SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
February 18, 2000
FIDELITY BANCORP, INC.
---------------------------------------
(Exact name of Registrant as specified in its Charter)
Pennsylvania 0-22288 25-1705405
-------------- --------- -----------
(State or other jurisdiction (SEC File No.) (IRS Employer Identification
of incorporation) Number)
1009 Perry Highway, Pittsburgh, Pennsylvania 15237
- --------------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (412) 367-3300
--------------
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last Report)
<PAGE>
INFORMATION TO BE INCLUDED IN REPORT
------------------------------------
Item 5. Other Events
- ------- ------------
A copy of a press release issued February 18, 2000 by the Registrant is
attached hereto as Exhibit 99 and is incorporated herein by reference in its
entirety.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
- ------- ------------------------------------------------------------------
Exhibit 99 -- Press Release concerning Merger Agreement dated February 18, 2000.
- ----------
Exhibit 99.1 -- Agreement and Plan of Merger between Fidelity Bancorp, Inc. and
- ------------
Penwood Bancorp, Inc., dated as of February 18, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, hereunto duly authorized.
FIDELITY BANCORP, INC.
Date: February 23, 2000 By: /s/William L. Windisch
------------------------------
William L. Windisch
President
EXHIBIT 99
<PAGE>
February 18, 2000 Fidelity Bancorp, Inc.
William L. Windisch
(412) 367-3300
Pennwood Bancorp, Inc.
Paul S. Pieffer
(412) 761-1234
FIDELITY BANCORP, INC. ANNOUNCES MERGER
WITH PENNWOOD BANCORP, INC.
Pittsburgh, Pennsylvania, February 18, 2000: Fidelity Bancorp, Inc.
(NASDAQ -- "FSBI") and Pennwood Bancorp, Inc. ("OTC BB -- "PWBK") jointly
announced today the signing of a Definitive Agreement and Plan of Merger,
whereby Fidelity will acquire all of the outstanding common stock of Pennwood
for $13.10 per share in cash. This represents an acquisition value of
approximately $7.5 million or 113% of Pennwood's stated book value at December
31, 1999. The acquisition is subject to several contingencies, including
approval by the stockholders of Pennwood and receipt of regulatory approval.
Pennwood will be filing a proxy statement and other relevant documents
concerning the merger with the Securities and Exchange Commission ("SEC"). WE
URGE INVESTORS TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS
FILED WITH THE SEC BECAUSE THEY CONTAIN IMPORTANT INFORMATION. Investors will be
able to obtain the documents free of charge at the SEC's website, www.sec.gov.
In addition, documents filed with the SEC by Pennwood will be available free of
charge from the Corporate Secretary of Pennwood at 683 Lincoln Avenue,
Pittsburgh, PA 15202, telephone (412) 761-1234. Documents filed with the SEC by
Fidelity will be available free of charge from the Corporate Secretary of
Fidelity at 1009 Perry Highway, Pittsburgh, PA 15237, telephone (412) 367-3300.
INVESTORS SHOULD READ THE PROXY STATEMENT CAREFULLY BEFORE MAKING A DECISION
CONCERNING THE MERGER.
<PAGE>
Pennwood and its directors and executive officers may be deemed to be
participants in the solicitation of proxies of Pennwood stockholders to approve
the merger. Pennwood's board of directors is composed of Mary M. Frank, Robert
W.Hannan, Michael Kotyk, John B. Mallon, Paul S. Pieffer, C. Joseph Touhill and
H. J. Zoffer. Collectively, the directors and executive officers at Pennwood may
be deemed to beneficially own approximately 24% of Pennwood's common stock. This
ownership information is as of December 31, 1999. As a result of consummation of
the merger, all stock options and shares of restricted stock awarded under
Pennwood's stock benefit plans will vest. Holders of Pennwood's stock options
will receive cash in an amount equal to the difference between $13.10 and the
option exercise price.
Fidelity Bank, the subsidiary of Fidelity Bancorp, Inc., is a
full-service community bank operating from nine offices in Allegheny and Butler
Counties, Pennsylvania. Pennwood Savings Bank, the subsidiary of Pennwood
Bancorp, Inc., operates from three offices in Pittsburgh and Kittanning,
Pennsylvania. William L. Windisch, President and Chief Executive Officer of
Fidelity, stated, "We are pleased to announce the acquisition of Pennwood. This
will be a positive addition to the Company. Merging Pennwood into Fidelity will
permit us to offer our full line of financial services to Pennwood customers and
the residents and businesses in their communities. We expect the acquisition to
be accretive to earnings during the first year." Paul S. Pieffer, President and
Chief Executive Officer of Pennwood said, "We are delighted to become part of
Fidelity, a local community-oriented financial institution. We believe the
transaction is in the best interests of our stockholders, customers and
employees. We believe this merger will provide long term benefits for our
customers." At December 31, 1999, Fidelity had total assets and stockholders'
equity of $497.5 million and $24.7 million, respectively.
EXHIBIT 99.1
<PAGE>
AGREEMENT AND PLAN OF MERGER
between
FIDELITY BANCORP, INC.
and
PENNWOOD BANCORP, INC.
dated as of February 18, 2000
<PAGE>
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS..............................................................................................1
ARTICLE II
THE MERGER...............................................................................................6
2.1 The Corporate Merger and Subsequent Events...................................................6
2.2 Effective Time; Closing......................................................................6
2.3 Treatment of Capital Stock...................................................................6
2.4 Shareholder Rights; Stock Transfers..........................................................7
2.5 Options and Restricted Stock.................................................................7
2.6 Exchange Procedures..........................................................................8
2.7 Dissenting Shares............................................................................9
2.8 Additional Actions...........................................................................9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER................................................................10
3.1 Capital Structure...........................................................................10
3.2 Organization, Standing and Authority of Seller..............................................10
3.3 Ownership of Seller Subsidiaries............................................................10
3.4 Organization, Standing and Authority of Seller Subsidiaries.................................11
3.5 Authorized and Effective Agreement..........................................................11
3.6 Securities Documents and Regulatory Reports.................................................12
3.7 Financial Statements........................................................................12
3.8 Material Adverse Change.....................................................................13
3.9 Environmental Matters.......................................................................13
3.10 Tax Matters.................................................................................14
3.11 Legal Proceedings...........................................................................14
3.12 Compliance with Laws........................................................................15
3.13 Certain Information.........................................................................15
3.14 Employee Benefit Plans......................................................................15
3.15 Certain Contracts...........................................................................17
3.16 Brokers and Finders.........................................................................17
3.17 Insurance...................................................................................18
3.18 Properties..................................................................................18
3.19 Labor.......................................................................................18
3.20 Allowance for Loan Losses...................................................................18
3.21 Year 2000 Compliant.........................................................................19
3.22 Material Interests of Certain Persons.......................................................19
3.23 Fairness Opinion............................................................................19
3.24 Disclosures.................................................................................19
3.25 No Undisclosed Liabilities..................................................................19
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
3.26 Loan Portfolio..............................................................................20
3.27 Investment Portfolio........................................................................20
3.28 Interest Rate Risk Management Instruments...................................................20
3.29 Interim Events..............................................................................20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER.................................................................21
4.1 Organization, Standing and Authority of Buyer...............................................21
4.2 Ownership of Buyer Subsidiaries.............................................................21
4.3 Organization, Standing and Authority of Buyer Subsidiaries..................................21
4.4 Authorized and Effective Agreement..........................................................21
4.5 Securities Documents and Regulatory Reports.................................................22
4.6 Financial Statements........................................................................23
4.7 Material Adverse Change.....................................................................23
4.8 Legal Proceedings...........................................................................24
4.9 Certain Information.........................................................................24
4.10 Brokers and Finders.........................................................................24
4.11 Disclosures.................................................................................24
4.12 Financial Resources.........................................................................24
ARTICLE V
COVENANTS...............................................................................................25
5.1 Reasonable Best Efforts.....................................................................25
5.2 Shareholder Meeting.........................................................................25
5.3 Regulatory Matters..........................................................................25
5.4 Investigation and Confidentiality...........................................................26
5.5 Press Releases..............................................................................27
5.6 Business of the Parties.....................................................................27
5.7 Certain Actions.............................................................................30
5.8 Current Information.........................................................................30
5.9 Indemnification; Insurance..................................................................31
5.10 Advisory Directors After the Company Merger.................................................31
5.11 Employees and Employee Benefit Plans........................................................31
5.12 Company Merger..............................................................................33
5.13 Bank Merger.................................................................................34
5.14 Organization of Merger Sub..................................................................34
5.15 Conforming Entries..........................................................................34
5.16 Integration of Policies.....................................................................35
5.17 Disclosure Supplements......................................................................35
5.18 Failure to Fulfill Conditions...............................................................35
5.19 Environmental Reports.......................................................................35
5.20 Transaction Expenses of Seller..............................................................36
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE VI
CONDITIONS PRECEDENT....................................................................................36
6.1 Conditions Precedent - Buyer and Seller.....................................................36
6.2 Conditions Precedent - Seller...............................................................37
6.3 Conditions Precedent - Buyer................................................................38
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT.......................................................................39
7.1 Termination.................................................................................39
7.2 Effect of Termination.......................................................................40
7.3 Survival of Representations, Warranties and Covenants.......................................41
7.4 Waiver......................................................................................41
7.5 Amendment or Supplement.....................................................................42
ARTICLE VIII
MISCELLANEOUS...........................................................................................42
8.1 Entire Agreement............................................................................42
8.2 No Assignment...............................................................................42
8.3 Notices.....................................................................................42
8.4 Alternative Structure.......................................................................43
8.5 Interpretation..............................................................................43
8.6 Counterparts................................................................................43
8.7 Governing Law...............................................................................44
8.8 Severability................................................................................44
8.9 Standard of Materiality.....................................................................44
</TABLE>
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
WHEREAS, the Boards of Directors of Buyer and Seller (all terms as
defined in Article I hereof) have determined to consummate certain business
combination transactions subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of such inducements and of the mutual
covenants and agreements contained herein, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Agreement" shall mean this Agreement and Plan of Merger dated as of
February 18, 2000 between Buyer and Seller.
"Articles of Merger" shall mean the articles of merger to be filed with
the Pennsylvania Secretary of State with respect to the Corporate Merger and the
Company Merger.
"Bank Merger" shall mean the contemplated merger of Seller Bank into
Buyer Bank, with Buyer Bank surviving.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"BIF" shall mean the Bank Insurance Fund administered by the FDIC or
any successor thereto.
"Buyer" shall mean Fidelity Bancorp, Inc., a Pennsylvania corporation.
"Buyer Bank" shall mean Fidelity Savings Bank, a Pennsylvania-chartered
stock savings bank and wholly owned subsidiary of Buyer.
"Buyer Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Buyer as of September
30, 1999 and 1998 and the consolidated income statements and statements of
changes in equity and cash flows (including related notes and schedules, if any)
of Buyer for each of the three years ended September 30, 1999, 1998 and 1997, as
filed by Buyer in its Securities Documents, and (ii) the consolidated balance
sheets (including related notes and schedules, if any) of Buyer and the
consolidated income statements and statements of changes in equity and cash
flows (including related notes and schedules, if any) of Buyer included in
Securities Documents filed by Buyer with respect to the periods ended subsequent
to September 30, 1999.
<PAGE>
"Cause" shall mean termination because of the employee's personal
dishonesty in the conduct of his duties, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties or willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or final cease-and-desist order.
"Certificate" shall mean any certificate which prior to the Effective
Time represented shares of Seller Common Stock.
"Closing" shall mean the closing of the Corporate Merger at a time and
place reasonably selected by Buyer following the satisfaction or waiver of all
conditions to the Corporate Merger.
"Closing Date" shall mean the date on which the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company Merger" shall mean the contemplated Merger of the Surviving
Corporation into Buyer, with Buyer surviving.
"Corporate Merger" shall mean the merger of Merger Sub into Seller,
with Seller surviving.
"CRA" shall mean the Community Reinvestment Act.
"Department" shall mean the Pennsylvania Department of Banking.
"Dissenting Shares" shall mean any shares of Seller Common Stock whose
holder becomes entitled to the payment of the fair value of such shares under
the PBCL.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the time of the filing of the Articles of
Merger, or such later time as may be specified in the Articles of Merger.
"Environmental Claim" shall mean any written notice from any
Governmental Entity or third party alleging potential liability (including
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on, or resulting from the presence, or
release into the environment, of any Materials of Environmental Concern.
"Environmental Laws" shall mean any federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with any
Governmental Entity relating to (i) the protection, preservation or restoration
of the environment (including air, water vapor, surface water, groundwater,
drinking water supply, surface soil, subsurface soil, plant and animal life or
any other natural resource), and/or (ii) the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of Materials of Environment Concern. The term Environmental Law
includes (i) the Comprehensive Environmental Response, Compensation and
Liability Act, as
2
<PAGE>
amended, 42 U.S.C. ss.9601, et seq; the Resource Conservation and Recovery Act,
as amended, 42 U.S.C. ss.6901, et seq; the Clean Air Act, as amended, 42 U.S.C.
ss.7401, et seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
ss.1251, et seq; the Toxic Substances Control Act, as amended, 15 U.S.C.
ss.9601, et seq; the Emergency Planning and Community Right to Know Act, 42
U.S.C. ss.1101, et seq; the Safe Drinking Water Act, 42 U.S.C. ss.300f, et seq;
and all comparable state and local laws, and (ii) any common law (including
common law that may impose strict liability) that may impose liability or
obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" shall mean an exchange agent designated by Buyer, who
shall be reasonably acceptable to Seller.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System.
"FHLB" shall mean the Federal Home Loan Bank of Pittsburgh.
"GAAP" shall mean generally accepted accounting principles.
"Governmental Entity" shall mean any federal or state court,
administrative agency or commission or other governmental authority or
instrumentality.
"include" shall mean "include without limitation."
"Insider Loans" shall mean loans from Seller or any Seller Subsidiary
to any executive officer or director of Seller, any Seller Subsidiary or any
associate or related interest of any such person.
"IRS" shall mean the Internal Revenue Service or any successor thereto.
"Material Adverse Effect" shall mean, with respect to any Party, any
effect that is material and adverse to the financial condition, results of
operations or business of that Party and its Subsidiaries taken as whole, or
that materially impairs the ability of any Party to consummate the Merger,
provided, however, that Material Adverse Effect shall not be deemed to include
the impact of (a) changes in laws and regulations or interpretations thereof
that are generally applicable to the banking or savings industries, (b) changes
in GAAP that are generally applicable to the banking or savings industries, (c)
expenses incurred in connection with the transactions contemplated hereby, (d)
actions or omissions of a party (or any of its Subsidiaries) taken with the
prior informed written consent of the other party or parties in contemplation of
the transactions contemplated hereby, or (e)
3
<PAGE>
changes attributable to or resulting from changes in general economic
conditions, including changes in the prevailing level of interest rates.
"Materials of Environmental Concern" shall mean pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products and any
other materials regulated under Environmental Laws.
"Merger" shall mean the Corporate Merger, the other transactions
contemplated by this Agreement, the Company Merger and the Bank Merger.
"Merger Consideration" shall mean $13.10 in cash without interest for
each share of Seller Common Stock.
"Merger Sub" shall mean a Pennsylvania corporation to be organized as a
subsidiary of Buyer.
"Merger Sub Common Stock" shall mean the common stock of Merger Sub.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Parties" shall mean Buyer and Seller.
"PBCL" shall mean the Pennsylvania Business Corporation Law, as
amended.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Previously Disclosed" shall mean disclosed in a disclosure schedule
delivered on or prior to the date hereof by the disclosing Party to the other
Party specifically referring to the appropriate section of this Agreement and
describing in reasonable detail the matters contained therein.
"Proxy Statement" shall mean the proxy statement to be delivered to
shareholders of Seller in connection with the solicitation of their approval of
this Agreement and the transactions contemplated hereby.
"Rights" shall mean warrants, options, rights, convertible securities
and other arrangements or commitments which obligate an entity to issue or
dispose of any of its capital stock or other ownership interests.
"SAIF" shall mean the Savings Association Insurance Fund administered
by the FDIC or any successor thereto.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
4
<PAGE>
"Securities Documents" shall mean all reports, offering circulars,
proxy statements, registration statements and all similar documents filed, or
required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the SEC promulgated thereunder.
"Seller" shall mean Pennwood Bancorp, Inc., a Pennsylvania corporation.
"Seller Bank" shall mean Pennwood Savings Bank, a
Pennsylvania-chartered savings bank and wholly owned subsidiary of Seller.
"Seller Common Stock" shall mean the common stock, par value $.01 per
share, of Seller.
"Seller Defined Benefit Plan" shall mean any Seller Employee Plan
constituting an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA.
"Seller Employee Plans" shall mean all stock option, employee stock
purchase and stock bonus plans, qualified pension or profit-sharing plans, any
deferred compensation, consultant, bonus or group insurance contract or any
other incentive, health and welfare or employee benefit plan or agreement
maintained for the benefit of employees or former employees of Seller, or any
Seller Subsidiary, whether written or oral.
"Seller ESOP" shall mean the employee stock ownership plan of Seller,
as in effect as of the date hereof.
"Seller Financial Statements" shall mean (i) the consolidated
statements of financial condition (including related notes and schedules, if
any) of Seller as of June 30, 1999 and 1998 and the consolidated statements of
income, shareholders' equity and cash flows (including related notes and
schedules, if any) of Seller for each of the three years ended June 30, 1999,
1998 and 1997 as filed by Seller in its Securities Documents, and (ii) the
consolidated statements of financial condition of Seller (including related
notes and schedules, if any) and the consolidated statements of income,
shareholders' equity and cash flows (including related notes and schedules, if
any) of Seller included in the Securities Documents filed by Seller with respect
to the periods ended subsequent to June 30, 1999.
"Seller Options" shall mean options to purchase shares of Seller Common
Stock issued pursuant to Seller's Stock Option Plan.
"Seller Preferred Stock" shall mean the shares of serial preferred
stock, par value $.01 per share, of Seller.
"Seller Restricted Stock" shall mean Seller Common Stock subject to
restrictions pursuant to Seller's Recognition and Retention Plan.
5
<PAGE>
"Subsidiary" and "Significant Subsidiary" shall have the meanings set
forth in Rule 1-02 of Regulation S-X of the SEC.
"Surviving Corporation" shall mean Seller after the Corporate Merger.
"Surviving Corporation Common Stock" shall mean the shares of common
stock of the Surviving Corporation.
"Year 2000 Compliant" shall mean that all hardware, firmware, software
and computer systems (i) continue to completely and accurately address, produce,
store and calculate data involving dates beginning with January 1, 2000 and
continue not to produce abnormally ending or incorrect results involving such
dates as used in any forward or regression dated based functions; and (ii)
continue to provide that all "date"-related functionalities and data fields
include the indication of century and millennium, and continue to perform
calculations which involve a four- digit year.
ARTICLE II
THE MERGER
2.1 The Corporate Merger and Subsequent Events
------------------------------------------
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time, Merger Sub shall be merged into Seller in accordance with the
provisions of Section 1921 of the PBCL, and the separate corporate existence of
Merger Sub shall cease. Seller shall be the Surviving Corporation of the
Corporate Merger, and shall continue its corporate existence under the laws of
the Commonwealth of Pennsylvania. The name of the Surviving Corporation shall be
as stated in the Articles of Incorporation of Seller immediately prior to the
Effective Time. Immediately following the Corporate Merger, (i) the Surviving
Corporation shall merge into Buyer, with Buyer surviving and (ii) the Seller
Bank shall merge with Buyer Bank, with Buyer Bank surviving.
(b) The Articles of Incorporation and Bylaws of Seller as in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
and Bylaws of the Surviving Corporation.
(c) The directors and officers of Merger Sub immediately prior to the
Effective Time shall be the directors and officers of the Surviving Corporation.
2.2 Effective Time; Closing
-----------------------
The Corporate Merger shall become effective at the Effective Time. The
Articles of Merger shall be filed as soon after the Closing as is practicable.
2.3 Treatment of Capital Stock
--------------------------
Subject to the provisions of this Agreement, at the Effective Time,
automatically by virtue of the Corporate Merger and without any action on the
part of any shareholder:
6
<PAGE>
(a) each outstanding share of Merger Sub Common Stock shall
automatically convert into a share of Surviving Corporation Common Stock;
(b) each share of Buyer's common stock shall continue unchanged as the
same share of Buyer's common stock; and
(c) each share of Seller Common Stock issued and outstanding
immediately prior to the Effective Time (other than Dissenting Shares) shall, by
virtue of the Corporate Merger and without any action of any kind by any person
or entity, be converted into the right to receive the Merger Consideration;
provided, however, that each share of Seller Common Stock which is owned
beneficially or of record by Seller (including treasury shares) or Buyer or any
of their respective Subsidiaries (other than shares held in a fiduciary capacity
for the benefit of third parties or as a result of debts previously contracted)
shall be canceled and retired without consideration or conversion.
2.4 Shareholder Rights; Stock Transfers
-----------------------------------
At the Effective Time, holders of Seller Common Stock shall cease to be
and shall have no rights as shareholders of Seller, other than to receive the
Merger Consideration for each share of Seller Common Stock held. After the
Effective Time, there shall be no transfers on the stock transfer books of
Seller or the Surviving Corporation of shares of Seller Common Stock and if
Certificates are presented for transfer after the Effective Time, they shall be
delivered to Buyer or the Exchange Agent for cancellation against delivery of
the Merger Consideration. No interest shall be paid on the Merger Consideration.
2.5 Options and Restricted Stock
----------------------------
At the Effective Time, each outstanding Seller Option granted to an
eligible individual (an "Optionee") under the Seller's Stock Option Plan shall
be, as indicated by the Optionee and subject to Buyer's discretion, converted
into an option to purchase Buyer's common stock ("Buyer Stock Option"), wherein
all material respects each Optionee receiving Buyer Stock Options will maintain
the same economically equivalent position that such Optionee previously held
with Seller Options, and the Buyer Stock Options that Optionees receive shall be
subject to the same terms and conditions that governed the Seller Option on
which it was based, including the length of time within which the Seller Option
may be exercised and for any Seller Options which are "incentive stock options"
(as defined in Section 422 of the Code), the adjustments shall be and are
intended to be effected in a manner which is consistent with Section 424(a) of
the Code. If the Optionee shall elect not to convert an option to purchase
Seller Common Stock to an option to purchase Buyer's common stock or if Buyer
determines not to issue Buyer Stock Options in exchange for Seller Options, each
share of Seller Common Stock under such Seller Options shall be converted into a
right to receive the Merger Consideration less the applicable exercise price per
share.
At the Effective Time, each holder of an unvested share of Seller
Restricted Stock under the Seller's Recognition and Retention Plan shall be
entitled to receive an amount of compensation equal to the Merger Consideration
for each such share of Seller Restricted Stock subject to applicable
7
<PAGE>
federal and state tax withholding obligations of the Seller together with
accumulated but undistributed dividends on such Seller Restricted Stock.
2.6 Exchange Procedures
-------------------
(a) No later than five business days following the Effective Time,
Buyer shall cause the Exchange Agent to mail or make available to each holder of
record of any Certificate a notice and letter of transmittal disclosing the
effectiveness of the Corporate Merger and the procedure for exchanging
Certificates for the Merger Consideration. Such letter of transmittal shall
specify that delivery shall be effected and risk of loss and title shall pass
only upon proper delivery of Certificates to the Exchange Agent.
(b) At or prior to the Effective Time, Buyer shall deliver to the
Exchange Agent an amount of cash equal to the aggregate Merger Consideration.
(c) Each holder of any outstanding Certificate (other than holders of
Dissenting Shares) who surrenders such Certificate to the Exchange Agent will,
upon acceptance thereof by the Exchange Agent, be entitled to the Merger
Consideration for each share represented by such Certificate. The Exchange Agent
shall accept Certificates upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly exchange in
accordance with normal exchange practices. Each outstanding Certificate which is
not surrendered to the Exchange Agent shall, except as otherwise herein
provided, evidence ownership of only the right to receive the Merger
Consideration for each share represented by such Certificate.
(d) The Exchange Agent shall not be obligated to deliver the Merger
Consideration until the holder surrenders a Certificate as provided in this
Section 2.6, or, in default thereof, an appropriate affidavit of loss and
indemnity agreement and/or a bond as may be required in each case by the
Exchange Agent. If any check is to be issued in a name other than that in which
the Certificate is registered, it shall be a condition of the issuance thereof
that the Certificate so surrendered shall be properly endorsed or accompanied by
an executed form of assignment separate from the Certificate and otherwise in
proper form for transfer and that the person requesting such exchange pay to the
Exchange Agent any transfer or other tax required by reason of the issuance of a
check in any name other than that of the registered holder of the certificate
surrendered or otherwise establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
(e) Any portion of the cash delivered to the Exchange Agent by Buyer
pursuant to Section 2.6(b) that remains unclaimed by the shareholders of Seller
for six months after the Closing Date shall be delivered by the Exchange Agent
to Buyer. Any shareholders of Seller who have not theretofore complied with
Section 2.6(c) shall thereafter look only to Buyer for the Merger Consideration.
If outstanding Certificates are not surrendered or the payment for them is not
claimed prior to the date on which such payment would otherwise escheat to or
become the property of any Governmental Entity, the unclaimed items shall, to
the extent permitted by abandoned property and any other applicable law, become
the property of Buyer (and to the extent not in its possession shall be
delivered to it), free and clear of all claims or interest of any person
previously entitled to such property. Neither the Exchange Agent nor any party
to this Agreement shall be liable to any holder of Seller Common Stock
represented by any Certificate for any consideration paid to a public official
8
<PAGE>
pursuant to applicable abandoned property, escheat or similar laws. Buyer and
the Exchange Agent shall be entitled to rely upon the stock transfer books of
Seller to establish the identity of those persons entitled to receive the Merger
Consideration, which books shall be conclusive with respect thereto. In the
event of a dispute with respect to ownership of Seller Common Stock represented
by any Certificate, Buyer and the Exchange Agent shall be entitled to deposit
any Merger Consideration represented thereby in escrow with an independent third
party and thereafter be relieved with respect to any claims thereto.
(f) Buyer shall be entitled to deduct and withhold from consideration
otherwise payable pursuant to this Agreement to any holder of Certificates, such
amounts as it is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by Buyer, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the Certificates in respect of which such deduction and withholding
was made.
2.7 Dissenting Shares
-----------------
(a) Any holders of Dissenting Shares shall be entitled to payment for
such shares only to the extent permitted by and in accordance with the
provisions of the PBCL; provided, however, that if, in accordance with the PBCL,
any holder of Dissenting Shares shall forfeit such right to payment of the fair
value of such shares, such shares shall thereupon be deemed to have been
converted into and to have become exchangeable for, as of the Effective Time,
the right to receive the Merger Consideration. Dissenting Shares shall not,
after the Effective Time, be entitled to vote for any purpose or receive any
dividends or other distributions and shall be entitled only to such rights as
are afforded in respect of Dissenting Shares pursuant to the PBCL.
(b) Seller shall give Buyer (i) prompt notice of any written objections
to the Corporate Merger and any written demands for the payment of the fair
value of any shares, withdrawals of such demands, and any other instruments
served pursuant to the PBCL received by Seller and (ii) the opportunity to
participate in all negotiations and proceedings with respect to such demands
under the PBCL. Seller shall not voluntarily make any payment with respect to
any demands for payment of fair value and shall not, except with the prior
written consent of Buyer, settle or offer to settle any such demands.
2.8 Additional Actions
------------------
If, at any time after the Effective Time, Buyer shall consider that any
further assignments or assurances in law or any other acts are necessary or
desirable to (i) vest, perfect or confirm, of record or otherwise, in Buyer its
right, title or interest in, to or under any of the rights, properties or assets
of Seller acquired or to be acquired by Buyer as a result of, or in connection
with, the Merger, or (ii) otherwise carry out the purposes of this Agreement,
Seller and its proper officers and directors shall be deemed to have granted to
Buyer an irrevocable power of attorney to execute and deliver all such proper
deeds, assignments and assurances in law and to do all acts necessary or proper
to vest, perfect or confirm title to and possession of such rights, properties
or assets in Buyer and otherwise to carry out the purposes of this Agreement;
and the proper officers and directors of Buyer are fully authorized in the name
of Seller or otherwise to take any and all such action.
9
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows, except as
Previously Disclosed:
3.1 Capital Structure
-----------------
The authorized capital stock of Seller consists of 4,000,000 shares of
Seller Common Stock and 1,000,000 shares of Seller Preferred Stock. As of the
date hereof, 555,539 shares of Seller Common Stock are outstanding (including
21,478 shares of Seller Restricted Stock issued under Seller's Recognition and
Retention Plan), 257,880 shares of Seller Common Stock are held in treasury, and
no shares of Seller Preferred Stock have been issued. All outstanding shares of
Seller Common Stock have been duly authorized and validly issued and are fully
paid and nonassessable, and none of the outstanding shares of Seller Common
Stock has been issued in violation of the preemptive rights of any person, firm
or entity. Except for (i) Seller Options to acquire not more than 81,350 shares
of Seller Common Stock as of the date hereof, a schedule of which has been
Previously Disclosed, and (ii) 21,478 unvested shares of Seller Restricted Stock
as of the date hereof, a schedule of which has been Previously Disclosed, there
are no Rights authorized, issued or outstanding with respect to the capital
stock of Seller as of the date hereof.
3.2 Organization, Standing and Authority of Seller
----------------------------------------------
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania, with full corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as now conducted, and Seller is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
licensing or qualification. Seller is a bank holding company under the BHCA and
subject to the regulation and supervision by the Federal Reserve Board and the
Department. Seller has heretofore delivered to Buyer true and complete copies of
the Articles of Incorporation and Bylaws of Seller as in effect as of the date
hereof.
3.3 Ownership of Seller Subsidiaries
--------------------------------
Seller has Previously Disclosed the name, jurisdiction of incorporation
and percentage ownership of each direct or indirect Seller Subsidiary and
identified Seller Bank as its only Significant Subsidiary. Except for (x)
capital stock of Seller Subsidiaries, (y) securities and other interests held in
a fiduciary capacity and beneficially owned by third parties or taken in
consideration of debts previously contracted and (z) securities and other
interests which are Previously Disclosed, Seller does not own or have the right
to acquire, directly or indirectly, any outstanding capital stock or other
voting securities or ownership interests of any corporation, bank, savings
association, partnership, joint venture or other organization, other than
investment securities representing not more than 5% of any entity. The
outstanding shares of capital stock or other ownership interests of each Seller
Subsidiary have been duly authorized and validly issued, are fully paid and
nonassessable, and are directly owned by Seller free and clear of all liens,
claims, encumbrances, charges, pledges, restrictions or rights of third parties
of any kind whatsoever. No rights are
10
<PAGE>
authorized, issued or outstanding with respect to the capital stock or other
ownership interests of Seller Subsidiaries and there are no agreements,
understandings or commitments relating to the right of Seller to vote or to
dispose of such capital stock or other ownership interests.
3.4 Organization, Standing and Authority of Seller Subsidiaries
-----------------------------------------------------------
Each of the Seller Subsidiaries is a savings bank, corporation or
partnership duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is organized with full power and authority to
own or lease all of its properties and assets and to carry on its business as
now conducted, and each of the Seller Subsidiaries is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
licensing or qualification. The deposit accounts of Seller Bank are insured by
the SAIF to the maximum extent permitted by the FDIA and Seller Bank has paid
all deposit insurance premiums and assessments required by the FDIA and the
regulations thereunder. Seller has heretofore delivered to Buyer true and
complete copies of the Articles of Incorporation, as amended and restated, and
Bylaws of Seller Bank as in effect as of the date hereof.
3.5 Authorized and Effective Agreement
----------------------------------
(a) Seller has all requisite power and authority to enter into this
Agreement and (subject to receipt of all necessary governmental approvals and
the approval of Seller's shareholders of this Agreement) to perform all of its
respective obligations hereunder. The execution and delivery of this Agreement
and the completion of the transactions contemplated hereby have been deemed
advisable by the Board and duly authorized and approved by all necessary
corporate action in respect thereof on the part of Seller, except for the
approval of this Agreement by Seller's shareholders. This Agreement has been
duly and validly executed and delivered by Seller and, assuming due
authorization, execution and delivery by Buyer, constitutes a legal, valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms, subject, as to enforceability, to bankruptcy, insolvency and other laws
of general applicability relating to or affecting creditors' rights and to
general equity principles.
(b) Neither the execution and delivery of this Agreement nor completion
of the transactions contemplated hereby, nor compliance by Seller with any of
the provisions hereof (i) does or will conflict with or result in a breach of
any provisions of the Articles of Incorporation or Bylaws of Seller or the
equivalent documents of any Seller Subsidiary, (ii) violate, conflict with or
result in a breach of any term, condition or provision of, or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of Seller or any Seller
Subsidiary pursuant to, any material note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which
Seller or any Seller Subsidiary is a party, or by which any of their respective
properties or assets may be bound or affected, or (iii) subject to receipt of
all required governmental and shareholder approvals, violates any order, writ,
injunction, decree, statute, rule or regulation applicable to Seller or any
Seller Subsidiary.
11
<PAGE>
(c) To the best knowledge of Seller, except for (i) the filing of
applications and notices with and the approvals of the Federal Reserve Board and
the FDIC, (ii) the filing of applications with the Department and the approvals
of the Department, (iii) the filing and clearance of the Proxy Statement
relating to the meeting of shareholders of Seller to be held pursuant to Section
5.2 hereof with the SEC, (iv) the approval of this Agreement and the
transactions contemplated hereby by the requisite vote of the shareholders of
Seller, (v) the filing of the Articles of Merger with the Secretary of State of
the Commonwealth of Pennsylvania in connection with the Corporate Merger, (vi)
the filing of Articles of Merger with the Department in connection with the Bank
Merger, and (vii) review of the Merger by the DOJ under federal antitrust laws,
no consents or approvals of or filings or registrations with any Governmental
Entity or with any third party are necessary on the part of Seller or Seller
Bank in connection with (x) the execution and delivery by Seller of this
Agreement and the completion of the transactions contemplated hereby, or (y) the
Merger.
(d) Except as Previously Disclosed, as of the date hereof, neither
Seller nor Seller Bank is aware of any reasons relating to Seller or Seller Bank
(including CRA compliance) why all consents and approvals shall not be procured
from all Governmental Entities having jurisdiction over the Merger as shall be
necessary for the completion of the Merger and the continuation by Buyer after
the Effective Time of the business of each of Seller and Seller Bank,
respectively, as such business is carried on immediately prior to the Effective
Time, free of any conditions or requirements which could materially impair the
value of Seller or Seller Bank to Buyer.
3.6 Securities Documents and Regulatory Reports
-------------------------------------------
(a) Since January 1, 1997, Seller has timely filed with the SEC and the
NASD all Securities Documents required by the Securities Laws and such
Securities Documents complied in all material respects with the Securities Laws
and did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) Since January 1, 1997, each of Seller and Seller Bank has duly
filed with the FDIC and any other applicable federal or state banking authority,
as the case may be, the reports required to be filed under applicable laws and
regulations and such reports were in all material respects complete and accurate
and in compliance with the requirements of applicable laws and regulations. In
connection with the most recent examinations of Seller and Seller Bank by the
Federal Reserve Board, FDIC, and the Department, neither Seller nor Seller Bank
was required to correct or change any action, procedure or proceeding which
Seller or Seller Bank believes has not been corrected or changed as required.
3.7 Financial Statements
--------------------
(a) Seller has previously delivered or made available to Buyer accurate
and complete copies of the Seller Financial Statements, which are accompanied by
the audit reports of KPMG, LLP, independent certified public accountants with
respect to Seller. The Seller Financial Statements, as well as the Seller
Financial Statements to be delivered pursuant to Section 5.8 hereof, fairly
present or will fairly present, as the case may be, the consolidated financial
condition of Seller as of the respective dates set forth therein, and the
consolidated income, changes in shareholders'
12
<PAGE>
equity and cash flows of Seller for the respective periods or as of the
respective dates set forth therein.
(b) Each of the Seller Financial Statements referred to in Section
3.7(a) has been or will be, as the case may be, prepared in accordance with GAAP
consistently applied during the periods involved, except as stated therein. The
audits of Seller have been conducted in all material respects in accordance with
generally accepted auditing standards. The books and records of Seller and the
Seller Subsidiaries are being maintained in compliance with applicable legal and
accounting requirements, and such books and records accurately reflect all
dealings and transactions in respect of the business, assets, liabilities and
affairs of Seller and its Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for
in the Seller Financial Statements, (ii) of liabilities since incurred in the
ordinary course of business and (iii) of liabilities incurred in connection with
completion of the transactions contemplated by this Agreement, neither Seller
nor any Seller Subsidiary has any liabilities, whether absolute, accrued,
contingent or otherwise.
3.8 Material Adverse Change
-----------------------
Since June 30, 1999 or as Previously Disclosed, (i) Seller and its
Subsidiaries have conducted their respective businesses in the ordinary and
usual course (excluding the incurrence of expenses in connection with this
Agreement and the transactions contemplated hereby) and (ii) no event has
occurred or circumstance arisen that, in the aggregate, has had or is reasonably
likely to have a Material Adverse Effect on Seller.
3.9 Environmental Matters
---------------------
(a) To the best of Seller's knowledge, Seller and its Subsidiaries are
in compliance with all Environmental Laws. Neither Seller nor any Seller
Subsidiary has received any communication alleging that Seller or any Seller
Subsidiary is not in such compliance and, to the best knowledge of Seller, there
are no present circumstances that would prevent or interfere with the
continuation of such compliance.
(b) To the best of Seller's knowledge, none of the properties owned,
leased or operated by Seller or a Seller Subsidiary has been or is in violation
of or liable under any Environmental Law.
(c) To the best of Seller's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents that could
reasonably form the basis of any Environmental Claim or other claim or action or
governmental investigation that could result in the imposition of any liability
arising under any Environmental Law against Seller or a Seller Subsidiary or
against any person or entity whose liability for any Environmental Claim Seller
or a Seller Subsidiary has or may have retained or assumed either contractually
or by operation of law.
(d) Except in the ordinary course of its loan underwriting activities,
and except as Previously Disclosed, Seller has not conducted any environmental
studies during the past five years with respect to any properties owned by it or
a Seller Subsidiary as of the date hereof.
13
<PAGE>
3.10 Tax Matters
-----------
(a) Seller and its Subsidiaries have timely filed all federal, state
and local (and, if applicable, foreign) income, franchise, bank, excise, real
property, personal property and other tax returns required by applicable law to
be filed by them (including estimated tax returns, income tax returns,
information returns and withholding and employment tax returns) and have paid,
or where payment is not required to have been made, have set up an adequate
reserve or accrual for the payment of, all taxes required to be paid in respect
of the periods covered by such returns and, as of the Effective Time, will have
paid, or where payment is not required to have been made, will have set up an
adequate reserve or accrual for the payment of, all material taxes for any
subsequent periods ending on or prior to the Effective Time. Neither Seller nor
any Seller Subsidiary will have any material liability for any such taxes in
excess of the amounts so paid or reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by Seller and its Subsidiaries are complete and accurate in all material
respects. Neither Seller nor any Seller Subsidiary is delinquent in the payment
of any tax, assessment or governmental charge or has requested any extension of
time within which to file any tax returns in respect of any fiscal year or
portion thereof. The federal, state and local income tax returns of Seller and
its Subsidiaries have been audited by the applicable tax authorities for all
periods ended through December 31, 1994 (or are closed to examination due to the
expiration of the applicable statute of limitations) and no deficiencies for any
tax, assessment or governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against Seller or any Subsidiary as a result of such
audits or otherwise which have not been settled and paid. There are currently no
agreements in effect with respect to Seller or any Subsidiary to extend the
period of limitations for the assessment or collection of any tax. As of the
date hereof, no audit, examination or deficiency or refund litigation with
respect to any such return is pending or, to the best of Seller's knowledge,
threatened.
(c) Neither Seller nor any Seller Subsidiary (i) is a party to any
agreement providing for the allocation or sharing of taxes other than the
agreement between Seller and Seller Bank Previously Disclosed, (ii) is required
to include in income any adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary change in accounting method initiated by Seller or any
Subsidiary (nor does Seller have any knowledge that the IRS has proposed any
such adjustment or change of accounting method) or (iii) has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply.
3.11 Legal Proceedings
-----------------
Except as Previously Disclosed, there are no actions, suits, claims,
governmental investigations or proceedings instituted, pending or, to the best
knowledge of Seller, that are unasserted or threatened against Seller or any of
its Subsidiaries or against any asset, interest or right of Seller or any of its
Subsidiaries, or against any officer, director or employee of any of them.
Neither Seller nor any Seller Subsidiary is a party to any order, judgment or
decree.
14
<PAGE>
3.12 Compliance with Laws
--------------------
(a) Each of Seller and the Seller Subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, all Governmental Entities that are
required in order to permit it to carry on its business as it is presently being
conducted; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and will not be adversely affected by
virtue of the completion of the Merger; and to the best knowledge of Seller, no
suspension or cancellation of any of the same is threatened.
(b) Except as Previously Disclosed, neither Seller nor any Seller
Subsidiary is in violation of its respective Articles of Incorporation, Charter
or Bylaws, or of any applicable federal, state or local law or ordinance or any
order, rule or regulation of any Governmental Entity (including all banking
(including all regulatory capital requirements), truth-in-lending, usury, fair
credit reporting, consumer protection, securities, municipal securities, safety,
health, environmental, zoning, anti-discrimination, antitrust, and wage and hour
laws, ordinances, orders, rules and regulations), or in default with respect to
any order, writ, injunction or decree of any court, or in default under any
order, license, regulation or demand of any Governmental Entity; and neither
Seller nor any Seller Subsidiary has received any notice or communication from
any Governmental Entity asserting that Seller or any Seller Subsidiary is in
violation of any of the foregoing. Neither Seller nor any Seller Subsidiary is
subject to any regulatory or supervisory cease and desist order, agreement,
written directive, memorandum of understanding or written commitment (other than
those of general applicability to savings banks or holding companies thereof
issued by Governmental Entities), and neither of them has received any written
communication requesting that it enter into any of the foregoing.
3.13 Certain Information
-------------------
None of the information relating to Seller and its Subsidiaries
supplied or to be supplied by them for inclusion in the Proxy Statement, as of
the date such Proxy Statement is mailed to shareholders of Seller and up to and
including the date of the meeting of shareholders to which such Proxy Statement
relates, will contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided that
information as of a later date shall be deemed to modify information as of an
earlier date.
3.14 Employee Benefit Plans
----------------------
(a) Seller has Previously Disclosed all Seller Employee Plans and has
heretofore delivered to Buyer accurate and complete copies of each (including
amendments and agreements relating thereto) together with, in the case of
tax-qualified plans, (i) the most recent actuarial and financial reports
prepared with respect thereto, (ii) the most recent annual reports filed with
any Governmental Entity with respect thereto, and (iii) all rulings and
determination letters and any open requests for rulings or letters that pertain
thereto.
(b) None of Seller, any Seller Subsidiary, any Seller Defined Benefit
Plan or, to the best of Seller's knowledge, any fiduciary of a Seller Defined
Benefit Plan, has incurred any material
15
<PAGE>
liability to the PBGC or the IRS with respect to any Seller Defined Benefit
Plan. To the best of Seller's knowledge, no reportable event under Section
4043(b) of ERISA has occurred with respect to any Seller Defined Benefit Plan.
(c) Neither Seller nor any Seller Subsidiary participates in or has
incurred any liability under Section 4201 of ERISA for a complete or partial
withdrawal from a multi-employer plan (as such term is defined in ERISA).
(d) A favorable determination letter has been issued by the IRS with
respect to each Seller Defined Benefit Plan or Seller Employee Plans, including
Seller ESOP, which is intended to qualify under Section 401 of the Code to the
effect that such Seller Defined Benefit Plan and Seller Employee Plans,
including Seller ESOP, is qualified under Section 401 of the Code, and the trust
associated with such Seller Defined Benefit Plan and Seller Employee Plans,
including Seller ESOP, is tax exempt under Section 501 of the Code. No such
letter has been revoked or, to the best of Seller's knowledge, is threatened to
be revoked, and Seller does not know of any ground on which such revocation may
be based. Neither Seller nor any Seller Subsidiary has any liability under any
such Seller Defined Benefit Plan and Seller Employee Plans, including Seller
ESOP, that is not reflected in the Seller Financial Statements, other than
liabilities incurred in the ordinary course of business in connection therewith
subsequent to the date thereof.
(e) No transaction prohibited by Section 406 of ERISA (and not exempt
under Section 408 of ERISA or Section 4975 of the Code) has occurred with
respect to any Seller Employee Plan which would result in the imposition,
directly or indirectly, of an excise tax under Section 4975 of the Code or
otherwise have a Material Adverse Effect on Seller.
(f) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to the
date hereof, and full payment will be so made (or proper accruals will be so
established) of all contributions which are required for periods after the date
hereof and prior to the Effective Time, under the terms of each Seller Employee
Plan or ERISA; except as disclosed in the Seller Financial Statements, no
accumulated funding deficiency (as defined in Section 302 of ERISA or Section
412 of the Code), whether or not waived, exists with respect to any Seller
Defined Benefit Plan, and there is no "unfunded current liability" (as defined
in Section 412 of the Code) with respect to any Seller Defined Benefit Plan.
(g) The Seller Employee Plans have been operated in compliance in all
material respects with the applicable provisions of ERISA, the Code, all
regulations, rulings and announcements promulgated or issued thereunder and all
other applicable governmental laws and regulations. All contributions required
to be made to Seller Employee Plans at the date hereof have been made, and all
contributions required to be made to Seller Employee Plans as of the Effective
Time will have been made as of such date.
(h) There are no pending or, to the best knowledge of Seller,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of Seller Employee Plans or any trust related thereto or any
fiduciary thereof.
16
<PAGE>
(i) Neither Seller nor any Seller Subsidiary has made any payments, or
is or has been a party to any agreement or any Seller Employee Plan, that under
any circumstances could obligate it or its successor to make payments or deemed
payments, that (i) are not or will not be deductible because of Sections 162(m)
or 280G of the Code or (ii) require Buyer or any Buyer Subsidiary to record any
charge or expense therefor (or any tax gross-up payments) for financial
reporting purposes on a post-acquisition basis.
3.15 Certain Contracts
-----------------
(a) Except as Previously Disclosed, neither Seller nor any Subsidiary
is a party to, is bound or affected by, receives, or is obligated to pay,
benefits under (i) any agreement, arrangement or commitment, including any
agreement, indenture or other instrument, relating to the borrowing of money by
Seller or a Subsidiary (other than in the case of Seller Bank deposits, FHLB
advances, federal funds purchased and securities sold under agreements to
repurchase in the ordinary course of business) or the guarantee by Seller or a
Subsidiary of any obligation, other than by Seller Bank in the ordinary course
of its banking business, (ii) any agreement, arrangement or commitment relating
to the employment of a consultant or the employment, election or retention in
office of any present or former director, officer or employee of Seller or a
Subsidiary, (iii) any agreement, arrangement or understanding (other than as set
forth in this Agreement) pursuant to which any payment (whether of severance pay
or otherwise) became or may become due to any director, officer or employee of
Seller or a Subsidiary upon execution of this Agreement or upon or following
completion of the transactions contemplated by this Agreement (either alone or
in connection with the occurrence of any additional acts or events); (iv) any
agreement, arrangement or understanding pursuant to which Seller or a Subsidiary
is obligated to indemnify any director, officer, employee or agent of Seller or
a Subsidiary, other than as set forth in Seller Employee Plans and in the
Articles of Incorporation, Bylaws or other governing documents of Seller and its
Subsidiaries; (v) any agreement, arrangement or understanding to which Seller or
a Subsidiary is a party or by which any of the same is bound which limits the
freedom of Seller or a Subsidiary to compete in any line of business or with any
person; (vi) any assistance agreement, supervisory agreement, memorandum of
understanding, consent order, cease and desist order or condition of any
regulatory order or decree with or by the Federal Reserve Board, the FDIC, the
Department, or any other regulatory agency; or (vii) any agreement, arrangement
or understanding which would be required to be filed as an exhibit to Seller's
Annual Report on Form 10-KSB under the Exchange Act and which has not been so
filed.
(b) Neither Seller nor any Seller Subsidiary is in default or in
non-compliance under any contract, agreement, commitment, arrangement, lease,
insurance policy or other instrument to which it is a party or by which its
assets, business or operations may be bound or affected, whether entered into in
the ordinary course of business or otherwise and whether written or oral, and
there has not occurred any event that with the lapse of time or the giving of
notice, or both, would constitute such a default or non-compliance.
3.16 Brokers and Finders
-------------------
Except for Previously Disclosed agreements with FinPro Inc., neither
Seller nor any Seller Subsidiary nor any of their respective directors, officers
or employees, has employed any broker or
17
<PAGE>
finder or incurred any liability for any broker or finder fees or commissions in
connection with the transactions contemplated hereby.
3.17 Insurance
---------
Each of Seller and its Subsidiaries is insured for reasonable amounts
with financially sound and reputable insurance companies against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured and has maintained all insurance required by
applicable laws and regulations.
3.18 Properties
----------
All real and personal property owned by Seller or its Subsidiaries or
presently used by any of them in its respective business is in good condition
(ordinary wear and tear excepted) and is sufficient to carry on the business of
Seller and its Subsidiaries in the ordinary course of business consistent with
their past practices. Seller has good and marketable title free and clear of all
liens, encumbrances, charges, defaults or equities (other than equities of
redemption under applicable foreclosure laws) to all of its properties and
assets, real and personal, except (i) liens for current taxes not yet due or
payable, (ii) pledges to secure deposits and other liens incurred in the
ordinary course of its banking business, (iii) such imperfections of title,
easements and encumbrances, if any, as are de minimis in character, amount or
extent and (iv) as reflected in the Seller Financial Statements. All real and
personal property which is material to Seller's business on a consolidated basis
and leased or licensed by Seller or a Subsidiary is held pursuant to leases or
licenses which are valid and enforceable in accordance with their respective
terms and such leases will not terminate or lapse prior to the Effective Time.
All improved real property owned by Seller or its Subsidiaries is in compliance
with all applicable zoning laws.
3.19 Labor
-----
No work stoppage involving Seller or a Subsidiary is pending or, to the
best knowledge of Seller, threatened. Neither Seller nor a Subsidiary is
involved in or, to the best knowledge of Seller, threatened with or affected by,
any labor dispute, arbitration, lawsuit or administrative proceeding involving
the employees of Seller or a Subsidiary. Employees of Seller and Seller
Subsidiaries are not represented by any labor union nor are any collective
bargaining agreements otherwise in effect with respect to such employees, and to
the best of Seller's knowledge, there have been no efforts to unionize or
organize any employees of Seller or any Seller Subsidiaries during the past five
years.
3.20 Allowance for Loan Losses
-------------------------
The allowance for loan losses reflected on Seller's consolidated
statement of financial condition included in the Seller Financial Statements is,
and will be in the case of subsequently delivered Seller Financial Statements,
in the opinion of Seller's management, adequate in all material respects as of
their respective dates under the requirements of GAAP to provide for reasonably
anticipated losses on outstanding loans, net of recoveries. The real estate
owned reflected in the Seller Financial
18
<PAGE>
Statements is, and will be in the case of subsequently delivered Seller
Financial Statements, carried at the lower of cost or fair value, less estimated
costs to sell, as required by GAAP.
3.21 Year 2000 Compliant
-------------------
All hardware, firmware, software and computer systems of Seller and its
Subsidiaries are Year 2000 Compliant and shall continue to function in
accordance with their intended purpose without error or interruption during and
after the year 2000.
3.22 Material Interests of Certain Persons
-------------------------------------
(a) No officer or director of Seller, any Seller Subsidiary or any
"associate" (as such term is defined in Rule 14a-1 under the Exchange Act) or
related interest of any such person has any material interest in any material
contract or property (real or personal, tangible or intangible), used in, or
pertaining to, the business of Seller or any Subsidiary of Seller.
(b) There are no Insider Loans as of the date hereof.
3.23 Fairness Opinion
----------------
Seller has received an opinion from FinPro Inc. to the effect that, as
of the date hereof, the consideration to be received by shareholders of Seller
pursuant to this Agreement is fair, from a financial point of view, to such
shareholders.
3.24 Disclosures
-----------
None of the representations and warranties of Seller or any of the
written information or documents furnished or to be furnished by Seller to Buyer
in connection with or pursuant to this Agreement or the completion of the
transactions contemplated hereby, when considered as a whole, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
3.25 No Undisclosed Liabilities
--------------------------
Seller and its Subsidiaries do not have any liability, whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or to
become due, including any liability for taxes (and there is no past or present
fact, situation, circumstance, condition or other basis for any present or
future action, suit or proceeding, hearing, charge, complaint, claim or demand
against Seller or its Subsidiaries giving rise to any such liability) required
in accordance with generally accepted accounting principles to be reflected in
an audited consolidated balance sheet of Seller, except and to the extent (i)
reflected, disclosed or provided for in the Seller Financial Statements, (ii) of
liabilities since incurred in the ordinary course of business and (iii) of
liabilities incurred in connection with completion of the transactions
contemplated by this Agreement.
19
<PAGE>
3.26 Loan Portfolio
--------------
(i) All loans and discounts shown on the Seller Financial Statements or
which were entered into after the date of the most recent balance sheet included
in the Seller Financial Statements were and shall be made for good, valuable and
adequate consideration in the ordinary course of the business of Seller and its
Subsidiaries, in accordance with sound banking practices, and are not subject to
any known defenses, set-offs or counter-claims, including any such as are
afforded by usury or truth in lending laws, except as may be provided by
bankruptcy, solvency or similar laws or by general principles of equity, (ii)
the notes or other evidence of indebtedness evidencing such loans in all forms
of pledges, mortgages and other collateral documents and security agreements are
and shall be in force, valid, true and genuine and what they purport to be, and
(iii) except as Previously Disclosed, Seller and its Subsidiaries have complied
and shall prior to the Effective Time comply with all laws and regulations
relating to such loans.
3.27 Investment Portfolio
--------------------
All investment securities held by Seller or its Subsidiaries, as
reflected in the consolidated balance sheets of Seller included in the Seller
Financial Statements, are carried in accordance with GAAP, specifically
including but not limited to, FAS 115.
3.28 Interest Rate Risk Management Instruments
-----------------------------------------
Seller has Previously Disclosed all interest rate swaps, caps, floors,
option agreements or other interest rate risk management arrangements or
agreements, whether entered into for the account of Seller or its Subsidiaries
or for the account of a customer of Seller or one of its Subsidiaries. All such
arrangements and agreements were entered into in the ordinary course of business
and in accordance with prudent banking practice and applicable rules,
regulations and policies and with counter parties believed to be financially
responsible at the time and are legal, valid and binding obligations of Seller
or one of its Subsidiaries in force in accordance with their terms (subject to
the provisions of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws effecting the enforceability of creditors rights
generally from time to time and effect, and equitable principles relating to the
granting of specific performance and other equitable remedies as a matter of
judicial discretion), and are in full force and effect. Seller and its
Subsidiaries have duly performed all of their obligations thereunder to the
extent that such obligations to perform have accrued; and, to Seller's
knowledge, there are no breaches, violations or defaults or allegations or
assertions of such by any party thereunder.
3.29 Interim Events
--------------
Since December 31, 1999, except as Previously Disclosed, neither Seller
nor its Subsidiaries have paid or declared any dividend or made any other
distribution to shareholders or taken any action which if taken after the date
hereof would require the prior written consent of Buyer pursuant to Section 5.6
hereof.
20
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows, except as
Previously Disclosed:
4.1 Organization, Standing and Authority of Buyer
---------------------------------------------
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania, with full corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as now conducted, and Buyer is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
licensing or qualification. Buyer is a bank holding company under the BHCA and
subject to the regulations of the Federal Reserve Board. Buyer has heretofore
delivered to Seller true and complete copies of the Articles of Incorporation
and Bylaws of Buyer as in effect as of the date hereof.
4.2 Ownership of Buyer Subsidiaries
-------------------------------
Buyer has Previously Disclosed the name, jurisdiction of incorporation
and percentage ownership of each direct or indirect Buyer Subsidiary and
identified Buyer Bank as its only Significant Subsidiary. The outstanding shares
of capital stock or other ownership interests of each Buyer Subsidiary have been
duly authorized and validly issued, are fully paid and nonassessable, and are
directly owned by Buyer free and clear of all liens, claims, encumbrances,
charges, pledges, restrictions or rights of third parties of any kind
whatsoever. No Rights are authorized, issued or outstanding with respect to the
capital stock or other ownership interests of Buyer Subsidiaries and there are
no agreements, understandings or commitments relating to the right of Buyer to
vote or to dispose of such capital stock or other ownership interests.
4.3 Organization, Standing and Authority of Buyer Subsidiaries
----------------------------------------------------------
Each of the Buyer Subsidiaries is a savings bank, corporation or
partnership duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is organized, with full power and authority to
own or lease all of its properties and assets and to carry on its business as
now conducted, and each of the Buyer Subsidiaries is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
licensing or qualification. The deposit accounts of Buyer Bank are insured by
the FDIC to the maximum extent permitted by the FDIA and Buyer Bank has paid all
deposit insurance premiums and assessments required by the FDIA and the
regulations thereunder. Buyer has heretofore delivered to Seller true and
complete copies of the Articles of Incorporation and Bylaws of Buyer Bank as in
effect as of the date hereof.
4.4 Authorized and Effective Agreement
----------------------------------
(a) Buyer has all requisite power and authority to enter into this
Agreement and (subject to receipt of all necessary governmental approvals) to
perform all of its respective obligations hereunder. The execution and delivery
of this Agreement and the completion of the transactions
21
<PAGE>
contemplated hereby have been deemed advisable by the Board and duly authorized
and approved by all necessary corporate action in respect thereof on the part of
Buyer. This Agreement has been duly and validly executed and delivered by Buyer
and, assuming due authorization, execution and delivery by Seller, constitutes a
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(b) Neither the execution and delivery of this Agreement nor completion
of the transactions contemplated hereby, nor compliance by Buyer with any of the
provisions hereof (i) does or will conflict with or result in a breach of any
provisions of the Articles of Incorporation or Bylaws of Buyer or the equivalent
documents of any Buyer Subsidiary, (ii) violate, conflict with or result in a
breach of any term, condition or provision of, or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or give rise to any right of termination, cancellation or acceleration
with respect to, or result in the creation of any lien, charge or encumbrance
upon any property or asset of Buyer or any Buyer Subsidiary pursuant to, any
material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which Buyer or any Buyer
Subsidiary is a party, or by which any of their respective properties or assets
may be bound or affected, or (iii) subject to receipt of all required
governmental approvals, violates any order, writ, injunction, decree, statute,
rule or regulation applicable to Buyer or any Buyer Subsidiary.
(c) To the best knowledge of Buyer, except for (i) the filing of
applications and notices with and the approvals of the Federal Reserve Board and
the FDIC, (ii) the filing of applications with the Department and the approvals
of the Department, (iii) the filing of the Articles of Merger with the Secretary
of State of the Commonwealth of Pennsylvania in connection with the Corporate
Merger, (iv) the filing of a Articles of Merger with the Secretary of State of
the Commonwealth of Pennsylvania in connection with the Company Merger, (v) the
filing of Articles of Merger with the Department in connection with the Bank
Merger, and (vi) review of the Merger by the DOJ under federal antitrust laws,
no consents or approvals of or filings or registrations with any Governmental
Entity or with any third party are necessary on the part of Buyer, Merger Sub or
Buyer Bank in connection with (x) the execution and delivery by Buyer of this
Agreement, and the completion of the transactions contemplated hereby, or (y)
the Merger.
(d) As of the date hereof, neither Buyer nor Buyer Bank is aware of any
reasons relating to Buyer or Buyer Bank (including CRA compliance) why all
consents and approvals shall not be procured from all Governmental Entities
having jurisdiction over the Merger as shall be necessary for completion of the
Merger and continuation by Buyer after the Effective Time of the business of
each of Seller and Seller Bank, respectively, as such business is carried on
immediately prior to the Effective Time, free of any conditions or requirements
which could impair the value of Seller or Seller Bank to Buyer.
4.5 Securities Documents and Regulatory Reports
-------------------------------------------
(a) Since January 1, 1997, Buyer has timely filed with the SEC and the
NASD all Securities Documents required by the Securities Laws and such
Securities Documents complied in all material respects with the Securities Laws
and did not contain any untrue statement of a material
22
<PAGE>
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(b) Each of Buyer and Buyer Bank has since January 1, 1997, duly filed
with the Federal Reserve Board, FDIC, the Department and any other applicable
federal or state banking authority, as the case may be, the reports required to
be filed under applicable laws and regulations and such reports were in all
material respects complete and accurate and in compliance with the requirements
of applicable laws and regulations. In connection with the most recent
examinations of Buyer and Buyer Bank by the Federal Reserve Board, FDIC, and
Department, neither Buyer nor Buyer Bank was required to correct or change any
action, procedure or proceeding which Buyer or Buyer Bank believes has not been
corrected or changed as required.
4.6 Financial Statements
--------------------
(a) Buyer has previously delivered or made available to Seller accurate
and complete copies of the Buyer Financial Statements, which are accompanied by
the audit reports of KPMG LLP, independent certified public accountants with
respect to Buyer. The Buyer Financial Statements, as well as the Buyer Financial
Statements to be delivered pursuant to Section 5.8 hereof, fairly present and
will fairly present, as the case may be, the consolidated financial condition of
Buyer as of the respective dates set forth therein, and the consolidated income,
changes in equity and cash flows of Buyer for the respective periods or as of
the respective dates set forth therein.
(b) Each of the Buyer Financial Statements referred to in Section
4.4(a) has been or will be, as the case may be, prepared in accordance with GAAP
consistently applied during the periods involved, except as stated therein. The
audits of Buyer have been conducted in accordance with generally accepted
auditing standards. The books and records of Buyer and the Buyer Subsidiaries
are being maintained in compliance with applicable legal and accounting
requirements, and all such books and records accurately reflect all dealings and
transactions in respect of the business, assets, liabilities and affairs of
Buyer and its Subsidiaries.
(c) Except to the extent (i) reflected, disclosed or provided for in
the Buyer Financial Statements, (ii) of liabilities since incurred in the
ordinary course of business and (iii) of liabilities incurred in connection with
completion of the transaction contemplated by this Agreement, neither Buyer nor
any Buyer Subsidiary has any liabilities, whether absolute, accrued, contingent
or otherwise.
4.7 Material Adverse Change
-----------------------
Since December 31, 1999, (i) Buyer and its Subsidiaries have conducted
their respective businesses in the ordinary and usual course (excluding the
incurrence of expenses in connection with this Agreement and the transactions
contemplated hereby) and (ii) no event has occurred or circumstance arisen that,
in the aggregate, has had or is reasonably likely to have a Material Adverse
Effect on Buyer.
23
<PAGE>
4.8 Legal Proceedings
-----------------
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of Buyer, that are
unasserted or threatened against Buyer or any of its Subsidiaries or against any
asset, interest or right of Buyer or any of its Subsidiaries, or against any
officer, director or employee of any of them. Neither Buyer nor any Buyer
Subsidiary is a party to any order, judgment or decree.
4.9 Certain Information
-------------------
None of the information relating to Buyer and its Subsidiaries supplied
or to be supplied by them for inclusion in the Proxy Statement, as of the date
such Proxy Statement is mailed to shareholders of Seller and up to and including
the date of the meeting of shareholders to which such Proxy Statement relates,
will contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, provided that information as of a
later date shall be deemed to modify information as of an earlier date.
4.10 Brokers and Finders
-------------------
Except for Previously Disclosed agreements with Ryan, Beck & Co.,
neither Buyer nor any Buyer Subsidiary, nor any of their respective directors,
officers or employees, has employed any broker or finder or incurred any
liability for any broker or finder fees or commissions in connection with the
transactions contemplated hereby.
4.11 Disclosures
-----------
None of the representations and warranties of Buyer or any of the
written information or documents furnished or to be furnished by Buyer to Seller
in connection with or pursuant to this Agreement or the completion of the
transactions contemplated hereby, when considered as a whole, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
4.12 Financial Resources
-------------------
Buyer has the financial wherewithal and has, or will have prior to the
Effective Time, sufficient internal funds to perform its obligations under this
Agreement. Buyer and Buyer Bank are, and will be immediately following the
Merger, in material compliance with all applicable capital, debt and financial
and non-financial regulations of state and federal banking agencies having
jurisdiction over them.
24
<PAGE>
ARTICLE V
COVENANTS
5.1 Reasonable Best Efforts
-----------------------
Subject to the terms and conditions of this Agreement, each of Seller
and Buyer (i) shall use its reasonable best efforts in good faith to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary or advisable under applicable laws and regulations so as to permit and
otherwise enable completion of the Merger as promptly as reasonably practicable,
and (ii) shall cooperate fully with each other to that end. If necessary to
complete Bank Merger, Seller shall cause Seller Bank to amend its Amended and
Restated Articles of Incorporation to facilitate the completion of the Bank
Merger prior to the Effective Time.
5.2 Shareholder Meeting
-------------------
Seller shall take all action necessary to file the Proxy Statement
within 45 days of the date of this Agreement and to properly call and convene a
meeting of its shareholders as soon as practicable after the date hereof to
consider and vote upon this Agreement and the transactions contemplated hereby.
The Board of Directors of Seller will recommend that the shareholders of Seller
approve this Agreement and the transactions contemplated hereby, provided that
the Board of Directors of Seller may fail to make such recommendation, or
withdraw, modify or change any such recommendation, if such Board of Directors,
after having consulted with and considered the advice of outside counsel, has
determined that the making of such recommendation, or the failure to withdraw,
modify or change such recommendation, would constitute a breach of the fiduciary
duties of such directors under applicable law.
5.3 Regulatory Matters
------------------
(a) The parties hereto shall promptly cooperate with each other in the
preparation and filing of the Proxy Statement relating to the meeting of
shareholders of Seller to be held pursuant to Section 5.2 of this Agreement.
Each of Buyer and Seller shall use its reasonable best efforts to have the Proxy
Statement approved for mailing in definitive form as promptly as practicable and
thereafter Seller shall promptly mail to its shareholders the Proxy Statement.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file within 45 days after the
date hereof or as soon thereafter as is reasonably practicable, all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all Governmental Entities and third parties which are
necessary or advisable to consummate the transactions contemplated by this
Agreement. Buyer and Seller shall have the right to review in advance, and to
the extent practicable each will consult with the other on, in each case subject
to applicable laws relating to the exchange of information, all the information
which appears in any filing made with or written materials submitted to any
third party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals
25
<PAGE>
and authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein. The parties hereto agree
that they will use their reasonable best efforts to cause the Closing Date to
occur by June 30, 2000.
(c) Buyer and Seller shall, upon request, furnish each other with all
information concerning themselves, their respective Subsidiaries, directors and
officers, the shareholders of Seller and such other matters as may be reasonably
necessary or advisable in connection with any statement, filing, notice or
application made by or on behalf of Buyer, Buyer Bank, Merger Sub, Seller or
Seller Bank to any Governmental Entity in connection with the transactions
contemplated hereby.
(d) Buyer and Seller shall promptly furnish each other with copies of
written communications received by Buyer or Seller, as the case may be, or any
of their respective Subsidiaries from, or delivered by any of the foregoing to,
any Governmental Entity in respect of the transactions contemplated hereby.
5.4 Investigation and Confidentiality
---------------------------------
(a) The Seller shall permit the Buyer and its representatives
reasonable access to its properties and personnel, and shall disclose and make
available to the Buyer, upon the Buyer's reasonable request, all books, papers
and records relating to the assets, stock ownership, properties, operations,
obligations and liabilities of Seller and Seller Subsidiaries, including, but
not limited to, all books of account (including the general ledger), tax
records, minute books of meetings of boards of directors (and any committees
thereof) and shareholders, organizational documents, bylaws, material contracts
and agreements, filings with any regulatory authority, accountants' work papers,
litigation files, loan files, plans affecting employees, and any other business
activities or prospects in which the Buyer may have a reasonable interest,
provided that such access and any such reasonable request shall be reasonably
related to the transactions contemplated hereby and, in the reasonable opinion
of the Seller providing such access, not unduly interfere with normal
operations. The Seller and its Subsidiaries shall make their respective
directors, officers, employees and agents and authorized representatives
(including counsel and independent public accountants) available to confer with
the Buyer and its representatives, provided that such access shall be reasonably
related to the transactions contemplated hereby and shall not unduly interfere
with normal operations.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be treated
as the sole property of the party furnishing the information until completion of
the transactions contemplated hereby and, if such transactions shall not occur,
the party receiving the information shall either destroy or return to the party
which furnished such information all documents or other materials containing,
reflecting or referring to such information, shall use its best efforts to keep
confidential all such information, and shall not directly or indirectly use such
information for any competitive or other commercial purposes. The obligation to
keep such information confidential shall continue for five years from the date
the proposed transactions are abandoned but shall not apply to (i) any
information which (x) the party receiving the information can establish was
already in its possession prior to the disclosure thereof by the party
furnishing the information; (y) was then generally known to the public; or (z)
became known to the
26
<PAGE>
public through no fault of the party receiving the information; or (ii)
disclosures pursuant to a legal requirement or in accordance with an order of a
court of competent jurisdiction, provided that the party which is the subject of
any such legal requirement or order shall use its best efforts to give the other
party at least ten business days prior notice thereof.
5.5 Press Releases
--------------
Buyer agrees it will not issue any press release related to this
Agreement or the transactions contemplated hereby, without first consulting with
Seller as to the form and substance of public disclosures which may relate to
the transactions contemplated by this Agreement, provided, however, that nothing
contained herein shall prohibit either party, following notification to the
other party, from making any disclosure which is required by law or regulation.
5.6 Business of the Parties
-----------------------
(a) During the period from the date of this Agreement and continuing
until the Effective Time, except as expressly contemplated or permitted by this
Agreement or with the prior written consent of Buyer, Seller and its
Subsidiaries shall carry on their respective businesses in the ordinary course
consistent with past practice. During such period, Seller also will use all
reasonable efforts to (x) preserve its business organization and that of Seller
Bank intact, (y) keep available to itself and Buyer the present services of the
employees of Seller and Seller Bank and (z) preserve for itself and Buyer the
goodwill of the customers of Seller and Seller Bank and others with whom
business relationships exist. Without limiting the generality of the foregoing,
except with the prior written consent of Buyer or as expressly contemplated
hereby, between the date hereof and the Effective Time, Seller shall not, and
shall cause each Seller Subsidiary not to:
(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of Seller Common Stock, except for one regular
quarterly cash dividend at a rate per share of Seller Common Stock not
in excess of $0.075 per share to be paid on or after April 1, 2000;
provided, however, that (I) Seller shall be allowed to make or pay an
additional cash dividend at a rate per share on Seller Common Stock not
in excess of $0.075 per share if the Closing Date does not occur before
September 1, 2000, but only to the extent that such dividend may be
funded out of Seller's earnings for the quarter ended June 30, 2000;
and (II) that nothing contained herein shall be deemed to affect the
ability of a Subsidiary to pay dividends on its capital stock to
Seller;
(ii) issue any shares of its capital stock, other than upon
exercise of Seller Options referred to in Section 3.1 hereof; issue,
grant, modify or authorize any Rights; purchase any shares of Seller
Common Stock; or effect any recapitalization, reclassification, stock
dividend, stock split or like change in capitalization;
(iii) amend its Articles of Incorporation, Bylaws or similar
organizational documents, unless such amendment shall be necessary to
complete the Corporate Merger, Company Merger, or Bank Merger; impose,
or suffer the imposition, on any share of stock or other ownership
interest held by Seller in a Subsidiary of any lien,
27
<PAGE>
charge or encumbrance or permit any such lien, charge or encumbrance
to exist; or waive or release any material right or cancel or
compromise any material debt or claim;
(iv) increase the rate of compensation of any of its
directors, officers or employees, or pay or agree to pay any bonus or
severance to, or provide any other new employee benefit or incentive
to, any of its directors, officers or employees, except (i) Seller may
pay bonuses that in the aggregate do not exceed $25,000 to certain key
employees, as Previously Disclosed, provided such bonuses shall not be
paid to any employees that terminate employment prior to the Effective
Time, or (ii) as may be required by law;
(v) enter into or, except as may be required by law and for
amendments contemplated by Section 5.11 hereof, modify any Seller
Employee Plan or other employee benefit, incentive or welfare contract,
plan or arrangement, or any trust agreement related thereto, in respect
of any of its directors, officers or employees; or make any
contributions to any Seller Defined Benefit Plan or the Seller ESOP
(other than as required by law or regulation or in a manner and amount
consistent with past practices);
(vi) originate or purchase any loan in excess of $250,000 with
respect to loans secured by one- to four-family properties and in
excess of $300,000 with respect to loans secured by commercial
properties;
(vii) enter into (w) any transaction, agreement, arrangement
or commitment not made in the ordinary course of business, (x) any
agreement, indenture or other instrument relating to the borrowing of
money by Seller or a Subsidiary or guarantee by Seller or any Seller
Subsidiary of any such obligation, except in the case of Seller Bank
for deposits, FHLB advances, federal funds purchased and securities
sold under agreements to repurchase in the ordinary course of business
consistent with past practice, (y) any agreement, arrangement or
commitment relating to the employment of an employee or consultant, or
amend any such existing agreement, arrangement or commitment, provided
that Seller and Seller Bank may employ an employee in the ordinary
course of business if the employment of such employee is terminable by
Seller or Seller Bank at will without liability, other than as required
by law; or (z) any contract, agreement or understanding with a labor
union;
(viii) change its method of accounting in effect for the year
ended June 30, 1999, except as required by changes in laws or
regulations or GAAP, or change any of its methods of reporting income
and deductions for federal income tax purposes from those employed in
the preparation of its federal income tax return for such year, except
as required by changes in laws or regulations;
(ix) except as Previously Disclosed, make any expenditures in
excess of $10,000 individually or $25,000 in the aggregate, other than
(a) in the ordinary course of business, (b) in connection with the
transactions contemplated by this Agreement,
28
<PAGE>
(c) pursuant to binding commitments that have been Previously
Disclosed and are existing on the date hereof, and (d) expenditures
necessary to maintain existing assets in good repair; or enter into
any new lease or lease renewal of real property or any new lease or
lease renewal of personal property providing for annual payments
exceeding $5,000;
(x) file any applications or make any contract with respect to
branching or site location or relocation;
(xi) acquire in any manner whatsoever (other than to realize
upon collateral for a defaulted loan) control over or any equity
interest in any business or entity;
(xii) enter or agree to enter into any agreement or
arrangement granting any preferential right to purchase any of its
assets or rights or requiring the consent of any party to the transfer
and assignment of any such assets or rights;
(xiii) except as necessitated in the reasonable opinion of
Seller due to changes in interest rates, and in accordance with safe
and sound banking practices, change or modify in any material respect
any of its lending or investment policies, except to the extent
required by law or an applicable regulatory authority;
(xiv) except as necessitated in the reasonable opinion of
Seller due to changes in interest rates, and in accordance with safe
and sound banking practices, enter into any futures contract, option
contract, interest rate caps, interest rate floors, interest rate
exchange agreement or other agreement for purposes of hedging the
exposure of its interest-earning assets and interest-bearing
liabilities to changes in market rates of interest;
(xv) take any action that would result in any of the
representations and warranties of Seller contained in this Agreement
not to be true and correct in any material respect at the Effective
Time or that would cause any of the conditions of Sections 6.1 or 6.3
hereof not to be satisfied;
(xvi) take any action that would materially impede or delay
the completion of the transactions contemplated by this Agreement or
the ability of Buyer or Seller to perform its covenants and agreements
under this Agreement; or
(xvii) materially increase or decrease the rate of interest
paid on time deposits, or on certificates of deposit, except in a
manner and pursuant to policies consistent with past practices or to
reflect changes in market interest rates; or
(xviii) agree to do any of the foregoing.
(b) Seller shall promptly notify Buyer in writing of the occurrence of
any matter or event known to and directly involving Seller, which would not
include any changes in conditions that affect
29
<PAGE>
the banking industry generally, that would have, either individually or in the
aggregate, a Material Adverse Effect on Seller.
(c) Except with the prior written consent of Seller or as expressly
contemplated hereby, between the date hereof and the Effective Time, Buyer shall
not, and shall cause each Buyer Subsidiary not to:
(i) take any action that would result in any of the
representations and warranties of Buyer contained in this Agreement not
to be true and correct in any material respect at the Effective Time or
that would cause any of the conditions of Sections 6.1 or 6.2 hereof
not to be satisfied;
(ii) take any action that would materially impede or delay the
completion of the transactions contemplated by this Agreement or the
ability of Buyer or Seller to perform its covenants and agreements
under this Agreement; or
(iii) agree to do any of the foregoing.
5.7 Certain Actions
---------------
Seller shall not, and shall cause each Seller Subsidiary not to,
solicit or encourage inquiries or proposals with respect to, furnish any
information relating to, or participate in any negotiations or discussions
concerning, any acquisition, purchase of all or a substantial portion of the
assets of, or any equity interest in, Seller or a Subsidiary (other than with
Buyer or an affiliate thereof), provided, however, that the Board of Directors
of Seller may furnish such information or participate in such negotiations or
discussions if such Board of Directors, after having consulted with and
considered the advice of outside counsel, has determined that the failure to do
the same may constitute a breach of fiduciary duties of such directors under
applicable law. Seller will promptly inform Buyer orally and in writing of any
such request for information or of any such negotiations or discussions, as well
as instruct its and its Subsidiaries' directors, officers, representatives and
agents to refrain from taking any action prohibited by this Section 5.7.
5.8 Current Information
-------------------
During the period from the date hereof to the Effective Time, Seller
shall, upon the request of Buyer, cause one or more of its designated
representatives to confer on a monthly or more frequent basis with
representatives of Buyer regarding Seller's financial condition, operations and
business and matters relating to the completion of the transactions contemplated
hereby. As soon as reasonably available, but in no event more than two business
days after filing, Seller will deliver to Buyer all reports filed by it under
the Exchange Act subsequent to the date hereof. Seller also will deliver to
Buyer each call report or similar report filed by it with the FDIC or the
Department concurrently with the filing of such call report. Within 20 days
after the end of each month, Seller will deliver to Buyer an unaudited
consolidated balance sheet and an unaudited consolidated statement of income,
without related notes, for such month prepared in accordance with GAAP.
30
<PAGE>
5.9 Indemnification; Insurance
--------------------------
(a) From and after the Effective Time, Buyer agrees for a period of six
years, to indemnify and hold harmless the past and present directors and
officers of Seller and its Subsidiaries (the "Indemnified Parties") for all acts
or omissions occurring at or prior to the Effective Time to the same extent such
persons are indemnified and held harmless under the respective Articles of
Incorporation, Charter or Bylaws of Seller and its Subsidiaries in the form in
effect at the date of this Agreement, and such duties and obligations shall
continue in full force and effect for so long as they would (but for the Merger)
otherwise survive and continue in full force and effect. Without limiting the
foregoing, all limitations of liability existing in favor of the Indemnified
Parties in the Articles of Incorporation, Charter or Bylaws of Seller or any
Seller Subsidiary as of the date hereof, to the extent permissible under
applicable law as of the date hereof, arising out of matters existing or
occurring at or prior to the Effective Time, shall survive the Merger and shall
continue in full force and effect. Buyer will provide, or cause to be provided,
for a period of not less than three years from the Ef fective Time, an insurance
and indemnification policy that provides the officers and directors of Seller
and its Subsidiaries immediately prior to the Effective Time coverage no less
favorable than as currently provided by Seller to such officers and directors,
to the extent such insurance may be purchased or kept in full force without any
material increase in the cost of the premium currently paid by Buyer for its
directors' and officers' liability insurance (provided that if such insurance is
not available without such a material increase, Buyer will substitute or cause
Seller to substitute therefor to the extent available at a cost not in excess of
150% of the current annual premium cost of Seller's existing directors and
officers' insurance, single premium tail coverage with policy limits equal to
Seller's existing annual coverage limits). At the request of Buyer, Seller shall
use reasonable efforts to procure the insurance coverage referred to in the
preceding sentence prior to the Effective Time.
(b) In the event that Buyer or any of its respective successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case the successors and assigns of such
entity shall assume the obligations set forth in this Section 5.9, which
obligations are expressly intended to be for the irrevocable benefit of, and
shall be enforceable by, each director and officer covered hereby.
5.10 Advisory Directors After the Company Merger
-------------------------------------------
Buyer agrees to take all action necessary to appoint all the
non-employee individuals on Seller's current Board of Directors, effective as of
the Effective Time, to an advisory board for a period of at least two years.
Buyer shall pay quarterly such advisory board fees as Previously Disclosed equal
to the regular board fees paid to Seller's Board of Directors for the year ended
December 31, 1999.
5.11 Employees and Employee Benefit Plans
------------------------------------
(a) Former full time employees of Seller or Seller Bank who remain
employed by Buyer or Buyer Bank will be eligible to participate in the Buyer's
employee stock ownership plan on the earliest date required by ERISA ("Entry
Date"), with credit for years of service with Seller or any of its Subsidiaries
for the purpose of eligibility and vesting on and after the Entry Date (but not
for the
31
<PAGE>
purpose of accrual of benefits or allocation of employer contributions). Former
full time employees of Seller or Seller Bank who remain employed by Buyer or
Buyer Bank will be eligible to participate in the Buyer's benefit plans, other
than the Buyer's employee stock ownership plan, on the earliest date permitted
by such plan, with credit for years of service with Seller or any of its
Subsidiaries for the purpose of eligibility and vesting (but not for the purpose
of accrual of benefits or allocation of employer contributions). Buyer shall
cause any and all pre-existing condition limitations (to the extent such
limitations did not apply to a pre-existing condition under any Seller Employee
Plan) and eligibility waiting periods under group health plans to be waived with
respect to such participants and their eligible dependents.
(b) To the extent that Buyer or a Buyer Subsidiary terminates the
employment of any Seller or Seller Bank employee other than for Cause within one
year following the Effective Time, Buyer shall, or shall cause a Buyer
Subsidiary to, provide severance benefits in a cash amount equal to such
employee's regular salary for a one-week period (as in effect immediately prior
to the Effective Time) multiplied by the total number of whole years of such
employee's employment (up to a maximum of ten years) at Seller, Buyer and any
Subsidiary of either; provided, however that in no event shall Buyer or a Buyer
Subsidiary have any obligation to provide severance benefits to any Seller or
Seller Bank employee whose termination of employment occurs due to resignation
or discharge for Cause or who is entitled to severance benefits or the
equivalent thereof under the terms of any other compensation plan or individual
contract with Seller or Seller Bank.
(c) Buyer agrees to cause Buyer Bank to offer employment to Messrs.
Paul S. Pieffer and James W. Kihm in positions that would allow such individuals
to maximize their contributions to Buyer Bank. In the event, however, that Buyer
Bank, Mr. Pieffer, or Mr. Kihm decide to terminate their employment relationship
prior to the date one year after the Closing Date, such terminating employee
shall receive a lump sum amount equal to his then current salary for the
remainder of the period which ends one year after the Closing Date. Messrs.
Pieffer and Kihm may elect, at the time of Closing, to terminate their
employment and receive a lump sum amount from Buyer Bank equal to 100% of such
terminating individual's cash base salary paid for the year ended December 31,
1999.
(d) In the sole discretion of Buyer or a Buyer Subsidiary, as
applicable, payments made by it in full and complete satisfaction of obligations
of Seller or Seller Bank under any Seller Employee Plan or under Section 5.11(c)
shall be subject to the recipient's delivery to Buyer or a Buyer Subsidiary, as
applicable, of (i) a written acknowledgment signed by such recipient that the
payment or payments and benefits to be made to him or her is in full and
complete satisfaction of all liabilities and obligations thereunder of Seller,
Seller Bank, Buyer or any Buyer Subsidiary, and each of their respective
affiliates, directors, officers, employees and agents, and (ii) a release by
such recipient of all such parties from further liability in connection with the
particular Seller Employee Plan or this Agreement, as applicable.
(e) Subject to the Code and relevant regulations, as of the Effective
Time or as soon as practicable thereafter, the loan to the Seller ESOP shall be
repaid in full with the cash consideration received from Buyer for the
unallocated shares of Seller Common Stock held in the Seller ESOP in the amount
equal to the Merger Consideration multiplied by the number of unallocated shares
of Seller Common Stock held by the Seller ESOP, and any unallocated portion of
the consideration remaining after such repayment shall be allocated to the
Seller ESOP accounts of the employees of
32
<PAGE>
Seller and its Subsidiaries who are participants and beneficiaries (such
individuals hereinafter referred to as the "ESOP Participants") as earnings and
not as "annual additions," in accordance with the terms of the Seller ESOP as
amended. As of the Effective Time, the Seller ESOP shall be terminated. The
current administrator of the Seller ESOP, or another administrator selected by
Buyer (subject to consultation with Seller ESOP's then current trustee), shall
continue to administer the Seller ESOP subsequent to the Effective Time, and the
current Trustee of the Seller ESOP, or such other trustee(s) selected by Buyer
(subject to consultation with Seller ESOP's then current trustee) or the
administrators, shall continue to be the Trustee subsequent to the Effective
Time. Buyer agrees not to amend the Seller ESOP subsequent to the Effective Time
in any manner that would change or expand the class of persons entitled to
receive benefits under the Seller ESOP. The Parties agree that the Seller ESOP
shall be amended to the extent necessary to receive a favorable determination
letter from the IRS as to the tax qualified status of the Seller ESOP upon its
termination under Section 401(a) and 4975(e)(7) of the Code (the "Final
Determination Letter"). Following the receipt of the Final Determination Letter,
distributions of the account balances under the Seller ESOP shall be made to the
ESOP Participants. From and after the date hereof, in anticipation of such
termination and distribution, Buyer and Seller prior to the Effective Time, and
Buyer after the Effective Time, shall use their best efforts to apply for and
obtain a favorable Final Determination Letter from the IRS. In the event that
Buyer and Seller, prior to the Effective Time, and Buyer after the Effective
Time, reasonably determine that the Seller ESOP cannot obtain a favorable Final
Determination Letter, or that the amounts held therein cannot be so applied,
allocated or distributed without causing the Seller ESOP to lose its tax
qualified status, Seller prior to the Effective Time and Buyer after the
Effective Time shall take such action as they may reasonably determine is
necessary to obtain a favorable Final Determination Letter from the IRS and for
the distribution of account balances to the ESOP Participants, provided that the
assets of the Seller ESOP shall be held or paid solely for the benefit of the
ESOP Participants and provided further that in no event shall any portion of the
amounts held in the Seller ESOP revert, directly or indirectly, to Seller or any
affiliate thereof, or to Buyer or any affiliate thereof unless required by the
IRS as a condition to the issuance of a favorable Final Determination Letter.
All ESOP Participants shall fully vest and have a nonforfeitable interest in
their accounts under the Seller ESOP determined as of the termination date.
(f) After prior written notice to the Buyer, Seller shall take all
necessary steps to cause the Seller Defined Benefit Plan to be terminated prior
to the Effective Time in accordance with applicable law and in a manner that
will not result in the imposition of any underfunding liability or
responsibility upon Buyer or any of its Subsidiaries; provided, that Seller
shall not terminate the Seller Defined Benefit Plan without approval from the
Buyer if the Seller Defined Benefit Plan has an outstanding underfunded
liability. The Parties agree that the Seller Defined Benefit Plan shall be
amended to the extent necessary to receive a favorable determination letter from
the IRS as to the tax qualified status of the Seller Defined Benefit Plan upon
its termination under Section 401(a) of the Code.
5.12 Company Merger
--------------
Buyer and Seller shall take, and shall cause their Subsidiaries to
take, all necessary and appropriate actions to make it possible for the Company
Merger to be authorized, agreed to, and accomplished immediately after the
Corporate Merger, or at such other time as may be determined by Buyer in its
sole discretion.
33
<PAGE>
5.13 Bank Merger
-----------
Buyer and Seller shall take, and shall cause their Subsidiaries to
take, all necessary and appropriate actions to make it possible for the Bank
Merger to be authorized, agreed to, and accomplished immediately after the
Corporate Merger, or at such other time thereafter as may be determined by Buyer
in its sole discretion.
5.14 Organization of Merger Sub
--------------------------
Buyer shall cause Merger Sub to be organized under the PBCL as soon as
practicable hereafter. Following the organization, the Board of Directors of
Merger Sub shall approve this Agreement and the transactions contemplated
hereby, whereupon Merger Sub shall become a party to, and be bound by, this
Agreement, and Buyer shall approve this Agreement in its capacity as the sole
stockholder of Merger Sub.
5.15 Conforming Entries
------------------
(a) Seller recognizes that Buyer may have adopted different loan,
accrual and reserve policies (including loan classifications and levels of
reserves for possible loan losses). Subject to applicable laws, from and after
the date of this Agreement to the Effective Time, Seller and Buyer shall consult
and cooperate with each other with respect to conforming the loan, accrual and
reserve policies of Seller and the Seller Subsidiaries to those policies of
Buyer, as specified in each case in writing to Seller, based upon such
consultation and subject to the conditions in Section 5.15(c) below.
(b) Subject to applicable laws and regulations, Seller and Buyer shall
consult and cooperate with each other with respect to determining, as specified
in a written notice from Buyer to Seller, based upon such consultation and
subject to the conditions in Section 5.15(c) below, the amount and the timing
for recognizing for financial accounting purposes Seller's expenses of the
Merger and the restructuring charges relating to or to be incurred in connection
with the Merger.
(c) Subject to applicable laws and regulations, Seller shall (i)
establish and take such reserves and accruals at such time as Buyer shall
reasonably request to conform Seller's loan, accrual and reserve policies to
Buyer's policies, and (ii) establish and take such accruals, reserves and
charges in order to implement such policies and to recognize for financial
accounting purposes such expenses of the Merger and restructuring charges
related to or to be incurred in connection with the Merger, in each case at such
times as are reasonably requested by Buyer; provided, however, that on the date
such reserves, accruals and charges are to be taken, Buyer shall certify to
Seller that all conditions to Buyer's obligation to consummate the Merger set
forth in Sections 6.1 and 6.3 hereof (other than the delivery of certificates,
opinions and other instruments and documents to be delivered at the Closing or
otherwise to be dated at the Effective Time, the delivery of which shall
continue to be conditions to Buyer's obligation to consummate the Merger) have
been satisfied or waived; and provided, further, that Seller shall not be
required to take any such action that is not consistent with GAAP and regulatory
accounting principles.
(d) No reserves, accruals or charges taken in accordance with this
Section 5.15 may be a basis to assert a violation of a breach of a
representation, warranty or covenant of Seller herein.
34
<PAGE>
5.16 Integration of Policies
-----------------------
During the period from the date hereof to the Effective Time, Seller
and Seller Bank shall, and shall cause their directors, officers and employees
to, and shall make all reasonable efforts to cause their respective data
processing service providers to, cooperate and assist Buyer in connection with
an electronic and systematic conversion of all applicable data regarding Seller
to Buyer's system of electronic data processing. In furtherance of the
foregoing, Seller shall make reasonable arrangements during normal business
hours to permit representatives of Buyer to train Seller and Seller Bank
employees in Buyer's system of electronic data processing.
5.17 Disclosure Supplements
----------------------
From time to time prior to the Effective Time, each party shall
promptly supplement or amend any materials Previously Disclosed and delivered to
the other party pursuant hereto with respect to any matter hereafter arising
which, if existing, occurring or known at the date of this Agreement, would have
been required to be set forth or described in materials Previously Disclosed to
the other party or which is necessary to correct any information in such
materials which has been rendered materially inaccurate thereby; no such
supplement or amendment to such materials shall be deemed to have modified the
representations, warranties and covenants of the parties for the purpose of
determining whether the conditions set forth in Article VI hereof have been
satisfied.
5.18 Failure to Fulfill Conditions
-----------------------------
In the event that either of the Parties hereto determines that a
condition to its respective obligations to consummate the transactions
contemplated may not be fulfilled on or prior to the termination of this
Agreement, it will promptly notify the other party. Each Party will promptly
inform the other Party of any facts applicable to it that would be likely to
prevent or materially delay approval of the Merger by any Governmental Entity or
third party or which would otherwise prevent or materially delay completion of
such transactions.
5.19 Environmental Reports
---------------------
Seller shall have furnished to Buyer before the date of this Agreement
any environmental reports related to any property owned or being used by Seller.
Buyer, at its sole discretion, may obtain, as soon as reasonably practical, but
not later than 30 days after the date hereof (or within ten days after the
acquisition of lease of any real property acquired or leased after the date
hereof), a report of a phase one environmental investigation on real property
owned or leased by Seller or its Subsidiaries (but excluding space in office or
retail and similar establishments leased by Seller or its subsidiaries for
automatic teller machines or bank branch facilities or other office uses where
the space leased comprises less than 20% of the total space leased to all
tenants of such property). If required by the phase one investigation in Buyer's
reasonable opinion, Seller shall provide to Buyer, within 40 days of the receipt
by Seller of the request of Buyer therefor, a report of a phase two
investigation on properties requiring such additional study. Buyer shall have 5
business days to request Seller to obtain a phase two investigation report.
Buyer shall have 5 business days from the receipt of any such phase two
investigation report to notify Seller of any dissatisfaction with the contents
of such report. Should the cost of taking all remedial or other corrective
actions and
35
<PAGE>
measures (i) required by applicable law or reasonably likely to be required by
applicable law, or (ii) recommended or suggested by such report or reports or
prudent in light of serious life, health or safety concerns, in the aggregate,
exceed the sum of $150,000 as reasonably estimated by an environmental expert
retained for such purpose by Buyer and reasonably acceptable to Seller, or if
the cost of such actions and measures cannot be so reasonably estimated by such
expert to be such amount or less with any reasonable degree of certainty, then
Buyer shall have the right pursuant to Section 7.1 hereof, for a period of ten
business days following receipt of such estimate or indication that the cost of
such actions and measures can not be so reasonably estimated, to terminate this
Agreement, which shall be Buyer's sole remedy in such event. The costs of the
phase one and phase two investigations, if any, shall be borne by Buyer.
5.20 Transaction Expenses of Seller
------------------------------
(a) For planning purposes, the Seller (as Previously Disclosed) has
provided Buyer with its estimated budget of transaction-related expenses
reasonably anticipated to be payable by the Seller in connection with the
Agreement based on facts and circumstances then currently known, including the
fees and expenses of counsel, accountants, investment bankers and other
professionals. The Seller shall promptly notify the Buyer if or when it
determines that it will expect to exceed its budget.
(b) Promptly after the execution of this Agreement, the Seller shall
ask all of its attorneys and other professionals to render current and correct
invoices for all unbilled time and disbursements within 30 days. The Seller
shall accrue and/or pay all of such amounts as soon as possible.
(c) The Seller shall cause its professionals to render monthly invoices
within 30 days after the end of each month. The Seller shall advise the Buyer
monthly of all out-of-pocket expenses which the Seller has incurred in
connection with the Agreement.
(d) The Seller, in reasonable consultation with the Buyer, shall make
all arrangements with respect to the printing and mailing of the Proxy
Statement.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent - Buyer and Seller
---------------------------------------
The respective obligations of Buyer and Seller to effect the
transactions contemplated hereby shall be subject to satisfaction of the
following conditions at or prior to the Effective Time.
(a) All corporate action necessary to authorize the execution and
delivery of this Agreement and completion of the Corporate Merger shall have
been duly and validly taken by Buyer, Merger Sub and Seller, including adoption
of this Agreement by the requisite vote of the shareholders of Seller.
(b) All approvals and consents from any Governmental Entity the
approval or consent of which is required for the completion of the Corporate
Merger shall have been received and all statutory waiting periods in respect
thereof shall have expired; and Buyer, Buyer Bank, Seller and
36
<PAGE>
Seller Bank shall have procured all other approvals, consents and waivers of
each person (other than the Governmental Entities referred to above) whose
approval, consent or waiver is necessary to the completion of the Corporate
Merger and the failure of which to obtain would have the effects set forth in
the following proviso clause; provided, however, that no approval or consent
referred to in this Section 6.1(b) shall be deemed to have been received if it
shall include any nonstandard condition or requirement that, in the aggregate,
would so materially reduce the economic or business benefits of the transactions
contemplated by this Agreement to Buyer that had such condition or requirement
been known, Buyer, in its reasonable judgment, would not have entered into this
Agreement.
(c) None of Buyer, Buyer Bank, Merger Sub, Seller or Seller Bank shall
be subject to any statute, rule, regulation, injunction or other order or decree
which shall have been enacted, entered, promulgated or enforced by any
governmental or judicial authority which prohibits, restricts or makes illegal
completion of the Corporate Merger.
(d) No proceeding initiated by any Governmental Entity seeking an
order, injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition preventing the completion
of the Corporate Merger shall be pending.
6.2 Conditions Precedent - Seller
-----------------------------
The obligations of Seller to effect the transactions contemplated
hereby shall be subject to satisfaction of the following conditions at or prior
to the Effective Time unless waived by Seller pursuant to Section 7.4 hereof.
(a) The representations and warranties of Buyer set forth in Article IV
hereof shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date, or on the date when made in the case of a representation and warranty
which specifically relates to an earlier date.
(b) Buyer shall have performed in all material respects all obligations
and complied with all covenants required to be performed and complied with by it
pursuant to this Agreement on or prior to the Effective Time.
(c) Buyer shall have delivered to Seller a certificate, dated the date
of the Closing and signed by its President and Chief Executive Officer and by
its Chief Financial Officer, to the effect that the conditions set forth in
Sections 6.2(a) and 6.2(b) have been satisfied.
(d) Buyer shall have furnished Seller with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 6.1 and 6.2 as such conditions relate to Buyer
as Seller may reasonably request.
(e) Opinion of Counsel. Buyer shall have received an opinion of
counsel, dated the Closing Date, in form and substance reasonably satisfactory
to Seller, substantially to the effect set forth in Exhibit 6.2(e) hereto.
37
<PAGE>
6.3 Conditions Precedent - Buyer
----------------------------
The obligations of Buyer to effect the transactions contemplated hereby
shall be subject to satisfaction of the following conditions at or prior to the
Effective Time unless waived by Buyer pursuant to Section 7.4 hereof.
(a) The representations and warranties of Seller set forth in Article
III hereof shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though made on and as of the
Closing Date, or on the date when made in the case of a representation and
warranty which specifically relates to an earlier date.
(b) Seller shall have performed in all material respects all
obligations and complied with all covenants required to be performed and
complied with by it pursuant to this Agreement on or prior to the Effective
Time.
(c) Seller shall have delivered to Buyer a certificate, dated the date
of the Closing and signed by its President and Chief Executive Officer and by
its Chief Financial Officer, to the effect that the conditions set forth in
Sections 6.3(a) and 6.3(b) have been satisfied.
(d) Seller shall have furnished Buyer with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 6.1 and 6.3 as such conditions relate to Seller
as Buyer may reasonably request.
(e) No more than 15% the outstanding shares of Seller Common Stock
shall be Dissenting Shares.
(f) Opinion of Counsel. Buyer shall have received an opinion of counsel
to Seller, dated the Closing Date, in form and substance reasonably satisfactory
to Buyer, substantially to the effect set forth in Exhibit 6.3(f) hereto.
(g) Merger Related Expense. Seller shall have provided Buyer with an
accounting of all merger related expenses incurred by it through the Closing
Date, including a good faith estimate of such expenses incurred but as to which
invoices have not been submitted as of the Closing Date. The merger related
expenses of Seller other than printing expenses (which are within the control of
Buyer), shall be reasonable, taking into account normal and customary billing
rates, fees and expenses for similar transactions.
(h) Voting Agreements. Each of the Seller's directors have entered into
a voting agreement, a form of which is attached as Exhibit 6.3(h), hereto.
38
<PAGE>
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 Termination
-----------
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time, by the mutual
consent in writing of the parties hereto;
(b) at any time on or prior to the Effective Time, by Buyer in writing
if Seller has, or by Seller in writing if Buyer has, breached any covenant or
undertaking contained herein or any representation or warranty contained herein,
unless such breach has been cured within 30 days after written notice of such
breach;
(c) at any time, by either Buyer or Seller in writing, (i) if any
application for prior approval of a Governmental Entity which is necessary to
consummate the Corporate Merger is denied or withdrawn at the request or
recommendation of the Governmental Entity which must grant such approval, unless
within the 25-day period following such denial or withdrawal a petition for
rehearing or an amended application has been filed with the applicable
Governmental Entity, provided, however, that no party shall have the right to
terminate this Agreement pursuant to this Section 7(c)(i) if such denial or
request or recommendation for withdrawal shall be due to the failure of the
party seeking to terminate this Agreement to perform or observe the covenants
and agreements of such party set forth herein, or (ii) if any Governmental
Entity of competent jurisdiction shall have issued a final nonappealable order
enjoining or otherwise prohibiting the completion of the Corporate Merger;
(d) at any time, by either Buyer or Seller in writing, if the
shareholders of Seller do not approve this Agreement after a vote taken thereon
at a meeting duly called for such purpose (or at any adjournment thereof) unless
the failure of such occurrence shall be due to the failure of the party seeking
to terminate to perform or observe in any material respect its agreements set
forth herein to be performed or observed by such party at or before the
Effective Time; and
(e) by either Buyer or Seller in writing if the Effective Time has not
occurred by the close of business on December 31, 2000, provided that this right
to terminate shall not be available to any party whose failure to perform an
obligation in breach of such party's obligations under this Agreement has been
the cause of, or resulted in, the failure of the Corporate Merger to be
consummated by such date.
(f) by Buyer to the extent provided by Section 5.19, by giving timely
written notice thereof to Seller.
For purposes of this Section 7.1, termination by Buyer also shall be
deemed to be termination on behalf of the Merger Sub.
39
<PAGE>
7.2 Effect of Termination
---------------------
(a) Each of the Parties shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel, provided that
notwithstanding anything to the contrary contained in this Agreement, neither
Buyer nor Seller shall be released from any liabilities or damages arising out
of its willful breach of any provision of this Agreement.
(b) In order to induce Buyer, the Buyer Bank and Merger Sub to
enter into this Agreement and as a means of compensating Buyer, the Buyer Bank
and Merger Sub for the substantial direct and indirect monetary and other costs
incurred and to be incurred in connection with this Agreement and the
transactions contemplated hereby, the Seller and Seller Bank agree that if this
Agreement is terminated by the Buyer in accordance with Section 7.1(b) the
Seller will upon demand pay to Buyer or Buyer Bank in immediately available
funds $377,000, inclusive of any other amounts that may otherwise be due and
payable in accordance with Section 7.2 hereunder.
If this Agreement is terminated by the Buyer in accordance with Section
7.1(d) or (e) and prior to such termination a Termination Event, as defined in
paragraph (c) of this Section 7.2, shall have occurred, the Seller will upon
demand pay to Buyer or Buyer Bank in immediately available funds $377,000,
inclusive of any other amounts that may otherwise be due and payable in
accordance with Section 7.2 hereunder; provided however, no such payment shall
be due or payable hereunder prior to the Seller and/or the Seller Bank either
receiving a publicly announced bona fide offer from a third party prior to the
date of Seller's shareholder meeting, which offer is not publicly withdrawn
prior to such meeting, and subsequently failing to receive shareholder approval
of the Agreement or the Seller and/or Seller Bank entering into a written
definitive agreement with a third party with respect to a Takeover Proposal
either prior to the meeting of the shareholders of Seller to approve the
Agreement or within 15 months after termination of the Agreement or within such
15 month period any third-party person or entity acquires 25% or more of the
Seller Common Stock. "Takeover Proposal" shall mean any proposal, other than as
contemplated by this Agreement, for a merger or other business combination
involving the Seller or any Seller Subsidiary or for the acquisition of a ten
percent (10%) or greater equity interest in Seller or any Seller Subsidiary, or
for the purchase, lease or other acquisition of a substantial portion of the
assets of Seller or any Seller Subsidiary (other than loans or securities sold
in the ordinary course of business).
(c) For purposes of this Agreement, a Termination Event
shall mean either of the following:
(i) The Seller or any Seller Subsidiary, without
having received Buyer's prior written consent, shall have entered into a written
agreement to engage in a Takeover Proposal with any person (the term "person"
for purposes of this Agreement having the meaning assigned thereto in Sections
3(a)(9) and 13(d)(3) of the Exchange Act, and the rules and regulations
thereunder) other than Buyer or any affiliate of Buyer (the term "affiliate" for
purposes of this Agreement having the meaning assigned thereto in Rule 405 under
the Securities Act) or the Board of Directors of the Seller shall have
recommended that the shareholders of the Seller approve or accept any Takeover
Proposal with any person other than Buyer or any affiliate of Buyer; or
40
<PAGE>
(ii) After a bona fide written proposal is made by
any person other than Buyer or any affiliate of Buyer to the Seller or its
shareholders to engage in a Takeover Proposal and is publicly disclosed, either
(A) the Seller shall have breached any covenant or obligation contained in this
Agreement and such breach would entitle Buyer to terminate this Agreement, or
(B) the holders of Seller Common Stock shall not have approved this Agreement at
the Seller's shareholder meeting described in Section 5.2 of this Agreement, a
proxy statement has not been mailed to the holders of Seller Common Stock as a
result of the Board of Directors' exercise of its fiduciary duties as set forth
in Section 5.2 of this Agreement, such shareholder meeting shall not have been
held in a timely manner or shall have been postponed, delayed or enjoined prior
to termination of this Agreement except as a result of a judicial or
administrative proceeding or the Seller's Board of Directors shall have (i)
withdrawn or modified in a manner materially adverse to Buyer the recommendation
of the Seller's Board of Directors with respect to this Agreement, or announced
or disclosed to any third party its intention to do so or (ii) failed to
recommend, in the case of a tender offer or exchange offer for the Seller Common
Stock, against acceptance of such tender offer or exchange offer to its
shareholders or takes no position with respect to acceptance of such tender
offer or exchange offer by its stockholders.
(d) In the event that this Agreement is terminated pursuant to Section
7.1 hereof, this Agreement shall become void and have no effect, except that (i)
the provisions relating to confidentiality set forth in Section 5.4(b) and this
Section 7.2, shall survive any such termination and (ii) a termination pursuant
to Section 7.1(b), (c), (d), or (e) shall not relieve the breaching party from
any liability or damages arising out of its willful breach of any provision of
this Agreement giving rise to such termination.
7.3 Survival of Representations, Warranties and Covenants
-----------------------------------------------------
All representations, warranties and covenants in this Agreement or in
any instrument delivered pursuant hereto or thereto shall expire on, and be
terminated and extinguished at, the Effective Time other than covenants that by
their terms are to be performed after the Effective Time (including the
covenants set forth in Sections 2.6, 2.8, 5.9, 5.10 and 5.11 hereof), provided
that no such representations, warranties or covenants shall be deemed to be
terminated or extinguished so as to deprive Buyer or Seller (or any director,
officer or controlling person of either thereof) of any defense at law or in
equity which otherwise would be available against the claims of any person,
including any shareholder or former shareholder of either Buyer or Seller.
7.4 Waiver
------
Each party hereto by written instrument signed by an executive officer
of such party, may at any time (whether before or after approval of this
Agreement by the shareholders of Seller) extend the time for the performance of
any of the obligations or other acts of the other party hereto and may waive (i)
any inaccuracies of the other party in the representations or warranties
contained in this Agreement or any document delivered pursuant hereto, (ii)
compliance with any of the covenants, undertakings or agreements of the other
party, (iii) to the extent permitted by law, satisfaction of any of the
conditions precedent to its obligations contained herein or (iv) the performance
by the other party of any of its obligations set forth herein, provided that any
such waiver granted, or any amendment or supplement pursuant to Section 7.5
hereof executed after shareholders of Seller have
41
<PAGE>
approved this Agreement, shall not modify either the amount or form of the
consideration to be provided hereby to the holders of Seller Common Stock upon
completion of the Corporate Merger or otherwise materially adversely affect such
shareholders without the approval of the shareholders who would be so affected.
7.5 Amendment or Supplement
-----------------------
This Agreement may be amended or supplemented at any time by mutual
agreement of the Parties hereto, subject to the proviso to Section 7.4 hereof.
Any such amendment or supplement must be in writing and authorized by or under
the direction of the Board of Directors of each of the Parties hereto.
ARTICLE VIII
MISCELLANEOUS
8.1 Entire Agreement
----------------
This Agreement contains the entire agreement among the Parties with
respect to the transactions contemplated hereby and supersedes all prior
arrangements or understandings with respect thereto, written or oral, other than
documents referred to herein and therein. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the Parties hereto
and their respective successors. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the Parties hereto,
and their respective successors, any rights, remedies, obligations or
liabilities other than as set forth in Sections 5.9, 5.10 and 5.11 hereof.
8.2 No Assignment
-------------
None of the Parties hereto may assign any of its rights or obligations
under this Agreement to any other person.
8.3 Notices
-------
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally, telecopied
(with confirmation) or sent by overnight mail service or by registered or
certified mail (return receipt requested), postage prepaid, addressed as
follows:
If to Buyer:
Fidelity Bancorp, Inc.
1009 Perry Highway
Pittsburgh, PA 15237-2105
Attn: William L. Windisch, President
Fax: 412-364-6504
42
<PAGE>
With a required copy to:
Malizia Spidi & Fisch, PC
1301 K Street, NW, Suite 700 East
Washington, DC 20005
Attn: Samuel J. Malizia, Esq.
Fax: 202-434-4661
E-Mail: [email protected]
If to Seller:
Pennwood Bancorp, Inc.
683 Lincoln Avenue
Bellevue, PA 15202
Attn: Paul S. Pieffer, President
Fax: 412-761-7828
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, NW
Washington, DC 20005
Attn: Raymond A. Tiernan, Esq.
Gerald F. Heupel, Jr., Esq.
Fax: 202-347-2172
8.4 Alternative Structure
---------------------
Notwithstanding any provision of this Agreement to the contrary, Buyer
may, with the written consent of Seller, which shall not be unreasonably
withheld, at any time modify the structure of the acquisition of Seller set
forth herein, provided that (i) the consideration to be paid to the holders of
Seller Common Stock is not thereby changed in kind or reduced in amount as a
result of such modification and (ii) such modification will not materially delay
or jeopardize receipt of any required approvals of Governmental Entities or any
other condition to the obligations of Buyer set forth in Sections 6.1 and 6.3
hereof.
8.5 Interpretation
--------------
The captions contained in this Agreement are for reference purposes
only and are not part of this Agreement.
8.6 Counterparts
------------
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
43
<PAGE>
8.7 Governing Law
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania applicable to agreements made and
entirely to be performed within such jurisdiction.
8.8 Severability
------------
Any term, provision, covenant or restriction contained in this
Agreement held to be invalid, void or unenforceable, shall be ineffective to the
extent of such invalidity, voidness or unenforceability, but neither the
remaining terms, provisions, covenants or restrictions contained in this
Agreement nor the validity or enforceability thereof in any other jurisdiction
shall be affected or impaired thereby. Any term, provision, covenant or
restriction contained in this Agreement that is so found to be so broad as to be
unenforceable shall be interpreted to be as broad as is enforceable.
8.9 Standard of Materiality
-----------------------
No representation or warranty shall be deemed untrue or incorrect, and
no Party shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance unless such
fact, event or circumstance, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or warranty
has had or is reasonably likely to have a Material Adverse Effect on the Party
making such representation or warranty.
44
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers and their corporate
seal to be hereunto affixed and attested by their officers thereunto duly
authorized, all as of the day and year first above written.
PENNWOOD BANCORP, INC.
Attest:
/s/James W. Kihm By: /s/Paul S. Pieffer
- ------------------------------------ -------------------------------------
Secretary Paul S. Pieffer, President
FIDELITY BANCORP, INC.
Attest:
/s/Richard L. Barron By: /s/William L. Windisch
- ------------------------------------ -------------------------------------
Assistant Secretary William L. Windisch, President
45
