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): July 10, 1998
CORTLAND FIRST FINANCIAL CORPORATION
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(Exact name of registrant as specified in its charter)
New York 0-15366 16-1276885
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(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
65 Main Street, P.O. Box 5430, Cortland, New York 13045-5430
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (607) 756-2831
Not Applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On July 10, 1998, Cortland First Financial Corporation ("CFF") entered
into an Agreement and Plan of Reorganization and related Plan of Merger
(collectively, the "Merger Agreement") and two separate Stock Option Agreements
with Oneida Valley Bancshares, Inc. ("OVB").
The Merger Agreement provides that CFF and OVB will be merged together
(the "Merger") under the name of Alliance Financial Corporation ("Alliance").
Pursuant to the Merger Agreement, upon consummation of the Merger each holder of
CFF common stock will own one share of Alliance common stock for each CFF share
owned, while each holder of OVB common stock will own at least 1.75 shares but
not more than 2.0 shares of Alliance common stock for each OVB share owned. The
consummation of the Merger requires the satisfaction of certain conditions,
including the approval of the Merger Agreement and the Merger by the
shareholders of both CFF and OVB, and the receipt of certain regulatory
approvals. The Merger Agreement also contemplates the merger of First National
Bank of Cortland and Oneida Valley National Bank, the respective banking
subsidiaries of CFF and OVB, under the name Alliance Bank, N.A.
One Stock Option Agreement grants CFF an option (the "CFF Option") to
purchase from OVB a number of shares up to 19.9% (subject to adjustment
described therein) of OVB's currently outstanding shares of common stock at a
purchase price of $52.50 per share. The other Stock Option Agreement grants OVB
an option (the "OVB Option") to purchase from CFF a number of shares up to 19.9%
(subject to adjustment described therein) of CFF's currently outstanding shares
of common stock at a purchase price of $28.50 per share. The CFF Option and the
OVB Option are only exercisable upon certain events, as specified in the
respective Stock Option Agreements, none of which has occurred as of July 22,
1998.
In connection with the Merger, the directors of both CFF and OVB have
entered into certain individual letter agreements. Each director of CFF entered
into a separate letter agreement with OVB (the "CFF Letter Agreements") in which
such director generally agreed, among other things, to vote his or her
individual shares of CFF common stock for approval of the Merger Agreement.
Correspondingly, each director of OVB entered into a separate letter agreement
with CFF (the "OVB Letter Agreements") in which such director generally agreed,
among other things, to do the same with respect to their individual shares of
OVB common stock.
For information regarding the terms of the Merger Agreement and the
Stock Option Agreements, reference is made to the Merger Agreement, the Stock
Option Agreements, the forms of the CFF Letter Agreements and the OVB Letter
Agreements and to the joint press release of CFF and OVB dated July 13, 1998,
which are attached hereto as exhibits and incorporated herein by reference.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(a) Not Applicable
(b) Not Applicable
(c) Exhibits.
2.1 Agreement and Plan of Reorganization and related Plan of Merger
dated as of July 10, 1998. (Exhibits and Schedules omitted. CFF
agrees to supplementally furnish a copy of any omitted Exhibits
and Schedules to the Commission upon request.)
10.1 Stock Option Agreement, dated as of July 10, 1998, between CFF
(as the issuer) and OVB (as the grantee).
10.2 Stock Option Agreement dated July 10, 1998, between OVB (as the
issuer) and CFF (as the grantee).
10.3 Form of letter agreement between the CFF directors and OVB.
10.4 Form of letter agreement between the OVB directors and CFF.
99.1 Joint Press Release dated July 13, 1998.
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 hereto duly authorized.
CORTLAND FIRST FINANCIAL CORPORATION
Date: July 22, 1998 By: /s/ DAVID R. ALVORD
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David R. Alvord
President and Chief Executive Officer
3
AGREEMENT AND PLAN
OF
REORGANIZATION
BETWEEN
CORTLAND FIRST FINANCIAL CORPORATION
AND
ONEIDA VALLEY BANCSHARES, INC.
JULY 10, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE 1 CERTAIN DEFINED TERMS............................................2
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF
OVB AND ONEIDA VALLEY............................................5
2.1. Capital Structure of OVB.........................................5
2.2. Organization, Standing and Authority of OVB......................6
2.3. Oneida Valley....................................................6
2.4. Organization, Standing and Authority of Oneida Valley............6
2.5. Authorized and Effective Agreement...............................7
2.6. Regulatory Filings...............................................8
2.7. Financial Statements; Books and Records; Minute Books............8
2.8. Material Adverse Change..........................................8
2.9. Absence of Undisclosed Liabilities...............................9
2.10 Properties.......................................................9
2.11. Loans............................................................9
2.12. Allowance for Loan Losses.......................................10
2.13. Tax Matters.....................................................10
2.14. Employee Benefit Plans; ERISA...................................11
2.15. Labor Matters...................................................12
2.16. Certain Contracts...............................................13
2.17. Real Estate Owned...............................................14
2.18. Legal Proceedings...............................................14
2.19. Compliance with Laws............................................14
2.20. Brokers and Finders.............................................15
2.21. Insurance.......................................................15
2.22. Deposit Insurance...............................................15
2.23. Environmental Matters...........................................15
2.24. Certain Information.............................................16
2.25. Administration of Trust Accounts................................16
2.26. Information in Applications.....................................17
2.27. Pooling of Interests............................................17
2.28. Intellectual Property...........................................17
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF CFF
AND CORTLAND NATIONAL...........................................17
3.1. Capital Structure of CFF........................................17
3.2. Organization, Standing and Authority of CFF.....................18
3.3. Cortland National ..............................................18
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TABLE OF CONTENTS CONT'D
PAGE
3.4. Organization, Standing and Authority of Cortland National.......18
3.5. Authorized and Effective Agreement..............................19
3.6. SEC Documents; Regulatory Filings...............................20
3.7. Financial Statements; Books and Records; Minute Books...........20
3.8. Material Adverse Change.........................................20
3.9. Absence of Undisclosed Liabilities..............................21
3.10. Properties......................................................21
3.11. Loans...........................................................21
3.12. Allowance for Loan Losses.......................................22
3.13. Tax Matters.....................................................22
3.14. Employee Benefit Plans; ERISA...................................23
3.15. Labor Matters...................................................24
3.16. Certain Contracts...............................................25
3.17. Real Estate Owned...............................................26
3.18. Legal Proceedings...............................................26
3.19. Compliance with Laws............................................26
3.20. Brokers and Finders.............................................27
3.21. Insurance.......................................................27
3.22. Deposit Insurance; Federal Reserve Membership...................27
3.23. Environmental Matters...........................................27
3.24. Certain Information.............................................28
3.25. Administration of Trust Accounts................................28
3.26. Information in Applications.....................................29
3.27. Pooling of Interests............................................29
3.28. Intellectual Property...........................................29
ARTICLE 4 COVENANTS.......................................................29
4.1. Shareholders' Meetings..........................................29
4.2 Proxy Statement; Registration Statement.........................29
4.3. Regulatory Applications.........................................30
4.4. Best Efforts to Consummate Transaction..........................30
4.5. Investigation and Confidentiality...............................31
4.6. Press Releases..................................................31
4.7. Conduct of Business - Covenants of OVB and Oneida Valley.......32
4.8. Conduct of Business - Covenants of CFF and Cortland National....34
4.9. Closing; Certificate of Merger; Headquarters....................37
4.10. Affiliates Holding Period.......................................37
4.11. Board of Directors..............................................37
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TABLE OF CONTENTS CONT'D
PAGE
4.12. Management; Employees; Employee Benefits........................38
4.13. Indemnification.................................................40
4.14. Nasdaq Listing..................................................43
4.15. Reservation of Right to Revise Transaction......................43
4.16 Dividends.......................................................43
ARTICLE 5 CONDITIONS PRECEDENT............................................43
5.1. Conditions Precedent - Mutual...................................43
5.2. Conditions Precedent - CFF and Cortland National................45
5.3. Conditions Precedent - OVB and Oneida Valley....................46
ARTICLE 6 TERMINATION, WAIVER AND AMENDMENT...............................47
6.1. Termination.....................................................47
6.2. Effect of Termination...........................................48
6.3 Termination Fees. .............................................48
6.4. Survival of Representations, Warranties and Covenants...........50
6.5. Waiver..........................................................50
6.6. Amendment or Supplement.........................................50
ARTICLE 7 MISCELLANEOUS...................................................51
7.1. Expenses........................................................51
7.2. Entire Agreement................................................51
7.3. No Assignment...................................................52
7.4. Notices.........................................................52
7.5. Captions........................................................53
7.6. Counterparts....................................................53
7.7. Governing Law...................................................53
7.8. Construction and Interpretation.................................54
7.9. Severability....................................................54
7.10. No Employee or Customer Solicitation............................54
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Reorganization
Agreement"), dated as of July 10, 1998, is entered into by and among CORTLAND
FIRST FINANCIAL CORPORATION, a New York corporation ("CFF"), FIRST NATIONAL BANK
OF CORTLAND, a national banking association ("Cortland National"), ONEIDA VALLEY
BANCSHARES, INC., a New York corporation ("OVB"), and ONEIDA VALLEY NATIONAL
BANK, a national banking association ("Oneida Valley").
WITNESSETH
WHEREAS, the parties hereto desire to combine their respective
businesses; and
WHEREAS, the Board of Directors of OVB and CFF have determined that
the combination of the respective businesses and operations of OVB and CFF
through a merger of equals will be in the best long term interests of the
respective shareholders of OVB and CFF; and
WHEREAS, in furtherance of the combination of their respective
businesses, the parties desire that OVB shall be merged (the "Merger") with and
into CFF under the name of "Alliance Financial Corporation" (the corporation
surviving the Merger is referred to herein as the "Continuing Corporation"), all
the outstanding shares of common stock of OVB (other than shares held by
dissenting shareholders, to the extent applicable) shall be converted into and
exchanged for shares of common stock of the Continuing Corporation, and all the
issued and outstanding shares of capital stock of CFF shall continue to be
issued and outstanding shares of capital stock of the Continuing Corporation,
all pursuant to a Plan of Merger (the "Plan of Merger"), substantially in the
form attached as Annex A subject to any amendments approved by both CFF's and
OVB's Board of Directors; and
WHEREAS, in furtherance of the combination of their respective
businesses, the parties desire that, contemporaneously with the Merger or as
soon thereafter as practicable, Cortland National, a wholly owned subsidiary of
CFF, shall be merged (the "Bank Merger") with and into Oneida Valley, a wholly
owned subsidiary of OVB, under the charter of Oneida Valley and the name of
"Alliance Bank, N.A." (the bank surviving the Bank Merger is referred to herein
as the "Continuing Bank"), pursuant to an Agreement and Plan of Merger (the
"Bank Merger Agreement"), substantially in the form attached as Annex B, subject
to any amendments approved by both CFF's and OVB's Board of Directors; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby;
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NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained and intending to be
legally bound hereby, the parties do hereby agree as follows:
ARTICLE 1
CERTAIN DEFINED TERMS
1.1. "Bank Holding Company Act" shall mean the Bank Holding Company
Act of 1956, as amended.
1.2. "Banking Department" shall mean the New York State Banking
Department.
1.3. "Closing Date" shall have the meaning specified in Section 4.9
hereof.
1.4. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.5. "Commission" shall mean the Securities and Exchange Commission.
1.6. "Continuing Corporation Common Stock" shall mean CFF Common
Stock from and after the Effective Date.
1.7. "Effective Date" shall have the meaning specified in Section
4.9 hereof.
1.8. "Environmental Laws" shall mean all applicable federal, state
and local laws and regulations, including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, that relate to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata). This definition includes, without limitation, laws and regulations
relating to emissions, discharges, releases or threatened releases of Materials
of Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
1.9. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
1.10. "ERISA Affiliate" shall mean any trade or business, whether or
not incorporated, that, together with OVB or CFF, as the case may be, would be
deemed a "single employer" under Section 414 of the Code.
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1.11. "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
1.12. "FDIA" shall mean the Federal Deposit Insurance Act, as
amended.
1.13. "FDIC" shall mean the Federal Deposit Insurance Corporation.
1.14. "Federal Reserve Board" shall mean the Board of Governors of
the Federal Reserve System.
1.15. "FRBNY" shall mean the Federal Reserve Bank of New York.
1.16. "CFF Common Stock" shall have the meaning set forth in Section
3.1 hereof.
1.17. "CFF DRIP" shall mean CFF's Dividend Reinvestment and Stock
Purchase Plan.
1.18. "CFF Financial Statements" shall mean (i) the consolidated
balance sheets of CFF as of March 31, 1998 and as of December 31, 1997 and 1996
and the related consolidated statements of income, cash flows and changes in
stockholders' equity (including related notes, if any) for the three months
ended March 31, 1998 and March 31, 1997 and for each of the three years ended
December 31, 1997, 1996 and 1995 as filed by CFF in SEC Documents and (ii) the
consolidated balance sheets of CFF and related consolidated statements of
income, cash flows and changes in shareholders' equity (including related notes,
if any) as filed by CFF in SEC Documents with respect to periods ended
subsequent to March 31, 1998.
1.19. "CFF Option Agreement" shall mean the Stock Option Agreement
dated of even date herewith between CFF, as issuer, and OVB, as grantee, with
regard to CFF Common Stock.
1.20. "CFF Plan" shall mean each bonus, deferred compensation,
incentive compensation, stock purchase, stock option, severance pay, medical,
life or other insurance, profit-sharing, or pension plan, program, agreement or
arrangement, and each other employee benefit plan, program, agreement or
arrangement, sponsored, maintained or contributed to or required to be
contributed to by CFF or by an ERISA Affiliate for the benefit of any employee
or director or former employee or former director of CFF or any ERISA Affiliate
of CFF.
1.21. "Intellectual Property" means domestic and foreign letters
patent, patents, patent applications, patent licenses, software licensed or
owned, know-how, know-how licenses, trade names, common law and other
trademarks, service marks, licenses of trademarks, trade names and/or service
marks, trademark registrations and applications, service mark registrations and
applications and copyright registrations and applications.
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1.22. "Materials of Environmental Concern" shall mean pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products and any
other materials regulated under Environmental Laws.
1.23. "OCC" shall mean the Office of the Comptroller of the
Currency.
1.24. "OVB Common Stock" shall have the meaning set forth in Section
2.1 hereof.
1.25. "OVB Financial Statements" shall mean (i) the consolidated
balance sheets of OVB as of March 31, 1998 and as of December 31, 1997 and 1996
and the related consolidated statements of income, cash flows and changes in
stockholders' equity (including related notes, if any) for the three months
ended March 31, 1998 and March 31, 1997 and for each of the three years ended
December 31, 1997, 1996 and 1995 as published by OVB in reports to its
shareholders and (ii) the consolidated balance sheets of OVB and related
consolidated statements of income, cash flows and changes in stockholders'
equity (including related notes, if any) as published by OVB in reports to its
shareholders with respect to periods ended subsequent to March 31, 1998.
1.26. "OVB Option Agreement" shall mean the Stock Option Agreement
dated as of even date herewith between OVB, as issuer, and CFF, as grantee, with
regard to OVB Common Stock.
1.27. "OVB Plan" shall mean each bonus, deferred compensation,
incentive compensation, stock purchase, stock option, severance pay, medical,
life or other insurance, profit-sharing, or pension plan, program, agreement or
arrangement, and each other employee benefit plan, program, agreement or
arrangement, sponsored, maintained or contributed to or required to be
contributed to by OVB or by an ERISA Affiliate for the benefit of any employee
or director or former employee or former director of OVB or any ERISA Affiliate
of OVB.
1.28. "Previously Disclosed" shall mean disclosed in writing by
either party in (i) the disclosure schedule ("Disclosure Schedule") which shall
be delivered with this Agreement, and updated from time to time up to the
Closing Date to reflect any exceptions to the representations and warranties
contained in Article 2 and 3 of this Agreement, or (ii) an SEC Document filed
with the Commission after December 31, 1997 and before the date hereof. Any
information disclosed by one party to the other hereunder for any purpose
hereunder shall be deemed to be disclosed for all purposes hereunder. The
inclusion of any matter in information Previously Disclosed shall not be deemed
an admission or otherwise to imply that any such matter is material for purposes
of this Agreement.
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1.29. "Proxy Statement" shall mean the joint proxy
statement/prospectus (or similar documents) together with any supplements
thereto sent to the shareholders of OVB and CFF to solicit their votes in
connection with approving the Merger and related matters.
1.30. "Registration Statement" shall mean the registration statement
with respect to the Continuing Corporation Common Stock to be issued in
connection with the Merger as declared effective by the Commission under the
Securities Act.
1.31. "REO" shall mean real property assets acquired as a result of
foreclosure, deed in lieu of foreclosure, or any other method in satisfaction of
indebtedness.
1.32. "Stock 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.
1.33. "SEC Documents" shall mean all reports and registration
statements filed, or required to be filed, by a party hereto pursuant to the
Securities Laws.
1.34. "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.35. "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 Commission promulgated thereunder. Other terms used
herein are defined in the preamble, recitals or other sections of this
Reorganization Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF
OVB AND ONEIDA VALLEY
OVB and Oneida Valley hereby represent and warrant to CFF and Cortland
National as follows:
2.1. Capital Structure of OVB
(a) The authorized capital stock of OVB consists of 2,000,000 shares
of common stock, par value $2.50 per share ("OVB Common Stock"), of which
964,740 shares are issued and 59,461 shares are held in treasury. All
outstanding shares of OVB Common Stock have been duly authorized and validly
issued, and are fully paid and nonassessable. None of the shares of OVB's
capital stock has been issued in violation of the preemptive rights of any
person.
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(b) Except for the OVB Option Agreement, there are no Stock Rights
authorized, issued or outstanding with respect to the capital stock of OVB and
no written or oral plans, understandings, commitments or contracts to which OVB
or, to OVB's knowledge, any of its affiliates is subject with respect to the
issuance, voting or sale of issued or unissued shares of OVB's capital stock.
2.2. Organization, Standing and Authority of OVB
OVB is a duly organized corporation, validly existing and in good
standing under the laws of the State of New York. OVB (i) has full corporate
power and authority to carry on its business as now conducted and (ii) is duly
qualified to do business in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires such qualification and where failure to so qualify would have
a material adverse effect on the financial condition, results of operations or
business of OVB on a consolidated basis. OVB has all federal, state, local and
foreign governmental authorizations and licenses necessary for it to own and
lease its properties and assets and to carry on its business as it is now being
conducted. OVB has delivered to CFF true, complete and correct copies of its
certificate of incorporation and by-laws, each as in effect on the date of this
Agreement. OVB is registered as a bank holding company under the Bank Holding
Company Act.
2.3. Oneida Valley
OVB does not own, directly or indirectly, 5% or more of the
outstanding capital stock or other voting securities of any corporation, bank or
other organization except Oneida Valley. The outstanding shares of capital stock
of Oneida Valley have been duly authorized and are validly issued, and are fully
paid and (subject to 12 U.S.C. ss. 55) nonassessable and all such shares are
directly owned by OVB free and clear of all liens, claims and encumbrances. No
Stock Rights are authorized, issued or outstanding with respect to the capital
stock of Oneida Valley and there are no agreements, understandings or
commitments relating to the right of OVB to vote or to dispose of these shares.
None of the shares of capital stock of Oneida Valley has been issued in
violation of the preemptive rights of any person.
2.4. Organization, Standing and Authority of Oneida Valley
Oneida Valley is a duly organized national banking association,
validly existing and in good standing under applicable laws. There are no other
OVB subsidiaries. Oneida Valley (i) has full corporate power and authority to
own, lease and operate its properties and to carry on its business as now
conducted, and (ii) is duly qualified to do business in the states of the United
States and foreign jurisdictions where its ownership or leasing of property or
the conduct of its business requires such qualification and where failure to so
qualify would have a material adverse effect on the financial condition, results
of operations or business of OVB on
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a consolidated basis. Oneida Valley has all federal, state, local and foreign
governmental authorizations and licenses necessary for it to own or lease its
properties and assets and to carry on its business as it is now being conducted.
Oneida Valley has delivered to CFF true, complete and correct copies of its
articles of association and by-laws, each as in effect on the date of this
Agreement.
2.5. Authorized and Effective Agreement
(a) OVB has all requisite corporate power and authority to enter
into, adopt and perform all of its obligations under this Reorganization
Agreement, the Plan of Merger and the OVB Option Agreement. The execution,
adoption and delivery of this Reorganization Agreement, the Plan of Merger and
the OVB Option Agreement and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of OVB (including the unanimous
approval of its Board of Directors), except that the affirmative vote of the
holders of 66-2/3% of the outstanding shares of OVB Common Stock entitled to
vote thereon is required to adopt the Plan of Merger pursuant to the New York
Business Corporation Law.
(b) Oneida Valley has all requisite corporate power and authority to
enter into and perform all of its obligations under this Reorganization
Agreement and the Bank Merger Agreement, and the execution and delivery of this
Reorganization Agreement and the Bank Merger Agreement and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
Oneida Valley.
(c) This Reorganization Agreement and the Plan of Merger constitute
legal, valid and binding obligations of OVB and this Reorganization Agreement
and the Bank Merger Agreement constitute legal, valid and binding obligations of
Oneida Valley, in each case enforceable against it in accordance with their
respective 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.
(d) Except as Previously Disclosed, neither the execution, adoption
and delivery of this Reorganization Agreement, the Plan of Merger or the OVB
Option Agreement, in the case of OVB, or this Reorganization Agreement or the
Bank Merger Agreement, in the case of Oneida Valley, nor consummation of the
transactions contemplated hereby or thereby, nor compliance by OVB or Oneida
Valley with any of the provisions hereof or thereof shall (i) conflict with or
result in a breach of any provision of the certificate of incorporation,
articles of association or by-laws of OVB or Oneida Valley, (ii) constitute or
result in a breach of any term, condition or provision of, or 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 OVB or Oneida Valley pursuant to, any
note, bond, mortgage, indenture, license, agreement or other
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instrument or obligation, in each case in an amount greater than $100,000 or
requiring an annual payment greater than $100,000, or (iii) subject to the
receipt of all required regulatory approvals, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to OVB or Oneida
Valley.
(e) Except for consents and approvals of or filings with the Federal
Reserve Board, the OCC, the FDIC, the Commission, the Banking Department and the
New York Department of State, and except as Previously Disclosed, no consents or
approvals of or filings or registrations with any public body or authority are
necessary, and no consents or approvals of any third parties are necessary, in
connection with the execution and delivery of this Agreement and the Bank Merger
Agreement by OVB and Oneida Valley or the consummation by OVB or Oneida Valley
of the transactions contemplated hereby, thereby or by the Plan of Merger.
2.6. Regulatory Filings
Each of OVB and Oneida Valley has filed all reports required by
statute or regulation to be filed with any federal or state bank regulatory
agency, and such reports were prepared in accordance with the applicable
statutes, regulations and instructions in all material respects.
2.7. Financial Statements; Books and Records; Minute Books
The OVB Financial Statements fairly present the consolidated
financial position of OVB as of the dates indicated and the consolidated results
of operations, changes in stockholders' equity and cash flows of OVB for the
periods then ended in conformity with generally accepted accounting principles
applicable to financial institutions applied on a consistent basis except (i) as
disclosed therein, (ii) for the omission of notes to unaudited statements, (iii)
for normally recurring year-end adjustments in the case of interim financial
statements, and (iv) as Previously Disclosed. The books and records of OVB and
Oneida Valley fairly reflect the transactions to which it is a party or by which
its properties are subject or bound. Such books and records have been properly
kept and maintained and are in compliance in all material respects with all
applicable legal and accounting requirements. The minute books of OVB and Oneida
Valley contain accurate records of all corporate actions of their respective
shareholders and Boards of Directors (including committees of their Boards of
Directors).
2.8. Material Adverse Change
OVB has not, on a consolidated basis, suffered any material adverse
change in its business, financial condition or results of operations since March
31, 1998 to the date hereof.
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2.9. Absence of Undisclosed Liabilities
Neither OVB nor Oneida Valley has any liability (contingent or
otherwise) that is material to OVB on a consolidated basis, or that, when
combined with all similar liabilities, would be material to OVB on a
consolidated basis, except as disclosed in the OVB Financial Statements and
except for liabilities incurred in the ordinary course of business consistent
with past practice since the date of the most recent OVB Financial Statements.
2.10 Properties
Except as Previously Disclosed, OVB and Oneida Valley have good
title free and clear of all liens, encumbrances, charges, defaults or equitable
interests to all of the properties and assets, real and personal, reflected on
the OVB Financial Statements as of March 31, 1998 or acquired after such date,
except (i) liens for current taxes not yet due and payable, (ii) pledges to
secure deposits and other liens incurred in the ordinary course of banking
business, (iii) such imperfections of title, easements and encumbrances, if any,
as are customary under local practice or are not material in character, amount
or extent and (iv) dispositions and encumbrances for adequate consideration in
the ordinary course of business. OVB or Oneida Valley, as lessee, has the right
under valid and subsisting leases of properties used by OVB and Oneida Valley in
the conduct of their banking business to occupy and use all such properties as
presently occupied and used by them. Each of the real properties used by OVB and
Oneida Valley has been maintained in all material respects in good condition and
is suitable for its current use by OVB and Oneida Valley. Each of such
properties conforms in all material respects to currently applicable ordinances,
regulations and zoning requirements and, if required, is occupied pursuant to a
certificate of occupancy authorizing its current use. Except as Previously
Disclosed, since March 31, 1998, none of such properties which are material to
the operation of OVB and Oneida Valley has been damaged by fire, storm or other
identifiable event or other act of God, except to the extent that any property
owned or leased by OVB or Oneida Valley, if so damaged, is insured to the extent
necessary to satisfactorily repair the damaged premises.
2.11. Loans
(a) Except as Previously Disclosed, to the best knowledge of OVB and
Oneida Valley, each loan reflected as an asset in the OVB Financial Statements
(i) is evidenced by notes, agreements or other evidences of indebtedness which
are true, genuine and what they purport to be, (ii) to the extent secured, has
been secured by valid liens and security interests which have been perfected,
and (iii) is the legal, valid and binding obligation of the obligor named
therein, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles. All
loans and extensions of credit made by Oneida Valley that are subject to
Regulation O of the Federal Reserve Board comply therewith.
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(b) The classification on the books and records of OVB and Oneida
Valley of loans as nonaccrual, troubled debt restructuring, in-substance
foreclosure or other real estate owned, or other similar classification,
complies in all material respects with generally accepted accounting principles
and applicable regulatory accounting policy.
2.12. Allowance for Loan Losses
The allowance for loan losses reflected on the OVB Financial
Statements as of March 31, 1998 and any OVB Financial Statements referred to in
Section 1.25(ii) hereof, as of their respective dates, is adequate in all
material respects under the requirements of generally accepted and regulatory
accounting principles to provide for reasonably anticipated losses on
outstanding loans.
2.13. Tax Matters
(a) OVB and Oneida Valley, and each of their respective
predecessors, have timely filed, or obtained a valid extension for, federal
income tax returns for each year through December 31, 1997 and have timely
filed, or caused to be filed, all other federal, state, local and foreign tax
returns (including, without limitation, estimated tax returns, withholding tax
returns and FICA and FUTA returns) required to be filed with respect to OVB or
Oneida Valley. OVB has made available to CFF true and complete copies of its
federal and state income tax returns for the past five years, and true and
complete copies of all correspondence from governmental authorities, and
responses of OVB or Oneida Valley thereto, relating to such federal and state
income tax returns or any other federal, state, local or other tax filings
within the past five years. All taxes due in respect of the periods covered by
such tax returns have been paid or adequate reserves have been established for
the payment of such taxes and, as of the Closing Date, all taxes due in respect
of any subsequent periods ending on or prior to the Closing Date will have been
paid or adequate reserves will have been established for the payment thereof.
Except as Previously Disclosed, no audit examination or deficiency or refund
litigation with respect to such returns is pending. Neither OVB nor Oneida
Valley 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) tax
returns filed by OVB and Oneida Valley are complete and accurate in all material
respects. Neither OVB nor Oneida Valley is delinquent in the payment of any tax,
assessment or governmental charge, and none of them has requested any extension
of time within which to file any tax returns in respect of any fiscal year or
portion thereof which have not since been filed. No deficiencies for any tax,
assessment or governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against OVB or Oneida Valley which have not been
settled and paid. Except as Previously Disclosed, there are currently no
agreements in effect with respect to OVB or Oneida Valley to extend the period
of limitations for the assessment or collection of any tax.
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(c) OVB and Oneida Valley have timely filed all information returns
required under Sections 6041-6050N of the Code and any comparable state and
local laws, and have timely complied in all respects with the requirements of
Section 3406 of the Code and the regulations thereunder and any comparable state
and local laws and regulations.
(d) Termination of the employment of any employees of OVB or Oneida
Valley following consummation of the transactions contemplated hereby will not
cause OVB or Oneida Valley to make or to be required to make any "excess
parachute payment" as that term is defined in Section 280G of the Code.
2.14. Employee Benefit Plans; ERISA
(a) OVB has Previously Disclosed each material OVB Plan.
(b) With respect to each material OVB Plan, OVB has made available
to CFF true and complete copies of each of the following documents: (1) the OVB
Plan and related documents (including all amendments thereto); (2) the most
recent annual reports, financial statements, and actuarial reports, if any; (3)
the most recent summary plan description, together with each summary of material
modifications, required under ERISA with respect to such OVB Plan; and (4) the
most recent determination letter received from the Internal Revenue Service with
respect to each OVB Plan that is intended to be qualified under the Code.
(c) No liability under Title IV of ERISA has been incurred by OVB or
any ERISA Affiliate of OVB since the effective date of ERISA that has not been
satisfied in full, and no condition exists that presents a material risk to OVB
or any ERISA Affiliate of OVB of incurring a liability under such Title, other
than liability for premium payments to the Pension Benefit Guaranty Corporation,
which premiums have been or will be paid when due.
(d) Neither OVB nor any ERISA Affiliate of OVB, nor any of the OVB
Plans, nor any trust created thereunder, nor, to the best knowledge of OVB, any
trustee or administrator thereof has engaged in a prohibited transaction (within
the meaning of Section 406 of ERISA and Section 4975 of the Code) in connection
with which OVB or any ERISA Affiliate of OVB could, either directly or
indirectly, incur a material liability or cost.
(e) Full payment has been made, or will be made in accordance with
Section 404(a)(6) of the Code, of all amounts that OVB or any ERISA Affiliate of
OVB is required to pay under Section 412 of the Code or under the terms of the
OVB Plans.
(f) As of the Closing Date, the then fair market value of the assets
held under each OVB Plan that is subject to Title IV of ERISA will be sufficient
so as to permit a "standard termination" of each such OVB Plan under Section
4042(b) of ERISA without the need to make any additional contributions to such
OVB Plans. No reportable event under
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Section 4043 of ERISA has occurred with respect to any OVB Plan on or before the
Closing Date other than any reportable event occurring by reason of the
transactions contemplated by this Agreement or a reportable event for which the
requirement of notice to the Pension Benefit Guaranty Corporation has been
waived.
(g) Except as Previously Disclosed, none of the OVB Plans is a
"multiemployer pension plan," as such term is defined in Section 3(37) of ERISA,
a "multiple employer welfare arrangement," as such term is defined in Section
3(40) of ERISA, or a single employer plan that has two or more contributing
sponsors, at least two of whom are not under common control, within the meaning
of Section 4063(a) of ERISA.
(h) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each OVB Plan that is intended to be "qualified"
within the meaning of Section 401(a) of the Code to the effect that such plan is
so qualified and each such OVB Plan satisfies the requirements of Section 401(a)
of the Code in all material respects. Each OVB Plan that is intended to satisfy
the requirements of Section 125 or 501(c)(9) of the Code satisfies such
requirements in all material respects. Each OVB Plan has been operated and
administered in all material respects in accordance with its terms and
applicable laws, including but not limited to ERISA and the Code.
(i) There are no actions, suits or claims pending, or, to the
knowledge of OVB, threatened or anticipated (other than routine claims for
benefits) against any OVB Plan, the assets of any OVB Plan or against OVB or any
ERISA Affiliate of OVB with respect to any OVB Plan. There is no judgment,
decree, injunction, rule or order of any court, governmental body, commission,
agency or arbitrator outstanding against or in favor of any OVB Plan or any
fiduciary thereof (other than rules of general applicability). There are no
pending or threatened audits, examinations or investigations by any governmental
body, commission or agency involving any OVB Plan.
(j) Except as Previously Disclosed, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee or director of OVB or any ERISA Affiliate of OVB to severance
pay, unemployment compensation or any similar payment, or (ii) accelerate the
time of payment or vesting, or increase the amount, of any compensation due to
any such current or former employee or director, or (iii) renew or extend the
term of any agreement regarding compensation for any such current or former
employee or director.
2.15. Labor Matters
With respect to their employees, neither OVB nor Oneida Valley is a
party to any labor agreement with any labor organization, group or association
and each of OVB and Oneida Valley is in material compliance with all applicable
laws respecting employment practices, terms and conditions of employment and
wages and hours and has not engaged in
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any unfair labor practice. OVB and Oneida Valley have not experienced any
attempt by organized labor or its representatives to make OVB or Oneida Valley
conform to demands of organized labor relating to their employees or to enter
into a binding agreement with organized labor that would cover the employees of
OVB or Oneida Valley. To the knowledge of OVB and Oneida Valley, there is no
unfair labor practice charge, discrimination claim, or other complaint of any
nature by any employee or former employee of OVB or Oneida Valley against any of
them pending before any governmental agency, court or tribunal arising out of
OVB's or Oneida Valley's activities.
2.16. Certain Contracts
(a) Except as Previously Disclosed, neither OVB nor Oneida Valley is
a party to, or is bound by, (i) any material agreement, arrangement or
commitment involving annual payments in excess of $100,000, whether or not made
in the ordinary course of business, (ii) any agreement, indenture or other
instrument relating to the borrowing of money by OVB or the guarantee by OVB of
any such obligation of a duration greater than 7 days and in excess of $250,000,
(iii) any agreement, arrangement or commitment relating to the employment of a
consultant or the employment, election, retention in office or severance of any
present or former director or officer, (iv) any agreement to make loans or for
the provision, purchase or sale of goods, services or property between OVB or
Oneida Valley and any director or executive officer of OVB or Oneida Valley, or
any member of the immediate family or affiliate of any of the foregoing
involving annual payments in excess of $100,000, or (v) any agreement between
OVB or Oneida Valley and any five percent or more shareholder of OVB, in each
case other than transactions entered into in the ordinary course of the banking
business of Oneida Valley consistent with past practice.
(b) Neither OVB nor Oneida Valley is in default under any material
agreement, commitment, arrangement, lease, insurance policy or other instrument
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 giving of notice or both, would constitute such a default, other than
defaults of loan agreements by borrowers from Oneida Valley in the ordinary
course of its banking business.
(c) Since March 31, 1998, neither OVB nor Oneida Valley has incurred
or paid any obligation or liability that would be material to OVB, except
obligations incurred or paid in connection with transactions in the ordinary
course of business of Oneida Valley consistent with its past practice and except
as Previously Disclosed. Except as Previously Disclosed, from March 31, 1998 to
the date hereof, neither OVB nor Oneida Valley has taken any action that, if
taken after the date hereof, would breach any of the covenants contained in
Section 4.7(b) hereof.
(d) Neither OVB nor Oneida Valley has, during the period since
December 31, 1996, controlled expenses through elimination of employee benefits,
deferral of routine
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maintenance of real property or leased premises, elimination of reserves where
the liability related to such reserve has remained, reduction of capital
improvements from previous levels, failure to depreciate capital assets in
accordance with past practice or eliminate capital assets which are no longer
used in the business of either OVB or Oneida Valley, capitalized loan production
expenses other than in accordance with FAS 91 or extraordinary reduction or
deferral of ordinary or necessary expenses.
2.17. Real Estate Owned
(a) Except for liens, security interests, claims, charges, or such
other encumbrances as have been appropriately reserved for in the OVB Financial
Statements or are not material and are in the process of being cleared, title to
the REO is good and marketable, and there are no adverse claims or encumbrances
on the REO.
(b) All title, hazard and other insurance claims and mortgage
guaranty claims with respect to the REO have been timely filed and neither OVB
nor Oneida Valley has received any notice of denial of any such claim.
(c) Except as Previously Disclosed, no legal proceeding or
quasi-legal proceeding is pending or, to the knowledge of OVB and Oneida Valley,
threatened concerning any REO or any servicing activity or omission to provide a
servicing activity with respect to any of the REO.
2.18. Legal Proceedings
Except as Previously Disclosed, there are no actions, suits or
proceedings instituted, pending or, to the knowledge of OVB, threatened against
OVB or Oneida Valley or against any asset, interest or right of OVB or Oneida
Valley that might have a material adverse effect on the financial condition,
results of operations or business of OVB on a consolidated basis. To the
knowledge of OVB, there are no actual or threatened actions, suits or
proceedings which present a claim to restrain or prohibit the transactions
contemplated herein. There are no actions, suits or proceedings instituted,
pending or, to the knowledge of OVB, threatened against any present or former
director or officer of OVB that might give rise to a claim for indemnification,
and, to the knowledge of OVB, there is no reasonable basis for any such action,
suit or proceeding.
2.19. Compliance with Laws
OVB and Oneida Valley are in compliance in material respects with
all statutes and regulations applicable to the conduct of their business, and
neither OVB nor Oneida Valley has received notification from any agency or
department of federal, state or local government (i) asserting a material
violation of any such statute or regulation, (ii) threatening to revoke any
license, franchise, permit or government authorization or (iii) restricting or
in
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any way limiting its operations. Neither OVB nor Oneida Valley is subject to any
regulatory or supervisory cease and desist order, agreement, directive,
memorandum of understanding or commitment, and neither of them has received any
communication requesting that they enter into any of the foregoing. Without
limiting the generality of the foregoing, Oneida Valley is in compliance in
material respects with the filing of currency transaction reports required to be
filed and taken all other actions required under the Currency and Foreign
Transactions Reporting Act, codified at 31 U.S.C. (S) 5301 et seq., and its
implementing regulations.
2.20. Brokers and Finders
Except for OVB's engagement of and agreement to pay Capital
Formation Group of Rochester, L.P., Jamesson Associates and Empire Evaluation
Consultants, Inc., neither OVB nor Oneida Valley, nor any of their respective
officers, directors or employees, has employed any broker, finder or financial
advisor in connection with the transactions contemplated herein, the Bank Merger
Agreement or the Plan of Merger.
2.21. Insurance
OVB and Oneida Valley currently maintain insurance in amounts
reasonably necessary for their operations and, to the best knowledge of OVB,
similar in scope and coverage to that maintained by other entities similarly
situated. Neither OVB nor Oneida Valley has received any advance notice of a
material premium increase or cancellation with respect to any of its insurance
policies or bonds, and within the last three years, neither OVB nor Oneida
Valley has been refused any insurance coverage sought or applied for, and OVB
has no reason to believe that existing insurance coverage cannot be renewed as
and when the same shall expire, upon terms and conditions as favorable as those
presently in effect, other than possible increases in premiums or unavailability
in coverage that have not resulted from any extraordinary loss experience of OVB
or Oneida Valley.
2.22. Deposit Insurance
The deposits of Oneida Valley are insured by the FDIC in accordance
with the FDIA, and Oneida Valley has paid all assessments and filed all reports
required by the FDIA. Oneida Valley is a member of the Federal Reserve System
and has subscribed and paid for the requisite number of shares of capital stock
of the FRBNY.
2.23. Environmental Matters
(a) Except for any violation, liability or noncompliance which does
not have a material adverse effect on OVB or Oneida Valley, to the best
knowledge of OVB and Oneida Valley: (i) neither OVB nor Oneida Valley has
violated during the last five years or is in violation of or is liable under any
federal, state or local environmental law; (ii) none of the properties owned or
leased by either OVB or Oneida Valley (including, without limitation,
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soils and surface and ground waters) are contaminated with any hazardous
substance; (iii) neither OVB nor Oneida Valley is liable for any off-site
contamination; and (iv) each of OVB and Oneida Valley is, and during the last
five years has been, in compliance with, all of its respective permits, licenses
and other authorizations issued under any environmental laws. For purposes of
the foregoing, all references to "properties" include, without limitation, any
owned real property or leased real property.
(b) Neither OVB nor Oneida Valley has received any written notice of
any legal, administrative, arbitral or other proceeding, claim or action and, to
the knowledge of OVB and Oneida Valley, there is no governmental investigation
of any nature ongoing, in each case that could reasonably be expected to result
in the imposition, on OVB or Oneida Valley of any liability arising under any
local, state or federal environmental statute, regulation or ordinance
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, which liability would have a
material adverse effect on OVB or Oneida Valley; to the best knowledge of OVB
and Oneida Valley, there are no facts or circumstances which could reasonably be
expected to form the basis for any such proceeding, claim, action or
governmental investigation that would impose any such liability; and neither OVB
nor Oneida Valley is subject to any agreement, order, judgment, decree or
memorandum by or with any court, governmental authority, regulatory agency or
third party imposing any such liability.
2.24. Certain Information
When the Registration Statement or any post-effective amendment
thereto shall become effective, and at all times subsequent to such
effectiveness up to and including the time of the later of the OVB and CFF
shareholders' meetings to vote upon the Merger, such Registration Statement and
all amendments or supplements thereto, with respect to all information set forth
therein furnished by OVB relating to OVB and Oneida Valley, (i) shall comply in
all material respects with the applicable provisions of the Securities Laws, and
(ii) shall not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements contained therein not misleading.
2.25. Administration of Trust Accounts
Oneida Valley has properly administered, in all respects material
and which could reasonably be expected to be material to the business,
operations or financial condition of OVB and Oneida Valley, taken as a whole,
all accounts for which it acts as a fiduciary, including but not limited to
accounts for which it serves as a trustee, agent, custodian, personal
representative, guardian, conservator or investment advisor, in accordance with
the terms of the governing documents and applicable state and federal law and
regulation and common law. Neither OVB, Oneida Valley, nor any director, officer
or employee of OVB or Oneida Valley has committed any breach of trust with
respect to any such fiduciary account
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which is material to or could reasonably be expected to be material to the
business, operations or financial condition of OVB and Oneida Valley, taken as a
whole, and the accountings for each such fiduciary account are true and correct
in all material respects and accurately reflect the assets of such fiduciary
account in all material respects.
2.26. Information in Applications
All information concerning OVB and Oneida Valley, and their
respective officers, directors and shareholders, included (or submitted for
inclusion) in the applications described in Section 4.3 hereof shall be true,
correct and complete in all material respects.
2.27. Pooling of Interests
OVB knows of no reason (after consultation with its independent
accountants) which would reasonably cause it to believe that the Merger will not
qualify as a pooling of interests for financial accounting purposes.
2.28. Intellectual Property
OVB and Oneida Valley own the entire right, title and interest in
and to, or have valid licenses with respect to, all the Intellectual Property
necessary in all material respects to conduct their business and operations as
presently conducted, except where the failure to do so would not, individually
or in the aggregate, have a material adverse effect on the financial condition,
results of operations or business of OVB on a consolidated basis.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CFF
AND CORTLAND NATIONAL
CFF and Cortland National hereby represent and warrant to OVB and
Oneida Valley as follows:
3.1. Capital Structure of CFF
(a) The authorized capital stock of CFF consists of (i) 3,000,000
shares of common stock, par value $1.6667 per share ("CFF Common Stock"), of
which 2,016,000 shares are issued and 46,224 shares are held in treasury. All
outstanding shares of CFF Common Stock have been duly authorized and validly
issued, and are fully paid and nonassessable. None of the shares of CFF's
capital stock has been issued in violation of the preemptive rights of any
person.
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(b) Except for the Cortland Option Agreement, there are no Stock
Rights authorized, issued or outstanding with respect to the capital stock of
CFF and no written or oral plans, understandings, commitments or contracts to
which CFF or, to CFF's knowledge, any of its affiliates is subject with respect
to the issuance, voting or sale of issued or unissued shares of CFF's capital
stock.
3.2. Organization, Standing and Authority of CFF
CFF is a duly organized corporation, validly existing and in good
standing under the laws of the State of New York. CFF (i) has full corporate
power and authority to carry on its business as now conducted and (ii) is duly
qualified to do business in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires such qualification and where failure to so qualify would have
a material adverse effect on the financial condition, results of operations or
business of CFF on a consolidated basis. CFF has all federal, state, local and
foreign governmental authorizations and licenses necessary for it to own and
lease its properties and assets and to carry on its business as it is now being
conducted. CFF has delivered to OVB true, complete and correct copies of its
certificate of incorporation and by-laws, each as in effect on the date of this
Agreement. CFF is registered as a bank holding company under the Bank Holding
Company Act.
3.3. Cortland National
CFF does not own, directly or indirectly, 5% or more of the
outstanding capital stock or other voting securities of any corporation, bank or
other organization except Cortland National. The outstanding shares of capital
stock of Cortland National has been duly authorized and are validly issued, and
are fully paid and (subject to 12 U.S.C. (ss. 55) nonassessable and all such
shares are directly or indirectly owned by CFF free and clear of all liens,
claims and encumbrances. No Stock Rights are authorized, issued or outstanding
with respect to the capital stock of Cortland National and there are no
agreements, understandings or commitments relating to the right of CFF to vote
or to dispose of these shares. None of the shares of capital stock of Cortland
National has been issued in violation of the preemptive rights of any person.
3.4. Organization, Standing and Authority of Cortland National
Cortland National is a duly organized national banking association,
validly existing and in good standing under applicable laws. There are no other
CFF subsidiaries. Cortland National (i) has full corporate power and authority
to own, lease and operate its properties and to carry on its business as now
conducted, and (ii) is duly qualified to do business in the states of the United
States and foreign jurisdictions where its ownership or leasing of property or
the conduct of its business requires such qualification and where failure to so
qualify would have a material adverse effect on the financial condition,
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results of operations or business of CFF on a consolidated basis. Cortland
National has all federal, state, local and foreign governmental authorizations
and licenses necessary for it to own or lease its properties and assets and to
carry on its business as it is now being conducted. Cortland National has
delivered to OVB true, complete and correct copies of its articles of
association and by-laws, each as in effect on the date of this Agreement.
3.5. Authorized and Effective Agreement
(a) CFF has all requisite corporate power and authority to enter
into, adopt and perform all of its obligations under this Reorganization
Agreement, the Plan of Merger and the CFF Option Agreement. The execution,
adoption and delivery of this Reorganization Agreement, the Plan of Merger and
the CFF Option Agreement and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of CFF (including the unanimous
approval of its Board of Directors), except that the affirmative vote of the
holders of 66-2/3% of the outstanding shares of CFF Common Stock entitled to
vote thereon is required to adopt the Plan of Merger pursuant to the New York
Business Corporation Law.
(b) Cortland National has all requisite corporate power and
authority to enter into and perform all of its obligations under this
Reorganization Agreement and the Bank Merger Agreement and the execution and
delivery of this Reorganization Agreement and the Bank Merger Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action in respect thereof on
the part of Cortland National.
(c) This Reorganization Agreement and the Plan of Merger constitute
legal, valid and binding obligations of CFF and this Reorganization Agreement
and the Bank Merger Agreement constitute legal, valid and binding obligations of
Cortland National, in each case enforceable against it in accordance with their
respective 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.
(d) Except as Previously Disclosed, neither the execution, adoption
and delivery of this Reorganization Agreement, the Plan of Merger or the CFF
Option Agreement, in the case of CFF, or this Reorganization Agreement or the
Bank Merger Agreement, in the case of Cortland National, nor consummation of the
transactions contemplated hereby or thereby, nor compliance by CFF or Cortland
National with any of the provisions hereof or thereof shall (i) conflict with or
result in a breach of any provision of the certificate of incorporation,
articles of association or by-laws of CFF or Cortland National, (ii) constitute
or result in a breach of any term, condition or provision of, or 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 CFF or Cortland National pursuant to,
any note, bond, mortgage, indenture, license, agreement or other
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instrument or obligation, in each case in an amount greater than $100,000 or
requiring an annual payment greater than $100,000, or (iii) subject to the
receipt of all required regulatory approvals, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to CFF or Cortland
National.
(e) Except for consents and approvals of or filings with the Federal
Reserve Board, the OCC, the FDIC, the Commission, the Banking Department, the
New York Department of State and any appropriate state securities authorities,
and except as Previously Disclosed, no consents or approvals of or filings or
registrations with any public body or authority are necessary, and no consents
or approvals of any third parties are necessary, in connection with the
execution and delivery of this Agreement and the Bank Merger Agreement by CFF
and Cortland National or the consummation by CFF or Cortland National of the
transactions contemplated hereby, thereby or by the Plan of Merger.
3.6. SEC Documents; Regulatory Filings
CFF has filed all SEC Documents required by the Securities Laws and
such SEC Documents complied in all material respects with the Securities Laws.
Each of CFF and Cortland National has filed all reports required by statute or
regulation to be filed with any federal or state bank regulatory agency, and
such reports were prepared in accordance with the applicable statutes,
regulations and instructions in all material respects.
3.7. Financial Statements; Books and Records; Minute Books
The CFF Financial Statements fairly present the consolidated
financial position of CFF as of the dates indicated and the consolidated results
of operations, changes in stockholders' equity and cash flows of CFF for the
periods then ended in conformity with generally accepted accounting principles
applicable to financial institutions applied on a consistent basis except (i) as
disclosed therein, (ii) for the omission of notes to unaudited statements, and
(iii) for normally recurring year-end adjustments in the case of interim
financial statements. The books and records of CFF and Cortland National fairly
reflect the transactions to which it is a party or by which its properties are
subject or bound. Such books and records have been properly kept and maintained
and are in compliance in all material respects with all applicable legal and
accounting requirements. The minute books of CFF and Cortland National contain
accurate records of all corporate actions of their respective shareholders and
Boards of Directors (including committees of their Boards of Directors).
3.8. Material Adverse Change
CFF has not, on a consolidated basis, suffered any material adverse
change in its business, financial condition or results of operations since March
31, 1998 to the date hereof.
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3.9. Absence of Undisclosed Liabilities
Neither CFF nor Cortland National has any liability (contingent or
otherwise) that is material to CFF on a consolidated basis, or that, when
combined with all similar liabilities, would be material to CFF on a
consolidated basis, except as disclosed in the Cortland Financial Statements and
except for liabilities incurred in the ordinary course of business consistent
with past practice since the date of the most recent CFF Financial Statements.
3.10. Properties
CFF and Cortland National have good title free and clear of all
liens, encumbrances, charges, defaults or equitable interests to all of the
properties and assets, real and personal, reflected on the CFF Financial
Statements as of March 31, 1998 or acquired after such date, except (i) liens
for current taxes not yet due and payable, (ii) pledges to secure deposits and
other liens incurred in the ordinary course of banking business, (iii) such
imperfections of title, easements and encumbrances, if any, as are customary
under local practice or are not material in character, amount or extent and (iv)
dispositions and encumbrances for adequate consideration in the ordinary course
of business. CFF or Cortland National, as lessee, has the right under valid and
subsisting leases of properties used by CFF and Cortland National in the conduct
of its banking business to occupy and use all such properties as presently
occupied and used by it. Each of the real properties used by CFF and Cortland
National has been maintained in all material respects in good condition and is
suitable for its current use by CFF and Cortland National. Each of such
properties conforms in all material respects to currently applicable ordinances,
regulations and zoning requirements and, if required, is occupied pursuant to a
certificate of occupancy authorizing its current use. Since March 31, 1998, none
of such properties which are material to the operation of CFF and Cortland
National has been damaged by fire, storm or other identifiable event or other
act of God, except to the extent that any property owned or leased by CFF or
Cortland National, if so damaged, is insured to the extent necessary to
satisfactorily repair the damaged premises.
3.11. Loans
(a) Except as Previously Disclosed, to the best knowledge of CFF and
Cortland National, each loan reflected as an asset in the CFF Financial
Statements (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and what they purport to be, (ii) to the
extent secured, has been secured by valid liens and security interests which
have been perfected, and (iii) is the legal, valid and binding obligation of the
obligor named therein, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles. All loans and extensions of credit made by Cortland National that
are subject to Regulation O of the Federal Reserve Board comply therewith.
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(b) The classification on the books and records of CFF and Cortland
National of loans as nonaccrual, troubled debt restructuring, in-substance
foreclosure or other real estate owned, or other similar classification,
complies in all material respects with generally accepted accounting principles
and applicable regulatory accounting policy.
3.12. Allowance for Loan Losses
The allowance for loan losses reflected on the CFF Financial
Statements as of March 31, 1998, and any CFF Financial Statements referred to in
Section 1.18(ii) hereof, as of their respective dates, is adequate in all
material respects under the requirements of generally accepted and regulatory
accounting principles to provide for reasonably anticipated losses on
outstanding loans.
3.13. Tax Matters
(a) CFF and Cortland National, and each of their respective
predecessors, have timely filed, or obtained a valid extension for, federal
income tax returns for each year through December 31, 1997 and have timely
filed, or caused to be filed, all other federal, state, local and foreign tax
returns (including, without limitation, estimated tax returns, withholding tax
returns and FICA and FUTA returns) required to be filed with respect to CFF or
Cortland National. CFF has made available to OVB true and complete copies of its
federal and state income tax returns for the past five years, and true and
complete copies of all correspondence from governmental authorities, and
responses of CFF or Cortland National thereto, relating to such federal and
state income tax returns or any other federal, state, local or other tax filings
within the past five years. All taxes due in respect of the periods covered by
such tax returns have been paid or adequate reserves have been established for
the payment of such taxes and, as of the Closing Date, all taxes due in respect
of any subsequent periods ending on or prior to the Closing Date will have been
paid or adequate reserves will have been established for the payment thereof.
Except as Previously Disclosed, no audit examination or deficiency or refund
litigation with respect to such returns is pending. Neither CFF nor Cortland
National 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) tax
returns filed by CFF and Cortland National are complete and accurate in all
material respects. Neither CFF nor Cortland National is delinquent in the
payment of any tax, assessment or governmental charge, and, except as Previously
Disclosed, none of them has requested any extension of time within which to file
any tax returns in respect of any fiscal year or portion thereof which have not
since been filed. No deficiencies for any tax, assessment or governmental charge
have been proposed, asserted or assessed (tentatively or otherwise) against CFF
or Cortland National which have not been settled and paid. Except as Previously
Disclosed, there are currently no agreements in effect with respect to CFF or
Cortland National to extend the period of limitations for the assessment or
collection of any tax.
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(c) CFF and Cortland National have timely filed all information
returns required under Sections 6041-6050N of the Code and any comparable state
and local laws, and have timely complied in all respects with the requirements
of Section 3406 of the Code and the regulations thereunder and any comparable
state and local laws and regulations.
(d) Termination of the employment of any employees of CFF or
Cortland National following consummation of the transactions contemplated hereby
will not cause CFF or Cortland National to make or to be required to make any
"excess parachute payment" as that term is defined in Section 280G of the Code.
3.14. Employee Benefit Plans; ERISA
(a) CFF has Previously Disclosed each material CFF Plan.
(b) With respect to each material CFF Plan, CFF has made available
to OVB true and complete copies of each of the following documents: (1) the CFF
Plan and related documents (including all amendments thereto); (2) the most
recent annual reports, financial statements, and actuarial reports, if any; (3)
the most recent summary plan description, together with each summary of material
modifications, required under ERISA with respect to such CFF Plan; and (4) the
most recent determination letter received from the Internal Revenue Service with
respect to each CFF Plan that is intended to be qualified under the Code.
(c) No liability under Title IV of ERISA has been incurred by CFF or
any ERISA Affiliate of CFF since the effective date of ERISA that has not been
satisfied in full, and no condition exists that presents a material risk to CFF
or any ERISA Affiliate of CFF of incurring a liability under such Title. None of
the CFF Plans is subject to Title IV of ERISA.
(d) Neither CFF nor any ERISA Affiliate of CFF nor any of the CFF
Plans, nor any trust created thereunder, nor, to the best knowledge of CFF, any
trustee or administrator thereof has engaged in a prohibited transaction (within
the meaning of Section 406 of ERISA and Section 4975 of the Code) in connection
with which CFF or any ERISA Affiliate of CFF could, either directly or
indirectly, incur a material liability or cost.
(e) Full payment has been made, or will be made in accordance with
Section 404(a)(6) of the Code, of all amounts that CFF or any ERISA Affiliate of
CFF is required to pay under Section 412 of the Code or under the terms of the
CFF Plans.
(f) None of the CFF Plans is a "multiemployer pension plan," as such
term is defined in Section 3(37) of ERISA, a "multiple employer welfare
arrangement," as such term is defined in Section 3(40) of ERISA, or a single
employer plan that has two or more contributing sponsors, at least two of whom
are not under common control, within the meaning of Section 4063(a) of ERISA.
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(g) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each CFF Plan that is intended to be "qualified"
within the meaning of Section 401(a) of the Code to the effect that such plan is
so qualified and each such CFF Plan satisfies the requirements of Section 401(a)
of the Code in all material respects. Each CFF Plan that is intended to satisfy
the requirements of Section 125 or 501(c)(9) of the Code satisfies such
requirements in all material respects. Each CFF Plan has been operated and
administered in all material respects in accordance with its terms and
applicable laws, including but not limited to ERISA and the Code.
(h) There are no actions, suits or claims pending, or, to the
knowledge of CFF, threatened or anticipated (other than routine claims for
benefits) against any CFF Plan, the assets of any CFF Plan or against CFF or any
ERISA Affiliate of CFF with respect to any CFF Plan. There is no judgment,
decree, injunction, rule or order of any court, governmental body, commission,
agency or arbitrator outstanding against or in favor of any CFF Plan or any
fiduciary thereof (other than rules of general applicability). There are no
pending or threatened audits, examinations or investigations by any governmental
body, commission or agency involving any CFF Plan.
(i) Except as Previously Disclosed, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee or director of CFF or any ERISA Affiliate of CFF to severance
pay, unemployment compensation or any similar payment, or (ii) accelerate the
time of payment or vesting, or increase the amount, of any compensation due to
any such current or former employee or director, or (iii) renew or extend the
term of any agreement regarding compensation for any such current or former
employee or director.
3.15. Labor Matters
With respect to their employees, neither CFF nor Cortland National
is a party to any labor agreement with any labor organization, group or
association, and each of CFF and Cortland National is in material compliance
with all applicable laws respecting employment practices, terms and conditions
of employment and wages and hours and has not engaged in any unfair labor
practice. CFF and Cortland National have not experienced any attempt by
organized labor or its representatives to make CFF or Cortland National conform
to demands of organized labor relating to their employees or to enter into a
binding agreement with organized labor that would cover the employees of CFF or
Cortland National. To the knowledge of CFF and Cortland National, there is no
unfair labor practice charge, discrimination claim, or other complaint of any
nature by any employee or former employee of CFF or Cortland National against
any of them pending before any governmental agency, court or tribunal arising
out of CFF's or Cortland National's activities.
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3.16. Certain Contracts
(a) Except as Previously Disclosed, neither CFF nor Cortland
National is a party to, or is bound by, (i) any material agreement, arrangement
or commitment involving annual payments in excess of $100,000, whether or not
made in the ordinary course of business, (ii) any agreement, indenture or other
instrument relating to the borrowing of money by CFF or the guarantee by CFF of
any such obligation of a duration greater than 7 days and in excess of $250,000,
(iii) any agreement, arrangement or commitment relating to the employment of a
consultant or the employment, election, retention in office or severance of any
present or former director or officer, (iv) any agreement to make loans or for
the provision, purchase or sale of goods, services or property between CFF or
Cortland National and any director or executive officer of CFF or Cortland
National, or any member of the immediate family or affiliate of any of the
foregoing, or (v) any agreement between CFF or Cortland National and any five
percent or more shareholder of CFF, in each case other than transactions entered
into in the ordinary course of the banking business of Cortland National
consistent with past practice.
(b) Neither CFF nor Cortland National is in default under any
material agreement, commitment, arrangement, lease, insurance policy or other
instrument 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 giving of notice or both, would constitute such a default,
other than defaults of loan agreements by borrowers from Cortland National in
the ordinary course of its banking business.
(c) Since March 31, 1998, neither CFF nor Cortland National has
incurred or paid any obligation or liability that would be material to CFF,
except obligations incurred or paid in connection with transactions in the
ordinary course of business of Cortland National consistent with its past
practice and except as Previously Disclosed. Except as Previously Disclosed,
from March 31, 1998 to the date hereof, neither CFF nor Cortland National has
taken any action that, if taken after the date hereof, would breach any of the
covenants contained in Section 4.8(b) hereof.
(d) Neither CFF nor Cortland National has, during the period since
December 31, 1996, controlled expenses through elimination of employee benefits,
deferral of routine maintenance of real property or leased premises, elimination
of reserves where the liability related to such reserve has remained, reduction
of capital improvements from previous levels, failure to depreciate capital
assets in accordance with past practice or eliminate capital assets which are no
longer used in the business of either of CFF or Cortland National, capitalized
loan production expenses other than in accordance with FAS 91 or extraordinary
reduction or deferral of ordinary or necessary expenses.
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3.17. Real Estate Owned
(a) Except for liens, security interests, claims, charges, or such
other encumbrances as have been appropriately reserved for in the CFF Financial
Statements or are not material and are in the process of being cleared, title to
the REO is good and marketable, and there are no adverse claims or encumbrances
on the REO.
(b) All title, hazard and other insurance claims and mortgage
guaranty claims with respect to the REO have been timely filed and neither CFF
nor Cortland National has received any notice of denial of any such claim.
(c) Except as Previously Disclosed, no legal proceeding or
quasi-legal proceeding is pending or, to the knowledge of CFF and Cortland
National threatened concerning any REO or any servicing activity or omission to
provide a servicing activity with respect to any of the REO.
3.18. Legal Proceedings
Except as Previously Disclosed, there are no actions, suits or
proceedings instituted, pending or, to the knowledge of CFF, threatened against
CFF or Cortland National or against any asset, interest or right of CFF or
Cortland National that might have a material adverse effect on the financial
condition, results of operations or business of CFF on a consolidated basis. To
the knowledge of CFF, there are no actual or threatened actions, suits or
proceedings which present a claim to restrain or prohibit the transactions
contemplated herein. There are no actions, suits or proceedings instituted,
pending or, to the knowledge of CFF, threatened against any present or former
director or officer of CFF that might give rise to a claim for indemnification,
and, to the knowledge of CFF, there is no reasonable basis for any such action,
suit or proceeding.
3.19. Compliance with Laws
CFF and Cortland National are in compliance in material respects
with all statutes and regulations applicable to the conduct of their business,
and except as Previously Disclosed, neither CFF nor Cortland National has
received notification from any agency or department of federal, state or local
government (i) asserting a material violation of any such statute or regulation,
(ii) threatening to revoke any license, franchise, permit or government
authorization or (iii) restricting or in any way limiting its operations.
Neither CFF nor Cortland National is subject to any regulatory or supervisory
cease and desist order, agreement, directive, memorandum of understanding or
commitment, and neither of them has received any communication requesting that
they enter into any of the foregoing. Without limiting the generality of the
foregoing, Cortland National is in compliance in material respects with filing
of currency transaction reports required to be filed and taken all other
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actions required under the Currency and Foreign Transactions Reporting Act,
codified at 31 U.S.C. (S) 5301 et seq., and its implementing regulations.
3.20. Brokers and Finders
Except for CFF's engagement of and agreement to pay Capital
Formation Group of Rochester, L.P. and Jamesson Associates, neither CFF nor
Cortland National, nor any of their respective officers, directors or employees,
has employed any broker, finder or financial advisor or incurred any liability
for any fees or commissions in connection with the transactions contemplated
herein, the Bank Merger Agreement or the Plan of Merger.
3.21. Insurance
CFF and Cortland National currently maintain insurance in amounts
reasonably necessary for their operations and, to the best knowledge of CFF,
similar in scope and coverage to that maintained by other entities similarly
situated. Neither CFF nor Cortland National has received any advance notice of a
material premium increase or cancellation with respect to any of its insurance
policies or bonds, and within the last three years, neither CFF nor any CFF
Subsidiary has been refused any insurance coverage sought or applied for, and
CFF has no reason to believe that existing insurance coverage cannot be renewed
as and when the same shall expire, upon terms and conditions as favorable as
those presently in effect, other than possible increases in premiums or
unavailability in coverage that have not resulted from any extraordinary loss
experience of CFF or any CFF Subsidiary.
3.22. Deposit Insurance; Federal Reserve Membership
The deposits of Cortland National are insured by the FDIC in
accordance with the FDIA, and Cortland National has paid all assessments and
filed all reports required by the FDIA. Cortland National is a member of the
Federal Reserve System and has subscribed and paid for the requisite number of
shares of capital stock of the FRBNY.
3.23. Environmental Matters
(a) Except for any violation, liability or noncompliance which does
not have a material adverse effect on CFF or Cortland National, to the best
knowledge of CFF and Cortland National; (i) neither CFF nor Cortland National
has violated during the last five years or is in violation of or is liable under
any federal, state or local environmental law; (ii) none of the properties owned
or leased by either CFF or Cortland National (including, without limitation,
soils and surface and ground waters) are contaminated with any hazardous
substance; (iii) neither CFF nor Cortland National is liable for any off-site
contamination; and (iv) each of CFF and Cortland National is, and during the
last five years has been, in compliance with, all of its respective permits,
licenses and other authorizations issued under
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any environmental laws. For purposes of the foregoing, all references to
"properties" include, without limitation, any owned real property or leased real
property.
(b) Neither CFF nor Cortland National has received any written
notice of any legal, administrative, arbitral or other proceeding, claim or
action and, to the knowledge of CFF and Cortland National, there is no
governmental investigation of any nature ongoing, in each case that could
reasonably be expected to result in the imposition, on CFF or Cortland National
of any liability arising under any local, state or federal environmental
statute, regulation or ordinance including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, which liability would have a material adverse effect on CFF or Cortland
National; to the best knowledge of CFF and Cortland National, there are no facts
or circumstances which could reasonably be expected to form the basis for any
such proceeding, claim, action or governmental investigation that would impose
any such liability; and neither CFF nor Cortland National is subject to any
agreement, order, judgment, decree or memorandum by or with any court,
governmental authority, regulatory agency or third party imposing any such
liability.
3.24. Certain Information
When the Registration Statement or any post-effective amendment
thereto shall become effective, and at all times subsequent to such
effectiveness up to and including the time of the later of the OVB and CFF
shareholders' meetings to vote upon the Merger, such Registration Statement and
all amendments or supplements thereto, with respect to all information set forth
therein furnished by CFF relating to CFF and Cortland National, (i) shall comply
in all material respects with the applicable provisions of the Securities Laws,
and (ii) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements contained therein not misleading.
3.25. Administration of Trust Accounts
Cortland National has properly administered, in all respects
material and which could reasonably be expected to be material to the business,
operations or financial condition of CFF and Cortland National, taken as a
whole, all accounts for which it acts as a fiduciary, including but not limited
to accounts for which it serves as a trustee, agent, custodian, personal
representative, guardian, conservator or investment advisor, in accordance with
the terms of the governing documents and applicable state and federal law and
regulation and common law. Neither CFF, Cortland National, nor any director,
officer or employee of CFF or Cortland National has committed any breach of
trust with respect to any such fiduciary account which is material to or could
reasonably be expected to be material to the business, operations or financial
condition of CFF and Cortland National, taken as a whole, and the accountings
for each such fiduciary account are true and correct in all material respects
and accurately reflect the assets of such fiduciary account in all material
respects.
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3.26. Information in Applications
All information concerning CFF and Cortland National and their
respective officers, directors and shareholders, included (or submitted for
inclusion) in the applications described in Section 4.3 hereof shall be true,
correct and complete in all material respects.
3.27. Pooling of Interests
CFF knows of no reason (after consultation with its independent
accountants) which would reasonably cause it to believe that the Merger will not
qualify as a pooling of interests for financial accounting purposes.
3.28. Intellectual Property
CFF and Cortland National own the entire right, title and interest
in and to, or have valid licenses with respect to, all the Intellectual Property
necessary in all material respects to conduct their business and operations as
presently conducted, except where the failure to do so would not, individually
or in the aggregate, have a material adverse effect on the financial condition,
results of operations or business of CFF on a consolidated basis.
ARTICLE 4
COVENANTS
4.1. Shareholders' Meetings
CFF and OVB shall submit this Reorganization Agreement, the Plan of
Merger and such related matters as the parties shall reasonably and in good
faith agree (including amendments to their respective certificates of
incorporation) to their respective shareholders for approval at an annual or a
special meeting to be held as soon as practicable. Except to the extent legally
required for the discharge by the boards of directors of their fiduciary duties
as determined by such boards of directors after consultation with such board's
counsel, the boards of directors of OVB and CFF shall recommend at the
respective shareholders' meetings that the shareholders vote in favor of and
approve the Merger and adopt the Plan of Merger.
4.2 Proxy Statement; Registration Statement
As promptly as practicable after the date hereof, CFF shall prepare
and file the Registration Statement with the SEC, and OVB shall cooperate in the
preparation of the Registration Statement, which shall include the Proxy
Statement to be mailed to the shareholders of CFF and OVB in connection with the
Merger. CFF will advise OVB, promptly after it receives notice (i) of the time
when the Registration Statement or any post-effective amendment thereto has
become effective or any supplement or amendment has
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been filed, (ii) of the issuance of any stop order, (iii) of the suspension of
qualification of the Continuing Corporation Common Stock issuable in connection
with the Merger for offering or sale in any jurisdiction, or the initiation or
threat of any proceeding for any such purpose, or (iv) of any request by the
Commission for the amendment or supplement of the Registration Statement or for
additional information. The Continuing Corporation shall take all actions
necessary to register or qualify the shares of Continuing Corporation Common
Stock to be issued in the Merger pursuant to all applicable state "blue sky" or
securities laws.
4.3. Regulatory Applications
The parties hereto shall use their best efforts to submit or cause
to be submitted, as promptly as practicable after the date hereof, any requisite
applications or notices for prior approval of the transactions contemplated
herein and in the Plan of Merger, or requests for waivers thereof, to any state
or federal government agency, department or body the approval of which is
required for consummation of the Merger and the Bank Merger. At a reasonable
time prior to the making of any such filings with any regulatory authority or
any third persons, CFF and OVB shall submit to each other the materials to be
filed, mailed or released. Any such materials must be acceptable to both CFF and
OVB prior to the filings with any regulatory authorities or any third persons,
except to the extent that CFF or OVB is legally required to proceed prior to
obtaining the acceptance of the other. Each party agrees to consult with the
other with respect to obtaining all necessary approvals and consents and each
will keep the other apprised of the status of matters relating to such approvals
and consents.
4.4. Best Efforts to Consummate Transaction
CFF, Cortland National, OVB and Oneida Valley each shall use its
best efforts in good faith to (i) furnish such information as may be necessary
or desirable in connection with the preparation of the documents referred to in
Sections 4.2 and 4.3 above, and (ii) take or cause to be taken all action
necessary or desirable on its part so as to permit consummation of the Merger
and the Bank Merger at the earliest possible date, including, without
limitation, (1) obtaining the consent or approval of each individual,
corporation, or other entity whose consent or approval is necessary or desirable
for consummation of the transactions contemplated hereby, and (2) requesting the
delivery of appropriate opinions, consents and letters from its counsel and
independent auditors. No party hereto shall take, or cause or to the best of its
ability permit to be taken, any action that would adversely affect the
qualification of the Merger for pooling of interests accounting treatment or as
a reorganization within the meaning of Section 368(a) of the Code; provided that
nothing herein contained shall preclude CFF from exercising its rights under the
OVB Option Agreement or OVB from exercising its rights under the CFF Option
Agreement. In the event that any party hereto has taken any action, whether
before, on or after the date hereof, that would adversely affect such
qualification, each party shall take such action as any other party may
reasonably request to cure such effect to the extent curable without a material
adverse effect on the financial condition, results of operations or business of
either CFF or OVB on a consolidated basis.
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4.5. Investigation and Confidentiality
(a) CFF and OVB each will keep the other advised of all material
developments relevant to its business and to consummation of the transactions
contemplated herein. CFF and OVB each may make or cause to be made such
investigation of the financial and legal condition of the other as such party
reasonably deems necessary or advisable in connection with the transactions
contemplated herein and in the Plan of Merger and the Bank Merger Agreement,
provided, however, that such investigation shall be reasonably related to such
transactions and shall not interfere unnecessarily with normal operations. CFF
and OVB agree to furnish the other and the other's advisors with such financial
data and other information with respect to its business and properties as such
other party shall from time to time reasonably request. No investigation
pursuant to this Section 4.5 shall affect or be deemed to modify any
representation or warranty made by, or the conditions to the obligations to
consummate the Merger and the Bank Merger of, any party hereto.
(b) Each party hereto shall, and shall cause its directors,
officers, attorneys and advisors to, maintain the confidentiality of all
information obtained in such investigation which is not otherwise publicly
disclosed by the other parties, said undertaking with respect to confidentiality
to survive any termination of this Agreement pursuant to Section 6.1 hereof.
Each party hereto shall hold all information furnished by any other party or
such other party's subsidiaries or representatives pursuant hereto in confidence
to the extent required by, and in accordance with, the provisions of the
Confidentiality Agreement dated April 24, 1998 by and between CFF and OVB (the
"Confidentiality Agreement"). In the event of termination of this Agreement each
party shall return to the furnishing party or destroy and certify the
destruction of all information previously furnished in connection with the
transactions contemplated by this Agreement.
(c) OVB shall give prompt notice to CFF, and CFF shall give prompt
notice to OVB, of (i) the occurrence, or failure to occur, of any material event
which occurrence or failure would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect any time from the date hereof to the Closing Date and (ii) any material
failure of OVB or CFF, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder, and each party shall use all reasonable efforts to remedy such
failure.
4.6. Press Releases
The parties hereto shall agree with each other as to the form and
substance of any press release related to this Reorganization Agreement, the
Plan of Merger and the Bank Merger Agreement or the transactions contemplated
hereby or thereby, and shall consult each other as to the form and substance of
other public disclosures related thereto, provided, however, that nothing
contained herein shall prohibit any party, following notification to the other
parties, from making any disclosure which its legal counsel advises is legally
required.
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4.7. Conduct of Business - Covenants of OVB and Oneida Valley
(a) Prior to the Closing Date, and except as otherwise provided for
by this Reorganization Agreement or consented to or approved by CFF, OVB and
Oneida Valley each shall use its best efforts to preserve its properties,
business and relationships with customers, employees and other persons.
(b) Except with the prior written consent of CFF or except as
Previously Disclosed, between the date hereof and the Effective Date, OVB and
Oneida Valley each shall not:
(1) carry on its business other than in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted;
(2) in the case of OVB only, declare, set aside, make or pay
any dividend or other distribution in respect of its capital stock other than
quarterly cash dividends in respective amounts not in excess of $0.25 per share
or other dividends consistent with historical practice, in a manner consistent
with past practice and in accordance with applicable law, regulation and
contractual and regulatory commitments;
(3) issue any shares of its capital stock or otherwise permit
any treasury shares to become outstanding other than pursuant to the OVB Option
Agreement, or incur any additional debt obligation or other obligation for
borrowed money other than in the ordinary course of business of Oneida Valley
consistent with past practice;
(4) issue, grant or authorize any Stock Rights other than
pursuant to the OVB Option Agreement or as Previously Disclosed or effect any
recapitalization, reclassification, stock dividend, stock split or like change
in capitalization or redeem, repurchase or otherwise acquire any shares of its
capital stock;
(5) amend its certificate of incorporation, articles of
association or by-laws except as contemplated herein or as agreed to by the
parties hereto (and, to the extent required, disclosed in the Proxy Statement)
to facilitate the consummation of the transactions contemplated hereby; impose,
or suffer the imposition, on any share of stock held by OVB in Oneida Valley of
any lien, charge or encumbrance, or permit any such lien, charge or encumbrance
to exist;
(6) merge or consolidate with any other entity; sell, lease,
liquidate or dispose of all or any material portion of its assets or business or
any material asset; make any acquisition of all or any substantial portion of
the business or assets of any other person, firm, association, corporation or
business organization other than in connection with the collection of any loan
or credit arrangement between it and any other person; enter into or consummate
a purchase and assumption transaction with respect to deposits and liabilities;
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revoke or surrender its certificate of authority to maintain, or apply for the
relocation of, any existing branch office or apply for a certificate of
authority to establish a new branch office, except as Previously Disclosed;
(7) fail to comply in any material respect with any laws,
regulations, ordinances or governmental actions applicable to it and to the
conduct of its business;
(8) acquire any material fixed assets; make any capital
expenditures in excess of $100,000 in the aggregate; or modify any leases or
other contracts relating thereto that involve annual payments that exceed
$100,000 in the aggregate, except as Previously Disclosed;
(9) increase the rate of compensation of, pay or agree to pay
any bonus to, or provide any additional employee benefit or incentive to (i) any
director or any executive officer under any circumstances, or (ii) any other
officer or employee except in the ordinary course of business in a manner
consistent with the company's established salary and bonus policies and
procedures and past practice, provided, however, that such payments may not
increase severance amounts payable under employment or severance agreements
(except for any payments made or paid pursuant to any change in control
provisions contained therein); enter into, modify or extend, or permit to be
renewed, any employment or severance contracts with any of its present or former
directors, officers or employees, or enter into or modify (except as may be
required by applicable law) any pension, retirement, stock option, stock
purchase, stock appreciation right, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or other
employees;
(10) change its lending, investment, asset/liability
management or other material banking policies in any material respect except as
may be required by changes in applicable law; except as Previously Disclosed,
make any loan or extend any credit, except in the ordinary course of business
consistent with its lending policies and past practice;
(11) change its methods of accounting in effect at December
31, 1997, except as required by changes in generally accepted accounting
principles concurred in by its independent certified public accountants, 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
returns for the year ended December 31, 1997, except as required by changes in
law;
(12) solicit or encourage inquiries or proposals with respect
to any acquisition or purchase of all or a substantial portion of the assets of,
or a substantial equity interest in, OVB or Oneida Valley or any business
combination with OVB or Oneida Valley other than as contemplated by this
Reorganization Agreement; or authorize or permit any
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officer, director, agent or affiliate of it to do any of the above; or fail to
notify CFF immediately if any such inquiries or proposals are received by OVB or
Oneida Valley; provided, however, that if following the execution hereof and
prior to the Closing Date any unsolicited inquiry or proposal is received by any
OVB officer, director, agent or affiliate and the OVB directors determine (in
good faith after consultation with financial advisors and legal counsel) that
their fiduciary duties require them to consider such inquiry or proposal, OVB
shall be free to deal with any such inquiry or proposal in any manner that is
deemed by OVB's directors as being in the best interests of OVB's shareholders
and that is not contrary to the terms of this Agreement, the Plan of Merger or
the CFF Option Agreement;
(13) foreclose on any commercial loan secured by real property
(other than those commercial loans in which it already has commenced action
seeking foreclosure) unless it first has obtained an environmental audit,
analysis or survey that indicates that it will not incur material potential
liability under Environmental Laws as a result of such foreclosure;
(14) purchase or acquire any of the outstanding shares of
capital stock of CFF other than as contemplated by the CFF Option Agreement; or
(15) agree to do any of the foregoing.
4.8. Conduct of Business - Covenants of CFF and Cortland National
(a) Prior to the Closing Date, and except as otherwise provided for
by this Reorganization Agreement or consented to or approved by OVB, CFF and
Cortland National each shall use its best efforts to preserve its properties,
business and relationships with customers, employees and other persons.
(b) Except with the prior written consent of OVB or except as
Previously Disclosed, between the date hereof and the Effective Date, CFF and
Cortland National each shall not:
(1) carry on its business other than in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted;
(2) in the case of CFF only, declare, set aside, make or pay
any dividend or other distribution in respect of its capital stock other than
quarterly cash dividends in respective amounts not in excess of $0.14 per share
or other dividends consistent with historical practice, in a manner consistent
with past practice and in accordance with applicable law, regulation and
contractual and regulatory commitments;
(3) issue any shares of its capital stock or otherwise permit
any treasury shares to become outstanding other than pursuant to the CFF Option
Agreement or pursuant to the CFF DRIP, or incur any additional debt obligation
or other obligation for
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borrowed money other than in the ordinary course of business of Cortland
National consistent with past practice;
(4) issue, grant or authorize any Stock Rights other than
pursuant to the CFF Option Agreement or as Previously Disclosed, or effect any
recapitalization, reclassification, stock dividend, stock split or like change
in capitalization, or redeem, repurchase or otherwise acquire any shares of its
capital stock;
(5) amend its certificate of incorporation, articles of
association or by-laws except as contemplated herein or as agreed to by the
parties hereto (and, to the extent required, disclosed in the Proxy Statement)
to facilitate the consummation of the transactions contemplated hereby; impose,
or suffer the imposition, on any share of stock held by CFF in Cortland National
of any lien, charge or encumbrance, or permit any such lien, charge or
encumbrance to exist;
(6) merge or consolidate with any other entity; sell, lease,
liquidate or dispose of all or any material portion of its assets or business or
any material asset; make any acquisition of all or any substantial portion of
the business or assets of any other person, firm, association, corporation or
business organization other than in connection with the collection of any loan
or credit arrangement between it and any other person; enter into or consummate
a purchase and assumption transaction with respect to deposits and liabilities;
revoke or surrender its certificate of authority to maintain, or apply for the
relocation of, any existing branch office or apply for a certificate of
authority to establish a new branch office;
(7) fail to comply in any material respect with any laws,
regulations, ordinances or governmental actions applicable to it and to the
conduct of its business;
(8) acquire any material fixed assets, make any capital
expenditures in excess of $100,000 in the aggregate; modify any leases or other
contracts relating thereto that involve annual payments that exceed $100,000 in
the aggregate, except as Previously Disclosed;
(9) increase the rate of compensation of, pay or agree to pay
any bonus to, or provide any additional employee benefit or incentive to (i) any
director or any executive officer under any circumstances, or (ii) any other
officer or employee except in the ordinary course of business in a manner
consistent with the company's established salary and bonus policies and
procedures and past practice provided, however, that such payments may not
increase severance amounts payable under employment or severance agreements
(except for any payments made or paid pursuant to any change in control
provisions contained therein); enter into, modify or extend, or permit to be
renewed, any employment or severance contracts with any of its present or former
directors, officers or employees, or enter into or modify (except as may be
required by applicable law) any pension, retirement, stock option, stock
purchase, stock appreciation right, savings, profit sharing, deferred
compensation,
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consulting, bonus, group insurance or other employee benefit, incentive or
welfare contract, plan or arrangement, or any trust agreement related thereto,
in respect of any of its directors, officers or other employees;
(10) change its lending, investment, asset/liability
management or other material banking policies in any material respect except as
may be required by changes in applicable law; make any loan or extend any
credit, except in the ordinary course of business consistent with its lending
policies and past practice;
(11) change its methods of accounting in effect at December
31, 1997, except as required by changes in generally accepted accounting
principles concurred in by its independent certified public accountants, 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
returns for the year ended December 31, 1997, except as required by changes in
law;
(12) solicit or encourage inquiries or proposals with respect
to any acquisition or purchase of all or a substantial portion of the assets of,
or a substantial equity interest in, CFF or Cortland National or any business
combination with CFF or Cortland National other than as contemplated by this
Reorganization Agreement; or authorize or permit any officer, director, agent or
affiliate of it to do any of the above; or fail to notify OVB immediately if any
such inquiries or proposals are received by CFF or Cortland National; provided,
however, that if following the execution hereof and prior to the Closing Date
any unsolicited inquiry or proposal is received by any CFF officer, director,
agent or affiliate and the CFF directors determine (in good faith after
consultation with financial advisors and legal counsel) that their fiduciary
duties require them to consider such inquiry or proposal, CFF shall be free to
deal with any such inquiry or proposal in any manner that is deemed by CFF's
directors as being in the best interests of CFF's shareholders and that is not
contrary to the terms of this Agreement, the Plan of Merger or the OVB Option
Agreement;
(13) foreclose on any commercial loan secured by real property
(other than those commercial loans in which it already has commenced action
seeking foreclosure) unless it first has obtained an environmental audit,
analysis or survey that indicates that it will not incur material potential
liability under Environmental Laws as a result of such foreclosure;
(14) purchase or acquire any of the outstanding shares of
capital stock of OVB other than as contemplated by the OVB Option Agreement; or
(15) agree to do any of the foregoing.
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4.9. Closing; Certificate of Merger; Headquarters
The transactions contemplated by this Reorganization Agreement and
the Plan of Merger shall be consummated at a closing to be held at such location
as the parties shall agree on the fifth business day following satisfaction of
the conditions to consummation of the Merger set forth in Article 5 hereof or
such other date as may be agreed upon by the parties hereto (the "Closing
Date"). In connection with such Closing, CFF and OVB shall execute a Certificate
of Merger and shall cause such certificate to be delivered to the New York
Department of State in accordance with Section 904 of the New York Business
Corporation Law. The Merger shall be effective at the time and on the date
specified in such Certificate of Merger (the "Effective Date"). The Bank Merger
shall be effectuated at the same time as the Merger or as soon thereafter as
practicable as provided in the Bank Merger Agreement. At the Effective Date, the
Continuing Corporation shall maintain headquarters offices in both Oneida and
Cortland.
4.10. Affiliates Holding Period
CFF and OVB shall cooperate and use their best efforts to identify
those persons who may be deemed to be "affiliates" of CFF or OVB within the
meaning of Rule 144 or 145 promulgated by the Commission under the Securities
Act, as appropriate, or by whom the transfer of Continuing Corporation Common
Stock following consummation of the Merger may adversely affect the accounting
for the Merger as a pooling of interests. OVB and CFF shall use their best
efforts to cause each person so identified to deliver to CFF or OVB, no later
than 30 days prior to the Effective Date, a written agreement providing that
such person will not dispose of any OVB Common Stock, CFF Common Stock or
Continuing Corporation Common Stock except in compliance with the Securities
Act, the rules and regulations promulgated thereunder and the Commission's rules
relating to pooling of interests accounting treatment. Shares of Continuing
Corporation Common Stock issued to such affiliates in exchange for OVB Common
Stock shall not be transferable until such time as financial results covering at
least 30 days of combined operations of OVB and CFF have been published,
regardless of whether each such affiliate has provided the written agreement
referred to in this section.
4.11. Board of Directors
(a) From and after the Effective Date, the Board of Directors of the
Continuing Corporation shall consist of 22 persons, 12 of whom shall be persons
named by the Board of Directors of CFF as Previously Disclosed and 10 of whom
shall be persons named by the Board of Directors of OVB as Previously Disclosed.
The terms of the directors of the Continuing Corporation after the Effective
Date shall be allocated, prior to the mailing of the Proxy Statement, so that,
as nearly as practicable, the terms of the same number of persons designated as
directors by CFF and by OVB, respectively, will expire in each applicable year.
If prior to the Effective Date (i) any of the individuals named by either CFF or
OVB to serve
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on the Board of Directors of the Continuing Corporation following the Effective
Date becomes unable or unwilling to serve as a director of the Continuing
Corporation, or (ii) either CFF or OVB determines to replace an individual named
by such party to serve on the Board of Directors of the Continuing Corporation,
the party that designated such individual may name a replacement to become a
director of the Continuing Corporation after the Effective Date. For so long as
David R. Alvord and John C. Mott shall serve as Co-CEOs of the Continuing
Corporation, they shall also serve as Co-Chairs of the Board of Directors. The
Board of Directors of the Continuing Bank following the Bank Merger shall be
identical to members of the Continuing Corporation.
(b) The addition to or removal of (without cause) any members, or a
change in the number of directors, of the Board of Directors of either the
Continuing Corporation or the Continuing Bank shall be approved by at least a
two-thirds vote of the directors then holding office and such provision shall be
included in the Bylaws of the Continuing Corporation and Continuing Bank. A
mandatory retirement policy will be established for all directors at age 71,
provided that certain current directors will be grandfathered to age 72, and
such provision shall be included in the Bylaws of the Continuing Corporation and
Continuing Bank.
(c) The members of the Executive Committees of the Boards of
Directors of the Continuing Corporation and of the Continuing Bank following the
Effective Date shall be as Previously Disclosed and in accordance with the
Bylaws of the Continuing Corporation attached as Annex B to the Plan of Merger.
The members of the Committees of the Boards of both the Continuing Corporation
and the Continuing Bank shall be composed so as to include as nearly equal as
possible numbers of directors from CFF and OVB and any chairs of such committees
will be designated to include as nearly equal as possible numbers of directors
from CFF and OVB.
(d) The persons named by CFF and OVB as members of the Board of
Directors of the Continuing Corporation after the Effective Date shall be named
in the Proxy Statement and the Registration Statement, subject to receipt of the
consent of such individuals to be so named.
(e) A decision of the Continuing Corporation not to maintain
headquarters offices in both Oneida and Cortland shall require the affirmative
vote of at least two-thirds of the directors then in office, and such a
provision shall be included in the Bylaws for the Continuing Corporation.
4.12. Management; Employees; Employee Benefits
(a) From and after the Effective Date, David R. Alvord and John C.
Mott shall be Co-Chief Executive Officers of the Continuing Corporation, and the
other executive officers of the Continuing Corporation shall be named based upon
candidates approved by both
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the Board of Directors of CFF and OVB prior to the Effective Date and the Board
of Directors of the Continuing Corporation following the Effective Date. The
principal officers of the Continuing Bank from and after the Effective Date
shall be as provided in the Bank Merger Agreement and as approved by the Board
of Directors of Cortland National and Oneida Valley, or the Board of the
Continuing Bank depending on the timing of the Bank Merger. As of the Effective
Date, the Continuing Corporation and Continuing Bank shall enter into employment
agreements with each of David R. Alvord and John C. Mott on substantially the
terms Previously Disclosed or as the Boards of Directors of both CFF and OVB may
otherwise agree.
(b) It is the intention of the parties hereto that, as soon as
practicable after the Effective Date, all directors, officers and employees of
the Continuing Corporation and its subsidiaries will be entitled to participate
in compensation, benefit, welfare and related plans, programs or arrangements
made available to similarly situated directors, officers and employees under the
same terms and conditions, notwithstanding whether such individual was employed
by, or provided services to, CFF and Cortland National or OVB and Oneida Valley
prior to the Effective Date. The parties agree to work together prior to the
Effective Date to develop and design such plans, programs and arrangements, and
to prepare for the implementation of such plans, programs and arrangements as
soon as practicable following the Effective Date. It is also anticipated that
any such plans, programs or arrangements that are effective after the Effective
Date shall provide that, for purposes of determining eligibility for and vesting
of such employee benefits only (and not for pension benefit or other accrual
purposes except to the extent that an individual was covered by the applicable
plan prior to the Effective Date and accrued benefits thereunder), service with
OVB or Oneida Valley, on the one hand, or CFF or Cortland National, on the other
hand, prior to the Effective Date shall be treated as service with an "employer"
to the same extent as if such persons had been employees of CFF or Cortland
National or of OVB or Oneida Valley, as appropriate. The parties understand and
acknowledge that the implementation of the plans, programs and arrangements
described in this Section 4.12(b) may depend upon, and shall be subject to
evaluation of, the cost of such plans, programs and arrangements, as well as
other relevant factors.
(c) It is the intention of the parties to provide a stock based
incentive compensation plan to key executives and employees of the Continuing
Corporation which shall include provisions for the issuance of incentive stock
options, nonqualified stock options, restricted stock grants and similar
features in order to provide a long term incentive to key executives and
employees, enhance the ability of the Continuing Corporation to attract and
retain talented executives and employees, and more closely align the interests
of management with the interests of the shareholders. The parties agree to work
together to develop and approve such a plan as soon as possible prior to the
filing of the Registration Statement.
(d) Except as provided under Section 4.12(a) hereof, nothing herein
shall be construed as giving any employee of CFF, OVB or their respective
subsidiaries a right to
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continuing employment with the Continuing Corporation at any of its subsidiaries
after the Effective Date.
(e) The Continuing Corporation shall honor CFF's and OVB's
obligations under any of its deferred compensation plans for its executives and
directors to the extent that such obligations have been properly recorded and
accrued for on CFF's and OVB's books. The Continuing Corporation shall also
honor OVB's supplemental executive retirement agreement with Mr. Mott and CFF's
supplemental executive retirement agreement with Mr. Alvord, and each such
executive's benefits shall accrue under the applicable agreement or under
alternative arrangements agreed to by Mr. Mott and Mr. Alvord, respectively.
(f) It is the intention of the parties to provide for a severance
plan or policy which would be effective after the Effective Date and which would
be available for eligible employees of the Continuing Corporation or Continuing
Bank who are affected by the Merger. The parties agree to work together prior to
the Effective Date to develop and design such a plan taking into account the
business and integration plan of the Continuing Bank, the level of service and
period of service of employees, the cost of such a plan, and other relevant
factors.
4.13. Indemnification
(a) From and after the Effective Date, the Continuing Corporation
shall indemnify, defend and hold harmless each person who is now, or who has
been at any time before the date hereof or who becomes before the Effective
Date, an officer or director of either OVB or CFF or any of their respective
subsidiaries (the "Indemnified Parties") against all losses, claims, damages,
costs, expenses (including attorneys' fees), liabilities or judgments or amounts
that are paid in settlement (which settlement shall require the prior written
consent of the Continuing Corporation, which consent shall not be unreasonably
withheld) of or in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, or administrative (each, a "Claim"), in
which an Indemnified Party is, or is threatened to be made, a party or witness
in whole or in part on or arising in whole or in part out of the fact that such
person is or was a director or officer of either OVB or CFF or any of their
respective subsidiaries if such Claim pertains to any matter or fact arising,
existing or occurring before the Effective Date (including without limitation
the Merger and the other transactions contemplated hereby), regardless of
whether such Claim is asserted or claimed before, or at or after, the Effective
Date (the "Indemnified Liabilities"), to the fullest extent permitted under
applicable state or federal law in effect as of the date hereof or as amended
applicable to a time before the Effective Date and under OVB's or CFF's
governing corporate documents, and the Continuing Corporation shall pay expenses
in advance of the final disposition of any such action or proceeding to each
Indemnified Party to the full extent permitted by applicable state or federal
law in effect as of the date hereof or as amended applicable to a time before
the Effective Date upon receipt of any undertaking required by applicable law.
Any Indemnified Party wishing to claim indemnification under this Section
4.13(a), upon learning of any Claim, shall notify the Continuing Corporation
(but the failure
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so to notify the Continuing Corporation shall not relieve it from any liability
which it may have under this Section 4.13(a), except to the extent such failure
materially prejudices the Continuing Corporation) and shall deliver to the
Continuing Corporation the undertaking, if any, required by applicable law. The
Continuing Corporation shall ensure, to the extent permitted under applicable
law, that all limitations of liability existing in favor of the Indemnified
Parties as provided in OVB's or CFF's governing corporation documents, as in
effect as of the date hereof, or allowed under applicable state or federal law
as in effect as of the date hereof or as amended applicable to a time before the
Effective Date, with respect to claims or liabilities arising from facts or
events existing or occurring before the Effective Date (including without
limitation, the transactions contemplated hereby), shall survive the Merger. In
the event of any such Claim (whether arising before or after the Effective
Date), (1) the Continuing Corporation shall have the right to assume the defense
thereof (in which event the Indemnified Parties will cooperate in the defense of
any such matter) and upon such assumption the Continuing Corporation shall not
be liable to any Indemnified Party for any legal expenses of other counsel or
any other expenses subsequently incurred by any Indemnified Party in connection
with the defense thereof, except that if the Continuing Corporation elects not
to assume such defense, or counsel for the Indemnified Parties reasonably
advises the Indemnified Parties that there are or may be (whether or not any
have yet actually arisen) issues which raise conflicts of interest between the
Continuing Corporation and the Indemnified Parties, the Indemnified Parties may
retain counsel reasonably satisfactory to them, and the Continuing Corporation
shall pay the reasonable fees and expenses of such counsel for the Indemnified
Parties, (2) the Continuing Corporation shall be obligated pursuant to this
paragraph to pay for only one firm of counsel for all Indemnified Parties whose
reasonable fees and expenses shall be paid promptly as statements are received,
(3) the Continuing Corporation shall not be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld) and (4) the Continuing Corporation shall have no obligation hereunder
to any Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law.
(b) From and after the Effective Date, the directors, officers and
employees of OVB and CFF hereto or any of their respective subsidiaries who
become directors or officers of the Continuing Corporation or any of its
subsidiaries, except for the indemnification rights provided pursuant to any
indemnification agreements between CFF and OVB and their respective directors
and as set forth in paragraph (a) of this Section 4.13, shall have
indemnification rights having prospective application only. The prospective
indemnification rights shall consist of such rights to which directors and
officers of the Continuing Corporation and its subsidiaries are entitled under
the provisions of the governing corporation documents of the Continuing
Corporation and its subsidiaries, as in effect from time to time after the
Effective Date, as applicable, and provisions of applicable state and federal
law as in effect from time to time after the Effective Date.
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(c) For a period of six years from and after the Effective Date, the
Continuing Corporation shall cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by OVB
(provided that the Continuing Corporation may substitute therefor policies from
financially capable insurers of at least the same coverage and amounts
containing terms and conditions which are substantially no less advantageous)
with respect to Claims arising from facts or events which occurred before the
Effective Date. Following consummation of the Merger, the directors and officers
of the Continuing Corporation shall be covered by the directors' and officers'
liability insurance maintained by the Continuing Corporation.
(d) The obligations of the Continuing Corporation provided under
paragraphs (a), (b) and (c) of this Section 4.13 are intended to be enforceable
against the Continuing Corporation directly by the Indemnified Parties and shall
be binding on all respective successors and permitted assigns of the Continuing
Corporation.
(e) In the event the Continuing Corporation or any of its 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 or conveys all or substantially all of its properties
and assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of the
Continuing Corporation shall assume the obligations set forth in this Section
4.13.
(f) As a condition to receiving indemnification under this Section
4.13, the party claiming indemnification shall assign, by separate writing, to
the Continuing Corporation all right, title and interest to and in proceeds of
any insurance maintained or provided by OVB or CFF or any of their respective
affiliates for the benefits of the claiming party, to the extent of
indemnification actually received from the Continuing Corporation hereunder and
shall send such notices as the Continuing Corporation may reasonably request
under any applicable directors' and officers' liability or blanket bond
insurance coverage to preserve claims of which the claiming party is aware.
(g) No person shall be entitled to indemnification under this
Section 4.13 if such person is seeking indemnification based on a claim (other
than a claim arising as a supplier to, customer of or borrower from CFF,
Cortland National, OVB or Oneida Valley) brought by such person or by an entity
of which such person is a general partner, executive officer, director, trustee,
beneficiary or controlling person unless such person has waived any right to
participate in any damage or other award to such claiming party or other entity
in any such action, suit or proceeding.
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4.14. Nasdaq Listing
The parties hereto shall use their best efforts to cause the shares
of Continuing Corporation Common Stock to be approved for quotation on the
Nasdaq National Market System.
4.15. Reservation of Right to Revise Transaction
The parties hereto may hereafter agree in writing to change the
method of effecting the Merger to the extent permitted by applicable law and to
the extent they deem any such change to be desirable; provided, however, that no
such change shall materially alter the benefits of the Merger as is presently
contemplated in this Agreement and in the Plan of Merger to any of the parties
hereto or to their respective shareholders.
4.16 Dividends
After the date of this Agreement, each of the parties hereto shall
coordinate with the other the declaration of any dividends in respect of CFF
Common Stock or OVB Common Stock and the record dates and payment dates relating
thereto, it being the intention of the parties hereto that holders of CFF Common
Stock and OVB Common Stock shall not receive two dividends, or fail to receive
one dividend, for any single calendar quarter with respect to their shares of
CFF Common Stock and/or OVB Common Stock and any shares of Continuing
Corporation Common Stock any such holder receives in exchange therefor in the
Merger.
ARTICLE 5
CONDITIONS PRECEDENT
5.1. Conditions Precedent - Mutual
The respective obligations of CFF and OVB to effect the Merger and
of Cortland National and Oneida Valley to effect the Bank Merger shall be
subject to satisfaction or waiver of the following conditions at or prior to the
Closing Date:
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Reorganization Agreement, the Plan of Merger
and the Bank Merger Agreement and consummation of the transactions contemplated
hereby and thereby shall have been duly and validly taken, and all required
shareholder approvals shall have been duly received.
(b) The parties hereto shall have received all regulatory approvals
required or mutually deemed necessary in connection with the transactions
contemplated by this
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Reorganization Agreement, the Plan of Merger and the Bank Merger Agreement, all
notice periods and waiting periods required after the granting of any such
approvals shall have passed and all conditions contained in any such approval
required to have been satisfied prior to consummation of such transactions shall
have been satisfied, provided, however, that no such approval shall have imposed
any condition or requirement which, in the reasonable good faith opinion of the
Boards of Directors of CFF and OVB (as they shall so agree) so materially and
adversely affects the anticipated economic and business benefits to such parties
of the transactions contemplated by this Agreement as to render consummation of
such transactions inadvisable.
(c) The parties hereto shall have received an opinion of Bond,
Schoeneck & King, LLP dated as of the Closing Date, satisfactory in form and
substance to CFF and OVB, to the effect that the Merger when consummated in
accordance with the terms hereof and the Plan of Merger, and the Bank Merger
when consummated in accordance with the terms of the Bank Merger Agreement, will
constitute reorganizations within the meaning of Section 368(a) of the Code, and
that the exchange of OVB Common Stock to the extent exchanged for CFF Common
Stock will not give rise to recognition of gain or loss for federal income tax
purposes to the shareholders of OVB, except to the extent that cash is received
in lieu of fractional share interests of CFF Common Stock, and neither the
Merger nor the Bank Merger will give rise to recognition of gain or loss for
federal income tax purposes to the Continuing Corporation. CFF, Cortland
National, OVB and Oneida Valley shall provide Bond, Schoeneck & King, LLP with
the facts, representations and assumptions (including without limitation the
standard representations set forth in Revenue Procedure 86-42, 1986-2 C.B. 772
or, if the parties are unable to provide such standard representations, such
other representations requested by Bond, Schoeneck & King, LLP) on which Bond,
Schoeneck & King, LLP will rely in rendering its opinion, which facts,
representations and assumptions will be consistent with the state of facts CFF,
Cortland National, OVB and Oneida Valley believe will exist on the Effective
Date.
(d) No event shall have occurred that shall preclude the Merger from
being accounted for as a pooling of interests, and the parties shall have
received from Coopers & Lybrand L.L.P. a letter to the effect that, based on a
review of this Agreement and related agreements and the relevant facts and
circumstances, the Merger shall be accounted for as a pooling-of-interests under
GAAP.
(e) The Registration Statement (including any post-effective
amendment thereto) shall be effective under the Securities Act, and no
proceeding shall be pending or threatened by the Commission to suspend the
effectiveness of such Registration Statement, and CFF shall have received all
state securities or "Blue Sky" permits or other authorizations, or confirmations
as to the availability of an exemption from registration requirements as may be
necessary, and no proceedings shall be pending or threatened by any state "Blue
Sky" securities administrator to suspend the effectiveness of such Registration
Statement.
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(f) To the extent that any lease, license, loan, financing agreement
or other contract or agreement to which any party hereto of any of its
subsidiaries, as the case may be, is a party requires the consent of or waiver
from the other party thereto as a result of the transactions contemplated by
this Agreement, such consent or waiver shall have been obtained, unless the
failure to obtain such consent or waiver would not have a material adverse
effect on the Continuing Corporation as the parties hereto shall reasonably and
in good faith agree.
(g) None of the parties hereto or to the Bank Merger Agreement shall
be subject to any order, decree or injunction of a court or agency of competent
jurisdiction, which enjoins or prohibits the consummation of the transactions
contemplated by this Reorganization Agreement, the Plan of Merger and the Bank
Merger Agreement and there shall be no action or proceeding by or before any
such court or agency that, in the judgment of OVB or CFF, with the advice of its
respective counsel, shall present a bona fide claim to restrain, prohibit or
invalidate the transactions contemplated hereby.
5.2. Conditions Precedent - CFF and Cortland National
The obligations of CFF to effect the Merger and of Cortland National
to effect the Bank Merger shall be subject to satisfaction of the following
additional conditions at or prior to the Closing Date unless waived by CFF
pursuant to Section 6.4 hereof:
(a) The representations and warranties of OVB and Oneida Valley set
forth in Article 2 hereof shall be true and correct in all material respects as
of the date of this Reorganization 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 any representation and warranty which specifically relates to an earlier
date), except as otherwise contemplated by this Reorganization Agreement or
consented to in writing by CFF or where the failure to be true and correct would
not have, or would not reasonably be expected to have, a material adverse effect
on OVB and Oneida Valley, taken as a whole;
(b) OVB and Oneida Valley shall have in all material respects
performed all obligations and complied with all covenants required by this
Reorganization Agreement, the Plan of Merger and the Bank Merger Agreement,
except where the failure to perform or comply would not have, or would not
reasonably be expected to have, a material adverse effect on OVB and Oneida
Valley, taken as a whole;
(c) CFF shall have received an opinion from Capital Formation Group
of Rochester, L.P. on or before the date of this Agreement, and updated as of a
date within five (5) days of mailing the Prospectus/Proxy Statement, to the
effect that the consideration to be offered to the shareholders of OVB pursuant
to this Agreement is fair, from a financial point of view, to the shareholders
of CFF;
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(d) Each of OVB and Oneida Valley shall have delivered to CFF a
certificate, dated the Closing Date and signed by its President and Chief
Executive Officer and by its Chief Financial Officer to the effect that the
conditions set forth in paragraphs (a), (b) and (f) of this section have been
satisfied;
(e) CFF shall have received an opinion of Mackenzie, Smith, Lewis,
Michell & Hughes, LLP counsel to OVB, dated as of the Closing Date, in a form
mutually acceptable to the parties related to the representations in Section
2.5(a); and
(f) Neither OVB nor Oneida Valley shall have experienced or suffered
any material adverse change in its business, operations, assets or condition
(financial or other) since the date hereof; provided, however, that a material
adverse change shall not be deemed to include the impact of (i) changes in
banking and similar laws of general applicability to all depository institutions
or interpretations thereof by courts or other governmental authorities, (ii)
changes in generally accepted accounting principles or regulatory accounting
requirements generally applicable to financial institutions and their holding
companies, (iii) actions or omissions of a party hereto taken with the prior
written consent of the other party, and (iv) the transaction costs associated
with the Merger and compliance by either party with the provisions of this
Agreement.
5.3. Conditions Precedent - OVB and Oneida Valley
The obligations of OVB to effect the Merger and of Oneida Valley to
effect the Bank Merger shall be subject to satisfaction of the following
additional conditions at or prior to the Closing Date unless waived by OVB
pursuant to Section 6.4 hereof:
(a) The representations and warranties of CFF and Cortland National
set forth in Article 3 hereof shall be true and correct in all material respects
as of the date of this Reorganization 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 any representation and warranty which specifically relates to an earlier
date), except as otherwise contemplated by this Reorganization Agreement or
consented to in writing by OVB or where the failure to be true and correct would
not have, or would not reasonably be expected to have, a material adverse effect
on CFF and Cortland National, taken as a whole;
(b) CFF and Cortland National shall have in all material respects
performed all obligations and complied with all covenants required by this
Reorganization Agreement, the Plan of Merger and the Bank Merger Agreement,
except where the failure to perform or comply would not have, or would not
reasonably be expected to have, a material adverse effect on CFF and Cortland
National, taken as a whole;
(c) OVB shall have received an opinion from Empire Evaluation
Consultants, Inc. on or before the date of this Agreement, and updated as of a
date within five
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(5) days of mailing the Prospectus/Proxy Statement, to the effect that the
consideration to be received by shareholders of OVB pursuant to this Agreement
is fair, from a financial point of view, to such shareholders;
(d) Each of CFF and Cortland National shall have delivered to OVB a
certificate, dated the Closing Date and signed by its President and Chief
Executive Officer and by its Chief Financial Officer to the effect that the
conditions set forth in paragraphs (a), (b) and (f) of this section have been
satisfied;
(e) OVB shall have received an opinion of Bond, Schoeneck & King,
LLP, counsel to CFF, dated as of the Closing Date, in a form mutually acceptable
to the parties related to the representations in Section 3.5(a); and
(f) Neither CFF nor Cortland National shall have experienced or
suffered any material adverse change in its business, operations, assets or
condition (financial or other) since the date hereof; provided, however, that a
material adverse change shall not be deemed to include the impact of (i) changes
in banking and similar laws of general applicability to all depository
institutions or interpretations thereof by courts or other governmental
authorities, (ii) changes in generally accepted accounting principles or
regulatory accounting requirements generally applicable to financial
institutions and their holding companies, (iii) actions or omissions of a party
hereto taken with the prior written consent of the other party, and (iv) the
transaction costs associated with the Merger and compliance by either party with
the provisions of this Agreement.
ARTICLE 6
TERMINATION, WAIVER AND AMENDMENT
6.1. Termination
This Reorganization Agreement, the Plan of Merger and the Bank
Merger Agreement may be terminated, either before or after approval by the
shareholders of CFF or OVB:
(a) At any time on or prior to the Effective Date, by the mutual
consent in writing of the parties hereto;
(b) At any time on or prior to the Closing Date, by CFF in writing,
if OVB or Oneida Valley has, or by OVB in writing, if CFF or Cortland National
has, in any material respect, breached (i) any covenant or agreement contained
herein, in the Plan of Merger or in the Bank Merger Agreement or (ii) any
representation or warranty contained herein, and in either case if such breach
has not been cured by the earlier of 30 days after the date on which written
notice of such breach is given to the party committing such breach or the
Closing
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Date, and which breach would, in the reasonable opinion of the non-breaching
party, individually or in the aggregate, have, or reasonably likely to have, a
material adverse effect on the breaching party or upon consummation of the
transactions contemplated by this Agreement;
(c) At any time, by any party hereto in writing, if the governmental
applications for prior approval referred to in Section 4.3 hereof have been
denied, and the time period for appeals and requests for reconsideration has
run;
(d) At any time, by any party hereto in writing, if the shareholders
of OVB or CFF do not approve the transactions contemplated herein at the annual
or special meeting duly called for that purpose; or
(e) By any party hereto in writing if the Closing Date has not
occurred by the close of business on March 31, 1999.
6.2. Effect of Termination
In the event this Reorganization Agreement, the Plan of Merger or
the Bank Merger Agreement are terminated pursuant to Section 6.1 hereof, this
Agreement, the Plan of Merger and the Bank Merger Agreement shall become void
and have no effect, except that (i) the applicable set forth in Sections 4.5,
4.6, 4.7(b)(14), 4.8(b)(14), 6.3 and 7.1 hereof, respectively, shall survive any
such termination and (ii) a termination pursuant to Section 6.1(b) shall not
relieve the breaching party from liability for an uncured, intentional and
willful breach of such representation, warranty, covenant or agreement giving
rise to such termination.
6.3 Termination Fees.
(a) Termination Fee for CFF. If, within 18 calendar months following
the date of termination of this Agreement, an entity or person other than CFF or
an affiliate of CFF, enters into an agreement with OVB or Oneida Valley pursuant
to which such entity or person or affiliate would (i) merge or consolidate, or
enter into any similar transaction, with OVB or Oneida Valley, (ii) acquire all
or substantially all of the assets of OVB or Oneida Valley, or (iii) acquire
beneficial ownership of securities representing, or the right to acquire
beneficial ownership or to vote securities representing, 25% or more of the then
outstanding shares of OVB or Oneida Valley Common Stock then OVB or Oneida
Valley shall immediately pay to CFF a fee of $1 million, which fee shall include
reimbursement to CFF for its costs and expenses, including legal fees and
expenses, incurred in connection with this Agreement and the transactions
contemplated hereby. Nothing in this Section 6.3 shall constitute a waiver or
limitation, in whole or in part, of any legal or equitable rights which CFF may
possess against any person or affiliate relating to this Agreement or the OVB
Option Agreement, or relating to CFF's relationship with OVB or for any act or
omission of such
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person or affiliate, including any tortious interference with this Agreement or
the OVB Option Agreement or otherwise wrongfully inducing or causing any breach
of any such agreement. The provisions of this Section 6.3(a) shall not apply in
the event of termination of this Agreement pursuant to (i) Section 6.1(a), (ii)
Section 6.1(b) on account of an unremedied material breach by CFF, (iii) Section
6.1(c) or (d), or (iv) Section 6.1(e) (unless the failure to close shall be due
to the failure of OVB to perform or observe any of its agreements set forth in
this Agreement required to be performed or observed by OVB on or before the
Closing Date).
(b) Termination Fee for OVB. If, within 18 calendar months following
the date of termination of this Agreement, a entity or person other than OVB or
an affiliate of OVB, enters into an agreement with CFF or Cortland National
pursuant to which such entity or person or affiliate would (i) merge or
consolidate, or enter into any similar transaction, with CFF or Cortland
National, (ii) acquire all or substantially all of the assets of CFF or Cortland
National, or (iii) acquire beneficial ownership of securities representing, or
the right to acquire beneficial ownership or to vote securities representing,
25% or more of the then outstanding shares of CFF or Cortland National Common
Stock, then CFF or Cortland National shall immediately pay to OVB a fee of $1
million, which fee shall include reimbursement to OVB for its costs and
expenses, including legal fees and expenses, incurred in connection with this
Agreement and the transactions contemplated hereby. Nothing in this Section 6.3
shall constitute a waiver or limitation, in whole or in part, of any legal or
equitable rights which OVB may possess against any person or affiliate relating
to this Agreement or the CFF Option Agreement, or relating to OVB's relationship
with CFF or Cortland National or for any act or omission of such person or
affiliate, including any tortious interference with this Agreement or the CFF
Option Agreement or otherwise wrongfully inducing or causing any breach of any
such agreement. The provisions of this Section 6.3(b) shall not apply in the
event of termination of this Agreement pursuant to (i) Section 6.1(a), (ii)
Section 6.1(b) on account of an unremedied material breach by OVB, (iii) Section
6.1(c) or (d), or (iv) Section 6.1(e) (unless the failure to close shall be due
to the failure of CFF to perform or observe any of its agreements set forth in
this Agreement required to be performed or observed by OVB on or before the
Closing Date).
(c) The provisions of this Section 6.3 shall not apply in the
event of a merger, consolidation or similar transaction involving CFF or OVB, as
the case may be, in which (i) persons who were members of the Board of Directors
of CFF or OVB, as the case may be, immediately prior to such termination
continue to constitute at least a majority of the members of the Board of
Directors of the surviving or resulting entity following completion of such
transaction and (ii) shareholders of CFF or OVB, as the case may be, immediately
prior to such transaction continue to own at least a majority of the outstanding
voting securities of the surviving or resulting entity immediately following
completion of such transaction.
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6.4. Survival of Representations, Warranties and Covenants
All representations, warranties and covenants in this Reorganization
Agreement, the Plan of Merger and the Bank Merger Agreement or in any instrument
delivered pursuant hereto or thereto shall expire on, and be terminated and
extinguished at, the Effective Date and from and after the Effective Date, none
of the parties hereto shall have any liability to the other on account of any
breach or failure of any of these representations, warranties or covenants;
provided, however, that the foregoing clause (i) shall not apply to agreements
or covenants of the parties that by their terms are to survive or be performed
after the Effective Date, and (ii) no such representations, warranties or
covenants shall be deemed to be terminated or extinguished so as to deprive CFF,
Cortland National, OVB or Oneida Valley (or any director, officer or controlling
person thereof) of any defense in law or equity which otherwise would be
available against the claims of any person, including, without limitation, any
shareholder or former shareholder of either CFF or OVB, the aforesaid
representations, warranties and covenants being material inducements to the
consummation by CFF, OVB, Cortland National and Oneida Valley of the
transactions contemplated herein and in the Bank Merger Agreement.
6.5. Waiver
Except with respect to any required shareholder or regulatory
approval, CFF and OVB respectively, by written instrument signed by an executive
officer of such party, may at any time (whether before or after approval of this
Reorganization Agreement and the Plan of Merger by the shareholders of CFF and
OVB) extend the time for the performance of any of the obligations or other acts
of CFF or Cortland National, on the one hand, or OVB or Oneida Valley, on the
other hand, and may waive (i) any inaccuracies of such parties in the
representations or warranties contained in this Agreement, the Plan of Merger,
the Bank Merger Agreement or any document delivered pursuant hereto or thereto,
(ii) compliance with any of the covenants, undertakings or agreements of such
parties, or satisfaction of any of the conditions precedent to its obligations,
contained herein, in the Plan of Merger or in the Bank Merger Agreement or (iii)
the performance by such parties of any of its obligations set out herein or
therein; provided, however, that no such waiver executed after approval of this
Reorganization Agreement and the Plan of Merger by the shareholders of CFF
and/or OVB shall alter the number of shares of CFF Common Stock into which each
share of OVB Common Stock shall be converted pursuant to the Merger.
6.6. Amendment or Supplement
This Reorganization Agreement, the Plan of Merger and the Bank
Merger Agreement may be amended or supplemented at any time by mutual agreement
of the parties hereto, in the case of this Reorganization Agreement, or thereto,
in the case of the Plan of Merger and the Bank Merger Agreement, respectively.
Any such amendment or supplement
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must be in writing and approved by their respective boards of directors and/or
officers authorized thereby and shall be subject to the proviso in Section 6.4
hereof.
ARTICLE 7
MISCELLANEOUS
7.1. Expenses
(a) Except as provided in Section 7.1(b) below, each party hereto
shall bear and pay all costs and expenses incurred by it in connection with the
transactions contemplated in this Reorganization Agreement, including fees and
expenses of its own financial consultants, accountants and counsel, except that
CFF and OVB each shall bear and pay 50% of all printing costs relating to the
Registration Statement and the Proxy Statement.
(b) In the event that the Merger is not consummated and this
Reorganization Agreement is terminated for any reason except pursuant to Section
6.1(b) hereof, OVB and CFF shall share equally all Transactional Costs (defined
below) incurred by either party. Transactional Costs as used in this Section
shall mean the following fees and expenses incurred in connection with or
related to the Merger or Bank Merger: (i) legal fees and expenses, (ii) all
accounting fees and expenses, (iii) fees and expenses of Capital Formation Group
of Rochester, L.P. and Jamesson Associates, and (iv) fees and expenses of Empire
Evaluation Consultants, Inc. In the event this Reorganization Agreement is
terminated pursuant to Section 6.1(b) hereof or otherwise relates to a breach of
a material covenant or obligation between the parties, each party shall be free
to pursue any and all legal remedies available at law or equity, including the
recovery of all costs, damages and expenses.
7.2. Entire Agreement
This Reorganization Agreement, the Plan of Merger, the Bank Merger
Agreement, the CFF Option Agreement, the OVB Option Agreement and the
Confidentiality Agreement contain the entire agreement between the parties with
respect to the transactions contemplated hereunder and thereunder and supersede
all prior arrangements or understandings with respect thereto, written or oral,
other than documents referred to herein or therein. The terms and conditions of
this Reorganization Agreement, the Plan of Merger and the Bank Merger Agreement
shall inure to the benefit of and be binding upon the parties hereto and thereto
and their respective successors. Nothing in this Reorganization Agreement, the
Plan of Merger or the Bank Merger Agreement, expressed or implied, is intended
to confer upon any party, other than the parties hereto and thereto, and their
respective successors, any rights, remedies, obligations or liabilities.
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7.3. No Assignment
No party hereto may assign any of its rights or obligations under
this Reorganization Agreement to any other person.
7.4. Notices
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent by
facsimile transmission or overnight express or by registered or certified mail,
postage prepaid, addressed as follows:
If to CFF or Cortland National:
Cortland First Financial Corporation
65 Main Street
Cortland, New York 13045
Attention: David R. Alvord, President and CEO
Facsimile No.: (607) 758-1297
With a required copy to:
Bond, Schoeneck & King, LLP
One Lincoln Center
Syracuse, New York 13202-1355
Attention: George J. Getman, Esq.
Facsimile No.: (315) 422-3598
If to OVB or Oneida Valley:
Oneida Valley Bancshares, Inc.
160 Main Street
Oneida, New York 13421
Attention: John C. Mott, President
Facsimile No.: (315) 363-0319
With a required copy to:
Mackenzie, Smith, Lewis, Michell &
Hughes, LLP
600 M&T Building
Syracuse, New York 13221-4967
Attention: Edward J. Moses, Esq.
Facsimile No.: (315) 474-6409
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And a copy of all communications to any party to:
Capital Formation Group of Rochester, L.P.
387 East Main Street
Suite 200
Rochester, New York 14604
Attention: David H. Waterman
as well as:
Empire Valuation Consultants
3255 Brighton Henrietta Town Line Road
Rochester, New York 14623
Attention: Terence L. Griswold, ASA
Facsimile No. (716) 475-9380
7.5. Captions
The captions contained in this Reorganization Agreement are for
reference purposes only and are not part of this Reorganization Agreement.
7.6. Counterparts
This Reorganization 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.
7.7. Governing Law
This reorganization agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and entirely to be performed within such jurisdiction, except to the extent
federal law may be applicable.
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7.8. Construction and Interpretation
Except as the context otherwise requires, all references herein to
any state or federal regulatory agency shall also be deemed to refer to any
predecessor or successor agency, and all references to state and federal
statutes or regulations also shall be deemed to refer to any successor statute
or regulation.
7.9. Severability
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, then such provision will be ineffective only to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or other remaining provisions of the Agreement.
7.10. No Employee or Customer Solicitation
If this Agreement is terminated, the parties agree that, for a
period of two years subsequent to such termination except as may occur as a
result of a general advertisement to the public (i) none of the parties shall,
without first obtaining the prior written consent of the other, directly or
indirectly, solicit the employment of any current director, officer or employee
of the other party and (ii) none of the parties will solicit business
relationships with clients of the other party solely as a result of review of
the information contemplated in Section 4.5 herein or otherwise.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have caused this Reorganization 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.
CORTLAND FIRST FINANCIAL CORPORATION
By: /s/ DAVID R. ALVORD
-----------------------------------
David R. Alvord
President and Chief Executive Officer
FIRST NATIONAL BANK OF CORTLAND
By: /s/ DAVID R. ALVORD
-----------------------------------
David R. Alvord
President and Chief Executive Officer
ONEIDA VALLEY BANCSHARES, INC.
By: /s/ JOHN C. MOTT
-----------------------------------
John C. Mott
President
ONEIDA VALLEY NATIONAL BANK
By: /s/ JOHN C. MOTT
-----------------------------------
John C. Mott
President and Chief Executive Officer
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PLAN OF MERGER OF ONEIDA VALLEY BANCSHARES, INC.
WITH AND INTO CORTLAND FIRST FINANCIAL CORPORATION
THIS PLAN OF MERGER ("Plan of Merger"), dated as of July 10, 1998, is by
and between ONEIDA VALLEY BANCSHARES, INC. ("OVB"), a New York corporation, and
CORTLAND FIRST FINANCIAL CORPORATION ("CFF"), a New York corporation.
WITNESSETH
----------
WHEREAS, the respective Boards of Directors of OVB and CFF deem the merger
of OVB with and into CFF, under and pursuant to the terms and conditions herein
set forth or referred to, desirable and in the best interests of the respective
corporations and their respective shareholders, and the respective Boards of
Directors of OVB and CFF have adopted resolutions approving this Plan of Merger
and an Agreement and Plan of Reorganization dated of even date herewith (the
"Reorganization Agreement");
WHEREAS, the Board of Directors of OVB has directed that this Plan of
Merger be submitted to the shareholders of OVB; and
WHEREAS, the Board of Directors of CFF has directed that this Plan of
Merger be submitted to the shareholders of CFF;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto do hereby agree that the Plan of
Merger shall be as follows:
ARTICLE I
MERGER
Subject to the terms and conditions of this Plan of Merger and the
Reorganization Agreement, on the Effective Date (as hereinafter defined), OVB
shall be merged with and into CFF, pursuant to the provisions of, and with the
effect provided in Article 9 of the New York Business Corporation Law (said
transaction being hereinafter referred to as the "Merger"). Capitalized terms
defined in the Reorganization Agreement and used herein shall have the same
meanings as set forth in the Reorganization Agreement. On the Effective Date,
the separate existence of OVB shall cease and CFF, as the surviving entity,
shall continue unaffected and unimpaired by the Merger and shall operate under
the name Alliance Financial Corporation and the Certificate of Incorporation and
Bylaws referenced in Article II of this Plan of Merger ("referred to as the
"Continuing Corporation").
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ARTICLE II
CERTIFICATE OF INCORPORATION AND BY-LAWS
Upon the Effective Date, the Certificate of Incorporation of the
Continuing Corporation shall be restated in the form to be agreed to by the
parties hereto in good faith and attached hereto as Annex A prior to submission
of this Plan of Merger to the respective shareholders of OVB and CFF (the
"Submission"), and the By-Laws of the Continuing Corporation shall be restated
in the form to be agreed to by the parties hereto in good faith and attached
hereto as Annex B prior to the Submission, in each case until amended in
accordance with applicable law and any applicable provisions of the Certificate
of Incorporation and the By-Laws.
ARTICLE III
BOARD OF DIRECTORS AND OFFICERS
From and after the Effective Date, the directors of the Continuing
Corporation, who shall hold office until the expiration of their respective
terms or until their successors are duly elected and qualified, shall be the 12
persons designated by CFF and the 10 persons designated by OVB pursuant to the
Reorganization Agreement, or any persons chosen to replace such designated
persons pursuant to the Reorganization Agreement and the Certificate of
Incorporation and By-Laws of the Continuing Corporation. The directors of the
Continuing Corporation shall be divided into three classes as nearly equal in
number as possible, as provided in the Reorganization Agreement. It is intended
by the parties hereto that, following the Effective Date, David R. Alvord and
John C. Mott shall serve as Co-Chief Executive Officers of the Continuing
Corporation. All other officers of the Continuing Corporation shall be appointed
by resolution of the directors in accordance with the By-Laws of the Continuing
Corporation.
ARTICLE IV
CAPITAL
1. The designation and number of outstanding shares of capital stock of
OVB is as follows: (a) 905,279 shares of common stock, par value $2.50 per share
("OVB Common Stock"). Each share of OVB Common Stock is entitled to vote with
respect to the Merger. Such number of outstanding shares of OVB Common Stock may
be changed prior to the Effective Date as a result of the repurchase by OVB of
such shares in accordance with the Reorganization Agreement.
2. The designation and number of outstanding shares of capital stock of
CFF is as follows: (a) 1,969,776 shares of common stock, par value $1.6667 per
share ("CFF Common Stock" until the Effective Date and, subject to the change in
par value to be effectuated by the amendment and restatement of the Certificate
of Incorporation pursuant to Article II hereof, "Continuing Corporation Common
Stock" from and after the Effective Date). Each share of CFF Common Stock is
entitled to vote with respect to the Merger. Such number of
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outstanding shares of CFF Common Stock may be changed prior to the Effective
Date as a result of the sale of such shares by CFF pursuant to its Dividend
Reinvestment Plan or upon the repurchase by CFF of such shares in accordance
with the Reorganization Agreement.
3. The shares of capital stock of CFF issued and outstanding immediately
prior to the Effective Date shall, on the Effective Date, continue to be issued
and outstanding capital stock of the Continuing Corporation.
ARTICLE V
CONVERSION AND EXCHANGE OF OVB
SHARES; FRACTIONAL SHARE INTERESTS
1. On the Effective Date, each share of OVB Common Stock outstanding
immediately prior to the Effective Date (except as provided in Paragraphs 2, 5,
6 and 7 of this Article) shall, by virtue of the Merger, be converted into the
number of Exchange Shares of Continuing Corporation Common Stock based upon the
Exchange Ratio for the Exchange Price of CFF Common Stock determined in
accordance with the attached Annex C, and shall no longer be shares of common
stock of OVB. Each share of CFF Common Stock issued and outstanding immediately
before the Effective Date shall remain an outstanding share of Continuing
Corporation Common Stock after the Effective Date.
2. On the Effective Date, all shares of OVB Common Stock held in the
treasury of OVB or owned beneficially by any subsidiary of OVB other than in a
fiduciary capacity and all shares of OVB Common Stock owned by the Continuing
Corporation or owned beneficially by any subsidiary of the Continuing
Corporation other than in a fiduciary capacity shall be canceled and no cash,
stock or other property shall be delivered in exchange therefor.
3. On and after the Effective Date, each holder of a certificate or
certificates theretofore representing outstanding shares of OVB Common Stock
(any such certificate being hereinafter referred to as a "Certificate") may
surrender the same to the Continuing Corporation or its agent for cancellation
and each such holder shall be entitled upon such surrender to receive in
exchange therefor certificate(s) representing the number of whole shares of
Continuing Corporation Common Stock to which such holder is entitled as provided
herein and a check in an amount equal to the amount of cash, without interest,
to which such holder is entitled for fractional shares. As soon as practicable
after the Effective Date, the Continuing Corporation or its agent will send a
notice and transmittal form to each OVB stockholder of record at the Effective
Date whose OVB Common Stock shall have been converted into Continuing
Corporation Common Stock advising such stockholder of the effectiveness of the
Merger and the procedure for surrendering to the Continuing Corporation or its
agent outstanding certificates formerly representing OVB Common Stock in
exchange for new certificates for Continuing Corporation Common Stock. Until so
surrendered, each Certificate shall be deemed for all purposes to evidence
ownership of the number of whole shares of Continuing Corporation Common Stock
into which the shares represented by such
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Certificates have been changed or converted as aforesaid and the right to
receive cash for fractional shares. Certificates surrendered for exchange by any
person who is an "affiliate" of OVB for purposes of Rule 145(c) under the
Securities Act of 1933, as amended, shall not be exchanged for certificates
representing shares of Continuing Corporation Common Stock until the Continuing
Corporation has received the written agreement of such person contemplated by
Section 4.10 of the Reorganization Agreement. If any certificate surrendered for
exchange is to be issued in a name other than that in which a certificate
surrendered for exchange is issued, the certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and the person
requesting such exchange shall affix any requisite stock transfer tax stamps to
the certificate surrendered or provide funds for their purchase or establish to
the satisfaction of the Continuing Corporation or its agent that such taxes are
not payable.
4. Upon the Effective Date, the stock transfer books of OVB shall be
closed and no transfer of OVB Common Stock shall thereafter be made or
recognized. Any other provision of this Plan of Merger notwithstanding, neither
the Continuing Corporation or its agent nor any party to the Merger shall be
liable to a holder of OVB Common Stock for any amount properly paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat or similar law.
5. To the extent dissenters' rights apply under New York law, no
conversion under Paragraph 1 of this Article V shall be made in respect of any
share of OVB Common Stock as to which a OVB shareholder has elected to exercise
dissenters' rights pursuant to Section 910 of the New York Business Corporation
Law, as amended, if any, until such time as such shareholder shall have
effectively lost dissenters' rights.
6. In the event that during the period commencing on the date hereof and
ending on the Effective Date, the outstanding shares of CFF Common Stock shall
have been increased, decreased or changed into or exchanged for a different
number or kind of shares or securities by reorganization, recapitalization,
reclassification, stock dividend, stock split or other like changes in CFF's
capitalization, all without CFF's receiving consideration therefor, then an
appropriate and proportionate adjustment shall be made in the number and kind of
shares of Continuing Corporation Common Stock to be thereafter delivered
pursuant to this Plan of Merger.
7. Notwithstanding any other provision hereof, each holder of shares of
OVB Common Stock who would otherwise have been entitled to receive a fraction of
a share of Continuing Corporation Common Stock (after taking into account all
Certificates delivered by such holder) shall receive, in lieu thereof, upon
presentation of such Certificates, cash in an amount equal to such fractional
part of a share of Continuing Corporation Common Stock multiplied by the
Exchange Price of CFF Common Stock as defined and determined in the calculation
of the Exchange Ratio pursuant to Annex C. No such holder shall be entitled to
dividends, interest, voting rights or any other shareholder right in respect of
any fractional share.
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8. CFF shall reserve for issuance a sufficient number of shares of CFF
Common Stock for the purpose of issuing its shares to OVB's shareholders in
accordance with this Article V.
ARTICLE VI
EFFECTIVE DATE OF THE MERGER
A certificate of merger evidencing the transactions contemplated herein
shall be delivered to the New York Department of State for filing as provided in
the Reorganization Agreement. The Merger shall be effective at the time and on
the date specified in such certificate of merger (such date and time being
herein referred to as the "Effective Date").
ARTICLE VII
FURTHER ASSURANCES
If at any time the Continuing Corporation shall consider or be advised
that any further assignments, conveyances or assurances are necessary or
desirable to vest, perfect or confirm in the Continuing Corporation title to any
property or rights of OVB, or otherwise carry out the provisions hereof, the
proper officers and directors of OVB, as of the Effective Date, and thereafter
the officers of the Continuing Corporation acting on behalf of OVB, shall
execute and deliver any and all proper assignments, conveyances and assurances,
and do all things necessary or desirable to vest, perfect or confirm title to
such property or rights in the Continuing Corporation and otherwise carry out
the provisions hereof.
ARTICLE VIII
CONDITIONS PRECEDENT
The obligations of CFF and OVB to effect the Merger as herein provided
shall be subject to satisfaction, unless duly waived, of the conditions set
forth in the Reorganization Agreement.
ARTICLE IX
TERMINATION
Anything contained in this Plan of Merger to the contrary notwithstanding,
and notwithstanding adoption hereof by the shareholders of OVB and CFF, this
Plan of Merger may be terminated and the Merger abandoned as provided in the
Reorganization Agreement. If the Reorganization Agreement is terminated, then
this Plan of Merger shall terminate automatically, without further action of the
parties.
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ARTICLE X
MISCELLANEOUS
1. This Plan of Merger may be amended or supplemented at any time prior to
its Effective Date by mutual agreement of CFF and OVB. Any such amendment or
supplement must be in writing and approved by their respective Boards of
Directors and/or by officers authorized thereby and shall be subject to the
proviso in Section 6.5 of the Reorganization Agreement.
2. Any notice or other communication required or permitted under this Plan
of Merger shall be given, and shall be effective, in accordance with the
provisions of the Reorganization Agreement.
3. The headings of the several Articles herein are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Plan of Merger.
4. This Plan of Merger shall be governed by and construed in accordance
with the laws of the State of New York applicable to agreements made and
entirely to be performed in such jurisdiction, except to the extent Federal law
may be applicable.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Plan of Merger 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.
CORTLAND FIRST FINANCIAL CORPORATION
By: /s/ DAVID R. ALVORD
-------------------------------------
David R. Alvord
President and Chief Executive Officer
ONEIDA VALLEY BANCSHARES INC.
By: /s/ JOHN C. MOTT
-------------------------------------
John C. Mott
President
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ANNEX C
EXCHANGE OF SHARES OF CFF FOR SHARES OF OVB
AT THE EFFECTIVE DATE OF THE MERGER.
The Exchange Ratio will be determined by taking the average closing bid for CFF
at the close of business for the 30 calendar days preceding the Effective Date
of the Merger. The average price will be rounded to the nearest $0.125
("Exchange Price") in order to determine the number of shares ("Exchange
Shares") as presented in the following schedule.
EXCHANGE PRICE EXCHANGE SHARES
26.250 or less 2.00
26.375 1.99
26.500 1.98
26.625 1.97
26.750 1.96
26.875 1.95
27.000 1.94
27.125 1.94
27.250 1.93
27.375 1.92
27.500 1.91
27.625 1.90
27.750 1.89
27.875 1.88
28.000 1.88
28.125 1.87
28.250 1.86
28.375 1.85
28.500 1.84
28.625 1.83
28.750 1.83
28.875 1.82
29.000 1.81
29.125 1.80
29.250 1.79
29.375 1.79
29.500 1.78
29.625 1.77
29.750 1.76
29.875 1.76
30.00 or more 1.75
With respect to partial Exchange Shares, such shares will be redeemed for cash
at the Exchange Price per share.
CFF STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Option Agreement"), dated as of July 10,
1998, is by and between CORTLAND FIRST FINANCIAL CORPORATION ("CFF"), a New York
corporation, as issuer, and ONEIDA VALLEY BANCSHARES, INC. ("OVB"), a New York
corporation, as grantee.
WITNESSETH
WHEREAS, the respective Boards of Directors of CFF and OVB have approved
an Agreement and Plan of Reorganization (the "Reorganization Agreement") and
have adopted a related Agreement and Plan of Merger dated as of the date hereof
(together with the Reorganization Agreement, the "Merger Agreements"), providing
for certain transactions pursuant to which OVB would be merged with and into
CFF; and
WHEREAS, as a condition to and as consideration for OVB's entry into the
Merger Agreements and to induce such entry, CFF has agreed to grant to OVB the
option set forth herein to purchase authorized but unissued shares of common
stock, par value $1.6667 per share, of CFF ("CFF Common Stock");
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. DEFINITIONS.
Capitalized terms defined in the Merger Agreements and used herein shall
have the same meanings as set forth in the Merger Agreements.
2. GRANT OF OPTION TO OVB.
Subject to the terms and conditions set forth herein, CFF hereby grants to
OVB an option ("Option") to purchase up to 391,985 shares of CFF Common Stock,
at a price of $28.50 per share, payable in cash as provided in Section 4 hereof;
provided, however, that, in the event CFF issues or agrees to issue any shares
of CFF Common Stock (other than as permitted under the Merger Agreements) at a
price less than $28.50 per share (as adjusted pursuant to Section 6 hereof), the
exercise price shall be equal to such lesser price. Notwithstanding anything
else in this Agreement to the contrary, the number of shares of CFF Common Stock
subject to the Option shall be reduced to such lesser number, if any, as may
from time-to-time be necessary, but only for so long as may be necessary, to
cause OVB not to be deemed an "interested shareholder" as such term is defined
for purposes of Section 912 of the New York Business Corporation Law, as
amended.
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3. EXERCISE OF OPTION.
(a) Unless OVB shall have breached in any material respect any material
covenant or representation contained in the Reorganization Agreement and such
breach has not been cured, OVB may exercise the Option, in whole or part, at any
time or from time to time if a Purchase Event (as defined below) shall have
occurred and be continuing; provided that, to the extent the Option shall not
have been exercised, it shall terminate and be of no further force and effect
(i) on the Effective Date of the Merger or (ii) upon termination of the Merger
Agreements in accordance with the provisions thereof (other than a termination
resulting from a willful breach by CFF of any Specified Covenant (as defined
below) following receipt of a bona fide proposal by CFF or Cortland National to
acquire CFF or Cortland National by merger, consolidation, purchase of all or
substantially all of its assets or any other similar transaction, or, following
the occurrence of a Purchase Event, failure of CFF's shareholders to approve the
Merger Agreements by the vote required under applicable law or under CFF's
Certificate of Incorporation), or (iii) twelve months after termination of the
Merger Agreements due to a willful breach by CFF of any Specified Covenant
following receipt of a bona fide proposal by CFF or Cortland National to acquire
CFF or Cortland National by merger, consolidation, purchase of all or
substantially all of its assets or any other similar transaction, or, following
the occurrence of a Purchase Event, failure of CFF's shareholders to approve the
Merger Agreements by the vote required under applicable law or under CFF's
Certificate of Incorporation; and provided further that any such exercise shall
be subject to compliance with applicable provisions of law.
(b) As used herein, a "Purchase Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) CFF or its wholly owned subsidiary, Cortland National, without
having received OVB's prior written consent, shall have entered into an
agreement with any person (other than OVB or any of its subsidiaries) to (x)
merge or consolidate, or enter into any similar transaction, with CFF or
Cortland National, (y) purchase, lease or otherwise acquire all or substantially
all of the assets of CFF or Cortland National or (z) purchase or otherwise
acquire (including by way of merger, consolidation, share exchange or any
similar transaction) securities representing 10% or more of the voting power of
CFF or Cortland National;
(ii) any person (other than CFF, Cortland National, Cortland
National in a fiduciary capacity, OVB, Oneida Valley or Oneida Valley in a
fiduciary capacity) shall have acquired beneficial ownership or the right to
acquire beneficial ownership of 20% or more of the outstanding shares of CFF
Stock after the date hereof (the term "beneficial ownership" for purposes of
this Option Agreement having the meaning assigned thereto in Section 13(d) of
the Exchange Act and the regulations promulgated thereunder);
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<PAGE>
(iii) any person (other than OVB or Oneida Valley) shall have made a
bona fide proposal to CFF by public announcement or written communication that
is or becomes the subject of public disclosure to acquire CFF or Cortland
National by merger, consolidation, purchase of all or substantially all of its
assets or any other similar transaction, and following such bona fide proposal
the shareholders of CFF vote not to adopt the Plan of Merger; or
(iv) CFF shall have willfully and intentionally breached any
Specified Covenant following receipt of a bona fide proposal to Cortland
National to acquire CFF or Cortland National by merger, consolidation, purchase
of all or substantially all of its assets or any other similar transaction,
which breach would entitle OVB to terminate the Merger Agreements (without
regard to the cure periods provided for therein) and such breach shall not have
been cured prior to the Notice Date (as defined below).
If more than one of the transactions giving rise to a Purchase Event under
this Section 3(b) is undertaken or effected, then all such transactions shall
give rise only to one Purchase Event, which Purchase Event shall be deemed
continuing for all purposes hereunder until all such transactions are abandoned.
As used in this Option Agreement, "person" shall have the meanings specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(c) In the event OVB wishes to exercise the Option, it shall send to CFF a
written notice (the date of which being herein referred to as "Notice Date")
specifying (i) the total number of shares it will purchase pursuant to such
exercise, and (ii) a place and date not earlier than three business days nor
later than 60 business days from the Notice Date for the closing of such
purchase ("Closing Date"); provided that, if prior notification to or approval
of any federal or state regulatory agency is required in connection with such
purchase, OVB shall promptly file the required notice or application for
approval and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date on
which any required notification period has expired or been terminated or such
approval has been obtained and any requisite waiting period shall have passed.
(d) As used herein, "Specified Covenant" means any covenant contained in
Sections 4.1, 4.4 or 4.9, or subsections (2), (3), (4), (5), (6), (12), (14)
and, to the extent applicable to the foregoing subsections, (15) of Section
4.8(b) of the Reorganization Agreement.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) At the closing referred to in Section 3 hereof, OVB shall pay to CFF
the aggregate purchase price for the shares of CFF Common Stock purchased
pursuant to the exercise of the Option in immediately available funds by a wire
transfer to a bank account designated by CFF.
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(b) At such closing, simultaneously with the delivery of funds as provided
in subsection (a), CFF shall deliver to OVB a certificate or certificates
representing the number of shares of CFF Common Stock purchased by OVB, and OVB
shall deliver to CFF a letter agreeing that OVB will not offer to sell or
otherwise dispose of such shares in violation of applicable law or the
provisions of this Option Agreement.
(c) Certificates for CFF Common Stock delivered at a closing hereunder may
be endorsed with a restrictive legend which shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and Cortland First Financial Corp. and to resale
restrictions arising under the Securities Act of 1933, as amended, a
copy of which agreement is on file at the principal office of
Cortland First Financial Corp. A copy of such agreement will be
provided to the holder hereof without charge upon receipt by
Cortland First Financial Corp. of a written request."
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if OVB shall have delivered to
CFF a copy of a letter from the staff of the Commission, or an opinion of
counsel, in form and substance satisfactory to CFF, to the effect that such
legend is not required for purposes of the Securities Act.
5. REPRESENTATIONS.
CFF hereby represents, warrants and covenants to OVB as follows:
(a) CFF shall at all times maintain sufficient authorized but unissued
shares of CFF Common Stock so that the Option may be exercised without
authorization of additional shares of CFF Common Stock.
(b) The shares to be issued upon due exercise, in whole or in part, of the
Option, when paid for as provided herein, will be duly authorized, validly
issued, fully paid and nonassessable.
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
In the event of any change in CFF Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, exchanges of
shares or the like, the type and number of shares subject to the Option, and the
purchase price per share, as the case may be, shall be adjusted appropriately.
In the event that any additional shares of CFF Common Stock are issued or
otherwise become outstanding after the date of this Option Agreement
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<PAGE>
(other than pursuant to this Option Agreement), the number of shares of CFF
Common Stock subject to the Option shall be adjusted so that, after such
issuance, it equals 19.9% of the number of shares of CFF Common Stock then
issued and outstanding without giving effect to any shares subject or issued
pursuant to the Option. Nothing contained in this Section 6 shall be deemed to
authorize CFF to breach any provision of the Merger Agreements.
7. REPURCHASE.
At the request of OVB at any time commencing immediately following the
occurrence of a Repurchase Event (as defined below) and ending upon the
termination of this Agreement pursuant to the terms hereof ("Repurchase
Period"), CFF shall repurchase the Option from OVB together with any shares of
CFF Common Stock purchased by OVB pursuant thereto, at a price equal to the sum
of:
(a) The exercise price paid by OVB for any shares of CFF Common Stock
acquired pursuant to the Option;
(b) The difference between the "market/tender offer" price for shares of
CFF Common Stock (defined as the highest of (i) the highest price per share at
which a tender or exchange offer has been made, (ii) the price per share,
whether in cash or the value of securities or other property or a combination
thereof, of CFF Common Stock to be paid by any third party pursuant to an
agreement with CFF, or (iii) the highest reported sale price for shares of CFF
Common Stock within that portion of the Repurchase Period preceding the date OVB
gives notice of the required repurchase under this Section 7) and the exercise
price as determined pursuant to Section 2 hereof, multiplied by the number of
shares of CFF Common Stock with respect to which the Option has not been
exercised, but only if the market/tender offer price is greater than such
exercise price;
(c) The difference between the market/tender offer price (as defined in
Section 7(b) hereof) and the exercise price paid by OVB for any shares of CFF
Common Stock purchased pursuant to the exercise of the Option, multiplied by the
number of shares so purchased, but only if the market/tender offer price is
greater than such exercise price; and
(d) OVB's reasonable out-of-pocket expenses incurred in connection with
the transactions contemplated by the Reorganization Agreement, including,
without limitation, legal, accounting, financial advisory and investment banking
fees, except to the extent that such expenses have already been paid pursuant to
Section 6.3 of the Reorganization Agreement.
In the event OVB exercises its right to require the repurchase of the
Option, CFF shall, within ten business days thereafter, pay the required amount
to OVB in immediately available funds and OVB shall surrender the Option to CFF
and the certificates evidencing the shares of CFF Common Stock purchased
thereunder; provided that if prior notification to or approval of
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the Federal Reserve Board or other regulatory agency is required in connection
with such purchase, CFF shall promptly file the required notice or application
for approval and shall expeditiously process the same and the period of time
that otherwise would run pursuant to this sentence shall run instead from the
date on which any required notification period has expired or been terminated.
As used herein, a "Repurchase Event" shall mean any of the transactions
described in clauses (i), (ii), (iii) or (iv) of Section 3(b) herein except, for
this purpose, the percentage in clause (ii) shall be 50% and, for purposes of
clauses (iii) and (iv) for a Repurchase Event to occur, any party shall, prior
to the termination of this Agreement, engage in a transaction contemplated by
clauses (i) or (ii) (at the 50% level) of Section 3(b), provided that, for all
purposes herein, the payment required by this Section 7 shall be due and payable
only upon consummation of the events described in clauses (i) and (ii) of
Section 3(b) of this Agreement.
8. REGISTRATION RIGHTS.
CFF shall, if requested by OVB, as expeditiously as possible file a
registration statement on a form of general use under the Securities Act if
necessary in order to permit the sale or other disposition of the shares of CFF
Common Stock that have been acquired upon exercise of the Option in accordance
with the intended method of sale or other disposition requested by OVB. OVB
shall provide all information reasonably requested by CFF for inclusion in any
registration statement to be filed hereunder. CFF will use its best efforts to
cause such registration statement first to become effective and then to remain
effective for such period not in excess of 180 days from the day such
registration statement first becomes effective as may be reasonably necessary to
effect such sales or other dispositions. The first registration effected under
this Section 7 shall be at CFF's expense except for underwriting commissions and
the fees and disbursements of OVB's counsel attributable to the registration of
such CFF Common Stock. A second registration may be requested hereunder at OVB's
expense. In no event shall CFF be required to effect more than two registrations
hereunder. The filing of any registration statement hereunder may be delayed for
such period of time as may reasonably be required to facilitate any public
distribution by CFF of CFF Common Stock. If requested by OVB, in connection with
any such registration, CFF will become a party to any underwriting agreement
relating to the sale of such shares, but only to the extent of obligating itself
in respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements. Upon receiving any request
from OVB or assignee thereof under this Section 8, CFF agrees to send a copy
thereof to OVB and to any assignee thereof known to CFF, in each case by
promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies.
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9. SEVERABILITY.
If any term, provision, covenant or restriction contained in this Option
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Option
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Option will not permit the holder to acquire or CFF
to repurchase pursuant to Section 7 hereof the full number of shares of CFF
Common Stock provided in Section 2 hereof (as adjusted pursuant to Section 6
hereof), it is the express intention of CFF to allow the holder to acquire or to
require CFF to repurchase up to the maximum number of shares as may be
permissible from time to time, without any amendment or modification hereof.
10. MISCELLANEOUS.
(a) Expenses. Except as otherwise provided herein, each of the parties
hereto 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.
(b) Entire Agreement. Except as otherwise expressly provided herein, this
Option Agreement contains the entire agreement between the parties with respect
to the transactions contemplated hereunder and supersedes all prior arrangements
or understandings with respect thereto, written or oral. The terms and
conditions of this Option Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns. Nothing in
this Option Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Option Agreement, except as expressly provided herein.
(c) Assignment. Neither of the parties hereto may assign any of its rights
or obligations under this Option Agreement or the Option created hereunder to
any other person, without the express written consent of the other party, except
that, in the event a Purchase Event shall have occurred and be continuing, OVB
may assign, in whole or in part, its rights and obligations hereunder; provided,
however, that to the extent required by applicable regulatory authorities, OVB
may not assign its rights under the Option except in (i) a widely dispersed
public distribution, (ii) a private placement in which no one party acquires the
right to purchase 2% or more of the voting shares of CFF, (iii) an assignment to
a single party (e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on OVB's behalf, or (iv) any
other manner approved by applicable regulatory authorities.
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(d) Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered in the
manner and to the addresses provided for in or pursuant to Section 7.4 of the
Reorganization Agreement.
(e) Counterparts. This Option 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.
(f) Specific Performance. The parties agree that damages would be an
inadequate remedy for a breach of the provisions of this Option Agreement by
either party hereto and that this Option Agreement may be enforced by either
party hereto through injunctive or other equitable relief.
(g) Governing Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and entirely to be performed within such state and such federal
laws as may be applicable.
IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the day and year first written above.
CORTLAND FIRST FINANCIAL CORPORATION
By: /s/ DAVID R. ALVORD
-------------------------------------
David R. Alvord
President and Chief Executive Officer
ONEIDA VALLEY BANCSHARES, INC
By: /s/ JOHN C. MOTT
-------------------------------------
John C. Mott
President
-8-
OVB STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Option Agreement"), dated as of July 10,
1998, is by and between ONEIDA VALLEY BANCSHARES, INC. ("OVB"), a New York
corporation, as issuer, and CORTLAND FIRST FINANCIAL CORPORATION ("CFF"), a New
York corporation, as grantee.
WITNESSETH
WHEREAS, the respective Boards of Directors of OVB and CFF have approved
an Agreement and Plan of Reorganization (the "Reorganization Agreement") and
have adopted a related Agreement and Plan of Merger dated as of the date hereof
(together with the Reorganization Agreement, the "Merger Agreements"), providing
for certain transactions pursuant to which OVB would be merged with and into
CFF; and
WHEREAS, as a condition to and as consideration for CFF's entry into the
Merger Agreements and to induce such entry, OVB has agreed to grant to CFF the
option set forth herein to purchase authorized but unissued shares of common
stock, par value $2.50 per share, of OVB ("OVB Common Stock");
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. DEFINITIONS.
Capitalized terms defined in the Merger Agreements and used herein shall
have the same meanings as set forth in the Merger Agreements.
2. GRANT OF OPTION TO CFF.
Subject to the terms and conditions set forth herein, OVB hereby grants to
CFF an option ("Option") to purchase up to 180,150 shares of OVB Common Stock,
at a price of $52.50 per share, payable in cash as provided in Section 4 hereof;
provided, however, that, in the event OVB issues or agrees to issue any shares
of OVB Common Stock (other than as permitted under the Merger Agreements) at a
price less than $52.50 per share (as adjusted pursuant to Section 6 hereof), the
exercise price shall be equal to such lesser price. Notwithstanding anything
else in this Agreement to the contrary, the number of shares of OVB Common Stock
subject to the Option shall be reduced to such lesser number, if any, as may
from time-to-time be necessary, but only for so long as may be necessary, to
cause CFF not to be deemed an "interested shareholder" as such term is defined
for purposes of Section 912 of the New York Business Corporation Law, as
amended.
-1-
<PAGE>
3. EXERCISE OF OPTION.
(a) Unless CFF shall have breached in any material respect any material
covenant or representation contained in the Reorganization Agreement and such
breach has not been cured, CFF may exercise the Option, in whole or part, at any
time or from time to time if a Purchase Event (as defined below) shall have
occurred and be continuing; provided that, to the extent the Option shall not
have been exercised, it shall terminate and be of no further force and effect
(i) on the Effective Date of the Merger or (ii) upon termination of the Merger
Agreements in accordance with the provisions thereof (other than a termination
resulting from a willful breach by OVB of any Specified Covenant (as defined
below) following receipt of a bona fide proposal by OVB or Oneida Valley to
acquire OVB or Oneida Valley by merger, consolidation, purchase of all or
substantially all of its assets or any other similar transaction, or, following
the occurrence of a Purchase Event, failure of OVB's shareholders to approve the
Merger Agreements by the vote required under applicable law or under OVB's
Certificate of Incorporation), or (iii) twelve months after termination of the
Merger Agreements due to a willful breach by OVB of any Specified Covenant
following receipt of a bona fide proposal by OVB or Oneida Valley to acquire OVB
or Oneida Valley by merger, consolidation, purchase of all or substantially all
of its assets or any other similar transaction, or, following the occurrence of
a Purchase Event, failure of OVB's shareholders to approve the Merger Agreements
by the vote required under applicable law or under OVB's Certificate of
Incorporation; and provided further that any such exercise shall be subject to
compliance with applicable provisions of law.
(b) As used herein, a "Purchase Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) OVB or its wholly owned subsidiary, Oneida Valley, without
having received CFF's prior written consent, shall have entered into an
agreement with any person (other than CFF or any of its subsidiaries) to (x)
merge or consolidate, or enter into any similar transaction, with OVB or Oneida
Valley, (y) purchase, lease or otherwise acquire all or substantially all of the
assets of OVB or Oneida Valley or (z) purchase or otherwise acquire (including
by way of merger, consolidation, share exchange or any similar transaction)
securities representing 10% or more of the voting power of OVB or Oneida Valley;
(ii) any person (other than OVB, Oneida Valley, Oneida Valley in a
fiduciary capacity, CFF, its wholly owned subsidiary, Cortland National or
Cortland National in a fiduciary capacity) shall have acquired beneficial
ownership or the right to acquire beneficial ownership of 20% or more of the
outstanding shares of OVB Common Stock after the date hereof (the term
"beneficial ownership" for purposes of this Option Agreement having the meaning
assigned thereto in Section 13(d) of the Exchange Act and the regulations
promulgated thereunder);
-2-
<PAGE>
(iii) any person (other than CFF or Cortland National) shall have
made a bona fide proposal to OVB by public announcement or written communication
that is or becomes the subject of public disclosure to acquire OVB or Oneida
Valley by merger, consolidation, purchase of all or substantially all of its
assets or any other similar transaction, and following such bona fide proposal
the shareholders of OVB vote not to adopt the Plan of Merger; or
(iv) OVB shall have willfully and intentionally breached any
Specified Covenant following receipt of a bona fide proposal to Oneida Valley or
OVB to acquire OVB or Oneida Valley by merger, consolidation, purchase of all or
substantially all of its assets or any other similar transaction, which breach
would entitle CFF to terminate the Merger Agreements (without regard to the cure
periods provided for therein) and such breach shall not have been cured prior to
the Notice Date (as defined below).
If more than one of the transactions giving rise to a Purchase Event under
this Section 3(b) is undertaken or effected, then all such transactions shall
give rise only to one Purchase Event, which Purchase Event shall be deemed
continuing for all purposes hereunder until all such transactions are abandoned.
As used in this Option Agreement, "person" shall have the meanings specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(c) In the event CFF wishes to exercise the Option, it shall send to OVB a
written notice (the date of which being herein referred to as "Notice Date")
specifying (i) the total number of shares it will purchase pursuant to such
exercise, and (ii) a place and date not earlier than three business days nor
later than 60 business days from the Notice Date for the closing of such
purchase ("Closing Date"); provided that, if prior notification to or approval
of any federal or state regulatory agency is required in connection with such
purchase, CFF shall promptly file the required notice or application for
approval and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date on
which any required notification period has expired or been terminated or such
approval has been obtained and any requisite waiting period shall have passed.
(d) As used herein, "Specified Covenant" means any covenant contained in
Sections 4.1, 4.4 or 4.9, or subsections (2), (3), (4), (5), (6), (12), (14)
and, to the extent applicable to the foregoing subsections, (15) of Section
4.7(b) of the Reorganization Agreement.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) At the closing referred to in Section 3 hereof, CFF shall pay to OVB
the aggregate purchase price for the shares of OVB Common Stock purchased
pursuant to the exercise of the Option in immediately available funds by a wire
transfer to a bank account designated by OVB.
-3-
<PAGE>
(b) At such closing, simultaneously with the delivery of funds as provided
in subsection (a), OVB shall deliver to CFF a certificate or certificates
representing the number of shares of OVB Common Stock purchased by CFF, and CFF
shall deliver to OVB a letter agreeing that CFF will not offer to sell or
otherwise dispose of such shares in violation of applicable law or the
provisions of this Option Agreement.
(c) Certificates for OVB Common Stock delivered at a closing hereunder may
be endorsed with a restrictive legend which shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and Oneida Valley Bancshares, Inc. and to resale
restrictions arising under the Securities Act of 1933, as amended, a
copy of which agreement is on file at the principal office of Oneida
Valley Bancshares, Inc. A copy of such agreement will be provided to
the holder hereof without charge upon receipt by Oneida Valley
Bancshares, Inc. of a written request."
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if CFF shall have delivered to
OVB a copy of a letter from the staff of the Commission, or an opinion of
counsel, in form and substance satisfactory to OVB, to the effect that such
legend is not required for purposes of the Securities Act.
5. REPRESENTATIONS.
OVB hereby represents, warrants and covenants to CFF as follows:
(a) OVB shall at all times maintain sufficient authorized but unissued
shares of OVB Common Stock so that the Option may be exercised without
authorization of additional shares of OVB Common Stock.
(b) The shares to be issued upon due exercise, in whole or in part, of the
Option, when paid for as provided herein, will be duly authorized, validly
issued, fully paid and nonassessable.
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
In the event of any change in OVB Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, exchanges of
shares or the like, the type and number of shares subject to the Option, and the
purchase price per share, as the case may be, shall be adjusted appropriately.
In the event that any additional shares of OVB Common Stock are issued or
otherwise become outstanding after the date of this Option Agreement
-4-
<PAGE>
(other than pursuant to this Option Agreement), the number of shares of OVB
Common Stock subject to the Option shall be adjusted so that, after such
issuance, it equals 19.9% of the number of shares of OVB Common Stock then
issued and outstanding without giving effect to any shares subject or issued
pursuant to the Option. Nothing contained in this Section 6 shall be deemed to
authorize OVB to breach any provision of the Merger Agreements.
7. REPURCHASE.
At the request of CFF at any time commencing immediately following the
occurrence of a Repurchase Event (as defined below) and ending upon termination
of this Agreement pursuant to the terms hereof ("Repurchase Period"), OVB shall
repurchase the Option from CFF together with any shares of OVB Common Stock
purchased by CFF pursuant thereto, at a price equal to the sum of:
(a) The exercise price paid by CFF for any shares of OVB Common Stock
acquired pursuant to the Option;
(b) The difference between the "market/tender offer" price for shares of
OVB Common Stock (defined as the highest of (i) the highest price per share at
which a tender or exchange offer has been made, (ii) the price per share,
whether in cash or the value of securities or other property or a combination
thereof, of OVB Common Stock to be paid by any third party pursuant to an
agreement with OVB, or (iii) the highest reported sale price for shares of OVB
Common Stock within that portion of the Repurchase Period preceding the date CFF
gives notice of the required repurchase under this Section 7) and the exercise
price as determined pursuant to Section 2 hereof, multiplied by the number of
shares of OVB Common Stock with respect to which the Option has not been
exercised, but only if the market/tender offer price is greater than such
exercise price;
(c) The difference between the market/tender offer price (as defined in
Section 7(b) hereof) and the exercise price paid by CFF for any shares of OVB
Common Stock purchased pursuant to the exercise of the Option, multiplied by the
number of shares so purchased, but only if the market/tender offer price is
greater than such exercise price; and
(d) CFF's reasonable out-of-pocket expenses incurred in connection with
the transactions contemplated by the Reorganization Agreement, including,
without limitation, legal, accounting, financial advisory and investment banking
fees, except to the extent that such expenses have already been paid pursuant to
Section 6.3 of the Reorganization Agreement.
In the event CFF exercises its right to require the repurchase of the
Option, OVB shall, within ten business days thereafter, pay the required amount
to CFF in immediately available funds and CFF shall surrender the Option to OVB
and the certificates evidencing the shares of OVB Common Stock purchased
thereunder; provided that if prior notification to or approval
-5-
<PAGE>
of the Federal Reserve Board or other regulatory agency is required in
connection with such purchase, OVB shall promptly file the required notice or
application for approval and shall expeditiously process the same and the period
of time that otherwise would run pursuant to this sentence shall run instead
from the date on which any required notification period has expired or been
terminated.
As used herein, a "Repurchase Event" shall mean any of the transactions
described in clauses (i), (ii), (iii) or (iv) of Section 3(b) herein except, for
this purpose, the percentage in clause (ii) shall be 50% and, for purposes of
clauses (iii) and (iv) for a Repurchase Event to occur, any party shall, prior
to the termination of this Agreement, engage in a transaction contemplated by
clauses (i) or (ii) (at the 50% level) of Section 3(b), provided that, for all
purposes herein, the payment required by this Section 7 shall be due and payable
only upon consummation of the events described in clauses (i) and (ii) of
Section 3(b) of this Agreement.
8. REGISTRATION RIGHTS.
OVB shall, if requested by CFF, as expeditiously as possible file a
registration statement on a form of general use under the Securities Act if
necessary in order to permit the sale or other disposition of the shares of OVB
Common Stock that have been acquired upon exercise of the Option in accordance
with the intended method of sale or other disposition requested by CFF. CFF
shall provide all information reasonably requested by OVB for inclusion in any
registration statement to be filed hereunder. OVB will use its best efforts to
cause such registration statement first to become effective and then to remain
effective for such period not in excess of 180 days from the day such
registration statement first becomes effective as may be reasonably necessary to
effect such sales or other dispositions. The first registration effected under
this Section 7 shall be at OVB's expense except for underwriting commissions and
the fees and disbursements of CFF's counsel attributable to the registration of
such OVB Common Stock. A second registration may be requested hereunder at CFF's
expense. In no event shall OVB be required to effect more than two registrations
hereunder. The filing of any registration statement hereunder may be delayed for
such period of time as may reasonably be required to facilitate any public
distribution by OVB of OVB Common Stock. If requested by CFF, in connection with
any such registration, OVB will become a party to any underwriting agreement
relating to the sale of such shares, but only to the extent of obligating itself
in respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements. Upon receiving any request
from CFF or assignee thereof under this Section 8, OVB agrees to send a copy
thereof to CFF and to any assignee thereof known to OVB, in each case by
promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies.
-6-
<PAGE>
9. SEVERABILITY.
If any term, provision, covenant or restriction contained in this Option
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Option
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Option will not permit the holder to acquire or OVB
to repurchase pursuant to Section 7 hereof the full number of shares of OVB
Common Stock provided in Section 2 hereof (as adjusted pursuant to Section 6
hereof), it is the express intention of OVB to allow the holder to acquire or to
require OVB to repurchase up to the maximum number of shares as may be
permissible from time to time, without any amendment or modification hereof.
10. MISCELLANEOUS.
(a) Expenses. Except as otherwise provided herein, each of the parties
hereto 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.
(b) Entire Agreement. Except as otherwise expressly provided herein, this
Option Agreement contains the entire agreement between the parties with respect
to the transactions contemplated hereunder and supersedes all prior arrangements
or understandings with respect thereto, written or oral. The terms and
conditions of this Option Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns. Nothing in
this Option Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Option Agreement, except as expressly provided herein.
(c) Assignment. Neither of the parties hereto may assign any of its rights
or obligations under this Option Agreement or the Option created hereunder to
any other person, without the express written consent of the other party, except
that, in the event a Purchase Event shall have occurred and be continuing, CFF
may assign, in whole or in part, its rights and obligations hereunder; provided,
however, that to the extent required by applicable regulatory authorities, CFF
may not assign its rights under the Option except in (i) a widely dispersed
public distribution, (ii) a private placement in which no one party acquires the
right to purchase 2% or more of the voting shares of OVB, (iii) an assignment to
a single party (e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on CFF's behalf, or (iv) any
other manner approved by applicable regulatory authorities.
-7-
<PAGE>
(d) Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered in the
manner and to the addresses provided for in or pursuant to Section 7.4 of the
Reorganization Agreement.
(e) Counterparts. This Option 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.
(f) Specific Performance. The parties agree that damages would be an
inadequate remedy for a breach of the provisions of this Option Agreement by
either party hereto and that this Option Agreement may be enforced by either
party hereto through injunctive or other equitable relief.
(g) Governing Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and entirely to be performed within such state and such federal
laws as may be applicable.
IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the day and year first written above.
ONEIDA VALLEY BANCSHARES, INC.
By: /s/ JOHN C. MOTT
-------------------------------------
John C. Mott
President
CORTLAND FIRST FINANCIAL CORPORATION
By: /s/ DAVID R. ALVORD
-------------------------------------
David R. Alvord
President and Chief Executive Officer
-8-
July 10, 1998
Oneida Valley Bancshares, Inc.
160 Main Street
Oneida, New York 13421
Gentlemen:
The undersigned is a director of Cortland First Financial Corporation
("CFF") and a director of its subsidiary bank, and is the beneficial holder of
shares of common stock, par value $1.6667 per share, of CFF ("CFF Common
Stock"). The undersigned is executing this Agreement for the purpose of ensuring
compliance with certain federal securities law requirements and certain
requirements for the application of "pooling" accounting treatment in connection
with the transaction described below.
CFF and Oneida Valley Bancshares, Inc. ("OVB") are considering execution
of an Agreement and Plan of Reorganization and a related Plan of Merger
(collectively, the "Merger Agreement") contemplating a merger of OVB with and
into CFF (the "Merger"), with the resulting corporation to assume a new name
(the "Continuing Corporation"), such execution being subject in the case of OVB
to the execution and delivery of this Agreement. In consideration of the
substantial expenses that OVB will incur in connection with the transactions
contemplated by the Merger Agreement and in order to induce OVB to execute the
Merger Agreement and to proceed to incur such expenses, the undersigned agrees,
undertakes and represents, in his capacity as a shareholder of CFF and not in
his capacity as a director of CFF, as follows:
1. VOTING OF SHARES. The undersigned will vote or cause to be voted for
approval of the Merger Agreement all of the shares of CFF Common Stock the
undersigned is entitled to vote with respect thereto, unless by a two-thirds
vote the Board of Directors of CFF, in accordance with Section 4.8(12) of the
Reorganization Agreement, votes to pursue a superior proposal.
2. NO TRANSFER OF SHARES. The undersigned will not effect any transfer or
other disposition of any of the undersigned's shares of CFF Common Stock until
CFF's shareholders have voted to approve the Merger Agreement or until the
Merger Agreement has been terminated pursuant to the terms thereof. In the case
of any transfer by operation of law, this Agreement shall be binding upon and
inure to the benefit of the transferee. Any transfer or other disposition in
violation of the terms of this paragraph 2 shall be null and void. The terms of
this paragraph 2 shall not apply to any transfer or other disposition pursuant
to the terms of any pledge of CFF Common Stock made by the undersigned and
existing at the date
<PAGE>
Oneida Valley Bancshares, Inc.
July 10, 1998
Page 2
hereof, provided that the undersigned will not pledge or otherwise encumber any
additional shares of CFF Common Stock during the period specified in the first
sentence of this paragraph.
3. FURTHER RESTRICTIONS. Notwithstanding the foregoing, the undersigned
agrees not to sell, or in any other way reduce the risk of the undersigned
relative to, any shares of CFF common stock or shares of OVB common stock,
during the period commencing 30 days prior to the effective date of the Merger
and ending on the date on which financial results covering at least 30 days of
post-Merger combined operations of CFF and OVB have been published within the
meaning of Topic 2-E of the Staff Accounting Bulletin Series of the SEC,
provided, however, that excluded from the foregoing undertaking shall be such
sales, pledges, transfers or other dispositions of shares of CFF common stock or
shares of OVB common stock which, in OVB's sole judgment, are individually and
in the aggregate de minimis within the meaning of Topic 2-E of the Staff
Accounting Bulletin Series of the SEC. The undersigned agrees to confer with OVB
and CFF prior to engaging in any transactions or agreements related to shares of
CFF Common Stock in order to insure compliance with this Agreement.
4. STOP TRANSFER ORDERS. The Undersigned agrees that neither CFF nor OVB
shall be bound by any attempted sale or other transfer of any shares of CFF
common stock or shares of OVB common stock, and CFF's and OVB's respective
transfer agents shall be given appropriate stop transfer orders and shall not be
required to register any such attempted sale or other transfer, unless the sale
has been effected in compliance with the terms of this Agreement.
5. AFFILIATES OBLIGATED. The undersigned acknowledges and agrees that the
provisions of paragraphs 3 and 4 hereof also apply to shares of OVB common stock
and shares of CFF common stock owned by (a) his or her spouse, (b) any of his or
her relatives or relatives of his or her spouse occupying his or her home, and
(c) any trust or estate in which he or she, his or her spouse, or any such
relative owns at least a 10% beneficial interest or of which any of them serves
as trustee, executor or in any similar capacity, and (d) any corporation or
other organization in which the undersigned, any affiliate of the undersigned,
his or her spouse, or any such relative owns at least 10% of any class of equity
securities or of the equity interest.
6. NO INTENT TO SELL. The undersigned represents that he or she has no
plan or intention to sell, exchange, or otherwise dispose of any shares of OVB
common stock or shares of CFF common stock prior to expiration of the time
period referred to in paragraph 3 hereof.
<PAGE>
Oneida Valley Bancshares, Inc.
July 10, 1998
Page 3
7. ENFORCEMENT. The undersigned represents that he or she has the capacity
to enter into this Agreement and that it is a valid and binding obligation
enforceable against the undersigned in accordance with its terms, subject to
bankruptcy, insolvency and other laws affecting creditors' rights and general
equitable principles.
8. REMEDIES. The undersigned acknowledges and agrees that any remedy at
law for breach of the foregoing provisions shall be inadequate and that, in
addition to any other relief which may be available, OVB shall be entitled to
temporary and permanent injunctive relief without the necessity of proving
actual damages.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
Very truly yours,
-------------------------------------
Accepted and agreed to as of the date first above written:
ONEIDA VALLEY BANCSHARES, INC.
By:
---------------------------
John C. Mott
President
July 10, 1998
Cortland First Financial Corporation
65 Main Street
Cortland, New York 13045
Ladies and Gentlemen:
The undersigned is a director of Oneida Valley Bancshares, Inc. ("OVB")
and a director of its subsidiary bank, and is the beneficial holder of shares of
common stock, par value $2.50 per share, of OVB ("OVB Common Stock"). The
undersigned is executing this Agreement for the purpose of ensuring compliance
with certain federal securities law requirements and certain requirements for
the application of "pooling" accounting treatment in connection with the
transaction described below.
OVB and Cortland First Financial Corporation ("CFF") are considering
execution of an Agreement and Plan of Reorganization and a related Plan of
Merger (collectively, the "Merger Agreement") contemplating a merger of OVB with
and into CFF (the "Merger"), with the resulting corporation to assume a new name
(the "Continuing Corporation"), such execution being subject in the case of CFF
to the execution and delivery of this Agreement. In consideration of the
substantial expenses that CFF will incur in connection with the transactions
contemplated by the Merger Agreement and in order to induce CFF to execute the
Merger Agreement and to proceed to incur such expenses, the undersigned agrees,
undertakes and represents, in his capacity as a shareholder of OVB and not in
his capacity as a director of OVB, as follows:
1. VOTING OF SHARES. The undersigned will vote or cause to be voted for
approval of the Merger Agreement all of the shares of OVB Common Stock the
undersigned is entitled to vote with respect thereto, unless by a two-thirds
vote the Board of Directors of OVB, in accordance with Section 4.7(12) of the
Reorganization Agreement, votes to pursue a superior proposal.
2. NO TRANSFER OF SHARES. The undersigned will not effect any transfer or
other disposition of any of the undersigned's shares of OVB Common Stock until
OVB's shareholders have voted to approve the Merger Agreement or until the
Merger Agreement has been terminated pursuant to the terms thereof. In the case
of any transfer by operation of law, this Agreement shall be binding upon and
inure to the benefit of the transferee. Any transfer or other disposition in
violation of the terms of this paragraph 2 shall be null and void. The terms of
this paragraph 2 shall not apply to any transfer or other disposition pursuant
to the terms of any pledge of OVB Common Stock made by the undersigned and
existing at the date
<PAGE>
Cortland First Financial Corporation
July 10, 1998
Page 2
hereof, provided that the undersigned will not pledge or otherwise encumber any
additional shares of OVB Common Stock during the period specified in the first
sentence of this paragraph.
3. FURTHER RESTRICTIONS. Notwithstanding the foregoing, the undersigned
agrees not to sell, or in any other way reduce the risk of the undersigned
relative to, any shares of CFF common stock or shares of OVB common stock,
during the period commencing 30 days prior to the effective date of the Merger
and ending on the date on which financial results covering at least 30 days of
post-Merger combined operations of CFF and OVB have been published within the
meaning of Topic 2-E of the Staff Accounting Bulletin Series of the SEC,
provided, however, that excluded from the foregoing undertaking shall be such
sales, pledges, transfers or other dispositions of shares of CFF common stock or
shares of OVB common stock which, in CFF's sole judgment, are individually and
in the aggregate de minimis within the meaning of Topic 2-E of the Staff
Accounting Bulletin Series of the SEC. The undersigned agrees to confer with CFF
and OVB prior to engaging in any transactions or agreements related to shares of
OVB Common Stock in order to ensure compliance with this Agreement.
4. STOP TRANSFER ORDERS. The Undersigned agrees that neither CFF nor OVB
shall be bound by any attempted sale or other transfer of any shares of CFF
common stock or shares of OVB common stock, and CFF's and OVB's respective
transfer agents shall be given appropriate stop transfer orders and shall not be
required to register any such attempted sale or other transfer, unless the sale
has been effected in compliance with the terms of this Agreement.
5. AFFILIATES OBLIGATED. The undersigned acknowledges and agrees that the
provisions of paragraphs 3 and 4 hereof also apply to shares of OVB common stock
and shares of CFF common stock owned by (a) his or her spouse, (b) any of his or
her relatives or relatives of his or her spouse occupying his or her home, and
(c) any trust or estate in which he or she, his or her spouse, or any such
relative owns at least a 10% beneficial interest or of which any of them serves
as trustee, executor or in any similar capacity, and (d) any corporation or
other organization in which the undersigned, any affiliate of the undersigned,
his or her spouse, or any such relative owns at least 10% of any class of equity
securities or of the equity interest.
6. NO INTENT TO SELL. The undersigned represents that he has no plan or
intention to sell, exchange, or otherwise dispose of any shares of OVB common
stock or shares of CFF common stock prior to expiration of the time period
referred to in paragraph 3 hereof.
<PAGE>
Cortland First Financial Corporation
July 10, 1998
Page 3
7. ENFORCEMENT. The undersigned represents that he or she has the capacity
to enter into this Agreement and that it is a valid and binding obligation
enforceable against the undersigned in accordance with its terms, subject to
bankruptcy, insolvency and other laws affecting creditors' rights and general
equitable principles.
8. REMEDIES. The undersigned acknowledges and agrees that any remedy at
law for breach of the foregoing provisions shall be inadequate and that, in
addition to any other relief which may be available, CFF shall be entitled to
temporary and permanent injunctive relief without the necessity of proving
actual damages.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
Very truly yours,
------------------------------------
Accepted and agreed to as of
the date first above written:
CORTLAND FIRST FINANCIAL
CORPORATION
By:
----------------------------------------
David R. Alvord
President and Chief Executive Officer
DATE: July 13, 1998
CONTACTS:
John C. Mott David R. Alvord
President President and CEO
Oneida Valley Bancshares, Inc. Cortland First Financial Corporation
(315) 363-4500 (607) 758-1201
CORTLAND FIRST FINANCIAL CORPORATION AND ONEIDA VALLEY BANCSHARES,
INC. AGREE TO MERGE
- --------------------------------------------------------------------------------
CORTLAND, NEW YORK Cortland First Financial Corporation (CTLN) and ONEIDA,
NEW YORK, Oneida Valley Bancshares, Inc. (ONVB) today jointly announced that
they executed an Agreement to create, through the merger of the two companies,
an independent bank holding company aimed at serving the community banking
market of Central New York State. The new company, to be named Alliance
Financial Corporation, with consolidated assets exceeding $450 million and $50
million in capital resources, plans to expand its banking franchise through new
branch openings in Onondaga County during its first twelve months of combined
operations. Their respective bank subsidiaries, First National Bank of Cortland
and Oneida Valley National Bank, will merge under the name Alliance Bank, N.A.
Presently, the combined banks have 16 branch locations in Onondaga, Cortland,
Broome, Oneida and Madison Counties and employ over 250 people.
The proposed transaction will be a "merger of equals" and will be
accounted for on a "pooling of interests" basis. It will be tax free to the
shareholders of each company. The present shareholders of Cortland First and
Oneida Valley will each own approximately one-half of Alliance Financial
Corporation. Each Cortland First shareholder will own one share of the merged
company for each Cortland First share owned, while each Oneida Valley
shareholder will own at least 1.75 shares but not more than 2.0 shares of the
merged company for each Oneida Valley share owned. The Oneida Valley exchange
ratio (i.e., the number of shares of the merged company to be received for each
Oneida Valley share owned) will equal 1.75 if the market value of Cortland First
stock (near the merger date) is $30 or more per share, while it will be 2.0 if
the market value of Cortland First stock is $26.25 or below per share. Between
these prices, the Oneida Valley exchange ratio will be set to approximate an
exchange value of $52.50 in Alliance Financial Corporation stock. The present
combined market capitalization of the two companies approximates $100 million
based on July 10, 1998 closing prices.
<PAGE>
John Mott, President of Oneida Valley, and David Alvord, President and CEO
of Cortland First, said, "We are excited and enthusiastic about the alliance of
our two community banking companies. This merger will allow us to continue to
serve our existing core customers as we have for more than 125 years. At the
same time, we will leverage our combined resources to expand our markets and
enhance shareholder value through increased earnings, while maintaining our
independence as a community banking enterprise."
While the company will only have approximately three months of operations
on a merged basis during fiscal 1998, the proposed transaction (exclusive of
merger related expenses) is expected to be accretive to earnings. The addition
of the planned new branches in the greater Syracuse area is expected to cause
some temporary negative impact on the earnings of the combined company during
the start-up phase of these branches. Exclusive of the non-recurring expenses
anticipated, the first full year of consolidated operations in 1999 should see a
material positive impact on the earnings of the combined company as anticipated
revenue enhancements and cost savings are implemented. The combined company is
expected to take a one-time after-tax charge of approximately $600,000 to
$1,000,000 for costs to be incurred in connection with the transaction, and
anticipates after-tax cost savings will be running at a $600,000 annual rate by
the end of 1999.
Messrs. Mott and Alvord also said, "This merger will allow us to provide
enhanced products and services, ranging from personal loans and residential and
commercial mortgages, through a full complement of corporate financing
facilities, to enhanced trust and investment services. Our new market area will
cover the Central New York region. Our combined resources will ensure our
ability to afford the most advanced technology, to offer the widest product
range, and to meet the credit needs of the small to medium-sized business
borrowers in our area, well beyond what we could expect to achieve on an
individual basis."
"The merger also presents several opportunities to cost effectively
consolidate our operations in many areas, including data processing and
corporate staff functions. We will proceed diligently, but carefully, to merge
our branch operations, products, and services without inconvenience or
disruption to our customers. The advantages of this merger to our customers,
communities, staff, and shareholders are truly compelling, and we are all
dedicated to achieving them."
The merger, which is expected to close in the fourth quarter of 1998, is
subject to approval of the shareholders of both companies as well as regulatory
approvals and other customary closing conditions. In conjunction with execution
of the merger agreement, each party has granted the other an option to acquire
19.9% of its outstanding stock under certain circumstances.
<PAGE>
The membership of the Board of Directors of the new company and bank will
be comprised of all twenty-two members of the respective boards. The Co-Chairmen
and Co-CEO's of both the company and bank will be Mr. Alvord and Mr. Mott. Other
senior management will be drawn from both institutions. The new company will
maintain dual headquarters in Oneida, New York, and Cortland, New York.
Cortland First Financial Corporation is the parent company for First
National Bank of Cortland, an independent commercial bank serving the Cortland,
Southern Onondaga, and Northern Broome County region. From its eight branches
First National Bank of Cortland offers individual, business and municipal
customers a full range of loan and deposit products and trust and investment
services. The common stock of Cortland First Financial Corporation is publicly
traded under the stock symbol "CTLN".
Oneida Valley Bancshares, Inc. is the parent company of Oneida Valley
National Bank, an independent commercial bank serving the Madison, Eastern
Onondaga, and Western Oneida County region. From its eight branches Oneida
Valley National Bank offers individual, business and municipal customers a full
range of loan and deposit products and trust and investment services. The common
stock of Oneida Valley Bancshares, Inc. is traded under the stock symbol "ONVB".
*******************************************************************************
This press release contains certain forward-looking statements with
respect to the financial condition, results of operations and business of
Alliance Financial Corporation following the consummation of the merger,
including statements relating to the cost savings and revenue enhancements that
are expected to be realized from the merger and the expected impact of the
merger on financial performance. These forward-looking statements involve
certain risks and uncertainties. Factors that may cause actual results to differ
materially from those contemplated by such forward-looking statements include,
among others, the following possibilities: (1) expected cost savings from the
merger cannot be fully realized or cannot be realized as quickly as anticipated;
(2) the planned expansion into the Syracuse market is not completed on schedule
or on budget or the new branches do not attract the expected loan and deposit
customers; (3) competitive pressure in the banking industry increases
significantly; (4) costs or difficulties related to the integration of the
businesses of CTLN and ONVB are greater than expected; (5) changes in the
interest rate environment reduce margins; (6) general economic conditions,
either nationally or regionally, are less favorable than expected, resulting in,
among other things, a deterioration in credit quality; (7) changes occur in the
regulatory environment; (8) changes occur in the business conditions and
inflation; and (9) changes occur in the securities markets
