person in connection with the
transactions contemplated by this Agreement or in connection with any
transaction other than the Consolidation, which has not been reflected in the
Heritage Financials. The Heritage Disclosure Schedule shall contain as an
----------------------------
exhibit the engagement letter between Heritage and McConnell, Budd & Downes,
Inc.
Section 2.15 Securities Documents. Heritage has delivered to BCB copies
--------------------
of its (i) annual reports on SEC Form 10-K for the years ended December 31,
1996, 1995 and 1994, (ii) a quarterly report on SEC Form 10-Q for the quarters
ended March 31, 1997 and June 30, 1997, and (iii) proxy materials used in
connection with its meetings of shareholders held in 1997, 1996 and 1995. Such
reports and such proxy materials complied, at the time filed with the SEC, in
all material respects, with the Exchange Act and all applicable rules and
regulations of the SEC.
Section 2.16 Environmental Matters. To the knowledge of Heritage,
---------------------
neither Heritage nor any Heritage Subsidiary, nor any properties owned or
operated by Heritage or any Heritage Subsidiary has been or is in violation of
or liable under any Environmental Law which violation or liability, individually
or in the aggregate, resulted in, or will result, in a Material Adverse Effect
with respect to Heritage. There are no actions, suits or proceedings, or
demands, claims, notices or investigations (including without limitation
notices, demand letters or requests for information from any environmental
agency) instituted or pending, or to the knowledge of Heritage, threatened,
relating to the liability of any property owned or
25
<PAGE>
operated by Heritage or any Heritage Subsidiary under any Environmental Law.
Section 2.17 Allowance for Loan Losses. The allowance for loan losses
-------------------------
reflected, and to be reflected, in the Heritage Regulatory Reports, and shown,
and to be shown, on the balance sheets contained in the Heritage Financials have
been, and will be, established in accordance with the requirements of GAAP and
all applicable regulatory criteria.
Section 2.18 Related Party Transactions. Except as disclosed (i) in the
--------------------------
Heritage Disclosure Schedule, (ii) in the Heritage proxy statement dated March
- ----------------------------
10, 1997 or (iii) in the footnotes to the Heritage Financials, Heritage is not a
party to any transaction (including any loan or other credit accommodation but
excluding deposits in the ordinary course of business) with any Affiliate of
Heritage (except an Heritage Subsidiary); and all such transactions (a) were
made in the ordinary course of business, (b) were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other Persons, and (c) did not involve more
than the normal risk of collectability or present other unfavorable features.
Except as set forth on the Heritage Disclosure Schedule, no loan or credit
----------------------------
accommodation to any Affiliate of Heritage is presently in default or, during
the three year period prior to the date of this Agreement, has been in default
or has been restructured, modified or extended. Neither Heritage nor Heritage
National Bank has been notified that principal and interest with respect to any
such loan or other credit accommodation will not be paid when due or that the
loan grade classification accorded such loan or credit accommodation by Heritage
National Bank is inappropriate.
Section 2.19 Loans. Each loan reflected as an asset in the Heritage
-----
Financial Statements (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and correct (ii) to the extent secured, has
been secured by valid liens and security interests which have been perfected,
and (ii) is the legal, valid and binding obligation of the obligor named
therein, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles, in
each case other than loans as to which the failure to satisfy the foregoing
standards would not have a Material Adverse Effect on Heritage.
Section 2.20 Accounting for the Consolidation; Reorganization. As of
------------------------------------------------
the date hereof, Heritage does not have any reason to believe that the
Consolidation will fail to qualify (i) for pooling-of-interests accounting
treatment under GAAP, or (ii) as a reorganization under Section 368(a) of the
IRC.
Section 2.21 Fairness Opinion. Heritage has received an oral opinion
----------------
from McConnell Budd & Downes, Inc., to the
26
<PAGE>
effect that, as of the date hereof, the exchange ratio to be received by
shareholders of Heritage pursuant to this Agreement is fair, from a financial
point of view, to such shareholders.
Section 2.22 Quality of Representations. The representations made by
--------------------------
Heritage in this Agreement are true, correct and complete in all material
respects, and do not omit statements necessary to make them not misleading under
all facts and circumstances.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BCB
-------------------------------------
BCB hereby represents and warrants to Heritage that, except as set forth
in the BCB Disclosure Schedule delivered by BCB to Heritage on or prior to the
-----------------------
date hereof:
Section 3.01 Organization.
------------
(a) BCB is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania. BCB is a bank duly
registered under the BHCA. BCB has the corporate power and authority to carry
on its business and operations as now being conducted and to own and operate the
properties and assets now owned and being operated by it. Each BCB Subsidiary
is duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation and each possesses full corporate power and
authority to carry on its respective business and to own, lease and operate its
properties as presently conducted. Neither BCB nor any BCB Subsidiary is
required by the conduct of its business or the ownership or leasing of its
assets to qualify to do business as a foreign corporation in any jurisdiction
other than the Commonwealth of Pennsylvania, except where the failure to be so
qualified would not have a Material Adverse Effect on BCB.
(b) Berks County Bank is a state-chartered bank, duly organized and
validly existing under the laws of the Commonwealth of Pennsylvania. Berks
County Bank has the corporate power and authority to carry on its business and
operations as now being conducted and to own and operate the properties and
assets now owned and being operated by it.
(c) There are no BCB Subsidiaries other than Berks County Bank and
Berks Mortgage Company.
(d) The deposits of Berks County Bank are insured by the FDIC to the
extent provided in the FDIA.
(e) The respective minute books of BCB and Berks County Bank and
each other BCB Subsidiary accurately record, in all material respects, all
material corporate actions of their respective shareholders and boards of
directors (including committees).
27
<PAGE>
(f) Prior to the date of this Agreement, BCB has delivered to Heritage
true and correct copies of the articles of incorporation and the bylaws of BCB
and Berks County Bank, respectively, as in effect on the date hereof.
Section 3.02 Capitalization.
--------------
(a) The authorized capital stock of BCB consists of (a) 20,000,000
shares of common stock, $2.50 par value ("BCB Common Stock"), of which, at the
date of this Agreement, no shares were issued and held by BCB as treasury stock
and 3,469,930 shares are outstanding, validly issued, fully paid and
nonassessable and free of preemptive rights. Neither BCB nor Berks County Bank
nor any other BCB Subsidiary has or is bound by any subscription, option,
warrant, call, commitment, agreement, plan or other Right of any character
relating to the purchase, sale or issuance or voting of, or right to receive
dividends or other distributions on any shares of BCB Common Stock or any other
security of BCB or any securities representing the right to vote, purchase or
otherwise receive any shares of BCB Common Stock or any other security of BCB,
other than (i) the shares issuable under the Heritage Option, (ii) options to
acquire 138,942 shares of BCB Common Stock under BCB Stock Option Plans and
(iii) the BCB dividend reinvestment and stock purchase plan.
(b) The authorized capital stock of Berks County Bank consists of
3,000,000 shares of common stock, par value $5.00 per share ("BCB Bank Common
Stock"), of which 1,407,098 shares are outstanding, validly issued, fully paid,
nonassessable, free of preemptive rights and owned by BCB. Either BCB or Berks
County Bank owns all of the outstanding shares of capital stock of each BCB
Subsidiary free and clear of all liens, security interests, pledges, charges,
encumbrances, agreements and restrictions of any kind or nature.
(c) Except as set forth in the BCB Disclosure Schedule, neither (i)
-----------------------
BCB, (ii) Berks County Bank nor (iii) any other BCB Subsidiary, owns any equity
interest, directly or indirectly, other than treasury stock, in any other
company or controls any other company, except for equity interests held in the
investment portfolios of BCB Subsidiaries, equity interests held by BCB
Subsidiaries in a fiduciary capacity, and equity interests held in connection
with the commercial loan activities of BCB Subsidiaries. There are no
subscriptions, options, warrants, calls, commitments, agreements or other Rights
outstanding and held by BCB or Berks County Bank with respect to any other
company's capital stock or the equity of any other person.
(d) To the best of BCB's knowledge, except as disclosed in BCB's proxy
statement dated March 14, 1997, no person or "group" (as that term is used in
Section 13(d)(3) of the Exchange Act) is the beneficial owner (as defined in
28
<PAGE>
Section 13(d) of the Exchange Act) of 5% or more of the outstanding shares of
BCB Common Stock.
Section 3.03 Authority; No Violation.
-----------------------
(a) BCB has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by BCB and the completion by BCB of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of BCB and, except for approval of the shareholders of BCB as
required by the BCL, BCB's articles of incorporation and bylaws and Nasdaq
requirements applicable to it, no other corporate proceedings on the part of BCB
are necessary to complete the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by BCB and, subject to approval
by the shareholders of BCB and receipt of the required approvals of Regulatory
Authorities described in Section 3.04 hereof, constitutes the valid and binding
obligation of BCB, enforceable against BCB in accordance with its terms, subject
to applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally and subject, as to enforceability, to general principles of
equity.
(b) (A) The execution and delivery of this Agreement by BCB, (B)
subject to receipt of approvals from the Regulatory Authorities referred to in
Section 3.04 hereof and Heritage's and BCB's compliance with any conditions
contained therein, the completion of the transactions contemplated hereby, and
(C) compliance by BCB with any of the terms or provisions hereof, will not (i)
conflict with or result in a breach of any provision of the articles of
incorporation or other organizational document or bylaws of BCB or any BCB
Subsidiary; (ii) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to BCB or any BCB
Subsidiary or any of their respective properties or assets; or (iii) violate,
conflict with, result in a breach of any provisions of, constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default), under, result in the termination of, accelerate the performance
required by, or result in a right of termination or acceleration or the creation
of any lien, security interest, charge or other encumbrance upon any of the
properties or assets of BCB or any BCB Subsidiary under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other investment or obligation to which BCB or any
BCB Subsidiary is a party, or by which they or any of their respective
properties or assets may be bound or affected, except for such violations,
conflicts, breaches or defaults under clause (ii) or (iii) hereof which, either
individually or in the aggregate, will not have a Material Adverse Effect on
BCB.
29
<PAGE>
Section 3.04 Consents. Except for consents, approvals, filings and
--------
registrations from or with the FRB, the DOJ, the SEC, the PDS, the NASD and
state "blue sky" authorities, and compliance with any conditions contained
therein, and the approval of this Agreement by the shareholders of BCB, and
except as disclosed in the BCB Disclosure Schedule, no consents or approvals of,
-----------------------
or filings or registrations with, any public body or authority are necessary,
and no consents or approvals of any third parties are necessary, or will be, in
connection with (a) the execution and delivery of this Agreement by BCB, and (b)
the completion by BCB of the transactions contemplated hereby. As of the date
hereof, BCB has no reason to believe that (i) any required consents or approvals
will not be received or will be received with conditions, limitations or
restrictions unacceptable to it or which would adversely impact BCB's ability to
complete the transactions contemplated by this Agreement or that (ii) any public
body or authority, the consent or approval of which is not required or any
filing with which is not required, will object to the completion of the
transactions contemplated by this Agreement.
Section 3.05 Financial Statements.
--------------------
(a) BCB has made the BCB Regulatory Reports available to Heritage for
inspection. The BCB Regulatory Reports have been, or will be, prepared in all
material respects in accordance with applicable regulatory accounting principles
and practices throughout the periods covered by such statements, and fairly
present, or will fairly present in all material respects, the financial
position, results of operations, and changes in shareholders' equity of BCB as
of and for the periods ended on the dates thereof, in accordance with applicable
regulatory accounting principles applied on a consistent basis.
(b) BCB has previously delivered, or will deliver, to Heritage the BCB
Financials. The BCB Financials have been, or will be, prepared in accordance
with GAAP applied on a consistent basis throughout the periods covered by such
statements, except as noted therein, and fairly present, or will fairly present,
the consolidated financial position, results of operations and cash flows of BCB
as of and for the periods ending on the dates thereof, in accordance with GAAP
applied on a consistent basis, except as noted therein.
(c) At the date of each balance sheet included in the BCB Financials
or BCB Regulatory Reports, neither BCB or Berks County Bank did not have any
liabilities, obligations or loss contingencies of any nature (whether absolute,
accrued, contingent or otherwise) of a type required to be reflected in such BCB
Financials or BCB Regulatory Reports or in the footnotes thereto which are not
fully reflected or reserved against therein or disclosed in a footnote thereto,
except for liabilities, obligations or loss contingencies which are not material
in the aggregate and which are incurred in the ordinary course of
30
<PAGE>
business, consistent with past practice, and except for liabilities, obligations
or loss contingencies which are within the subject matter of a specific
representation and warranty herein and subject, in the case of any unaudited
statements, to normal recurring audit adjustments and the absence of footnotes.
Section 3.06 Taxes.
-----
(a) BCB and the BCB Subsidiaries are members of the same affiliated
group within the meaning of IRC Section 1504(a). BCB has duly filed, and will
file, all federal, state and local tax returns required to be filed by or with
respect to BCB and all BCB Subsidiaries on or prior to the Closing Date (all
such returns being accurate and correct in all material respects) and has duly
paid or will pay, or made or will make, provisions for the payment of all
federal, state and local taxes which have been incurred by or are due or claimed
to be due from BCB and any BCB Subsidiary by any taxing authority or pursuant to
any tax sharing agreement or arrangement (written or oral) on or prior to the
Closing Date other than taxes which (i) are not delinquent or (ii) are being
contested in good faith.
(b) No consent pursuant to IRC Section 341(f) has been filed (or will
be filed prior to the Closing Date) by or with respect to BCB or any BCB
Subsidiary.
Section 3.07 No Material Adverse Effect. BCB has not suffered any
--------------------------
Material Adverse Effect since September 30, 1997.
Section 3.08 Contracts.
---------
(a) Except as described in BCB's proxy statement dated March 14, 1997
and Annual Reports on Form 10-KSB for the years ended December 31, 1994, 1995
and 1996, previously delivered to Heritage, in the footnotes to the audited
consolidated financial statements of BCB as of December 31, 1996, and for the
three years ended December 31, 1996, or in the BCB Disclosure Schedule, neither
-----------------------
BCB nor any BCB Subsidiary is a party to or subject to: (i) any employment,
consulting or severance contract or arrangement with any past or present
officer, director or employee of BCB or any BCB Subsidiary, except for "at will"
arrangements; (ii) any plan, arrangement or contract providing for bonuses,
pensions, options, deferred compensation, retirement payments, profit sharing or
similar arrangements for or with any past or present officers, directors or
employees of BCB or any BCB Subsidiary; (iii) any collective bargaining
agreement with any labor union relating to employees of BCB or any BCB
Subsidiary; (iv) any agreement which by its terms limits the payment of
dividends by any BCB Subsidiary; (v) any instrument evidencing or related to
indebtedness for borrowed money whether directly or indirectly, by way of
purchase money obligation, conditional sale, lease purchase, guaranty or
otherwise, in respect of which BCB or any BCB Subsidiary is an obligor to any
person, which instrument evidences or relates to
31
<PAGE>
indebtedness other than deposits, repurchase agreements, Federal Home Loan Bank
advances, bankers acceptances and "treasury tax and loan" accounts established
in the ordinary course of business and transactions in "federal funds" or which
contains financial covenants or other restrictions (other than those relating to
the payment of principal and interest when due) which would be applicable on or
after the Closing Date to the Holding Company or any Holding Company Subsidiary;
or (vi) any contract (other than this Agreement) limiting the freedom of any BCB
Subsidiary to engage in any type of banking or bank-related business permissible
under law.
(b) True and correct copies of agreements, plans, arrangements and
instruments referred to in Section 3.08(a), described in the BCB proxy statement
dated March 14, 1997 or in a footnote to the BCB Financials, have been provided
or been made available to Heritage on or before the date hereof, and are in full
force and effect on the date hereof and neither BCB nor any BCB Subsidiary (nor,
to the knowledge of Heritage, any other party to any such contract, plan,
arrangement or instrument) has breached any provision of, or is in default in
any respect under any term of, any such contract, plan, arrangement or
instrument which breach has resulted in or will result in a Material Adverse
Effect with respect to BCB. Except as set forth in the BCB Disclosure Schedule,
-----------------------
no party to any material contract, plan, arrangement or instrument will have the
right to terminate any or all of the provisions of any such contract, plan,
arrangement or instrument as a result of the transactions contemplated by this
Agreement. Except as set forth in the BCB Disclosure Schedule, none of the
-----------------------
employees (including officers) of BCB or any BCB Subsidiary possess the right to
terminate their employment as a result of the execution of this Agreement.
Except as set forth in the BCB Disclosure Schedule, no plan, employment
-----------------------
agreement, termination agreement, or similar agreement or arrangement to which
BCB or any BCB Subsidiary is a party or under which BCB or any BCB Subsidiary
may be liable contains provisions which permit an employee or independent
contractor to terminate it without cause and continue to accrue future benefits
thereunder. Except as set forth in the BCB Disclosure Schedule, no such
-----------------------
agreement, plan or arrangement (i) provides for acceleration in the vesting of
benefits or payments due thereunder upon the occurrence of a change in ownership
or control of BCB or any BCB Subsidiary absent the occurrence of a subsequent
event; (ii) provides for benefits which may cause the disallowance of a federal
income tax deduction under IRC Section 280G; or (iii) requires BCB or any BCB
Subsidiary to provide a benefit in the form of BCB Common Stock or determined by
reference to the value of BCB Common Stock.
32
<PAGE>
Section 3.09 Ownership of Property; Insurance Coverage.
-----------------------------------------
(a) BCB and the BCB Subsidiaries have good and, as to real property,
marketable title to all assets and properties owned by BCB or any of its
Subsidiaries in the conduct of their businesses, whether such assets and
properties are real or personal, tangible or intangible, including assets and
property reflected in the balance sheets contained in the BCB Regulatory Reports
and in the BCB Financials or acquired subsequent thereto (except to the extent
that such assets and properties have been disposed of for fair value, in the
ordinary course of business, since the date of such balance sheets), subject to
no encumbrances, liens, mortgages, security interests or pledges, except (i)
those items that secure repurchase agreements and liabilities for borrowed
money, (ii) statutory liens for amounts not yet delinquent or which are being
contested in good faith, and (iii) items permitted under Article IV. BCB and
the BCB Subsidiaries, as lessee, have the right under valid and subsisting
leases of real and personal properties used by BCB and its Subsidiaries in the
conduct of their businesses to occupy and use all such properties as presently
occupied and used by each of them. Except as set forth in the BCB Disclosure
--- ----------
Schedule, such existing leases and commitments to lease constitute or will
- --------
constitute operating leases for both tax and financial accounting purposes and
the lease expense and minimum rental commitments with respect to such leases and
lease commitments are as disclosed in the notes to the BCB Financials.
(b) With respect to all agreements pursuant to which BCB or any BCB
Subsidiary has purchased securities subject to an agreement to resell, if any,
BCB or such BCB Subsidiary, as the case may be, has a valid, perfected first
lien or security interest in the securities or other collateral securing the
repurchase agreement, and the value of such collateral equals or exceeds the
amount of the debt secured thereby.
(c) BCB and the BCB Subsidiaries currently maintain insurance in
amounts considered by BCB to be reasonable for their respective operations, and
such insurance is similar in scope and coverage to that maintained by other
businesses similarly engaged. Neither BCB nor any BCB Subsidiary has received
notice from any insurance carrier that (i) such insurance will be cancelled or
that coverage thereunder will be reduced or eliminated or (ii) premium costs
with respect to such insurance will be substantially increased. There are
presently no material claims pending under such policies of insurance and no
notices have been given by BCB or Berks County Bank under such policies. All
such insurance is valid and enforceable and in full force and effect, and within
the last three years BCB has received each type of insurance coverage for which
it has applied and during such periods has not been denied indemnification for
any material claims submitted under any of its insurance policies.
33
<PAGE>
Section 3.10 Legal Proceedings. Except as set forth in the BCB
----------------- ---
Disclosure Schedule, neither BCB nor any BCB Subsidiary is a party to any, and
- ---------- --------
there are no pending or, to the best of BCB's knowledge, threatened legal,
administrative, arbitration or other proceedings, claims, actions or
governmental investigations or inquiries of any nature (i) against BCB or any
BCB Subsidiary, (ii) to which BCB's or any BCB Subsidiary's assets are or may be
subject, (iii) challenging the validity or propriety of any of the transactions
contemplated by this Agreement, or (iv) which could adversely affect the ability
of BCB to perform under this Agreement, except for any proceedings, claims,
actions, investigations or inquiries referred to in clauses (i) or (ii) which,
individually or in the aggregate, could not be reasonably expected to have a
Material Adverse Effect on BCB.
Section 3.11 Compliance With Applicable Law.
------------------------------
(a) BCB and the BCB Subsidiaries hold all licenses, franchises,
permits and authorizations necessary for the lawful conduct of their businesses
under, and have complied in all material respects with, applicable laws,
statutes, orders, rules or regulations of any federal, state or local
governmental authority relating to them, other than where such failure to hold
or such noncompliance will neither result in a limitation in any material
respect on the conduct of their businesses nor otherwise have a Material Adverse
Effect on BCB.
(b) Neither BCB nor any BCB Subsidiary has received any notification
or communication from any Regulatory Authority (i) asserting that BCB or any BCB
Subsidiary is not in compliance with any of the statutes, regulations or
ordinances which such Regulatory Authority enforces; (ii) threatening to revoke
any license, franchise, permit or governmental authorization which is material
to BCB or any BCB Subsidiary; (iii) requiring or threatening to require BCB or
any BCB Subsidiary, or indicating that BCB or any BCB Subsidiary may be
required, to enter into a cease and desist order, agreement or memorandum of
understanding or any other agreement restricting or limiting, or purporting to
restrict or limit, in any manner the operations of BCB or any BCB Subsidiary,
including without limitation any restriction on the payment of dividends; or
(iv) directing, restricting or limiting, or purporting to direct, restrict or
limit, in any manner the operations of BCB or any BCB Subsidiary, including
without limitation any restriction on the payment of dividends (any such notice,
communication, memorandum, agreement or order described in this sentence is
hereinafter referred to as a "Regulatory Agreement"). Neither BCB nor any BCB
Subsidiary has consented to or entered into any Regulatory Agreement, except as
heretofore disclosed to Heritage.
Section 3.12 Information to be Supplied. The information to be supplied
--------------------------
by BCB for inclusion in the Registration Statement (including the
Prospectus/Proxy Statement)
34
<PAGE>
will not, at the time the Registration Statement is declared effective pursuant
to the Securities Act and as of the date the Prospectus/Proxy Statement is
mailed to shareholders of BCB and Heritage and up to and including the date(s)
of the meetings of shareholders of BCB and Heritage to which such
Prospectus/Proxy Statement relates, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein not misleading. The information supplied, or to be supplied,
by BCB for inclusion in the Applications will, at the time such documents are
filed with any Regulatory Authority and up to and including the date(s) of the
obtainment of any required regulatory approvals or consents, be accurate in all
material aspects.
Section 3.13 ERISA. BCB has previously delivered or made available to
-----
Heritage true and complete copies of the employee pension benefit plans which it
currently maintains within the meaning of ERISA Section 3(2), including profit
sharing plans, stock purchase plans, deferred compensation and supplemental
income plans, supplemental executive retirement plans, severance plans, policies
and agreements, group insurance plans, and all other employee welfare benefit
plans within the meaning of ERISA Section 3(1) (including, if applicable,
vacation pay, sick leave, short-term disability, long-term disability, and
medical plans), and all other employee benefit plans, policies, agreements and
arrangements, all of which are set forth on the BCB Disclosure Schedule,
-----------------------
maintained or contributed to for the benefit of the employees or former
employees (including retired employees) and any beneficiaries thereof or
directors or former directors of BCB or any BCB Subsidiary, together with (i)
the most recent actuarial (if any) and financial reports relating to those plans
which constitute "qualified plans" under IRC Section 401(a), (ii) the most
recent annual reports relating to such plans filed by them, respectively, with
any government agency, and (iii) all rulings and determination letters which
pertain to any such plans. To the best of BCB's knowledge, neither BCB, any BCB
Subsidiary, nor any pension plan maintained by BCB or any BCB Subsidiary, has
incurred, directly or indirectly, within the past six (6) years any liability
under Title IV of ERISA (including to the Pension Benefit Guaranty Corporation)
or to the IRS with respect to any pension plan qualified under IRC Section
401(a) which liability has resulted in or will result in a Material Adverse
Effect with respect to BCB, except liabilities to the Pension Benefit Guaranty
Corporation pursuant to ERISA Section 4007, all of which have been fully paid,
nor has any reportable event under ERISA Section 4043 occurred with respect to
any such pension plan. With respect to each of such plans that is subject to
Title IV of ERISA, the fair market value of the assets under such plan exceeds
the present value of the accrued benefits liability as of the end of the most
recent plan year with respect to such plan calculated on the basis of the actual
assumptions used in the most recent actuarial valuation for such plan. Neither
BCB nor any BCB Subsidiary has incurred or is subject to any liability under
ERISA Section 4201 for a complete or partial
35
<PAGE>
withdrawal from a multi-employer plan. To the best of BCB's knowledge, all
"employee benefit plans," as defined in ERISA Section 3(3), comply and within
the past six (6) years have complied in all material respects with (i) relevant
provisions of ERISA, and (ii) in the case of plans intended to qualify for
favorable income tax treatment, provisions of the IRC relevant to such
treatment. To the best of BCB's knowledge, no prohibited transaction (which
shall mean any transaction prohibited by ERISA Section 406 and not exempt under
ERISA Section 408 or any transaction prohibited under IRC Section 4975) has
occurred within the past six (6) years with respect to any employee benefit plan
maintained by BCB or any BCB Subsidiary that would result in the imposition,
directly or indirectly, of an excise tax under IRC Section 4975 or other penalty
under ERISA or the IRC, which individually or in the aggregate, has resulted in
or will result in a Material Adverse Effect with respect to BCB. BCB and the
BCB Subsidiaries comply with the continuation coverage rules applicable to its
group health plan(s) for covered employees and "qualified beneficiaries" of
covered employees (as defined in IRC Section 4980B(g)), in accordance with the
provisions of IRC Section 4980B(f). Such group health plans are in compliance
with Section 1862(b)(1) of the Social Security Act. Neither BCB nor any BCB
Subsidiary is aware of any existing or contemplated audit of any of its employee
benefit plans by the Internal Revenue Service or U.S. Department of Labor.
Section 3.14 Brokers, Finders and Financial Advisors. Except for BCB's
---------------------------------------
engagement of Janney Montgomery Scott Inc. in connection with the transactions
contemplated by this Agreement, neither BCB nor any BCB Subsidiary, nor any of
their respective officers, directors, employees or agents, has employed any
broker, finder or financial advisor in connection with the transactions
contemplated by this Agreement or in connection with any transaction other than
the Consolidation, or, except for its commitments disclosed in the BCB
---
Disclosure Schedule, incurred any liability or commitment for any fees or
- -------------------
commissions to any such person in connection with the transactions contemplated
by this Agreement or in connection with any transaction other than the
Consolidation, which has not been reflected in the BCB Financials. The BCB
---
Disclosure Schedule shall contain as an exhibit the engagement letter between
- -------------------
BCB and Janney Montgomery Scott Inc.
Section 3.15 Securities Documents. BCB has delivered to Heritage copies
--------------------
of its (i) annual reports on SEC Form 10-KSB for the years ended December 31,
1996, 1995 and 1994, (ii) quarterly reports on SEC Form 10-QSB for the quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997 and (iii) proxy
materials used in connection with its annual meetings of shareholders held in
1997, 1996 and 1995. Such reports and such proxy materials complied, at the
time filed with the SEC, in all material respects, with the Exchange Act and the
applicable rules and regulations of the SEC.
36
<PAGE>
Section 3.16 Environmental Matters. To the knowledge of BCB, neither
---------------------
BCB nor any BCB Subsidiary, nor any properties owned or operated by BCB or any
BCB Subsidiary has been or is in violation of or liable under any Environmental
Law which violation or liability, individually or in the aggregate, resulted in
or will result in a Material Adverse Effect with respect to BCB. There are no
actions, suits or proceedings, or demands, claims, notices or investigations
(including without limitation notices, demand letters or requests for
information from any environmental agency) instituted or pending, or to the
knowledge of BCB, threatened, relating to the liability of any property owned or
operated by BCB or any BCB Subsidiary under any Environmental Law.
Section 3.17 Allowance for Loan Losses. The allowance for loan losses
-------------------------
reflected, and to be reflected, in the BCB Regulatory Reports, and shown, and to
be shown, on the balance sheets contained in the BCB Financials have been, and
will be, established in accordance with the requirements of GAAP and all
applicable regulatory criteria.
Section 3.18 Related Party Transactions. Except as disclosed (i) in the
--------------------------
BCB Disclosure Schedule, (ii) in the BCB proxy statement dated March 14, 1997 or
- -----------------------
(iii) in the footnotes to the BCB Financials, BCB is not a party to any
transaction (including any loan or other credit accommodation but excluding
deposits in the ordinary course of business) with any Affiliate of BCB (except a
BCB Subsidiary); and all such transactions (a) were made in the ordinary course
of business, (b) were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other Persons, and (c) did not involve more than the normal
risk of collectability or present other unfavorable features. Except as set
forth on the BCB Disclosure Schedule, no loan or credit accommodation to any
-----------------------
Affiliate of BCB is presently in default or, during the three year period prior
to the date of this Agreement, has been in default or has been restructured,
modified or extended. Neither BCB nor Berks County Bank has been notified that
principal and interest with respect to any such loan or other credit
accommodation will not be paid when due or that the loan grade classification
accorded such loan or credit accommodation by BCB Bank is inappropriate.
Section 3.19 Loans. Each loan reflected as an asset in the BCB
-----
Financial Statements (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and correct (ii) to the extent secured, has
been secured by valid liens and security interests which have been perfected,
and (ii) is the legal, valid and binding obligation of the obligor named
therein, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles, in
each case
37
<PAGE>
other than loans as to which the failure to satisfy the foregoing standards
would not have a Material Adverse Effect on BCB.
Section 3.20 Accounting for the Consolidation; Reorganization. As of
------------------------------------------------
the date hereof, BCB does not have any reason to believe that the Consolidation
will fail to qualify (i) for pooling-of-interests treatment under GAAP, or (ii)
as a reorganization under Section 368(a) of the IRC.
Section 3.21 Fairness Opinion. BCB has received an oral opinion from
----------------
Janney Montgomery Scott Inc. to the effect that, as of the date hereof, the
exchange ratio to be received by shareholders of BCB pursuant to this Agreement
is fair, from a financial point of view, to such shareholders.
Section 3.22 Quality of Representations. The representations made by
--------------------------
BCB in this Agreement are true, correct and complete in all material respects
and do not omit statements necessary to make the representations not misleading
under the circumstances.
ARTICLE IV
COVENANTS OF THE PARTIES
------------------------
Section 4.01 Conduct of Business.
-------------------
(a) From the date of this Agreement to the Closing Date, Heritage and
BCB and their respective Subsidiaries will conduct their business and engage in
transactions, including extensions of credit, only in the ordinary course and
consistent with past practice and policies, except as otherwise required or
contemplated by this Agreement or with the written consent of the other party.
Heritage and BCB will use their reasonable good faith efforts, and will cause
each of the Subsidiaries to use its reasonable good faith efforts, to (i)
preserve its business organizations intact, (ii) maintain good relationships
with employees, and (iii) preserve for itself the goodwill of its customers and
others with whom business relationships exist. From the date hereof to the
Closing Date, except as otherwise consented to or approved by the other party in
writing or as permitted or required by this Agreement, neither Heritage or BCB
will, or will permit any Subsidiary to:
(i) amend or change any provision of its certificate or articles
of incorporation, charter, or bylaws;
(ii) change the number of authorized or issued shares of its
capital stock or issue any shares or issue or grant any option, warrant,
call, commitment, subscription, Right or agreement of any character
relating to its authorized or issued capital stock or any securities
convertible into shares of such stock, or split, combine or reclassify any
shares of capital stock, or declare, set
38
<PAGE>
aside or pay any dividend or other distribution in respect of capital
stock, or redeem or otherwise acquire any shares of capital stock, except
that (A) Heritage may issue up to an aggregate of 93,052 shares of Heritage
Common Stock upon the valid exercise of Heritage Options, (B) Heritage may
grant in 1998 Heritage Options for up to an aggregate of 48,000 shares of
Heritage Common Stock and may issue shares (out of Treasury or new stock)
upon the valid exercise thereof, (C) Heritage may issue (out of Treasury or
new stock) or acquire shares of Heritage Common Stock in connection with
the Heritage ESOP consistent with past practice, (D) Heritage may acquire
shares of Heritage Common Stock in connection with the payment of all or
part of the exercise price or tax withholdings of Heritage Stock Options in
connection with the valid exercise thereof, (E) Heritage may issue shares
of Heritage Common Stock pursuant to the Heritage DRIP consistent with past
practice, (F) Heritage may issue shares of Heritage Common Stock pursuant
to the BCB Lock-Up Option, (G) Heritage may pay a quarterly cash dividend
not to exceed $0.14 per share of Heritage Common Stock outstanding, (H) BCB
may issue up to an aggregate of 138,942 shares of BCB Common Stock upon the
valid exercise of BCB Options, (I) BCB may acquire shares of BCB Common
Stock in connection with the payment of all or part of the exercise price
or tax withholdings of BCB Stock Options in connection with the valid
exercise thereof, (J) BCB may issue shares of BCB Common Stock consistent
with past practice, pursuant to the BCB dividend reinvestment plan
consistent with past practice, (K) BCB may issue shares of BCB Common Stock
pursuant to the Heritage Lock-Up Option, and (L) BCB may pay a quarterly
cash dividend not to exceed $.08 per share of BCB Common Stock outstanding;
it being the intent of the parties that, after the Effective Date, the
Holding Company pay a quarterly dividend of not less than $.14 per quarter.
Heritage and BCB agree to coordinate (on a mutually agreeable basis) the
declaration of dividends (and the record of payment dates therefor) payable
during the period preceding and including the quarter in which the
Effective Date occurs so that shareholders of Heritage and BCB will receive
fair dividends and in no event shall shareholders of either Heritage or BCB
fail to receive a fair dividend during any quarter up to and including the
quarter immediately following the Effective Date. Nothing contained in this
Section 4.01(a)(ii) or in any other Section of this Agreement shall be
construed to permit Heritage or BCB shareholders to receive two dividends
in any quarter or to deny or prohibit them from receiving one dividend in
any quarter. Nothing contained herein shall be deemed to affect the ability
of an Heritage or BCB Subsidiary to pay dividends on its capital stock
subject to applicable regulatory restrictions.
(iii) grant any severance or termination pay (other than pursuant to
written policies or written
39
<PAGE>
agreements in effect on the date hereof and provided to the other party prior to
the date hereof) to, or, except as expressly contemplated by this Agreement,
enter into any new or amend any existing employment agreement with, or increase
the compensation of, any employee, officer or director except for routine
periodic increases, that individually and in the aggregate do not exceed 10% and
that are otherwise in accordance with past practice; provided, however, that
nothing herein shall prevent Heritage from establishing a bonus pool in the
aggregate amount of $100,000 to be paid to certain officers and employees solely
for the purpose of inducing such officer or employee to continue working for
Heritage or the Holding Company through a date not more than six (6) months
after the Effective Date.
(iv) merge or consolidate any Subsidiary with any other corporation;
sell or lease all or any substantial portion of the assets or business; make any
acquisition of all or any substantial portion of the business or assets of any
other person, firm, association, corporation or business organization other than
in connection with the collection of any loan or credit arrangement; enter into
a purchase and assumption transaction with respect to deposits and liabilities;
permit the revocation or surrender by any Subsidiary of its certificate of
authority to maintain, or file an application for the relocation of, any
existing branch office;
(v) sell or otherwise dispose of the capital stock or sell or
otherwise dispose of any of its assets or the assets of any Subsidiary other
than in the ordinary course of business consistent with past practice; subject
any of its assets to a lien, pledge, security interest or other encumbrance
(other than in connection with government deposits, repurchase agreements,
bankers acceptances, "treasury tax and loan" accounts established in the
ordinary course of business and transactions in Federal Home Loan Bank advances
and "federal funds" and the satisfaction of legal requirements in the exercise
of trust powers) other than in the ordinary course of business consistent with
past practice; incur any indebtedness for borrowed money (or guarantee any
indebtedness for borrowed money), except in the ordinary course of business
consistent with past practice;
(vi) take any action which would result in any of its representations
and warranties set forth in this Agreement becoming untrue as of any date after
the date hereof except as otherwise contemplated or permitted by this Agreement,
or in any of the conditions set forth in Article V hereof not being satisfied,
except in each case as may be required by applicable law;
40
<PAGE>
(vii) change any method, practice or principle of accounting, except
as may be required from time to time by GAAP (without regard to any optional
early adoption date) or any Regulatory Authority;
(viii) waive, release, grant or transfer any rights of value or
modify or change in any material respect any existing material agreement to
which it or any Subsidiary is a party, other than in the ordinary course of
business consistent with past practice;
(ix) implement any pension, retirement, profit sharing, bonus,
welfare benefit or similar plan or arrangement that was not in effect on the
date of this Agreement (except that BCB and Heritage each may adopt its annual
bonus plan in 1998 consistent with past practice), or, except as required by law
and except as set forth in Section 4.10, materially amend any existing plan or
arrangement except to the extent such amendments do not result in an increase in
cost; provided, however, that (A) Heritage may contribute to the Heritage
pension plan an amount not to exceed the minimum amount required under ERISA or
the IRC if such amount is usual and ordinary and consistent with past practice
and (B) Heritage may establish the bonus pool contemplated by 4.01(a)(iii) and
may continue its company-wide bonus program for 1998 on a pro rata basis through
June 30, 1998 for all employees not selected to participate in the Holding
Company bonus plan for 1998 provided that such selected employees shall also
participate unless they participate in the Holding Company bonus plan on a full
year basis.
(x) purchase any security for its investment portfolio not rated
"AAA" or higher by Standard & Poor's Corporation or "Aaa" by Moody's Investor
Services, Inc.;
(xi) amend or otherwise modify the underwriting and other lending
guidelines and policies in effect as of the date hereof or otherwise fail to
conduct its lending activities in the ordinary course of business consistent
with past practice;
(xii) enter into, renew, extend or modify any other transaction with
any Affiliate, other than deposit and loan transactions in the ordinary course
of business and which are in compliance with the requirements of applicable laws
and regulations;
(xiii) enter into any interest rate swap, floor or cap or similar
commitment, agreement or arrangement;
41
<PAGE>
(xiv) except for the execution of this Agreement, take any action
that would give rise to a right of payment to any individual under any
employment agreement;
(xv) take any action that would preclude the Consolidation from
qualifying (A) for pooling-of-interests accounting treatment under GAAP or
(B) as a reorganization within the meaning of Section 368 of the IRC,
provided, however, that nothing contained herein shall limit the ability of
either to comply with its obligations under the BCB Option or the Heritage
Option; or
(xvi) agree to do any of the foregoing.
For purposes of this Section 4.01, it shall not be considered in the
ordinary course of business for either party to do any of the following: (i)
except for expenditures associated with new branches and the BCB Operations
Center, make any capital expenditure of $100,000 or more not disclosed on the
Heritage or BCB Disclosure Schedule, without the prior written consent of the
- -----------------------------------
other party; (ii) make any sale, assignment, transfer, pledge, hypothecation or
other disposition of any assets having a book or market value, whichever is
greater, in the aggregate in excess of $250,000, other than pledges of assets to
secure Federal Home Loan Bank advances or government deposits, to exercise trust
powers, sales of assets received in satisfaction of debts previously contracted
in the normal course of business, issuance and sales of loans, or transactions
in the investment securities portfolio or repurchase agreements, in each case,
in the ordinary course of business; or (iii) except for expenditures associated
with new branches and the BCB Operations Center, undertake or enter any lease,
contract or other commitment for its account, other than in the normal course of
providing credit to customers as part of its banking business, involving a
payment of more than $250,000 annually, or containing a material financial
commitment and extending beyond 12 months from the date hereof. Notwithstanding
the foregoing, BCB shall consult with Heritage concerning proposed expenditures
associated with new branches and the BCB Operations Center.
Notwithstanding anything to the contrary contained elsewhere in this
Agreement, Heritage shall not be prohibited or restricted in any way from taking
any of the following actions: (i) granting up to 48,000 additional Heritage
Stock Options under the Heritage Stock Option Plans; (ii) making Employer
contributions to the ESOP as provided by Section 4.10; (iii) establishing the
special bonus pool contemplated by 4.01(a)(iii) and continuing its company-wide
bonus program for 1998 on a pro rata basis through June 30, 1998 as contemplated
by 4.01(a)(ix).
42
<PAGE>
Section 4.02 Access; Confidentiality.
-----------------------
(a) From the date of this Agreement through the Closing Date, Heritage
or BCB, as the case may be, shall afford to, and shall cause each Heritage
Subsidiary or BCB Subsidiary to afford to, the other party and its authorized
agents and representatives, complete access to their respective properties,
assets, books and records and personnel, at reasonable hours and after
reasonable notice; and the officers of Heritage and BCB will furnish any person
making such investigation on behalf of the other party with such financial and
operating data and other information with respect to the businesses, properties,
assets, books and records and personnel as the person making such investigation
shall from time to time reasonably request.
(b) Heritage and BCB each agree to conduct such investigation and
discussions hereunder in a manner so as not to interfere unreasonably with
normal operations and customer and employee relationships of the other party.
(c) All information furnished to BCB by Heritage or by Heritage to BCB
previously in connection with the transactions contemplated by this Agreement or
pursuant hereto shall be held in confidence to the extent required by, and in
accordance with, the confidentiality agreements, dated September 8, 1997,
between Heritage and BCB (the "Confidentiality Agreement").
Section 4.03 Regulatory Matters and Consents.
-------------------------------
(a) Heritage and BCB shall promptly prepare a Prospectus/Proxy
Statement to be mailed to their respective shareholders in connection with the
meetings of their respective shareholders and transactions contemplated hereby,
and to be filed by BCB and Heritage on behalf of the Holding Company with the
SEC in the Registration Statement, which Prospectus/Proxy Statement shall
conform to all applicable legal requirements. BCB shall, as promptly and as
practicable following the preparation thereof, file the Registration Statement
with the SEC and Heritage and BCB shall use all reasonable efforts to have the
Registration Statement declared effective under the Securities Act as promptly
and as practicable after such filing. BCB will advise Heritage, promptly after
BCB receives notice thereof, of the time when the Registration Statement has
become effective or any supplement or amendment has been filed, of the issuance
of any stop order or the suspension of the qualification of the shares of
capital stock issuable pursuant to the Registration Statement, or the initiation
or threat of any proceeding for any such purpose, or of any request by the SEC
for the amendment or supplement of the Registration Statement or for additional
information. BCB shall use its reasonable best efforts to obtain, prior to the
effective date of the Registration Statement, all necessary state securities
laws or "Blue Sky" permits and approvals required to carry out the transactions
43
<PAGE>
contemplated by this Agreement. BCB will provide Heritage with as many copies
of such Registration Statement and all amendments thereto promptly upon the
filing thereof as Heritage may reasonably request.
(b) BCB and Heritage will prepare all Applications to Regulatory
Authorities and make all filings for, and use their reasonable best efforts to
obtain as promptly as practicable after the date hereof, all necessary permits,
consents, approvals, waivers and authorizations of all Regulatory Authorities
necessary or advisable to consummate the transactions contemplated by this
Agreement.
(c) Each party will furnish the other with all information concerning
itself and its Subsidiaries as may be reasonably necessary or advisable in
connection with the Registration Statement and any Application or filing made to
any Regulatory Authority in connection with the transactions contemplated by
this Agreement.
(d) BCB and Heritage shall have the right to review in advance, and
each will consult with the other on, all information which appears in any filing
made with or written materials submitted to the SEC, any Regulatory Authority or
any third party in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, each of the parties hereto shall
act reasonably and as promptly as practicable. The parties hereto agree that
they will consult with each other with respect to the obtaining of all permits,
consents, approvals and authorizations of the SEC, Regulatory Authorities and
third parties necessary or advisable to consummate the transactions contemplated
by this Agreement and each party will keep the other apprised of the status of
matters relating to completion of the transactions contemplated hereby and
thereby.
(e) Each party will promptly furnish the other with copies of all
Applications and other written communications to, or received from, any
Regulatory Authority in respect of the transactions contemplated hereby.
Section 4.04 Taking of Necessary Action. BCB and Heritage shall each
--------------------------
use its reasonable best efforts in good faith, and each of them shall cause its
Subsidiaries to use their reasonable best efforts in good faith, to take or
cause to be taken all action necessary or desirable on its part so as to permit
completion of the Consolidation as soon as practicable after the date hereof,
including, without limitation, (A) obtaining the consent or approval of each
individual, partnership, corporation, association or other business or
professional entity whose consent or approval is required or desirable for
consummation of the transactions contemplated hereby (including assignment of
leases without any change in terms), provided that neither party or its
Subsidiaries shall
44
<PAGE>
agree to make any payments or modifications to agreements in connection
therewith without the prior written consent of the other party, and (B)
requesting the delivery of appropriate opinions, consents and letters from its
counsel and independent auditors. No party hereto shall take, or cause, or to
the best of its ability permit to be taken, any action that would substantially
impair the prospects of completing the Consolidation pursuant to this Agreement;
provided that nothing herein contained shall preclude BCB or Heritage from
exercising its rights under this Agreement or the Heritage Lock-Up Option or BCB
Lock-Up Option.
Section 4.05 Indemnification; Insurance.
--------------------------
(a) Indemnification. In the event of any threatened or actual claim,
---------------
action, suit, proceeding or investigation, whether civil, criminal or
administrative, in which any person who is now, or has been at any time prior to
the date of this Agreement, or who becomes prior to the Effective Date, a
director or officer or employee of either party or any of their respective
Subsidiaries (the "Indemnified Parties") is, or is threatened to be, made a
party to a suit based in whole or in part on, or arising in whole or in part out
of, or pertaining to (i) the fact that he is or was a director, officer or
employee of either party, any of their respective Subsidiaries or any of their
respective predecessors or (ii) this Agreement or any of the transactions
contemplated hereby, whether in any case asserted or arising before or after the
Effective Date, the parties hereto agree to cooperate and use their best efforts
to defend against and respond thereto to the extent permitted by the BCL and the
Articles of Incorporation and Bylaws of such party. On or after the Effective
Date, the Holding Company shall indemnify, defend and hold harmless all prior
and then-existing directors and officers of Heritage, BCB or their respective
Subsidiaries, against (i) all losses, claims, damages, costs, expenses,
liabilities or judgments or amounts that are paid in settlement (with the prior
approval of the Holding Company) of or in connection with any claim, action,
suit, proceeding or investigation based in whole or in part on or arising in
whole or in part out of the fact that such person is or was a director, officer
or employee of Heritage, BCB or their respective Subsidiaries, whether
pertaining to any matter existing or occurring at or prior to the Effective Date
and whether asserted or claimed prior to, or at or after, the Effective Date
("Indemnified Liabilities") and (ii) all Indemnified Liabilities based in whole
or in part on, or arising in whole or in part out of, or pertaining to this
Agreement or the transactions contemplated hereby, to the same extent as such
officer, director or employee may be indemnified by Heritage, BCB or their
respective Subsidiaries, as the case may be, as of the date hereof including the
right to advancement of expenses, provided, however, that any such officer,
director or employee may not be indemnified by the Holding Company if such
indemnification is prohibited by applicable law.
45
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(b) Insurance. The Holding Company shall maintain a directors' and
---------
officers' liability insurance policy providing coverage amounts not less than
the greater of coverage amounts provided under the Heritage or BCB directors and
officers' liability insurance policy and on terms generally no less favorable,
including Heritage or BCB's existing policy if it meets the foregoing standard.
Such policy shall cover persons who are currently covered by the Heritage and
BCB insurance policies for a period of six years after the Effective Date.
(c) Assumption. In the event that the Holding Company or any of its
----------
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or consolidation or (ii) transfers all or substantially all
of its properties and assets to any Person, then, and in each such case the
successors and assigns of such entity shall assume the obligations set forth in
this Section 4.05.
Section 4.06 No Other Bids and Related Matters. So long as this
---------------------------------
Agreement remains in effect, neither party shall and shall not authorize or
permit any of its directors, officers, employees or agents, to directly or
indirectly (i) respond to, solicit, initiate or encourage any inquiries relating
to, or the making of any proposal which relates to, an Acquisition Transaction
(as defined below), (ii) recommend or endorse an Acquisition Transaction, (iii)
participate in any discussions or negotiations regarding an Acquisition
Transaction, (iv) provide any third party (other than the other party to this
Agreement or an affiliate of such party) with any nonpublic information in
connection with any inquiry or proposal relating to an Acquisition Transaction
or (v) enter into an agreement with any other party with respect to an
Acquisition Transaction. Notwithstanding the foregoing, (i) the Board of
Directors of Heritage or BCB may respond to unsolicited inquiries relating to an
Acquisition Transaction or (ii) the Board of Directors of Heritage or BCB may
recommend or endorse an Acquisition Transaction, in each case, if it receives an
unqualified written opinion of outside counsel that the failure to do so would
constitute a breach of their fiduciary duty. Each party hereto will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations previously conducted with any parties other than the other party
hereto with respect to any of the foregoing, and will take all actions necessary
or advisable to inform the appropriate individuals or entities referred to in
this sentence of the obligations undertaken in this Section 4.06. Each party
hereto will notify the other party hereto orally (within one day) and in writing
(as promptly as practicable) if any inquiries or proposals relating to an
Acquisition Transaction are received or any such negotiations or discussions are
sought to be initiated or continued. As used in this Agreement, "Acquisition
Transaction" shall mean one of the following transactions with a party other
than the other party
46
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hereto (i) a merger or consolidation, or any similar transaction, (ii) a
purchase, lease or other acquisition of all or a substantial portion of the
assets or liabilities of a party hereto or (iii) a purchase or other acquisition
(including by way of share exchange, tender offer, exchange offer or otherwise)
of a substantial interest in any class or series of its equity securities (other
than as permitted by Section 4.01(a)(ii) hereof) or its Subsidiary.
Section 4.07 Duty to Advise; Duty to Update Disclosure Schedule. Each
--------------------------------------------------
party shall promptly advise the other party of any change or event having a
Material Adverse Effect on it or which it believes would or would be reasonably
likely to cause or constitute a material breach of any of its representations,
warranties or covenants set forth herein. Each party shall update its
respective Disclosure Schedule as promptly as practicable after the occurrence
of an event or fact which, if such event or fact had occurred prior to the date
of this Agreement, would have been disclosed in such Disclosure Schedule. The
delivery of such updated Disclosure Schedule shall not relieve a party from any
breach or violation of this Agreement and shall not have any effect for the
purposes of determining the satisfaction of the condition set forth in Section
5.01(c).
Section 4.08 Current Information.
-------------------
(a) Ongoing Communications. During the period from the date of this
----------------------
Agreement to the Effective Date, each party shall, upon the request of the other
party, cause one or more of its designated representatives to confer on a
monthly or more frequent basis with representatives of the other party regarding
its financial condition, operations and business and matters relating to the
completion of the transactions contemplated hereby. As soon as reasonably
available, but in no event more than 45 days after the end of each calendar
quarter ending after the date of this Agreement (other than the last quarter of
each fiscal year ending December 31) Heritage and BCB will deliver to the other
party its quarterly report on Form 10-Q under the Exchange Act, and, as soon as
reasonably available, but in no event more than 90 days after the end of each
fiscal year ended December 31, Heritage and BCB will deliver to the other party
its Annual Report on Form 10-K.
(b) Board Minutes. Each party shall provide to the other party a copy
-------------
of the minutes of any meeting of the Board of Directors of such party or any
Subsidiary thereof, or any committee thereof, or any senior management
committee, promptly after such minutes are approved at a subsequent meeting of
the board or committee, but in any event within 40 days of the meeting of such
board or committee to which such minutes relate, except that with respect to any
meeting held within 30 days of the Closing Date, such minutes shall be provided
prior to the Closing Date.
47
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Section 4.09 Undertakings by BCB and Heritage. From and after the date
--------------------------------
of this Agreement, each party shall:
(a) Phase I Environmental Audit. Permit the other party, if such
---------------------------
party elects to do so, at its own expense, to cause a "phase I environmental
audit" to be performed at any physical location owned or occupied by it or any
of its Subsidiaries on the date hereof;
(b) Timely Review. If requested by the other party at the other
-------------
party's sole expense, cause its independent certified public accountants to
perform a review of its unaudited consolidated financial statements as of the
end of any calendar quarter, in accordance with Statement of Auditing Standards
No. 71, and to issue its report on such financial statements as soon as is
practicable thereafter;
(c) Outside Service Bureau Contracts. If requested to do so by the
--------------------------------
other party, use its reasonable best efforts to obtain an extension of any
contract with an outside service bureau or other vendor of services or any
Subsidiary, on terms and conditions mutually acceptable to each party;
(d) List of Nonperforming Assets. Provide each party, within fifteen
----------------------------
(15) days after the monthly meeting of its Loan Review Committee, a written list
of nonperforming assets as of the end of such month; and
(e) Shareholders Meetings. Take all action necessary to properly call
---------------------
and convene a special meeting of its shareholders as soon as practicable after
the date hereof to consider and vote upon this Agreement and the transactions
contemplated hereby. Subject to the provisions of Section 4.06, the Board of
Directors of Heritage and the Board of Directors of BCB will recommend that the
shareholders of Heritage (including Heritage National Bank, in its fiduciary
capacity) and BCB, respectively, approve this Agreement and the transactions
contemplated hereby. If required by the other party, a party shall retain a
proxy solicitor in connection with the solicitation of the approval of its
shareholders of this Agreement and the transactions contemplated hereby.
(f) Public Announcements. Cooperate and cause its respective
--------------------
officers, directors, employees and agents to cooperate in good faith, consistent
with their respective legal obligations, in the preparation and distribution of,
and agree upon the form, substance and timing of, any press release related to
this Agreement and the transactions contemplated hereby, and any other public
disclosures related thereto, including without limitation, communications to
shareholders and internal announcements and customer disclosures, but nothing
contained herein shall prohibit either party from making any disclosure which
its counsel deems necessary under applicable law;
48
<PAGE>
(g) Maintenance of Insurance. Maintain, and cause their respective
------------------------
Subsidiaries to maintain, insurance in such amounts as are reasonable to cover
such risks as are customary in relation to the character and location of its
properties and the nature of its business;
(h) Maintenance of Books and Records. Maintain, and cause their
--------------------------------
respective Subsidiaries to maintain, books of account and records in accordance
with GAAP applied on a basis consistent with those principles used in preparing
the financial statements heretofore delivered;
(i) Delivery of Securities Documents. Deliver to the other, copies of
--------------------------------
all Securities Documents simultaneously with the filing thereof; and
(j) Taxes. File all federal, state, and local tax returns required to
-----
be filed by them or their respective Subsidiaries on or before the date such
returns are due (including any extensions) and pay all taxes shown to be due on
such returns on or before the date such payment is due.
Section 4.10 Employee Benefits.
-----------------
(a) Employee Benefits. On and after the Effective Date, the fringe
-----------------
benefits (including miscellaneous benefits) and welfare benefit plans (other
than the welfare plans set forth in subsection 4.10(b) below) of BCB and
Heritage may, at the Holding Company's election and subject to the requirements
of the IRC and any other laws applicable to such benefit plans, continue to be
maintained separately or consolidated. With respect to pension benefit
(retirement) plans and other plans as described below, the following provisions
and guidelines shall apply:
(i) Heritage ESOP (Containing 401(k) Provisions).
--------------------------------------------
(A) At some time after the execution of this Agreement but
prior to the Effective Date, as determined by Heritage, Heritage will take
action, through its Board of Directors, to terminate the IRC Section 4975
employee stock ownership plan portion of the Heritage ESOP, effective as of
the Effective Date. Any action to terminate the IRC Section 4975 portion of
the Heritage ESOP will be specifically conditioned upon successful
consummation of the Consolidation. The termination of the Heritage ESOP
will apply to the IRC Section 4975 employee stock ownership plan portion of
the Heritage ESOP, and assets related thereto, only. The portion of the
Heritage ESOP subject to IRC Section 401(k) (salary reduction
contributions) and IRC Section 401(m) (employer matching contributions),
and the assets related thereto, shall be handled as set
49
<PAGE>
forth in subparagraph (D) below. Each participant in the Heritage ESOP not
fully vested will, in accordance with the termination of the Heritage ESOP,
become fully vested in all of his or her Heritage ESOP accounts as of the
date of the effective date of the termination of the Heritage ESOP.
Heritage shall be responsible for taking all appropriate action, including
possible amendments to the Heritage ESOP, in order to provide for the
termination of the IRC Section 4975 employee stock ownership plan portion
of the Heritage ESOP and the transfer of the IRC Section 401(k) (salary
reduction) and IRC Section 401(m) (employer matching) portion of the
Heritage ESOP. Heritage and BCB agree that, subject to the conditions
described herein, as soon as practicable after the termination of the IRC
Section 4975 employee stock ownership plan portion of the Heritage ESOP,
participants in the Heritage ESOP shall be entitled, at their election, to
have their Heritage ESOP employer discretionary contribution employee stock
ownership plan accounts either distributed to them in a lump sum or
directly transferred to another tax-qualified plan (including the Holding
Company plan(s)) or to an individual retirement account. Participants who
request a direct transfer to the Holding Company's plan(s) will be
permitted to transfer employer stock and will be permitted to hold employer
stock in the Holding Company plan(s).
(B) The actions relating to effectuating termination
distributions from the Heritage ESOP will be conditioned upon receiving a
favorable determination letter from the Internal Revenue Service ("IRS")
with regard to the qualification of the termination of the IRC Section 4975
employer stock ownership plan portion of the Heritage ESOP. Heritage and
the Holding Company will cooperate in submitting appropriate requests for
any such determination letter to the IRS and will use their best efforts to
seek the issuance of such letter as soon as practicable following the
effective date of the termination of the Heritage ESOP. Heritage and the
Holding Company will adopt such additional amendments to the Heritage ESOP
as may be reasonably required by the IRS as a condition to granting such
determination letter, provided that such amendments do not (i)
substantially change the terms outlined herein, (ii) have a Material
Adverse Effect on Heritage or (iii) result in an additional material
liability to the Holding Company.
(C) As of and following the Effective Date, the terminated
Heritage ESOP will not be made available to any employees other than
persons who were
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participants or beneficiaries of the Heritage ESOP as of the effective date
of the termination.
(D) As soon as practicable after the consummation of the
Consolidation, the Holding Company and Heritage will take appropriate
action to effectuate a plan merger of the IRC Section 401(k) and IRC
Section 401(m) portions, including the assets related thereto, of the
Heritage ESOP with and into the BCB 401(k) Plan. Such plan merger will
involve the transfer of IRC Section 401(k) contribution assets (and related
earnings) and IRC Section 401(m) contribution assets (and related earnings)
in the Heritage ESOP to the BCB 401(k) Plan.
(E) Heritage will make an employer discretionary contribution to
the Heritage ESOP for the 1997 Heritage ESOP Plan Year in an amount not to
exceed $100,000. After 1997 and up to the termination effective date of
the IRC Section 4975 employee stock ownership plan portion of the Heritage
ESOP, Heritage shall make an employer discretionary contribution to the
Heritage ESOP in an amount not to exceed $8,500 for each complete calendar
month in 1998 through the Effective Date. The 1998 employer discretionary
contribution to the Heritage ESOP is conditioned upon successful
consummation of the Consolidation.
(ii) Heritage Pension Plan. At a date following the execution of
---------------------
this Agreement but prior to the Effective Date, as determined by Heritage, the
Heritage Board of Directors shall take the following actions, all subject to
successful consummation of the Consolidation, with respect to the Heritage
Bancorp, Inc. Employee Retirement Plan ("Heritage Pension Plan"):
(A) Approve an amendment to the Heritage Pension Plan to provide
for the freezing of benefit accruals (cessation of future benefit accruals)
as of the Effective Date.
(B) Approve an amendment to the Heritage Pension Plan to provide
for the allocation of excess assets upon plan termination for the benefit
of active plan participants with accrued benefits under the Heritage
Pension Plan.
(C) Approve the termination of the Heritage Pension Plan.
Heritage and the Holding Company shall cooperate in effectuating the
distribution of appropriate notices to affected Heritage Pension Plan
participants and in the submission of the terminated Heritage Pension Plan to
the Pension Benefit Guaranty Corporation
51
<PAGE>
(PBGC) and the IRS. No distributions shall be made to any participants from the
Heritage Pension Plan, prior to the successful expiration of the 60 day PBGC
review period and the receipt of a favorable determination letter from the IRS;
provided, however, employee participants who qualify for a retirement pension
under the Heritage Pension Plan and retire from Heritage prior to the completion
of the submissions to the PBGC and the IRS, shall be able to receive their basic
accrued benefit. Heritage Pension Plan participants shall be entitled, at their
election, to elect a direct transfer of their benefit (if a lump sum) to another
tax-qualified plan (including any plan(s) of the Holding Company) or to an IRA
or to request that their benefit be paid to them in an annuity form or lump sum
form.
(b) Retirement Plans Provided to Employees Commencing Upon the
----------------------------------------------------------
Effective Date.
- --------------
(i) BCB 401(k) Plan. As of the Effective Date, employees of
---------------
Heritage shall be eligible to participate in the BCB 401(k) Plan. No later
than the Effective Date, the BCB 401(k) Plan shall be amended to provide
for prior Heritage service credit, for eligibility and vesting purposes.
The BCB 401(k) Plan shall also be amended no later than the Effective Date
to provide for the participation of eligible Heritage employees in the BCB
401(k) Plan as of the Effective Date. A 75% employer matching contribution
up to 6% of employee IRC Section 401(k) deferrals formula shall be applied
under the BCB 401(k) Plan for a period of five BCB 401(k) Plan years after
the Effective Date with the 1998 plan year constituting the first BCB
401(k) plan year for purposes of the five year period described above. No
reduction in the above described formula will be made for the five year
period described above. No later than the Effective Date, the BCB 401(k)
Plan shall also be amended to provide for 100% immediate vesting on all
employer matching contributions. On and after the Effective Date the BCB
401(k) Plan shall continue to make available an employer stock-based
investment option, and shall consider making available to all participants
in the BCB 401(k) Plan the participant directed investment options
currently offered to Heritage employees under the Heritage ESOP. No
amendment shall be made to the BCB 401(k) Plan regarding full 100% vesting
on employer matching contributions for the same five year period described
above.
(ii) Money Purchase Pension Plan. As of the Effective Date,
---------------------------
employees of Heritage and BCB shall be eligible to participate in a new
money purchase pension plan to be established by the Holding Company,
subject to successful consummation of the
52
<PAGE>
Consolidation. The money purchase plan shall contain eligibility
provisions requiring an employee to be at least 21 years of age and have at
least one year of service, with entry dates of at least January 1 and July
1; provided, however, the Holding Company may establish eligibility
provisions which are more liberal than age 21 and one year of service. The
money purchase pension plan shall provide for a fixed employer contribution
equal to 3% of an eligible employee's base salary, shall provide for prior
Heritage and BCB service credit for eligibility and vesting, shall contain
a vesting schedule which shall provide 20% vesting for each year of service
up to 100% vesting upon completion of five years of service and shall
permit participants to direct the investment of their account balances in
the money purchase plan in investment options similar to those offered
under the BCB 401(k) Plan. In lieu of the adoption of a new money purchase
plan by the Holding Company, to the extent permitted by the IRC, the
Holding Company may cause the BCB 401(k) Plan to be amended, as of the
Effective Date, to provide for a fixed employer contribution in the same
amount and subject to the same provisions as are set forth in the preceding
sentence. The fixed 3% employer contribution formula which shall be
provided in either a new money purchase plan or in the BCB 401(k) Plan
shall not be reduced for the same five year period described in
subparagraph (A) above.
(iii) Welfare Benefit Plans. Following the Consolidation, the
---------------------
Holding Company will adopt the Heritage Blue Cross/Blue Shield Plan, the
Heritage short-term and long-term disability plans and the BCB group life
insurance plan. The Holding Company shall also adopt a Flexible Benefits (IRC
Section 125) Plan similar to the existing Heritage Flexible Benefit Plan. With
respect to any other welfare benefit plans of BCB and Heritage, the Holding
Company shall undertake a study, in consultation with appropriate professional
advisors, with a view toward the possible combination of some or all of such
plans (other than the welfare plans described above) or the benefits provided
thereunder. Following such study, the Holding Company shall take such action
with respect to such plans (which may include the implementation of new
benefits, reduction or elimination of some benefits, and/or the alteration of
the respective cost allocation between employer and employee) as it deems
appropriate under the circumstances.
(iv) Bonus Plans and Arrangements. Heritage and BCB may continue to
----------------------------
administer such bonus programs and arrangements as are disclosed pursuant to
this Agreement through the Effective Date, with such equitable
53
<PAGE>
modifications as may be appropriate to take into account the circumstances
of the Consolidation and the timing thereof.
(v) Other Plans. From the date of this Agreement through the
-----------
Effective Date of the Consolidation, without the prior written consent of
the other party or except as otherwise expressly permitted by this
Agreement, no further benefits, grants or awards shall be made available
under any Heritage or BCB plans to employees or directors, including,
without limitation, the granting of stock options, stock appreciation
rights, restricted stock, and performance shares except that BCB may make
its annual grant of 1,000 shares of BCB Common Stock to Nelson R. Oswald
and 992 shares of BCB Common Stock to Robert D. McHugh, Jr.
Section 4.11 Nasdaq Listing. BCB shall use all reasonable efforts to
--------------
cause the shares of the Holding Company Common Stock to be issued in connection
with the Consolidation to be approved for quotation on the Nasdaq Stock Market's
National Market, subject to official notice of issuance, as of or prior to the
Effective Date.
Section 4.12 Affiliate Letters.
-----------------
(a) Each party has provided to the other party a schedule of each
person that, to the best of its knowledge, is deemed to be an "Affiliate" of it,
as that term is used in Rule 145 under the Securities Act or Accounting Series
Releases 130 and 135 of the Commission.
(b) Each of Heritage and BCB shall use its reasonable efforts to cause
each person who may be deemed to be an Affiliate of Heritage and BCB
respectively, to execute and deliver to BCB as soon as practicable after the
date of this Agreement, and in any event prior to the date of the meetings of
shareholders of Heritage and BCB to be called pursuant to Section 4.09(f)
hereof, a written agreement in the form of Exhibit 1-A and 1-B in the case of
Affiliates of Heritage and BCB, respectively.
Section 4.13 Employment and Change in Control Agreements.
-------------------------------------------
(a) Employment Agreements. On or before the Effective Date, Heritage
---------------------
and Heritage National Bank, and BCB and Berks County Bank, as applicable, shall
use their best efforts to amend the employment agreements of Nelson R. Oswald,
Allen E. Kiefer, Robert D. McHugh, Jr. and Richard A. Ketner so that such
agreements, contain customary change in control provisions, provide salaries and
benefits comparable to salaries and benefits payable to executive officers at
companies that will be peer companies of the Holding Company and otherwise will
be substantially identical in form.
54
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(b) Change in Control Agreements. On or before the Effective Date,
----------------------------
Heritage and Heritage National Bank, and BCB and Berks County Bank, as
applicable, shall use their best efforts to amend the existing employment or
change in control agreement, or enter into a new change in control agreement,
with the following individuals: Sherelyn A. Ammon, Steven A. Ehrlich, Norman E.
Heilenman, Donna L. Rickert, Dorothy I. Krick, David Scott, David Snyder, Marie
Umbriac and Mary Jo Wright. Such change in control agreements shall be
substantially identical in form.
(c) Holding Company Assumption of Agreements. On the Effective Date,
----------------------------------------
each employment agreement or change in control agreement, or any nonqualified
retirement, deferred compensation, "top hat," excess benefit or supplemental
pension plans, whether entered into before or after the date of this Agreement,
to which either Heritage or BCB is a party shall be expressly assumed in writing
by the Holding Company.
(d) Holding Company Assumption of Benefit Plans. On the Effective
-------------------------------------------
Date, each employee benefit plan of Heritage or BCB described in Section 4.10
shall be expressly assumed in writing by the Holding Company and administered in
the manner contemplated by Section 4.10.
Section 4.14 Severance and Vacation Pay. After the Effective Date (i)
--------------------------
employees of Heritage or BCB or any of their respective Subsidiaries who are
involuntarily terminated, other than for cause, within one year of the Effective
Date, and (ii) employees of Heritage or BCB (other than those holding a title of
Vice President or above) who, within one year of the Effective Date, are asked,
but decline to, relocate their workplace to a location that increases their
daily one-way commute by more than 30 miles, in each case, shall be entitled to
severance benefits as follows: (i) one week of pay per year of service, with a
minimum of 2 weeks severance and a maximum of 20 weeks severance; (ii) medical
insurance continuation until the end of the severance period (or earlier if
other coverage is obtained); and (iii) payment of accrued vacation days for the
year of termination. In addition, through the end of calendar year 1999,
employees of BCB or Heritage who continue as employees of the Holding Company or
its Subsidiaries after the Effective Date shall be provided with the greater of
the days of annual vacation and sick days to which they were entitled on the day
before the Effective Date or the days of annual vacation and sick days to which
similarly situated employees of the Holding Company are then entitled.
Section 4.15 Transition Committee. Promptly after execution of this
--------------------
Agreement, the parties shall establish a transition committee consisting of not
less than 4 or more than 6 members, including Messrs. Oswald, Kiefer, McHugh and
Ketner and up to one director from each of BCB and Heritage. The function of
such committee shall be to determine the name for the Holding
55
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Company, approve the form of employment and change in control agreements
referred to in Section 4.13 and to address such other transitional matters as
the Boards of Directors of Heritage and BCB may direct.
Section 4.16 Voting of Heritage Common Stock Held by Heritage National
---------------------------------------------------------
Bank as Fiduciary. Heritage shall direct the full Board of Directors of
- -----------------
Heritage National Bank, and not a committee or other designee of the Board of
Directors, to exercise all voting rights as Heritage National Bank may possess
with respect to all shares of Heritage Common Stock held by Heritage National
Bank in a fiduciary capacity.
ARTICLE V
CONDITIONS
----------
Section 5.01 Mutual Conditions to the Obligations of Heritage and BCB
--------------------------------------------------------
under this Agreement. The obligations of Heritage and BCB hereunder shall be
- --------------------
subject to satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by both parties pursuant to Section 7.03 hereof:
(a) Corporate Proceedings. All action required to be taken by, or on
---------------------
the part of, each party to authorize the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated by this
Agreement, shall have been duly and validly taken and each party shall have
received certified copies of the resolutions of the other party evidencing such
authorizations;
(b) Covenants. The obligations and covenants of each party required
---------
by this Agreement to be performed by each party at or prior to the Closing Date
shall have been duly performed and complied with in all material respects;
(c) Representations and Warranties. The representations and
------------------------------
warranties of each party set forth in this Agreement shall be true and correct,
as of the date of this Agreement, and as of the Closing Date as though made on
and as of the Closing Date, except as to any representation or warranty (i)
which specifically relates to an earlier date or (ii) where the breach of the
representation or warranty would not, either individually or in the aggregate,
constitute a Material Adverse Effect;
(d) Approvals of Regulatory Authorities. The parties shall have
-----------------------------------
received all required approvals of Regulatory Authorities of the Consolidation,
without the imposition of any term or condition that would have a Material
Adverse Effect on the Holding Company upon completion of the Consolidation and
all notice and waiting periods required thereunder shall have expired or been
terminated;
56
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(e) No Injunction. There shall not be in effect any order, decree or
-------------
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby;
(f) Officer's Certificate. Each party shall have delivered to the
---------------------
other party a certificate, dated the Closing Date and signed, without personal
liability, by its chairman or president, to the effect that the conditions set
forth in subsections (a) through (e) of this Section 5.01 have been satisfied,
to the best knowledge of the officer executing the same;
(g) Opinions of Counsel. Heritage shall have received an opinion of
-------------------
Stevens & Lee, counsel to BCB, dated the Closing Date, in form and substance
reasonably satisfactory to Heritage and its counsel to the effect set forth on
Exhibit 6 attached hereto and BCB shall have received an opinion of counsel of
Rhoads and Sinon LLP counsel to Heritage, dated the Closing Date, in form and
substance reasonably satisfactory to BCB and its counsel to the effect set forth
in Exhibit 7 attached hereto;
(h) Registration Statement. The Registration Statement shall be
----------------------
effective under the Securities Act and no proceedings shall be pending or
threatened by the SEC to suspend the effectiveness of the Registration
Statement; all required approvals by state securities or "blue sky" authorities
with respect to the transactions contemplated by this Agreement, shall have been
obtained; and neither the Registration Statement nor any such approval by state
securities or "blue sky" authorities shall be subject to a stop order or
threatened stop order by the SEC or any such authority;
(i) Tax Opinion. Each party shall have received an opinion of Stevens
-----------
& Lee substantially to the effect set forth on Exhibit 8 attached hereto;
(j) Pooling Letter. Beard & Company shall have issued a letter dated
--------------
as of the Effective Date to Heritage and BCB, to the effect that, based on a
review of this Agreement and related agreements and the facts and circumstances
then known to it, the Consolidation shall be accounted for as a pooling-of-
interests under GAAP, and BCB and Heritage shall have received from the
Affiliates of BCB and Heritage the agreements referred to in Section 4.12(b)
hereof to the extent necessary to ensure in the reasonable judgment of Heritage
and BCB that the Consolidation shall be accounted for in such manner;
(k) Approval of Shareholders. This Agreement shall have been approved
------------------------
by the shareholders of Heritage and BCB by such vote as is required under the
BCL, their respective articles of incorporation and bylaws or under Nasdaq
requirements applicable to it;
57
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(l) Nasdaq Listing. The Holding Company Common Stock shall be
--------------
approved for quotation on the Nasdaq National Market System;
(m) Other. Each party shall have furnished the other party with such
-----
certificates of its respective officers or others and such documents to evidence
fulfillment of the conditions set forth in this Section 5.01 as each party may
reasonable request.
ARTICLE VI
TERMINATION, WAIVER AND AMENDMENT
---------------------------------
Section 6.01 Termination. This Agreement may be terminated on or at any
-----------
time prior to the Closing Date:
(a) By the mutual written consent of the parties hereto;
(b) By BCB or Heritage:
(i) if the Closing Date shall not have occurred on or before
July 31, 1998, unless the failure of such occurrence shall be due to the
failure of the party seeking to terminate this Agreement to perform or
observe in any material respect its agreements set forth in this Agreement
required to be performed or observed by such party on or before the Closing
Date; or
(ii) if either party has received a final unappealable
administrative order from a Regulatory Authority whose approval or consent
has been requested that such approval or consent will not be granted, will
not be granted absent the imposition of terms and conditions which would
permit satisfaction of the condition set forth at Section 5.01(d) hereof,
unless the failure of such occurrence shall be due to the failure of the
party seeking to terminate this Agreement to perform or observe in any
material respect its agreements set forth herein required to be performed
or observed by such party on or before the Closing Date; or
(c) (A) By BCB, in the event during a thirty trading day period
ended five trading days prior to the Effective Date the average of the
mean between the closing high bid and low asked prices for Heritage
Common Stock for any consecutive ten day period declines to a level 40%
less than or equal to the Index Value established for Heritage;
(B) By Heritage, in the event during a thirty trading day
period ended five trading days prior to the Effective Date the average of
the mean between the closing high bid and low asked prices for BCB
58
<PAGE>
Common Stock for any consecutive ten day period declines to a level 30%
less than or equal to the Index Value established for BCB;
(C) For purposes of this subparagraph (C), the Index Value
for each of BCB and Heritage shall be the average of the mean between the
closing high bid and low asked prices for Heritage or BCB Common Stock,
as reported by Nasdaq, for the 3 trading days beginning November 20,
1997.
(d) at any time on or prior to the Effective Date, by Heritage in
writing if BCB has, or by BCB in writing if Heritage has, in any material
respect, breached (i) any material covenant or undertaking contained herein or
(ii) any representation or warranty contained herein, which in the case of a
breach by BCB would have a Material Adverse Effect on BCB or in the case of a
breach by Heritage would have a Material Adverse Effect on Heritage, in any
case, if such breach has not been substantially cured by the earlier of 30 days
after the date on which written notice of such breach is given to the party
committing such breach or the Effective Date unless on such date such breach no
longer causes a Material Adverse Effect;
(e) by either the Board of Directors of BCB or the Board of Directors
of Heritage if the Board of Directors of the other party shall have exercised
its rights under Section 4.06 or shall have otherwise withdrawn, modified or
changed in a manner adverse to the terminating party its approval or
recommendation of this Agreement and the transactions contemplated hereby;
(f) by either the Board of Directors of BCB or the Board of Directors
of Heritage if their shareholders shall have not approved this Agreement by the
requisite vote; provided, however, that no termination right shall exist
hereunder if prior to such shareholder vote the Board of Directors of the party
whose shareholders failed to approve this Agreement shall have exercised its
right under clause (ii) of the second sentence of Section 4.06 or shall have
otherwise withdrawn, modified or changed in a manner adverse to the other party
its approval or recommendation of this Agreement and the transactions
contemplated thereby.
Section 6.02 Effect of Termination. If this Agreement is terminated
---------------------
pursuant to Section 6.01 hereof, this Agreement shall forthwith become void
(other than Section 4.02(d) and Section 7.01 hereof, which shall remain in full
force and effect), and there shall be no further liability on the part of BCB or
Heritage to the other, except for any liability arising out of any uncured
willful breach of any covenant or other agreement contained in this Agreement,
any fraudulent breach of a representation or warranty, in this Agreement and any
obligation or liability arising under the Heritage Option or the BCB Option.
59
<PAGE>
Nothing contained in this Section 6.02 shall be deemed to prohibit BCB or
Heritage from maintaining an action against a third party for tortious
interference or otherwise.
ARTICLE VII
MISCELLANEOUS
-------------
Section 7.01 Expenses. Except for the cost of printing and mailing the
--------
Proxy Statement/Prospectus which shall be shared equally, each party hereto
shall bear and pay all costs and expenses incurred by it in connection with the
transactions contemplated hereby, including fees and expenses of its own
financial consultants, accountants and counsel.
Section 7.02 Non-Survival of Representations and Warranties. All
----------------------------------------------
representations, warranties and, except to the extent specifically provided
otherwise herein, agreements and covenants, other than those covenants that by
their terms are to be performed after the Effective Date, including without
limitation the covenants set forth in Sections 1.02(f) and (g), 4.05, 4.10 and
4.13(c) hereof, which will survive the Consolidation, shall terminate on the
Closing Date.
Section 7.03 Amendment, Extension and Waiver. Subject to applicable
-------------------------------
law, at any time prior to the consummation of the transactions contemplated by
this Agreement, the parties may (a) amend this Agreement, (b) extend the time
for the performance of any of the obligations or other acts of either party
hereto, (c) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, or (d) waive
compliance with any of the agreements or conditions contained in Articles IV and
V hereof or otherwise, provided that any amendment, extension or waiver granted
or executed after shareholders of Heritage or BCB have approved this Agreement
shall not modify either the amount or the form of the consideration to be
provided hereby to holders of Heritage Common Stock or BCB Common Stock upon
consummation of the Consolidation, change any terms of the articles of Holding
Company or otherwise materially adversely affect the shareholders of Heritage or
BCB without the approval of the shareholders who would be so affected. This
Agreement may not be amended except by an instrument in writing authorized by
the respective Boards of Directors and signed, by duly authorized officers, on
behalf of the parties hereto. Any agreement on the part of a party hereto to
any extension or waiver shall be valid only if set forth in an instrument in
writing signed by a duly authorized officer on behalf of such party, but such
waiver or failure to insist on strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
Section 7.04 Entire Agreement. This Agreement, including the documents
----------------
and other writings referred to herein or delivered pursuant hereto, contains the
entire agreement and
60
<PAGE>
understanding of the parties with respect to its subject matter. This Agreement
supersedes all prior arrangements and understandings between the parties, both
written or oral with respect to its subject matter. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors; provided, however, that nothing in this Agreement, expressed or
-------- -------
implied, is intended to confer upon any party, other than the parties hereto and
their respective successors, any rights, remedies, obligations or liabilities
other than pursuant to Sections 1.02(f) and (g), 4.05, and 4.13(a), (b) and (c).
Section 7.05 No Assignment. Neither party hereto may assign any of its
-------------
rights or obligations hereunder to any other person, without the prior written
consent of the other party hereto.
Section 7.06 Notices. All notices or other communications hereunder
-------
shall be in writing and shall be deemed given if delivered personally, mailed by
prepaid registered or certified mail (return receipt requested), or sent by
telecopy, addressed as follows:
(a) If to BCB, to:
BCB Financial Services Corporation
400 Washington Street
Reading, Pennsylvania 19603-1097
Attention: Nelson R. Oswald, Chairman,
President and Chief Executive
Officer
Telecopy No.: (610) 378-9193
with a copy to:
Stevens & Lee
One Glenhardie Corporate Center
1275 Drummers Lane
P.O. Box 236
Wayne, Pennsylvania 19087-0236
Attention: Jeffrey P. Waldron, Esquire
Telecopy No.: (610) 687-1384
61
<PAGE>
(b) If to Heritage, to:
Heritage Bancorp, Inc.
120 South Centre Street
Pottsville, Pennsylvania 17901-3002
Attention: Allen E. Kiefer
President and Chief
Executive Officer
Telecopy No.: (717) 622-2320
with copies to:
Rhoads & Sinon LLP
One South Market Square, 12th Floor
Harrisburg, Pennsylvania 17108
Attention: Charles J. Ferry, Esquire
Telecopy No.: (717) 232-1459
Section 7.07 Captions. The captions contained in this Agreement are for
--------
reference purposes only and are not part of this Agreement.
Section 7.08 Counterparts. This Agreement may be executed in any number
------------
of counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
Section 7.09 Severability. If any provision of this Agreement or the
------------
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
Section 7.10 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the domestic
62
<PAGE>
internal law (including the law of conflicts of law) of the Commonwealth of
Pennsylvania.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
BCB FINANCIAL SERVICES CORPORATION
By
------------------------------------
Nelson R. Oswald
Chairman, President and
Chief Executive Officer
HERITAGE BANCORP, INC.
By
------------------------------------
Allen E. Kiefer
President and Chief
Executive Officer
63
<PAGE>
Exhibit 1-A
-----------
November 18, 1997
BCB Financial Services Corporation
The Madison Building
400 Washington Street
Reading, Pennsylvania 19601
Ladies and Gentlemen:
BCB Financial Services Corporation ("BCB") and Heritage Bancorp, Inc.
("Heritage") desire to enter into an agreement dated November 18, 1997
("Agreement"), pursuant to which, subject to the terms and conditions set forth
therein, (a) a new corporation with name to be determined will be formed by BCB
and Heritage (the "Holding Company"), (b) shareholders of BCB shall receive
shares of Holding Company common stock for shares of common stock of BCB
outstanding on the closing date, and (c) shareholders of Heritage shall receive
shares of Holding Company common stock for shares of common stock of Heritage
outstanding on the closing date (the foregoing, collectively, referred to herein
as the "Consolidation").
BCB has requested, as an inducement to its execution and delivery to
Heritage of the Agreement, that the undersigned execute and deliver to BCB this
Letter Agreement.
In consideration of the foregoing, each of the undersigned hereby
irrevocably:
(a) Agrees (i) to be present (in person or by proxy) at all meetings
of shareholders of Heritage called to vote for approval of the Agreement and the
Consolidation so that all shares of common stock of Heritage then owned by the
undersigned will be counted for the purpose of determining the presence of a
quorum at such meetings, and (ii) unless the undersigned has voted against
approval and adoption of the Agreement in his or her capacity as a director of
Heritage at a meeting of the Board of Directors of Heritage or pursuant to
Section 4.06 of the Agreement has voted to recommend or endorse an Acquisition
Transaction, to vote or cause to be voted all shares owned by the undersigned on
any record date for any meeting of shareholders of Heritage called to vote on
the Consolidation in favor of approval and adoption of the Agreement and the
transactions contemplated thereby (including any amendments or modifications of
the terms thereof approved by the Board of Directors of Heritage).
<PAGE>
BCB Financial Services Corporation
November 18, 1997
Page 2
(b) Agrees not to offer, sell, transfer or otherwise dispose of any
shares of common stock of the Holding Company received in the Consolidation,
except (i) at such time as a registration statement under the Securities Act of
1933, as amended ("Securities Act") covering sales of such Holding Company
common stock is effective and a prospectus is made available under the
Securities Act, (ii) within the limits, and in accordance with the applicable
provisions of, Rule 145(d) under the Securities Act, or (iii) in a transaction
which, in the opinion of counsel satisfactory to the Holding Company or as
described in a "no-action" or interpretive letter from the staff of the
Securities and Exchange Commission ("SEC"), is not required to be registered
under the Securities Act; and acknowledges and agrees that the Holding Company
is under no obligation to register the sale, transfer or other disposition of
the Holding Company common stock by the undersigned or on behalf of the
undersigned, or to take any other action necessary to make an exemption from
registration available;
(c) Notwithstanding the foregoing, agrees not to sell, or in any other
way reduce the risk of the undersigned relative to, any shares of common stock
of Heritage or of common stock of the Holding Company, during the period
commencing thirty days prior to the effective date of the Consolidation and
ending on the date on which financial results covering at least thirty days of
post-Consolidation combined operations of the Holding Company have been
published within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies, provided, however, that excluded from the
foregoing undertaking shall be such sales, pledges, transfers or other
dispositions of shares of Heritage common stock or shares of Holding Company
common stock which, in BCB's or the Holding Company's sole judgment, are
individually and in the aggregate de minimis within the meaning of Topic 2-E of
the Staff Accounting Bulletin Series of the SEC;
(d) Agrees that neither Heritage nor the Holding Company shall be
bound by any attempted sale of any shares of Heritage common stock or Holding
Company common stock, respectively, in violation of this Agreement and
Heritage's and the Holding Company's transfer agents shall be given appropriate
stop transfer orders and shall not be required to register any such attempted
sale, unless the sale has been effected in compliance with the terms of this
Letter Agreement; and further agrees that the certificate representing shares of
Holding
<PAGE>
BCB Financial Services Corporation
November 18, 1997
Page 3
Company common stock owned by the undersigned may be endorsed with a restrictive
legend consistent with the terms of this Letter Agreement;
(e) Agrees to use reasonable efforts to cause the provisions of
subparagraphs (b) or (c) hereof to be observed with respect to shares of Holding
Company common stock and Heritage common stock owned by (i) his or her spouse,
(ii) any of his or her relatives or relatives of his or her spouse occupying his
or her home, (iii) any trust or estate in which he or she, his or her spouse, or
any such relative owns at least a 10% beneficial interest or of which any of
them serves as trustee, executor or in any similar capacity, and (iv) any
corporation or other organization in which the undersigned, any affiliate of the
undersigned, his or her spouse, or any such relative owns at least 10% of any
class of equity securities or of the equity interest;
(f) Represents that the undersigned has the capacity to enter into
this Letter Agreement and that it is a valid and binding obligation enforceable
against the undersigned in accordance with its terms, subject to bankruptcy,
insolvency and other laws affecting creditors' rights and general equitable
principles.
------------------------
It is understood and agreed that the provisions of subparagraph (a) of this
Letter Agreement relate solely to the capacity of the undersigned as a
shareholder or other beneficial owner of shares of Heritage common stock and is
not in any way intended to affect the exercise by the undersigned of the
undersigned's responsibilities as a director or officer of Heritage. It is
further understood and agreed that such subparagraphs of this Letter Agreement
are not in any way intended to affect the exercise by the undersigned of any
fiduciary responsibility which the undersigned may have in respect of any shares
of Heritage common stock held by the undersigned as of the date hereof.
------------------------
This Letter Agreement may be executed in two or more counterparts, each of
which shall be deemed to constitute an
<PAGE>
BCB Financial Services Corporation
November 18, 1997
Page 4
original, but all of which together shall constitute one and the same Letter
Agreement.
---------------------------
This Letter Agreement shall terminate concurrently with any termination of
the Agreement in accordance with its terms.
---------------------------
The undersigned intend to be legally bound hereby.
Sincerely,
-----------------------------------
Ermano O. Agosti
-----------------------------------
Richard D. Biever
-----------------------------------
Jane C. Diebert
-----------------------------------
Albert L. Evans, Jr.
-----------------------------------
Richard T. Fenstermacher
-----------------------------------
Frederick A. Gosch
-----------------------------------
Joseph Schlitzer
-----------------------------------
Richard A. Ketner
-----------------------------------
Allen E. Kiefer
-----------------------------------
Robert F. Koehler
<PAGE>
BCB Financial Services Corporation
November 18, 1997
Page 5
----------------------------------
Joanne C. McCloskey
-----------------------------------
Raman V. Patel
-----------------------------------
David Scott
-----------------------------------
William J. Zimmerman
<PAGE>
Exhibit 1-B
-----------
November 18, 1997
Heritage Bancorp, Inc.
120 South Centre Street
Pottsville, Pennsylvania 17901
Ladies and Gentlemen:
BCB Financial Services Corporation and Heritage Bancorp, Inc. ("Heritage")
desire to enter into an agreement dated November 18, 1997 ("Agreement"),
pursuant to which, subject to the terms and conditions set forth therein (a) a
new corporation will be formed by BCB and Heritage (the "Holding Company"), (b)
shareholders of BCB will receive shares of Holding Company common stock for
shares of BCB common stock outstanding on the closing date, and (c) shareholders
of Heritage shall receive shares of Holding Company common stock for shares of
common stock Heritage outstanding on the closing date (the foregoing,
collectively referred to herein as the "Consolidation").
Heritage has requested, as an inducement to its execution and delivery to
BCB of the Agreement, that the undersigned execute and deliver to Heritage this
Letter Agreement.
In consideration of the foregoing, each of the undersigned hereby
irrevocably:
(a) Agrees (i) to be present (in person or by proxy) at all meetings
of shareholders of BCB called to vote for approval of the Agreement and the
Consolidation so that all shares of common stock of BCB then owned by the
undersigned will be counted for the purpose of determining the presence of a
quorum at such meetings, and (ii) subject to Section 4.06 of the Agreement and
unless the undersigned has voted against approval and adoption of the Agreement
in his capacity as a director of BCB at a meeting of the Board of Directors of
BCB or pursuant to Section 4.06 of the agreement has voted to recommend or
endorse an Acquisition Transaction, to vote or cause to be voted all shares
owned by the undersigned on any record date for any meeting of shareholders of
BCB called to vote on the Consolidation in favor of approval and adoption of the
Agreement and the transactions contemplated thereby (including any amendments or
modifications of the terms thereof approved by the Board of Directors of BCB).
<PAGE>
Heritage Bancorp, Inc.
November 18, 1997
Page 2
(b) Notwithstanding the foregoing, agrees not to sell, or in any
other way reduce the risk of the undersigned relative to, any shares of common
stock of Heritage or of common stock of BCB, during the period commencing thirty
days prior to the effective date of the Consolidation and ending on the date on
which financial results covering at least thirty days of post-Consolidation
combined operations of BCB and Heritage have been published within the meaning
of Section 201.01 of the Codification of Financial Reporting Policies of the
Securities and Exchange Commission ("SEC"), provided, however, that excluded
from the foregoing undertaking shall be such sales, pledges, transfers or other
dispositions of shares of BCB common stock or shares of BCB common stock which,
in Heritage's or the Holding Company's sole judgment, are individually and in
the aggregate de minimis within the meaning of Topic 2-E of the Staff Accounting
Bulletin Series of the SEC;
(c) Agrees that neither the Holding Company nor BCB shall be bound by
any attempted sale of any shares of Holding Company common stock or BCB common
stock, respectively, in violation of this Agreement and the Holding Company's
and BCB's transfer agents shall be given appropriate stop transfer orders and
shall not be required to register any such attempted sale, unless the sale has
been effected in compliance with the terms of this Letter Agreement; and further
agrees that the certificate representing shares of the Holding Company common
stock owned by the undersigned may be endorsed with a restrictive legend
consistent with the terms of this Letter Agreement;
(d) Agrees to use reasonable efforts to cause the provisions of
subparagraphs (b) and (c) to be observed with respect to shares of BCB common
stock and Holding Company common stock owned by (i) his or her spouse, (ii) any
of his or her relatives or relatives of his or her spouse occupying his or her
home, (iii) any trust or estate in which he or she, his or her spouse, or any
such relative owns at least a 10% beneficial interest or of which any of them
serves as trustee, executor or in any similar capacity, and (iv) any corporation
or other organization in which the undersigned, any affiliate of the
undersigned, his or her spouse, or any such relative owns at least 10% of any
class of equity securities or of the equity interest;
<PAGE>
Heritage Bancorp, Inc.
November 18, 1997
Page 3
(e) Represents that the undersigned has the capacity to enter into
this Letter Agreement and that it is a valid and binding obligation enforceable
against the undersigned in accordance with its terms, subject to bankruptcy,
insolvency and other laws affecting creditors' rights and general equitable
principles.
-------------------------
It is understood and agreed that the provisions of subparagraph (a) of this
Letter Agreement relate solely to the capacity of the undersigned as a
shareholder or other beneficial owner of shares of BCB common stock and is not
in any way intended to affect the exercise by the undersigned of the
undersigned's responsibilities as a director or officer of BCB. It is further
understood and agreed that such subparagraphs of this Letter Agreement are not
in any way intended to affect the exercise by the undersigned of any fiduciary
responsibility which the undersigned may have in respect of any shares of BCB
common stock held by the undersigned as of the date hereof.
-------------------------
This Letter Agreement may be executed in two or more counterparts, each of
which shall be deemed to constitute an original, but all of which together shall
constitute one and the same Letter Agreement.
-------------------------
This Letter Agreement shall terminate concurrently with any termination of
the Agreement in accordance with its terms.
-------------------------
<PAGE>
Heritage Bancorp, Inc.
November 18, 1997
Page 4
The undersigned intend to be legally bound hereby.
Sincerely,
___________________________________
Harold C. Bossard
___________________________________
Edward J. Edwards
___________________________________
Lewis R. Frame, Jr.
___________________________________
Ivan H. Gordon
__________________________________
Jeffrey W. Hayes
___________________________________
Alfred B. Mast
___________________________________
Robert D. McHugh, Jr.
___________________________________
Nelson R. Oswald
___________________________________
Wesley R. Pace
___________________________________
Floyd S. Weber
___________________________________
Randall S. Weeber
<PAGE>
Exhibit 2
---------
STOCK OPTION AGREEMENT
----------------------
THIS STOCK OPTION AGREEMENT ("Stock Option Agreement") dated November 18,
1997, is by and between BCB FINANCIAL SERVICES CORPORATION, a Pennsylvania
corporation ("BCB") and HERITAGE BANCORP, INC., a Pennsylvania corporation
("HERITAGE").
BACKGROUND
----------
1. BCB and Heritage desire to enter into an Agreement and Plan of
Consolidation, dated November 18, 1997 (the "Agreement"), providing, among other
things, for the creation by BCB and Heritage of a bank holding company which
will issue shares of its common stock to the shareholders of BCB and Heritage
(the "Consolidation").
2. As a condition to BCB to enter into the Agreement, Heritage is granting
to BCB an option to purchase up to that number of shares of common stock, par
value $5.00 per share (the "Common Stock") of Heritage as shall equal 19.9% of
shares of Common Stock of Heritage issued and outstanding as of the date hereof,
on the terms and conditions hereinafter set forth.
AGREEMENT
---------
In consideration of the foregoing and the mutual covenants and agreements
set forth herein, BCB and Heritage, intending to be legally bound hereby, agree:
1. Grant of Option. Heritage hereby grants to BCB, on the terms and
---------------
conditions set forth herein, the option to purchase (the "Option") up to 947,041
shares of Common Stock of Heritage (as adjusted as set forth herein, the "Option
Shares") at a price per share (as adjusted as set forth herein, the "Option
Price") equal to $22.875, provided, however, that in no event shall the number
of Option Shares for which the Option is exercisable exceed 19.9% of the issued
and outstanding shares of Heritage Common Stock without giving effect to any
shares subject to or issued pursuant to the Option.
2. Exercise of Option.
------------------
(a) Provided that (i) BCB shall not be, on the date of exercise, in
material breach of the agreements or covenants contained in the Agreement, this
Stock Option Agreement or the reciprocal Stock Option Agreement by and between
Heritage and BCB, and (ii) no preliminary or permanent injunction or other order
against the delivery of shares covered by the Option issued by any court of
competent jurisdiction in the United States shall be in effect on the date of
exercise, upon or after the occurrence of a Triggering Event (as such term is
hereinafter
1
<PAGE>
defined) BCB may exercise the Option, in whole or in part, at any time or one or
more times, from time to time; provided that the Option shall terminate and be
of no further force and effect upon the earliest to occur of (A) the Effective
Date of the Consolidation, as provided in the Agreement, (B) termination of the
Agreement in accordance with the terms thereof prior to the occurrence of a
Triggering Event or a Preliminary Triggering Event, other than a termination of
the Agreement pursuant to Section 6.01(d), unless in the case of termination by
Heritage pursuant to Section 6.01(d), such termination is as a result of a
willful breach of the Agreement by BCB (a termination pursuant to Section
6.01(d), except a termination by Heritage as a result of a willful breach by
BCB, being referred to herein as a "Default Termination"), (C) 18 months after
the termination of the Agreement by BCB or Heritage pursuant to a Default
Termination, and (D) 18 months after termination of the Agreement (other than
pursuant to a Default Termination) following the occurrence of a Triggering
Event or a Preliminary Triggering Event; and provided, further, that any
purchase of shares upon exercise of the Option shall be subject to compliance
with applicable securities and banking laws. The rights set forth in Section 3
hereof shall terminate when the right to exercise the Option terminates (other
than as a result of a complete exercise of the Option) as set forth above.
(b) As used herein, the term "Triggering Event" means the occurrence of
any of the following events:
(i) a person or group (as such terms are defined in the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations thereunder), other than BCB or an affiliate of BCB,
acquires beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of 25% or more of the then outstanding shares of Common Stock
(excluding any shares eligible to be reported on Schedule 13G of the
Securities and Exchange Commission); or
(ii) a person or group, other than BCB or an affiliate of BCB,
enters into an agreement or letter of intent or memorandum of understanding
with Heritage or Heritage shall have authorized, recommended or publicly
proposed, or publicly announced an intention to authorize, recommend or
propose, such an agreement or letter of intent or memorandum of
understanding, pursuant to which such person or group or any affiliate of
such person or group would (i) merge or consolidate, or enter into any
similar transaction, with Heritage, (ii) acquire all or substantially all
of the assets or liabilities of Heritage or all or substantially all of the
assets or liabilities of Heritage National Bank (or any successor
subsidiary), the wholly-owned subsidiary of Heritage ("Heritage Bank"), or
(iii) acquire beneficial ownership of securities representing, or the right
to acquire beneficial ownership
2
<PAGE>
or to vote securities representing, 25% or more of the then outstanding
shares of Common Stock (excluding any shares eligible to be reported on
Schedule 13G of the Securities and Exchange Commission) or the then
outstanding shares of common stock of Heritage Bank.
(c) As used herein, the term "Preliminary Triggering Event" means the
occurrence of any of the following events:
(i) a person or group (as such terms are defined in the Exchange
Act and the rules and regulations thereunder), other than BCB or an
affiliate of BCB, acquires beneficial ownership (within the meaning of Rule
13d-3 under the Exchange Act) of 10% or more of the then outstanding shares
of Common Stock (excluding any shares eligible to be reported on Schedule
13G of the Securities and Exchange Commission);
(ii) a person or group, other than BCB or an affiliate of BCB,
publicly announces a bona fide proposal (including a written communication
that is or becomes the subject of public disclosure) for (i) any merger,
consolidation or acquisition of all or substantially all the assets or
liabilities of Heritage or all or substantially all the assets or
liabilities of Heritage Bank, or any other business combination involving
Heritage or Heritage Bank, or (ii) a transaction involving the transfer of
beneficial ownership of securities representing, or the right to acquire
beneficial ownership or to vote securities representing, 10% or more of the
then outstanding shares of Common Stock or the then outstanding shares of
Common Stock of Heritage Bank (collectively, a "Proposal"), and thereafter,
if such Proposal has not been Publicly Withdrawn (as such term is
hereinafter defined) at least 30 days prior to the meeting of shareholders
of Heritage called to vote on the Consolidation, Heritage's shareholders
fail to approve the Consolidation by the vote required by applicable law at
the meeting of shareholders called for such purpose or such meeting has
been cancelled; or
(iii) the Board of Directors of Heritage shall (A) exercise the
right granted to it in clause (i) of the second sentence of Section 4.06 of
the Agreement, (B) fail to recommend the Consolidation, (C) recommend an
Acquisition Transaction or (D) have withdrawn or modified in a manner
adverse to BCB the recommendation of the Board of Directors of Heritage
with respect to the Agreement and thereafter Heritage's shareholders fail
to approve the Consolidation by the vote required by law at the meeting of
shareholders called for such purpose or such meeting is not scheduled or is
cancelled without the written consent of BCB; or
3
<PAGE>
(iv) a person or group, other than BCB or an affiliate of BCB,
makes a bona fide Proposal and thereafter, but before such Proposal has
been Publicly Withdrawn, Heritage shall have breached any representation,
warranty, covenant or obligation contained in the Agreement and such breach
would entitle BCB to terminate the Agreement under Section 6.01(d) thereof
(without regard to the cure period provided for therein unless such cure is
promptly effected without jeopardizing consummation of the Consolidation
pursuant to the Agreement).
If more than one of the transactions giving rise to a Triggering Event or a
Preliminary Triggering Event under this Section 2 is undertaken or effected,
then all such transactions shall give rise only to one Triggering Event or
Preliminary Triggering Event, as applicable, which Triggering Event or
Preliminary Triggering Event shall be deemed continuing for all purposes
hereunder until all such transactions are abandoned.
"Publicly Withdrawn" for purposes of this Section 2 shall mean an
unconditional bona fide withdrawal of the Proposal coupled with a public
announcement of no further interest in pursuing such Proposal or in acquiring
any controlling influence over Heritage or in soliciting or inducing any other
person (other than BCB or an affiliate of BCB) to do so.
Notwithstanding the foregoing, the obligation of Heritage to issue Option
Shares upon exercise of the Option shall be deferred (but shall not terminate):
(i) until the receipt of all required governmental or regulatory approvals or
consents necessary for Heritage to issue the Option Shares or BCB to exercise
the Option, or until the expiration or termination of any waiting period
required by law, or (ii) so long as any injunction or other order, decree or
ruling issued by any federal or state court of competent jurisdiction is in
effect which prohibits the sale or delivery of the Option Shares, and, in each
case, notwithstanding any provision to the contrary set forth herein, the Option
shall not expire or otherwise terminate with respect to the Option Shares
subject to any prior exercise.
Heritage shall notify BCB promptly in writing of the occurrence of any
Triggering Event known to it, it being understood that the giving of such notice
by Heritage shall not be a condition to the right of BCB to exercise the Option.
Heritage will not take any action which would have the effect of preventing or
disabling Heritage from delivering the Option Shares to BCB upon exercise of the
Option or otherwise performing its obligations under this Stock Option
Agreement, except to the extent required by applicable securities and banking
laws and regulations. In the event BCB wishes to exercise the Option, BCB shall
send a written notice to Heritage (the date of which is hereinafter referred to
as the "Notice Date") specifying the total number of Option Shares it wishes to
purchase and a place and date between two and ten business days inclusive from
the
4
<PAGE>
Notice Date for the closing of such a purchase (a "Closing"); provided, however,
that a Closing shall not occur prior to two days after the later of receipt of
any necessary regulatory approvals or the expiration of any legally required
notice or waiting period, if any.
3. Repurchase of Option by Heritage.
--------------------------------
(a) Subject to the last sentence of Section 2(a), at the request of BCB
at any time commencing upon the first occurrence of a Repurchase Event (as
defined in Section 3(d)) and ending 18 months immediately thereafter, Heritage
shall repurchase from BCB (x) the Option and (y) all shares of Common Stock
purchased by BCB pursuant hereto with respect to which BCB then has beneficial
ownership. The date on which BCB exercises its rights under this Section 3 is
referred to as the "Request Date." Such repurchase shall be at an aggregate
price (the "Section 3 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by BCB for any shares of
Common Stock acquired pursuant to the Option with respect to which BCB then
has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Common Stock over (y) the Option Price (subject to
adjustment pursuant to Section 6), multiplied by the number of shares of
Common Stock with respect to which the Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the
Option Price (subject to adjustment pursuant to Section 6) paid (or, in the
case of Option Shares with respect to which the Option has been exercised,
but the Closing has not occurred, payable) by BCB for each share of Common
Stock with respect to which the Option has been exercised and with respect
to which BCB then has beneficial ownership, multiplied by the number of
such shares.
(b) If BCB exercises it rights under this Section 3, Heritage shall,
within ten (10) business days after the Request Date, pay the Section 3
Repurchase Consideration to BCB in immediately available funds, and
contemporaneously with such payment, BCB shall surrender to Heritage the Option
and the certificate evidencing the shares of Common Stock purchased thereunder
with respect to which BCB then has beneficial ownership, and BCB shall warrant
that it has sole record and beneficial ownership of such shares, and that the
same are then free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever. Notwithstanding the foregoing, to the extent that prior
notification to or approval of any banking agency or department of any federal
or state government, including without limitation the FRB, the OCC, the FDIC, or
the
5
<PAGE>
respective staffs thereof (the "Regulatory Authority"), is required in
connection with the payment of all or any portion of the Section 3 Repurchase
Consideration, BCB shall have the ongoing option to revoke its request for
repurchase pursuant to Section 3, in whole or in part, or to require that
Heritage deliver from time to time that portion of the Section 3 Repurchase
Consideration that it is not then so prohibited from paying and promptly file
the required notice or application for approval and expeditiously process the
same (and each party shall cooperate with the other in the filing of any such
notice or application and the obtaining of any such approval), in which case the
ten (10) business day period of time that would otherwise run pursuant to the
preceding sentence for the payment of the portion of the Section 3 Repurchase
Consideration shall run instead from the date on which, as the case may be, any
required notification period has expired or been terminated or such approval has
been obtained and, in either event, any requisite waiting period shall have
passed. If any Regulatory Authority disapproves of any part of Heritage's
proposed repurchase pursuant to this Section 3, Heritage shall promptly give
notice of such fact to BCB. If any Regulatory Authority prohibits the repurchase
pursuant to this Section 3, Heritage shall promptly give notice of such fact to
BCB. If any Regulatory Authority prohibits the repurchase in part but not in
whole, then BCB shall have the right (i) to revoke the repurchase request or
(ii) to the extent permitted by such Regulatory Authority, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent to
each, and BCB shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Request Date
less the sum of the number of shares covered by the Option in respect of which
payment has been made pursuant to Section 3(a)(ii) and the number of shares
covered by the portion of the Option (if any) that has been repurchased. BCB
shall notify Heritage of its determination under the preceding sentence within
five (5) business days of receipt of notice of disapproval of the repurchase.
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Common Stock paid for any such
share by the person or groups described in Section 3(d)(i), (ii) the price per
share of Common Stock received by a holder of Common Stock in connection with
any merger or other business combination transaction described in Section
3(d)(ii), (iii) or (iv), or (iii) the highest closing sales price per share of
Common Stock quoted on the Nasdaq Stock Market during the 40 business days
preceding the Request Date; provided, however, that in the event of a sale of
less than all of Heritage's assets, the Applicable Price shall be the sum of the
price paid in such sale for such assets and the current market value of the
remaining assets of Heritage as determined by a nationally-recognized investment
banking firm selected by BCB, divided by the number of shares of Common Stock
outstanding at the time of such sale. If the consideration to be
6
<PAGE>
offered, paid or received pursuant to either of the foregoing clauses (i) or
(ii) shall be other than in cash, the value of such consideration shall be
determined in good faith by an independent nationally-recognized investment
banking firm selected by BCB and reasonably acceptable to Heritage, which
determination shall be conclusive for all purposes of this Agreement.
(d) As used herein, a Repurchase Event shall occur if (i) any person or
group (as such terms are defined in the Exchange Act and the rules and
regulations thereunder), other than BCB or an affiliate of BCB, acquires
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act)
of, or the right to acquire beneficial ownership of, 25% or more of the then-
outstanding shares of Common Stock, (ii) Heritage shall have merged or
consolidated with any person, other than BCB or an affiliate of BCB, and shall
not be the surviving or continuing corporation of such merger or consolidation,
(iii) any person, other than BCB or an affiliate of BCB, shall have merged into
Heritage and Heritage shall be the surviving corporation, but, in connection
with such merger, the then-outstanding shares of Common Stock have been changed
into or exchanged for stock or other securities of Heritage or any other person
or cash or any other property or the outstanding shares of Common Stock
immediately prior to such merger shall after such merger represent less than 50%
of the outstanding shares and share equivalents of the surviving corporation or
(iv) Heritage shall have sold or otherwise transferred more than 25% of its
consolidated assets to any person, other than BCB or an affiliate of BCB.
4. Payment and Delivery of Certificates. At any Closing hereunder,
------------------------------------
(a) BCB will make payment to Heritage of the aggregate price for the Option
Shares so purchased by wire transfer of immediately available funds to an
account designated by Heritage, (b) Heritage will deliver to BCB a stock
certificate or certificates representing the number of Option Shares so
purchased, registered in the name of BCB or its designee, in such denominations
as were specified by BCB in its notice of exercise, and (c) BCB will pay any
transfer or other taxes required by reason of the issuance of the Option Shares
so purchased.
A legend will be placed on each stock certificate evidencing Option Shares
issued pursuant to this Stock Option Agreement, which legend will read
substantially as follows:
"The shares of stock evidenced by this certificate have not been
the subject of a registration statement filed under the Securities Act of
1933, as amended (the "Act"), and declared effective by the Securities and
Exchange Commission. These shares may not be sold, transferred or otherwise
disposed of prior to such time unless Heritage Bancorp, Inc. receives an
opinion of counsel acceptable to it stating that an
7
<PAGE>
exemption from the registration provisions of the Act is available for such
transfer."
5. Registration Rights. Upon or after the occurrence of a Triggering
-------------------
Event and upon receipt of a written request from BCB, Heritage shall prepare and
file as soon as practicable a registration statement under the Securities Act of
1933 (the "Securities Act") with the Securities and Exchange Commission covering
the Option and such number of Option Shares as BCB shall specify in its request,
and Heritage shall use its best efforts to cause such registration statement to
be declared effective in order to permit the sale or other disposition of the
Option and the Option Shares, provided that BCB shall in no event have the right
to have more than one such registration statement become effective, and provided
further that Heritage shall not be required to prepare and file any such
registration statement in connection with any proposed sale with respect to
which counsel to Heritage delivers to Heritage and to BCB its opinion to the
effect that no such filing is required under applicable laws and regulations
with respect to such sale or disposition; provided further, however, that
Heritage may delay any registration of Option Shares above for a period not
exceeding 90 days in the event that Heritage shall in good faith determine that
any such registration would adversely affect an offering or contemplated
offering of securities by Heritage. BCB shall provide all information reasonably
requested by Heritage for inclusion in any registration statement to be filed
hereunder. In connection with such filing, Heritage shall use its reasonable
best efforts to cause to be delivered to BCB such certificates, opinions,
accountant's letters and other documents as BCB shall reasonably request and as
are customarily provided in connection with registration of securities under the
Securities Act. Heritage shall provide to BCB such number of copies of the
preliminary prospectus and final prospectus and any amendments and supplements
thereto as BCB may reasonably request.
All reasonable expenses incurred by Heritage in complying with the
provisions of this Section 5, including, without limitation, all registration
and filing fees, reasonable printing expenses, reasonable fees and disbursements
of counsel for Heritage and blue sky fees and expenses, shall be paid by
Heritage. Underwriting discounts and commissions to brokers and dealers relating
to the Option Shares, fees and disbursements of counsel to BCB and any other
expenses incurred by BCB in connection with such filing shall be borne by BCB.
In connection with such filing, Heritage shall indemnify and hold harmless BCB
against any losses, claims, damages or liabilities, joint or several, to which
BCB may become subject, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
preliminary or final registration statement or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact
8
<PAGE>
required to be stated therein or necessary to make the statements therein not
misleading; and Heritage will reimburse BCB for any legal or other expense
reasonably incurred by BCB in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that Heritage
will not be liable in any case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such preliminary or
final registration statement or such amendment or supplement thereto in reliance
upon and in conformity with written information furnished by or on behalf of BCB
specifically for use in the preparation thereof. BCB will indemnify and hold
harmless Heritage to the same extent as set forth in the immediately preceding
sentence but only with reference to written information furnished by or on
behalf of BCB for use in the preparation of such preliminary or final
registration statement or such amendment or supplement thereto; and BCB will
reimburse Heritage for any legal or other expense reasonably incurred by
Heritage in connection with investigating or defending any such loss, claim,
damage, liability or action. Notwithstanding anything to the contrary contained
herein, no indemnifying party shall be liable for any settlement effected
without its prior written consent.
6. Adjustment Upon Changes in Capitalization. In the event of any change
-----------------------------------------
in the Common Stock by reason of stock dividends, split-ups, recapitalizations,
combinations, conversions, divisions, exchanges of shares or the like, then the
number and kind of Option Shares and the Option Price shall be appropriately
adjusted.
7. Filings and Consents. Each of BCB and Heritage will use its reasonable
--------------------
best efforts to make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Stock Option Agreement. Within 10 days from
the date hereof, BCB shall file a report of beneficial ownership on Form 13D
with the Securities and Exchange Commission under the Exchange Act which
discloses the rights of BCB hereunder.
8. Representations and Warranties of Heritage. Heritage hereby represents
------------------------------------------
and warrants to BCB as follows:
(a) Due Authorization. Heritage has full corporate power and
-----------------
authority to execute, deliver and perform this Stock Option Agreement and all
corporate action necessary for execution, delivery and performance of this Stock
Option Agreement has been duly taken by Heritage. This Stock Option Agreement
constitutes a legal, valid and binding obligation of Heritage, enforceable
against Heritage in accordance with its terms (except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or affecting
creditors' rights or by general equity principles).
9
<PAGE>
(b) Authorized Shares. Heritage has taken all necessary corporate
-----------------
action to authorize and reserve for issuance all shares of Common Stock that may
be issued pursuant to any exercise of the Option.
9. Representations and Warranties of BCB. BCB hereby represents and
-------------------------------------
warrants to Heritage that BCB has full corporate power and authority to execute,
deliver and perform this Stock Option Agreement and all corporate action
necessary for execution, delivery and performance of this Stock Option Agreement
has been duly taken by BCB. This Stock Option Agreement constitutes a legal,
valid and binding obligation of BCB, enforceable against BCB in accordance with
its terms (except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles).
10. Specific Performance. The parties hereto acknowledge that damages would
--------------------
be an inadequate remedy for a breach of this Stock Option Agreement and that the
obligations of the parties hereto shall be specifically enforceable.
11. Entire Agreement. This Stock Option Agreement and the Agreement
----------------
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, among the parties or any of them with respect to the subject
matter hereof.
12. Assignment or Transfer. BCB may not sell, assign or otherwise
----------------------
transfer its rights and obligations hereunder, in whole or in part, to any
person or group of persons other than to a subsidiary of BCB. BCB represents
that it is acquiring the Option for BCB's own account and not with a view to, or
for sale in connection with, any distribution of the Option or the Option
Shares. BCB is aware that neither the Option nor the Option Shares is the
subject of a registration statement filed with, and declared effective by, the
Securities and Exchange Commission pursuant to Section 5 of the Securities Act,
but instead each is being offered in reliance upon the exemption from the
registration requirement provided by Section 4(2) thereof and the
representations and warranties made by BCB in connection therewith.
13. Amendment of Stock Option Agreement. By mutual consent of the
-----------------------------------
parties hereto, this Stock Option Agreement may be amended in writing at any
time, for the purpose of facilitating performance hereunder or to comply with
any applicable regulation of any governmental authority or any applicable order
of any court or for any other purpose.
14. Validity. The invalidity or unenforceability of any provision of
--------
this Stock Option Agreement shall not affect the
10
<PAGE>
validity or enforceability of any other provisions of this Stock Option
Agreement, which shall remain in full force and effect.
15. Notices. All notices, requests, consents and other communications
-------
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered personally, by telegram or telecopy, or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties as follows:
(i) If to BCB, to:
BCB Financial Services Corporation
The Madison Building
400 Washington Street
Reading, Pennsylvania 19601
Attention: Nelson R. Oswald, President
and Chief Executive Officer
Telecopy No.: (610) 378-9193
with a copy to:
Stevens & Lee
One Glenhardie Corporate Center
1275 Drummers Lane
Wayne, Pennsylvania 19087
Attention: Jeffrey P. Waldron, Esquire
Telecopy No.: (610) 687-1384
(ii) If to Heritage, to:
Heritage Bancorp, Inc.
120 South Centre Street
Pottsville, Pennsylvania 17901
Attention: Allen E. Kiefer
President
and Chief Executive Officer
Telecopy No.: (717) 622-2320
with copies to:
Rhoads & Sinon LLP
One South Market Street, 12th Floor
Harrisburg, Pennsylvania 17108
Attention: Charles J. Ferry, Esquire
Telecopy No.: (717) 232-1459
11
<PAGE>
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
16. Governing Law. This Stock Option Agreement shall be governed by and
-------------
construed in accordance with the domestic internal law (but not the law of
conflicts of law) of the Commonwealth of Pennsylvania.
17. Captions. The captions in this Stock Option Agreement are inserted for
--------
convenience and reference purposes, and shall not limit or otherwise affect any
of the terms or provisions hereof.
18. Waivers and Extensions. The parties hereto may, by mutual written
----------------------
consent, extend the time for performance of any of the obligations or acts of
either party hereto. Each party may waive in writing (i) compliance with any of
the covenants of the other party contained in this Stock Option Agreement and/or
(ii) the other party's performance of any of its obligations set forth in this
Stock Option Agreement.
19. Parties in Interest. This Stock Option Agreement shall be binding upon
-------------------
and inure solely to the benefit of each party hereto, and, nothing in this Stock
Option Agreement, express or implied, is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by reason of
this Stock Option Agreement.
20. Counterparts. This Stock Option Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
21. Expenses. Except as otherwise provided herein, all costs and expenses
--------
incurred by the parties hereto in connection with the transactions contemplated
by this Stock Option Agreement or the Option shall be paid by the party
incurring such cost or expense.
12
<PAGE>
22. Defined Terms. Capitalized terms which are used but not defined
-------------
herein shall have the meanings ascribed to such terms in the Agreement.
IN WITNESS WHEREOF, each of the parties hereto, pursuant to resolutions
adopted by its Board of Directors, has caused this Stock Option Agreement to be
executed by its duly authorized officer all as of the day and year first above
written.
BCB FINANCIAL SERVICES CORPORATION
By
-------------------------------------
Nelson R. Oswald,
Chairman, President and Chief
Executive Officer
HERITAGE BANCORP, INC.
By
-------------------------------------
Allen E. Kiefer
President and Chief Executive
Officer
13
<PAGE>
Exhibit 3
---------
STOCK OPTION AGREEMENT
----------------------
THIS STOCK OPTION AGREEMENT ("Stock Option Agreement") dated November
18, 1997, is by and between HERITAGE BANCORP, INC., a Pennsylvania corporation
("Heritage") and BCB FINANCIAL SERVICES CORPORATION, a Pennsylvania corporation
("BCB").
BACKGROUND
----------
1. Heritage and BCB desire to enter into an Agreement and Plan of
Consolidation, dated November 18, 1997 (the "Agreement"), providing, among other
things, for the creation by Heritage and BCB of a bank holding company which
will issue shares of its common stock to the shareholders of Heritage and BCB
(the "Consolidation").
2. As a condition to Heritage to enter into the Agreement, BCB is
granting to Heritage an option to purchase up to that number of shares of common
stock, par value $2.50 per share (the "Common Stock") of BCB as shall equal
19.9% of shares of Common Stock of BCB issued and outstanding as of the date
hereof, on the terms and conditions hereinafter set forth.
AGREEMENT
---------
In consideration of the foregoing and the mutual covenants and
agreements set forth herein, Heritage and BCB, intending to be legally bound
hereby, agree:
1. Grant of Option. BCB hereby grants to Heritage, on the terms and
---------------
conditions set forth herein, the option to purchase (the "Option") up to 690,516
shares of Common Stock of BCB (as adjusted as set forth herein, the "Option
Shares") at a price per share (as adjusted as set forth herein, the "Option
Price") equal to $22.375, provided, however, that in no event shall the number
of Option Shares for which the Option is exercisable exceed 19.9% of the issued
and outstanding shares of BCB Common Stock without giving effect to any shares
subject to or issued pursuant to the Option.
2. Exercise of Option.
------------------
(a) Provided that (i) Heritage shall not be, on the date of
exercise, in material breach of the agreements or covenants contained in the
Agreement, this Stock Option Agreement or the reciprocal Stock Option Agreement
by and between BCB and Heritage, and (ii) no preliminary or permanent injunction
or other order against the delivery of shares covered by the Option issued by
any court of competent jurisdiction in the United States shall be in effect on
the date of exercise, upon or after the occurrence of a Triggering Event (as
such term is hereinafter
1
<PAGE>
defined) Heritage may exercise the Option, in whole or in part, at any time or
one or more times, from time to time; provided that the Option shall terminate
and be of no further force and effect upon the earliest to occur of (A) the
Effective Date of the Consolidation, as provided in the Agreement, (B)
termination of the Agreement in accordance with the terms thereof prior to the
occurrence of a Triggering Event or a Preliminary Triggering Event, other than a
termination of the Agreement pursuant to Section 6.01(d), unless in the case of
termination by BCB pursuant to Section 6.01(d), such termination is as a result
of a willful breach of the Agreement by Heritage (a termination pursuant to
Section 6.01(d), except a termination by BCB as a result of a willful breach by
Heritage, being referred to herein as a "Default Termination"), (C) 18 months
after the termination of the Agreement by Heritage or BCB pursuant to a Default
Termination, and (D) 18 months after termination of the Agreement (other than
pursuant to a Default Termination) following the occurrence of a Triggering
Event or a Preliminary Triggering Event; and provided, further, that any
purchase of shares upon exercise of the Option shall be subject to compliance
with applicable securities and banking laws. The rights set forth in Section 3
hereof shall terminate when the right to exercise the Option terminates (other
than as a result of a complete exercise of the Option) as set forth above.
(b) As used herein, the term "Triggering Event" means the
occurrence of any of the following events:
(i) a person or group (as such terms are defined in the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations thereunder), other than Heritage or an affiliate of
Heritage, acquires beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of 25% or more of the then outstanding shares of
Common Stock (excluding any shares eligible to be reported on Schedule 13G
of the Securities and Exchange Commission); or
(ii) a person or group, other than Heritage or an affiliate of
Heritage, enters into an agreement or letter of intent or memorandum of
understanding with BCB or BCB shall have authorized, recommended or
publicly proposed, or publicly announced an intention to authorize,
recommend or propose, such an agreement or letter of intent or memorandum
of understanding, pursuant to which such person or group or any affiliate
of such person or group would (i) merge or consolidate, or enter into any
similar transaction, with BCB, (ii) acquire all or substantially all of the
assets or liabilities of BCB or all or substantially all of the assets or
liabilities of Berks County Bank (or any successor subsidiary), the wholly-
owned subsidiary of BCB ("BCB Bank"), or (iii) acquire beneficial ownership
of securities representing, or the right to acquire beneficial ownership or
to vote securities representing, 25% or more of
2
<PAGE>
the then outstanding shares of Common Stock (excluding any shares eligible
to be reported on Schedule 13G of the Securities and Exchange Commission)
or the then outstanding shares of common stock of BCB Bank.
(c) As used herein, the term "Preliminary Triggering Event" means
the occurrence of any of the following events:
(i) a person or group (as such terms are defined in the
Exchange Act and the rules and regulations thereunder), other than Heritage
or an affiliate of Heritage, acquires beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) of 10% or more of the then
outstanding shares of Common Stock (excluding any shares eligible to be
reported on Schedule 13G of the Securities and Exchange Commission);
(ii) a person or group, other than Heritage or an affiliate
of Heritage, publicly announces a bona fide proposal (including a written
communication that is or becomes the subject of public disclosure) for (i)
any merger, consolidation or acquisition of all or substantially all the
assets or liabilities of BCB or all or substantially all the assets or
liabilities of BCB Bank, or any other business combination involving BCB or
BCB Bank, or (ii) a transaction involving the transfer of beneficial
ownership of securities representing, or the right to acquire beneficial
ownership or to vote securities representing, 10% or more of the then
outstanding shares of Common Stock or the then outstanding shares of Common
Stock of BCB Bank (collectively, a "Proposal"), and thereafter, if such
Proposal has not been Publicly Withdrawn (as such term is hereinafter
defined) at least 30 days prior to the meeting of shareholders of BCB
called to vote on the Consolidation, BCB's shareholders fail to approve the
Consolidation by the vote required by applicable law at the meeting of
shareholders called for such purpose or such meeting has been cancelled; or
(iii) the Board of Directors of BCB shall (A) exercise the
right granted to it in clause (i) of the second sentence of Section 4.06 of
the Agreement, (B) fail to recommend the Consolidation, (C) recommend an
Acquisition Transaction or (D) have withdrawn or modified in a manner
adverse to Heritage the recommendation of the Board of Directors of BCB
with respect to the Agreement and thereafter BCB's shareholders fail to
approve the Consolidation by the vote required by law at the meeting of
shareholders called for such purpose or such meeting is not scheduled or is
cancelled without the written consent of Heritage; or
3
<PAGE>
(iv) a person or group, other than Heritage or an affiliate of
Heritage, makes a bona fide Proposal and thereafter, but before such
Proposal has been Publicly Withdrawn, BCB shall have breached any
representation, warranty, covenant or obligation contained in the Agreement
and such breach would entitle Heritage to terminate the Agreement under
Section 6.01(d) thereof (without regard to the cure period provided for
therein unless such cure is promptly effected without jeopardizing
consummation of the Consolidation pursuant to the Agreement).
If more than one of the transactions giving rise to a Triggering Event or a
Preliminary Triggering Event under this Section 2 is undertaken or effected,
then all such transactions shall give rise only to one Triggering Event or
Preliminary Triggering Event, as applicable, which Triggering Event or
Preliminary Triggering Event shall be deemed continuing for all purposes
hereunder until all such transactions are abandoned.
"Publicly Withdrawn" for purposes of this Section 2 shall mean an
unconditional bona fide withdrawal of the Proposal coupled with a public
announcement of no further interest in pursuing such Proposal or in acquiring
any controlling influence over BCB or in soliciting or inducing any other person
(other than Heritage or an affiliate of Heritage) to do so.
Notwithstanding the foregoing, the obligation of BCB to issue Option
Shares upon exercise of the Option shall be deferred (but shall not terminate):
(i) until the receipt of all required governmental or regulatory approvals or
consents necessary for BCB to issue the Option Shares or Heritage to exercise
the Option, or until the expiration or termination of any waiting period
required by law, or (ii) so long as any injunction or other order, decree or
ruling issued by any federal or state court of competent jurisdiction is in
effect which prohibits the sale or delivery of the Option Shares, and, in each
case, notwithstanding any provision to the contrary set forth herein, the Option
shall not expire or otherwise terminate with respect to the Option Shares
subject to any prior exercise.
BCB shall notify Heritage promptly in writing of the occurrence of any
Triggering Event known to it, it being understood that the giving of such notice
by BCB shall not be a condition to the right of Heritage to exercise the Option.
BCB will not take any action which would have the effect of preventing or
disabling BCB from delivering the Option Shares to Heritage upon exercise of the
Option or otherwise performing its obligations under this Stock Option
Agreement, except to the extent required by applicable securities and banking
laws and regulations. In the event Heritage wishes to exercise the Option,
Heritage shall send a written notice to BCB (the date of which is hereinafter
referred to as the "Notice Date") specifying the total number of Option Shares
it wishes to purchase and a place and date between two and ten business days
inclusive from
4
<PAGE>
the Notice Date for the closing of such a purchase (a "Closing"); provided,
however, that a Closing shall not occur prior to two days after the later of
receipt of any necessary regulatory approvals or the expiration of any legally
required notice or waiting period, if any.
3. Repurchase of Option by BCB.
---------------------------
(a) Subject to the last sentence of Section 2(a), at the request
of Heritage at any time commencing upon the first occurrence of a Repurchase
Event (as defined in Section 3(d)) and ending 18 months immediately thereafter,
BCB shall repurchase from Heritage (x) the Option and (y) all shares of Common
Stock purchased by Heritage pursuant hereto with respect to which Heritage then
has beneficial ownership. The date on which Heritage exercises its rights under
this Section 3 is referred to as the "Request Date." Such repurchase shall be at
an aggregate price (the "Section 3 Repurchase Consideration") equal to the sum
of:
(i) the aggregate Purchase Price paid by Heritage for any
shares of Common Stock acquired pursuant to the Option with respect to
which Heritage then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as
defined below) for each share of Common Stock over (y) the Option Price
(subject to adjustment pursuant to Section 6), multiplied by the number of
shares of Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the
Option Price (subject to adjustment pursuant to Section 6) paid (or, in the
case of Option Shares with respect to which the Option has been exercised,
but the Closing has not occurred, payable) by Heritage for each share of
Common Stock with respect to which the Option has been exercised and with
respect to which Heritage then has beneficial ownership, multiplied by the
number of such shares.
(b) If Heritage exercises it rights under this Section 3, BCB
shall, within ten (10) business days after the Request Date, pay the Section 3
Repurchase Consideration to Heritage in immediately available funds, and
contemporaneously with such payment, Heritage shall surrender to BCB the Option
and the certificate evidencing the shares of Common Stock purchased thereunder
with respect to which Heritage then has beneficial ownership, and Heritage shall
warrant that it has sole record and beneficial ownership of such shares, and
that the same are then free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever. Notwithstanding the foregoing, to the
extent that prior notification to or approval of any banking
5
<PAGE>
agency or department of any federal or state government, including without
limitation the FRB, the OCC, the FDIC, or the respective staffs thereof (the
"Regulatory Authority"), is required in connection with the payment of all or
any portion of the Section 3 Repurchase Consideration, Heritage shall have the
ongoing option to revoke its request for repurchase pursuant to Section 3, in
whole or in part, or to require that BCB deliver from time to time that portion
of the Section 3 Repurchase Consideration that it is not then so prohibited from
paying and promptly file the required notice or application for approval and
expeditiously process the same (and each party shall cooperate with the other in
the filing of any such notice or application and the obtaining of any such
approval), in which case the ten (10) business day period of time that would
otherwise run pursuant to the preceding sentence for the payment of the portion
of the Section 3 Repurchase Consideration shall run instead from the date on
which, as the case may be, any required notification period has expired or been
terminated or such approval has been obtained and, in either event, any
requisite waiting period shall have passed. If any Regulatory Authority
disapproves of any part of BCB's proposed repurchase pursuant to this Section 3,
BCB shall promptly give notice of such fact to Heritage. If any Regulatory
Authority prohibits the repurchase pursuant to this Section 3, BCB shall
promptly give notice of such fact to Heritage. If any Regulatory Authority
prohibits the repurchase in part but not in whole, then Heritage shall have the
right (i) to revoke the repurchase request or (ii) to the extent permitted by
such Regulatory Authority, determine whether the repurchase should apply to the
Option and/or Option Shares and to what extent to each, and Heritage shall
thereupon have the right to exercise the Option as to the number of Option
Shares for which the Option was exercisable at the Request Date less the sum of
the number of shares covered by the Option in respect of which payment has been
made pursuant to Section 3(a)(ii) and the number of shares covered by the
portion of the Option (if any) that has been repurchased. Heritage shall notify
BCB of its determination under the preceding sentence within five (5) business
days of receipt of notice of disapproval of the repurchase.
(c) For purposes of this Agreement, the "Applicable Price" means
the highest of (i) the highest price per share of Common Stock paid for any such
share by the person or groups described in Section 3(d)(i), (ii) the price per
share of Common Stock received by a holder of Common Stock in connection with
any merger or other business combination transaction described in Section
3(d)(ii), (iii) or (iv), or (iii) the highest closing sales price per share of
Common Stock quoted on the Nasdaq Stock Market during the 40 business days
preceding the Request Date; provided, however, that in the event of a sale of
less than all of BCB's assets, the Applicable Price shall be the sum of the
price paid in such sale for such assets and the current market value of the
remaining assets of BCB as determined by a nationally-recognized investment
banking firm selected by Heritage, divided by the number of shares of Common
Stock
6
<PAGE>
outstanding at the time of such sale. If the consideration to be offered, paid
or received pursuant to either of the foregoing clauses (i) or (ii) shall be
other than in cash, the value of such consideration shall be determined in good
faith by an independent nationally-recognized investment banking firm selected
by Heritage and reasonably acceptable to BCB, which determination shall be
conclusive for all purposes of this Agreement.
(d) As used herein, a Repurchase Event shall occur if (i) any
person or group (as such terms are defined in the Exchange Act and the rules and
regulations thereunder), other than Heritage or an affiliate of Heritage,
acquires beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of, or the right to acquire beneficial ownership of, 25% or more
of the then-outstanding shares of Common Stock, (ii) BCB shall have merged or
consolidated with any person, other than Heritage or an affiliate of Heritage,
and shall not be the surviving or continuing corporation of such merger or
consolidation, (iii) any person, other than Heritage or an affiliate of
Heritage, shall have merged into BCB and BCB shall be the surviving corporation,
but, in connection with such merger, the then-outstanding shares of Common Stock
have been changed into or exchanged for stock or other securities of BCB or any
other person or cash or any other property or the outstanding shares of Common
Stock immediately prior to such merger shall after such merger represent less
than 50% of the outstanding shares and share equivalents of the surviving
corporation or (iv) BCB shall have sold or otherwise transferred more than 25%
of its consolidated assets to any person, other than Heritage or an affiliate of
Heritage.
4. Payment and Delivery of Certificates. At any Closing hereunder,
------------------------------------
(a) Heritage will make payment to BCB of the aggregate price for the Option
Shares so purchased by wire transfer of immediately available funds to an
account designated by BCB, (b) BCB will deliver to Heritage a stock certificate
or certificates representing the number of Option Shares so purchased,
registered in the name of Heritage or its designee, in such denominations as
were specified by Heritage in its notice of exercise, and (c) Heritage will pay
any transfer or other taxes required by reason of the issuance of the Option
Shares so purchased.
A legend will be placed on each stock certificate evidencing Option
Shares issued pursuant to this Stock Option Agreement, which legend will read
substantially as follows:
"The shares of stock evidenced by this certificate have not been
the subject of a registration statement filed under the Securities Act of
1933, as amended (the "Act"), and declared effective by the Securities and
Exchange Commission. These shares may not be sold, transferred or otherwise
disposed of prior
7
<PAGE>
to such time unless BCB Financial Services Corporation receives an opinion
of counsel acceptable to it stating that an exemption from the registration
provisions of the Act is available for such transfer."
5. Registration Rights. Upon or after the occurrence of a Triggering
-------------------
Event and upon receipt of a written request from Heritage, BCB shall prepare and
file as soon as practicable a registration statement under the Securities Act of
1933 (the "Securities Act") with the Securities and Exchange Commission covering
the Option and such number of Option Shares as Heritage shall specify in its
request, and BCB shall use its best efforts to cause such registration statement
to be declared effective in order to permit the sale or other disposition of the
Option and the Option Shares, provided that Heritage shall in no event have the
right to have more than one such registration statement become effective, and
provided further that BCB shall not be required to prepare and file any such
registration statement in connection with any proposed sale with respect to
which counsel to BCB delivers to BCB and to Heritage its opinion to the effect
that no such filing is required under applicable laws and regulations with
respect to such sale or disposition; provided further, however, that BCB may
delay any registration of Option Shares above for a period not exceeding 90 days
in the event that BCB shall in good faith determine that any such registration
would adversely affect an offering or contemplated offering of securities by
BCB. Heritage shall provide all information reasonably requested by BCB for
inclusion in any registration statement to be filed hereunder. In connection
with such filing, BCB shall use its reasonable best efforts to cause to be
delivered to Heritage such certificates, opinions, accountant's letters and
other documents as Heritage shall reasonably request and as are customarily
provided in connection with registration of securities under the Securities Act.
BCB shall provide to Heritage such number of copies of the preliminary
prospectus and final prospectus and any amendments and supplements thereto as
Heritage may reasonably request.
All reasonable expenses incurred by BCB in complying with the
provisions of this Section 5, including, without limitation, all registration
and filing fees, reasonable printing expenses, reasonable fees and disbursements
of counsel for BCB and blue sky fees and expenses, shall be paid by BCB.
Underwriting discounts and commissions to brokers and dealers relating to the
Option Shares, fees and disbursements of counsel to Heritage and any other
expenses incurred by Heritage in connection with such filing shall be borne by
Heritage. In connection with such filing, BCB shall indemnify and hold harmless
Heritage against any losses, claims, damages or liabilities, joint or several,
to which Heritage may become subject, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any preliminary or final registration statement
8
<PAGE>
or any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading; and
BCB will reimburse Heritage for any legal or other expense reasonably incurred
by Heritage in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that BCB will not be liable in
any case to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in such preliminary or final registration statement or
such amendment or supplement thereto in reliance upon and in conformity with
written information furnished by or on behalf of Heritage specifically for use
in the preparation thereof. Heritage will indemnify and hold harmless BCB to the
same extent as set forth in the immediately preceding sentence but only with
reference to written information furnished by or on behalf of Heritage for use
in the preparation of such preliminary or final registration statement or such
amendment or supplement thereto; and Heritage will reimburse BCB for any legal
or other expense reasonably incurred by BCB in connection with investigating or
defending any such loss, claim, damage, liability or action. Notwithstanding
anything to the contrary contained herein, no indemnifying party shall be liable
for any settlement effected without its prior written consent.
6. Adjustment Upon Changes in Capitalization. In the event of any
-----------------------------------------
change in the Common Stock by reason of stock dividends, split-ups,
recapitalizations, combinations, conversions, divisions, exchanges of shares or
the like, then the number and kind of Option Shares and the Option Price shall
be appropriately adjusted.
7. Filings and Consents. Each of Heritage and BCB will use its
--------------------
reasonable best efforts to make all filings with, and to obtain consents of, all
third parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Stock Option Agreement. Within 10 days from
the date hereof, Heritage shall file a report of beneficial ownership on Form
13D with the Securities and Exchange Commission under the Exchange Act which
discloses the rights of Heritage hereunder.
8. Representations and Warranties of BCB. BCB hereby represents and
-------------------------------------
warrants to Heritage as follows:
(a) Due Authorization. BCB has full corporate power and authority
-----------------
to execute, deliver and perform this Stock Option Agreement and all corporate
action necessary for execution, delivery and performance of this Stock Option
Agreement has been duly taken by BCB. This Stock Option Agreement constitutes a
legal, valid and binding obligation of BCB, enforceable against BCB in
accordance with its terms (except as may be limited by applicable bankruptcy,
insolvency,
9
<PAGE>
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles).
(b) Authorized Shares. BCB has taken all necessary corporate
-----------------
action to authorize and reserve for issuance all shares of Common Stock that may
be issued pursuant to any exercise of the Option.
9. Representations and Warranties of Heritage. Heritage hereby
------------------------------------------
represents and warrants to BCB that Heritage has full corporate power and
authority to execute, deliver and perform this Stock Option Agreement and all
corporate action necessary for execution, delivery and performance of this Stock
Option Agreement has been duly taken by Heritage. This Stock Option Agreement
constitutes a legal, valid and binding obligation of Heritage, enforceable
against Heritage in accordance with its terms (except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or affecting
creditors' rights or by general equity principles).
10. Specific Performance. The parties hereto acknowledge that
--------------------
damages would be an inadequate remedy for a breach of this Stock Option
Agreement and that the obligations of the parties hereto shall be specifically
enforceable.
11. Entire Agreement. This Stock Option Agreement and the Agreement
----------------
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, among the parties or any of them with respect to the subject
matter hereof.
12. Assignment or Transfer. Heritage may not sell, assign or
----------------------
otherwise transfer its rights and obligations hereunder, in whole or in part, to
any person or group of persons other than to a subsidiary of Heritage. Heritage
represents that it is acquiring the Option for Heritage's own account and not
with a view to, or for sale in connection with, any distribution of the Option
or the Option Shares. Heritage is aware that neither the Option nor the Option
Shares is the subject of a registration statement filed with, and declared
effective by, the Securities and Exchange Commission pursuant to Section 5 of
the Securities Act, but instead each is being offered in reliance upon the
exemption from the registration requirement provided by Section 4(2) thereof and
the representations and warranties made by Heritage in connection therewith.
13. Amendment of Stock Option Agreement. By mutual consent of the
-----------------------------------
parties hereto, this Stock Option Agreement may be amended in writing at any
time, for the purpose of facilitating performance hereunder or to comply with
any applicable regulation
10
<PAGE>
of any governmental authority or any applicable order of any court or for any
other purpose.
14. Validity. The invalidity or unenforceability of any provision of
--------
this Stock Option Agreement shall not affect the validity or enforceability of
any other provisions of this Stock Option Agreement, which shall remain in full
force and effect.
15. Notices. All notices, requests, consents and other communications
-------
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered personally, by telegram or telecopy, or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties as follows:
(i) If to Heritage, to:
Heritage Bancorp, Inc.
120 South Centre Street
Pottsville, Pennsylvania 17901
Attention: Allen E. Kiefer, President
and Chief Executive Officer
Telecopy No.: (717) 622-2320
with a copy to:
Rhoads & Sinon LLP
One South Market Square, 12th Floor
Harrisburg, Pennsylvania 17108
Attention: Charles J. Ferry, Esquire
Telecopy No.: (717) 232-1459
(ii) If to BCB, to:
BCB Financial Services Corporation
The Madison Building
400 Washington Street
Reading, Pennsylvania 19601
Attention: Nelson R. Oswald, President
and Chief Executive Officer
Telecopy No.: (610) 378-9193
11
<PAGE>
with copies to:
Stevens & Lee
One Glenhardie Corporate Center
Suite 202
1275 Drummers Lane
P.O. Box 236
Wayne, PA 19087
Attention: Jeffrey P. Waldron, Esquire
Telecopy No.: (610) 687-1384
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
16. Governing Law. This Stock Option Agreement shall be governed by
-------------
and construed in accordance with the domestic internal law (but not the law of
conflicts of law) of the Commonwealth of Pennsylvania.
17. Captions. The captions in this Stock Option Agreement are inserted
--------
for convenience and reference purposes, and shall not limit or otherwise affect
any of the terms or provisions hereof.
18. Waivers and Extensions. The parties hereto may, by mutual written
----------------------
consent, extend the time for performance of any of the obligations or acts of
either party hereto. Each party may waive in writing (i) compliance with any of
the covenants of the other party contained in this Stock Option Agreement and/or
(ii) the other party's performance of any of its obligations set forth in this
Stock Option Agreement.
19. Parties in Interest. This Stock Option Agreement shall be binding
-------------------
upon and inure solely to the benefit of each party hereto, and, nothing in this
Stock Option Agreement, express or implied, is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by reason of
this Stock Option Agreement.
20. Counterparts. This Stock Option Agreement may be executed in two
------------
or more counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
21. Expenses. Except as otherwise provided herein, all costs and
--------
expenses incurred by the parties hereto in connection with the transactions
contemplated by this Stock Option Agreement or the Option shall be paid by the
party incurring such cost or expense.
12
<PAGE>
22. Defined Terms. Capitalized terms which are used but not defined
-------------
herein shall have the meanings ascribed to such terms in the Agreement.
IN WITNESS WHEREOF, each of the parties hereto, pursuant to
resolutions adopted by its Board of Directors, has caused this Stock Option
Agreement to be executed by its duly authorized officer as of the day and year
first above written.
HERITAGE BANCORP, INC.
By
-------------------------------------
Allen E. Kiefer,
President and Chief
Executive Officer
BCB FINANCIAL SERVICES CORPORATION
By
--------------------------------------
Nelson R. Oswald,
Chairman, President and Chief
Executive Officer
13
<PAGE>
EXHIBIT 4
---------
FORM OF
ARTICLES OF CONSOLIDATION OF
BCB FINANCIAL SERVICES CORPORATION
AND
HERITAGE BANCORP, INC.
ARTICLES OF CONSOLIDATION (the "Articles of Consolidation") dated
__________, 1997 between BCB FINANCIAL SERVICES CORPORATION, a Pennsylvania
corporation ("BCB") with a principal place of business in Reading, Pennsylvania,
and HERITAGE BANCORP, INC., a Pennsylvania corporation ("Heritage") with a
principal place of business in Pottsville, Pennsylvania.
WHEREAS, BCB is a corporation organized and existing under the laws of the
Commonwealth of Pennsylvania that is registered as a bank holding company
pursuant to the Bank Holding Company Act of 1956, as amended (the "Act"), the
authorized capital stock of which consists of 20,000,000 shares of common stock,
par value $2.50 per share (the "BCB Common Stock"), of which at November 18,
1997, 3,469,930 shares were issued and outstanding; and
WHEREAS, Heritage is a corporation organized and existing under the laws of
the Commonwealth of Pennsylvania that is registered as a bank holding company
pursuant to the Act, the authorized capital stock of which consists of
10,000,000 shares of common stock, par value $5.00 per share (the "Heritage
Common Stock"), of which at November 18, 1997, 4,758,999 shares were issued and
outstanding, and 10,000,000 shares of preferred stock, par value $25.00 per
share, none of which are issued and outstanding; and
WHEREAS, the respective Boards of Directors of BCB and Heritage deem the
formation of a new Pennsylvania corporation by BCB and Heritage (the "Holding
Company") which will then issue 1.05 share and 1.3335 shares of common stock of
the Holding Company to Heritage and BCB shareholders, respectively, for each
share of each of Heritage and BCB common stock outstanding as of the closing
date, pursuant to the terms and conditions herein set forth or referred to, is
desirable and in the best interests of the respective corporations and their
respective shareholders, and the respective Boards of Directors and shareholders
of BCB and Heritage have adopted resolutions approving the Plan of Consolidation
and an Agreement and Plan of Consolidation of even date herewith (the "Agreement
and Plan") pursuant to the following vote results:
1
<PAGE>
(i) the BCB Board of Directors approved the Agreement and the Plan by a
vote of ______ votes for the Agreement and the Plan and ______ votes
against the Agreement and the Plan;
(ii) the BCB shareholders approved the Agreement and the Plan by a vote of
______ votes for the Agreement and the Plan and ______ votes against
the Agreement and the Plan;
(iii) the Heritage Board of Directors approved the Agreement and the Plan
by a vote of _____ votes for the Agreement and the Plan and ______
votes against the Agreement and the Plan; and
(iv) the Heritage shareholders approved the Agreement and the Plan by a
vote of ______ votes for the Agreement and the Plan and ______ votes
against the Agreement and the Plan.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, and in accordance with applicable provisions of the
Pennsylvania Business Corporation Law of 1988, as amended, of the Commonwealth
of Pennsylvania (the "BCL"), the parties hereto do hereby agree as follows:
ARTICLE I
CONSOLIDATION
Subject to the terms and conditions of the Agreement and Plan on the
Effective Date, the shareholders of BCB and Heritage shall consolidate into the
Holding Company in accordance with the BCL. As a result of the foregoing, the
separate corporate existence of BCB and Heritage shall cease and such
transaction shall hereinafter be referred to as the "Consolidation." The
capital stock of the Holding Company shall consist of 50,000,000 shares of
common stock, par value $1.00 per share (the "Holding Company Common Stock") and
5,000,000 shares of preferred stock, having such par value as the board of
directors of the Holding Company shall fix from time to time, issuable in
series.
ARTICLE II
ARTICLE OF INCORPORATION AND BY-LAWS
The Articles of Incorporation of the Holding Company shall be as set forth
in Exhibit A hereto and the By-Laws of the Holding Company shall be as set forth
in Exhibit B hereto, in each case until altered, amended or repealed.
2
<PAGE>
ARTICLE III
BOARD OF DIRECTORS AND OFFICERS
From and after the Effective Date, the directors and officers of the
Holding Company, who shall hold office until their successors are elected and
qualified according to the By-Laws of the Holding Company, shall be those
persons listed on Exhibit C hereto.
ARTICLE IV
CONVERSION AND EXCHANGE OF SHARES
1. The shares of the parties hereto outstanding immediately prior to
the Effective Date, shall, by virtue of the Consolidation and without any action
by the holders thereof, be converted as follows:
(a) Each share of BCB Common Stock shall be converted into 1.3335
shares of Holding Company Common Stock.
(b) Each share of Heritage Common Stock shall be converted into 1.05
share of Holding Company Common Stock.
(c) No fractional shares of Holding Company Common Stock and no scrip
or certificates therefor will be issued in connection with the Consolidation.
Any former holder of BCB or Heritage Common Stock who would otherwise be
entitled to receive a fraction of a share of Holding Company Common Stock shall
receive, in lieu thereof, a check for cash in an amount equal to such fraction
of a share multiplied by the closing price of the Holding Company Common Stock
on the Nasdaq National Market System on the first day Holding Company Common
Stock is traded after the Effective Date.
2. All shares of BCB Common Stock held in the treasury of BCB or any BCB
Subsidiary or owned by Heritage or any Heritage Subsidiary and all shares of
Heritage Common Stock held in the treasury of Heritage or any Heritage
Subsidiary or owned by BCB or any BCB Subsidiary shall be cancelled, and no
cash, stock or other property shall be delivered in exchange therefor.
3. On and after the Effective Date, each holder of a certificate or
certificates theretofore representing outstanding shares of BCB Common Stock or
outstanding shares of Heritage Common Stock may surrender same to the Holding
Company or the Exchange Agent for cancellation and each such holder shall be
entitled upon such surrender to receive in exchange therefor certificate(s)
representing the number of shares of Holding Company Common Stock and a check
for cash representing the value of fractional shares to which the holder is
entitled as provided above. Until surrendered, each certificate theretofore
representing outstanding shares of BCB Common Stock or outstanding shares of
Heritage Common Stock, from and after the Effective Date, will evidence solely
the right to receive
3
<PAGE>
certificates for shares of Holding Company Common stock and a check for cash in
lieu of any fractional shares as described above.
ARTICLE V
EFFECTIVE DATE OF THE CONSOLIDATION
The Consolidation shall be effective at the close of business on the date
these Articles of Consolidation are filed in accordance with the BCL (the date
of such filing being herein referred to as the "Effective Date").
ARTICLE VI
EFFECT OF THE CONSOLIDATION
On the Effective Date, the separate existence of BCB and Heritage shall
cease and all of the property, real, personal, and mixed, and franchises of each
of BCB and Heritage, and all debts due on whatever account to each of them,
including subscriptions to shares and other choses in action, shall be taken and
deemed to be transferred to and vested in the Holding Company, without further
act or deed. The Holding Company shall thenceforth be responsible for all the
liabilities and obligations of each of BCB and Heritage provided in the BCL.
ARTICLE VII
CONDITIONS PRECEDENT
The obligations of BCB and Heritage to effect the Consolidation shall be
subject to satisfaction, unless duly waived, of the conditions set forth in the
Agreement and Plan.
ARTICLE VIII
TERMINATION
Anything contained in these Articles of Consolidation to the contrary
notwithstanding, and notwithstanding adoption hereof by the shareholders of BCB
or Heritage, the Agreement and Plan may be terminated and the Consolidation
abandoned as provided in Section 6 of the Agreement and Plan.
ARTICLE IX
MISCELLANEOUS
1. Each party, by written instrument signed by a duly authorized officer,
may extend the time for the performance of any of the obligations or other acts
of the other party hereto and may waive compliance with any of the covenants or
performance of any of the obligations of the other party contained in this Plan
of Consolidation.
2. Any notice or other communication required or permitted under this
Plan of Consolidation shall be given, and
4
<PAGE>
shall be effective, in accordance with the provisions of Section 7 of the
Agreement.
3. The headings of the several Articles herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Plan of Consolidation.
4. For the convenience of the parties hereto and to facilitate the
filing and recording of this Plan of Consolidation, it may be executed in
several counterparts, each of which shall be deemed the original, but all of
which together shall constitute one and the same instrument.
5. This Plan of Consolidation shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
6. The full text of the Agreement and Plan is on file at the offices
of the Holding Company located at 400 Washington Street, Reading, Pennsylvania
19603, and is available for review by BCB shareholders or Heritage shareholders
during reasonable business hours.
5
<PAGE>
IN WITNESS WHEREOF, BCB and Heritage have caused this Plan of Consolidation
to be executed in counterparts by their duly authorized officers and their
corporate seals to be hereunto affixed on the date first written above.
ATTEST BCB FINANCIAL SERVICES CORPORATION
- -------------------------------- ---------------------------------------
Secretary NELSON R. OSWALD,
Chairman, President and Chief
Executive Officer
(SEAL)
ATTEST HERITAGE BANCORP, INC.
- -------------------------------- ---------------------------------------
Secretary ALLEN E. KIEFER,
President and Chief Executive
Officer
(SEAL)
6
<PAGE>
EXHIBIT A
ARTICLES OF INCORPORATION
7
<PAGE>
ARTICLES OF INCORPORATION
OF
______________________
FIRST. The name of the Corporation is ____________________.
SECOND. The location and post office address of the Corporation's
registered office in this Commonwealth is 400 Washington Street, Reading,
Pennsylvania 19603.
THIRD. The purpose of the Corporation is and it shall have unlimited power
to engage in and to do any lawful act concerning any or all lawful business for
which corporations may be incorporated under provisions of the Business
Corporation Law of 1988, the Act approved December, 1988, P.L. 1444, as amended
(the "Pennsylvania Business Corporation Law").
FOURTH. The term of the Corporation's existence is perpetual.
FIFTH. The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is 55,000,000 shares, divided into two
classes consisting of 50,000,000 shares of common stock, par value $1.00 per
share (the "Common Stock") and 5,000,000 shares of preferred stock, having such
par value as the board of directors shall fix and determine, as provided in
Article SIXTH below (the "Preferred Stock").
SIXTH. The Preferred Stock may be issued from time to time as a class
without series or, if so determined by the board of directors of the
Corporation, either in whole or in part, in one or more series. There is hereby
expressly granted to and vested in the board of directors of the Corporation
authority to fix and determine (except as fixed and determined herein), by
resolution, the par value, voting powers, full or limited, or no voting powers,
and such designations, preferences and relative, participating, optional or
other special rights, if any, and the qualifications, limitations or
restrictions thereof, if any, including specifically, but not limited to, the
dividend rights, conversion rights, redemption rights and liquidation
preferences, if any, of any wholly unissued series of Preferred Stock (or the
entire class of Preferred Stock if none of such shares have been issued), the
number of shares constituting any such series and the terms and conditions of
the issue thereof. Prior to the issuance of any shares of Preferred Stock, a
statement setting forth a copy of each such resolution or resolutions and the
number of shares of Preferred Stock of each such class or series shall be
executed and filed in accordance with the Pennsylvania Business Corporation Law.
Unless otherwise provided in any such resolution or resolutions, the number of
shares of capital stock of any such class or series so set forth in such
resolution or resolutions may thereafter be increased or decreased (but not
below the number of shares then outstanding), by a statement
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likewise executed and filed setting forth a statement that a specified increase
or decrease therein had been authorized and directed by a resolution or
resolutions likewise adopted by the board of directors of the Corporation. In
case the number of such shares shall be decreased, the number of shares so
specified in the statement shall resume the status they had prior to the
adoption of the first resolution or resolutions.
SEVENTH. Each holder of record of Common Stock shall have the right to one
vote for each share of Common Stock standing in such holder's name on the books
of the Corporation. No shareholder shall be entitled to cumulate any votes for
the election of directors.
EIGHTH. For a period of three (3) years after the formation of the
Corporation, the Board of Directors shall consist of at least thirteen (13)
directors, (i) seven (7) of whom shall have been directors of BCB Financial
Services Corporation or chosen by directors of the Holding Company who were
directors of BCB Financial Services Corporation, and (ii) six (6) of whom shall
have been directors of Heritage Bancorp, Inc. or chosen by directors of the
Holding Company who were directors of Heritage Bancorp, Inc. Thereafter, the
management, control and government of the Corporation shall be vested in a board
of directors consisting of not less than five (5) nor more than twenty-five (25)
members in number, as fixed by the board of directors of the Corporation from
time to time. The directors of the Corporation shall be divided into three
classes: Class I, Class II and Class III. Each Class shall be as nearly equal
in number as possible. If the number of Class I, Class II or Class III
directors is fixed for any term of office, it shall not be increased during that
term, except by a majority vote of the board of directors. The term of office
of the initial Class I directors shall expire at the annual election of
directors by the shareholders of the Corporation in 1998; the term of office of
the initial Class II directors shall expire at the annual election of directors
by the shareholders of the Corporation in 1999; and the term of office of the
initial Class III directors shall expire at the annual election of directors by
the shareholders of the Corporation in 2000. After the initial term of each
Class, the term of office of each Class shall be three (3) years, so that the
term of office of one class of directors shall expire each year when their
respective successors have been duly elected by the shareholders and qualified.
At each annual election by the shareholders of the Corporation, the directors
chosen to succeed those whose terms then expire shall be identified as being of
the same class as the directors they succeed. Unless waived by the board of
directors of the Corporation, in order to qualify for election as a director of
the Corporation, a person must have been a shareholder of record of the
Corporation for a period of time equal to the lesser of (i) three (3) years, or
(ii) the time elapsed since the consolidation of BCB Financial Services
Corporation and Heritage Bancorp, Inc. into the Corporation (the
"Consolidation").
2
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Shareholders of another corporation that merges with the Corporation, is
acquired by, or acquires the Corporation, or enters into any similar transaction
with the Corporation shall qualify for election as a director of the Corporation
if such shareholder was a shareholder of record of the other corporation for a
period of time equal to the lesser of (i) three (3) years, or (ii) the time
elapsed since the Consolidation. If, for any reason, a vacancy occurs on the
board of directors of the Corporation, a majority of the remaining directors
shall have the exclusive power to fill the vacancy by electing a director to
hold office for the unexpired term in respect of which the vacancy occurred. No
director of the Corporation shall be removed from office, as a director, by the
vote of shareholders, unless the votes of shareholders cast in favor of the
resolution for the removal of such director constitute at least a majority of
the votes which all shareholders would be entitled to cast at an annual election
of directors.
NINTH. No holder of any class of capital stock of the Corporation shall
have preemptive rights, and the Corporation shall have the right to issue and to
sell to any person or persons any shares of its capital stock or any option,
warrant or right to acquire capital stock, or any securities having conversion
or option rights without first offering such shares, rights or securities to any
holder of any class of capital stock of the Corporation.
TENTH. Except as set forth below, the affirmative vote of at least 80
percent (80%) of votes cast by shareholders entitled to vote, and if any class
of shares is entitled to vote as a separate class, the affirmative vote of
shareholders entitled to cast at least a majority of the votes cast by the
outstanding shares of such class (or such greater amount as required by the
provisions of these Articles of Incorporation establishing such class) shall be
required to approve any of the following:
(a) any merger or consolidation of the Corporation with or into any
other corporation;
(b) any share exchange in which a corporation, person or entity
acquires the issued or outstanding shares of capital stock of the
Corporation pursuant to a vote of shareholders;
(c) any sale, lease, exchange or other transfer of all, or
substantially all, of the assets of the Corporation to any other
corporation, person or entity; or
(d) any transaction similar to, or having similar effect as, any of
the foregoing transactions.
The board of directors of the Corporation shall have the power and duty to
determine, for purposes of this Article TENTH, on the basis of information known
to the board, if any
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transaction is similar to, or has an effect similar to, any of the transactions
identified above in this Article TENTH. Any such determination shall be
conclusive and binding for all purposes of this Article TENTH. The Corporation
may voluntarily completely liquidate and/or dissolve only in accordance with all
applicable laws and only if the proposed liquidation and/or dissolution is
approved by the affirmative vote of shareholders entitled to cast at least 80
percent (80%) of the votes which all shareholders are entitled to cast. The
provisions of this Article TENTH shall not apply to any transaction which is
approved in advance by 75 percent (75%) of the members of the board of directors
of the Corporation, at a meeting duly called and held.
ELEVENTH. Subsection 1. No Person or Group Acting in Concert shall
Acquire Voting Control of the Corporation, at any time, except in accordance
with the provisions of Article TENTH. The terms "Acquire," "Voting Control,"
"Group Acting in Concert," and "Person" as used in this Article ELEVENTH are
defined in subsection 4 hereof.
Subsection 2. If Voting Control of the Corporation is acquired, in
violation of this Article ELEVENTH, all shares with respect to which any Person
or Group Acting in Concert has acquired Voting Control in excess of the number
of shares the beneficial ownership of which is deemed under subsection 4 hereof
to confer Voting Control of the Corporation (as determined without regard to
this Subsection 2) shall be considered from and after the date of acquisition by
such Person or Group Acting in Concert to be "excess shares" for purposes of
this Article ELEVENTH. All shares deemed to be excess shares shall thereafter
no longer be entitled to vote on any matter or to take other shareholder action.
If, after giving effect to the first two sentences of this Subsection 2, any
Person or Group Acting in Concert still shall be deemed to be in Voting Control
of the Corporation based on the number of votes then entitled to be cast (rather
than the number of issued and outstanding shares of common stock of the
Corporation), then shares held in excess of the number of shares deemed to
confer Voting Control upon such Person or Group Acting in Concert also shall not
be entitled to vote on any matter or take any other shareholder action, but this
subsequent reduction in voting rights shall be effected only once. The
provisions of this Subsection 2 deeming shares to be excess shares shall only
apply for so long as such shares shall be beneficially owned by such Person or
Group Acting in Concert who has acquired Voting Control. Notwithstanding the
foregoing, shares held in excess of the number of shares the beneficial
ownership of which would otherwise be deemed under Subsection 4 to confer Voting
Control of the Corporation shall not be deemed to be excess shares if such
shares are held by a Tax-Qualified Employee Stock Benefit Plan.
Subsection 3. The provisions of this Article ELEVENTH shall be of no
further force and effect after the consummation of
4
<PAGE>
a transaction in which another Person Acquires shares of capital stock of the
Corporation entitled to cast 80% or more of the votes which all shareholders are
entitled to cast (as determined without regard to the application of this
Article ELEVENTH) and such transaction was approved in advance by the board of
directors of the Corporation.
Subsection 4. For purposes of this Article ELEVENTH:
A. The term "Acquire" includes every type of acquisition,
whether effected by purchase, exchange, operation of law or otherwise.
B. "Voting Control" means the sole or shared power to vote or to
direct the voting of, or to dispose or to direct the disposition of, more
than ten percent (10%) of the issued and outstanding common stock of the
Corporation; provided that (i) the solicitation, holding and voting of
proxies obtained by the board of directors of the Corporation pursuant to a
solicitation under Regulation 14A of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
shall not constitute Voting Control, (ii) a Tax-Qualified Employee Stock
Benefit Plan which holds more than 10 percent of the voting shares of the
Corporation shall not be deemed to have Voting Control of the Corporation,
(iii) any trustee, member of any administrative committee or employee
beneficiary of a Tax-Qualified Employee Stock Benefit Plan shall not be
deemed to have Voting Control of the Corporation either (A) as a result of
their control of a Tax-Qualified Employee Stock Benefit Plan, and/or their
beneficial interest in voting shares held by a Tax-Qualified Employee Stock
Benefit Plan, or (B) as a result of the aggregation of both their
beneficial interest in voting shares held by a Tax-Qualified Employee Stock
Benefit Plan and voting shares held by such trustee, administrative
committee member or employee beneficiary independent of a Tax-Qualified
Employee Stock Benefit Plan, and (iv) any trustee which is a direct or
indirect subsidiary of the Corporation shall not be deemed to have Voting
Control of the Corporation as a result of having the right to vote more
than ten percent (10%) of the issued and outstanding common stock of the
Corporation.
C. "Group Acting in Concert" includes Persons seeking to combine
or pool their voting or other interests in the voting shares for a common
purpose, pursuant to any contract, understanding, relationship, agreement
or other arrangement, whether written or otherwise, provided, that a "Group
Acting in Concert" shall not include (i) the members of the board of
directors of the Corporation solely as a result of their board membership,
(ii) the members of the board of directors of the Corporation as a result
of their solicitation, holding and voting of proxies obtained by them
pursuant to a solicitation subject to rules and regulations
5
<PAGE>
promulgated under the Exchange Act or any successor statute or (iii) any
member or all the members of the board of directors of the Corporation, and
any Tax-Qualified Employee Stock Benefit Plan and the trustees,
administrative committee members and employee beneficiaries thereof.
D. The term "Person" includes an individual, a Group Acting in
Concert, a corporation, a partnership, an association, a joint stock
company, a trust, an unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding
or disposing of the equity securities of the Corporation.
E. The term "Tax-Qualified Employee Stock Benefit Plan" means
any defined benefit plan or defined contribution plan of the Corporation or
any subsidiary, such as an employee stock ownership plan, stock bonus plan,
profit sharing plan or other plan, that, with its related trust, meets the
requirements to be "qualified" under Section 401 of the Internal Revenue
Code of 1986, as amended.
Subsection 5. This Article ELEVENTH shall not apply to the purchase
of securities of the Corporation by underwriters in connection with a public
offering of such securities by the Corporation or by a holder of shares of
capital stock of the Corporation with written consent of the board of directors
of the Corporation; provided, however, that purchasers of securities of the
Corporation from any underwriter shall be subject to the provisions of this
Article ELEVENTH.
The board of directors of the Corporation shall have the power and duty to
determine, for purposes of this Article ELEVENTH, on the basis of information
known to the Board, if and when such other Person has acquired Voting Control of
the Corporation, and/or if any transaction is similar to, or has a similar
effect as, any of the transactions identified in this Article ELEVENTH. Any
such determination shall be conclusive and binding for all purposes of this
Article ELEVENTH.
TWELFTH. No action required to be taken or which may be taken at any
annual or special meeting of shareholders of the Corporation may be taken
without a meeting, and the power of the shareholders of the Corporation to
consent in writing to action without a meeting is specifically denied. The
presence, in person or by proxy, of shareholders entitled to cast at least a
majority of the votes which all shareholders are entitled to cast shall
constitute a quorum of shareholders at any annual or special meeting of
shareholders of the Corporation.
THIRTEENTH. The authority to make, amend, alter, change or repeal the By-
Laws of the Corporation is hereby expressly and solely granted to and vested in
the board of directors of the
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<PAGE>
Corporation, subject always to the power of the shareholders to change such
action by the affirmative vote of shareholders of the Corporation entitled to
cast at least 66-2/3 percent (66-2/3%) of the votes which all shareholders are
entitled to cast, except that provisions of the By-Laws of the Corporation
relating to limitations on directors' liabilities and indemnification of
directors, officers and others may not be amended to increase the exposure to
liability for directors or to decrease the indemnification of directors,
officers and others except by the affirmative vote of 66-2/3 percent (66-2/3%)
of the entire board of directors or by the affirmative vote of shareholders of
the Corporation entitled to cast at least 75 percent (75%) of the votes which
all shareholders are entitled to cast.
FOURTEENTH. The board of directors of the Corporation, when evaluating any
offer of another party to (a) make a tender or exchange offer for any equity
security of the Corporation, (b) merge or consolidate the Corporation with
another corporation, (c) purchase or otherwise acquire all or substantially all
of the properties and assets of the Corporation, or (d) engage in any
transaction similar to, or having similar effects as, any of the foregoing
transactions, shall, in connection with the exercise of its judgment in
determining what is in the best interests of the Corporation and its
shareholders, give due consideration to all relevant factors, including without
limitation the social and economic effects of the proposed transaction on the
employees, suppliers, customers and other constituents of the Corporation and
its subsidiaries and on the communities in which the Corporation and its
subsidiaries operate or are located, the business reputation of the other party,
and the board of directors' evaluation of the then value of the Corporation in a
freely negotiated sale and of the future prospects of the Corporation as an
independent entity.
FIFTEENTH. If any corporation, person, entity, or group becomes the
beneficial owner, directly or indirectly, of shares of capital stock of the
Corporation having the right to cast in the aggregate 25 percent (25%) or more
of all votes entitled to be cast by all issued and outstanding shares of capital
stock of the Corporation entitled to vote, such corporation, person, entity or
group shall within thirty (30) days thereafter offer to purchase all shares of
capital stock of the Corporation issued, outstanding and entitled to vote. Such
offer to purchase shall be at a price per share equal to the highest price paid
for shares of the respective class or series of capital stock of the Corporation
purchased by such corporation, person, entity or group within the preceding
twelve months. If such corporation, person, entity or group did not purchase
any shares of a particular class or series of capital stock of the Corporation
within the preceding twelve months, such offer to purchase shall be at a price
per share equal to the fair market value of such class or series of capital
stock on the date on which such corporation, person, entity or group becomes the
beneficial owner, directly or indirectly, of shares of capital stock of the
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Corporation having the right to cast in the aggregate 25 percent (25%) or more
of all votes entitled to be cast by all issued and outstanding capital stock of
the Corporation. Such offer shall provide that the purchase price for such
shares shall be payable in cash. The provisions of this Article FIFTEENTH shall
not apply if 80 percent (80%) or more of the members of the board of directors
of the Corporation approve in advance the acquisition of beneficial ownership by
such corporation, person, entity or group, of shares of capital stock of the
Corporation having the right to cast in the aggregate 25 percent (25%) or more
of all votes entitled to be cast by all issued and outstanding shares of capital
stock of the Corporation. The provisions of this Article FIFTEENTH shall be in
addition to and not in lieu of any rights granted under Subchapter E of Chapter
25 of the Pennsylvania Business Corporation Law and any amendment or restatement
of such section ("Subchapter E"); provided, however, that if the provisions of
this Article FIFTEENTH and Subchapter E are both applicable in any given
instance, the price per share to be paid for shares of capital stock of the
Corporation issued, outstanding and entitled to vote shall be the higher of the
price per share determined in accordance with this Article FIFTEENTH or the
price per share determined in accordance with the provisions of Subchapter E.
SIXTEENTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in its Articles of Incorporation in the manner
now or hereafter prescribed by statute and all rights conferred upon
shareholders and directors herein are hereby granted subject to this
reservation; provided, however, that the provisions set forth in Articles
SEVENTH, EIGHTH and TENTH through FOURTEENTH, inclusive, of these Articles of
Incorporation may not be repealed, altered or amended, in any respect
whatsoever, unless such repeal, alteration or amendment is approved by either
(a) the affirmative vote of at least 80 percent (80%) of votes cast by
shareholders entitled to vote or (b) the affirmative vote of 75 percent (75%) of
the members of the board of directors of the Corporation and the affirmative
vote of a majority of the votes cast by all shareholders of the Corporation then
entitled to vote.
8
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EXHIBIT B
BY-LAWS
8
<PAGE>
EXHIBIT C
DIRECTORS
<TABLE>
<CAPTION>
[TO BE SUPPLIED] BCB Heritage
<S> <C> <C> <C>
CLASS I 2 2
CLASS II 3 2
CLASS III 2/1/ 2/2/
</TABLE>
OFFICERS
Nelson R. Oswald - Chairman and Chief Executive
Officer
Allen E. Kiefer - President and Chief Operating
Officer
Robert D. McHugh, Jr. - Executive Vice President and
Chief Financial Officer
Richard A. Ketner - Executive Vice President and
Chief Administrative Officer
- -------------------
/1/ Includes Holding Company Chairman
/2/ Includes Holding Company Vice Chairman and President
9
<PAGE>
Exhibit 5
---------
BYLAWS
OF
---------------------
ARTICLE I. MEETINGS OF SHAREHOLDERS.
- --------- ------------------------
Section 101. Place of Meetings. All meetings of the shareholders shall be
----------- -----------------
held at such place or places, within or without the Commonwealth of
Pennsylvania, as shall be determined by the Board of Directors from time to
time.
Section 102. Annual Meetings.
----------- ---------------
(a) Time and Date. The annual meeting of the shareholders for the
-------------
election of Directors and the transaction of such other business as may properly
come before the meeting shall be held at such date or hour as may be fixed by
the Board of Directors. At each annual meeting of shareholders, directors shall
be elected, reports of the affairs of the Corporation shall be considered, and
any other business may be transacted which is within the power of the
shareholders.
(b) Agenda for Annual Meeting. Matters to be placed on the agenda for
-------------------------
consideration at annual meetings of shareholders may be determined by the Board
of Directors or by any shareholder entitled to vote for the election of
directors. Matters proposed for the agenda by shareholders entitled to vote for
the election of directors shall be made by notice in writing, delivered or
mailed by first-class United States mail, postage prepaid, to the Secretary of
the Corporation not less than sixty (60) days prior to any annual meeting of
shareholders; provided, however, that if less than twenty-one (21) days' notice
of the meeting is given to shareholders, such written notice shall be delivered
or mailed, as prescribed, to the Secretary of the Corporation not later than the
close of the seventh day following the day on which notice of the meeting was
mailed to shareholders. Notice of matters which are proposed by the Board of
Directors shall be given at any time by the Chairman of the Board or any other
appropriate officer. Each notice made by shareholders shall set forth a brief
description of the business desired to be brought before the annual meeting.
The chairman of the meeting may determine and declare to the meeting that a
matter proposed for the agenda was not made in accordance with the foregoing
procedure, and if the chairman should so determine, the chairman shall so
declare to the meeting and the matter shall be disregarded.
Section 103. Special Meetings. Special meetings of the shareholders may
----------- ----------------
be called at any time by the Board of Directors in the manner provided herein.
Shareholders shall not have the
1
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right to call special meetings of shareholders, except as specifically provided
by law.
Section 104. Conduct of Shareholders' Meetings. At every meeting of the
----------- ---------------------------------
shareholders, the Chairman of the Board or, in the Chairman's absence, the
President or, in the President's absence, a chairman (who shall be one of the
officers, if any is present) chosen by a majority of the members of the Board of
Directors shall act as chairman of the meeting. The chairman of the meeting
shall have any and all powers and authority necessary in the chairman's sole
discretion to conduct an orderly meeting and preserve order and to determine any
and all procedural matters, including imposing reasonable limits on the amount
of time at the meeting taken up in remarks by any one shareholder or group of
shareholders. In addition, until the business to be completed at a meeting of
the shareholders is completed, the chairman of a meeting of the shareholders is
expressly authorized to temporarily adjourn and postpone the meeting from time
to time. The Secretary of the Corporation or in the Secretary's absence, an
assistant secretary, shall act as secretary of all meetings of the shareholders.
In the absence at such meeting of the Secretary or assistant secretary, the
chairman of the meeting may appoint another person to act as secretary of the
meeting.
Section 105. Determination of Record Date. The Board of Directors may fix
----------- ----------------------------
a time prior to the date of any meeting of shareholders as a record date for the
determination of the shareholders entitled to notice of, or to vote at, the
meeting, which time, except in the case of an adjourned meeting, shall be not
more than 90 days prior to the date of the meeting of shareholders. Only
shareholders of record on the date fixed shall be so entitled notwithstanding
any transfer of shares on the books of the Corporation after any record date
fixed as provided in this section. The Board of Directors may similarly fix a
record date for the determination of shareholders of record for any other
purpose. When a determination of shareholders of record has been made as
provided in this section for purposes of a meeting, the determination shall
apply to any adjournment thereof unless the Board of Directors fixes a new
record date for the adjourned meeting.
Section 106. Voting List. The officer or agent having charge of the
----------- -----------
transfer books for shares of the Corporation shall make a complete list of the
shareholders entitled to vote at any meeting of shareholders, arranged in
alphabetical order, with the address of and the number of shares held by each.
The list shall be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any shareholder during the whole time
of the meeting for the purposes thereof.
Failure to comply with the requirements of this section shall not affect
the validity of any action taken at a meeting prior to a demand at the meeting
by any shareholder entitled to vote thereat to examine the list. The original
share register or
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transfer book, or a duplicate thereof kept in Pennsylvania, shall be prima facie
evidence as to who are the shareholders entitled to examine the list or share
register or transfer book or to vote at any meeting of shareholders.
Section 107. Judges of Election. In advance of any meeting of
----------- ------------------
shareholders of the Corporation, the Board of Directors may appoint judges of
election, who need not be shareholders, to act at the meeting or any adjournment
thereof. If judges of election are not so appointed, the presiding officer of
the meeting may, and on the request of any shareholder shall, appoint judges of
election at the meeting. The number of judges shall be one (1) or three (3).
No person who is a candidate for office to be filled at the meeting shall act as
a judge of election.
In the event any person appointed as a judge fails to appear or fails or
refuses to act, the vacancy may be filled by appointment made by the Board of
Directors in advance of convening the meeting or at the meeting by the presiding
officer thereof.
The judges of election shall determine the number of shares outstanding and
the voting power of each, the shares represented at the meeting, the existence
of a quorum, the authenticity, validity and effect of proxies, receive votes or
ballots, hear and determine all challenges and questions in any way arising in
connection with the right to vote, count and tabulate all votes, determine the
result and do such acts as may be proper to conduct the election or vote with
fairness to all shareholders. The judge or judges of election shall perform
their duties impartially, in good faith, to the best of their ability and as
expeditiously as is practical. If there are three judges of election, the
decision, act or certificate of a majority shall be effective in all respects as
the decision, act or certificate of all.
On request of the presiding officer of the meeting, or of any shareholder,
the judge or judges shall make a report in writing of any challenge or question
or matter determined by them, and execute a certificate of any fact found by
them. Any report or certificate made by them shall be prima facie evidence of
the facts stated therein.
Section 108. No Consent of Shareholders in Lieu of Meeting. No action
----------- ---------------------------------------------
required to be taken or which may be taken at any annual or special meeting of
shareholders of the Corporation may be taken without a meeting, and the power of
the shareholders to consent in writing to action without a meeting is
specifically denied.
3
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ARTICLE II. DIRECTORS AND BOARD MEETINGS.
- ---------- ----------------------------
Section 201. Management by Board of Directors. The business and affairs
----------- --------------------------------
of the Corporation shall be managed by a Board of Directors consisting of not
less than five (5) nor more than twenty-five (25) members, as fixed by the Board
of Directors from time to time. The Board of Directors may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute, regulation, the Articles of Incorporation or these Bylaws directed or
required to be exercised or done by the shareholders. The Board of Directors
shall appoint one of its members to be the Chairman and Chief Executive Officer
("Chairman and CEO") to serve at the pleasure of the Board. He shall be a
voting member of the Board of Directors, the Executive Committee and shall
preside at all meetings of the Board of Directors and Shareholders. The Board
of Directors shall also appoint a Vice Chairman and/or President of the
Corporation. The Vice Chairman or President shall preside at any meeting of the
Board in the absence of the Chairman and CEO.
Section 202. Nominations for Directors. Nominations by shareholders for
----------- -------------------------
directors to be elected at an annual meeting of shareholders must be submitted
to the Secretary of the Corporation in writing not later than the close of
business on the ninetieth (90th) day immediately preceding the date of the
meeting. Such notification shall contain the following information: (a) name
and address of each proposed nominee; (b) the principal occupation of each
proposed nominee; (c) the total number of shares of capital stock of the
Corporation that will be voted for each proposed nominee; (d) the name and
residence address of the notifying shareholder; and (e) the number of shares of
capital stock of the Corporation owned by the notifying shareholder.
Nominations not made in accordance herewith may, in the discretion of the
chairman of the meeting, be disregarded and, upon instruction, the judges of
election may disregard all votes cast for any such proposed nominee.
Section 203. Qualifications of Directors.
----------- ---------------------------
(a) Share Ownership. Every Director must be a shareholder of the
---------------
Corporation and shall own in his/her own right the number of shares (if any)
required by law in order to qualify as such Director. Any Director shall
forthwith cease to be a Director when he/she no longer holds such shares, which
fact shall be reported to the Board of Directors by the Secretary, whereupon the
Board of Directors shall declare the seat of such Director vacated.
(b) Other Qualifications. Until January 1, 2003, it shall be a
--------------------
qualification for election and continued service as a Director of the
Corporation for each Director of the Corporation to observe the following
agreements and covenants:
4
<PAGE>
(i) Except for the Chairman and Chief Executive Officer,
Directors of the Corporation shall not, either in their capacities as
Directors, shareholders, or otherwise, directly or indirectly, encourage,
solicit, initiate, or respond to any indications of interest, proposals or
offers for any acquisition of, or change of control involving, the
Corporation, whether by merger, sale of assets, or otherwise, or assist,
aid or abet any person or persons with respect to such conduct. In the
event that any director is approached as described herein, any such contact
shall be immediately referred in writing to the Chairman of the Board of
Directors.
(ii) Directors of the Corporation shall not, either in their
capacities as Directors, shareholders or otherwise, provide any third
person with non-public information concerning the Corporation; and
(iii) Directors of the Corporation shall not (in any capacity)
publicly comment on the Corporation's strategic alternatives (including
sale or possible sale of the Corporation) or on differences of view among
members of the Board relating to the Corporation's strategic alternatives
or on specific merger proposals or opportunities;
absent in any case either a direction from the entire Board of Directors by the
affirmative vote of 75% of the total number of directors then in office
(rounding up to the nearest whole number) or a written opinion of counsel to the
Corporation that such Director's fiduciary duty requires any such conduct.
It is adopted as the corporate policy of this Corporation that the failure
by a Director to observe and comply with the foregoing covenants and agreements
shall subject the Director to removal by a vote of a majority of the Board of
Directors then in office or otherwise in accordance with law, unless such
Director has received a written opinion of the Corporation's counsel that such
Director's fiduciary duty requires such conduct.
Section 204. Classification of Directors. The Board of Directors of the
----------- ---------------------------
Corporation shall be divided into three (3) classes, as nearly equal in number
as possible, as provided in the Corporation's Articles of Incorporation.
Section 205. Compensation of Directors. No Director shall be entitled to
----------- -------------------------
any salary as such; but the Board of Directors may fix, from time to time,
reasonable fees or other compensation, payable in cash, stock or other property,
for acting as a Director and reasonable fees to be paid each Director for
his/her services in attending meetings of the Board and meetings of committees
appointed by the Board. The Corporation may reimburse Directors for expenses
related to their duties as members of the Board of Directors.
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<PAGE>
Section 206. Regular Meetings. Regular meetings of the Board of Directors
----------- ----------------
shall be held on such day, at such hour, and at such place, consistent with
applicable law, as the Board of Directors shall from time to time designate or
as may be designated in any notice from the Secretary calling the meeting. The
Board of Directors shall meet for reorganizational purposes at the first regular
meeting following the annual meeting of shareholders at which the Directors are
elected. Notice need not be given of regular meetings of the Board of Directors
which are held at the time and place designated by the Board of Directors. If a
regular meeting is not to be held at the time and place designated by the Board
of Directors, notice of such meeting, which need not specify the business to be
transacted thereat and which may be either verbal or in writing, shall be given
by the President to each member of the Board of Directors at least twenty-four
(24) hours before the time of the meeting.
A majority of the members of the Board of Directors shall constitute a
quorum for the transaction of business. If at the time fixed for the meeting,
including the meeting to organize the new Board following the annual meeting of
shareholders, a quorum is not present, the directors in attendance may adjourn
the meeting from time to time until a quorum is present.
Except as otherwise provided in Section 209 or as otherwise provided
herein, a majority of Directors present and voting at any meeting of the Board
of Directors at which a quorum is present, shall decide each matter considered.
A Director cannot vote by proxy, or otherwise act by proxy at a meeting of the
Board of Directors.
Section 207. Special Meetings. Special meetings of the Board of Directors
----------- ----------------
may be called by the Chairman of the Board, or at the request of a majority of
Directors then in office. A special meeting of the Board of Directors shall be
deemed to be any meeting other than a regular meeting of the Board of Directors.
Notice of the time and place of every special meeting, which need not specify
the business to be transacted thereat, shall be given by the Chairman to each
member of the Board at least twenty-four (24) hours before the time of such
meeting.
Section 208. Reports and Records. The reports of officers and Committees
----------- -------------------
and the records of the proceedings of all Committees shall be filed with the
Secretary of the Corporation and presented to the Board of Directors, if
practicable, at its next regular meeting. The Board of Directors shall keep
complete records of its proceedings in a minute book kept for that purpose.
When a Director shall request it, the vote of each Director upon a particular
question shall be recorded in the minutes.
Section 209. Special Director Voting Requirements. Notwithstanding
----------- ------------------------------------
anything contained herein to the contrary, until
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<PAGE>
January 1, 2003, approval of any of the following actions shall require a vote
of 75% of the total number of directors of the Corporation then in office
(rounding up to the nearest whole number):
(i) adopting a motion or resolution to study sale of the
Corporation as a strategic alternative, or engaging a financial advisor
with respect thereto;
(ii) adopting a motion or resolution approving a fundamental
transaction (a "Fundamental Transaction") involving the Corporation within
the meaning of Chapter 19 of Title 15 of the Pennsylvania Business
Corporation Law of 1988, as amended, if upon completion of the Fundamental
Transaction the Corporation would not be the surviving or controlling
entity, or any successor provisions (whether by merger, consolidation,
share exchange or otherwise), or calling a special meeting of shareholders
of the Corporation to consider any such proposal or placing any such
proposal on the agenda for an annual meeting of shareholders of the
Corporation;
(iii) recommending that shareholders of the Corporation (A)
accept a transaction or tender their shares of the Corporation's voting
securities in connection with a tender or exchange offer for the
Corporation's voting securities or (B) cast votes with respect to their
voting securities in a proxy solicitation conducted by a party other than
the Corporation's Board of Directors contrary to the recommendation of the
Board of Directors;
(iv) soliciting indications of interest or responding to
proposals relating to a Fundamental Transaction in which the Corporation,
upon completion of such Fundamental Transaction, would not be the surviving
or controlling entity; or
(v) amending or repealing Sections 203 or 209 of these Bylaws.
ARTICLE III. COMMITTEES.
- ----------- ----------
Section 301. Committees. The following two (2) Committees of the Board of
----------- ----------
Directors shall be established by the Board of Directors in addition to any
other Committee the Board of Directors may in its discretion establish:
Executive and Audit Committees.
Section 302. Executive Committee. The Executive Committee shall consist
----------- -------------------
of five (5) Directors, including the Chairman and CEO who shall serve as
Chairman of the Committee and who shall designate the remaining four members.
For a period of three years after the formation of the Corporation, the
designees of the Chairman shall consist of two former directors of BCB
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Financial Services Corporation and two former directors of Heritage Bancorp,Inc.
A majority of the members of the Executive Committee shall constitute a quorum,
and actions of a majority of those present at a meeting at which a quorum is
present shall be the actions of the Committee. Meetings of the Committee may be
called at any time by the Chairman of the Committee or his designee. The
Executive Committee shall have and exercise the authority of the Board of
Directors in the management of the business of the Corporation between the dates
of regular meetings of the Board of Directors.
Section 303. Audit Committee. The Audit Committee shall consist of at
----------- ---------------
least five (5) Directors, none of whom shall be officers of the Corporation.
Meetings of the Committee may be called at any time by the Chairman of the Board
or the Chairman of the Committee or his designee. A majority of the members of
the Committee shall constitute a quorum for the transaction of business, and the
actions of a majority of those present at a meeting at which a quorum is present
shall be the actions of the Committee. The Committee shall, among other things,
supervise the audit of the books of the Corporation and recommend for approval
by the Board the services of a reputable Certified Public Accounting firm to
perform such audit.
Section 304. Appointment of Committee Members. The Chairman of the Board
----------- --------------------------------
of Directors shall appoint the members of the Committees and the Chairman of
each such Committee to serve until the next annual meeting of shareholders. The
Chairman of the Board shall appoint the members of any other Committees
established by the Board of Directors, and the Chairman of such Committee, to
serve until the next annual meeting of shareholders. The Board of Directors may
appoint, from time to time, other committees, for such purposes and with such
powers as the Board may determine.
Section 305. Organization and Proceedings. Each Committee of the Board of
----------- ----------------------------
Directors shall effect its own organization by the appointment of a Secretary
and such other officers, except the Chairman, as it may deem necessary. A
record of proceedings of all Committees shall be kept by the Secretary of such
Committee and filed and presented as provided in Section 208 of these Bylaws.
ARTICLE IV. OFFICERS.
- ---------- --------
Section 401. Chairman and CEO. The Board of Directors shall appoint one
----------- ----------------
of its members to be the Chairman and CEO to serve at the pleasure of the Board.
He shall be a voting member of the Board of Directors and shall preside at all
meetings of the Board of Directors, the Executive Committee and shareholders.
The Chairman and CEO shall supervise the carrying out of the policies adopted or
approved by the Board. He shall have general executive powers, as well as the
specific powers conferred by these Bylaws. He shall also have and may exercise
such further
8
<PAGE>
powers and duties as from time to time may be conferred upon,or assigned to him
by the Board of Directors.
Section 402. President. The Board of Directors shall appoint a President
----------- ---------
of the Corporation. In the absence of the Chairman of the Board and the Vice
Chairman, the President shall preside at any meeting of the Board. In the
absence of the Chairman and CEO, the President shall have general executive
powers, and shall have and may exercise any and all other powers and duties
pertaining by law, regulation, or practice, to the office of President, or
imposed by these Bylaws. He shall also have and may exercise such further
powers and duties as from time to time may be conferred upon or assigned to him
by the Board of Directors.
Section 403. Vice Presidents. The Board of Directors may appoint one or
----------- ---------------
more Executive Vice Presidents, Senior Vice Presidents, Vice Presidents and
Assistant Vice Presidents (collectively referred to herein as the "Vice
Presidents"). The Vice Presidents shall have such powers and duties as may be
assigned to them by the Board of Directors. The Executive Vice Presidents
shall, in the absence of the Vice Chairman and President, perform all the duties
of the Vice Chairman and President.
Section 404. Secretary. The Board of Directors shall appoint a Secretary,
----------- ---------
who shall be Secretary of the Board and of the Corporation, and shall keep
accurate minutes of all meetings. He shall attend to the giving of all notices
required by these Bylaws to be given. He shall be custodian of the corporate
seal, records, documents and papers of the Corporation. He shall provide for
the keeping of proper records of all transactions of the Corporation. He shall
have and may exercise any and all other powers and duties pertaining by law,
regulation or practice, to the office of Secretary, or imposed by these Bylaws.
He shall also perform such other duties as may be assigned to him, from time to
time, by the Board of Directors.
Section 405. Chief Financial Officer ("CFO"). The CFO shall act under the
----------- -------------------------------
supervision of the Chairman and CEO or such other officer as the Chairman and
CEO may designate. The CFO shall have custody of the Corporation's funds and
such other duties as may be prescribed by the Board of Directors, Chairman and
CEO or such other Supervising Officer as the Chairman and CEO may designate.
Section 406. Assistant Officers. Unless otherwise provided by the Board
----------- ------------------
of Directors, each Assistant Officer shall perform such duties as shall be
prescribed by the Board of Directors, the Chairman of the Board, the President
or the Officer to whom he/she is an Assistant. In the event of the absence or
disability of an Officer or his/her refusal to act, his/her Assistant Officer
shall, in the order of their rank, and within
9
<PAGE>
the same rank in the order of their seniority, have the powers and authorities
of such Officer.
Section 407. Compensation. Unless otherwise provided by the Board of
----------- ------------
Directors, the salaries and compensation of all Officers and Assistant Officers,
except the Chairman of the Board, the President and the Executive Vice
Presidents, shall be fixed by the Chairman of the Board in accordance with the
general salary administration programs and guidelines established by the Board.
Section 408. General Powers. The Officers are authorized to do and
----------- --------------
perform such corporate acts as are necessary in the carrying on of the business
of the Corporation, subject always to the direction of the Board of Directors.
ARTICLE V. SHARES OF CAPITAL STOCK.
- --------- -----------------------
Section 501. Authority to Sign Share Certificates. Every share
----------- ------------------------------------
certificate of the Corporation shall be signed by the Chairman of the Board, the
President or by an Executive Vice President or one of the Vice Presidents.
Certificates may be signed by facsimile signature.
Section 502. Lost or Destroyed Certificates. Any person claiming a share
----------- ------------------------------
certificate to be lost, destroyed or wrongfully taken shall receive a
replacement certificate if such person shall have: (a) requested such
replacement certificate before the Corporation has notice that the shares have
been acquired by a bona fide purchaser; (b) provided the Corporation with an
indemnity agreement satisfactory in form and substance to the Chairman of the
Board, the President or the Executive Vice President; and (c) satisfied any
other reasonable requirements (including providing an affidavit and a surety
bond) fixed by the Vice Chairman and President or the Executive Vice President.
ARTICLE VI. GENERAL.
- ---------- -------
Section 601. Fiscal Year. The fiscal year of the Corporation shall begin
----------- -----------
on the first (1st) day of January in each year and end on the thirty-first
(31st) day of December in each year.
Section 602. Absentee Participation in Meetings. Participation in
----------- ----------------------------------
meetings of the Board of Directors, or of Committees of the Board, by means of a
conference telephone or similar communications equipment, by means of which all
persons participating in the meeting can hear each other shall be permitted.
Section 603. Emergency Bylaws. In the event of any emergency resulting
----------- ----------------
from a nuclear attack or similar disaster, and during the continuance of such
emergency, the following Bylaw
10
<PAGE>
provisions shall be in effect, notwithstanding any other provisions of the
Bylaws:
(a) A meeting of the Board of Directors or of any Committee thereof
may be called by any Officer or Director upon one (1) hour's notice to all
persons entitled to notice whom, in the sole judgment of the notifier, it is
feasible to notify;
(b) The Director or Directors in attendance at the meeting of the
Board of Directors or of any Committee thereof shall constitute a quorum; and
(c) These Bylaws may be amended or repealed, in whole or in part, by a
majority vote of the Directors attending any meeting of the board of Directors,
provided such amendment or repeal shall only be effective for the duration of
such emergency.
Section 604. Severability. If any provision of these Bylaws is illegal or
----------- ------------
unenforceable as such, such illegality or unenforceability shall not affect any
other provision of these Bylaws and such other provisions shall continue in full
force and effect.
ARTICLE VII. LIABILITY OF DIRECTORS: INDEMNIFICATION.
- ----------- ---------------------------------------
Section 701. Elimination of Liability. To the fullest extent permitted by
----------- ------------------------
the laws of the Commonwealth of Pennsylvania, a Director of the Corporation
shall not be personally liable for monetary damages for any action taken or any
failure to take any action unless the Director has breached or failed to perform
the duties of his or her office under the Pennsylvania Business Corporation Law
of 1988, as amended, or any successor statute, and such breach or failure
constitutes self-dealing, willful misconduct or recklessness. The provisions of
this Section 701 shall not apply with respect to the responsibility or liability
of a Director under any criminal statute or the liability of a director for the
payment of taxes pursuant to local, state or federal law.
Section 702. Indemnification. The Corporation shall indemnify any person
----------- ---------------
who was or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative by reason of the fact that such person is or
was a Director, officer, employee, or agent of the Corporation, or is or was
serving at the request of the corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), amounts paid in
settlement, judgments, and fines actually and reasonably incurred by such person
in connection with such action, suit, or proceeding; provided, however, that no
indemnification shall be made in any case where the act or failure to act giving
rise to the claim for
11
<PAGE>
indemnification is determined by a court to have constituted willful misconduct
or recklessness.
Section 703. Expenses. Expenses (including attorneys' fees) incurred in
----------- --------
defending a civil or criminal action, suit, or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit, or
proceeding upon receipt of an undertaking by or on behalf of the Director,
officer, employee, or agent to repay such amount if it shall be ultimately
determined that he/she is not entitled to be indemnified by the Corporation as
authorized in this Article VII.
Section 704. Non-Exclusive. The indemnification and advancement of
----------- -------------
expenses provided by this Article VII shall not be deemed exclusive of any other
right to which persons seeking indemnification and advancement of expenses may
be entitled under any agreement, vote of shareholders or disinterested
directors, or otherwise, both as to actions in such persons' official capacity
and as to their actions in another capacity while holding office, and shall
continue as to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and administrator
of such person.
Section 705. Insurance, Etc. The Corporation may purchase and maintain
----------- --------------
insurance on behalf of any person, may enter into contracts of indemnification
with any person, may create a fund of any nature (which may, but need not be,
under the control of a trustee) for the benefit of any person, and may otherwise
secure in any manner its obligations with respect to indemnification and
advancement of expenses, whether arising under this Article IX or otherwise, to
or for the benefit of any person, whether or not the Corporation would have the
power to indemnify such person against such liability under the provisions of
this Article VII.
Section 706. Amendment. Notwithstanding anything herein contained or
----------- ---------
contained in the Articles of Incorporation to the contrary, this Article VII may
not be amended or repealed, and a provision inconsistent herewith may not be
adopted, except by the affirmative vote of 66 2/3% of the members of the
entire Board of Directors or by the affirmative vote of shareholders of the
corporation entitled to cast at least 75% of all votes which shareholders of the
corporation are then entitled to cast, except that, if the laws of the
Commonwealth of Pennsylvania are amended or any other statute is enacted so as
to decrease the exposure of directors to liability or to increase the
indemnification rights available, this Article VII and any other provision of
these Bylaws inconsistent with such decreased exposure or increased
indemnification rights shall be amended, automatically and without any further
action on the part of shareholders or directors, to reflect such decreased
exposure or to include such increased indemnification rights, unless such
legislation expressly otherwise requires. Any repeal or modification of this
Article VII by the directors or shareholders of the Corporation
12
<PAGE>
shall be prospective only, and shall not adversely affect any limitation on the
personal liability of a director of the Corporation or any right to
indemnification for any action taken or any failure to take any action occurring
prior to the time of such repeal or modification.
Section 707. Severability. If, for any reason, any provision of this
----------- ------------
Article VII shall be held invalid, such invalidity shall not affect any other
provision not held so invalid, and each such other provision shall, to the full
extent consistent with law, continue in full force and effect. If any provision
of this Article VII shall be held invalid in part, such invalidity shall in no
way affect the remainder of such provision, and the remainder of such provision,
together with all other provisions of this Article VII shall, to the full extent
consistent with law, continue in full force and effect.
ARTICLE VIII. AMENDMENT OR REPEAL.
- ------------ -------------------
Section 801. Amendment or Repeal by the Board of Directors. These Bylaws
----------- ---------------------------------------------
may be amended or repealed, in whole or in part, in the manner set forth in the
Articles of Incorporation.
13
<PAGE>
EXHIBIT 6
---------
FORM OF OPINION OF COUNSEL TO BCB
Heritage shall have received from counsel to BCB, an opinion, dated as
of the Closing Date, substantially to the effect that, subject to normal
exceptions and qualifications:
(a) BCB has full corporate power to carry out the transactions
contemplated in the Agreement. The execution and delivery of the Agreement and
the consummation of the transactions contemplated thereunder have been duly and
validly authorized by all necessary corporate action on the part of BCB, and the
Agreement constitutes a valid and legally binding obligation of BCB, except as
may be limited by (i) bankruptcy, insolvency, reorganization, moratorium,
receivership, conservatorship, and other laws now or hereafter in effect
relating to or affecting the enforcement of creditors' rights generally or the
rights of creditors of federal savings institutions or their holding companies,
and (ii) general equitable principles, except that no opinion need be rendered
as to the effect or availability of equitable remedies or injunctive relief
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). Subject to satisfaction of the conditions set forth in the
Agreement, neither the transactions contemplated in the Agreement, nor
compliance by BCB with any of the provisions thereof, will (i) conflict with or
result in a breach or default under (A) the articles of incorporation or bylaws
of BCB or the charter or bylaws of Berks County Bank, or, (B) to the knowledge
of such counsel, any note, bond, mortgage, indenture, license, agreement or
other material instrument or obligation to which BCB or Berks County Bank is a
party; or (ii) based on certificates of officers and without independent
verification, to the knowledge of such counsel, result in the creation or
imposition of any material lien or encumbrance upon the property of BCB or Berks
County Bank, except such material lien, instrument or obligation that has been
disclosed pursuant to the Agreement or the Plan; or (iii) violate in any
material respect any order, writ, injunction or decree known to such counsel, or
any federal or Pennsylvania statute, rule or regulation applicable to BCB or
Berks County Bank.
(b) Berks County Bank is a validly existing Pennsylvania-chartered
commercial bank organized under the laws of the Commonwealth of Pennsylvania and
the United States of America. The deposits of Berks County Bank are insured to
the maximum extent provided by law by the Federal Deposit Insurance Corporation.
(c) There is, to the knowledge of such counsel, no legal,
administrative, arbitration or governmental proceeding or investigation pending
or threatened to which BCB or Berks County Bank is a party which would, if
determined adversely to BCB or
1
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Berks County Bank, have a material adverse effect on the financial condition or
results of operation of BCB and Berks County Bank taken as a whole, or which
presents a claim to restrain or prohibit the transactions contemplated by the
Agreement and the Plan, respectively.
(d) No consent, approval, authorization or order of any federal or
state court or federal or state governmental agency or body, or to such
counsel's knowledge, of any third party, is required for the consummation by BCB
of the transactions contemplated by the Agreement, except for such consents,
approvals, authorizations or orders as have been obtained or which would not
have a Material Adverse Effect upon BCB or the Holding Company upon consummation
of the Consolidation.
(e) Upon the filing and effectiveness of the Articles of Consolidation
with the PDS, the Consolidation will have been effected in compliance with all
applicable Pennsylvania laws and regulations in all material respects.
(f) The shares of Holding Company Common Stock to be issued in
connection with the Consolidation have been duly authorized and will, when
issued in accordance with the terms of the Agreement, be validly issued, fully
paid and nonassessable, free and clear of any mortgage, pledge, lien,
encumbrance or claim (legal or equitable).
Such counsel's opinion shall be limited to matters governed by federal
banking and securities laws and by the BCL.
2
<PAGE>
EXHIBIT 7
---------
FORM OF OPINION OF COUNSEL TO HERITAGE
BCB shall have received from counsel to Heritage, an opinion, dated as
of the Closing Date, substantially to the effect that, subject to normal
exceptions and qualifications:
(a) Heritage has full corporate power to carry out the transactions
contemplated in the Agreement. The execution and delivery of the Agreement and
the consummation of the transactions contemplated thereunder have been duly and
validly authorized by all necessary corporate action on the part of Heritage and
the Agreement constitutes a valid and legally binding obligation of Heritage
except as may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, receivership, conservatorship, and other laws now or hereafter in
effect relating to or affecting the enforcement of creditors' rights generally
or the rights of creditors of federal savings institutions or their holding
companies, and (ii) general equitable principles, except that no opinion need be
rendered as to the effect or availability of equitable remedies or injunctive
relief (regardless of whether such enforceability is considered in a proceeding
in equity or at law). Subject to satisfaction of the conditions set forth in
the Agreement, neither the transactions contemplated in the Agreement nor
compliance by Heritage with any of the provisions thereof, will (i) conflict
with or result in a breach or default under (A) the certificate of incorporation
or bylaws of Heritage or the charter or bylaws of Heritage National Bank, or (B)
based on certificates of officers and without independent verification, to the
knowledge of such counsel, any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which Heritage or Heritage
National Bank is a party; or (ii) to the knowledge of such counsel, result in
the creation or imposition of any material lien, instrument or encumbrance upon
the property of Heritage or Heritage National Bank, except such material lien,
instrument or obligation that has been disclosed to BCB pursuant to the
Agreement and the Plan, or (iii) violate in any material respect any order,
writ, injunction, or decree known to such counsel, or any statute, rule or
regulation applicable to Heritage or Heritage National Bank.
(b) Heritage National Bank is a validly existing national bank
organized under the laws of the United States of America. The deposits of
Heritage National Bank are insured to the maximum extent provided by law by the
Federal Deposit Insurance Corporation.
(c) There is, to the knowledge of such counsel, no legal,
administrative, arbitration or governmental proceeding or investigation pending
or threatened to which Heritage or Heritage
1
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National Bank is a party which would, if determined adversely to Heritage or
Heritage National Bank, have a material adverse effect on the business,
properties, results of operations, or condition, financial or otherwise, of
Heritage or Heritage National Bank taken as a whole or which presents a claim to
restrain or prohibit the transactions contemplated by the Agreement and the
Plan, respectively.
(d) No consent, approval, authorization, or order of any federal or
state court or federal or state governmental agency or body, or to such
counsel's knowledge, of any third party of any third party, is required for the
consummation by Heritage of the transactions contemplated by the Agreement,
except for such consents, approvals, authorizations or orders as have been
obtained or which would not have a Material Adverse Effect upon Heritage or the
Holding Company upon consummation of the Consolidation.
Such counsel's opinion shall be limited to matters governed by federal
banking and securities laws and by the BCL.
2
<PAGE>
EXHIBIT 8
---------
FORM OF TAX OPINION OF STEVENS & LEE
------------------------------------
BCB and Heritage shall have received an opinion of Stevens & Lee
substantially to the effect that, under the provisions of the IRC:
1. The Consolidation will constitute a reorganization within the
meaning of IRC Section 368(a)(1)(A).
2. BCB, Heritage and Holding Company will each be "a party to a
reorganization" within the meaning of IRC Section 368(b).
3. Neither BCB, nor Heritage, nor Holding Company will recognize any
gain or loss upon the respective transfers of BCB's and Heritage's assets to
Holding Company in exchange solely for Holding Company Common Stock (including
any fractional share interests) and the assumption by Holding Company of the
respective liabilities of BCB and Heritage.
4. The basis of the respective BCB and Heritage assets in the hands
of Holding Company will be the same as the basis of such assets in the hands of
BCB and Heritage immediately prior to the Consolidation.
5. The holding period of the respective assets of BCB and Heritage to
be received by Holding Company will include the period during which the assets
were held by BCB and Heritage.
6. No gain or loss will be recognized by the shareholders of BCB or
Heritage on the receipt of Holding Company Common Stock (including any
fractional share interests) solely in exchange for their shares of BCB or
Heritage Common Stock, as the case may be.
7. The basis of the Holding Company Common Stock (including any
fractional share interests) to be received by the BCB and Heritage shareholders
in the Consolidation will be the same as the basis of the BCB or Heritage Common
Stock, as the case may be, surrendered in exchange therefor.
8. The holding period of the Holding Company Common Stock (including
any fractional share interests) to be received by the BCB and Heritage
shareholders in the Consolidation will include the period during which the BCB
and Heritage shareholders held their respective BCB and Heritage Common Stock,
provided the shares of such stock are held as a capital asset on the Effective
Date of the Consolidation.
9. The payment of cash in lieu of fractional share interests of
Holding Company Common Stock will be treated as if the fractional share
interests were distributed as part of the
1
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Consolidation and then redeemed by Holding Company. Such cash payments will be
treated as having been received as distributions in full payment in exchange for
the fractional share interests redeemed, as provided in IRC Section 302(a). Any
gain or loss recognized by a BCB or Heritage shareholder will be a capital gain
or loss, provided the shares of BCB or Heritage Common Stock, as the case may
be, are held as a capital asset on the Effective Date of the Consolidation.
10. As provided in IRC Section 381(c)(2) and related Treasury
regulations, Holding Company will succeed to and take into account the
respective earnings and profits, or deficit in earnings and profits, of BCB and
Heritage as of the Effective Date of the Consolidation. Any deficit in the
earnings and profits of the parties will be used only to offset the earnings and
profits accumulated after the Consolidation.
11. Pursuant to IRC Section 381(a) and related Treasury regulations,
Holding Company will succeed to and take into account the respective items of
BCB and Heritage described in IRC Section 381(c). Such items will be taken into
account by Holding Company subject to the conditions and limitations of IRC
Sections 381, 382, 383, and 384 and the Treasury regulations thereunder.
2
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Exhibit 99.1
------------
STOCK OPTION AGREEMENT
----------------------
THIS STOCK OPTION AGREEMENT ("Stock Option Agreement") dated November
18, 1997, is by and between HERITAGE BANCORP, INC., a Pennsylvania corporation
("Heritage") and BCB FINANCIAL SERVICES CORPORATION, a Pennsylvania corporation
("BCB").
BACKGROUND
----------
1. Heritage and BCB desire to enter into an Agreement and Plan of
Consolidation, dated November 18, 1997 (the "Agreement"), providing, among other
things, for the creation by Heritage and BCB of a bank holding company which
will issue shares of its common stock to the shareholders of Heritage and BCB
(the "Consolidation").
2. As a condition to Heritage to enter into the Agreement, BCB is
granting to Heritage an option to purchase up to that number of shares of common
stock, par value $2.50 per share (the "Common Stock") of BCB as shall equal
19.9% of shares of Common Stock of BCB issued and outstanding as of the date
hereof, on the terms and conditions hereinafter set forth.
AGREEMENT
---------
In consideration of the foregoing and the mutual covenants and
agreements set forth herein, Heritage and BCB, intending to be legally bound
hereby, agree:
1. Grant of Option. BCB hereby grants to Heritage, on the terms and
---------------
conditions set forth herein, the option to purchase (the "Option") up to 690,516
shares of Common Stock of BCB (as adjusted as set forth herein, the "Option
Shares") at a price per share (as adjusted as set forth herein, the "Option
Price") equal to $22.375, provided, however, that in no event shall the number
of Option Shares for which the Option is exercisable exceed 19.9% of the issued
and outstanding shares of BCB Common Stock without giving effect to any shares
subject to or issued pursuant to the Option.
2. Exercise of Option.
------------------
(a) Provided that (i) Heritage shall not be, on the date of
exercise, in material breach of the agreements or covenants contained in the
Agreement, this Stock Option Agreement or the reciprocal Stock Option Agreement
by and between BCB and Heritage, and (ii) no preliminary or permanent injunction
or other order against the delivery of shares covered by the Option issued by
any court of competent jurisdiction in the United States shall be in effect on
the date of exercise, upon or after the occurrence of a Triggering Event (as
such term is hereinafter
1
<PAGE>
defined) Heritage may exercise the Option, in whole or in part, at any time or
one or more times, from time to time; provided that the Option shall terminate
and be of no further force and effect upon the earliest to occur of (A) the
Effective Date of the Consolidation, as provided in the Agreement, (B)
termination of the Agreement in accordance with the terms thereof prior to the
occurrence of a Triggering Event or a Preliminary Triggering Event, other than a
termination of the Agreement pursuant to Section 6.01(d), unless in the case of
termination by BCB pursuant to Section 6.01(d), such termination is as a result
of a willful breach of the Agreement by Heritage (a termination pursuant to
Section 6.01(d), except a termination by BCB as a result of a willful breach by
Heritage, being referred to herein as a "Default Termination"), (C) 18 months
after the termination of the Agreement by Heritage or BCB pursuant to a Default
Termination, and (D) 18 months after termination of the Agreement (other than
pursuant to a Default Termination) following the occurrence of a Triggering
Event or a Preliminary Triggering Event; and provided, further, that any
purchase of shares upon exercise of the Option shall be subject to compliance
with applicable securities and banking laws. The rights set forth in Section 3
hereof shall terminate when the right to exercise the Option terminates (other
than as a result of a complete exercise of the Option) as set forth above.
(b) As used herein, the term "Triggering Event" means the occurrence
of any of the following events:
(i) a person or group (as such terms are defined in the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations thereunder), other than Heritage or an affiliate of
Heritage, acquires beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of 25% or more of the then outstanding shares of
Common Stock (excluding any shares eligible to be reported on Schedule 13G
of the Securities and Exchange Commission); or
(ii) a person or group, other than Heritage or an affiliate of
Heritage, enters into an agreement or letter of intent or memorandum of
understanding with BCB or BCB shall have authorized, recommended or
publicly proposed, or publicly announced an intention to authorize,
recommend or propose, such an agreement or letter of intent or memorandum
of understanding, pursuant to which such person or group or any affiliate
of such person or group would (i) merge or consolidate, or enter into any
similar transaction, with BCB, (ii) acquire all or substantially all of the
assets or liabilities of BCB or all or substantially all of the assets or
liabilities of Berks County Bank (or any successor subsidiary), the wholly-
owned subsidiary of BCB ("BCB Bank"), or (iii) acquire beneficial ownership
of securities representing, or the right to acquire beneficial ownership or
to vote securities representing, 25% or more of
2
<PAGE>
the then outstanding shares of Common Stock (excluding any shares eligible
to be reported on Schedule 13G of the Securities and Exchange Commission)
or the then outstanding shares of common stock of BCB Bank.
(c) As used herein, the term "Preliminary Triggering Event" means the
occurrence of any of the following events:
(i) a person or group (as such terms are defined in the Exchange
Act and the rules and regulations thereunder), other than Heritage or an
affiliate of Heritage, acquires beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act) of 10% or more of the then outstanding
shares of Common Stock (excluding any shares eligible to be reported on
Schedule 13G of the Securities and Exchange Commission);
(ii) a person or group, other than Heritage or an affiliate of
Heritage, publicly announces a bona fide proposal (including a written
communication that is or becomes the subject of public disclosure) for (i)
any merger, consolidation or acquisition of all or substantially all the
assets or liabilities of BCB or all or substantially all the assets or
liabilities of BCB Bank, or any other business combination involving BCB or
BCB Bank, or (ii) a transaction involving the transfer of beneficial
ownership of securities representing, or the right to acquire beneficial
ownership or to vote securities representing, 10% or more of the then
outstanding shares of Common Stock or the then outstanding shares of Common
Stock of BCB Bank (collectively, a "Proposal"), and thereafter, if such
Proposal has not been Publicly Withdrawn (as such term is hereinafter
defined) at least 30 days prior to the meeting of shareholders of BCB
called to vote on the Consolidation, BCB's shareholders fail to approve the
Consolidation by the vote required by applicable law at the meeting of
shareholders called for such purpose or such meeting has been cancelled; or
(iii) the Board of Directors of BCB shall (A) exercise the right
granted to it in clause (i) of the second sentence of Section 4.06 of the
Agreement, (B) fail to recommend the Consolidation, (C) recommend an
Acquisition Transaction or (D) have withdrawn or modified in a manner
adverse to Heritage the recommendation of the Board of Directors of BCB
with respect to the Agreement and thereafter BCB's shareholders fail to
approve the Consolidation by the vote required by law at the meeting of
shareholders called for such purpose or such meeting is not scheduled or is
cancelled without the written consent of Heritage; or
3
<PAGE>
(iv) a person or group, other than Heritage or an affiliate of
Heritage, makes a bona fide Proposal and thereafter, but before such
Proposal has been Publicly Withdrawn, BCB shall have breached any
representation, warranty, covenant or obligation contained in the Agreement
and such breach would entitle Heritage to terminate the Agreement under
Section 6.01(d) thereof (without regard to the cure period provided for
therein unless such cure is promptly effected without jeopardizing
consummation of the Consolidation pursuant to the Agreement).
If more than one of the transactions giving rise to a Triggering Event or a
Preliminary Triggering Event under this Section 2 is undertaken or effected,
then all such transactions shall give rise only to one Triggering Event or
Preliminary Triggering Event, as applicable, which Triggering Event or
Preliminary Triggering Event shall be deemed continuing for all purposes
hereunder until all such transactions are abandoned.
"Publicly Withdrawn" for purposes of this Section 2 shall mean an
unconditional bona fide withdrawal of the Proposal coupled with a public
announcement of no further interest in pursuing such Proposal or in acquiring
any controlling influence over BCB or in soliciting or inducing any other person
(other than Heritage or an affiliate of Heritage) to do so.
Notwithstanding the foregoing, the obligation of BCB to issue Option
Shares upon exercise of the Option shall be deferred (but shall not terminate):
(i) until the receipt of all required governmental or regulatory approvals or
consents necessary for BCB to issue the Option Shares or Heritage to exercise
the Option, or until the expiration or termination of any waiting period
required by law, or (ii) so long as any injunction or other order, decree or
ruling issued by any federal or state court of competent jurisdiction is in
effect which prohibits the sale or delivery of the Option Shares, and, in each
case, notwithstanding any provision to the contrary set forth herein, the Option
shall not expire or otherwise terminate with respect to the Option Shares
subject to any prior exercise.
BCB shall notify Heritage promptly in writing of the occurrence of any
Triggering Event known to it, it being understood that the giving of such notice
by BCB shall not be a condition to the right of Heritage to exercise the Option.
BCB will not take any action which would have the effect of preventing or
disabling BCB from delivering the Option Shares to Heritage upon exercise of the
Option or otherwise performing its obligations under this Stock Option
Agreement, except to the extent required by applicable securities and banking
laws and regulations. In the event Heritage wishes to exercise the Option,
Heritage shall send a written notice to BCB (the date of which is hereinafter
referred to as the "Notice Date") specifying the total number of Option Shares
it wishes to purchase and a place and date between two and ten business days
inclusive from
4
<PAGE>
the Notice Date for the closing of such a purchase (a "Closing"); provided,
however, that a Closing shall not occur prior to two days after the later of
receipt of any necessary regulatory approvals or the expiration of any legally
required notice or waiting period, if any.
3. Repurchase of Option by BCB.
---------------------------
(a) Subject to the last sentence of Section 2(a), at the request of
Heritage at any time commencing upon the first occurrence of a Repurchase Event
(as defined in Section 3(d)) and ending 18 months immediately thereafter, BCB
shall repurchase from Heritage (x) the Option and (y) all shares of Common Stock
purchased by Heritage pursuant hereto with respect to which Heritage then has
beneficial ownership. The date on which Heritage exercises its rights under
this Section 3 is referred to as the "Request Date." Such repurchase shall be
at an aggregate price (the "Section 3 Repurchase Consideration") equal to the
sum of:
(i) the aggregate Purchase Price paid by Heritage for any shares
of Common Stock acquired pursuant to the Option with respect to which
Heritage then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Common Stock over (y) the Option Price (subject to
adjustment pursuant to Section 6), multiplied by the number of shares of
Common Stock with respect to which the Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the
Option Price (subject to adjustment pursuant to Section 6) paid (or, in the
case of Option Shares with respect to which the Option has been exercised,
but the Closing has not occurred, payable) by Heritage for each share of
Common Stock with respect to which the Option has been exercised and with
respect to which Heritage then has beneficial ownership, multiplied by the
number of such shares.
(b) If Heritage exercises it rights under this Section 3, BCB shall,
within ten (10) business days after the Request Date, pay the Section 3
Repurchase Consideration to Heritage in immediately available funds, and
contemporaneously with such payment, Heritage shall surrender to BCB the Option
and the certificate evidencing the shares of Common Stock purchased thereunder
with respect to which Heritage then has beneficial ownership, and Heritage shall
warrant that it has sole record and beneficial ownership of such shares, and
that the same are then free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever. Notwithstanding the foregoing, to the
extent that prior notification to or approval of any banking
5
<PAGE>
agency or department of any federal or state government, including without
limitation the FRB, the OCC, the FDIC, or the respective staffs thereof (the
"Regulatory Authority"), is required in connection with the payment of all or
any portion of the Section 3 Repurchase Consideration, Heritage shall have the
ongoing option to revoke its request for repurchase pursuant to Section 3, in
whole or in part, or to require that BCB deliver from time to time that portion
of the Section 3 Repurchase Consideration that it is not then so prohibited from
paying and promptly file the required notice or application for approval and
expeditiously process the same (and each party shall cooperate with the other in
the filing of any such notice or application and the obtaining of any such
approval), in which case the ten (10) business day period of time that would
otherwise run pursuant to the preceding sentence for the payment of the portion
of the Section 3 Repurchase Consideration shall run instead from the date on
which, as the case may be, any required notification period has expired or been
terminated or such approval has been obtained and, in either event, any
requisite waiting period shall have passed. If any Regulatory Authority
disapproves of any part of BCB's proposed repurchase pursuant to this Section 3,
BCB shall promptly give notice of such fact to Heritage. If any Regulatory
Authority prohibits the repurchase pursuant to this Section 3, BCB shall
promptly give notice of such fact to Heritage. If any Regulatory Authority
prohibits the repurchase in part but not in whole, then Heritage shall have the
right (i) to revoke the repurchase request or (ii) to the extent permitted by
such Regulatory Authority, determine whether the repurchase should apply to the
Option and/or Option Shares and to what extent to each, and Heritage shall
thereupon have the right to exercise the Option as to the number of Option
Shares for which the Option was exercisable at the Request Date less the sum of
the number of shares covered by the Option in respect of which payment has been
made pursuant to Section 3(a)(ii) and the number of shares covered by the
portion of the Option (if any) that has been repurchased. Heritage shall notify
BCB of its determination under the preceding sentence within five (5) business
days of receipt of notice of disapproval of the repurchase.
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Common Stock paid for any such
share by the person or groups described in Section 3(d)(i), (ii) the price per
share of Common Stock received by a holder of Common Stock in connection with
any merger or other business combination transaction described in Section
3(d)(ii), (iii) or (iv), or (iii) the highest closing sales price per share of
Common Stock quoted on the Nasdaq Stock Market during the 40 business days
preceding the Request Date; provided, however, that in the event of a sale of
less than all of BCB's assets, the Applicable Price shall be the sum of the
price paid in such sale for such assets and the current market value of the
remaining assets of BCB as determined by a nationally-recognized investment
banking firm selected by Heritage, divided by the number of shares of Common
Stock
6
<PAGE>
outstanding at the time of such sale. If the consideration to be offered, paid
or received pursuant to either of the foregoing clauses (i) or (ii) shall be
other than in cash, the value of such consideration shall be determined in good
faith by an independent nationally-recognized investment banking firm selected
by Heritage and reasonably acceptable to BCB, which determination shall be
conclusive for all purposes of this Agreement.
(d) As used herein, a Repurchase Event shall occur if (i) any person
or group (as such terms are defined in the Exchange Act and the rules and
regulations thereunder), other than Heritage or an affiliate of Heritage,
acquires beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of, or the right to acquire beneficial ownership of, 25% or more
of the then-outstanding shares of Common Stock, (ii) BCB shall have merged or
consolidated with any person, other than Heritage or an affiliate of Heritage,
and shall not be the surviving or continuing corporation of such merger or
consolidation, (iii) any person, other than Heritage or an affiliate of
Heritage, shall have merged into BCB and BCB shall be the surviving corporation,
but, in connection with such merger, the then-outstanding shares of Common Stock
have been changed into or exchanged for stock or other securities of BCB or any
other person or cash or any other property or the outstanding shares of Common
Stock immediately prior to such merger shall after such merger represent less
than 50% of the outstanding shares and share equivalents of the surviving
corporation or (iv) BCB shall have sold or otherwise transferred more than 25%
of its consolidated assets to any person, other than Heritage or an affiliate of
Heritage.
4. Payment and Delivery of Certificates. At any Closing hereunder,
------------------------------------
(a) Heritage will make payment to BCB of the aggregate price for the Option
Shares so purchased by wire transfer of immediately available funds to an
account designated by BCB, (b) BCB will deliver to Heritage a stock certificate
or certificates representing the number of Option Shares so purchased,
registered in the name of Heritage or its designee, in such denominations as
were specified by Heritage in its notice of exercise, and (c) Heritage will pay
any transfer or other taxes required by reason of the issuance of the Option
Shares so purchased.
A legend will be placed on each stock certificate evidencing Option
Shares issued pursuant to this Stock Option Agreement, which legend will read
substantially as follows:
"The shares of stock evidenced by this certificate have not been
the subject of a registration statement filed under the Securities Act of
1933, as amended (the "Act"), and declared effective by the Securities and
Exchange Commission. These shares may not be sold, transferred or
otherwise disposed of prior
7
<PAGE>
to such time unless BCB Financial Services Corporation receives an opinion
of counsel acceptable to it stating that an exemption from the registration
provisions of the Act is available for such transfer."
5. Registration Rights. Upon or after the occurrence of a
-------------------
Triggering Event and upon receipt of a written request from Heritage, BCB shall
prepare and file as soon as practicable a registration statement under the
Securities Act of 1933 (the "Securities Act") with the Securities and Exchange
Commission covering the Option and such number of Option Shares as Heritage
shall specify in its request, and BCB shall use its best efforts to cause such
registration statement to be declared effective in order to permit the sale or
other disposition of the Option and the Option Shares, provided that Heritage
shall in no event have the right to have more than one such registration
statement become effective, and provided further that BCB shall not be required
to prepare and file any such registration statement in connection with any
proposed sale with respect to which counsel to BCB delivers to BCB and to
Heritage its opinion to the effect that no such filing is required under
applicable laws and regulations with respect to such sale or disposition;
provided further, however, that BCB may delay any registration of Option Shares
above for a period not exceeding 90 days in the event that BCB shall in good
faith determine that any such registration would adversely affect an offering or
contemplated offering of securities by BCB. Heritage shall provide all
information reasonably requested by BCB for inclusion in any registration
statement to be filed hereunder. In connection with such filing, BCB shall use
its reasonable best efforts to cause to be delivered to Heritage such
certificates, opinions, accountant's letters and other documents as Heritage
shall reasonably request and as are customarily provided in connection with
registration of securities under the Securities Act. BCB shall provide to
Heritage such number of copies of the preliminary prospectus and final
prospectus and any amendments and supplements thereto as Heritage may reasonably
request.
All reasonable expenses incurred by BCB in complying with the
provisions of this Section 5, including, without limitation, all registration
and filing fees, reasonable printing expenses, reasonable fees and disbursements
of counsel for BCB and blue sky fees and expenses, shall be paid by BCB.
Underwriting discounts and commissions to brokers and dealers relating to the
Option Shares, fees and disbursements of counsel to Heritage and any other
expenses incurred by Heritage in connection with such filing shall be borne by
Heritage. In connection with such filing, BCB shall indemnify and hold harmless
Heritage against any losses, claims, damages or liabilities, joint or several,
to which Heritage may become subject, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any preliminary or final registration statement
8
<PAGE>
or any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading; and
BCB will reimburse Heritage for any legal or other expense reasonably incurred
by Heritage in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that BCB will not be liable in
any case to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in such preliminary or final registration statement or
such amendment or supplement thereto in reliance upon and in conformity with
written information furnished by or on behalf of Heritage specifically for use
in the preparation thereof. Heritage will indemnify and hold harmless BCB to
the same extent as set forth in the immediately preceding sentence but only with
reference to written information furnished by or on behalf of Heritage for use
in the preparation of such preliminary or final registration statement or such
amendment or supplement thereto; and Heritage will reimburse BCB for any legal
or other expense reasonably incurred by BCB in connection with investigating or
defending any such loss, claim, damage, liability or action. Notwithstanding
anything to the contrary contained herein, no indemnifying party shall be liable
for any settlement effected without its prior written consent.
6. Adjustment Upon Changes in Capitalization. In the event of any
-----------------------------------------
change in the Common Stock by reason of stock dividends, split-ups,
recapitalizations, combinations, conversions, divisions, exchanges of shares or
the like, then the number and kind of Option Shares and the Option Price shall
be appropriately adjusted.
7. Filings and Consents. Each of Heritage and BCB will use its
--------------------
reasonable best efforts to make all filings with, and to obtain consents of, all
third parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Stock Option Agreement. Within 10 days from
the date hereof, Heritage shall file a report of beneficial ownership on Form
13D with the Securities and Exchange Commission under the Exchange Act which
discloses the rights of Heritage hereunder.
8. Representations and Warranties of BCB. BCB hereby represents and
-------------------------------------
warrants to Heritage as follows:
(a) Due Authorization. BCB has full corporate power and
-----------------
authority to execute, deliver and perform this Stock Option Agreement and all
corporate action necessary for execution, delivery and performance of this Stock
Option Agreement has been duly taken by BCB. This Stock Option Agreement
constitutes a legal, valid and binding obligation of BCB, enforceable against
BCB in accordance with its terms (except as may be limited by applicable
bankruptcy, insolvency,
9
<PAGE>
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles).
(b) Authorized Shares. BCB has taken all necessary corporate
-----------------
action to authorize and reserve for issuance all shares of Common Stock that may
be issued pursuant to any exercise of the Option.
9. Representations and Warranties of Heritage. Heritage hereby
------------------------------------------
represents and warrants to BCB that Heritage has full corporate power and
authority to execute, deliver and perform this Stock Option Agreement and all
corporate action necessary for execution, delivery and performance of this Stock
Option Agreement has been duly taken by Heritage. This Stock Option Agreement
constitutes a legal, valid and binding obligation of Heritage, enforceable
against Heritage in accordance with its terms (except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or affecting
creditors' rights or by general equity principles).
10. Specific Performance. The parties hereto acknowledge that
--------------------
damages would be an inadequate remedy for a breach of this Stock Option
Agreement and that the obligations of the parties hereto shall be specifically
enforceable.
11. Entire Agreement. This Stock Option Agreement and the Agreement
----------------
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, among the parties or any of them with respect to the subject
matter hereof.
12. Assignment or Transfer. Heritage may not sell, assign or
----------------------
otherwise transfer its rights and obligations hereunder, in whole or in part, to
any person or group of persons other than to a subsidiary of Heritage. Heritage
represents that it is acquiring the Option for Heritage's own account and not
with a view to, or for sale in connection with, any distribution of the Option
or the Option Shares. Heritage is aware that neither the Option nor the Option
Shares is the subject of a registration statement filed with, and declared
effective by, the Securities and Exchange Commission pursuant to Section 5 of
the Securities Act, but instead each is being offered in reliance upon the
exemption from the registration requirement provided by Section 4(2) thereof and
the representations and warranties made by Heritage in connection therewith.
13. Amendment of Stock Option Agreement. By mutual consent of the
-----------------------------------
parties hereto, this Stock Option Agreement may be amended in writing at any
time, for the purpose of facilitating performance hereunder or to comply with
any applicable regulation
10
<PAGE>
of any governmental authority or any applicable order of any court or for any
other purpose.
14. Validity. The invalidity or unenforceability of any provision of
--------
this Stock Option Agreement shall not affect the validity or enforceability of
any other provisions of this Stock Option Agreement, which shall remain in full
force and effect.
15. Notices. All notices, requests, consents and other
-------
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered personally, by telegram or
telecopy, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
(i) If to Heritage, to:
Heritage Bancorp, Inc.
120 South Centre Street
Pottsville, Pennsylvania 17901
Attention: Allen E. Kiefer, President
and Chief Executive Officer
Telecopy No.: (717) 622-2320
with a copy to:
Rhoads & Sinon LLP
One South Market Square, 12th Floor
Harrisburg, Pennsylvania 17108
Attention: Charles J. Ferry, Esquire
Telecopy No.: (717) 232-1459
(ii) If to BCB, to:
BCB Financial Services Corporation
The Madison Building
400 Washington Street
Reading, Pennsylvania 19601
Attention: Nelson R. Oswald, President
and Chief Executive Officer
Telecopy No.: (610) 378-9193
11
<PAGE>
with copies to:
Stevens & Lee
One Glenhardie Corporate Center
Suite 202
1275 Drummers Lane
P.O. Box 236
Wayne, PA 19087
Attention: Jeffrey P. Waldron, Esquire
Telecopy No.: (610) 687-1384
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
16. Governing Law. This Stock Option Agreement shall be governed by
-------------
and construed in accordance with the domestic internal law (but not the law of
conflicts of law) of the Commonwealth of Pennsylvania.
17. Captions. The captions in this Stock Option Agreement are
--------
inserted for convenience and reference purposes, and shall not limit or
otherwise affect any of the terms or provisions hereof.
18. Waivers and Extensions. The parties hereto may, by mutual
----------------------
written consent, extend the time for performance of any of the obligations or
acts of either party hereto. Each party may waive in writing (i) compliance
with any of the covenants of the other party contained in this Stock Option
Agreement and/or (ii) the other party's performance of any of its obligations
set forth in this Stock Option Agreement.
19. Parties in Interest. This Stock Option Agreement shall be
-------------------
binding upon and inure solely to the benefit of each party hereto, and, nothing
in this Stock Option Agreement, express or implied, is intended to confer upon
any other person any rights or remedies of any nature whatsoever under or by
reason of this Stock Option Agreement.
20. Counterparts. This Stock Option Agreement may be executed in two
------------
or more counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
21. Expenses. Except as otherwise provided herein, all costs and
--------
expenses incurred by the parties hereto in connection with the transactions
contemplated by this Stock Option Agreement or the Option shall be paid by the
party incurring such cost or expense.
12
<PAGE>
22. Defined Terms. Capitalized terms which are used but not defined
-------------
herein shall have the meanings ascribed to such terms in the Agreement.
IN WITNESS WHEREOF, each of the parties hereto, pursuant to
resolutions adopted by its Board of Directors, has caused this Stock Option
Agreement to be executed by its duly authorized officer as of the day and year
first above written.
HERITAGE BANCORP, INC.
By
---------------------------------
Allen E. Kiefer,
President and Chief
Executive Officer
BCB FINANCIAL SERVICES CORPORATION
By
---------------------------------
Nelson R. Oswald,
Chairman, President and Chief
Executive Officer
13
<PAGE>
Exhibit 99.2
------------
STOCK OPTION AGREEMENT
----------------------
THIS STOCK OPTION AGREEMENT ("Stock Option Agreement") dated November 18,
1997, is by and between BCB FINANCIAL SERVICES CORPORATION, a Pennsylvania
corporation ("BCB") and HERITAGE BANCORP, INC., a Pennsylvania corporation
("HERITAGE").
BACKGROUND
----------
1. BCB and Heritage desire to enter into an Agreement and Plan of
Consolidation, dated November 18, 1997 (the "Agreement"), providing, among other
things, for the creation by BCB and Heritage of a bank holding company which
will issue shares of its common stock to the shareholders of BCB and Heritage
(the "Consolidation").
2. As a condition to BCB to enter into the Agreement, Heritage is granting
to BCB an option to purchase up to that number of shares of common stock, par
value $5.00 per share (the "Common Stock") of Heritage as shall equal 19.9% of
shares of Common Stock of Heritage issued and outstanding as of the date hereof,
on the terms and conditions hereinafter set forth.
AGREEMENT
---------
In consideration of the foregoing and the mutual covenants and agreements
set forth herein, BCB and Heritage, intending to be legally bound hereby, agree:
1. Grant of Option. Heritage hereby grants to BCB, on the terms and
---------------
conditions set forth herein, the option to purchase (the "Option") up to 947,041
shares of Common Stock of Heritage (as adjusted as set forth herein, the "Option
Shares") at a price per share (as adjusted as set forth herein, the "Option
Price") equal to $22.875, provided, however, that in no event shall the number
of Option Shares for which the Option is exercisable exceed 19.9% of the issued
and outstanding shares of Heritage Common Stock without giving effect to any
shares subject to or issued pursuant to the Option.
2. Exercise of Option.
------------------
(a) Provided that (i) BCB shall not be, on the date of exercise, in
material breach of the agreements or covenants contained in the Agreement, this
Stock Option Agreement or the reciprocal Stock Option Agreement by and between
Heritage and BCB, and (ii) no preliminary or permanent injunction or other order
against the delivery of shares covered by the Option issued by any court of
competent jurisdiction in the United States shall be in effect on the date of
exercise, upon or after the occurrence of a Triggering Event (as such term is
hereinafter
1
<PAGE>
defined) BCB may exercise the Option, in whole or in part, at any time or one or
more times, from time to time; provided that the Option shall terminate and be
of no further force and effect upon the earliest to occur of (A) the Effective
Date of the Consolidation, as provided in the Agreement, (B) termination of the
Agreement in accordance with the terms thereof prior to the occurrence of a
Triggering Event or a Preliminary Triggering Event, other than a termination of
the Agreement pursuant to Section 6.01(d), unless in the case of termination by
Heritage pursuant to Section 6.01(d), such termination is as a result of a
willful breach of the Agreement by BCB (a termination pursuant to Section
6.01(d), except a termination by Heritage as a result of a willful breach by
BCB, being referred to herein as a "Default Termination"), (C) 18 months after
the termination of the Agreement by BCB or Heritage pursuant to a Default
Termination, and (D) 18 months after termination of the Agreement (other than
pursuant to a Default Termination) following the occurrence of a Triggering
Event or a Preliminary Triggering Event; and provided, further, that any
purchase of shares upon exercise of the Option shall be subject to compliance
with applicable securities and banking laws. The rights set forth in Section 3
hereof shall terminate when the right to exercise the Option terminates (other
than as a result of a complete exercise of the Option) as set forth above.
(b) As used herein, the term "Triggering Event" means the occurrence
of any of the following events:
(i) a person or group (as such terms are defined in the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations thereunder), other than BCB or an affiliate of BCB,
acquires beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of 25% or more of the then outstanding shares of Common Stock
(excluding any shares eligible to be reported on Schedule 13G of the
Securities and Exchange Commission); or
(ii) a person or group, other than BCB or an affiliate of BCB,
enters into an agreement or letter of intent or memorandum of understanding
with Heritage or Heritage shall have authorized, recommended or publicly
proposed, or publicly announced an intention to authorize, recommend or
propose, such an agreement or letter of intent or memorandum of
understanding, pursuant to which such person or group or any affiliate of
such person or group would (i) merge or consolidate, or enter into any
similar transaction, with Heritage, (ii) acquire all or substantially all
of the assets or liabilities of Heritage or all or substantially all of the
assets or liabilities of Heritage National Bank (or any successor
subsidiary), the wholly-owned subsidiary of Heritage ("Heritage Bank"), or
(iii) acquire beneficial ownership of securities representing, or the right
to acquire beneficial ownership
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<PAGE>
or to vote securities representing, 25% or more of the then outstanding
shares of Common Stock (excluding any shares eligible to be reported on
Schedule 13G of the Securities and Exchange Commission) or the then
outstanding shares of common stock of Heritage Bank.
(c) As used herein, the term "Preliminary Triggering Event" means
the occurrence of any of the following events:
(i) a person or group (as such terms are defined in the Exchange
Act and the rules and regulations thereunder), other than BCB or an
affiliate of BCB, acquires beneficial ownership (within the meaning of Rule
13d-3 under the Exchange Act) of 10% or more of the then outstanding shares
of Common Stock (excluding any shares eligible to be reported on Schedule
13G of the Securities and Exchange Commission);
(ii) a person or group, other than BCB or an affiliate of BCB,
publicly announces a bona fide proposal (including a written communication
that is or becomes the subject of public disclosure) for (i) any merger,
consolidation or acquisition of all or substantially all the assets or
liabilities of Heritage or all or substantially all the assets or
liabilities of Heritage Bank, or any other business combination involving
Heritage or Heritage Bank, or (ii) a transaction involving the transfer of
beneficial ownership of securities representing, or the right to acquire
beneficial ownership or to vote securities representing, 10% or more of the
then outstanding shares of Common Stock or the then outstanding shares of
Common Stock of Heritage Bank (collectively, a "Proposal"), and thereafter,
if such Proposal has not been Publicly Withdrawn (as such term is
hereinafter defined) at least 30 days prior to the meeting of shareholders
of Heritage called to vote on the Consolidation, Heritage's shareholders
fail to approve the Consolidation by the vote required by applicable law at
the meeting of shareholders called for such purpose or such meeting has
been cancelled; or
(iii) the Board of Directors of Heritage shall (A) exercise the
right granted to it in clause (i) of the second sentence of Section 4.06 of
the Agreement, (B) fail to recommend the Consolidation, (C) recommend an
Acquisition Transaction or (D) have withdrawn or modified in a manner
adverse to BCB the recommendation of the Board of Directors of Heritage
with respect to the Agreement and thereafter Heritage's shareholders fail
to approve the Consolidation by the vote required by law at the meeting of
shareholders called for such purpose or such meeting is not scheduled or is
cancelled without the written consent of BCB; or
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<PAGE>
(iv) a person or group, other than BCB or an affiliate of BCB,
makes a bona fide Proposal and thereafter, but before such Proposal has
been Publicly Withdrawn, Heritage shall have breached any representation,
warranty, covenant or obligation contained in the Agreement and such breach
would entitle BCB to terminate the Agreement under Section 6.01(d) thereof
(without regard to the cure period provided for therein unless such cure is
promptly effected without jeopardizing consummation of the Consolidation
pursuant to the Agreement).
If more than one of the transactions giving rise to a Triggering Event or a
Preliminary Triggering Event under this Section 2 is undertaken or effected,
then all such transactions shall give rise only to one Triggering Event or
Preliminary Triggering Event, as applicable, which Triggering Event or
Preliminary Triggering Event shall be deemed continuing for all purposes
hereunder until all such transactions are abandoned.
"Publicly Withdrawn" for purposes of this Section 2 shall mean an
unconditional bona fide withdrawal of the Proposal coupled with a public
announcement of no further interest in pursuing such Proposal or in acquiring
any controlling influence over Heritage or in soliciting or inducing any other
person (other than BCB or an affiliate of BCB) to do so.
Notwithstanding the foregoing, the obligation of Heritage to issue
Option Shares upon exercise of the Option shall be deferred (but shall not
terminate): (i) until the receipt of all required governmental or regulatory
approvals or consents necessary for Heritage to issue the Option Shares or BCB
to exercise the Option, or until the expiration or termination of any waiting
period required by law, or (ii) so long as any injunction or other order, decree
or ruling issued by any federal or state court of competent jurisdiction is in
effect which prohibits the sale or delivery of the Option Shares, and, in each
case, notwithstanding any provision to the contrary set forth herein, the Option
shall not expire or otherwise terminate with respect to the Option Shares
subject to any prior exercise.
Heritage shall notify BCB promptly in writing of the occurrence of any
Triggering Event known to it, it being understood that the giving of such notice
by Heritage shall not be a condition to the right of BCB to exercise the Option.
Heritage will not take any action which would have the effect of preventing or
disabling Heritage from delivering the Option Shares to BCB upon exercise of the
Option or otherwise performing its obligations under this Stock Option
Agreement, except to the extent required by applicable securities and banking
laws and regulations. In the event BCB wishes to exercise the Option, BCB shall
send a written notice to Heritage (the date of which is hereinafter referred to
as the "Notice Date") specifying the total number of Option Shares it wishes to
purchase and a place and date between two and ten business days inclusive from
the
4
<PAGE>
Notice Date for the closing of such a purchase (a "Closing"); provided, however,
that a Closing shall not occur prior to two days after the later of receipt of
any necessary regulatory approvals or the expiration of any legally required
notice or waiting period, if any.
3. Repurchase of Option by Heritage.
--------------------------------
(a) Subject to the last sentence of Section 2(a), at the request of
BCB at any time commencing upon the first occurrence of a Repurchase Event (as
defined in Section 3(d)) and ending 18 months immediately thereafter, Heritage
shall repurchase from BCB (x) the Option and (y) all shares of Common Stock
purchased by BCB pursuant hereto with respect to which BCB then has beneficial
ownership. The date on which BCB exercises its rights under this Section 3 is
referred to as the "Request Date." Such repurchase shall be at an aggregate
price (the "Section 3 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by BCB for any shares of
Common Stock acquired pursuant to the Option with respect to which BCB then
has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Common Stock over (y) the Option Price (subject to
adjustment pursuant to Section 6), multiplied by the number of shares of
Common Stock with respect to which the Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the
Option Price (subject to adjustment pursuant to Section 6) paid (or, in the
case of Option Shares with respect to which the Option has been exercised,
but the Closing has not occurred, payable) by BCB for each share of Common
Stock with respect to which the Option has been exercised and with respect
to which BCB then has beneficial ownership, multiplied by the number of
such shares.
(b) If BCB exercises it rights under this Section 3, Heritage shall,
within ten (10) business days after the Request Date, pay the Section 3
Repurchase Consideration to BCB in immediately available funds, and
contemporaneously with such payment, BCB shall surrender to Heritage the Option
and the certificate evidencing the shares of Common Stock purchased thereunder
with respect to which BCB then has beneficial ownership, and BCB shall warrant
that it has sole record and beneficial ownership of such shares, and that the
same are then free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever. Notwithstanding the foregoing, to the extent that prior
notification to or approval of any banking agency or department of any federal
or state government, including without limitation the FRB, the OCC, the FDIC, or
the
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<PAGE>
respective staffs thereof (the "Regulatory Authority"), is required in
connection with the payment of all or any portion of the Section 3 Repurchase
Consideration, BCB shall have the ongoing option to revoke its request for
repurchase pursuant to Section 3, in whole or in part, or to require that
Heritage deliver from time to time that portion of the Section 3 Repurchase
Consideration that it is not then so prohibited from paying and promptly file
the required notice or application for approval and expeditiously process the
same (and each party shall cooperate with the other in the filing of any such
notice or application and the obtaining of any such approval), in which case the
ten (10) business day period of time that would otherwise run pursuant to the
preceding sentence for the payment of the portion of the Section 3 Repurchase
Consideration shall run instead from the date on which, as the case may be, any
required notification period has expired or been terminated or such approval has
been obtained and, in either event, any requisite waiting period shall have
passed. If any Regulatory Authority disapproves of any part of Heritage's
proposed repurchase pursuant to this Section 3, Heritage shall promptly give
notice of such fact to BCB. If any Regulatory Authority prohibits the
repurchase pursuant to this Section 3, Heritage shall promptly give notice of
such fact to BCB. If any Regulatory Authority prohibits the repurchase in part
but not in whole, then BCB shall have the right (i) to revoke the repurchase
request or (ii) to the extent permitted by such Regulatory Authority, determine
whether the repurchase should apply to the Option and/or Option Shares and to
what extent to each, and BCB shall thereupon have the right to exercise the
Option as to the number of Option Shares for which the Option was exercisable at
the Request Date less the sum of the number of shares covered by the Option in
respect of which payment has been made pursuant to Section 3(a)(ii) and the
number of shares covered by the portion of the Option (if any) that has been
repurchased. BCB shall notify Heritage of its determination under the preceding
sentence within five (5) business days of receipt of notice of disapproval of
the repurchase.
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Common Stock paid for any such
share by the person or groups described in Section 3(d)(i), (ii) the price per
share of Common Stock received by a holder of Common Stock in connection with
any merger or other business combination transaction described in Section
3(d)(ii), (iii) or (iv), or (iii) the highest closing sales price per share of
Common Stock quoted on the Nasdaq Stock Market during the 40 business days
preceding the Request Date; provided, however, that in the event of a sale of
less than all of Heritage's assets, the Applicable Price shall be the sum of the
price paid in such sale for such assets and the current market value of the
remaining assets of Heritage as determined by a nationally-recognized investment
banking firm selected by BCB, divided by the number of shares of Common Stock
outstanding at the time of such sale. If the consideration to be
6
<PAGE>
offered, paid or received pursuant to either of the foregoing clauses (i) or
(ii) shall be other than in cash, the value of such consideration shall be
determined in good faith by an independent nationally-recognized investment
banking firm selected by BCB and reasonably acceptable to Heritage, which
determination shall be conclusive for all purposes of this Agreement.
(d) As used herein, a Repurchase Event shall occur if (i) any person
or group (as such terms are defined in the Exchange Act and the rules and
regulations thereunder), other than BCB or an affiliate of BCB, acquires
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act)
of, or the right to acquire beneficial ownership of, 25% or more of the then-
outstanding shares of Common Stock, (ii) Heritage shall have merged or
consolidated with any person, other than BCB or an affiliate of BCB, and shall
not be the surviving or continuing corporation of such merger or consolidation,
(iii) any person, other than BCB or an affiliate of BCB, shall have merged into
Heritage and Heritage shall be the surviving corporation, but, in connection
with such merger, the then-outstanding shares of Common Stock have been changed
into or exchanged for stock or other securities of Heritage or any other person
or cash or any other property or the outstanding shares of Common Stock
immediately prior to such merger shall after such merger represent less than 50%
of the outstanding shares and share equivalents of the surviving corporation or
(iv) Heritage shall have sold or otherwise transferred more than 25% of its
consolidated assets to any person, other than BCB or an affiliate of BCB.
4. Payment and Delivery of Certificates. At any Closing hereunder,
------------------------------------
(a) BCB will make payment to Heritage of the aggregate price for the Option
Shares so purchased by wire transfer of immediately available funds to an
account designated by Heritage, (b) Heritage will deliver to BCB a stock
certificate or certificates representing the number of Option Shares so
purchased, registered in the name of BCB or its designee, in such denominations
as were specified by BCB in its notice of exercise, and (c) BCB will pay any
transfer or other taxes required by reason of the issuance of the Option Shares
so purchased.
A legend will be placed on each stock certificate evidencing Option
Shares issued pursuant to this Stock Option Agreement, which legend will read
substantially as follows:
"The shares of stock evidenced by this certificate have not been
the subject of a registration statement filed under the Securities Act of
1933, as amended (the "Act"), and declared effective by the Securities and
Exchange Commission. These shares may not be sold, transferred or
otherwise disposed of prior to such time unless Heritage Bancorp, Inc.
receives an opinion of counsel acceptable to it stating that an
7
<PAGE>
exemption from the registration provisions of the Act is available for such
transfer."
5. Registration Rights. Upon or after the occurrence of a
-------------------
Triggering Event and upon receipt of a written request from BCB, Heritage shall
prepare and file as soon as practicable a registration statement under the
Securities Act of 1933 (the "Securities Act") with the Securities and Exchange
Commission covering the Option and such number of Option Shares as BCB shall
specify in its request, and Heritage shall use its best efforts to cause such
registration statement to be declared effective in order to permit the sale or
other disposition of the Option and the Option Shares, provided that BCB shall
in no event have the right to have more than one such registration statement
become effective, and provided further that Heritage shall not be required to
prepare and file any such registration statement in connection with any proposed
sale with respect to which counsel to Heritage delivers to Heritage and to BCB
its opinion to the effect that no such filing is required under applicable laws
and regulations with respect to such sale or disposition; provided further,
however, that Heritage may delay any registration of Option Shares above for a
period not exceeding 90 days in the event that Heritage shall in good faith
determine that any such registration would adversely affect an offering or
contemplated offering of securities by Heritage. BCB shall provide all
information reasonably requested by Heritage for inclusion in any registration
statement to be filed hereunder. In connection with such filing, Heritage shall
use its reasonable best efforts to cause to be delivered to BCB such
certificates, opinions, accountant's letters and other documents as BCB shall
reasonably request and as are customarily provided in connection with
registration of securities under the Securities Act. Heritage shall provide to
BCB such number of copies of the preliminary prospectus and final prospectus and
any amendments and supplements thereto as BCB may reasonably request.
All reasonable expenses incurred by Heritage in complying with the
provisions of this Section 5, including, without limitation, all registration
and filing fees, reasonable printing expenses, reasonable fees and disbursements
of counsel for Heritage and blue sky fees and expenses, shall be paid by
Heritage. Underwriting discounts and commissions to brokers and dealers
relating to the Option Shares, fees and disbursements of counsel to BCB and any
other expenses incurred by BCB in connection with such filing shall be borne by
BCB. In connection with such filing, Heritage shall indemnify and hold harmless
BCB against any losses, claims, damages or liabilities, joint or several, to
which BCB may become subject, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any preliminary or final registration statement or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact
8
<PAGE>
required to be stated therein or necessary to make the statements therein not
misleading; and Heritage will reimburse BCB for any legal or other expense
reasonably incurred by BCB in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that Heritage
will not be liable in any case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such preliminary or
final registration statement or such amendment or supplement thereto in reliance
upon and in conformity with written information furnished by or on behalf of BCB
specifically for use in the preparation thereof. BCB will indemnify and hold
harmless Heritage to the same extent as set forth in the immediately preceding
sentence but only with reference to written information furnished by or on
behalf of BCB for use in the preparation of such preliminary or final
registration statement or such amendment or supplement thereto; and BCB will
reimburse Heritage for any legal or other expense reasonably incurred by
Heritage in connection with investigating or defending any such loss, claim,
damage, liability or action. Notwithstanding anything to the contrary contained
herein, no indemnifying party shall be liable for any settlement effected
without its prior written consent.
6. Adjustment Upon Changes in Capitalization. In the event of any
-----------------------------------------
change in the Common Stock by reason of stock dividends, split-ups,
recapitalizations, combinations, conversions, divisions, exchanges of shares or
the like, then the number and kind of Option Shares and the Option Price shall
be appropriately adjusted.
7. Filings and Consents. Each of BCB and Heritage will use its
--------------------
reasonable best efforts to make all filings with, and to obtain consents of, all
third parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Stock Option Agreement. Within 10 days from
the date hereof, BCB shall file a report of beneficial ownership on Form 13D
with the Securities and Exchange Commission under the Exchange Act which
discloses the rights of BCB hereunder.
8. Representations and Warranties of Heritage. Heritage hereby
------------------------------------------
represents and warrants to BCB as follows:
(a) Due Authorization. Heritage has full corporate power and
-----------------
authority to execute, deliver and perform this Stock Option Agreement and all
corporate action necessary for execution, delivery and performance of this Stock
Option Agreement has been duly taken by Heritage. This Stock Option Agreement
constitutes a legal, valid and binding obligation of Heritage, enforceable
against Heritage in accordance with its terms (except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or affecting
creditors' rights or by general equity principles).
9
<PAGE>
(b) Authorized Shares. Heritage has taken all necessary
-----------------
corporate action to authorize and reserve for issuance all shares of Common
Stock that may be issued pursuant to any exercise of the Option.
9. Representations and Warranties of BCB. BCB hereby represents and
-------------------------------------
warrants to Heritage that BCB has full corporate power and authority to execute,
deliver and perform this Stock Option Agreement and all corporate action
necessary for execution, delivery and performance of this Stock Option Agreement
has been duly taken by BCB. This Stock Option Agreement constitutes a legal,
valid and binding obligation of BCB, enforceable against BCB in accordance with
its terms (except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles).
10. Specific Performance. The parties hereto acknowledge that
--------------------
damages would be an inadequate remedy for a breach of this Stock Option
Agreement and that the obligations of the parties hereto shall be specifically
enforceable.
11. Entire Agreement. This Stock Option Agreement and the Agreement
----------------
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, among the parties or any of them with respect to the subject
matter hereof.
12. Assignment or Transfer. BCB may not sell, assign or otherwise
----------------------
transfer its rights and obligations hereunder, in whole or in part, to any
person or group of persons other than to a subsidiary of BCB. BCB represents
that it is acquiring the Option for BCB's own account and not with a view to, or
for sale in connection with, any distribution of the Option or the Option
Shares. BCB is aware that neither the Option nor the Option Shares is the
subject of a registration statement filed with, and declared effective by, the
Securities and Exchange Commission pursuant to Section 5 of the Securities Act,
but instead each is being offered in reliance upon the exemption from the
registration requirement provided by Section 4(2) thereof and the
representations and warranties made by BCB in connection therewith.
13. Amendment of Stock Option Agreement. By mutual consent of the
-----------------------------------
parties hereto, this Stock Option Agreement may be amended in writing at any
time, for the purpose of facilitating performance hereunder or to comply with
any applicable regulation of any governmental authority or any applicable order
of any court or for any other purpose.
14. Validity. The invalidity or unenforceability of any provision of
--------
this Stock Option Agreement shall not affect the
10
<PAGE>
validity or enforceability of any other provisions of this Stock Option
Agreement, which shall remain in full force and effect.
15. Notices. All notices, requests, consents and other
-------
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered personally, by telegram or
telecopy, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
(i) If to BCB, to:
BCB Financial Services Corporation
The Madison Building
400 Washington Street
Reading, Pennsylvania 19601
Attention: Nelson R. Oswald, President
and Chief Executive Officer
Telecopy No.: (610) 378-9193
with a copy to:
Stevens & Lee
One Glenhardie Corporate Center
1275 Drummers Lane
Wayne, Pennsylvania 19087
Attention: Jeffrey P. Waldron, Esquire
Telecopy No.: (610) 687-1384
(ii) If to Heritage, to:
Heritage Bancorp, Inc.
120 South Centre Street
Pottsville, Pennsylvania 17901
Attention: Allen E. Kiefer
President
and Chief Executive Officer
Telecopy No.: (717) 622-2320
with copies to:
Rhoads & Sinon LLP
One South Market Street, 12th Floor
Harrisburg, Pennsylvania 17108
Attention: Charles J. Ferry, Esquire
Telecopy No.: (717) 232-1459
11
<PAGE>
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
16. Governing Law. This Stock Option Agreement shall be governed by
-------------
and construed in accordance with the domestic internal law (but not the law of
conflicts of law) of the Commonwealth of Pennsylvania.
17. Captions. The captions in this Stock Option Agreement are
--------
inserted for convenience and reference purposes, and shall not limit or
otherwise affect any of the terms or provisions hereof.
18. Waivers and Extensions. The parties hereto may, by mutual
----------------------
written consent, extend the time for performance of any of the obligations or
acts of either party hereto. Each party may waive in writing (i) compliance
with any of the covenants of the other party contained in this Stock Option
Agreement and/or (ii) the other party's performance of any of its obligations
set forth in this Stock Option Agreement.
19. Parties in Interest. This Stock Option Agreement shall be
-------------------
binding upon and inure solely to the benefit of each party hereto, and, nothing
in this Stock Option Agreement, express or implied, is intended to confer upon
any other person any rights or remedies of any nature whatsoever under or by
reason of this Stock Option Agreement.
20. Counterparts. This Stock Option Agreement may be executed in two
------------
or more counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
21. Expenses. Except as otherwise provided herein, all costs and
--------
expenses incurred by the parties hereto in connection with the transactions
contemplated by this Stock Option Agreement or the Option shall be paid by the
party incurring such cost or expense.
12
<PAGE>
22. Defined Terms. Capitalized terms which are used but not defined
-------------
herein shall have the meanings ascribed to such terms in the Agreement.
IN WITNESS WHEREOF, each of the parties hereto, pursuant to
resolutions adopted by its Board of Directors, has caused this Stock Option
Agreement to be executed by its duly authorized officer all as of the day and
year first above written.
BCB FINANCIAL SERVICES CORPORATION
By_________________________________
Nelson R. Oswald,
Chairman, President and Chief
Executive Officer
HERITAGE BANCORP, INC.
By_________________________________
Allen E. Kiefer
President and Chief Executive
Officer
13
<PAGE>
NEWS RELEASE [LOGO OF HERITAGE BANCORP, INC.
FROM APPEARS HERE]
RELEASE DATE: IMMEDIATE FOR ADDITIONAL INFORMATION
CONTACT: ALLEN E KIEFFER
THE HOLDING COMPANIES OF BERKS COUNTY BANK AND HERITAGE
NATIONAL BANK ANNOUNCE AFFILIATION
BCB Financial Services Corporation based in Reading, Pennsylvania and Heritage
Bancorp, Inc., located in Pottsville, Pennsylvania jointly announced the signing
of a Definitive Agreement and Plan of Consolidation. Under the Agreement BCB
and Heritage will consolidate into a new holding company which will direct the
banking activities of Berks County Bank and Heritage National Bank. On a pro
forma basis, at September 30, 1997 the resulting company would have had combined
assets of $798,653,000 and combined shareholders' equity of $86,028,000. Pro
forma earnings for the combined organization for the three and nine months ended
September 30, 1997 would have been $2,621,000 and $6,500,000 respectively.
Under the terms of the Agreement BCB shareholders will receive 1.3335 shares of
common stock of the new holding company for each BCB share owned on the date of
record. Heritage shareholders will receive 1.05 shares for each Heritage share
owned on the date of record. The transaction, which is subject to regulatory
approvals and the approval of BCB and Heritage shareholders, will be accounted
for as a pooling of interests and will be a tax free reorganization. The
transaction is expected to close during the second quarter of 1998.
Nelson R. Oswald, Chairman and President of BCB, said the combination of BCB and
Heritage, two respected and well established organizations, will result in a
stronger and larger organization that will better serve customers, shareholders,
local communities and employees. Oswald emphasized that the number one goal of
the new corporation would be to maintain a high level of personal service to its
customers through its two independent community banks, Heritage National Bank
and Berks County Bank. The combination will allow both banks to offer a broader
range of products and services to their customers.
Allen E. Keifer, President and CEO of Heritage, said the strengths of both
Corporations will complement each other well. BCB is recognized as one of the
fastest growing financial corporations and Heritage is recognized for its high
levels of profitability. The combination of growth and profitability will
benefit the shareholders of both Corporations in the future. "Heritage has
always dedicated itself to maximizing long-term shareholder value. This
combination will allow our shareholders to continue to benefit from solid
earnings growth, which has been the fundamental key to our success in recent
years."
1
120 South Centre Street; P.O. Box 1100; Pottsville, Pennsylvania 17901
Phone (717) 622-2320 . FAX (717) 622-2588
<PAGE>
BCB and Heritage, through their subsidiary banks, currently operate 19 community
offices in Berks, Montgomery, Schuylkill and Dauphin Counties. In addition,
there are loan offices in Berks, Bucks, Chester, Lehigh, Montgomery and
Schuylkill Counties.
Oswald and Kiefer jointly stated that "The affiliation of Heritage and BCB
presents a unique opportunity that will allow for the subsidiary community banks
to remain independent and service their separate markets. The combination will
result in operating efficiencies and increased profitability through the
consolidation of back-room operations. This will permit our Banks to provide an
even higher level of personalized services that the over 100,000 individual and
business customers we serve have come to expect."
Oswald and Kiefer stated that the merger of BCB and Heritage is unique because
- -- unlike most mergers which result in massive layoffs -- the anticipated growth
of the new organization will result in the likely creation of well over a
hundred new jobs over the next few years.
Executive management of the new corporation will include Nelson R. Oswald,
Chairman and Chief Executive Officer; Allen E. Kiefer, President and Chief
Operating Officer; Robert D. McHugh, Jr., Executive Vice President and Chief
Financial Officer and Richard A. Ketner, Executive Vice President and Chief
Administrative Officer. Oswald will continue to be President and CEO of Berks
County Bank and Kiefer will serve as President and CEO of Heritage National
Bank.
2
