<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 23, 1996
REGISTRATION NO. 333-00673
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
EXECUFIRST BANCORP, INC.
(EXACT NAME OF THE REGISTRANT AS SPECIFIED IN ITS CERTIFICATE OF INCORPORATION)
<TABLE>
<S> <C> <C>
PENNSYLVANIA 5961 23-2486815
(STATE OR OTHER JURISDICTION OF (PRIMARY S.I.C. NUMBER) (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
------------------------
1513 WALNUT STREET
PHILADELPHIA, PA 19102
(215) 564-3300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF THE REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ZVI H. MUSCAL
EXECUFIRST BANCORP, INC.
1513 WALNUT STREET
PHILADELPHIA, PA 19102
(215) 564-3300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies of all communications to:
STEPHEN T. BURDUMY, ESQUIRE AND EDWARD G. FITZGERALD, ESQUIRE
KLEHR, HARRISON, HARVEY, BRANZBURG SPECTOR, GADON & ROSEN, PC
& ELLERS 1700 MARKET STREET,
1401 WALNUT STREET 29TH FLOOR
PHILADELPHIA, PA 19103 PHILADELPHIA, PA 19103
(215) 568-6060 (215) 241-8833
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the Registration Statement becomes
effective.
If the Securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED(1) REGISTERED PRICE PER UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.01................. 1,985,658(2) $ $ $2,636.13(3)(4)
</TABLE>
(1) This registration statement relates to shares of common stock of the
Registrant issuable to holders of the common stock of Republic
Bancorporation, Inc. ('Republic') in connection with the proposed merger of
Republic with and into the Registrant.
(2) Based on an estimated maximum of 1,985,658 shares of Registrant's common
stock to be issued in exchange for an estimated maximum of 794,263
outstanding shares of Republic common stock.
(3) Estimated solely for the purpose of calculating the registration fee and
based, in accordance with Rule 457(f)(1) under the Securities Act of 1933,
on the average of the bid and asked prices of Republic's common stock
($9.625) as reported on the Electronic Bulletin board on January 25, 1996.
Pursuant to Rule 457(b), $397.13 represents the filing fee payable by
ExecuFirst and Republic under Section 14(g) of the Securities Exchange Act
of 1934 in connection with the filing of preliminary proxy materials.
(4) Paid upon initial filing of Registration Statement.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS
EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL
THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXECUFIRST BANCORP, INC.
REPUBLIC BANCORPORATION, INC.
CROSS-REFERENCE TABLE
PURSUANT TO REGULATION S-B
<TABLE>
<CAPTION>
ITEM NO. FORM S-4 CAPTION PROSPECTUS/JOINT PROXY
- --------- ------------------------------------------------------ -------------------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
Item 1 Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Facing Page; Cross Reference Sheet; Outside
Front Cover Page of Prospectus/Joint
Proxy Statement
Item 2 Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Available Information; Incorporation of
Certain Documents by Reference
Item 3 Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information................................... Outside Front Cover Page of
Prospectus/Joint Proxy Statement;
Summary; Special Considerations; Pro
Forma Per Share Comparative Financial
Data; The Merger; The Plan of Merger and
Related Agreements; ExecuFirst
Item 4 Terms of the Transaction.............................. Summary; The Merger; The Plan of Merger and
Related Agreements; Description of
ExecuFirst Stock; Certain Differences in
the Rights of ExecuFirst and Republic
Shareholders
Item 5 Pro Forma Financial Information....................... Unaudited Pro Forma Combined Financial Data
Item 6 Material Contracts with the Company Being Acquired.... Summary; The Merger
Item 7 Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters....... Not Applicable
Item 8 Interests of Named Experts and Counsel................ Not Applicable
Item 9 Disclosure of Commission Position on Indemnification
for Securities Acts Liabilities..................... Not Applicable
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ITEM NO. FORM S-4 CAPTION PROSPECTUS/JOINT PROXY
- --------- ------------------------------------------------------ -------------------------------------------
<S> <C> <C>
B. INFORMATION ABOUT THE REGISTRANT
Item 10 Information with Respect to S-3 Registrants........... Not Applicable
Item 11 Incorporation of Certain Information by Reference..... Not Applicable
Item 12 Information with Respect to S-2 or S-3 Registrants.... Incorporation of Certain Documents by
Reference
Item 13 Incorporation of Certain Information by Reference..... Incorporation of Certain Documents by
Reference
Item 14 Information with Respect to Registrants Other than S-2
or S-3 Registrants.................................. Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
Item 15 Information with Respect to S-3 Companies............. Not Applicable
Item 16 Information with Respect to S-2 or S-3 Companies...... Not Applicable
Item 17 Information with Respect to Companies Other than S-2
or S-3 Companies.................................... Summary; The Merger; Republic
D. VOTING AND MANAGEMENT INFORMATION
Item 18 Information if Proxies, Consents or Authorizations are
to be Solicited..................................... Facing Page; Outside Front Cover Page of
Prospectus/Joint Proxy Statement;
Summary; The ExecuFirst Meeting; The
Republic Meeting; The Merger; ExecuFirst;
Republic
Item 19 Information if Proxies, Consents or
Authorizations are not to be Solicited or in an
Exchange Offer...................................... Not Applicable
</TABLE>
ii
<PAGE>
EXECUFIRST BANCORP, INC.
1513 WALNUT STREET
PHILADELPHIA, PA 19102
(215) 564-3300
April __, 1996
Dear Shareholder:
You are cordially invited to attend the annual meeting of shareholders (the
'Annual Meeting') of ExecuFirst Bancorp, Inc. ('ExecuFirst') to be held
Wednesday, May 29, 1996, at 3:00 p.m., local time at the Union League, 140 S.
Broad Street, Philadelphia, PA 19102. Notice of the Annual Meeting, a
Prospectus/Joint Proxy Statement, and a Proxy Card are enclosed.
At this year's Annual Meeting, you are being asked to elect three (3) Class
III Directors and to consider and act upon a proposal for the approval of the
merger (the 'Merger') of Republic Bancorporation, Inc., a Pennsylvania
corporation ('Republic'), with and into ExecuFirst, pursuant to the Agreement
and Plan of Merger dated November 17, 1995 by and between ExecuFirst and
Republic (the 'Plan of Merger'). In addition, shareholders will be asked to
consider and vote upon proposals to approve certain amendments to ExecuFirst's
Articles of Incorporation and to approve an amended and restated stock option
plan. Shareholders may be asked to approve adjournment of the Annual Meeting to
permit further solicitation of proxies in the event that there are insufficient
votes at the time of the Annual Meeting to approve the Merger and the Plan of
Merger and the other proposed actions.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY ENDORSED THE NOMINEES FOR DIRECTOR
AND APPROVED THE PLAN OF MERGER AND BELIEVES THAT THE MERGER IS IN THE BEST
INTERESTS OF EXECUFIRST AND ITS SHAREHOLDERS. ACCORDINGLY, YOUR BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE MERGER AND
THE PLAN OF MERGER, FOR THE AMENDMENTS TO THE ARTICLES OF INCORPORATION, FOR THE
AMENDED AND RESTATED STOCK OPTION PLAN, AND FOR ADJOURNMENT OF THE ANNUAL
MEETING, IF NECESSARY.
If any other matters are properly brought before the Annual Meeting, the
persons named in the enclosed Proxy Card will vote the shares represented by
such proxy upon such matters in accordance with their best judgment. You are
urged to read the accompanying Prospectus/Joint Proxy Statement which provides
detailed information concerning the Merger and related matters. Please give this
material your careful consideration.
Your vote is important, regardless of the number of shares you own. ON
BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD AS SOON AS POSSIBLE EVEN IF YOU PLAN TO ATTEND THE ANNUAL
MEETING. This will not prevent you from voting in person but will assure that
your vote is counted if you are unable to attend the Annual Meeting.
Sincerely,
[SIGNATURE]
Zvi H. Muscal
Chairman of the Board,
President and Chief Executive Officer
<PAGE>
REPUBLIC BANCORPORATION, INC.
1515 MARKET STREET
PHILADELPHIA, PA 19102
(215) 563-3600
April __, 1996
Dear Shareholder:
You are cordially invited to attend a special meeting of shareholders (the
'Special Meeting') of Republic Bancorporation, Inc. ('Republic') to be held
Tuesday, May 28, 1996, at 10:00 a.m., local time at Republic Bank, 1515 Market
Street, Philadelphia, PA. Notice of the Special Meeting, a Prospectus/Joint
Proxy Statement, and a Proxy Card are enclosed.
The Special Meeting has been called for the purpose of considering and
acting upon a proposal for the approval of the merger (the 'Merger') of Republic
with and into ExecuFirst Bancorp, Inc., a Pennsylvania corporation
('ExecuFirst'), pursuant to the Agreement and Plan of Merger dated November 17,
1995 by and between ExecuFirst and Republic (the 'Plan of Merger'). In addition,
shareholders may be asked to approve adjournment of the Special Meeting to
permit further solicitation of proxies in the event that there are insufficient
votes at the time of the Special Meeting to approve the Merger and the Plan of
Merger.
YOUR BOARD OF DIRECTORS HAS APPROVED THE PLAN OF MERGER AND BELIEVES THAT
THE MERGER IS IN THE BEST INTERESTS OF REPUBLIC AND ITS SHAREHOLDERS.
ACCORDINGLY, YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE MERGER AND THE PLAN OF MERGER AND FOR ADJOURNMENT OF THE SPECIAL
MEETING, IF NECESSARY.
If the Merger is approved by the shareholders at the Special Meeting, under
Pennsylvania law, Republic shareholders may be entitled to exercise dissenters'
rights with respect to the proposed Merger. A description of the procedure for
exercising dissenters' rights is included in the Prospectus/Joint Proxy
Statement.
If any other matters are properly brought before the Special Meeting, the
persons named in the enclosed Proxy Card will vote the shares represented by
such proxy upon such matters as determined by a majority of the Board of
Directors. You are urged to read the accompanying Prospectus/Joint Proxy
Statement which provides detailed information concerning the Merger and related
matters. Please give this material your careful consideration.
Your vote is important, regardless of the number of shares you own. ON
BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD AS SOON AS POSSIBLE EVEN IF YOU PLAN TO ATTEND THE SPECIAL
MEETING. This will not prevent you from voting in person but will assure that
your vote is counted if you are unable to attend the Special Meeting.
Sincerely,
[SIGNATURE]
Rolf A. Stensrud
Director, President and
Chief Executive Officer
<PAGE>
EXECUFIRST BANCORP, INC.
1513 WALNUT STREET
PHILADELPHIA, PA 19102
(215) 564-3300
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 29, 1996
------------------------
NOTICE IS HEREBY GIVEN that an annual meeting of shareholders (the 'Annual
Meeting') of ExecuFirst Bancorp, Inc. ('ExecuFirst') will be held at the Union
League, 140 S. Broad Street, Philadelphia, Pennsylvania, on Wednesday, May 29,
1996, at 3:00 p.m., local time, for the following purposes:
(1) To elect three (3) Class III Directors.
(2) To consider and vote upon a proposal to approve an Agreement and
Plan of Merger dated November 17, 1995 (as the same may be amended, the
'Plan of Merger') by and between ExecuFirst and Republic Bancorporation,
Inc. ('Republic'), pursuant to which (a) Republic would merge with and into
ExecuFirst (the 'Merger'), and (b) each outstanding share of Republic
common stock, subject to the exercise of perfected dissenters' appraisal
rights, would be converted into shares of ExecuFirst common stock in
accordance with the exchange ratio set forth in the Plan of Merger.
(3) To consider and vote upon a proposal to approve an amendment to
ExecuFirst's Articles of Incorporation to insert a new Article relating to
a restriction on ownership of more than 10% of ExecuFirst's outstanding
common stock.
(4) To consider and vote upon a proposal to approve amendments to
ExecuFirst's Amended and Restated Articles of Incorporation relating to (i)
the indemnification of officers and directors by ExecuFirst; (ii)
nominations for election to the board of directors and (iii) the vote
required to amend the Articles of Incorporation.
(5) To consider and vote upon a proposal to adopt an Amended and
Restated Stock Option Plan.
(6) To consider and vote upon the adjournment of the Special Meeting
to permit further solicitation of proxies in the event that there are
insufficient votes at the time of the Special Meeting to approve the Merger
and the Plan of Merger.
(7) To consider and vote upon other business as may properly come
before the Special Meeting or any adjournments thereof.
As of the date hereof, the Board of Directors of ExecuFirst is not aware of any
other business to come before the Annual Meeting.
The Board of Directors of ExecuFirst has fixed the close of business on
April 12, 1996 as the record date for the determination of shareholders entitled
to notice of and to vote at the Special Meeting.
Any action may be taken on any one of the foregoing proposals at the Annual
Meeting on the date specified above, or on any date or dates to which, by
original or later adjournment, the Annual Meeting may be adjourned or to which
the Annual Meeting may be postponed. A majority of the outstanding shares of the
ExecuFirst common stock must be represented at the Annual Meeting, in person or
by proxy, to constitute a quorum for the transaction of business.
By Order of the Board of Directors,
[SIGNATURE]
Zvi H. Muscal
Chairman of the Board, President
and Chief Executive Officer
Philadelphia, Pennsylvania
April , 1996
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT
YOU PLAN TO BE PRESENT IN PERSON AT THE SPECIAL MEETING, PLEASE COMPLETE,
DATE, AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE,
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
[EXECUFIRST LOGO] [REPUBLIC LOGO]
EXECUFIRST BANCORP, INC. REPUBLIC BANCORPORATION, INC.
PROSPECTUS/PROXY STATEMENT PROXY STATEMENT
1,604,411 SHARES OF COMMON STOCK
PAR VALUE $.01 PER SHARE
(SUBJECT TO ADJUSTMENT)
<TABLE>
<S> <C>
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 29, SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 28,
1996 1996
</TABLE>
This Prospectus/Joint Proxy Statement and the accompanying proxy cards are
first being mailed to shareholders of ExecuFirst and Republic on or about
, 1996
------------------------
This Prospectus/Joint Proxy Statement is being furnished to holders of
common stock, $.01 par value ('ExecuFirst Common Stock'), of ExecuFirst Bancorp,
Inc., a Pennsylvania corporation ('ExecuFirst'), in connection with the
solicitation of proxies by the Board of Directors of ExecuFirst (the 'ExecuFirst
Board') for use at the annual meeting of ExecuFirst shareholders (the
'ExecuFirst Meeting') to be held at 3:00 p.m. local time, on Wednesday, May 29,
1996, at the Union League, 140 S. Broad Street, Philadelphia, PA, and at any
adjournment or postponement thereof.
This Prospectus/Joint Proxy Statement is being furnished to holders of
common stock, $.01 par value ('Republic Common Stock'), of Republic
Bancorporation, Inc., a Pennsylvania corporation ('Republic'), in connection
with the solicitation of proxies by the Board of Directors of Republic (the
'Republic Board') for use at a special meeting of Republic shareholders (the
'Republic Meeting') to be held at 10:00 a.m. local time, on Tuesday, May 28,
1996, at Republic Bank, 1515 Market Street, Philadelphia, PA, and at any
adjournment or postponement thereof.
At the ExecuFirst Meeting and the Republic Meeting, shareholders of
ExecuFirst and Republic, respectively, will be asked to consider and vote upon
the approval and adoption of an Agreement and Plan of Merger, dated November 17,
1995, by and between ExecuFirst and Republic (the 'Plan of Merger'), and to
approve the merger (the 'Merger') of Republic with and into ExecuFirst, which
shall be the surviving corporation (with respect to post-Merger actions,
ExecuFirst as the surviving corporation shall be referred to herein as the
'Holding Company'). Upon consummation of the Merger, ExecuFirst will change its
name to First Republic Bancorp, Inc. ('FIRST REPUBLIC'). Pursuant to the terms
of the Plan of Merger, each outstanding share of Republic Common Stock (other
than shares of Republic Common Stock as to which dissenters' rights of appraisal
have been perfected under Chapter 15 ('Chapter 15') of the Pennsylvania Business
Corporation Law of 1988, as amended (the 'BCL') will be converted into shares of
Holding Company's common stock, $.01 par value (the 'Holding Company Common
Stock') to be issued in exchange for each share of Republic Common Stock will be
determined by dividing the book value per share of Republic Common Stock by the
book value per share of ExecuFirst Common Stock, based on their respective per
share book value values at the end of the quarter immediately preceding
consummation of the Merger. In addition, shareholders of ExecuFirst will be
asked to elect three (3) Class III Directors and to consider and vote upon the
approval of certain amendments to ExecuFirst's Amended and Restated Articles of
Incorporation, as amended (the 'Articles of Incorporation') and the adoption of
the Amended and Restated ExecuFirst Stock Option Plan (the 'Amended and Restated
Stock Option Plan'). APPROVAL OF PROPOSALS III AND IV BY THE EXECUFIRST
SHAREHOLDERS, THE AMENDMENTS TO THE ARTICLES OF INCORPORATION, IS A CONDITION TO
THE CONSUMMATION OF THE MERGER, WHICH CONDITION MAY BE WAIVED BY REPUBLIC.
On April 22, 1996, the last reported sales price of ExecuFirst Common Stock
on the NASDAQ Small Cap Market was $6.50.
On April 22, 1996, the last reported sale price of Republic Common Stock on
the OTC Electronic Bulletin Board was $11.25.
Unless authority to vote is withheld, all shares of ExecuFirst Common Stock
represented by properly signed proxies received by the ExecuFirst Board pursuant
to this solicitation (and not revoked
(Cover continued on next page)
<PAGE>
before they are voted) will be voted FOR the election of the nominees to
ExecuFirst's Board of Directors; FOR approval and adoption of the Plan of Merger
and the Merger; FOR approval of the amendments to the Articles of Incorporation;
and FOR approval of the Amended and Restated Stock Option Plan.
Unless authority to vote is withheld, all shares of Republic Common Stock
represented by properly signed proxies received by the Republic Board pursuant
to this solicitation (and not revoked before they are voted) will be voted FOR
the approval and adoption of the Plan of Merger and the Merger.
As of the date of this Prospectus/Joint Proxy Statement, the ExecuFirst
Board and the Republic Board, respectively, know of no business that will be
presented for consideration at the ExecuFirst Meeting and Republic Meeting,
respectively, other than that referred to above. If any other business properly
comes before either of the meetings, the persons designated in the enclosed
proxy will vote on such business in accordance with their best judgment (in the
case of the ExecuFirst meeting) or as determined by a majority of the Republic
Board (in the case of the Republic meeting).
Under applicable Pennsylvania law, Republic shareholders may have
dissenters' rights with respect to the Merger. A summary of such rights,
including a description of the procedures to be followed in order to assert such
rights, is set forth in the Prospectus/Joint Proxy Statement under the caption
'THE MEETINGS--The Republic Meeting--Rights of Dissenting Shareholders.'
The enclosed proxies are being solicited by the ExecuFirst Board and the
Republic Board for use at the ExecuFirst Meeting and the Republic Meeting,
respectively. The costs of soliciting the shareholders of ExecuFirst and
Republic will be born by the parties on a pro rata basis based on the number of
shareholders. ExecuFirst has engaged Georgeson & Company, Inc. to assist in the
solicitation of proxies from ExecuFirst shareholders for an estimated fee of
$6,000. In addition, the solicitation may be made by directors, officers,
employees and management of ExecuFirst or Republic, respectively. However, such
persons will not receive any fees for such solicitation. Proxies may be
solicited in person or by mail, telephone, telegram, mailgram or other means.
Brokers, nominees, fiduciaries and other custodians have been requested to
forward such solicitation materials to the beneficial owners of shares held of
record by such custodian. Such custodians may be reimbursed for their expenses.
Any proxy may be revoked at any time before it is voted by giving written notice
of such revocation to, or by filing a later dated proxy with, the Secretary of
ExecuFirst or Republic, as appropriate. In addition, any proxy may be voided by
attending the ExecuFirst Meeting or the Republic Meeting, as appropriate, and
voting in person.
RIGHTS OF DISSENTING REPUBLIC SHAREHOLDERS
Under applicable Pennsylvania law, Republic shareholders may have
dissenters' rights with respect to the Merger. A summary of such rights,
including a description of the procedures to be followed in order to assert such
rights, is set forth in the Prospectus/Joint Proxy Statement under the caption
'THE MEETINGS -- The Republic Meeting -- Rights of Dissenting Shareholders.'
FOR ADDITIONAL INFORMATION
Questions concerning the voting of ExecuFirst shares should be directed to
the toll-free number established at ExecuFirst's request for Georgeson &
Company, Inc. (1-800-223-2064) between the hours of 9:00 A.M. and 8:00 P.M.
(Eastern Standard Time) or to George S. Rapp, Executive Vice President and Chief
Operating Officer of ExecuFirst ((215) 564-3300) between the hours of 9:00 A.M.
and 4:00 P.M. (Eastern Daylight Time).
Questions concerning the voting of Republic shares should be directed to
Jerome McTiernan, Executive Vice-President of Republic, (215) 563-3600 between
the hours of 9 a.m. and 4 p.m. Eastern Daylight Time.
<PAGE>
SEE 'SPECIAL CONSIDERATIONS' BEGINNING ON PAGE 11 FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE SECURITIES REFERRED TO HEREIN.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROSPECTUS/JOINT PROXY STATEMENT
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAVE THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS/JOINT PROXY STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES TO BE ISSUED PURSUANT TO THE PROSPECTUS/JOINT PROXY STATEMENT ARE
NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
The date of this Prospectus/Joint Proxy Statement is , 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
AVAILABLE INFORMATION...................................................................................... 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................ 5
SUMMARY.................................................................................................... 6
SPECIAL CONSIDERATIONS..................................................................................... 14
PRO FORMA PER SHARE COMPARATIVE FINANCIAL DATA............................................................. 16
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION......................................................... 16
REGULATORY CAPITAL OF EXECUFIRST AND REPUBLIC.............................................................. 22
THE MEETINGS............................................................................................... 23
General.................................................................................................. 23
The ExecuFirst Meeting................................................................................... 23
Time and Place........................................................................................ 23
Matters to be Considered.............................................................................. 23
Record Date; Voting at the ExecuFirst Meeting, Vote Required.......................................... 23
Voting and Revocation Of Proxies...................................................................... 24
Rights of Dissenting Shareholders..................................................................... 24
The Republic Meeting..................................................................................... 24
Time and Place........................................................................................ 24
Matters To Be Considered.............................................................................. 24
Record Date; Voting at the Republic Meeting, Vote Required............................................ 25
Voting and Revocation of Proxies...................................................................... 25
Rights of Dissenting Shareholders..................................................................... 26
PROPOSAL I:
ELECTION OF THREE (3) CLASS III DIRECTORS.................................................................. 27
PROPOSAL II:
APPROVAL OF THE AGREEMENT AND PLAN OF MERGER AND THE MERGER................................................ 30
The Merger................................................................................................. 30
Overview................................................................................................. 30
Background to the Merger................................................................................. 30
ExecuFirst's Reasons for the Merger...................................................................... 32
Republic's Reasons for the Merger........................................................................ 33
Opinions of Financial Advisors........................................................................... 34
Certain Federal Income Tax Consequences.................................................................. 42
Accounting Treatment..................................................................................... 44
Regulatory Approvals..................................................................................... 44
Recent Developments...................................................................................... 45
Rights of Dissenting Shareholders........................................................................ 45
Interests of Certain Persons in the Merger............................................................... 47
THE PLAN OF MERGER AND RELATED AGREEMENTS.................................................................. 49
The Plan of Merger....................................................................................... 49
Conversion of Republic Common Stock...................................................................... 49
Effective Date........................................................................................... 49
Alternative Proposals.................................................................................... 49
Business Pending Consummation of the Merger.............................................................. 50
Corporate Structure and Related Matters After the Merger................................................. 50
Conditions To Consummation of the Merger................................................................. 50
Termination; Amendment................................................................................... 51
Amended and Restated Stock Option Plan; Treatment of Employee Stock Options.............................. 52
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Stock Option Agreements.................................................................................. 53
Fees and Expenses........................................................................................ 55
EXECUFIRST................................................................................................. 55
History and Business..................................................................................... 55
Voting Securities and Principal Holders.................................................................. 55
Directors and Executive Officers......................................................................... 56
Executive Compensation................................................................................... 58
REPUBLIC................................................................................................... 61
Description of Business.................................................................................. 61
Service Area............................................................................................. 62
Competition.............................................................................................. 62
Employees................................................................................................ 63
Premises and Branches.................................................................................... 63
SUPERVISION AND REGULATION................................................................................. 63
Federal Law.............................................................................................. 63
Profitability, Monetary Policy and Economic Conditions................................................... 65
VOTING SECURITIES AND PRINCIPAL HOLDERS.................................................................... 66
Security Ownership of Management and Beneficial Owners................................................... 66
MARKET PRICE OF REPUBLIC COMMON STOCK AND DIVIDENDS........................................................ 67
Common Stock Prices...................................................................................... 67
Dividends................................................................................................ 67
MANAGEMENT'S DISCUSSION AND ANALYSIS....................................................................... 67
General.................................................................................................. 67
Performance Overview..................................................................................... 68
Net Income............................................................................................... 72
Net Interest Income...................................................................................... 72
Provision for Loan Losses................................................................................ 73
Non-Interest Income...................................................................................... 73
Non-Interest Expense..................................................................................... 74
Liquidity and Capital Resources.......................................................................... 74
Investment Securities.................................................................................... 78
Loan Portfolio........................................................................................... 79
Non-Performing Loans..................................................................................... 79
Policies and Procedures Relating to the Accrual of Interest Income....................................... 80
Allowance for Loan Losses................................................................................ 80
Summary of Loan Loss Experience.......................................................................... 81
Commitments.............................................................................................. 81
Deposits................................................................................................. 82
Capital Resources........................................................................................ 83
Return on Average Equity and Average Assets.............................................................. 84
Impact of Inflation...................................................................................... 84
Federal Income Taxation.................................................................................. 84
Voting Securities and Principal Holders.................................................................. 85
DESCRIPTION OF EXECUFIRST STOCK............................................................................ 86
Authorized Stock......................................................................................... 86
Common Stock............................................................................................. 86
Preferred Stock.......................................................................................... 87
Market Price of ExecuFirst Common Stock and Dividends.................................................... 87
</TABLE>
3
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<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
CERTAIN DIFFERENCES IN THE RIGHTS OF EXECUFIRST AND REPUBLIC SHAREHOLDERS.................................. 88
PROPOSAL III:
APPROVAL OF AN AMENDMENT TO THE ARTICLES OF INCORPORATION RELATING TO A RESTRICTION ON OWNERSHIP OF
SHARES................................................................................................... 93
PROPOSAL IV:
APPROVAL OF AMENDMENTS TO THE ARTICLES OF INCORPORATION RELATING TO (i) ARTICLE X, INDEMNIFICATION OF
OFFICERS AND DIRECTORS, (ii) ARTICLE VII, NOMINATIONS FOR ELECTION TO THE BOARD OF DIRECTORS, AND (iii)
ARTICLE XI, THE VOTE REQUIRED TO AMEND THE ARTICLES OF INCORPORATION..................................... 94
PROPOSAL V:
APPROVAL OF THE AMENDED AND RESTATED EXECUFIRST STOCK OPTION PLAN.......................................... 97
EXPERTS.................................................................................................... 101
LEGAL MATTERS.............................................................................................. 101
SHAREHOLDER PROPOSALS...................................................................................... 102
INDEX TO FINANCIAL STATEMENTS.............................................................................. F-1
ATTACHMENTS
ANNEX A: Agreement and Plan of Merger (Without Exhibits)
ANNEX B: Subchapter D of Chapter 15 and Section 1930 of the Pennsylvania Business Corporation Law of
1988, as amended ('Chapter 15')
ANNEX C: Fairness Opinion of Berwind Financial Group
ANNEX D: Fairness Opinion of Janney Montgomery Scott
ANNEX E: Amendment to Articles
ANNEX F: Amended and Restated Stock Option Plan
ANNEX G: ExecuFirst Stock Option Agreement
ANNEX H: Republic Stock Option Agreement
</TABLE>
4
<PAGE>
AVAILABLE INFORMATION
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
OTHER THAN THOSE CONTAINED OR INCORPORATED IN THIS PROSPECTUS/JOINT PROXY
STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY EXECUFIRST OR REPUBLIC. THIS
PROSPECTUS/JOINT PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO EXCHANGE OR
SELL, OR A SOLICITATION OF AN OFFER TO EXCHANGE OR PURCHASE, THE SECURITIES
OFFERED BY THIS PROSPECTUS/JOINT PROXY STATEMENT, OR THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. THE INFORMATION CONTAINED IN THIS PROSPECTUS/JOINT PROXY STATEMENT
SPEAKS AS OF THE DATE HEREOF UNLESS OTHERWISE SPECIFICALLY INDICATED.
INFORMATION CONTAINED IN THIS PROSPECTUS/JOINT PROXY STATEMENT REGARDING
REPUBLIC HAS BEEN PROVIDED BY REPUBLIC AND INFORMATION HEREIN REGARDING
EXECUFIRST HAS BEEN PROVIDED BY EXECUFIRST. NEITHER REPUBLIC NOR EXECUFIRST
WARRANTS THE ACCURACY OR COMPLETENESS OF INFORMATION RELATING TO THE OTHER
PARTY.
ExecuFirst has filed with the Securities and Exchange Commission (the
'SEC') a Registration Statement on Form S-4 under the Securities Act of 1933
(the 'Securities Act') relating to the shares of Holding Company Common Stock to
be issued in connection with the Merger (the 'Registration Statement'). This
Prospectus/Joint Proxy Statement does not contain all the information set forth
in the Registration Statement, certain portions of which have been omitted
pursuant to the rules and regulations of the SEC. The information omitted may be
obtained from the public reference facilities of the SEC or inspected and copied
at the principal or regional offices of the Securities and Exchange Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549; Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and Seven World Trade
Center, New York, New York 10048.
ExecuFirst is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the 'Exchange Act') and, in accordance
therewith, files reports, proxy statements and other information with the SEC.
Such reports, proxy statements and other information can be inspected and
copied, at prescribed rates, at the public reference facilities maintained by
the SEC at 450 Fifth Avenue, N.W., Room 1024, Washington, D.C. 20549, and at the
SEC's regional office located at 7 World Trade Center, New York, NY 10048.
ExecuFirst Common Stock is listed on the NASDAQ Small Cap Market, and such
reports, proxy statements and other information concerning ExecuFirst may be
inspected at the NASDAQ Stock Market, Reports Section, 1735 K Street, N.W.,
Washington, D.C. 20006.
Republic is not subject to the information requirements of the Exchange Act
and therefore does not file reports, proxy statements or other information with
the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC by ExecuFirst (File No. 0-17007)
under Section 13(a) of the Exchange Act are hereby incorporated by reference in
this Prospectus/Joint Proxy Statement;
(i) ExecuFirst's Annual Report on Form 10-KSB, as amended, for the
year ended December 31, 1995; and
(ii) ExecuFirst's Current Report on Form 8-K filed with the SEC on
April 21, 1995.
Accompanying this Prospectus/Joint Proxy Statement is ExecuFirst's Annual
Report on Form 10-KSB for the year ended December 31, 1995.
5
<PAGE>
SUMMARY
The following is a summary of certain information relating to the Merger.
This summary is not intended to include all material information relating to the
Merger and is qualified in its entirety by reference to the more detailed
information contained elsewhere in this Prospectus/Joint Proxy Statement,
including the attached Annexes. A copy of the Plan of Merger (including
exhibits) is set forth as 'Annex A' and reference is made thereto for a complete
description of the terms of the Merger. Shareholders are urged to read carefully
this entire Prospectus/Joint Proxy Statement, including the Annexes.
PARTIES TO THE MERGER
ExecuFirst Bancorp, Inc.
ExecuFirst is a bank holding company registered under the Bank Holding
Company Act of 1956, as amended (the 'Bank Holding Company Act'). It was
incorporated under the laws of the Commonwealth of Pennsylvania on November 16,
1987. ExecuFirst became a bank holding company on November 2, 1988 when it
acquired all of the authorized capital stock of First Executive Bank ('First
Executive Bank'). ExecuFirst provides banking services through First Executive
Bank and does not presently engage in any activities other than banking
activities. The principal executive offices of ExecuFirst and First Executive
Bank are located at 1513 Walnut Street, Philadelphia, PA 19102. The telephone
number is (215) 564-3300.
Republic Bancorporation, Inc.
Republic is a bank holding company registered under the Bank Holding
Company Act. It was incorporated under the laws of the Commonwealth of
Pennsylvania on January 18, 1995. Republic became a bank holding company on
August 2, 1995 when it acquired all of the authorized capital stock of Republic
Bank, a Pennsylvania state chartered bank ('Republic Bank') which commenced
business on September 6, 1988. Republic's non-banking subsidiary, Republic
Services, Inc. ('Republic Services') is a partner in a joint venture with a
subsidiary of Jackson Hewitt, Inc. ('Jackson Hewitt'), one of the country's
largest federal income tax preparers, to provide federal tax refund anticipation
loans (an 'RAL'). Persons who employ Jackson Hewitt to prepare their federal
income tax returns and are entitled to an income tax refund payment may arrange
with Jackson Hewitt for an RAL by submitting a loan application at the time
their federal income tax return is filed. Republic Services processes such loan
application, places the loan with a financial institution located in the State
of Delaware and Republic Bank partially funds such loans through a loan
participation agreement (the 'Refant Program'). The joint venture receives a fee
for such services. See 'REPUBLIC--Management's Discussion and Analysis.'
Republic does not currently engage in any other non-banking activities.
The principal executive offices of Republic and Republic Bank are located
at 1515 Market Street, Philadelphia, PA 19102. The telephone number is (215)
563-3600.
THE MERGER AND THE PLAN OF MERGER
On November 17, 1995, ExecuFirst and Republic entered into the Plan of
Merger pursuant to which Republic will be merged with and into ExecuFirst. Upon
consummation of the Merger, ExecuFirst will change its corporate name to First
Republic. Under the terms of the Plan of Merger, each outstanding share of
Republic Common Stock will be exchanged for shares of Holding Company Common
Stock, subject to any perfected exercise of dissenters' rights, with cash being
paid in lieu of any fractional share interest. On April 22, 1996, the last
reported sale price of ExecuFirst Common Stock on the NASDAQ SmallCap Market was
$6.50 per share. On April 22, 1996, the last reported sale price of Republic
Common Stock on the OTC Electronic Bulletin Board was $11.25 per share. The
exchange ratio for the stock exchange will be determined by the relative per
share book values of ExecuFirst Common Stock and Republic Common Stock at the
end of the quarter immediately preceding the consummation of the Merger. At
March 31, 1996, there were 1,229,557 shares of ExecuFirst Common Stock issued
and outstanding. The per share book value of ExecuFirst Common Stock was $6.30
and the per share book value of Republic Common Stock was $12.75. As a result,
if the Merger had been consummated on March 31, 1996, each share of Republic
Common Stock would be exchanged for approximately 2.02 shares of Holding Company
Stock and an aggregate total of
6
<PAGE>
1,604,411 shares of Holding Company Common Stock would be issued to Republic
shareholders, representing 56.6% of the then issued and outstanding Holding
Company Common Stock. On a pro forma basis the per share book value of Holding
Company Common Stock at March 31, 1996 would be $6.39. See 'THE
MERGER--Overview.' The Merger is subject to regulatory and shareholder approval,
and is intended to qualify as a tax-free reorganization under Section 368(a) of
the Internal Revenue Code of 1986, as amended (the 'Code'). See 'THE
MERGER--Regulatory Approvals; Certain Federal Income Tax Considerations.'
Following the Merger, First Executive Bank will merge with and into Republic
Bank and Republic Bank will change its name to First Republic Bank ('First
Republic Bank'). First Republic Bank will conduct business under Republic Bank's
charter. See 'THE MERGER--The Plan of Merger and Related Agreements.' Prior to
the discussions between ExecuFirst and Republic culminating in the Plan of
Merger, no affiliation existed between ExecuFirst and Republic.
Effective Date and Time
Subject to the terms and conditions of the Plan of Merger, the effective
date of the Merger (the 'Effective Date') will occur on the fifteenth calendar
day after certain conditions to the consummation of the Merger shall have been
satisfied or waived, or such other date as shall be mutually agreed upon by the
parties to the Plan of Merger. Subject to the foregoing, it is currently
anticipated that the Effective Date will occur on or before June 30, 1996. The
'Effective Time' of the Merger will be the time on the Effective Date at which
the Certificate of Merger is filed with the Department of State for the
Commonwealth of Pennsylvania or becomes effective. See 'THE PLAN OF MERGER AND
RELATED AGREEMENT--Effective Date.'
Business Pending Consummation of the Merger
The Plan of Merger requires each of Republic and ExecuFirst, and their
respective subsidiaries, to operate their businesses in accordance with their
ordinary and usual course and in a manner consistent with past practices pending
the consummation of the Merger. In particular, without the consent of the other
party, neither ExecuFirst nor Republic may issue any additional shares of
capital stock, declare or pay any dividends or redeem shares of its capital
stock, increase any salaries or employee benefits, dispose of any of its
material assets, or change accounting policies. Further, neither party may
solicit or encourage inquiries or proposals with respect to any tender or
exchange offer.
The parties have executed a Confidentiality Agreement which restricts their
ability to disclose or to use confidential information exchanged between the
parties in connection with the Merger. See 'THE PLAN OF MERGER AND RELATED
AGREEMENTS--Alternative Proposals; Business Pending Consummation of the Merger
and Related Matters.'
Conditions to Consummation of the Merger
Consummation of the Merger is subject to certain conditions, some of which
may be waived by either or both parties. SPECIFICALLY, IT IS A CONDITION TO
CONSUMMATION OF THE MERGER, WHICH CONDITION MAY BE WAIVED BY REPUBLIC, THAT THE
SHAREHOLDERS OF EXECUFIRST APPROVE PROPOSALS III AND IV RELATING TO CERTAIN
AMENDMENTS TO EXECUFIRST'S ARTICLES OF INCORPORATION. Certain conditions may not
be waived by the parties, including those relating to receipt of shareholder and
regulatory approval. See 'THE PLAN OF MERGER AND RELATED AGREEMENTS--Conditions
to Consummation of the Merger.'
Termination; Amendment
The Plan of Merger may be terminated before the Effective Time upon the
parties' mutual agreement or in the event that the Merger has not been
consummated by June 30, 1996. In addition, it may be terminated in the event
that (i) approval of the Merger is not received from the Board of Governors of
Federal Reserve System (the 'Federal Reserve Board') and/or the Pennsylvania
Department of Banking (the 'Department of Banking') or such approval shall have
been received subject to the imposition of a condition or requirement including,
but not limited to, the continuation of the Written Agreements (as hereinafter
defined) which would materially and adversely affect the economic or business
benefits of the Merger to ExecuFirst or Republic, (ii) the shareholders fail to
approve the Plan of Merger at the meetings called for such purpose, (iii) the
ExecuFirst Board or Republic Board do not recommend the Plan of Merger and the
Merger to their respective shareholders,
7
<PAGE>
or (iv) there is a breach by either party of any representation or warranty or
material breach of any covenant or agreement contained in the Plan of Merger,
which breach cannot be cured within 30 days of notice thereof to the breaching
party. The Plan of Merger may be amended at any time before the Effective Time
by written agreement of the parties. In the event the Merger is not consummated
by June 30, 1996, and the termination date is extended and the Exchange Ratio is
increased or decreased by more than 5%, ExecuFirst and Republic will each
resolicit the approval of their respective shareholders. See 'THE PLAN OF MERGER
AND RELATED AGREEMENTS--Termination; Amendment.'
Corporate Structure and Related Matters After the Merger
At the Effective Time, Republic will be merged with and into ExecuFirst. As
described above, all of the issued and outstanding shares of Republic Common
Stock, except those as to which dissenters' rights have been perfected, will be
converted into shares of Holding Company Common Stock in accordance with the
Exchange Ratio. Each outstanding Republic Stock Option (as hereinafter defined)
will be converted into a Holding Company Stock Option (as hereinafter defined).
ExecuFirst's Articles of Incorporation will be amended with respect to the
provisions relating to (i) indemnification of officers and directors; (ii)
nominations for election to the Board and (iii) the vote required to amend the
Articles; and with respect to certain restrictions on the ownership of more than
10% of the issued and outstanding Holding Company Common Stock and, as amended,
shall be the Articles of Incorporation of the Holding Company. The Holding
Company Board will be, or will have been, expanded to 17 members and 9 members
of the Republic Board (or designees of Republic who are acceptable to
ExecuFirst) will be, or will have been, appointed to fill such newly created
vacancies. As of the date hereof, it is intended that Messrs. Harry D. Madonna,
Kenneth Adelberg, Daniel S. Berman, William W. Batoff, Eustace W. Mita, Neal I.
Rodin, Steven J. Shotz, Rolf A. Stensrud and Harris Wildstein, each of whom is
currently a director of Republic, will be appointed to the First Republic Board.
See 'EXECUFIRST--Directors and Executive Officers--Current Republic Directors.'
In addition, certain management changes will be effected with respect to First
Republic and/or First Republic Bank. Harry D. Madonna, Chairman of Republic,
will serve as Chairman of First Republic. Zvi H. Muscal, Chairman, President and
Chief Executive Officer of ExecuFirst and First Executive Bank, will serve as
President and Chief Executive Officer of the Holding Company and Chairman and
Co-Chief Executive Officer of First Republic Bank. Rolf A. Stensrud, President
and Chief Executive Officer of Republic Bank, will serve as Executive Vice
President and Chief Operating Officer of Holding Company and President and
Co-Chief Executive Officer of First Republic Bank. See 'EXECUFIRST--Directors
and Executive Officers.' As of April 12, 1996, the record date for ExecuFirst
Meeting and Republic Meetings, ExecuFirst and Republic have not determined the
location of the Holding Company corporate headquarters. It is possible that
neither of the existing corporate headquarters will be utilized and that a new
location will be chosen. Proposals are currently being received from real estate
brokers and agents. Execufirst and Republic have not determined the level of
staff and other reductions, if any, which may take place following the Merger.
ExecuFirst and Republic have experienced some attrition of staff and other
personnel following the announcement of the Merger. The level of reductions
following the Merger, if any, would depend on the attrition level between the
date hereof and the consummation of the Merger. See 'THE PLAN OF MERGER AND
RELATED AGREEMENTS--Conversion of Republic Common Stock; Corporate Structure and
Related Matters After the Merger; Amended and Restated Stock Option Plan;
Treatment of Employee Stock Options.'
Stock Option Agreements
In connection with the Plan of Merger, each of ExecuFirst and Republic have
executed a Stock Option Agreement granting the other party an option,
exercisable under certain specified conditions, to purchase up to an aggregate
of 19.9% of the then outstanding ExecuFirst Common Stock or Republic Common
Stock, as the case may be. To the knowledge of ExecuFirst and Republic, as of
the date hereof, no event giving rise to exercise of either of such options has
occurred. See 'THE PLAN OF MERGER AND RELATED AGREEMENTS--Stock Option
Agreements.'
8
<PAGE>
CERTAIN ANTI-TAKEOVER PROVISIONS
The Articles of Incorporation and Bylaws of Republic and ExecuFirst each
contain certain provisions which are designed to render more difficult or
discourage a merger, tender offer or proxy contest or the assumption of control
by persons other than existing management.
Republic's Articles of Incorporation and Bylaws contain a limitation on the
amount of Republic stock which may be held by a person or group. Generally, no
shareholder may have 'holdings' in excess of ten percent (10%) of the issued and
outstanding Republic Common Stock without the approval of at least a two-thirds
majority of the Republic Board. See 'PROPOSAL IV'.
ExecuFirst's Articles of Incorporation and Bylaws do not currently contain
such a restriction. ExecuFirst's Articles and Bylaws do provide that, generally,
the affirmative vote of 75% of the outstanding shares of voting stock is
required to approve or authorize certain 'Business Combination' between
ExecuFirst and a 'Related Party'. Business Combinations are defined as, among
other things, a merger, consolidation or the sale, lease or transfer of ten
percent (10%) or more of ExecuFirst's assets. See 'CERTAIN DIFFERENCES IN THE
RIGHTS OF EXECUFIRST AND REPUBLIC SHAREHOLDERS--Anti-takeover Provisions'. The
Articles of Incorporation also provide that the amendment of the substantive
provision of the Articles of Incorporation requires the affirmative vote of 75%
of the voting shares of ExecuFirst. Such provisions including, among other
things, provisions (i) eliminating preemptive rights and disallowing cumulative
voting with respect to the election of directors; (ii) authorizing the
ExecuFirst Board to establish the number of directors, the procedures for
nomination, election and removal of directors and dividing the ExecuFirst Board
into three classes serving staggered three-year terms; and (iii) setting forth
the factors, including, but not limited to, (a) the acceptability of the offer
price based on the operating results or financial condition of ExecuFirst, (b)
the impact on ExecuFirst's employees, depositors and customers and (c) the
reputation and business practices of any potential acquiror, which the
ExecuFirst Board may, but is not legally obligated to, consider in determining
whether to oppose a tender offer or other offer for ExecuFirst's securities. See
'PROPOSAL IV'.
Following the Merger and assuming the adoption of Proposals III and IV by
ExecuFirst shareholders, the Articles of Incorporation and Bylaws of First
Republic will contain a ten percent (10%) restriction on the 'holdings' of a
shareholder and the Articles of Incorporation will provide that the affirmative
vote of 60% of the voting shares is required to amend the substantive provisions
of the Articles of Incorporation.
THE MEETINGS
The ExecuFirst Meeting
The ExecuFirst Meeting will be held on Wednesday, May 29, 1996, at 3:00
p.m. at the Union League, 140 S. Broad Street, Philadelphia, Pennsylvania. The
purpose of the ExecuFirst Meeting is to consider and vote upon proposals (i) to
elect three (3) Class III directors, (ii) to approve the Plan of Merger and the
Merger, (iii) to amend certain provisions of ExecuFirst's Articles of
Incorporation, and (iv) to approve the Amended and Restated Stock Option Plan.
See 'THE MEETINGS--The ExecuFirst Meeting--Matters to be Considered.'
As of April 12, 1996, the record date for voting at the ExecuFirst Meeting
(the 'ExecuFirst Record Date'), approximately 1,229,557 shares of ExecuFirst
Common Stock were issued and outstanding and entitled to vote at the ExecuFirst
Meeting. Such shares were held by approximately 323 holders of record. Holders
of ExecuFirst Common Stock are entitled to one vote per share with respect to
all matters acted upon at the ExecuFirst Meeting. As of the ExecuFirst Record
Date, there were no other classes of ExecuFirst's capital stock issued or
outstanding. See 'THE MEETINGS-- The ExecuFirst Meeting--Record Date; Voting at
the ExecuFirst Meeting; Vote Required.'
The presence in person or by proxy of a majority of the votes entitled to
be cast at the ExecuFirst Meeting will constitute a quorum for the purpose of
conducting business at the meeting. The affirmative vote of a majority of the
votes cast at the ExecuFirst Meeting will be required to approve the Merger and
the Plan of Merger and to adopt the Amended and Restated Stock Option Plan. The
affirmative vote of a majority of the outstanding shares of ExecuFirst Common
Stock will be required to adopt Proposal III, the amendment to the Articles of
Incorporation relating to the restriction on ownership of ExecuFirst Common
Stock. The affirmative vote of at least 75% of the outstanding
9
<PAGE>
shares of ExecuFirst Common Stock will be required to approve Proposal IV, the
amendments to ExecuFirst's Articles of Incorporation relating to (i)
indemnification of officers and directors, (ii) nominations for election to the
ExecuFirst Board and (iii) the vote required to amend the Articles of
Incorporation. Generally, Proposals III and IV, if adopted, would render more
difficult or discourage a merger, tender offer or proxy contest or the
assumption of control by persons other than the ExecuFirst management and are
intended to provide conformity in this respect between Republic's Articles of
Incorporation and ExecuFirst's Articles of Incorporation (which Articles of
Incorporation will be the Articles of Incorporation of the Holding Company).
Approval of Proposal I, the Plan of Merger and the Merger, is a condition
precedent to the adoption of Proposals III and IV, notwithstanding their
approval by ExecuFirst shareholders. See 'THE MEETINGS--The ExecuFirst
Meeting--Record Date; Voting at the ExecuFirst Meeting; Vote Required.'
As of the ExecuFirst Record Date, the directors and executive officers of
ExecuFirst and/or First Executive beneficially owned and have the right to vote,
in the aggregate, 106,148 shares of ExecuFirst Common Stock, representing 8.7%
of the votes entitled to be cast at the ExecuFirst Meeting. It is currently
expected that the directors and executive officers of ExecuFirst will vote their
shares of ExecuFirst Common Stock in favor of approval of the Plan of Merger and
the Merger, in favor of the amendments to the Articles of Incorporation and in
favor of the Amended and Restated Stock Option Plan. See 'EXECUFIRST--Voting
Securities and Principal Holders.'
Shares of ExecuFirst Common Stock represented by a proxy properly signed
and received at or before the ExecuFirst Meeting, unless subsequently revoked,
will be voted in accordance with the instructions thereon. IF A PROXY IS SIGNED
AND RETURNED WITHOUT INDICATING ANY VOTING INSTRUCTIONS, THE SHARES OF
EXECUFIRST COMMON STOCK REPRESENTED BY THE PROXY WILL BE VOTED 'FOR' THE
PROPOSAL TO APPROVE THE MERGER AND THE PLAN OF MERGER, AND 'FOR' THE OTHER
PROPOSED ACTIONS DESCRIBED ABOVE.
Any ExecuFirst shareholder who executes and returns a proxy card may revoke
it at any time before it is exercised by (i) delivering to the Corporate
Secretary an instrument revoking the proxy or a duly executed proxy bearing a
later date, or (ii) attending the Annual Meeting and voting in person. All
written notices of revocation and other communications with respect to
revocation of ExecuFirst proxies should be addressed to: ExecuFirst Bancorp,
Inc., 1513 Walnut Street, Philadelphia, PA 19102, Attn: Corporate Secretary.
ATTENDANCE AT THE EXECUFIRST MEETING WILL NOT IN AND OF ITSELF CONSTITUTE A
REVOCATION OF A PROXY. See 'THE MEETINGS--The ExecuFirst Meeting--Voting and
Revocation of Proxies.'
Holders of ExecuFirst Common Stock are not entitled to dissenters'
appraisal rights in connection with the Merger.
The Republic Meeting
The Republic Meeting will be held on Tuesday, May 28, 1996, at 10:00 a.m.
local time at Republic Bank, 1515 Market Street, Philadelphia, Pennsylvania. The
purpose of the Republic Meeting is to consider and vote upon a proposal to
approve the Merger and the Plan of Merger. See 'THE MEETINGS--The Republic
Meeting--Matters to be Considered.'
As of April 12, 1996, the record date for voting at the Republic Meeting
(the 'Republic Record Date'), 794,263 shares of Republic Common Stock were
issued and outstanding and entitled to vote at the Republic Meeting, held by
approximately 259 holders of record. Holders of Republic Common Stock are
entitled to one vote per share with respect to all matters acted upon at the
Republic Meeting. As of the Republic Record Date, there were no other classes of
Republic's capital stock issued or outstanding. See 'THE MEETINGS--The Republic
Meeting--Record Date; Voting at the Republic Meeting; Vote Required.'
The presence in person or by proxy of a majority of the votes entitled to
be cast at the Republic Meeting will constitute a quorum for the purpose of
conducting business at the meeting. The affirmative vote of a majority of the
votes cast at the Republic Meeting will be required to approve the Merger and
Plan of Merger. See 'THE MEETINGS--The Republic Meeting--Record Date; Voting at
the Republic Meeting; Vote Required.'
As of the Republic Record Date, the directors and executive officers of
Republic and/or Republic Bank beneficially owned and have the right to vote, in
the aggregate, 166,764 shares of Republic Common Stock, representing 21% of the
votes entitled to be cast at the Republic Meeting. It is
10
<PAGE>
currently expected that such directors and executive officers of Republic will
vote their shares of Republic Common Stock in favor of approval of the Plan of
Merger and the Merger at the Republic Meeting. See 'REPUBLIC--Voting Securities
and Principal Holders.'
Shares of Republic Common Stock represented by a proxy properly signed and
received at or before the Republic Meeting, unless subsequently revoked, will be
voted in accordance with the instructions thereon. IF A PROXY IS SIGNED AND
RETURNED WITHOUT INDICATING ANY VOTING INSTRUCTIONS, THE SHARES OF REPUBLIC
COMMON STOCK REPRESENTED BY THE PROXY WILL BE VOTED 'FOR' THE PROPOSAL TO
APPROVE THE PLAN OF MERGER.
Any Republic shareholder who executes and returns a proxy card may revoke
it at any time before it is exercised by (i) delivering to the Corporate
Secretary an instrument revoking the proxy or a duly executed proxy bearing a
later date, or (ii) attending the Republic Meeting and voting in person. All
written notices of revocation and other communications with respect to
revocation of Republic proxies should be addressed to: Republic Bancorporation,
Inc., 1515 Market Street, Philadelphia, PA 19102, Attn: Corporate Secretary.
ATTENDANCE AT THE REPUBLIC MEETING WILL NOT IN AND OF ITSELF CONSTITUTE A
REVOCATION OF A PROXY. See 'THE MEETINGS--The Republic Meeting--Voting and
Proxies.'
DISSENTER'S APPRAISAL RIGHTS
Holders of Republic Common Stock may have dissenters' appraisal rights in
connection with the Merger pursuant to Chapter 15. In order to exercise such
dissenters' rights, holders of Republic Common Stock must, among other things,
file with Republic, before the shareholder vote, a written notice of intention
to demand payment if the Merger is effectuated. It is a condition to
consummation of the Merger, which condition may be waived by Republic, that
holders of no more than 5% of the issued and outstanding Republic Common Stock
elect to exercise dissenters' rights. Based on the aggregate dollar amount that
the Holding Company would be required to pay in the event that the holders of
more than 5% of the issued and outstanding Republic Common Stock exercise and
perfect dissenters' rights, ExecuFirst and Republic have determined that such
exercise and perfection of dissenters' rights would constitute a Material
Adverse Effect and the Merger may be terminated. See 'REPUBLIC--Rights of
Dissenting Shareholders; Annex B: Chapter 15.'
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS; BACKGROUND AND REASONS
THE EXECUFIRST BOARD HAS APPROVED THE PLAN OF MERGER AND BELIEVES THE
MERGER IS FAIR TO, AND IS IN THE BEST INTERESTS OF, EXECUFIRST'S SHAREHOLDERS.
ACCORDINGLY, THE EXECUFIRST BOARD UNANIMOUSLY RECOMMENDS THAT THE EXECUFIRST
SHAREHOLDERS VOTE 'FOR' APPROVAL OF THE PLAN OF MERGER AND THE MERGER, 'FOR' THE
AMENDMENTS TO THE ARTICLES OF INCORPORATION, AND 'FOR' THE AMENDED AND RESTATED
STOCK OPTION PLAN.
THE REPUBLIC BOARD HAS APPROVED THE PLAN OF MERGER AND BELIEVES THE MERGER
IS FAIR TO, AND IS IN THE BEST INTERESTS OF, REPUBLIC'S SHAREHOLDERS.
ACCORDINGLY, THE REPUBLIC BOARD UNANIMOUSLY RECOMMENDS THAT THE REPUBLIC
SHAREHOLDERS VOTE 'FOR' APPROVAL OF THE PLAN OF MERGER AND THE MERGER.
For a discussion of the background of the Merger and the factors considered
by each of the ExecuFirst Board and the Republic Board in reaching its decision
to approve the Plan of Merger, See 'THE MERGER--Background; ExecuFirst's Reasons
for the Merger; Republic's Reasons for the Merger.'
11
<PAGE>
OPINIONS OF FINANCIAL ADVISORS
ExecuFirst
ExecuFirst has retained Berwind Financial Group, L.P. ('Berwind') as its
financial advisor in connection with the Merger and has requested that Berwind
render its opinion with respect to the fairness from a financial point of view
of the Merger to ExecuFirst and its shareholders. Berwind rendered its oral
opinion to the ExecuFirst Board on November 14, 1995 to the effect that the
Merger was fair to ExecuFirst and its shareholders from a financial point of
view (the 'November Opinion'). The November Opinion was updated and confirmed on
April 26, 1996 (the 'Fairness Opinion'). The Fairness Opinion sets forth a
description of the assumptions made, matters considered, and limitations of
review undertaken by Berwind. A copy of the Fairness Opinion is included herein
as Annex C.
Republic
Republic has retained Janney Montgomery Scott Inc. ('JMS') as its financial
advisor in connection with the Merger and has requested that JMS render its
opinion with respect to the fairness from a financial point of view of the
Merger to Republic and its shareholders. JMS rendered its oral opinion to the
Republic Board on November 14, 1995 to the effect that the Merger was fair to
Republic and its shareholders from a financial point of view (the 'Preliminary
Opinion'). The Preliminary Opinion was updated and confirmed on April 26, 1996
(the 'Proxy Opinion'). The Proxy Opinion sets forth a description of the
assumptions made, matters considered, and limitations of review undertaken by
JMS. A copy of the Proxy Opinion is included herein as Annex D.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Consummation of the Merger is conditioned, among other things, upon receipt
by ExecuFirst and Republic of the opinions of Klehr, Harrison, Harvey, Branzburg
& Ellers and Spector Gadon & Rosen, P.C., respectively, to the effect that no
gain or loss will be recognized for federal income tax purposes by the Republic
shareholders who receive shares of Holding Company Common Stock in the Merger,
other than in respect to any cash received in lieu of fractional share interests
or cash received upon exercise of perfected dissenters' rights (the 'Tax
Opinions'). See 'THE MERGER--Certain Federal Income Tax Consequences; THE PLAN
OF MERGER AND RELATED AGREEMENTS-- Conditions to the consummation of the
Merger.'
BECAUSE CERTAIN TAX CONSEQUENCES MAY VARY DEPENDING UPON THE PARTICULAR
CIRCUMSTANCES OF EACH REPUBLIC SHAREHOLDER, IT IS RECOMMENDED THAT EACH REPUBLIC
SHAREHOLDER CONSULT SUCH SHAREHOLDER'S OWN TAX ADVISORS CONCERNING THE FEDERAL
(AND ANY STATE, LOCAL AND FOREIGN) TAX CONSEQUENCES OF THE MERGER IN SUCH
SHAREHOLDER'S PARTICULAR CIRCUMSTANCES.
ACCOUNTING TREATMENT
The Merger will be accounted for under purchase accounting treatment under
generally accepted accounting principles ('GAAP') consistently applied. See 'THE
MERGER--Accounting Treatment;.'
REGULATORY APPROVALS
The Merger is subject to the prior approval of the Federal Reserve Board
under the Bank Holding Company Act and of the Department of Banking. Joint
applications with respect to the Merger have been filed with the Federal Reserve
Board and the Department of Banking. Consummation of the Merger is conditioned
upon the receipt of these regulatory approvals, which condition may not be
waived by the parties. In the event that such regulatory approval is received
subject to the imposition of a condition or requirement which would adversely
affect the economic or business benefit of the Merger to ExecuFirst or Republic,
the Plan of Merger and the Merger may be terminated. See 'THE MERGER--Regulatory
Approvals; THE PLAN OF MERGER AND RELATED AGREEMENTS-- Conditions to
Consummation of the Merger.' There can be no assurance that any such regulatory
approvals will be obtained in a timely manner, or at all, or if obtained will
not be subject to any such condition or requirement.
12
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of management and of the board of directors of each of
Republic and ExecuFirst may have interests in the Merger that are in addition to
any interests they may have as shareholders of Republic or ExecuFirst generally.
These interests may include, among others, certain provisions in the Plan of
Merger relating to indemnification of Republic directors and officers; the
election or appointment of members of the existing Republic Board (or other
designees of Republic who are reasonably acceptable to ExecuFirst) to the
Holding Company Board; the conversion of Republic Stock Options held by members
of Republic management into Holding Company Options; the grant of Holding
Company Options to Harry D. Madonna and the employment of certain members of
ExecuFirst's management, including Messrs. Muscal and Rapp, and of Republic's
management, including Messrs. Stensrud and Gallagher, by the Holding Company
and/or First Republic Bank. See 'THE MERGER--Interests of Certain Persons in the
Merger.'
RECENT DEVELOPMENTS
ExecuFirst and Republic have reported preliminary results for the quarter
ended March 31, 1996. Based on such results, if the Merger had been consummated
on March 31, 1996, each share of Republic Common Stock would be exchanged for
approximately 2.02 shares of Holding Company Common Stock. See 'APPROVAL OF THE
AGREEMENT AND PLAN OF MERGER -- The Merger -- Recent Developments.'
13
<PAGE>
SPECIAL CONSIDERATIONS
The following special considerations should be considered by holders of
ExecuFirst Common Stock and Republic Common Stock in evaluating whether to
approve the Plan of Merger and the Merger. These factors should be considered in
conjunction with the other information included and incorporated by reference in
this Prospectus/Joint Proxy Statement.
FAILURE TO INTEGRATE OPERATIONS
ExecuFirst and Republic have entered into the Plan of Merger with the
expectation that the Merger will result in certain beneficial synergies. These
include the combination of certain of the administrative and operational
functions of the companies and their subsidiaries. Achieving these anticipated
benefits will depend in part on whether the operations of First Executive Bank
and Republic Bank can be integrated in an efficient and effective manner. There
can be no assurance that such integration will occur or, if such integration
does occur, that the anticipated benefits will result. The combination of the
companies will require, among other things, integration of the banks' respective
computer and software systems and coordination of the banks' marketing and
customer service efforts. The successful integration of operations will be
significantly influenced by the ability of the combined business to retain key
management and other personnel. In addition, the integration of operations
following the Merger may temporarily distract the attention of certain members
of management from other responsibilities. The inability of management
successfully to integrate the operations of the companies could have an adverse
effect on the business and results of operations of First Republic Bank.
INCREASE IN LOAN LOSS RESERVES; PROFITABILITY
ExecuFirst reported a net income for the year ended December 31, 1995 of
approximately $503,000, or approximately $.41 per share of ExecuFirst Common
Stock primarily as a result of a decrease in the provision for loan loss
reserves. For the year ended December 3l, 1994, ExecuFirst sustained a net loss
of $834,339, or approximately $.68 per share. The net loss in 1994 was primarily
the result of an increase in the provision for loan loss reserves associated
with loan losses resulting from the bankruptcy of two significant borrowers.
There can be no assurance that future additions in the provision for loan loss
reserves for First Republic Bank will not be required and, if required, such
additions could have a material adverse effect on the results of operation and
financial position of First Republic Bank.
CONTINUED EXISTENCE OF THE WRITTEN AGREEMENTS
On May 24, 1995, ExecuFirst and First Executive Bank entered into Written
Supervisory Agreements (the 'Written Agreements') with each of the Federal
Reserve Bank of Philadelphia (the 'Federal Reserve') and the Department of
Banking. In the course of a joint examination, the Federal Reserve and the
Department of Banking identified certain alleged deficiencies and violations
relating to (i) certain policies and procedures of the Bank with respect to the
documentation, review and granting of loans; certain aspects of its loan loss
reserves; and certain other internal controls, (ii) the staff of First Executive
Bank, and (iii) certain reporting requirements under the Currency and Foreign
Transaction Reporting Act. In order to remedy such alleged deficiencies and
violations, but without admitting such allegations, ExecuFirst and First
Executive Bank agreed, among other things, to (a) not pay dividends or incur any
debt except in the ordinary course of business without the prior approval of the
Federal Reserve and/or the Department of Banking, (b) submit certain plans and
reports with respect to the capital position of First Executive Bank, its
proposed business activities, its executive management, and its loan policies
and procedures and internal controls to the Federal Reserve and/or the
Department of Banking and (c) to establish a 'Compliance Committee' composed of
three outside directors to ensure compliance with the Written Agreements.
However, the terms of the Written Agreements do not require ExecuFirst to merge
with another entity or to enter into any specific transactions. The approval of
the Merger by the Federal Reserve and/or the Department of Banking subject to
the terms and conditions of the Written Agreements would be deemed by Republic
to constitute the imposition of a condition or requirement which would adversely
affect the economic or business benefits of the Merger and would result in the
termination of the Plan of Merger and the Merger. See 'THE PLAN OF MERGER AND
RELATED AGREEMENTS--Termination;
14
<PAGE>
Amendment.' As of the date hereof, ExecuFirst and Republic expect that the terms
of the Written Agreements will not remain in force and effect following the
Merger. There can be no assurance that approval of the Merger will not be
subject to the terms of the Written Agreements or that the Holding Company
and/or First Republic Bank would not be subject to similar or identical
agreements in the future.
RESTRICTIONS ON PAYMENT OF DIVIDENDS ON COMMON STOCK
ExecuFirst has not paid any dividends on its Common Stock. In addition to
restrictions on the payment of dividends imposed by applicable Pennsylvania
banking law and/or Pennsylvania corporate law, the payment of dividends is
further restricted by the Written Agreements, which require ExecuFirst to
receive the prior approval of the Federal Reserve Bank and/or the Department of
Banking before paying any such dividends. The payment of dividends by First
Republic Bank is subject to restrictions imposed by the terms of certain
Subordinated Debentures (as hereinafter defined) issued by Republic Bank, which
Subordinated Debentures will remain an obligation of First Republic Bank upon
consummation of the Merger. See 'REPUBLIC--Market Price of Republic Common Stock
and Dividends.' There can be no assurance that the Holding Company will pay any
dividends on its Common Stock in the future.
COMPETITION
The market in which ExecuFirst and First Executive Bank compete is highly
competitive. As a result of certain recent mergers and consolidations in the
banking industry, many of the banks with which First Executive Bank competes are
much larger, have more branches, greater name recognition and financial
resources and offer a wider variety of financial products and services.
ExecuFirst and Republic believe that First Republic Bank will be more
competitive in the Philadelphia market as a result of, among other things,
certain projected internal cost savings, a projected increase in funds available
for loans, higher loan limits to borrowers and the offering of more diversified
products and services than First Executive Bank. However, there can be no
assurance that the Holding Company and First Republic Bank will be able to
compete successfully in such market.
LOSS OF KEY PERSONNEL
ExecuFirst and First Executive Bank and Republic and Republic Bank,
respectively, are, and the Holding Company and First Republic Bank will be,
dependent to a large extent on the services of certain key personnel, including
Messrs. Muscal and Rapp and Messrs. Stensrud and Gallagher, respectively. Each
of such persons are expected to provide such services to the Holding Company
and/or First Republic Bank. See 'THE PLAN OF MERGER AND RELATED AGREEMENTS--
Corporate Structure and Related Matters after the Merger.' The loss or
disruption of the services of one or more of such persons could have a material
adverse effect on the Holding Company and the Merged Bank.
CERTAIN TAX MATTERS; LIMITATION ON NET OPERATING LOSS CARRYFORWARDS
For the taxable year ended December 31, 1995, ExecuFirst reported, for
federal income tax purposes, net operating loss carryforwards of approximately
$2,734,000. Under section 382 of the Code, if a corporation which has net
operating losses and net operating loss carryforwards undergoes an 'Ownership
Change' (within the meaning of section 382 of the Code), the amount of its net
operating losses (and certain other tax attributes) prior to such Ownership
Change that may be utilized to offset taxable income following such Ownership
Change is subject to an annual limitation.
As a result of the Merger, it is expected that ExecuFirst will be deemed to
have undergone an Ownership Change for federal income tax purposes. Accordingly,
ExecuFirst's net operating loss carryforwards will be subject to such annual
limitation. Computation of the amount of such annual limitation will depend on
several factors, including, but not limited to, the value of ExecuFirst at the
time of the Ownership Change. Accordingly, there can be no assurance as to the
amount or period of utilization of net operating losses of the Holding Company.
15
<PAGE>
PRO FORMA PER SHARE COMPARATIVE FINANCIAL DATA
The following tabulation reflects (a) the historical net income (loss) per
share of ExecuFirst's Common Stock in comparison with the pro forma net income
per share after giving effect to the Merger; (b) the historical net income per
share of Republic Common Stock in comparison with the pro forma net income
(based on an Exchange Ratio of 1.71).
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-------------------
<S> <C>
NET INCOME (LOSS) PER SHARE
ExecuFirst Historical........................................... $ 0.41
Republic Historical............................................. $ 0.76
Republic Equivalent ProForma.................................... $ 0.44
Combined Pro Forma.............................................. $ 0.43
</TABLE>
BOOK VALUE PER SHARE
On December 31, 1995 the book value per share of ExecuFirst Common Stock
was $6.35 and the book value per share of Republic Common Stock was $10.86. The
pro forma book value per share for the Holding Company as of such date after
giving effect to the Merger would be $6.22 (based on an Exchange Ratio of 1.71)
and the equivalent pro forma book value per share of Republic would be $10.62.
No dividends were declared by ExecuFirst or Republic during the periods
presented.
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial statements
give effect to the Merger on a purchase accounting basis based on the fair
market value of ExecuFirst's Common Stock at a price of $5.75 per share, the
estimated market value of the stock for a reasonable period before and after
November 17, 1995, the announcement date of the Merger. Upon consummation of the
Merger, shareholders of Republic will own approximately 1,358,865 shares of
Holding Company Common Stock (based on an Exchange Ratio of 1.71 calculated
based on the ExecuFirst and Republic book values per share on December 31, 1995.
As a result, the Merger will be accounted for as a reverse acquisition of
ExecuFirst by Republic. Solely for accounting and financial reporting purposes,
Republic will be considered to be the acquiring entity notwithstanding the fact
that, the Holding Company (as ExecuFirst is referred to herein with respect to
post-Merger activities) will be the surviving entity and the entity issuing
common stock. Accordingly, the pro forma financial information presented herein
is the historical financial statements of Republic and ExecuFirst with purchase
accounting adjustments to reflect the acquisition of ExecuFirst.
16
<PAGE>
The pro forma combined condensed balance sheet assumes the Merger took
place on December 31, 1995, whereby Republic acquired all of the outstanding
ExecuFirst Common Stock at its fair market value plus direct costs incurred,
which are approximately $500,000. For accounting purposes, the acquisition has
been treated as a recapitalization of Republic with Republic as the acquiror
(reverse acquisition). The pro forma condensed combined statements of operations
present Republic's historical condensed consolidated statements of income for
the fiscal year ended December 31, 1995 with ExecuFirst's condensed consolidated
statement of operations for the fiscal year ended December 31, 1995 adjusted for
the following effects of the Merger, (i) amortization resulting from purchase
accounting adjustments to loans, deposits and other assets, and (ii) the related
tax effect of the Merger, as if the Merger occurred on January 1, 1995 with
respect to each period presented.
The pro forma information presented below does not include any expected
cost savings as a result of the merger. Estimated merger transaction costs for
the transaction are approximately $500,000 for Republic and ExecuFirst,
collectively. These costs represent estimated legal and professional fees and
severance payments to employees. ExecuFirst and Republic are reviewing certain
opportunities to reduce combined costs and plan to consider eliminating
duplicative operations where savings can be achieved after the Merger. Certain
restructuring charges may be incurred to eliminate duplicative operations. The
pro forma combined condensed statements of operations are not necessarily
indicative of operating results which would have been achieved had the Merger
been consummated as of the beginning of such periods and should not be construed
as representative of future operations.
These pro forma combined condensed financial statements should be read in
conjunction with the historical consolidated financial statements and the notes
thereto of ExecuFirst, which are incorporated by reference in this
Prospectus/Joint Proxy Statement, and Republic, which are included elsewhere in
this Prospectus/Joint Proxy Statement.
17
<PAGE>
PRO FORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 1995
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
EXECUFIRST REPUBLIC MERGER HOLDING
AND AND ADJUSTMENTS COMPANY
SUBSIDIARIES SUBSIDIARIES PRO FORMA PRO FORMA(1)
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks.............................. $ 4,644 $ 2,923 $ 7,567
Interest-bearing deposits with banks................. 990 990
Securities available for sale, at fair value
(amortized cost of $32,450)........................ 28,261 4,348 32,609
Securities held to maturity, at amortized cost (fair
value of $33,846).................................. 0 33,804 33,804
Federal Reserve Bank Stock, at cost.................. 322 200 522
Federal funds sold................................... 17,050 933 17,983
Loans.............................................. 77,529 85,863 200(5) 163,592
Less allowances.................................... (1,436) (680) (2,116)
----------- ----------- ----------- ------------
Loans, net........................................... 76,093 85,183 200(5) 161,476
Bank premises and equipment, net..................... 277 321 (277)(3) 321
Other real estate owned -- net....................... 81 295 (81)(3) 295
Accrued interest receivable and other assets......... 1,945 3,056 1,077(2) 5,357
----------- ----------- ----------- ------------
205(2)
(926)(3)
Total assets......................................... $ 129,663 $ 131,063 $ 198 $ 260,924
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Demand: non-interest bearing.................... $ 19,880 $ 12,570 $ 32,450
Demand: interest-bearing........................ 5,923 400 6,323
Money market & savings.......................... 21,317 0 21,317
Time deposits................................... 56,003 95,384 430(5) 151,817
Time deposits over $100,000..................... 17,145 8,070 25,215
----------- ----------- ----------- ------------
Total deposits....................................... 120,268 116,424 430(5) 237,122
Subordinated debt.................................... 0 3,400 3,400
Accrued expenses and other liabilities............... 1,613 2,617 4,230
----------- ----------- ----------- ------------
Total liabilities.................................... 121,881 122,441 430(5) 244,752
Commitments and contingencies
Shareholders' equity:
Common stock....................................... 12 1,588 (12)(4) 26
(1,562)(4)
Capital in excess of par........................... 11,483 5,075 (2,371)(4) 14,187
Retained earnings (deficit)........................ (3,799) 1,940 3,799(4) 1,940
Unrealized gain on securities available for sale,
net............................................. 86 19 (86)(4) 19
----------- ----------- ----------- ------------
Total shareholders' equity........................... 7,782 8,622 (232) 16,172
----------- ----------- ----------- ------------
Total liabilities and shareholders' equity........... $ 129,663 $ 131,063 198 260,924
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
Book value per share................................. $ 6.35 $ 10.86 $ 6.22
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
See notes to pro forma condensed combined balance sheet.
18
<PAGE>
FOOTNOTES TO PRO FORMA CONDENSED COMBINED BALANCE SHEET (UNAUDITED)
1. The pro forma combined condensed balance sheet gives effect to the
Merger on a purchase accounting basis based on the fair market value of
ExecuFirst's common stock at a price of $5.75 per share, the estimated market
value of the stock for a reasonable period before and after November 17, 1995,
the announcement date of the Merger. The Merger will be accounted for as a
reverse acquisition of ExecuFirst by Republic. Solely for accounting and
financial reporting purposes, Republic is considered the acquiring entity even
though, the Holding Company (as ExecuFirst is referred to with respect to
post-Merger actions) is the surviving entity and the entity issuing common stock
because Republic shareholders will acquire the majority of Holding Company
Common Stock as a result of the Merger. The purchase price calculated for
accounting purposes amounted to $7,550,000, which is the result of multiplying
the $5.75 per share market value as determined above, by the outstanding shares
of ExecuFirst of 1,226,057 as of December 31, 1995 plus $500,000 in estimated
merger related costs to be incurred by Republic. The purchase price has been
allocated as net assets of ExecuFirst, including fair value adjustments as
follows:
<TABLE>
<S> <C> <C>
Purchase Price........................................................... $7,550,000
Allocation to historical assets of
ExecuFirst............................................................... $7,782,000
Pro forma adjustments:
Premium on loans......................................................... 200,000
Premium on deposits...................................................... (430,000)
Deferred tax adjustments................................................. 1,282,000
-------------
Adjusted pro forma net assets of ExecuFirst.............................. 8,834,000
-------------
Negative goodwill........................................................ $1,284,000
-------------
</TABLE>
2. Reflects the reduction of the valuation allowance on gross deferred tax
assets the amount of $1,077,000 at December 31, 1995 and the deferred tax effect
of the purchase accounting adjustments in the amount of $205,000 as set forth in
footnote 5.
3. Negative goodwill in the amount of $1,284,000 was generated for purchase
accounting purposes, as discussed in Note 1, and was applied against (i) bank
premises and equipment in the amount of $277,000, (ii) other real estate owned,
in the net amount of $81,000, and (iii) the net deferred tax asset in the amount
of $926,000. No negative goodwill remains after application to these noncurrent
assets.
4. Reflects the recapitalization of Republic based upon the par value of
ExecuFirst shares which is reflected as an increase to capital in excess of par
of $1,562,000 and a decrease in common stock of $1,562,000 and the elimination
of all of ExecuFirst shareholders' equity.
5. Loans and deposits have been increased by $200,000 and $430,000 as of
December 31, 1995, respectively, to reflect the premium associated with the fair
market value of the underlying asset and liability. Deferred taxes have been
provided for the loan and deposit premiums, the writedown of bank premises and
equipment and other real estate owned in the amount of $205,000.
19
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HOLDING
EXECUFIRST REPUBLIC MERGER COMPANY
AND AND PRO FORMA PRO
SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS FORMA(1)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans................................. $ 7,131 $ 7,710 $ (40)(3) $14,801
Interest on federal funds sold............................. 637 176 813
Interest on time deposits due from banks................... 85 0 85
Interest on investments.................................... 1,738 2,016 3,754
----------- ----------- ----------- -----------
Total interest income................................... 9,591 9,902 (40) 19,453
Interest expense:
Interest on deposits....................................... 4,376 5,553 (430)(3) 9,499
Interest on borrowed funds................................. 0 62 62
Interest on subordinated debt.............................. 0 276 276
----------- ----------- ----------- -----------
Total interest expense.................................. 4,376 5,891 (430) 9,837
----------- ----------- ----------- -----------
Net interest income........................................ 5,215 4,011 390 9,616
Provision for loan losses.................................. 690 223 0 913
----------- ----------- ----------- -----------
Net interest income after provision for
loan losses............................................. 4,525 3,788 390 8,273
Other income:
Net gain on sale of securities............................. 178 0 178
Other income............................................... 218 155 0 373
----------- ----------- ----------- -----------
Total other income...................................... 396 155 0 551
----------- ----------- ----------- -----------
Income before other expenses............................... 4,921 3,943 390 9,254
Other expenses:
Salaries, wages and employee benefits...................... 2,246 1,592 3,838
Occupancy expenses......................................... 594 470 1,064
Professional fees.......................................... 468 327 795
Other operating expenses................................... 1,356 660 2,016
----------- ----------- ----------- -----------
Total other expenses.................................... 4,664 3,049 0 7,713
----------- ----------- ----------- -----------
Income before income taxes................................... 257 894 390 1,541
Provision (benefit) for income taxes......................... (247) 291 395(2) 439
----------- ----------- ----------- -----------
Net income................................................... $ 504 $ 603 ($ 15) $ 1,102
----------- ----------- ----------- -----------
Net income per common share.................................. $ 0.41(4) $ 0.76(4) $ 0.43(4)
Weighted average number of shares............................ 1,226 794 2,600
</TABLE>
See notes to pro forma condensed combined statements of operations.
20
<PAGE>
FOOTNOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS--(UNAUDITED)
1. The pro forma condensed combined statements of operations do not reflect
non-recurring professional fees of Republic directly attributable to the Merger
in the amount of $500,000 since these fees would be incurred by Republic, the
acquiring entity for accounting purposes, and are therefore an adjustment to the
purchase price. See Note 1 to the pro forma condensed combined balance sheet.
The after tax effect of such expenses if recorded in the pro forma condensed
combined statement of operations for the year ended December 31, 1995, would
have been to decrease net income by $330,000 or $0.13 per share.
2. The provision for income taxes has been adjusted to reflect a reduction
in the valuation allowance upon the adoption of SFAS No. 109, 'Accounting for
Income Taxes', in 1995 and a change in the net deferred tax asset during the
year. The provision in 1995 also reflects a change in the net deferred tax
asset.
3. Interest and fees on loans has been reduced by $40,000 for the year
ended December 31, 1995 to reflect the amortization of the purchase accounting
loan premium adjustment. The statement of operations also reflects the accretion
of the deposit premium purchase accounting adjustment amounting to $430,000 for
the year ended December 31, 1994. The loan premium and the deposit premium
amortization adjustments have been made assuming the Merger had taken place at
the beginning of the year presented and are being amortized over five years and
one year, respectively.
4. ExecuFirst and Republic's pro forma earnings per share for the year
ended December 31, 1995 are based on weighted average common shares outstanding
because dilution from potentially dilutive common stock equivalents was less
than 3% for each such period.
21
<PAGE>
REGULATORY CAPITAL OF EXECUFIRST AND REPUBLIC
The following table presents ExecuFirst and Republic's historical and pro
forma capital ratios at December 31, 1995:
<TABLE>
<CAPTION>
EXECUFIRST REPUBLIC
HISTORICAL HISTORICAL PRO FORMA
---------------- ---------------- ----------------
<S> <C> <C> <C>
Tier I Capital (1)...................................... $ 7,696,000 $ 8,622,000 $ 15,849,000
Tier II Capital (2)..................................... 1,038,000 4,080,000 5,265,000
Total Capital........................................... $ 8,734,000 $ 12,702,000 21,114,000
Total Average Quarterly Assets.......................... $ 123,786,000 $ 120,211,700 252,754,000
Total Risk-Weighted Assets (3).......................... 82,931,000 102,583,000 185,414,000
Tier I Risk-Based Capital Ratio (4)..................... 9.28% 8.40% 8.54%
Required Tier I Risk-Based Capital Ratio................ 4.00% 4.00% 4.00%
Excess Tier I Risk-Based Capital Ratio.................. 5.87% 4.40% 4.54%
Total Risk Based Capital Ratio (5)...................... 10.53% 12.38% 11.38%
Required Total Risk-Based Capital Ratio................. 8.00% 8.00% 8.00%
Excess Total Risk-Based Capital Ratio................... 2.53% 4.38% 3.38%
Tier I Leverage Ratio (6)............................... 6.22% 6.58% 6.27%
Required Tier I Leverage Ratio.......................... 5.00% 5.00% 5.00%
Excess Tier I Leverage Ratio............................ 1.22% 1.58% 1.27%
</TABLE>
- ------------------
(1) Represents Shareholders' Equity excluding unrealized gain or losses on
available-for-sale securities.
(2) Represents portion of allowance for possible loan losses.
(3) Includes off-balance sheet items at credit-equivalent values.
(4) Ratio of Tier I Capital to Total Risk-Weighted Assets.
(5) Ratio of Tier I and Tier II Capital to Total Risk-Weighted Assets.
(6) Ratio of Tier I Capital to Total Average Quarterly Assets.
22
<PAGE>
THE MEETINGS
GENERAL
This Prospectus/Joint Proxy Statement is being furnished by ExecuFirst to
the holders of ExecuFirst Common Stock as a proxy statement in connection with
the solicitation of proxies by the ExecuFirst Board for use at the ExecuFirst
Meeting and as a prospectus to the holders of Republic Common Stock with respect
to the shares of Holding Company Common Stock to be issued in the Merger.
This Prospectus/Joint Proxy Statement is being furnished by Republic to the
holders of Republic Common Stock as a proxy statement in connection with the
solicitation of proxies by the Republic Board for use at the Republic Meeting.
THE EXECUFIRST MEETING
Time and Place. The ExecuFirst Meeting is scheduled to be held on
Wednesday, May 29, 1996 at 3:00 p.m., at the Union League, 140 S. Broad Street,
Philadelphia, Pennsylvania.
Matters to be Considered. At the ExecuFirst Meeting, shareholders of
record of ExecuFirst as of the close of business on April 12, 1996, will be
asked to consider and vote upon proposals (i) to elect three (3) Class III
directors, (ii) to approve and adopt the Plan of Merger and to approve the
Merger, (iii) to amend certain provisions of ExecuFirst's Articles of
Incorporation, (iv) to adopt the Amended and Restated Stock Option Plan, and (v)
to transact such other business as may properly come before the ExecuFirst
Meeting or any postponements or adjournments thereof.
THE EXECUFIRST BOARD RECOMMENDS THAT THE SHAREHOLDERS ELECT THE NOMINEES AS
DIRECTORS. THE EXECUFIRST BOARD HAS DETERMINED THAT THE MERGER IS ADVISABLE AND
IN THE BEST INTERESTS OF EXECUFIRST AND ITS SHAREHOLDERS AND HAS THEREFORE
APPROVED THE PLAN OF MERGER AND THE MERGER, AND RECOMMENDS A VOTE BY THE
SHAREHOLDERS OF EXECUFIRST 'FOR' APPROVAL AND ADOPTION OF THE PLAN OF MERGER AND
APPROVAL OF THE MERGER, 'FOR' APPROVAL OF THE AMENDMENTS TO THE ARTICLES OF
INCORPORATION, AND 'FOR' APPROVAL OF THE AMENDED AND RESTATED PLAN.
Record Date; Voting at the ExecuFirst Meeting; Vote Required. The
ExecuFirst Board has fixed April 12, 1996 as the ExecuFirst Record Date for the
determination of the shareholders of ExecuFirst entitled to notice of and to
vote at the ExecuFirst Meeting. As of the ExecuFirst Record Date there were
1,229,557 shares of ExecuFirst Common Stock outstanding and entitled to vote,
which were held by approximately 323 holders of record. Each record holder of
ExecuFirst Common Stock on the ExecuFirst Record Date is entitled to cast one
vote per share, exercisable in person or by properly executed proxy, on each
matter properly submitted for the vote at the ExecuFirst Meeting.
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of ExecuFirst Common Stock entitled to vote
at the ExecuFirst Meeting is necessary to constitute a quorum. The affirmative
vote of a majority of the votes cast by all ExecuFirst shareholders entitled to
vote thereon will be required to elect each of the nominees to the Board, to
approve Proposal II (approval of the Plan of Merger and the Merger) and Proposal
V (approval of the Amended and Restated Stock Option Plan). The affirmative vote
of a majority of the issued and outstanding shares of ExecuFirst Common Stock
will be required to approve Proposal III (approval of the amendment to the
Articles of Incorporation relating to a restriction on ownership of ExecuFirst
Common Stock). The affirmative vote of at least 75% of the issued and
outstanding shares of ExecuFirst Common Stock will be required to approve
Proposal IV (approval of amendments to the Articles of Incorporation relating to
(i) indemnification of ExecuFirst directors and officers, (ii) nominations to
the ExecuFirst Board and (iii) the vote required to amend the Articles of
Incorporation). With respect to certain proposals, brokers who hold shares of
ExecuFirst Common Stock in street name for customers may not be entitled to vote
those shares without specific instructions from such customers ('Broker
Non-Votes'). Abstentions and Broker Non-Votes will be counted as being present
for purposes of determining the presence or absence of a quorum with respect to
the applicable proposals but, except with respect to Proposal III and Proposal
IV, will not constitute
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a vote cast for or against such proposal. In the case of Proposal III and
Proposal IV, abstentions and Broker Non-Votes will have the effect of a vote
cast against such proposal.
As of the ExecuFirst Record Date, ExecuFirst directors and executive
officers and their affiliates may be deemed to be the beneficial owners of
approximately 8.7% of the outstanding shares of ExecuFirst Common Stock. Each of
the directors and executive officers of ExecuFirst is expected to vote or direct
the vote of all shares of ExecuFirst Common Stock over which each of them has
voting control in favor of the Plan of Merger and the Merger.
Voting and Revocation of Proxies. All shares of ExecuFirst Common Stock
that are entitled to vote and are represented at the ExecuFirst Meeting by
properly executed proxies received before or at the ExecuFirst Meeting, and not
duly and timely revoked, will be voted at the ExecuFirst Meeting in accordance
with the instructions indicated on such proxies. IF NO INSTRUCTIONS ARE
INDICATED, SUCH PROXIES WILL BE VOTED FOR THE NOMINEES TO THE BOARD OF
DIRECTORS; FOR APPROVAL AND ADOPTION OF THE PLAN OF MERGER AND APPROVAL OF THE
MERGER; FOR APPROVAL OF THE AMENDMENTS TO THE ARTICLES OF INCORPORATION, AND FOR
APPROVAL OF THE AMENDED AND RESTATED STOCK OPTION PLAN.
IF ANY OTHER MATTERS ARE PROPERLY PRESENTED FOR CONSIDERATION AT THE
EXECUFIRST MEETING (OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF), INCLUDING,
AMONG OTHER THINGS, CONSIDERATION OF A MOTION TO ADJOURN OR POSTPONE THE
EXECUFIRST MEETING TO ANOTHER TIME AND/OR PLACE (INCLUDING, WITHOUT LIMITATION,
FOR THE PURPOSE OF SOLICITING ADDITIONAL PROXIES IF, FOR EXAMPLE, AN
INSUFFICIENT NUMBER OF VOTES ARE CAST TO APPROVE THE PLAN OF MERGER AND THE
MERGER), THE PERSONS NAMED IN THE ENCLOSED PROXY CARDS AND VOTING THEREUNDER
WILL VOTE IN ACCORDANCE WITH THEIR JUDGMENT ON SUCH MATTERS.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Corporate Secretary of ExecuFirst, at or before the taking of the vote
at the ExecuFirst Meeting, a written notice of revocation bearing a later date
than the proxy, (ii) duly executing a later dated proxy relating to the same
shares and delivering it to the Corporate Secretary of ExecuFirst before the
taking of the vote at the ExecuFirst Meeting, or (iii) attending the ExecuFirst
Meeting and voting in person (attendance at the ExecuFirst Meeting will not in
and of itself constitute a revocation of a proxy). Any written notice of
revocation or subsequent proxy should be sent so as to be delivered to
ExecuFirst Bancorp, Inc., 1513 Walnut Street, Philadelphia, PA 19102, Attn:
Corporate Secretary or hand-delivered to the Corporate Secretary at or before
the taking of the vote at the ExecuFirst Meeting.
ExecuFirst has engaged Georgeson & Co., Inc. to assist in the solicitation
of proxies. In addition to such solicitation and solicitation by use of the
mails, proxies may be solicited by directors, officers and employees of
ExecuFirst in person or by telephone, telegram or other means of communication.
Such directors, officers and employees will not be additionally compensated, but
may be reimbursed for reasonable out-of-pocket expenses in connection with such
solicitation. Arrangements will also be made with custodians, nominees and
fiduciaries for forwarding proxy solicitation materials to beneficial owners of
shares held of record by such custodians, nominees and fiduciaries, and
ExecuFirst will reimburse such custodians, nominees and fiduciaries for
reasonable expenses incurred in connection therewith.
Rights of Dissenting Shareholders. Holders of ExecuFirst Common Stock do
not have dissenters' appraisal rights in connection with the Merger.
THE REPUBLIC MEETING
Time and Place. The Republic Meeting is scheduled to be held on Tuesday,
May 28, 1996 at 10:00 a.m. local time, in the offices of Republic, 1515 Market
Street, Philadelphia, Pennsylvania.
Matters to be Considered. At the Republic Meeting, shareholders of record
of Republic as of the close of business on April 12, 1996, will be asked to
consider and vote upon proposals (i) to approve and adopt the Plan of Merger and
to approve the Merger, and (ii) to transact such other business as may properly
come before the Special Meeting or any postponements or adjournments thereof.
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THE REPUBLIC BOARD HAS DETERMINED THAT THE MERGER IS ADVISABLE AND IN THE
BEST INTERESTS OF REPUBLIC AND ITS SHAREHOLDERS AND HAS THEREFORE UNANIMOUSLY
APPROVED THE PLAN OF MERGER AND THE MERGER, AND RECOMMENDS A VOTE BY THE
SHAREHOLDERS OF REPUBLIC 'FOR' APPROVAL AND ADOPTION OF THE PLAN OF MERGER AND
APPROVAL OF THE MERGER.
Record Date; Voting at the Republic Meeting; Vote Required. The Republic
Board has fixed April 12, 1996 as the Republic Record Date for the determination
of the shareholders of Republic entitled to notice of and to vote at the
Republic Meeting. As of the Republic Record Date there were 794,263 shares of
Republic Common Stock outstanding and entitled to vote, which were held by
approximately 259 holders of record. Each record holder of Republic Common Stock
on the Republic Record Date is entitled to cast one vote per share, exercisable
in person or by properly executed proxy, on each matter properly submitted for
the vote of the shareholders of Republic at the Republic Meeting.
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of Republic Common Stock entitled to vote at
the Republic Meeting is necessary to constitute a quorum. The approval of the
Plan of Merger and the Merger will require the affirmative vote of a majority of
the votes cast by all Republic shareholders entitled to vote thereon.
Abstentions and Broker Non-Votes will be counted as being present for purposes
of determining the presence or absence of a quorum with respect to the
applicable proposals, but will not constitute a vote cast for or against such
proposal.
As of the Republic Record Date, Republic directors and executive officers
and their affiliates may be deemed to be the beneficial owners of approximately
21% of the outstanding shares of Republic Common Stock. Each of the directors
and executive officers of Republic is expected to vote or direct the vote of all
shares of Republic Common Stock over which each of them has voting control in
favor of the Plan of Merger and the Merger.
Voting and Revocation of Proxies. All shares of Republic Common Stock that
are entitled to vote and are represented at the Republic Meeting by properly
executed proxies received before or at the Republic Meeting, and not duly and
timely revoked, will be voted at the Republic Meeting in accordance with the
instructions indicated on such proxies. IF NO INSTRUCTIONS ARE INDICATED, SUCH
PROXIES WILL BE VOTED FOR APPROVAL AND ADOPTION OF THE PLAN OF MERGER AND
APPROVAL OF THE MERGER.
IF ANY OTHER MATTERS ARE PROPERLY PRESENTED FOR CONSIDERATION AT THE
REPUBLIC MEETING (OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF), INCLUDING,
AMONG OTHER THINGS, CONSIDERATION OF A MOTION TO ADJOURN OR POSTPONE THE
REPUBLIC MEETING TO ANOTHER TIME AND/OR PLACE (INCLUDING, WITHOUT LIMITATION,
FOR THE PURPOSE OF SOLICITING ADDITIONAL PROXIES IF, FOR EXAMPLE, AN
INSUFFICIENT NUMBER OF VOTES ARE CAST TO APPROVE THE PLAN OF MERGER AND THE
MERGER), THE PERSONS NAMED IN THE ENCLOSED PROXY CARDS AND VOTING THEREUNDER
WILL VOTE ON SUCH MATTERS IN ACCORDANCE WITH THE DETERMINATION OF A MAJORITY OF
THE REPUBLIC BOARD.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Corporate Secretary of Republic, at or before the taking of the vote at
the Republic Meeting, a written notice of revocation bearing a later date than
the proxy, (ii) duly executing a later dated proxy relating to the same shares
and delivering it to the Corporate Secretary of Republic before the taking of
the vote at the Republic Meeting, or (iii) attending the Republic Meeting and
voting in person (attendance at the Republic Meeting will not in and of itself
constitute a revocation of a proxy). Any written notice of revocation or
subsequent proxy should be sent so as to be delivered to Republic
Bancorporation, Inc., 1515 Market Street, Philadelphia, PA 19102, Attn:
Corporate Secretary or hand-delivered to the Corporate Secretary at or before
the taking of the vote at the Republic Meeting.
In addition to solicitation by use of the mails, proxies may be solicited
by directors, officers and employees of Republic in person or by telephone,
telegram or other means of communication. Such directors, officers and employees
will not be additionally compensated, but may be reimbursed for reasonable
out-of-pocket expenses in connection with such solicitation. Arrangements will
also be made with custodians, nominees and fiduciaries for forwarding proxy
solicitation materials to
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beneficial owners of shares held of record by such custodians, nominees and
fiduciaries, and Republic will reimburse such custodians, nominees and
fiduciaries for reasonable expenses incurred in connection therewith.
SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES
WITH THEIR PROXY CARDS
Rights of Dissenting Shareholders. In accordance with Pennsylvania law,
shareholders of Republic have the right to dissent from the proposed Merger and
to receive payment of the Fair Value of their shares of Republic Common Stock,
provided they comply with the statutory provisions relating to dissenters'
rights. If the Merger is not consummated for any reason, dissenters' rights will
not be available. See 'REPUBLIC--Rights of Dissenting Shareholders.'
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PROPOSAL I
ELECTION OF DIRECTORS
INFORMATION CONCERNING NOMINEES AND CONTINUING DIRECTORS
ExecuFirst's Bylaws provide for the classification of directors into three
classes, as nearly equal in number as possible, with approximately one-third of
the directors to be elected annually for three-year terms. The actual number of
positions on the Board of Directors at a given time is to be set, within limits,
by the Board of Directors from time to time.
The Board has nominated the three (3) current Class III directors, whose
terms expire this year and all of whom have agreed to be named as a nominee, to
stand for re-election as Class III directors at the Annual Meeting.
As of the Annual Meeting, the Board will have eight (8) members (Class
I--two (2) directors; Class II--three (3) directors; Class III--three (3)
directors). Class III directors will be elected at the Annual Meeting for terms
expiring in 1999. The current Class II directors' terms expire in 1997, and the
current Class I directors' terms expire in 1998.
Set forth below is certain information with respect to each of the nominees
for election to the Board of Directors at the Annual Meeting, including name,
age, the period during which such person has served as a Director of ExecuFirst,
such person's principal occupation and employment during the past five years.
Information relating to the amount and percentage of ExecuFirst's Common Stock
(based upon 1,229,557 shares of Common Stock issued and outstanding as of April
12, 1996) beneficially owned (as determined in accordance with Rule 13d-3 of the
1933 Act) by such persons as of April 12, 1996 is set forth under the caption
'EXECUFIRST--Voting Securities and Principal Holders.' It is the intention of
the persons named in the accompanying form of proxy to vote for all those
nominees listed below.
Each of the persons listed below as a nominee has agreed to be named as a
nominee for Director in this Proxy Statement and has consented to serve as a
Director if elected. ExecuFirst expects all nominees to be willing and able to
serve. The Board of Directors may designate a substitute nominee to replace any
bona fide nominee who was nominated and who, for any reason, becomes unavailable
for election as a Director. If any of the nominees shall become unable to serve,
the persons designated in the enclosed proxy will vote for the election of such
other person or persons as the Board of Directors may recommend. It is presently
anticipated that each person elected as a director of ExecuFirst, at the Annual
Meeting, as well as all other continuing members of the Board, will be elected
by ExecuFirst as a director of ExecuFirst's wholly-owned subsidiary, First
Executive Bank, following the Annual Meeting.
NOMINEES
Michael J. Bradley, age 50, was elected to the ExecuFirst Board in 1988. He
currently serves as Vice-Chairman of the ExecuFirst Board and Chairman of the
First Executive Board. Following the consummation of the Merger, Mr. Bradley
will serve as Vice Chairman of the Holding Company. Since December 1990, Mr.
Bradley has served as the Executive Vice President of Acute and Ambulatory
Services at Mercy Health Corporation of Southeastern Pennsylvania.
Gerald Levinson, age 64, was elected to the ExecuFirst Board in 1989. Since
July 1985, he has been an independent financial consultant. Mr. Levinson also
serves as a director of The Lannett Company, a publicly held pharmaceutical
company.
John O'Donnell, Ph.D. age 50, was elected to the ExecuFirst Board in 1995.
From 1986 to April 1995, Mr. O'Donnell was the Executive Director of the College
of Physicians of Philadelphia. Mr. O'Donnell is currently on sabbatical leave.
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CONTINUING DIRECTORS
CLASS II DIRECTORS:
John F. D'Aprix, age 52, was elected to the ExecuFirst Board in 1991. He is
currently Vice Chairman of the First Executive Board. Mr. D'Aprix has been the
President of Pennsylvania College of Podiatric Medicine since March 1995 and
Chairman and Chief Executive Officer of HCA Mgt., Inc. (managed home care) since
January 1993. From December 1991 to December 1992, Mr. D'Aprix served as
Chairman of Artran Scanning Technology (imaging services); from August 1990 to
September 1991, Mr. D'Aprix served as Chairman and Chief Executive Officer of
Vantage Health Partners, Inc. (risk-bearing managed care company). Mr. D'Aprix's
term of office expires at the annual meeting in 1997.
Allen L. Kramer, age 58, was appointed to the ExecuFirst Board of Directors
in 1995. Since May 1995, Mr. Kramer has acted as Senior Vice President of
Millard Consulting Services. From 1991 until April 1995, Mr. Kramer was Vice
President of Learning Services Co. Mr. Kramer's term of office expires at the
annual meeting in 1997.
James E. Schleif, age 53, was elected to the ExecuFirst Board in 1993.
Since 1978, Mr. Schleif has been the Executive Vice President, Administration
and Finance, for Mercy Health Corporation of Southeastern Pennsylvania. Mr.
Schleif's term of office expires at the annual meeting in 1997.
CLASS I DIRECTORS:
Zvi H. Muscal, age 60, is currently the Chairman of the Board, President
and Chief Executive Officer of ExecuFirst, and President and Chief Executive
Officer of First Executive Bank. Mr. Muscal has served in such capacities since
1988. Following the consummation of the Merger, Mr. Muscal will serve as
President and Chief Executive Officer of the Holding Company and Chairman and
Co-Chief Executive Officer of First Republic Bank. Mr. Muscal's term of office
expires at the annual meeting of 1998.
Sheldon E. Goldberg, age 63, was elected to the ExecuFirst Board in 1989.
Mr. Goldberg has acted as a General Partner and investment advisor at Cumberland
Advisors, Pty., Vineland, NJ since June, 1973; a director of Underwriters
Management Insurance, Inc. since January 1987; Chairman, Director and Secretary
of National CD Sales, Inc., Vineland, NJ (Certificate of Deposit Brokers) since
January 1989; and President of Cumberland Brokerage Corporation (broker/dealer),
Vineland, NJ, since July 1990. Mr. Goldberg's term of office expires at the
annual meeting in 1998.
Board Committees
ExecuFirst's Board of Directors has standing Executive/Oversight, Audit,
Nominating and Compensation committees.
Audit Committee. The Audit Committee is composed of the following
independent directors: Messrs. Schleif (Chairman), Levinson and Kramer. Mr.
Bradley is an ex-officio members of the Audit Committee. The Audit Committee
provides general financial oversight in financial reporting and adequacy of
ExecuFirst's internal controls through meetings with the ExecuFirst's management
and its independent auditors. The Audit Committee held 3 meetings during 1995.
Compensation Committee. The Compensation Committee is composed of the
following directors: Messrs. Bradley and Goldberg. Mr. Muscal is an ex-officio
member of the Compensation Committee. The Compensation Committee provides
general oversight in all employee personnel matters through periodic meetings
with management of ExecuFirst. The Compensation Committee did not meet during
1995.
Executive/Oversight Committee. The Executive/Oversight Committee is
composed of the following directors: Messrs. Bradley (Chairman), D'Aprix,
Goldberg, Muscal and O'Donnell. The Executive Committee is authorized to
exercise all of the authority of the Board in the management of the ExecuFirst's
affairs between Board meetings, unless otherwise provided by the bylaws or
applicable law. The Executive Committee held 19 meetings during 1995.
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Nominating Committee. The Nominating Committee is composed of the
following directors: Messrs. Levinson (Chairman), Bradley, D'Aprix and Muscal.
The Nominating Committee decides upon and suggests to the Board of Directors
candidates for appointment or election to the Board of Directors. The Nominating
Committee held 2 meetings during 1995. The Nominating Committee will consider
nominees recommended by securityholders for nomination for election at the
annual meetings of ExecuFirst's shareholders if such nominations are made as
described above under 'Shareholder Proposals and Nominations for the 1997 Annual
Meeting.'
During 1995, ExecuFirst's Board of Directors held 11 meetings. No
continuing director attended fewer than 75% of the aggregate number of meetings
of the Board of Directors and meetings of the committees, if any, on which such
directors served.
ExecuFirst's director compensation arrangement in effect throughout 1995
provides that each director would receive an annual fee of $500, plus $150 for
each Board and Committee meeting attended. The Chairman of the Board receives an
additional $50 per Board Meeting attended and each committee chairman receives
an additional $50 per committee meeting attended. Michael J. Bradley, Chairman
of First Executive Bank and Vice Chairman of ExecuFirst is paid the sum of
$1,000 per month by First Executive Bank and ExecuFirst as compensation for his
services.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain of the directors of ExecuFirst and First Executive and/or their
affiliates have loans outstanding from First Executive. Each of such loans was
made in the ordinary course of the Bank's business; were made on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with unrelated persons; and, in the opinion
of management, do not involve more than the normal risk of collectibility or
present other unfavorable features. At December 31, 1995, the aggregate amount
of such loans was $2,093,988 or 27% of total shareholder's equity.
QUORUM AND VOTING REQUIREMENTS
A quorum for the purpose of acting upon this Proposal I requires the
presence, in person or by proxy, of the holders of at least a majority of the
outstanding shares of ExecuFirst Common Stock.
The approval of this Proposal I requires the affirmative vote of a majority
of the votes cast by the holders of the shares of ExecuFirst Common Stock
present and voting, in person or by proxy.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF EXECUFIRST RECOMMENDS THAT SHAREHOLDERS VOTE
'FOR' EACH OF THE NOMINEES TO THE EXECUFIRST BOARD OF DIRECTORS.
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PROPOSAL II
TO APPROVE THE AGREEMENT AND
PLAN OF MERGER AND THE MERGER
THE MERGER
OVERVIEW
Pursuant to the terms of the Plan of Merger, Republic will merge with and
into ExecuFirst. Upon consummation of the Merger, Republic's separate corporate
existence will be extinguished, ExecuFirst will change its corporate name to
First Republic and the equity interest of Republic's shareholders in Republic
will cease. The number of directors comprising the Holding Company Board will be
increased to seventeen and the current members of the Republic Board will be
appointed to fill the newly created vacancies. See 'EXECUFIRST--Directors and
Executive Officers.' Each outstanding share of Republic Common Stock (other than
those as to which dissenters' rights have been perfected) will be converted into
the right to receive that number of shares of Holding Company Common Stock equal
to the quotient obtained by dividing the Republic Book Value Per Share (as
hereinafter defined) by the ExecuFirst Book Value Per Share (as hereinafter
defined) (the 'Exchange Ratio'). For the purposes of the Plan of Merger, the
'Republic Book Value Per Share' is defined as the quotient obtained by dividing
(x) the total shareholders' equity of Republic as reflected on Republic's
financial statements for the calendar quarter ended immediately preceding the
Effective Date, as determined in accordance with GAAP consistently applied, by
(y) the number of issued and outstanding shares of Republic Common Stock as of
the Effective Date less the number of shares of Republic Common Stock held by
Republic or any of its subsidiaries. The 'ExecuFirst Book Value Per Share' is
defined as the quotient obtained by dividing (x) the total shareholders' equity
of ExecuFirst as reflected on ExecuFirst's financial statements for the calendar
quarter ended immediately preceding the Effective Date, as determined in
accordance with GAAP (in the case of ExecuFirst only, changes after September
30, 1995 in the valuation reserve accounted for in compliance with Financial
Accounting Statement No. 115 will not be recognized as a change in ExecuFirst's
total shareholders' equity and profits or losses with respect to RALs funded by
First Executive will not be otherwise accrued or shown as losses), by (y) the
number of issued and outstanding shares of ExecuFirst Common Stock as of the
Effective Time less the number of shares of ExecuFirst Common Stock held by
ExecuFirst or any of its subsidiaries. No fractional shares of Holding Company
Common Stock will be issued in the Merger, but in lieu thereof each holder of
Republic Common Stock who would otherwise be entitled to a fraction of a share
of Holding Company Common Stock will receive from the Holding Company an amount
in cash (rounded to the nearest whole cent), without interest, equal to the
product of such fraction multiplied by the ExecuFirst Book Value Per Share. Each
share of Republic Common Stock would be exchanged for approximately 2.02 shares
of Holding Company Common Stock (an aggregate total of 1,604,411 shares of
Holding Company Common Stock representing 56.6% of the issued and outstanding
shares of Holding Company Common Stock), if the Exchange Ratio were based on the
ExecuFirst and Republic Book Values per share on March 31, 1996. See 'THE PLAN
OF MERGER AND RELATED AGREEMENTS--Conversion of Republic Common Stock.'
Upon consummation of the Merger, each then outstanding and unexercised
employee or director stock option to purchase Republic Common Stock (each, a
'Republic Stock Option') will be converted into and become an option to purchase
shares of Holding Company Common Stock. See 'THE PLAN OF MERGER AND RELATED
AGREEMENTS--Amended and Restated Stock Option Plan.'
BACKGROUND TO THE MERGER
As part of its review of strategic alternatives designed to enhance
shareholder value, the ExecuFirst Board has considered from time to time the
possible affiliation of ExecuFirst and First Executive Bank with other financial
institutions. In furtherance thereof, the Oversight Committee of the ExecuFirst
Board, which had been formed in the fall of 1994 to address regulatory issues
facing First Executive Bank, expanded its role to include activities related to
an evaluation of, and possible
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pursuit of, such strategic alternatives. This resulted in certain informal
general discussions with a select number of other banks during the first several
months of 1995 regarding the future of their institutions. Such discussions
terminated in their initial stages. In January 1995, the Oversight Committee
engaged Berwind to provide financial advisory services to the ExecuFirst Board.
At a special meeting of the Board of Directors of First Executive Bank (the
'First Executive Board') held on May 18, 1995, representatives of Berwind,
discussed various strategic alternatives available to the First Executive Board
including, but not limited to, remaining independent, an acquisition, sale or
merger. Thereafter, the First Executive Board authorized Berwind to contact a
limited number of qualified prospects to determine their interest in a possible
transaction.
During July and August 1995, Mr. Muscal had several meetings with Harry D.
Madonna, Chairman of the Republic Board and with Rolf A. Stensrud, President and
Chief Executive Officer of Republic, to discuss informally general issues
regarding a possible transaction involving the two institutions. Mr. Muscal, Mr.
Stensrud and Mr. Madonna have been acquaintances for several years. Mr. Muscal
and Mr. Madonna decided to continue these informal discussions regarding a
possible transaction between Republic and First Executive Bank, and Mr. Muscal
and Mr. Madonna exchanged copies of their respective reports and financial
statements. Messrs. Muscal, Stensrud and Madonna also discussed combined future
operations and plans, the relative benefits of the transaction for Republic and
First Executive Bank and the shareholders of their respective parent companies,
and structural issues. At a meeting of the Board of Directors held on August 16,
1995, Berwind reported the results of the contacts which they had made with
other financial institutions. Based upon this report and following consideration
and the factors set forth below, the Board authorized members of management and
the Oversight Committee to continue discussions with Republic regarding a
possible transaction.
On August 30, 1995, Mr. Muscal met with Mr. Madonna and a member of the
First Executive Board and Oversight Committee, to continue discussions
concerning management, employment, future operations and plans of both Republic
and First Executive, in the context of a possible transaction. On that same day,
Republic and ExecuFirst executed a Confidentiality Agreement and each entity
began a preliminary due diligence review of the other.
On September 6, 1995, Messrs. Muscal and Stensrud met again to continue
their general discussions concerning management of the banks. The First
Executive Board discussed the potential transaction with management and legal
counsel at its meeting of September 21, 1995. At that meeting, the First
Executive Board was presented with an executive summary of a proposed
transaction, a proposed management structure, preliminary pro forma financial
statements, and an analysis of potential merger economies. The Board concluded
that it would be prudent to continue discussions concerning a possible merger
with Republic and authorized management to proceed with such further
discussions.
At an executive session of the First Executive Board held on October 19,
1995, the Board discussed various aspects of the proposed transaction with legal
counsel and directed management to finalize an engagement with Berwind as its
financial advisor in connection with the proposed transaction and authorized
counsel to commence negotiations regarding a definitive agreement with Republic.
On that same day, Messrs. Muscal, Madonna and Stensrud met again to discuss
organizational, due diligence, personnel and other financial and regulatory
aspects of the proposed transaction. During October and early November, members
of ExecuFirst's Oversight Committee and Republic's Executive Committee, together
with their respective legal counsel met to discuss and establish the terms of
the proposed Merger, including, but not limited to, the Exchange Ratio, and to
prepare a draft of the proposed Plan of Merger and related agreements for
presentation to their respective Boards.
The ExecuFirst Board discussed the proposed merger with management of
ExecuFirst and First Executive Bank, legal counsel and representatives of
Berwind at a special meeting on November 14, 1995. Berwind apprised the
ExecuFirst Board of various business, financial and economic aspects of the
proposed merger with respect to the parties and their respective shareholders.
ExecuFirst's legal counsel provided detailed information concerning the legal
issues relating to the proposed transaction and discussed the results of the due
diligence review of Republic. Legal counsel also reviewed the terms of the draft
Plan of Merger and related agreements and responded to questions from the
members
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of the ExecuFirst Board. Berwind provided detailed information concerning the
financial terms of the merger, responded to questions from members of the Board,
and gave its oral opinion that, based upon its review as of the date of the
meeting, the proposed merger was fair from a financial point of view to the
holders of ExecuFirst Common Stock. See 'THE MERGER--Opinions of Financial
Advisors.' Upon further discussion, the ExecuFirst Board unanimously approved
the form of the Plan of Merger and related documents subject to amendments
deemed necessary or appropriate by ExecuFirst's management and authorized
management and members of the Oversight Committee to complete final negotiations
and definitive documentation.
On November 14, 1995, at a meeting of the Republic Board attended by
Republic's financial advisors, JMS, and legal counsel, detailed information
concerning the financial and legal terms of the proposed merger was provided.
Counsel presented the results of its due diligence review. After reviewing the
information and other drafts and an overview of the proposed Plan of Merger, the
Republic Board unanimously approved the transaction as presented and subject to
amendments deemed necessary or appropriate by Republic management. At a Special
Meeting of the Republic Board held on November 17, 1995, the Republic Board
unanimously approved the form of the Plan of Merger and authorized management to
execute the definitive agreement.
The Plan of Merger was executed by Republic and ExecuFirst on November 17,
1995.
EXECUFIRST'S REASONS FOR THE MERGER
The ExecuFirst Board has approved the Plan of Merger and has determined
that the Merger is in the best interests of ExecuFirst and its shareholders.
Therefore, the ExecuFirst Board recommends that holders of ExecuFirst Common
Stock vote FOR approval of the Plan of Merger and the Merger.
In arriving at its determination that the Plan of Merger and the Merger is
in the best interests of the ExecuFirst shareholders, the ExecuFirst Board
considered a number of factors, from both a short-term and long-term
perspective, including, without limitation, the following:
(i) Its familiarity with, and review of, ExecuFirst's business,
financial condition, results of operations and prospects, including, but
not limited to, its potential growth, development, productivity and
profitability;
(ii) The current and prospective environment in which ExecuFirst and
First Executive Bank operate, including the existence of the Written
Agreements, the national and local economic conditions, the competitive
environment for banks and other financial institutions generally and the
trend toward consolidation in the financial services industry and the
emergence of increasingly larger institutions;
(iii) Its review, with its legal and financial advisors, of
alternatives to the Merger, including ExecuFirst's continuing as an
independent institution, combining with other potential merger partners or
being sold and the possible effect of such alternatives on shareholder
value and the ExecuFirst Board's determination that the Merger presented a
better opportunity for enhancing shareholder value;
(iv) An oral presentation by Berwind regarding the above alternatives
and Berwind's opinion that the Merger is fair to the ExecuFirst
shareholders from a financial point of view, See 'THE MERGER--Opinion of
Financial Advisors';
(v) Its review of the general impact that the Merger would have on the
various constituencies served by First Executive Bank, including its
customers and employees, and its belief that being part of a bank holding
company of greater size and resources, would enable First Republic Bank to
provide its customers with a greater range of products and services;
(vi) Its belief that the Merger would result in First Republic Bank
being a stronger and more effective competitor in the rapidly changing
Philadelphia market than First Executive Bank would be on a stand-alone
basis;
(vii) Its belief that the Merger would result in First Republic Bank
being able to take advantage of opportunities that might not be available
to First Executive on an independent basis;
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(viii) Its consideration of the nature of, and the likelihood of
obtaining, the bank regulatory approvals that would be required with
respect to the Merger;
(ix) Its consideration of the fact that the Merger would be accounted
for under purchase accounting treatment for business combinations, See 'THE
MERGER--Accounting Treatment';
(x) Its consideration of the terms and conditions of the Plan of
Merger and the transactions contemplated thereby, including the Stock
Option Agreements; and
(xi) Its consideration of the compatibility of the respective business
and management philosophies of ExecuFirst and Republic.
The above discussion of the information and factors considered by the
ExecuFirst Board is not intended to be exhaustive. In reaching its decision to
approve and recommend the Plan of Merger and the Merger, the ExecuFirst Board
did not assign any relative or specific weights to the factors set forth above,
although individual directors may have given one or more factors more weight
than other factors.
REPUBLIC'S REASONS FOR THE MERGER
The Republic Board has approved the Plan of Merger and has determined that
the Merger is in the best interests of Republic and its shareholders. Therefore,
the Republic Board recommends that holders of Republic Common Stock vote for
approval of the Plan of Merger and the Merger.
In arriving at its determination that the Plan of Merger and the Merger is
in the best interests of the Republic shareholders, the Republic Board
considered a number of factors, keeping in mind both the short-term and
long-term interests of Republic, its shareholders and customers, including,
without limitation, the following:
(i) Republic's strong current financial condition and proven
management team;
(ii) The relative costs of increasing Republic's asset base by
internal means or by merger;
(iii) The national and local economic conditions, the competitive
environment for banks and other financial institutions, and the trend
towards consolidation in the financial services industry and the emergence
of increasingly larger institutions, especially in Republic's market;
(iv) Its review of the impact that the Merger would have on the
various constituencies served by Republic Bank, including its customers and
employees and the realization that the merger transaction would enable
First Republic Bank to provide Republic's customers with a greater range of
products and services along with increased loan limits;
(v) The enhanced shareholder value which would result from Republic's
shareholders owning a publicly-traded stock and the fact that a larger
shareholder base would result in a more liquid position for Republic
shareholders.
(vi) The ability to offer more services to customers and to have
additional locations in the center city Philadelphia area;
(vii) The prospective value of the Holding Company Common Stock based
upon the book value multiplies of other banking institutions in its market;
(viii) The fact that the receipt by Republic shareholders of Holding
Company Common Stock in the merger will not be a taxable transaction to
Republic shareholders;
(ix) Information concerning the financial condition, results of
operations and business prospects of the combined institutions; and
(x) A presentation made by JMS regarding the proposed transaction and
their opinion that the merger is fair to Republic shareholders from a
financial point of view.
Republic's Board of Directors did not assign any different weights to these
factors but considered all of such factors to be material, although individual
directors may have given one or more factors more weight than other factors.
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OPINIONS OF FINANCIAL ADVISORS
Opinion of ExecuFirst's Financial Advisor
General. Pursuant to an engagement letter dated March 8, 1995, as amended
(the 'Engagement Letter') between ExecuFirst and Berwind, ExecuFirst retained
Berwind to render an opinion with respect to the fairness from a financial point
of view to ExecuFirst and its shareholders of the Merger. Berwind, as part of
its investment banking activities, is regularly engaged in the valuation of
businesses and their securities in connection with merger transactions and other
types of acquisitions, private placements and valuations for corporate and other
purposes. ExecuFirst selected Berwind as its financial advisor on the basis of
its experience and expertise in banking transactions as well as its prior
relationship with Berwind. In the past, Berwind provided general financial
advisory services to the ExecuFirst Board.
At the November 14, 1995 meeting of the ExecuFirst Board, Berwind delivered
its oral November Opinion, subsequently confirmed in writing as of the date of
this Prospectus/Joint Proxy Statement, that the Merger was fair to ExecuFirst
and its shareholders from a financial point of view, as of such date. No
limitations were imposed by ExecuFirst on Berwind with respect to the
investigations made or procedures followed in rendering its opinions. The full
text of the Fairness Opinion as of the date hereof, which sets forth the
assumptions made, matters considered and limitations of the review undertaken,
attached as Annex C to this Prospectus/Joint Proxy Statement, is incorporated
herein by reference, and should be read in its entirety in connection with this
Prospectus/Joint Proxy Statement. The summary of the opinion of Berwind set
forth herein is qualified in its entirety by reference to the full text of the
Fairness Opinion.
In rendering its Fairness Opinion, Berwind: (i) reviewed the historical
financial performances, current financial positions and general prospects of
Republic and ExecuFirst, (ii) reviewed the Plan of Merger, (iii) reviewed and
analyzed stock market performance of ExecuFirst, (iv) studied and analyzed the
consolidated financial and operating data of Republic and ExecuFirst, (v)
considered the terms and conditions of the proposed Merger as compared with the
terms and conditions of comparable bank mergers and acquisitions, (vi) met
and/or communicated with certain members of Republic's and ExecuFirst's senior
management to discuss their respective operations, historical financial
statements, and future prospects, (vii) reviewed drafts of projections for the
combined entity prepared jointly by the managements of Republic and ExecuFirst,
(viii) reviewed this Prospectus/Joint Proxy Statement, and (ix) conducted such
other financial analyses, studies and investigations as Berwind deemed
appropriate.
In delivering its November Opinion and Fairness Opinion, Berwind assumed
that, in the course of obtaining the necessary regulatory and governmental
approvals for the Merger, no restriction will be imposed on ExecuFirst that
would have a material adverse effect on the contemplated benefits of the Merger.
Berwind also assumed that there would not occur any change in applicable law or
regulation that would cause a material adverse change in the prospects or
operations of the Holding Company after the Merger.
Berwind relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by and
discussed with it for purposes of its opinions. With respect to Republic's,
ExecuFirst's and the Holding Company's financial forecasts reviewed by Berwind
in rendering its opinions, Berwind assumed that such financial forecasts were
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of the managements of Republic and ExecuFirst as to the future
financial performance of Republic, ExecuFirst and the Holding Company. Berwind
did not assume any responsibility to independently verify the assumptions
underlying such projections. The projections furnished to Berwind were prepared
by the respective managements of ExecuFirst and Republic. ExecuFirst and
Republic do not publicly disclose internal management projections of the type
provided to Berwind in connection with its review of the Merger. Such
projections were not prepared with a view toward public disclosure. The
projections were based on numerous variables and assumptions which are
inherently uncertain, including, without limitation, factors related to future
economic and competitive conditions, the future financial condition and results
of operations of ExecuFirst and Republic and the future cost savings associated
with the Merger.
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Accordingly, actual results could vary significantly from those reflected in
such projections. Berwind did not make an independent evaluation or appraisal of
the assets (including loans) or liabilities of Republic or ExecuFirst nor was it
furnished with any such appraisal. Berwind also did not independently verify,
and has relied on and assumed, that all allowances for loan and lease losses set
forth in the balance sheets of Republic and ExecuFirst were adequate and
complied fully with applicable law, regulatory policy and sound banking practice
as of the date of such financial statements.
The following is a summary of selected analyses prepared by Berwind and
presented to ExecuFirst's Board in connection with the November Opinion and
analyzed by Berwind in connection with the November Opinion and Fairness
Opinion. In connection with delivering its Fairness Opinion, Berwind updated
certain analyses described above to reflect current market conditions and events
occurring since the date of the Plan of Merger. Such reviews and updates led
Berwind to conclude that it was not necessary to change the conclusions it had
reached in connection with rendering the November Opinion.
Comparable Companies and Comparable Acquisition Transaction
Analyses. Berwind compared selected financial and operating data for ExecuFirst
with those of a peer group of selected banks and bank holding companies with
assets between approximately $75 million and $100 million, as of the most recent
financial period publicly available, located in Eastern Pennsylvania (the
'Pennsylvania Peer Group'). Berwind also compared selected financial and
operating data for ExecuFirst with those of a peer group of Pennsylvania banks
commencing operations after January 1, 1985 (the 'De Novo Peer Group').
Financial data and operating ratios compared in the analysis of the Pennsylvania
Peer Group and De Novo Peer Group included but was not limited to: return on
average assets, return on average equity, shareholders' equity to assets ratio
and certain asset quality ratios.
Berwind also compared certain market ratios (including closing price of the
stock to latest twelve months' earnings per share, closing price to book value
per share, and dividend yield) of ExecuFirst to those of a group consisting of
the publicly traded banks located in Delaware, New Jersey and Pennsylvania with
assets less than $250 million. The comparisons discussed above supported
Berwind's overall conclusion that the proposed Merger was fair, from a financial
point of view, to the shareholders of ExecuFirst.
Discounted Dividend Analyses. Using discounted dividend analyses, Berwind
estimated the present value of the future dividend streams that ExecuFirst could
produce over a five year period under different assumptions as to dividend
payout levels, if ExecuFirst performed in accordance with various earnings
growth forecasts. Berwind also estimated the terminal value for ExecuFirst
Common Stock after the five year period by applying a range of earnings
multiples of ExecuFirst's terminal year earnings. The range of multiples used
reflected a variety of scenarios regarding the growth and profitability
prospects of ExecuFirst. The dividend streams and terminal values were then
discounted to present value using discount rates, reflecting different
assumptions regarding the rates of return required by holders or prospective
buyers of ExecuFirst Common Stock. The discounted dividend analysis supported
Berwind's overall conclusion that the proposed Merger was fair, from a financial
point of view, to the shareholders of ExecuFirst.
Analysis of Selected Merger of Equals Transactions. Berwind reviewed the
consideration paid in bank and thrift transactions which it viewed as involving
mergers of equals announced since January 1994. For each thrift or bank merged
or to be merged in such transactions, Berwind analyzed, among other things, the
ratio of transaction price to deposits, transaction price to book value, and
transaction price to assets. Berwind placed particular emphasis on those
transactions in which the institutions involved in the merger were of an asset
size less than $500 million.
No other company or transaction used in the above analysis as a comparison
is identical to ExecuFirst, Republic or the Merger. Accordingly, an analysis of
the results of the foregoing is not mathematical, rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading volume of the companies to which ExecuFirst, Republic and the Merger are
being compared. The comparison with mergers of equals transactions supported
Berwind's overall conclusion that the proposed Merger was fair, from a financial
point of view, to the shareholders of ExecuFirst.
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Analysis of Selected Merger and Acquisition Transactions. Berwind reviewed
the consideration paid in recently announced transactions in which the selling
bank sustained a loss in 1994 and was profitable in 1995. For each selling
institution, Berwind analyzed, among other things, the ratio of the transaction
price book value and transaction price to the latest twelve months earnings per
share.
No other company or transaction used in the above analysis as a comparison
is identical to ExecuFirst, Republic or the Merger. Accordingly, an analysis of
the results of the foregoing is not mathematical, rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of the companies to which ExecuFirst, Republic and the Merger are
being compared. The comparison with merger and acquisition transactions,
combined with ExecuFirst's experience in seeking a merger partner described
under the caption 'Background to the Merger,' supported Berwind's overall
conclusion that the proposed Merger was fair, from a financial point of view, to
the shareholders of ExecuFirst.
Pro Forma Contribution Analysis. Berwind analyzed the change in the amount
of earnings, book value and assets represented by one share of ExecuFirst Common
Stock prior to the Merger and one share of common stock in the combined entity
after the Merger. The analysis considered, among other things, the changes that
the Merger would cause to ExecuFirst's earnings per share, book value per share,
and assets per share. In reviewing the pro forma combined earnings, equity and
assets as of and for the period ended September 30, 1995, Berwind also reviewed
the percentage ownership that ExecuFirst's shareholders would hold in the
Holding Company. The Pro Forma contribution analysis supported Berwind's overall
conclusion that the proposed Merger was fair, from a financial point of view, to
the shareholders of ExecuFirst.
Pro Forma Comparable Analysis. Berwind compared selected financial and
operating data for the pro forma combined entity with those of a peer group of
publicly traded banks with assets between $200 million and $300 million with
headquarters in Maryland, New Jersey and Pennsylvania (the 'Pro Forma Peer
Group'). Financial data and operating ratios compared included, but were not
limited to, return on average assets, return on average equity, shareholders'
equity to assets and certain asset quality ratios. Berwind also compared certain
market ratios (including price to latest twelve months earnings per share, price
to book value and price to tangible book value) of the Pro Forma Peer Group with
those of the combined entity. The Pro Forma comparable analysis supported
Berwind's overall conclusion that the proposed Merger was fair, from a financial
point of view, to the shareholders of ExecuFirst.
Dilution Analysis. Using estimates prepared by the respective managements
of ExecuFirst and Republic, Berwind compared the calendar year 1996 and 1997
projected earnings per share of ExecuFirst Common Stock on a stand-alone basis
to the calendar year 1996 and 1997 projected earnings per share of the common
stock for the pro forma combined company. The dilution analysis supported to
Berwind's overall conclusion that the proposed Merger was fair, from a financial
point of view, to the shareholders of ExecuFirst.
Other Considerations. In connection with rendering its November Opinion
and Fairness Opinion, Berwind performed a variety of financial analyses.
Although the evaluation of the fairness, from a financial point of view, of the
consideration to be paid in the Merger was to some extent a subjective one based
on the experience and judgment of Berwind and not merely the result of
mathematical analysis of financial data, Berwind principally relied on the
previously discussed financial valuation methodologies in its determinations.
Berwind believes its analyses must be considered as a whole and that selecting
portions of such analyses and factors considered by Berwind without considering
all such analyses and factors could create an incomplete view of the process
underlying Berwind's opinion. In its analyses, Berwind made numerous assumptions
with respect to business, market, monetary and economic conditions, industry
performance and other matters, many of which are beyond Republic's and
ExecuFirst's control. Any estimates contained in Berwind's analyses are not
necessarily indicative of future results or values, which may be significantly
more or less favorable than such estimates.
In reaching its opinion as to fairness, none of the analyses performed by
Berwind was assigned a greater or lesser weight by Berwind than any other
analysis. As a result of its consideration of the
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aggregate of all factors present and analyses performed, Berwind reached the
conclusion, and opined, that the Merger, as set forth in the Plan of Merger, is
fair from a financial point of view to the shareholders of ExecuFirst.
Berwind's Fairness Opinion was based solely upon the information available
to it and the economic, market and other circumstances as they existed as of the
date the Fairness Opinion was delivered; events occurring after the date of the
Fairness Opinion could materially affect the assumptions used in preparing the
Fairness Opinion. Berwind has not undertaken to reaffirm and revise the Fairness
Opinion or otherwise comment upon any events occurring after the date thereof.
Pursuant to the terms of the Engagement Letter, ExecuFirst has previously
paid Berwind $15,000 for performing general financial advisory services and
$50,000 in connection with the Merger including the delivery of the November and
Fairness Opinions. In addition, ExecuFirst has also agreed to reimburse Berwind
for its reasonable out-of-pocket expenses. Whether or not the Merger is
consummated, ExecuFirst has also agreed to indemnify Berwind and certain related
persons against certain liabilities relating to or arising out of its
engagement.
ExecuFirst's shareholders are urged to read the Fairness Opinion in its
entirety. Berwind's Fairness Opinion is directed only to the fairness, from a
financial point of view, of the Merger to the shareholders of ExecuFirst and
does not constitute a recommendation to any holder of ExecuFirst Common Stock as
to how such holder should vote at the ExecuFirst Meeting.
THE FOREGOING PROVIDES ONLY A SUMMARY OF THE FAIRNESS OPINION OF BERWIND
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THAT OPINION,
WHICH IS SET FORTH IN ANNEX C TO THIS PROSPECTUS/JOINT PROXY STATEMENT.
Opinion of Republic's Financial Advisor
General. Republic has retained JMS to render a fairness opinion in
connection with the Merger. JMS has rendered opinions that, based upon and
subject to the various considerations set forth therein, as of November 14,
1995, and as of the date of this Prospectus/Joint Proxy Statement, the Merger is
fair, from a financial point of view, to the holders of Republic's securities.
The full text of JMS' Proxy Opinion as of the date thereof, which sets
forth the assumptions made, matters considered and limitations of the review
undertaken, attached as Annex D to this Prospectus/Joint Proxy Statement, is
incorporated herein by reference, and should be read in its entirety in
connection with this Prospectus/Joint Proxy Statement. The summary of the Proxy
Opinion of JMS set forth herein is qualified in its entirety by reference to the
full text of such opinion attached as Annex D to this Prospectus/Joint Proxy
Statement.
JMS was selected to render an opinion based upon its qualifications,
expertise and experience. JMS has knowledge of, and experience with,
Pennsylvania banking markets and banking organizations operating in those
markets and was selected by Republic because of its knowledge of, experience
with, and reputation in the financial services industry. In addition, within the
past three years, JMS acted as placement agent for Republic in the sale of
Subordinated Debentures and received a fee in connection therewith.
JMS did not participate in the negotiations with respect to the pricing and
other terms of the Merger, and the decision with respect to the Exchange Ratio
was determined by the Board in the process of its negotiations with ExecuFirst.
On November 17, 1995, the Board of Directors of Republic approved and executed
the Agreement and Plan of Merger. JMS delivered the Preliminary Opinion to the
Board stating that, as of November 14, 1995, the Exchange Ratio was fair to
holders of Republic's securities from a financial point of view. JMS reached the
same opinion as of the date of this Prospectus/Joint Proxy Statement. No
limitations were imposed by the Republic Board upon JMS with respect to the
investigations made or procedures followed by JMS in rendering the Preliminary
Opinion or the Proxy Opinion.
In rendering its Proxy Opinion, JMS: (i) reviewed the historical financial
performances, current financial positions and general prospects of Republic and
ExecuFirst, (ii) reviewed the Agreement and
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Plan of Merger, (iii) reviewed the Prospectus/Joint Proxy Statement, (iv)
reviewed and analyzed the stock market performance of Republic and ExecuFirst,
(v) studied and analyzed the consolidated financial and operating data of
Republic and ExecuFirst, (vi) considered the terms and conditions of the
proposed Merger between Republic and ExecuFirst as compared with the terms and
conditions of comparable bank mergers of equals and bank acquisitions, (vii) met
with certain members of Republic's and ExecuFirst's senior management to discuss
their respective operations, historical financial statements, and future
prospects, and (viii) conducted such other financial analyses, studies and
investigations as were deemed appropriate.
JMS relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by and
discussed with it for purposes of its opinion. With respect to Republic's,
ExecuFirst's and the Holding Company's financial forecasts reviewed by JMS in
rendering its opinion, JMS assumed that such financial forecasts were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the managements of Republic and ExecuFirst as to the future
financial performance of Republic, ExecuFirst and the Holding Company. JMS did
not make an independent evaluation or appraisal of the assets (including loans)
or liabilities of Republic or ExecuFirst nor was it furnished with any such
appraisal. JMS also did not independently verify and has relied on and assumed
that all allowances for loan and lease losses set forth in the balance sheets of
Republic and ExecuFirst were adequate and complied fully with applicable law,
regulatory policy and sound banking practice as of the date of such financial
statements.
The following is a summary of selected analyses prepared by JMS and
analyzed by JMS in connection with the Preliminary Opinion and Proxy Opinion.
Contribution Analysis. JMS analyzed the relative contributions by the two
parties to the merger in relation to the proportionate interests in the Holding
Company which will be held by shareholders of the respective parties following
the Merger. JMS estimated the holders of Republic's securities would hold
approximately 52.8% of the outstanding shares of the Holding Company and
existing shareholders of ExecuFirst would hold approximately 47.2% after the
Merger.
JMS presented a contribution analysis to the Board of Directors of Republic
showing that Republic accounted for approximately the following percentages of
the Holding Company based on managements' respective projections for the period
ended December 31, 1995: total assets--51.1%; total net loans--52.6%; total
deposits--50.1%; total equity--52.8% and total net income of 52.8%.
JMS also presented a comparison of various historical measures of earnings,
performance ratios and financial condition for the period from December 31, 1992
through December 31, 1995 JMS compared the following ratios: equity as a
percentage of assets over that time period for Republic and ExecuFirst (starting
at December 31, 1992) which were, respectively, 8.22%, 7.07%, 7.53% and 6.66%
for Republic and 7.81%, 7.12%, 6.20% and 6.10% and 6.10% for ExecuFirst;
nonaccruing loans as a percentage of assets were 0.00%, 0.27%, 0.83% and 0.41%
for Republic and 4.09%, 1.80%, 3.03% and 0.81% for ExecuFirst; nonperforming
assets plus loans 90 days past due as a percentage of assets were 0.54%, 0.27%,
0.83% and 0.94% for Republic and 5.05%, 2.39%, 3.13% and 1.02% for ExecuFirst;
loan loss reserve as a percentage of non-performing assets plus loans 90 day
past due were 77.10%, 167.88%, 74.03% and 51.55% for Republic and 49.85%,
50.13%, 41.27% and 98.33% for ExecuFirst; return on average assets before
extraordinary items were 0.54%, 0.55%, 0.78%, and 0.52%, for Republic and
(1.03%), 0.40%, (0.76%) and (0.01%) for ExecuFirst; return on average equity
before extraordinary items were 6.26%, 7.29%, 10.62% and 7.36% for Republic and
(10.89%), 5.18%, (10.46%) and (0.13%) for ExecuFirst; net interest margin were
3.10%, 2.97%, 3.29%, and 3.30% for Republic and 3.15%, 4.03%, 4.57% and 4.53%
for ExecuFirst; non-interest income as a percentage of average assets were
0.27%, 0.51%, 1.05%, and 0.14% for Republic and 0.07%, 0.09%, 0.11% and 0.18%
for ExecuFirst and efficiency ratios (defined as non-interest expense as a
percentage of net interest income plus non-interest income) were 82.64%, 73.98%,
64.49% and 72.50% for Republic and 94.00%, 82.93%, 89.69% and 85.34% for
ExecuFirst.
Comparable Company Analysis. JMS compared selected financial and operating
data for Republic and ExecuFirst with those of a peer group of selected banks
and bank holding companies, located in Connecticut, Delaware, District of
Columbia, Maryland, New Jersey, New York,
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Pennsylvania, Virginia and West Virginia, with assets between $50 million and
$150 million ('Peer') as of the most recent financial period publicly available
and for the past three fiscal reporting periods.
The analysis showed that equity as a percentage of assets was 6.66% for
Republic and 6.10% for ExecuFirst compared to the Peer median of 9.15%,
nonperforming assets plus loans 90 days past due as a percentage of
stockholders' equity plus loan loss reserves was 13.21% for Republic and 14.32%
for ExecuFirst compared to the Peer median of 10.35%, loan loss reserves as a
percentage of nonperforming assets plus loans 90 days past due was 51.55% for
Republic and 98.33% for ExecuFirst compared to the Peer median of 70.17% and
loans as a percentage of deposits were 72.81% for Republic and 64.09% for
ExecuFirst compared to the Peer median of 72.84%.
JMS also examined returns on average assets before extraordinary items,
returns on average equity before extraordinary items, net interest margins,
efficiency ratios and net charge-offs as a percentage of average loans for the
latest twelve months and the averages of these measures for the past three
fiscal years. Return on average assets before extraordinary items for the latest
twelve months and as an average over the past three years for Republic was 0.52%
and 0.62%, respectively, for ExecuFirst it was (0.01%) and (0.46%),
respectively, and for the Peer median it was 1.03% and 0.84%, respectively.
Return on average equity before extraordinary items for the latest twelve months
and as an average over the past three years for Republic was 7.36% and 8.06%,
respectively, for ExecuFirst it was (0.13%) and (5.39%), respectively, and for
the Peer median it was 11.72% and 9.38%, respectively. Net interest margins for
the latest twelve months and as an average over the past three years for
Republic were 3.30% and 3.12%, respectively, for ExecuFirst they were 4.53% and
3.92%, respectively, and for the Peer median they were 5.21% and 4.76%,
respectively. Efficiency ratios for the latest twelve months and as an average
over the past three years for Republic were 72.50% and 73.70%, respectively, for
ExecuFirst they were 85.34% and 88.87%, respectively, and for the Peer median
they were 72.80% and 75.29%, respectively. Net charge-offs as a percentage of
average loan for the latest twelve months and as an average over the past three
years for Republic were 0.25% and 0.16%, respectively, for ExecuFirst they were
2.84% and 1.92%, respectively, and for the Peer median they were 0.12% and
0.17%, respectively.
JMS also compared the growth in total loans, total assets and total
deposits for the period December 31, 1992, through September 30, 1995. Over that
period, total loans increased on a compounded annual basis of 12.3% for Republic
and over 0.4% for ExecuFirst compared to the Peer median of 13.0%, total assets
increased on a compounded annual basis of 17.6% for Republic and 9.1% for
ExecuFirst compared to the Peer median of 10.0% and total deposits increased on
a compounded annual basis of 16.9% for Republic and 9.7% for ExecuFirst compared
to the Peer median of 9.7%.
In addition, JMS reviewed selected market valuations for the peer group
compared to the indicated market valuations for Republic and ExecuFirst as of
November 9, 1995. Price per share as a percentage of book value was 79.9% for
Republic and 90.2% for ExecuFirst compared to the Peer median of 127.4%, price
as a percentage of tangible book value per share was 79.9% for Republic and
90.2% for ExecuFirst compared to the Peer median of 127.4% and price as a
multiple of latest twelve months earnings per share was 11.3 times for Republic
and not meaningful for ExecuFirst (as latest twelve months earnings were
negative) compared to the Peer median of 13.0 times. Dividend payout ratio for
Republic was 0.0% and 0.0% for ExecuFirst compared to the Peer median of 0.0%.
In addition, JMS also compared selected financial and operating projections
for the Holding Company based on managements' estimates with those of selected
banks and bank holding companies, located in Connecticut, Delaware, District of
Columbia, Maryland, New Jersey, New York, Pennsylvania, Virginia and West
Virginia, with assets between $200 million and $500 million ('Combined Company
Peer') as of the most recent financial period publicly available and for the
past three fiscal reporting periods.
The analysis showed that equity as a percentage of assets was 6.38% for
First Republic compared to the Combined Company Peer median of 8.25%,
nonperforming assets plus loans 90 days past due as a percentage of
stockholders' equity plus loan loss reserves was 13.75% for First Republic
compared to the Combined Company Peer median of 12.69%, loan loss reserves as a
percentage of nonperforming assets plus loans 90 days past due were 75.52% for
Combined Company compared to the Combined
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Company Peer median of 77.06% and loans as a percentage of deposits was 68.41%
for First Republic compared to the Combined Company Peer median of 71.33%.
JMS also examined returns on average assets before extraordinary items,
returns on average equity before extraordinary items, efficiency ratios and net
charge-offs as a percentage of average loans for the latest twelve months.
Return on average assets before extraordinary items for First Republic for the
latest twelve months was 0.26% compared to the Combined Company Peer median of
0.87%, return on average equity before extraordinary items for First Republic
for the latest twelve months was 3.87% compared to the Combined Company Peer
median of 10.73%, the efficiency ratio for First Republic for the latest twelve
months was 79.84% compared to the Combined Company Peer median of 65.95% and net
charge-offs as a percentage of average loans for First Republic were 0.44%
compared to the Combined Company Peer median of 0.10%.
In addition, JMS reviewed selected market valuations for the Combined
Company Peer group as of November 9, 1995. The median price per share as a
percentage of book value was 139.7%, the median price per share as a percentage
of tangible book value was 137.1%, price as a multiple of latest twelve months
earnings was 11.3 times and the dividend payout ratio (defined as cash dividends
paid as a percentage of net income) was 15.2%.
Comparable Transaction Analysis. JMS analyzed certain financial aspects of
selected other merger-of-equals transactions announced in the period of January
1, 1989 to November 14, 1995. JMS compared selected valuation ratios for all
mergers of equal transactions ('National Group') and those involving
transactions where the party deemed to be the 'selling' company had assets less
than $250 million ('Comparable Group'). The transaction price per share as a
percentage of book value per share was 89.5% for ExecuFirst compared to the
median for National Group of 133.6% and the median for Comparable Group of
132.1%. The transaction price per share as a percentage of tangible book value
of 89.5% for ExecuFirst compared to the median for National Group of 137.9% and
the median for Comparable Group of 132.1%. The transaction price per share as a
multiple of latest twelve months earnings per share was not meaningful since
ExecuFirst reported negative earnings for the period compared to the median for
National Group of 9.9 times and the median for Comparable Group of 10.1 times.
The transaction price per share as a percentage of deposits per share was 5.9%
for ExecuFirst compared to the median for National Group of 12.1% and the median
for Comparable Group of 11.7%. The transaction price per share as a percentage
of assets per share was 5.4% for ExecuFirst compared to the median for National
Group of 9.4% and the median for Comparable Group of 10.7%.
In addition, JMS reviewed the same valuation ratios for selected
acquisitions where the seller's total assets were less than $250 million
('Acquisition Group'). The median transaction price per share as a percentage of
book value for Acquisition Group was 188.5%, the median price per share as a
percentage of tangible book value per share was 188.5%, the median price per
share as a multiple of latest twelve months earnings per share was 19.8 times,
the median price per share as a percentage of deposits per share was 18.6% and
the median price per share as a percentage of assets per share was 16.5%.
Discounted Dividend Analyses. Using discounted dividend analyses, JMS
estimated the present value of the future dividend streams that Republic could
produce on a stand alone basis over a five year period under different
assumptions as to dividend payout levels, if Republic performed in accordance
with various earnings growth forecasts. JMS also estimated the terminal value
for Republic Common Stock after the five year period by applying a range of
earnings multiples from 10 to 13 times Republic's terminal year earnings. The
range of multiples used reflected a variety of scenarios regarding the growth
and profitability prospects of Republic. The dividend streams and terminal
values were then discounted to present value using discount rates ranging from
12% to 17%, reflecting different assumptions regarding the rates of return
required by holders or prospective buyers of Republic Common Stock. The analysis
showed an implied value ranging from $10.54 per share to $20.65 per share.
In addition, JMS estimated the present value of the future dividend streams
that the Holding Company could produce over a five year period under different
assumptions as to dividend payout levels, if the Holding Company performed in
accordance with various earnings growth forecasts based
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in part on the projections prepared jointly by the respective managements. JMS
also estimated the terminal value for the Holding Company Common Stock after the
five year period by applying a range of earnings multiples from 10 to 13 times
terminal year earnings. The range of multiples used reflected a variety of
scenarios regarding growth and profitability prospects of the Holding Company.
The dividend streams and terminal values were then discounted to present value
using discount rates ranging from 12% to 17%, reflecting different assumptions
regarding the rates of return required by holders or prospective buyers of the
Holding Company Common Stock. The analysis showed an implied value ranging from
$11.81 per share to $23.09 per share. Neither analysis is necessarily indicative
of actual values or actual future results and does not purport to reflect prices
at which securities may trade at the present or in the future.
Pro Forma Merger Analysis. JMS analyzed, using projections provided by
Republic and ExecuFirst certain pro forma effects resulting from the Merger
based on the proposed Exchange Ratio. This analysis examined the pro forma
impact to earnings per share and book value per share and compared them to
Republic's prospective earnings per share and book value per share. The analysis
indicated that based on the foregoing, the potential dilution to book value per
share was approximately 3.19% and the potential accretion to earnings per share
was approximately 30.74%.
In connection with rendering its Preliminary Opinion and Proxy Opinion, JMS
performed a variety of financial analyses. Although the evaluation of the
fairness, from a financial point of view, of the Exchange Ratio to be paid in
the Merger was to some extent a subjective one based on the experience and
judgment of JMS and not merely the result of mathematical analysis of financial
data, JMS principally relied on the previously discussed financial valuation
methodologies in its determinations. JMS believes its analyses must be
considered as a whole and that selecting portions of such analyses and factors
considered by JMS without considering all such analyses and factors could create
an incomplete view of the process underlying JMS' opinion. In its analysis, JMS
made numerous assumptions with respect to business, market, monetary and
economic conditions, industry performance and other matters, many of which are
beyond Republic's and ExecuFirst's control. Any estimates contained in JMS'
analyses are not necessarily indicative of future results or values, which may
be significantly more or less favorable than such estimates.
In reaching its opinion as to fairness, none of the analyses performed by
JMS was assigned a greater significance by JMS than any other. The analyses
discussed above supported JMS' overall conclusion that the proposed Merger is
fair from a financial point of view to the shareholders of Republic. As a result
of its consideration of the aggregate of all factors present and analyses
performed, JMS reached the conclusion, and opines, that the Exchange Ratio, as
set forth in the Agreement and Plan of Merger is fair, from a financial point of
view, to the shareholders of Republic.
In connection with delivering its Proxy Opinion, JMS updated certain
analyses described above to reflect current market conditions and events
occurring since the date of the Plan of Merger. Such reviews and updates led JMS
to conclude that it was not necessary to change the conclusions it had reached
in connection with rendering the Preliminary Opinion.
JMS, as part of its investment banking business, is regularly engaged in
the valuation of assets, securities and companies in connection with various
types of asset and securities transactions, including mergers, acquisitions,
private placements, and valuations for various other purposes and in the
determination of adequate consideration in such transactions.
JMS' Proxy Opinion was based solely upon the information available to it
and the economic, market and other circumstances as they existed as of the date
hereof; events occurring after the date hereof could materially affect the
assumptions used in preparing its Proxy Opinion. JMS has not undertaken to
reaffirm or revise its Proxy Opinion or otherwise comment upon any events
occurring after the date hereof.
In delivering its Preliminary Opinion and Proxy Opinion, JMS assumed that
in the course of obtaining the necessary regulatory and governmental approvals
for the Merger, no restrictions will be imposed on Republic or ExecuFirst that
would have a material adverse effect on the contemplated benefits of the Merger.
JMS also assumed that there would not occur any change in applicable law or
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regulation that would cause a material adverse change in the prospects or
operations of the Holding Company after the Merger.
Pursuant to the terms of the engagement letter dated November 8, 1995,
Republic paid JMS $25,000 upon the issuance of its Preliminary Opinion in
connection with the Merger. In addition, Republic has also agreed to pay JMS
$25,000 upon the consummation of the Merger and to reimburse JMS for its
reasonable out-of-pocket expenses. Whether or not the Merger is consummated,
Republic has agreed to indemnify JMS and certain related persons against certain
liabilities relating to or arising out of its engagement.
JMS' Proxy Opinion is directed only to the consideration to be received by
Republic shareholders in the Merger and does not constitute a recommendation to
any holder of Republic's securities as to how such security holder should vote
at the Special Meeting.
THE FOREGOING PROVIDES ONLY A SUMMARY OF THE PROXY OPINION OF JMS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THAT OPINION, WHICH
IS SET FORTH AS ANNEX D TO THIS PROSPECTUS/JOINT PROXY STATEMENT.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
consequences of the Merger to Republic and holders of Republic Common Stock. The
discussion does not address aspects of federal taxation other than income
taxation, nor does it address all aspects of federal income taxation including,
without limitation, aspects of federal income taxation that may be applicable to
particular holders of Republic Common Stock, such as holders who are dealers in
securities or persons who acquired their Republic Common Stock as compensation.
In addition, it does not address the state, local or foreign tax consequences of
the Merger, if any.
THE FOLLOWING DISCUSSION DOES NOT PURPORT TO BE, NOR SHOULD IT BE CONSTRUED
AS, TAX ADVICE. BECAUSE CERTAIN TAX CONSEQUENCES MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH HOLDER OF REPUBLIC COMMON STOCK, IT IS
RECOMMENDED THAT EACH REPUBLIC SHAREHOLDER SEEK THE ADVICE OF, AND CONSULT WITH,
HIS OR HER INDIVIDUAL TAX ADVISOR CONCERNING THE FEDERAL, STATE, LOCAL AND
FOREIGN TAX CONSEQUENCES OF THE MERGER IN LIGHT OF HIS OR HER PARTICULAR
CIRCUMSTANCES.
The principal federal income tax consequences of the Merger to ExecuFirst,
Republic and holders of Republic Common Stock will be as follows:
(1) The Merger will qualify as a reorganization within the meaning of
section 368(a) of the Code;
(2) No gain or loss will be recognized by ExecuFirst or Republic
solely as a result of the Merger;
(3) No gain or loss will be recognized by holders of Republic Common
Stock upon their receipt of Holding Company Common Stock in exchange for
their Republic Common Stock, except that Republic shareholders who receive
cash proceeds in lieu of fractional shares of Holding Company Common Stock
will recognize gain or loss equal to the difference, if any, between such
proceeds and the tax basis of Republic Common Stock allocated to their
fractional share interests. Such gain or loss, if any, will be capital gain
or loss if the fractional share interests exchanged are held as capital
assets at the Effective Date, and will be long-term capital gain or loss if
the holding period for the fractional share interests (including the
holding period of Republic Common Stock attributed thereto) exceeds one
year at the Effective Date;
(4) The tax basis of Holding Company Common Stock received by holders
of Republic Common Stock will be the same as the tax basis of the Republic
Common Stock exchanged therefor less the tax basis, if any, allocated to
fractional share interests;
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(5) The holding period of Holding Company Common Stock in the hands of
holders of Republic Common Stock will include the holding period of their
Republic Common Stock exchanged therefor, provided that such Republic
Common Stock is held as a capital asset at the Effective Date; and
(6) In general, a dissenting holder of Republic Common Stock receiving
solely cash in exchange therefor will recognize gain or loss equal to the
difference, if any, between the cash received and the dissenting holder's
tax basis in the Republic Common Stock. Such gain or loss, if any,
generally will be capital gain or loss if the Republic Common Stock for
which the dissenter receives cash is held as a capital asset at the
Effective Date, and will be long-term capital gain or loss if the
dissenting holder has held the Republic Common Stock for more than one year
at the Effective Date.
It is a condition to ExecuFirst's and Republic's obligations to effect the
Merger that ExecuFirst and Republic receive the Tax Opinions from Klehr,
Harrison, Harvey, Branzburg & Ellers and Spector Gadon & Rosen, P.C.,
respectively, to the effect that, on the basis of certain facts, including facts
derived from officers' certificates delivered by ExecuFirst and Republic and
certain assumptions stated in the Tax Opinions, (i) the Merger will be treated
as a reorganization under Section 368(a) of the Code, and (ii) no gain or loss
will be recognized by the Republic shareholders who receive shares of Holding
Company Common Stock in exchange for their shares of Republic Common Stock,
except that gain or loss may be recognized as to cash received in lieu of
fractional share interests. Neither ExecuFirst nor Republic intends to waive
this condition. If this condition is waived by either ExecuFirst or Republic
after approval of the Merger by the holders of Republic Common Stock, then
Republic intends to resolicit its shareholders prior to consummation of the
Merger. No ruling has been or will be obtained from the Internal Revenue Service
(the 'Service') with respect to the Merger. The Tax Opinions are not binding on
the Service or the courts, and no assurance can be given that the Tax Opinions
would be followed if challenged by the Service. See 'THE PLAN OF MERGER AND
RELATED AGREEMENTS--Conditions to Consummation.'
ACCOUNTING TREATMENT
The Merger will be accounted for under purchase accounting treatment. Upon
consummation of the Merger, shareholders of Republic will own approximately
1,604,411 shares of Holding Company Common Stock (based on an Exchange Ratio of
2.02 calculated based on the ExecuFirst and Republic Book Values per share on
March 31, 1996) or approximately 56.6% of the issued and outstanding Holding
Company Common Stock. GAAP requires that the company whose shareholders will
have the controlling interest in the combined entity be treated as the acquiring
entity for purposes of purchase accounting treatment. As a consequence, and
solely for accounting and financial reporting purposes, Republic will be deemed
to have acquired ExecuFirst, notwithstanding the fact that the Holding Company
(as ExecuFirst is referred to herein with respect to post-Merger actions) will
be the surviving and continuing legal entity. The unaudited pro forma financial
information contained in this Prospectus/Joint Proxy Statement has been prepared
using purchase accounting treatment to account for the Merger. See 'UNAUDITED
PRO FORMA COMBINED FINANCIAL INFORMATION.'
REGULATORY APPROVALS
The Merger is subject to prior approval by the Federal Reserve Board under
the Bank Holding Company Act. The Federal Reserve Board will consider the
financial and managerial resources of the companies involved and whether the
proposed transaction can reasonably be expected to produce benefits to the
public (such as greater convenience, increased competition, or gains in
efficiency) that outweigh possible adverse effects (such as undue concentration
of resources, decreased or unfair competition, conflicts of interests, or
unsound banking practices). In addition, the Federal Reserve Board has the
authority to deny an application if it concludes that the combined organization
would have an inadequate capital position or if the acquiring organization does
not meet the requirements of the Community Reinvestment Act of 1977.
The Merger is also subject to the approval of The Department of Banking.
The Department of Banking may conduct such investigation with respect to the
Merger as it deems necessary. Such
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investigation must specifically include consideration of the effects of the
Merger on the reasonable availability of banking services to all segments of the
public and economy of the Commonwealth of Pennsylvania, with special emphasis on
the financing of enterprises and economic development with a view to increasing
or retaining employment opportunities. The Department of Banking will also
review the credit practices and policies of each of ExecuFirst and Republic to
determine their overall performance in providing financial services to
individuals and businesses, their individual resources, capital and income, the
particular needs of the communities served by each of ExecuFirst and Republic,
and the existence of competition and alternative sources of credit within such
communities.
Joint applications for approval of the Plan of Merger and the Merger have
been filed by ExecuFirst and Republic with each of the Federal Reserve Board and
the Department of Banking.
THE MERGER CANNOT BE CONSUMMATED IN THE ABSENCE OF THE REQUISITE REGULATORY
APPROVALS. THERE CAN BE NO ASSURANCE THAT SUCH REGULATORY APPROVALS WILL BE
OBTAINED IN A TIMELY FASHION, OR AT ALL. IN THE EVENT THAT ANY SUCH REGULATORY
APPROVALS WHICH ARE OBTAINED ARE SUBJECT TO THE IMPOSITION OF A CONDITION OR
REQUIREMENT WHICH WOULD MATERIALLY AND ADVERSELY AFFECT THE ECONOMIC OR BUSINESS
BENEFITS OF THE MERGER TO EXECUFIRST OR REPUBLIC, THE PLAN OF MERGER AND THE
MERGER MAY BE TERMINATED. THERE CAN BE NO ASSURANCE THAT ANY SUCH REGULATORY
APPROVALS WHICH ARE OBTAINED WILL NOT BE SUBJECT TO SUCH CONDITION OR
REQUIREMENT. See 'THE PLAN OF MERGER AND RELATED AGREEMENTS--Conditions to
Consummation of the Merger; Termination; Amendment.'
RECENT DEVELOPMENTS
ExecuFirst and Republic have reported preliminary financial results for the
quarter ended March 31, 1996. Set forth below is a summary of such results.
EXECUFIRST
For the quarter ended March 31, 1996, ExecuFirst reported net income of
$216,000, or $0.18 per share compared with net income of $90,000, or $0.07 per
share, for the same period in 1995. The increase in the Company's results in the
first quarter of 1996 was primarily the result of an increase in non-interest
income in Bank servicing fees of $60,000 and revenue of $80,000 generated from a
tax refund program. Net interest income for the first quarter decreased to
$1,281,000 from $1,379,000 reported for the same period in 1995, resulting from
a decline in the net interest margin to 4.49% from 5.27%, primarily as the
result of an increase in the Bank's cost of funds.
The Company's total assets decreased to $120,714,000 at March 31, 1996 from
$129,663,000 at December 31, 1995, as the result of assets at year-end being
unusually high based on historical trends and due to the inclusion of some
short-term non-core deposits which were subsequently withdrawn during the first
quarter of 1996.
Shareholders' equity totaled $7,944,000 at March 31, 1996 compared to
$7,782,000 at December 31, 1995. The increase in first quarter earnings was
partially offset by the reduction of unrealized gain on Securities Held For Sale
to $17,000 from $86,000 at December 31, 1995.
REPUBLIC
For the quarter ended March 31, 1996, Republic reported net income of
$1,526,916, or $1.92 per share compared with net income of $140,048, or $0.18
per share, for the same period in 1995. The increase in Republic's results in
the first quarter of 1996 was primarily the result of an increase in non-
interest income generated from the Refant Program which represented
approximately $1,300,000 in net income, net of tax expense. Republic did not
participate in the Refant Program during 1995. Net interest income for the first
quarter increased to $1,159,271 from $888,050 reported for the same period in
1995, primarily as a result of increases in the loan portfolio as well as the
Refant Program.
Republic's total assets increased to $191,666,000 at March 31, 1996 from
$131,001,000 at December 31, 1995, the result of an increase in funding sources
obtained to participate in the tax
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refund program. This funding at March 31, 1995 was invested in Federal Funds
Sold which totaled $65,314,000.
Shareholders' equity totaled $10,157,000 at March 31, 1996 compared to
$8,622,000 at December 31, 1995. The increase is a result of first quarter
earnings.
Assuming that the Merger is consummated in the second fiscal quarter,
Republic's shareholders will receive 2.02 shares of Holding Company Common Stock
for each share of Republic Common Stock held.
RIGHTS OF DISSENTING SHAREHOLDERS
The following summary of the statutory requirements which a Republic
shareholder must satisfy in order to exercise the right to dissent is qualified
in its entirety by the full text of Chapter 15, a copy of which is attached to
this Prospectus/Joint Proxy Statement as Annex B. Any shareholder of Republic
who contemplates exercising the right to dissent should carefully read all of
the provisions of Chapter 15. EACH REQUIRED STEP MUST BE TAKEN IN THE INDICATED
ORDER AND IN STRICT COMPLIANCE WITH THE APPLICABLE PROVISIONS OF THE STATUTE IN
ORDER TO PERFECT DISSENTERS' RIGHTS AND HAVE A RIGHT TO PAYMENT. Any shareholder
who fails to comply with all of the required steps will not be permitted to
dissent and instead will receive shares of Holding Company Common Stock in
accordance with the Plan of Merger.
Any written notice or demand which is required in connection with the
exercise of dissenters' rights, whether before or after the Effective Date, must
be sent to Republic addressed to Rolf A. Stensrud, President, Republic Bank,
1515 Market Street, Philadelphia, PA 19102.
The term 'Fair Value' means the value of Republic Common Stock immediately
before the effectuation of the Merger, taking into account all relevant factors,
but excluding any appreciation or depreciation in anticipation of the Merger.
Any shareholder of Republic who wishes to dissent and obtain payment of the
Fair Value of such shareholder's shares must (i) file with Republic, prior to
the vote at the Republic Meeting, a written notice of intention to demand
payment for the Fair Value for such shares if the proposed Merger is
consummated, (ii) make no change in the beneficial ownership of such
shareholder's shares from the date of such filing continuously through the
Effective Date of the Merger, and (iii) refrain from voting such shareholder's
shares in approval of the Merger. A VOTE AGAINST THE MERGER WILL NOT CONSTITUTE
THE WRITTEN NOTICE REQUIRED BY CHAPTER 15. A proxy which is signed and returned
without any voting instructions will be deemed a vote in favor of the Merger. If
the Merger is approved by at least a majority of the shares cast at the Republic
Meeting, Republic, or the Holding Company, will mail a notice to all dissenters
who gave notice of intention to demand payment of the fair value of their shares
and who refrained from voting in favor of the Merger. The notice will state
where and when a demand for payment must be sent and where the original stock
certificates must be deposited in order to obtain payment. The date by which the
demand for payment and the deposit of the original stock certificates is
required to be made will be specified in the notice, but in no event will such
period of time be less than 30 days from the mailing of the notice. In addition,
the notice will provide a form for demanding payment, which will include a
request for certification of the date on which a shareholder acquired beneficial
ownership of such shareholder's shares.
Promptly after consummation of the Merger, the Holding Company will remit,
to dissenters who have made timely demand for payment and who have deposited
their original stock certificates, an amount which the Holding Company estimates
to be the Fair Value of the shares of Republic Common Stock. The payment will be
accompanied by the closing balance sheet and statement of income of Republic for
the fiscal year ending December 31, 1995, together with the latest available
interim statements. In addition, the payment will be accompanied by a statement
of the Holding Company's estimate of the Fair Value of the shares and a notice
of the right of the dissenter to demand supplemental payment for the dissenter's
shares. If the Holding Company gives notice of its estimate of the Fair Value of
the Republic Common Stock without payment of such amount or if the Holding
Company pays its estimate of the Fair Value of a dissenter's shares and the
dissenter believes that the amount stated or remitted is less than the Fair
Value of the shares, the dissenter may send to the
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Holding Company the dissenter's own estimate of the Fair Value of the shares,
which will be deemed to be a demand for payment of the amount or the deficiency.
Any such demand for payment of the amount or the deficiency must be made by the
dissenter within thirty (30) days after the mailing by the Holding Company of
its payment or notice, otherwise the dissenter will be entitled to no more than
the amount stated in the notice or paid by the Holding Company.
Within sixty (60) days after the latest of (i) consummation of the Merger,
(ii) timely receipt of any demands for payment, or (iii) timely receipt of any
estimate by a dissenter of the Fair Value of the shares, if any demands for
payment remain unsettled the Holding Company may file in court an application
for relief requesting that the Fair Value of the shares be determined by the
court. If the Holding Company fails to file an application with the court, any
dissenter who made a demand and who has not already settled the dissenter's
claim against the Holding Company may file an application with the court at any
time within thirty (30) days after expiration of the sixty (60) day period. If a
dissenter does not file an application within the thirty (30) day period, the
dissenter will be paid the Holding Company's estimate of the Fair Value of the
shares of Republic Common Stock and may bring an action to recover any amount
not previously remitted.
Where shares of Republic Common Stock are held of record in a 'nominee
name' or 'street name' by a broker or dealer, the broker or dealer may assert
dissenters' rights as to less than all of the shares registered in its name only
if such nominee dissents with respect to all of the shares beneficially owned by
any one person and discloses the name and address of the person or persons on
whose behalf the nominee dissents. A beneficial owner of shares of Republic
Common Stock who is not the record holder may assert dissenters' rights with
respect to shares held on such beneficial owner's behalf, and will be treated as
a dissenting shareholder, if such beneficial owner timely submits to Republic a
written consent of the record holder. A beneficial owner can only dissent with
respect to all of the shares of Republic Common Stock owned by such beneficial
owner, whether or not the shares owned by such beneficial owner are registered
in the beneficial owner's name.
Based on the aggregate dollar amount that the Holding Company would be
required to pay in the event that the holders of more than 5% of the issued and
outstanding Republic Common Stock exercise and perfect dissenters' rights, the
ExecuFirst and Republic have determined that such exercise and perfection of
dissenters' rights would constitute a Material Adverse Effect and The Merger
would be terminated.
IT IS A CONDITION TO CONSUMMATION OF THE MERGER, WHICH CONDITION MAY BE
WAIVED BY REPUBLIC, THAT THE HOLDERS OF NO MORE THAN 5% OF THE ISSUED AND
OUTSTANDING REPUBLIC COMMON STOCK ELECT TO EXERCISE DISSENTERS' RIGHTS.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the management and Boards of Republic and ExecuFirst
have interests in the Merger that are in addition to any interests they may have
as shareholders of Republic or ExecuFirst generally, as discussed below.
Employment Agreements
ExecuFirst and First Executive Bank have entered into an amended and
restated employment agreement with Zvi H. Muscal (the 'Muscal Agreement') with
respect to his employment as President and Chief Executive Officer of the
Holding Company and as Chairman and Co-Chief Executive Officer of First Republic
Bank. In the event the Merger is not consummated, Mr. Muscal will continued to
be employed by ExecuFirst and First Executive Bank under his current employment
agreement. The Muscal Agreement contains terms substantially similar to Mr.
Muscal's current employment agreement except that, among other things, Mr.
Muscal's annual base salary may not be increased for at least one year following
the Effective Date of the Merger. For a description of the Muscal Agreement, See
'EXECUFIRST--Directors and Executive Officers.'
Upon consummation of the Merger, the Holding Company and First Republic
Bank will enter into an agreement with Rolf A. Stensrud, currently Chief
Executive Officer, President and director of Republic, pursuant to which Mr.
Stensrud will serve as Executive Vice President and Chief Operating
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Officer of the Holding Company and President and Co-Chief Executive Officer of
First Republic Bank (the 'Stensrud Agreement'). For a description of the
Stensrud Agreement, See 'EXECUFIRST-- Directors and Executive Officers.'
George S. Rapp, currently Executive Vice President and Chief Operating
Officer of First Executive Bank, is employed under an agreement which will
expire on February 22, 1997. Mr. Rapp will continue to act as Executive Vice
President and Chief Operating Officer of First Republic Bank. Upon consummation
of the Merger, Mr. Rapp and First Republic Bank will enter into an amended and
restated agreement. For a description of Mr. Rapp's current agreement, See
'EXECUFIRST-- Directors and Executive Officers.'
Upon consummation of the Merger, First Republic Bank will enter into an
agreement (the 'Gallagher Agreement') with Kevin Gallagher, currently Republic
Bank's Chief Lending Officer, pursuant to which Mr. Gallagher will serve as
Executive Vice President and Chief Lending Officer of First Republic Bank. For a
description of the Gallagher Agreement, See 'EXECUFIRST--Directors and Executive
Officers.'
Other Agreements
Upon consummation of the Merger, the Holding Company will enter into an
agreement with Harry D. Madonna, currently Republic's Chairman, pursuant to
which Mr. Madonna will serve as Chairman of the Board of the Holding Company.
For a description of such agreement, See 'EXECUFIRST--Directors and Executive
Officers.'
Indemnification; Directors' and Officers' Insurance
The Plan of Merger provides that the Holding Company will indemnify the
past and present directors and officers of Republic and its subsidiaries against
certain liabilities, for six years following the Effective Date, to the fullest
extent that such persons are entitled to indemnification under the laws of the
Commonwealth of Pennsylvania and Republic's Articles of Incorporation and
By-Laws as in effect on the date of the Plan of Merger. The Plan of Merger also
provides that if economically feasible, for a period of 3 years after the
Effective Date, the Holding Company will maintain Republic's existing directors'
and officers' liability policy, or obtain a policy (including ExecuFirst's
existing policy) providing comparable coverage in an amount and on terms no less
favorable, covering such persons as were covered by the Republic policy on the
date of the Plan of Merger.
Employee Stock Options
Certain members of Republic's management hold Republic Stock Options. It is
a condition to consummation of the Merger, which condition may be waived by
ExecuFirst, that such holders waive certain rights with respect to such options.
Upon consummation of the Merger, such Republic Stock Options will be converted
into options to purchase stock in the Holding Company and will be governed by
the terms and conditions of the Amended and Restated Stock Option Plan except
that, in the event such option holder's relationship with the Holding Company is
terminated, such option will remain exercisable until its expiration. See 'THE
PLAN OF MERGER AND RELATED AGREEMENTS-- Amended and Restated Stock Option Plan;
Treatment of Employee Stock Option and PROPOSAL V.'
Appointment of Republic Directors to ExecuFirst Board
It is a condition to the consummation of the Merger that the ExecuFirst
Board increase the number of directors to 17 members from 8 members and that
such newly created vacancies be filled by the current members of the Republic
Board or other designees of Republic who shall be reasonably acceptable to
ExecuFirst. As of the date hereof, it is intended that Messrs. Harry D. Madonna,
Kenneth Adelberg, Daniel S. Berman, William W. Batoff, Eustace W. Mita, Neal I.
Rodin, Steven J. Shotz, Rolf A. Stensrud and Harris Wildstein, each of whom is
currently a director of Republic, will be appointed to the Holding Company
Board. See 'THE MERGER--Overview; THE PLAN OF MERGER AND RELATED
AGREEMENTS--Corporate Structure and Related Matters After the Merger; Conditions
to Consummation of the Merger.'
47
<PAGE>
THE PLAN OF MERGER AND RELATED AGREEMENTS
THE PLAN OF MERGER
The following paragraphs summarize, among other things, the material terms
of the Plan of Merger, which is attached hereto as Annex A and incorporated by
reference herein. Shareholders are urged to read the Plan of Merger in its
entirety for a more complete description of the Merger.
CONVERSION OF REPUBLIC COMMON STOCK
Subject to the terms and conditions of the Plan of Merger, Republic will
merge with and into ExecuFirst and ExecuFirst will change its corporate name to
First Republic. At the Effective Date, each outstanding share of Republic Common
Stock (other than shares as to which dissenters' rights have been perfected and
shares held in the treasury of Republic, the latter of which will be canceled,
without consideration, as a result of the Merger) will be converted into the
right to receive that number of shares of Holding Company Common Stock as
determined by the Exchange Ratio. If the Merger had been consummated on March
31, 1996, each share of Republic Common Stock would be exchanged for
approximately 2.02 shares of Holding Company Common Stock and an aggregate total
of 1,604,411 shares of Holding Company Common Stock would be issued to Republic
shareholders, representing 56.6% of the issued and outstanding Holding Company
Common Stock. No fractional shares of Holding Company Common Stock will be
issued in the Merger, but in lieu thereof each holder of Republic Common Stock
who would otherwise be entitled to a fraction of a share of Holding Company
Common Stock (after aggregating all fractional shares of Holding Company Common
Stock to be received by such holder) will receive from Holding Company an amount
in cash (rounded to the nearest whole cent), without interest, equal to the
product of such fraction multiplied by the ExecuFirst Book Value Per Share. For
information regarding rights of dissenting shareholders. See 'THE SPECIAL
MEETINGS--The Republic Meeting--Rights of Dissenting Shareholders'.
As soon as practicable after Effective Date, the Holding Company will cause
to be sent to each shareholder of record of Republic as of the Effective Date
(other than dissenting shareholders) transmittal materials for use in exchanging
certificates representing shares of Republic Common Stock for certificates
representing shares of Holding Company Common Stock. The transmittal materials
will contain information and instructions with respect to the surrender of
Republic Common Stock certificates and the amount of cash to be paid for any
fractional shares resulting from the exchange. CERTIFICATES REPRESENTING SHARES
OF REPUBLIC COMMON STOCK SHOULD NOT BE SURRENDERED UNTIL THE LETTER OF
TRANSMITTAL IS RECEIVED.
EFFECTIVE DATE
The Merger will become effective upon the fifteenth (15) calendar day
following the satisfaction or waiver by ExecuFirst and Republic of each of the
conditions set forth in Article VI of the Plan of Merger or upon such other date
as the parties may agree. See 'THE PLAN OF MERGER AND RELATED
AGREEMENTS--Conditions to Consummation of the Merger.'
ALTERNATIVE PROPOSALS
The Plan of Merger provides that each of Republic and ExecuFirst shall not,
other than in limited circumstances, directly or through their respective
subsidiaries, (i) solicit or encourage inquiries or proposals with respect to
any tender offer or exchange offer, or (ii) have any discussions or engage in
any negotiations with a third party concerning or relating to a tender offer or
exchange offer or the acquisition by such third party of a substantial equity
interest in or a substantial portion of the assets of the other party to the
Plan of Merger or its subsidiaries. The Plan of Merger does not prevent the
Republic Board and/or the ExecuFirst Board from furnishing information to and
participating in discussions and negotiations with third parties in the event
that either Board determines in good faith, after consultation with and upon the
advice of its outside counsel, that it is required to do so in the exercise of
their respective fiduciary duties.
49
<PAGE>
BUSINESS PENDING CONSUMMATION OF THE MERGER AND RELATED MATTERS
Pursuant to the Plan of Merger, each of Republic and ExecuFirst has made
certain covenants, with respect to itself and its subsidiary or subsidiaries,
relating to the conduct of business pending the consummation of the Merger.
Among other things, each of Republic and ExecuFirst has agreed (except as
otherwise contemplated or permitted by the Plan of Merger or with the prior
written consent of the other party) that it, and each of their respective
subsidiaries, will operate their businesses in accordance with their ordinary
and usual course and in a manner consistent with past practices. In particular,
each of Republic and ExecuFirst has agreed not to take any of the following
actions without the prior written consent of the other party: (i) issue any
additional shares of its capital stock or give any person the right to acquire
any such shares; (ii) declare or pay any dividend or redeem or otherwise acquire
any shares of its capital stock; (iii) increase any salaries or employee
benefits or enter into or modify any employment agreements or employee benefit
plans; (iv) dispose of or discontinue any of its material assets, business or
properties or acquire any material business or property of any other entity; (v)
take any action, other than as required by GAAP or by regulation of any banking
or governmental authority, to change accounting policies or procedures; or (vi)
knowingly take any action which would or would be reasonably likely to (a)
prevent or impede the Merger from qualifying as a reorganization under the Code,
(b) result in any of the representations or warranties contained in the Plan of
Merger being or becoming untrue in any material respect, (c) result in any of
the conditions to the Merger not being satisfied, or (d) result in a material
violation of any provision of the Plan of Merger except, in every case, as may
be required by law.
CORPORATE STRUCTURE AND RELATED MATTERS AFTER THE MERGER
On or prior to the Effective Date, the Articles of Amendment, as described
below, amending ExecuFirst's Articles of Incorporation will be filed with the
Secretary of State of the Commonwealth of Pennsylvania and the Department of
Banking and will become effective at the Effective Time. On the Effective Date
at the Effective Time, Republic will be merged with and into ExecuFirst and
ExecuFirst will change its corporate name to First Republic. ExecuFirst's Board
of Directors will be, or will have been, increased to seventeen (17) members and
nine (9) members of Republic's Board of Directors (or designees of Republic
reasonably acceptable to ExecuFirst) will have been appointed to fill such newly
created vacancies with respect to the Holding Company. First Republic. As of the
date hereof, it is intended that Messrs. Harry D. Madonna, Kenneth Adelberg,
Daniel S. Berman, William W. Batoff, EustaceW. Mita, Neal I. Rodin, Steven J.
Shotz, Rolf A. Stensrud and Harris Wildstein, each of whom is currently a
director of Republic, will be appointed to the First Republic Board. Harry D.
Madonna, (Chairman of the Republic Board) shall be Chairman of the Holding
Company Board; Michael J. Bradley (Chairman of First Executive) shall be
Vice-Chairman; Zvi H. Muscal (Chairman, President and Chief Executive Officer of
ExecuFirst) shall be President and Chief Executive Officer; and Rolf A. Stensrud
(President and Chief Executive Officer of Republic) shall be Executive Vice
President and Chief Operating Officer. With respect to First Republic Bank, Zvi
H. Muscal shall be Chairman and Co-Chief Executive Officer; Rolf A. Stensrud
shall be President and Co-Chief Executive Officer; George S. Rapp (Executive
Vice President and Chief Operating Officer of First Executive) shall be
Executive Vice President and Chief Operating Officer; and Kevin J. Gallagher
(Chief Lending Officer of Republic Bank) shall be Executive Vice President and
Chief Lending Officer. See 'THE MERGER--Interests of Certain Persons in the
Merger.'
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to the satisfaction of various
conditions, including (i) the approval and adoption of (a) the Plan of Merger,
(b) the amendments to ExecuFirst's Articles of Incorporation, and (c) the
Amended and Restated Stock Option Plan, by the requisite vote of the
shareholders of Republic (as to item (a) only) and ExecuFirst (as to items (a),
(b), and (c)); (ii) the effectiveness of the Registration Statement of which
this Prospectus/Joint Proxy Statement is a part (pursuant to which the Holding
Company Common Stock to be issued in the Merger will be registered) and the
absence of any stop order or proceedings seeking a stop order relating to the
Registration Statement; (iii) receipt by each of Republic and ExecuFirst of all
regulatory approvals and consents or the expiration or termination of any
waiting period applicable to the Merger; (iv) the absence of any
50
<PAGE>
order, decree or injunction issued by any court of competent jurisdiction or
other legal restraints or prohibitions, prohibiting or making illegal the
consummation of the Merger, (v) the receipt of an officer's certificate by each
of Republic and ExecuFirst to the effect that certain representations and
warranties made by the respective party are true and correct in all respects on
and as of the Effective Time, except where the failure to be true and correct
would not have had a Material Adverse Effect (as defined below), and to the
effect that the respective party has performed or complied in all material
respects with all agreements and covenants required by the Plan of Merger on or
prior to the Effective Time; (vi) the obtaining by Republic and ExecuFirst of
all material consents, waivers, approvals, authorizations or orders (other than
those of regulatory authorities or the shareholders of each of Republic and
ExecuFirst) required to be obtained and all filings required to be made for the
authorization, execution and delivery of the Plan of Merger and the consummation
of the transactions contemplated thereby; (vii) exercise of dissenters' rights
of appraisal under Chapter 15 of the BCL in connection with the Merger by
holders of not more than 5% of the shares of Republic Common Stock; (viii) the
receipt by Republic and ExecuFirst of the Tax Opinions, Accountant's Letters and
Fairness Opinions; (ix) approval for listing on NASDAQ Small Cap Market or, if
eligible, the National Market System, of the shares of the Holding Company
Common Stock issuable pursuant to the Plan of Merger; and (x) increase of
ExecuFirst's Board to 17 members and appointment thereto of 9 members of the
Republic Board or designees of Republic. In addition, it is a condition to the
obligation of Republic and ExecuFirst to consummate the Merger that the other
shall not have experienced any change, occurrence or circumstance (individually
or taken together) that is reasonably likely to be materially adverse to its or
any of its subsidiaries' business, assets, financial condition, results of
operations or prospects (a 'Material Adverse Effect').
The obligations of ExecuFirst to consummate the Merger are further subject
to the satisfaction of the following conditions: (i) ExecuFirst shall have
received a legal opinion, dated as of the Effective Date, from Spector, Gadon &
Rosen, P.C., outside counsel to Republic, regarding certain matters; (ii) each
of Rolf A. Stensrud and Kevin J. Gallagher shall have entered into employment
agreements, and each of Zvi H. Muscal and George Rapp shall have entered into
amended and restated employment agreements, with ExecuFirst; (iii) Harry D.
Madonna, Chairman of Republic, shall have entered into an agreement with the
Holding Company with respect to his service as Chairman of the Holding Company;
(iv) ExecuFirst shall have received a waiver from each holder of a Republic
Stock Option, (v) the total shareholders' equity of Republic (calculated in
accordance with GAAP) shall not be less than $6,979,000; and (vi) ExecuFirst
shall have received a written opinion from Berwind, dated as of the date hereof,
to the effect that the Merger is fair to ExecuFirst from a financial point of
view.
The obligations of Republic to consummate the Merger are further subject to
the satisfaction of the following conditions: (i) Republic shall have received a
legal opinion, dated as of the Effective Date, from Klehr, Harrison, Harvey,
Branzburg & Ellers, outside counsel to ExecuFirst, regarding certain matters;
(ii) Republic shall have received a written opinion from JMS, dated as of the
date hereof, to the effect that the terms of the Merger are fair to Republic and
its shareholders from a financial point of view, and (iii) the total
shareholder's equity of ExecuFirst (calculated in accordance with GAAP) shall
not be less than $6,000,000.
TERMINATION; AMENDMENT
The Plan of Merger may be terminated, and the Merger abandoned, prior to
the Effective Date (notwithstanding approval by the shareholders of each of
ExecuFirst and Republic), under the circumstances specified in the Plan of
Merger, including (i) by mutual written agreement of Republic and ExecuFirst; or
(ii) by either Republic or ExecuFirst, (a) if the Merger has not been
consummated by June 30, 1996 and if the terminating party has not caused the
failure of the Merger to be consummated by reason of its knowing action or
inaction; (b) if approval of the Merger is not received from the Federal Reserve
Board and/or the Department of Banking or such approval shall have been received
subject to the imposition of a condition or requirement which would materially
and adversely effect the business benefits of the Merger; (c) if the Federal
Reserve Board shall have issued a non-appealable final order prohibiting the
Merger; (d) if the shareholders of such party fail to approve the Merger or the
Plan of Merger; (e) if the Board of such party has failed to recommend the
Merger to its respective shareholders or has withdrawn, modified or changed its
recommendation of the Merger or
51
<PAGE>
the Plan of Merger; or (f) in the event of a breach by the other, of any
representation or warranty or a material breach of any covenant or agreement
contained in the Plan of Merger which breach cannot be cured within thirty (30)
days after the giving of notice to the breaching party.
The Plan of Merger may be amended by an agreement in writing among the
parties thereto at any time prior to the Effective Time. In the event that
following approval of the Merger and the Plan of Merger by the ExecuFirst and
Republic shareholders, the Exchange Ratio is increased or decreased by more than
5%, ExecuFirst and Republic will each resolicit their respective shareholders.
AMENDED AND RESTATED STOCK OPTION PLAN; TREATMENT OF EMPLOYEE STOCK OPTIONS
Subject to the approval of ExecuFirst's shareholders at the ExecuFirst
Meeting, the ExecuFirst Board has adopted the Amended and Restated Stock Option
Plan. Upon consummation of the Merger, Republic's Stock Option Plan (the
'Republic Plan') will be terminated and be of no further force and effect. It is
a condition to consummation of the Merger, which condition may be waived by
ExecuFirst, that holders of Republic Options consent to the conversion of such
options into Holding Company Options (as hereinafter defined). Such Holding
Company Options will be deemed to have been granted under the Amended and
Restated Stock Option Plan. The terms and conditions of such Holding Company
Options will be substantially similar to the terms and conditions of other
options granted under the Amended and Restated Stock Option Plan except that, in
the event such option holder's relationship with the Holding Company is
terminated, such option will remain exercisable until terminated. In the event
that the Amended and Restated Stock Option Plan is not approved by ExecuFirst
shareholders, such Holding Company Options will be granted outside ExecuFirst's
current Stock Option Plan.
A description of the Amended and Restated Stock Option Plan is set forth in
Proposal V and the full text of the Amended and Restated Plan is set forth as
Annex G to this Prospectus/Joint Proxy Statement.
Treatment of Republic Stock Options
Upon consummation of the Merger and the consent of the holders of Republic
Stock Options, each outstanding Republic Stock Option will be converted into an
option to purchase Holding Company Common Stock (a 'Holding Company Option').
Each such Holding Company Option which will be exercisable for that number of
shares of Holding Company Common Stock equal to the product of (i) the number of
shares of Republic Common Stock that were purchasable under the Republic Plan
immediately prior to the Effective Date, multiplied by (ii) the Exchange Ratio,
rounded down to the nearest whole number of shares of Holding Company Common
Stock. The per share exercise price for the shares of Holding Company Common
Stock issuable upon exercise of the Holding Company Option will be equal to the
product of (x) the exercise price per share of Republic Common Stock at which
the Republic Stock Option was exercisable immediately prior to the Effective
Date and (y) the quotient obtained by dividing 1 by the Exchange Ratio, and
rounding the resulting exercise price up to the nearest whole cent. The Holding
Company Option will be subject to any applicable vesting schedule to which the
Republic Stock Option was subject. Republic Stock Options exercisable to
purchase 154,880 shares of Republic Common Stock are issued and outstanding as
of the date hereof, such options, would be converted to options to purchase
312,858 shares of Holding Company Common Stock (based on the Exchange Ratio of
2.02 on March 31, 1996).
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<PAGE>
Set forth below is a list of the executive officers and directors of
Republic and/or Republic Bank who hold Republic Stock Options and the number of
Republic Stock Options held by each such person.
<TABLE>
<CAPTION>
NAME NUMBER OF OPTIONS
- ---- -----------------
<S> <C>
Kenneth Adelberg......................................................... 9,928
William W. Batoff........................................................ 7,943
Daniel S. Berman......................................................... 9,928
Kevin J. Gallagher....................................................... 3,971
Jerome D. McTiernan...................................................... 3,971
Harry D. Madonna......................................................... 21,842
Eustace W. Mita.......................................................... 11,914
Neal I. Rodin............................................................ 11,914
Steven J. Shotz.......................................................... 17,871
Rolf A. Stensrud......................................................... 23,828
</TABLE>
Treatment of ExecuFirst Stock Options
Each outstanding ExecuFirst Stock Option will be deemed to have been issued
under the Amended and Restated Stock Option Plan and will be subject to the
terms and conditions of such plan. No adjustment to (i) the number of shares of
ExecuFirst Common Stock issuable upon exercise of an ExecuFirst Option or (ii)
the per share exercise price of such options will be made as a result of the
adoption of the Amended and Restated Stock Option Plan.
STOCK OPTION AGREEMENTS
As an inducement and condition to Republic's willingness to enter into the
Plan of Merger, ExecuFirst entered into the ExecuFirst Stock Option Agreement
(the 'ExecuFirst Stock Option Agreement') with Republic. Pursuant to the
ExecuFirst Stock Option Agreement, ExecuFirst granted an option to Republic
which is exercisable, under the conditions set forth below, to purchase up to an
aggregate of 243,985 shares of ExecuFirst Common Stock, which shares represent
approximately 19.9% of the issued and outstanding ExecuFirst Common Stock, at an
exercise price of $5.00 per share. The purchase of any shares of ExecuFirst
Common Stock by Republic pursuant to the ExecuFirst Stock Option Agreement is
subject to compliance with applicable law, including the receipt of necessary
approvals under the Bank Holding Company Act.
As an inducement and condition to ExecuFirst's willingness to enter into
the Plan of Merger, Republic entered into the Republic Stock Option Agreement
(the 'Republic Stock Option Agreement,' the ExecuFirst Stock Option Agreement
and the Republic Stock Option Agreement are sometimes hereinafter referred to as
the 'Stock Option Agreements') with ExecuFirst. Pursuant to the Republic Stock
Option Agreement, Republic granted to ExecuFirst an option which is exercisable,
under the conditions set forth below, to purchase up to an aggregate of 158,058
shares of Republic Common Stock, which shares represent 19.9% of the issued and
outstanding Republic Common Stock, at an exercise price of $8.50 per share. The
purchase of any shares of Republic Common Stock by ExecuFirst pursuant to the
Republic Stock Option Agreement is subject to compliance with applicable law,
including the receipt of necessary approvals under the Bank Holding Company Act.
For purposes of the following summary of the material provisions of the
Stock Option Agreements, the term (i) 'Issuer' means Republic with respect to
the Republic Stock Option Agreement and ExecuFirst with respect to the
ExecuFirst Stock Option Agreement, and (ii) 'Grantee' means ExecuFirst with
respect to the Republic Stock Option Agreement and Republic with respect to the
ExecuFirst Stock Option Agreement.
If the Grantee is not in material breach of the related Stock Option
Agreement or the Plan of Merger and if no injunction or other court order
against delivery of the shares covered by the related stock option is in effect,
the Grantee may exercise the related stock option, in whole or in part, at any
time and from time to time following the happening of the following events
(each, a 'Purchase Event'):
(i) without the Grantee's prior written consent, the Issuer shall have
recommended, proposed or announced an intention to authorize, recommend or
propose, or entered into an agreement with
53
<PAGE>
any person (other than the Grantee or any subsidiary of the Grantee) to
effect (a) a merger, consolidation or similar transaction involving the
Issuer or any of its significant subsidiaries (other than transactions
solely between the Issuer's subsidiaries that are not violative of the Plan
of Merger, (b) the disposition, by sale, lease, exchange or otherwise, of
assets or deposits of the Issuer or any of its significant subsidiaries
representing in either case 22.5% or more of the consolidated assets or
deposits of the Issuer and its subsidiaries, or (c) the issuance, sale or
other disposition by the Issuer of (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 22.5% or more of the voting power of the Issuer or any of its
significant subsidiaries; or
(ii) any person (other than the Grantee or any subsidiary of the
Grantee) shall have acquired beneficial ownership (as such term is defined
in Rule 13d-3 promulgated under the Exchange Act) of or the right to
acquire beneficial ownership of, or any 'group' (as such term is defined in
Section 13(d)(3) of the Exchange Act), other than a group of which the
Grantee or the Issuer or any affiliates or persons participating with any
affiliate or any subsidiary of the Grantee or the Issuer is a part, shall
have been formed to acquire beneficial ownership of, or has the right to
acquire beneficial ownership of, 22.5% or more of the voting power of the
Issuer or any of its significant subsidiaries;
provided that the related stock option will terminate upon the earliest to occur
of:
(i) the Effective Time;
(ii) termination of the Plan of Merger prior to the occurrence of a
Purchase Event (other than a termination resulting from a willful breach by
the Issuer of any covenant contained therein); or
(iii) 12 months after a termination of the Plan of Merger following
the occurrence of a Purchase Event or if such termination is due to a
willful breach by the Issuer of any covenant, representation or warranty
contained therein.
Upon the occurrence of certain events set forth in the related Stock Option
Agreement, at the election of the Grantee the related stock option (or shares
issued pursuant to the exercise thereof) must be repurchased by the Issuer (the
'Repurchase') or converted into, or exchanged for, an option with respect to
another corporation of the Issuer (the 'Substitute Option'). In addition, the
Stock Option Agreement grants certain registration rights ('Registration
Rights') to the Grantee with respect to the shares represented by the related
option. The terms of such Repurchase, Substitute Option and Registration Rights
are set forth in the Stock Option Agreements.
The Stock Option Agreements and the stock options issuable thereunder are
intended to increase the likelihood that the Merger will be consummated
according to the terms set forth in the Plan of Merger, and may be expected to
discourage offers by third parties to acquire ExecuFirst or Republic prior to
the Merger. The exercise of the stock options by ExecuFirst or Republic, as the
case may be, would significantly increase a third party's cost of acquiring
ExecuFirst or Republic compared to the cost that would be incurred by such third
party in the absence of the Stock Option Agreements. Such increased cost may
discourage such third party from considering or proposing the acquisition of
ExecuFirst or Republic or may result in such third party proposing to pay a
lower per share price to acquire ExecuFirst or Republic, as the case may be,
than it might have otherwise proposed to pay. ExecuFirst and Republic believe
that the existence of the Stock Option Agreements is likely to prevent any such
third party from accounting for the acquisition of ExecuFirst or Republic
utilizing the pooling of interests accounting treatment. In addition, the
exercise of the option would increase the ability of ExecuFirst or Republic, as
the case may be, to obtain the approval of its shareholders of the Plan of
Merger and the Merger and would adversely affect the ability of any such third
party to obtain any necessary approval of the ExecuFirst or Republic
shareholders of an alternative transaction.
To the knowledge of ExecuFirst and Republic, no event giving rise to
exercise of either of the Options has occurred as of the date of this
Prospectus/Joint Proxy Statement.
Copies of the Stock Option Agreements are set forth in Annexes H and I,
respectively, to this Prospectus/Joint Proxy Statement, and reference is made
thereto for the complete terms of the Stock Option Agreements and the stock
options. The foregoing discussion is qualified in its entirety by reference to
the Stock Option Agreements.
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<PAGE>
FEES AND EXPENSES
All fees and expenses incurred by ExecuFirst in connection with the Plan of
Merger and the transactions contemplated thereby, including, but not limited to,
certain legal, accounting and investment bank fees and expenses related to the
preparation and distribution of this Prospectus/Joint Proxy Statement and the
Registration Statement, will be reimbursed by Republic upon consummation of the
Merger.
In the event that the Merger is not consummated, except as set forth below,
all fees and expenses incurred in connection with the Plan of Merger and the
transactions contemplated thereby will be paid by the party incurring such
expenses.
All expenses related to the preparation and distribution of this
Prospectus/Joint Proxy Statement and the Registration Statement shall be shared
pro-rata between the parties in proportion to the number of shareholders of each
of Republic and ExecuFirst.
EXECUFIRST
HISTORY AND BUSINESS
ExecuFirst is a bank holding company registered under the Bank Holding
Company Act. It was incorporated under the laws of the Commonwealth of
Pennsylvania on November 16, 1987. ExecuFirst became a bank holding company on
November 2, 1988 when it acquired all of the authorized capital stock of First
Executive Bank. ExecuFirst provides banking services through First Executive
Bank and does not presently engage in any activities other than banking
activities. ExecuFirst intends to establish an RAL program substantially similar
to Republic's Refant Program. The principal executive offices of ExecuFirst and
First Executive Bank are located at 1513 Walnut Street, Philadelphia, PA 19102.
The telephone number is (215) 564-3300.
VOTING SECURITIES AND PRINCIPAL HOLDERS
Security Ownership of Management
The following table sets forth information as of April 12, 1996 with
respect to the shares of ExecuFirst Common Stock beneficially owned by each
director and executive officer of ExecuFirst and by all directors and executive
officers as a group. With the exception of Mr. Muscal no executive officer
beneficially owns any ExecuFirst Common Stock. The address of each director and
executive officer is ExecuFirst Bancorp, Inc., 1513 Walnut Street, Philadelphia,
PA 19102.
<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY OF
NAME OWNED CLASS
- ------------------------------------------------------------------------------------- ----------------- -----------
<S> <C> <C>
Zvi H. Muscal........................................................................ 96,046(1) 7.7%
John F. D'Aprix...................................................................... 8,000 *
Michael J. Bradley................................................................... 20,000 1.9%
Sheldon E. Goldberg.................................................................. 30,750 2.5%
Gerald Levinson...................................................................... 5,352 *
John O'Donnell, Ph.D................................................................. -- --
Allen L. Kramer...................................................................... -- --
James E. Schleif..................................................................... 7,000 *
All directors and executive officers as a group (10 persons)......................... 167,148 13.0%
</TABLE>
- ------------------
* Less than 1%
(1) Includes immediately exercisable options held to purchase 60,000 shares of
ExecuFirst Common Stock.
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<PAGE>
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information concerning Mr. Zeev
Shenkman, a former director of ExecuFirst and First Executive, the only person,
other than Mr. Muscal, known to ExecuFirst to be the beneficial owners of more
than 5% of the shares of ExecuFirst Common Stock (based upon 1,229,557 shares of
ExecuFirst Common Stock outstanding as of April 12, 1996), as determined in
accordance with Rule 13d--3 of the Exchange Act. The information provided in
connection with this table has been obtained from ExecuFirst's records or from
Statements on Schedule 13D filed with the SEC. As of April 12, 1996, executive
officers and directors of ExecuFirst could be deemed to have beneficially owned,
in the aggregate, approximately 13.6% of ExecuFirst's Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE
NAME AND LOCAL ADDRESS BENEFICIAL OWNERSHIP OF CLASS
- ------------------------------------------------------------------------------- -------------------- -------------
<S> <C> <C>
Zeev Shenkman ................................................................. 105,200 8.6%
Two Bala Plaza, Suite 300
Bala Cynwyd, PA 19004
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS
ExecuFirst's By-Laws provide for the classification of directors into three
classes, as nearly equal in number as possible, with approximately one-third of
the directors to be elected annually for three-year terms. Pursuant to the Plan
of Merger, upon the Effective Date the Holding Company Board will be composed of
17 members, 9 of whom will be members of the Republic Board or designees of
Republic who are reasonably acceptable to ExecuFirst. As of the date hereof, it
is intended that the nine current members of the Republic will be appointed to
the Holding Company Board. See below--'Current Republic Directors.' The Holding
Company Board will be divided into three classes, which classes shall be as
nearly as equal a number as possible. Thereafter, the actual number of positions
on the ExecuFirst Board at a given time will be set, within limits prescribed by
the By-Laws, by the Holding Company Board from time to time.
Upon the consummation of the Merger, Harry D. Madonna will serve as the
Chairman of the Holding Company Board. Mr. Madonna will not receive any direct
compensation for his duties, but will enter into an agreement with the Holding
Company pursuant to which Mr. Madonna will be provided with the continuation of
certain benefits previously provided to him in his capacity as Chairman of
Republic. In addition, upon consummation of the Merger, Mr. Madonna will be
granted an immediately exercisable option to purchase up to an aggregate of 3%
of the issued and outstanding Holding Company Common Stock at an exercise price
equal to the fair market value of such stock on the date of grant. For purposes
of such grant, the fair market value shall mean the average of the closing bid
and asked price for ExecuFirst Common Stock as reported on the NASDAQ quotation
system for the 90 days prior to the date of grant.Based on the Exchange Ratio on
March 31, 1996, Mr. Madonna would be granted an option to purchase 85,019 shares
of Holding Company Common Stock.
Current ExecuFirst Directors
Set forth below is a list of the current directors of ExecuFirst, each of
whom is also a director of First Executive Bank and each of whom will continue
to serve as a director of the Holding Company and First Republic Bank. For a
complete biography of each such person, see Proposal I.
Zvi H. Muscal--Chairman of the Board, President and Chief Executive Officer
of ExecuFirst, and President and Chief Executive Officer of First Executive
Bank.
Michael J. Bradley--Vice-Chairman of the ExecuFirst Board and Chairman of
the First Executive Board.
Gerald Levinson--Director since 1989.
John F. D'Aprix--Director since 1991.
James E. Schleif--Director since 1993.
Sheldon E. Goldberg--Director since 1989.
John O'Donnell, Ph.D.--Director since 1995.
Allen L. Kramer--Director since 1995.
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<PAGE>
Current Republic Directors
Set forth below is certain biographical information with respect to the
current directors of Republic, each of whom it is currently expected will be
appointed as a director of the Holding Company and the Merged Bank.
Kenneth Adelberg, age 44, has served as a director of Republic since its
formation as a bank holding company in 1995 and as a director of Republic Bank
since 1989. Since 1976, Mr. Adelberg has been President of The Hifi House Group
of Companies, Broomall, Pennsylvania, which are engaged in the sale of audio,
video and telecommunications equipment.
Daniel S. Berman, age 35, has served as a director of Republic since its
formation as a bank holding company in 1995 and as a director of Republic Bank
since 1988. Since 1990, Mr. Berman has served as the President of Berman
Development Corporation, Valley Forge, Pennsylvania, a real estate development
company.
William W. Batoff, age 61, has served as a director of Republic since its
formation as a bank holding company in 1995 and as a director of Republic Bank
since 1988. Mr. Batoff serves as President of Pioneer of Philadelphia Title
Insurance Company. Mr. Batoff is also Senior Consultant of Cassidy & Associates,
a government relations consulting firm located in Washington, D.C. He is a
brother-in-law of Mr. Rodin.
Harry D. Madonna, age 53, has served as Chairman of Republic since its
formation as a bank holding company in 1995 and as Chairman of Republic Bank
since 1988. Mr. Madonna is partner in the law firm of Blank, Rome, Comisky &
McCauley, Philadelphia, Pennsylvania, concentrating in the areas of corporate,
securities and health care law, where he has practiced since 1977.
Eustace W. Mita, age 44, has served as a director of Republic since its
formation as a bank holding company in 1995 and as a director of Republic Bank
since 1988. From 1984 to 1994, Mr. Mita served as President of Mita Enterprises
Incorporated, an automobile leasing company located in Malvern, Pennsylvania.
From 1989 until the present, Mr. Mita has served as Chief Operating Officer of
HAC Group, Inc., a training services company.
Neal I. Rodin, age 57, has served as a director of Republic since its
formation as a bank holding company in 1995 and as a director of Republic Bank
since 1988. Since 1975, he has served as President of The Rodin Group, a real
estate investment company located in Philadelphia, Pennsylvania. Mr. Rodin is
the brother-in-law of Mr. Batoff.
Steven J. Shotz, age 50, has served as a director of Republic since its
formation as a bank holding company in 1995 and as a director of Republic Bank
since 1988. Since 1995, Mr. Shotz has served as President of Quantum Group,
Inc., a venture capital firm of which he is the founder. From 1980 to 1994, Mr.
Shotz was associated with the accounting firm of Shotz, Miller, Glusman, Footer
& Magarick P.C., Philadelphia, Pennsylvania, serving most recently as President
and Chief Executive Officer.
Rolf A. Stensrud, age 57, has served as President, Chief Executive Officer
and a director of Republic since its formation as a bank holding company in 1995
and as President, Chief Executive and a director of Republic Bank since the
Bank's formation in 1988.
Harris Wildstein, age 50, has served as a director of Republic since its
formation as a bank holding company in 1995 and as a director of Republic Bank
since 1988. Mr. Wildstein serves as President of R&S Imports, Ltd. and Vice
President of HVW, Inc., auto dealerships located in Huntingdon Valley,
Pennsylvania and Hamilton Square, New Jersey, respectively.
Executive Officers of the Holding Company/First Republic Bank
Set forth below is certain biographical information with respect to the
executive officers of ExecuFirst and First Executive Bank, other than Messrs.
Muscal and Bradley, and of Republic and Republic Bank, other than Mr. Stensrud,
each of whom is expected to be an executive officer of the Holding Company
and/or First Republic Bank. Information as to Messrs. Muscal, Bradley and
Stensrud is set forth above.
Kevin J. Gallagher, age 39, is the Executive Vice President and Chief
Lending Officer of Republic Bank. Mr. Gallagher served as Senior Vice President
of the Bank from 1992 to 1993 and as a Vice President of the Bank from 1988 to
1992. Mr. Gallagher was appointed Executive Vice President in March 1993. Upon
consummation of the Merger Mr. Gallagher will hold the same positions at First
Republic Bank.
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<PAGE>
Joseph M. Matisoff, age 49, is a Senior Vice President and the Chief
Lending Officer of First Executive Bank. He was formerly associated, from May
1993 to October 1994, with First Bank of Philadelphia as a Senior Vice President
and Chief Lending Officer. Upon consummation of the Merger, Mr. Mattisoff will
be Senior Vice President-Commercial Lending of First Republic Bank.
Jerome D. McTiernan, age 52, is the Executive Vice President and Chief
Operating Officer of Republic. Mr. McTiernan became Executive Vice President in
April 1992. From April 1985 to August 1988, Mr. McTiernan was Vice President of
Republic Bank and from August 1988 to April 1992 was a Senior Vice President.
Upon consummation of the Merger, Mr. McTiernan will be the Executive Vice
President of First Republic Bank.
George S. Rapp, age 43, has been the Executive Vice President and Chief
Operating Officer for ExecuFirst and First Executive Bank since February 1995.
Prior to joining ExecuFirst, he served for two years as Executive Vice President
and Chief Financial Officer at Old York Road Bancorp, Willow Grove, PA. Upon
consummation of the Merger, Mr. Rapp will be Executive Vice President and Chief
Operating Officer of First Republic Bank.
EXECUTIVE COMPENSATION
The following table shows the annual compensation of the Chief Executive
Officer of ExecuFirst and First Executive Bank for the fiscal years 1995, 1994
and 1993; and ExecuFirst's and First Executive Bank's most highly compensated
executive officer for the fiscal year 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
LONG-TERM
COMPENSATION
AWARDS
----------------------------
ANNUAL COMPENSATION SECURITIES
--------------------------------------------- UNDERLYING
NAME & PRINCIPAL OTHER ANNUAL OPTIONS/ ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) SARS (#) COMPENSATION($)
(A) (B) (C) (D) (E) (G) (I)
- --------------------------------- --------- ----------- --------- --------------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Zvi H. Muscal(1)................. 1995 $ 220,000 $ 0
1994 220,000 35,000 0 $ 16,036(2)
1993 213,339 37,500 12,000(3) 16,036(2)
12,000 8,377(2)
George S. Rapp(4)................ 1995 105,000 0 0 0
</TABLE>
(1) Mr. Muscal is currently Chairman of the Board, President and Chief Executive
Officer of ExecuFirst and President and Chief Executive Officer of First
Executive Bank. Upon the consummation of the Merger, Mr. Muscal will be
President and Chief Executive Officer of the Holding Company and Chairman
and Co-Chief Executive Officer of First Republic Bank.
(2) Represents premiums paid by the Bank for life and disability insurance for
the benefit of Mr. Muscal.
(3) No additional options were granted to Mr. Muscal in 1994. Certain options
previously granted to Mr. Muscal in 1989 were repriced in 1994 and are
reported herein as if granted in 1994.
(4) Mr. Rapp is Executive Vice President and Chief Operating Officer of
ExecuFirst and First Executive Bank. Information with respect to Mr. Rapp is
presented as if Mr. Rapp had been employed by First Executive for the entire
fiscal year. Mr. Rapp's employment commenced on February 17, 1995. Mr. Rapp
was paid an aggregate of $86,019 in 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
# OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS AT
FY-END(#)
SHARES ACQUIRED VALUE EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE
(A) (B) (C) (D)
- ---------------------------------------------- --------------------- ----------------- -------------
<S> <C> <C> <C>
Zvi H. Muscal................................. 0 0 60,000
60,000/0
</TABLE>
58
<PAGE>
Employment Agreements
Zvi H. Muscal. Upon consummation of the Merger, Mr. Muscal will serve as
President and Chief Executive Officer of the Holding Company and as Chairman and
Co-Chief Executive Officer of First Republic Bank pursuant to the terms and
conditions of the Muscal Agreement, which agreement contains terms and
conditions substantially similar to Mr. Muscal's existing employment agreement.
In the event the Merger is not consummated, Mr. Muscal's employment with
ExecuFirst and First Executive will continue to be governed by the existing
agreement. The Muscal Agreement provides for a term of four years, until January
31, 2000, and will automatically renew for successive one year terms thereafter
until terminated by any of the parties. Mr. Muscal will continue to receive an
annual base salary of $220,000 per year, which may not be increased for at least
one year following the Effective Date of the Merger. Mr. Muscal will also
continue to be entitled to receive bonuses at the discretion of the Holding
Company Board. In the event that Mr. Muscal dies during the term of the Muscal
Agreement, Mr. Muscal's salary will continue to be paid to his estate for six
months following his death. If Mr. Muscal's employment is terminated for other
than 'Good Cause' or Disability (each, as defined in the Muscal Agreement), Mr.
Muscal will be entitled to receive all of his salary and benefits for the
remaining term of the Muscal Agreement. If Mr. Muscal voluntarily terminates his
employment prior to June 30, 1999, he will forfeit certain of his existing stock
options in accordance with a schedule established in the Muscal Agreement.
Pursuant to the terms of the Muscal Agreement, Mr. Muscal will continue to
be eligible to (i) receive options to purchase shares of the Holding Company
Common Stock, at the discretion of the Holding Company Compensation Committee;
and (ii) participate in any short and long-term incentive compensation plans
established by the Holding Company. Mr. Muscal will also continue to be provided
with a car (at a monthly expense to the Holding Company of approximately $1,000,
including insurance, car phone and parking) and a term life insurance policy in
principal amount equal to three (3) times his annual salary. The Holding Company
will continue to reimburse Mr. Muscal for certain travel and entertainment
expenses incurred in connection with his duties, including, but not limited to,
membership fees in certain private clubs. The Holding Company will continue to
make contributions to a supplemental retirement plan in which Mr. Muscal
participates.
The Merged Bank will continue to provide Mr. Muscal with disability
insurance. If Mr. Muscal is unable to perform his duties due to disability, he
will continue to be entitled to receive his full salary and other benefits until
such time as the Merged Bank terminates the Muscal Agreement. The Merged Bank
may exercise its termination right if Mr. Muscal is disabled for six consecutive
months or for eight months out of any twelve month period. If Mr. Muscal resumes
his duties within thirty days of such a notice and thereafter continues to work
for a period of six months, the termination notice will have no effect. If First
Republic Bank does not terminate his employment and the disability continues for
more than six months, Mr. Muscal shall only be eligible to receive total salary
and the benefits equaling two-thirds of his then current salary, including
disability insurance and social security benefits.
The Muscal Agreement prohibits Mr. Muscal, during the term thereof and for
two years thereafter, from associating in any capacity (other than as a less
than 5% shareholder or as a customer) with any company or bank which competes
with the Holding Company and/or with First Republic Bank in the counties of
Philadelphia, Montgomery, Bucks, Delaware or Chester in Pennsylvania, the
counties of Burlington, Camden and Gloucester in New Jersey, or the county of
New Castle in Delaware. The Muscal Agreement further provides for the
non-disclosure by Mr. Muscal of confidential information acquired by him in the
context of his employment.
Rolf A. Stensrud. Upon consummation of the Merger, Mr. Stensrud, currently
the President and Chief Executive Officer of Republic Bank, will become
Executive Vice President and Chief Operating Officer of the Holding Company and
President and Co-Chief Executive Officer of First Republic Bank, pursuant to the
terms and conditions of the Stensrud Agreement. The Stensrud Agreement provides
for an initial term of three years which will automatically renew for successive
one year terms until terminated by the parties. Under the Stensrud Agreement,
Mr. Stensrud will receive an annual base salary of $175,000 per year. In
addition, Mr. Stensrud will be entitled to: (i) reimbursement for entertainment
and travel expenses in connection with his duties, including expenses for one
lunch club and annual dues for one golf club; (ii) participate in any bonus
stock purchase or grant, stock option, deferred compensation or other
compensation plans maintained by First Republic Bank for the Holding Company for
its senior executives; (iii) such basic medical, hospitalization and major
medical insurance coverage for himself and his dependents as First Republic Bank
maintains for its executives;
59
<PAGE>
and (iv) use of a car to be provided by the ExecuFirst. If Mr. Stensrud's
employment is terminated for reasons other than for engaging in conduct
detrimental to First Republic Bank, Mr. Stensrud will be entitled to receive his
salary and benefits for certain specified periods of time. The Stensrud
Agreement provides for the non-disclosure by Mr. Stensrud of confidential
information acquired by him in the context of his employment.
George S. Rapp. Mr. Rapp is currently employed by First Executive Bank
under an employment agreement which will expire on February 22, 1997. Upon
consummation of the Merger, Mr. Rapp and First Republic Bank will enter into an
amended and restated agreement (the 'Rapp Agreement'), effective as of that
date, pursuant to which Mr. Rapp will be employed as Executive Vice President
and Chief Operating Officer of First Republic Bank at an annual base salary of
$105,000. The term of the Rapp Agreement will be automatically renewed for
successive one-year periods beginning February 22, 1997, unless terminated by
either party upon 90 days written notice prior to the end of such term or any
renewal term. Mr. Rapp will continue to be eligible to receive an annual bonus
at the discretion of First Republic Bank Board and to participate in the Amended
and Restated Stock Option Plan and all other employee benefit plans. First
Republic Bank will continue to provide Mr. Rapp with the use of an automobile
and the reimbursement of certain expenses related to the use of such automobile
for business purposes. If Mr. Rapp's employment is terminated, other than for
engaging in conduct detrimental to First Republic Bank, Mr. Rapp will be
entitled to receive his salary and benefits for certain specified periods.
Kevin J. Gallagher. Upon consummation of the Merger, Mr. Gallagher will be
employed by First Republic Bank as Executive Vice President and Chief Lending
Officer pursuant to the terms and conditions of the Gallagher Agreement. The
Gallagher Agreement is for a term of one year at an annual base salary of
$105,000. The term of the Gallagher Agreement will be automatically renewed for
successive one-year periods unless terminated by either party upon 90 days
written notice prior to the end of the initial term or any renewal term. Mr.
Gallagher will be eligible to receive an annual bonus at the discretion of First
Republic Bank Board and to participate in the Amended and Restated Stock Option
Plan and all other employee benefit plans. First Republic Bank will provide Mr.
Gallagher with the use of an automobile and reimburse certain expenses related
to the use of such automobile for business purposes. If Mr. Gallagher's
employment is terminated, other than for engaging in conduct detrimental to
First Republic Bank, Mr. Gallagher will be entitled to receive his salary and
benefits for certain specified periods.
In a joint examination concluded in November 1994, ExecuFirst and First
Executive Bank were cited by the Federal Reserve Board and the Department of
Banking for certain alleged deficiencies and violations. See 'SPECIAL
CONSIDERATIONS; Written Agreements.' The Executive Vice President, Treasurer and
Chief Operating Officer of ExecuFirst and First Executive Bank and the Senior
Vice President and Chief Credit Officer of First Executive Bank and Secretary of
ExecuFirst and First Executive Bank resigned such positions effective November
10, 1994 and March 31, 1995, respectively.
60
<PAGE>
REPUBLIC
DESCRIPTION OF BUSINESS
Republic was organized as a Pennsylvania business corporation on January
18, 1995 for the purpose of becoming a bank holding company, which occurred on
August 12, 1995. Republic owns all of the common stock of Republic Bank.
Republic Bank (the 'Bank') was incorporated on November 25, 1987 under the laws
of the Commonwealth of Pennsylvania and is a member bank of the Federal Reserve
System. It commenced business on September 6, 1988 and engages in a general
commercial and consumer banking business in the Philadelphia metropolitan area.
The Bank maintains its main office at 1515 Market Street in Center City
Philadelphia and has a branch in Ardmore, Pennsylvania, a Philadelphia suburb.
The Bank provides a wide range of commercial and consumer banking services to
small and medium sized businesses, professionals and other individuals. The Bank
offers services and structures its charges in a manner designed to attract the
business of these customers. The Bank is a community bank and emphasizes
personal services, flexibility and responsiveness to customer's needs which it
believes can best be provided by an independent, locally owned and controlled
bank. The Bank believes that its business development activities have been and
will continue to be enhanced by the close ties of its directors to the business
community in Philadelphia and the surrounding metropolitan area.
In addition to traditional commercial and consumer banking services,
Republic Bank is engaged, through its wholly owned subsidiary, Republic
Services, Inc. ('Republic Services') in a tax refund anticipation loan program
('Refant') which was formed in August 1991. The Refant program is a joint
venture with a wholly owned subsidiary of Jackson Hewitt Inc. ('Hewitt'), a
company which provides income tax preparation services, and enables Republic
Bank to make refund anticipation loans ('RALs') to consumer taxpayers for whom
Hewitt prepares and electronically files federal income tax returns. The
workings of the Refant Program are discussed above, See --'MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION' and below, 'RESULTS OF
OPERATIONS.'
The business of Republic Bank consists primarily of attracting deposits and
applying those funds to the origination of loans, including RALs. Republic
Bank's income is derived principally from interest and fees earned in connection
with its lending activities, interest and dividends on investment securities and
short-term investments. Its principal expenses are interest paid on deposits and
operating expenses. Republic Bank's loan portfolio consists primarily of
commercial loan and loan participations. The principal sources of funds for
Republic Bank's lending and investment activities are deposits, loan repayments
and proceeds from investment securities.
Republic Bank's investment activities including managing an investment
securities portfolio valued at approximately $38 million on December 31, 1995.
Of this, approximately $25 million or 66% were collaterized mortgage
obligations. At December 31, 1995 and 1994, Republic Bank had Collateralized
Mortgage Obligations (CMO) of $25,215,000 and $25,402,000, respectively. These
CMO debt securities are fixed rate REMICs and have average lives of between one
and two years, after principal payments commence. The principal payments are
expected to begin at various times during the period from February 1996 to
August 1998. The timing and speed of the principal paydowns of CMO's are heavily
dependent on the prepayments of the underlying collateral. If the underlying
collateral prepays according to its expected schedule, the cash flows and yields
from the CMOs will be predictable. However, if the prepayments of the underlying
collateral is faster than anticipated, the CMO will pay down at a more rapid
rate, and the average life of the CMO bond will be shortened. This would reduce
the yield to maturity if the CMO bonds were purchased at a premium, and increase
the yield to maturity if the CMO bonds were purchased at a discount. Conversely,
if the underlying collateral pays at a slower rate than expected, the CMO bond
will have a longer average life. This would increase the yield to maturity if
the CMO bonds were purchased at premium and reduce the yield to maturity if the
CMO bonds were purchased at a discount. With respect to CMOs, Republic Bank's
strategy is to invest in securities with shorter rather than longer lives in
order to minimize risk. All CMOs in Republic Bank's portfolio are backed by
securities of U.S. government agencies.
The credit quality of these bonds are within Republic Bank's guidelines. As
with all Mortgage Backed Securities, there exists a certain degree of interest
rate risk, as the timing of the underlining collateral payments can not be
guaranteed.
61
<PAGE>
Republic Bank is subject to examination and extensive regulations by the
Pennsylvania Banking Department and the Federal Reserve Board. Its deposits are
insured by the FDIC to the maximum extent permitted by law.
Republic Bank operates two offices which are located at Three Penn Center,
1515 Market Street, Philadelphia, Pennsylvania 19102 and 233 Lancaster Ave.,
Ardmore, Pennsylvania 19003. The telephone numbers for the offices are (215)
563-3600 and (610) 896-9750, respectively.
SERVICE AREA
Republic Bank's primary service areas are an area of about 100 square
blocks in Center City, Philadelphia, including the Logan Square and Rittenhouse
Square neighborhoods and Montgomery County. Republic Bank also serves the
general Center City area and, to a lesser extent, other Philadelphia
neighborhoods and the surrounding counties of Bucks, Chester and Delaware.
During the 1980s the Center City, Philadelphia business district
experienced substantial economic growth as Philadelphia's economy has undergone
a transition from an industrial to a service-oriented base. In addition, during
this same period the Center City, Philadelphia residential areas experienced an
influx of white collar, upscale wage earners. However, during the early 1990's,
Philadelphia's economy was materially affected by the economic downturn
affecting the United States generally, which has resulted in a reduction of
commercial and residential real estate values from their highs of the late
1980's and has caused certain real properties, particularly office buildings, to
be in oversupply. Although there have been signs of resurgence in the
Philadelphia area in recent times, there can be no assurance that economic and
demographic trends in Republic Bank's primary service area will improve in the
future.
COMPETITION
The banking business is highly competitive. Republic Bank competes with
local commercial banks as well as numerous regionally based commercial banks all
of which have assets, capital and lending limits larger than those of Republic
Bank. Republic Bank also competes with savings banks, savings and loan
associations, money market funds, insurance companies, stock brokerage firms,
regulated small loan companies, credit unions and with the issuers of commercial
paper and other securities.
Among the advantages many of Republic Bank's competitors have are larger
asset and capital bases, numerous branch offices, the ability to finance wide
ranging advertising campaigns and to allocate their investment assets to regions
of highest yield and demand. Many competitors offer certain services such as
trust services and international banking which are not offered directly by
Republic Bank (but are available indirectly through correspondent
relationships). In addition, by virtue of this greater capital, most competitors
have substantially higher lending limits than Republic Bank.
Pennsylvania law authorizes the acquisition of banks and bank holding
companies located in Pennsylvania by out-of-state bank holding companies located
in all fifty states if the state in which such out-of-state bank holding
companies located in all fifty states if the state in which such out-of-state
bank holding company is located has adopted reciprocal legislation. Currently,
the interstate banking laws determined by the Pennsylvania Banking Department to
be fully reciprocal with the Pennsylvania law include the laws of the states of
Delaware, Indiana, Kentucky, Michigan, New Jersey, Ohio, Rhode Island,
Washington and West Virginia. It is expected that Pennsylvania's interstate
banking law will further intensify competition within Center City, Philadelphia,
In order to compete, Republic Bank attempts to use, to the fullest extent,
the flexibility of its independent status. This includes an emphasis on services
for professionals and small and medium sized businesses, and personal contacts
by Republic Bank's officers, directors and employees. For customers whose loan
requirements exceed Republic Bank's lending limits, Republic Bank will seek to
arrange such loans on a participation basis with other financial institutions.
Republic Bank also seeks to be competitive with respect to interest rates paid
and charged, and for service charges on customer accounts. Republic Bank
believes that its local ownership and management enhance its competitiveness in
its primary service area. No assurance can be given that Republic Bank's efforts
to compete will continue to be successful.
62
<PAGE>
EMPLOYEES
Republic Bank presently employs 28 persons on a full time equivalent basis,
of whom 4 are executive officers. See MANAGEMENT. Republic Bank may employ
additional persons in the future.
PREMISES AND BRANCHES
Republic Bank occupies under lease approximately 3,600 square feet on the
ground floor and 2,900 square feet in the mezzanine at the northwest corner of
Three Penn Center at 1515 Market Street in Center City, Philadelphia. This
office space contains a banking floor, lobby, operations center, and
administrative and executive offices. In addition, Republic Bank leases premises
at 233 Lancaster Avenue East in Ardmore, Pennsylvania which contains
approximately 800 square feet consisting of a banking floor and operations area.
The lease at Republic Bank's main office commenced in March, 1988 and runs
for an initial term of ten years. Republic Bank has three options to renew, the
first for a three-year period and the second and third for five years each at
the then prevailing market rates. The annual adjusted base rent commenced at
$163,380 per year for the first year of the lease and increases periodically
thereafter to $336,981 per year for the seventh through the tenth years of the
lease term, subject to cost of living adjustments. Rental payments during the
renewal periods are based on the fair rental value as determined by the
landlord.
The lease on the Ardmore branch commenced in September 1995 and runs for a
ten year term with an initial annual rent of $19,152 increasing 3% per year.
Republic Bank is responsible for utilities and improvements.
In addition, under the lease, Republic Bank is required to pay for its own
cleaning, electricity, heating, air conditioning and water, and to pay its pro
rata share of the insurance and property taxes of the building. Leasehold
improvements and the interior furnishings are the responsibility of Republic
Bank.
SUPERVISION AND REGULATION
As a state-chartered bank, Republic Bank is subject to regulation,
supervision and regular examination by the Pennsylvania Banking Department and
is subject to the provisions of the Pennsylvania Banking Code of 1965, as
amended (the 'Banking Code'). The Banking Code contains provisions that (1)
require the maintenance of certain reserves against deposits, (2) limit the type
and amount of loans that may be made and the interest that may be charged
thereon, (3) restrict investments and other activities, (4) limit the payment of
dividends, (5) regulate the establishment of branch offices, (6) set minimum
capital stock and surplus requirements, and (7) restrict any person from
acquiring more than 10% of any class of outstanding stock of a bank. Current law
permits banking institutions to establish branches within any county in
Pennsylvania, but forbids branching across state lines. The amount of funds that
Republic Bank may lend to a single borrower is limited generally under
Pennsylvania law to fifteen percent of the aggregate of its capital, surplus,
undivided profits and loan loss reserves (all as defined by statute and
regulation).
Pennsylvania law also requires that a bank obtain the approval of the
Pennsylvania Banking Department prior to amending its Articles of Incorporation
or effecting any merger where the surviving bank would be a
Pennsylvania-chartered bank. In reviewing a merger application, the Pennsylvania
Banking Department considers, among other things, whether the merger would be
consistent with adequate and sound banking practices and in the public interest
on the basis of several factors, including the potential effect of the merger on
competition and the convenience and needs of the area primarily to be served by
the bank resulting from the merger.
FEDERAL LAW
As a member of the Federal Reserve System, Republic Bank is also subject to
regulation, supervision and regular examination by the FRB. The prior approval
of the FRB is required for the establishment of branch offices and the
consummation of a merger involving Republic Bank. In addition, under the Bank
Merger Act of 1956, as amended, the approval of the appropriate federal bank
regulatory agency (the FRB, the Comptroller of the Currency or the FDIC,
depending on the resulting institution) is required before Republic Bank may
merge or consolidate with, or acquire all or substantially all of the assets of,
another bank.
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The FRB has adopted a regulation pursuant to the Change in Bank Control Act
of 1978, which, subject to certain exceptions, requires persons who intend to
acquire control of a bank or bank holding company to give at least 60 days prior
written notice to the FRB. Control for the purpose of this regulation exists
when the acquiring party obtains voting control of at least 25% of any class of
the bank's voting securities. Subject to rebuttal, control is presumed to exist
when the acquiring party obtains voting control of at least 10% of any class of
the bank's voting securities if (i) securities issued by the bank are registered
pursuant to Section 12 of the Securities Exchange Act of 1934, or (ii) following
the acquisition, there would be no holder larger than the acquiring party. The
Change in Bank Control Act of 1978 and the regulations promulgated thereunder,
authorize the FRB to disapprove any such acquisition on certain specified
grounds.
The FRB has issued regulations that require state member banks, such as
Republic Bank, to maintain minimum levels of capital. The FDIC has also issued
regulations requiring maintenance of the same minimum levels of capital by all
FDIC-insured banks. In general, the regulations require a primary
capital-to-assets ratio of 5.5% and a total capital-to-assets ratio of 6.0%,
each of which has been found by the FRB to be fundamentally sound and
well-managed and which have been found to have no material financial weaknesses.
For banks found to have greater financing weaknesses or risk, the FRB and/or the
FDIC may require higher levels of minimum capital.
Republic Bank is also required to comply with certain additional
'risk-based' capital adequacy guidelines issued by the FRB and the FDIC. These
guidelines assign varying risk weights to the individual assets held by a bank.
The guidelines also assign weights to the 'credit-equivalent' amounts of certain
off-balance sheet items, such as letters of credit and interest rate and
currency swap contracts. Under these guidelines, banks are expected to meet a
minimum target ratio for 'qualifying total capital' to weighted-risk assets of
8% (7.25% during a phase-in period which ended December 31, 1992) at least
one-half of which is required to be in the form of 'tier 1 capital'. Qualifying
total capital is divided into two separate categories or 'tiers'. 'Tier 1
capital' includes common stockholders' equity, certain qualifying perpetual
preferred stock and minority interests in the equity accounts of consolidated
subsidiaries, less goodwill. 'Tier 2 capital' components (limited in the average
to one-half of total qualifying capital) include allowances for credit losses
(within limits), certain excess levels of perpetual preferred stock and certain
types of 'hybrid' capital instruments, subordinated debt and other preferred
stock. For additional information regarding Republic Bank's compliance with
these 'risk-based' capital adequacy guidelines, see MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Capital Resources.
Although the Financial Institutions Reform, Recovery, and Enforcement Act
of 1989 ('FIRREA') pertains primarily to thrift depository institutions (such as
savings and loan associations), certain of FIRREA's provisions may now or in the
future affect Republic Bank. In particular, if Republic Bank in the future
sought to acquire and own a single thrift institution, FIRREA would permit such
acquisition free from interstate banking laws. In addition, under FIRREA all
commonly controlled insured depository institutions are liable to the FDIC for
any loss the FDIC incurs in connection with defaults of or assistance granted to
their affiliated depository institutions. Under such 'cross-guarantee'
arrangement, each depository institution could be subject to claims for amounts
the FDIC actually loses in connection with the operation of or assistance
granted to an affiliated institution in the event the affiliated institution
were ultimately to be taken over by the FDIC.
On December 19, 1991, the Federal Deposit Insurance Corporation Improvement
Act of 1991 ('FDICIA') became law. Under FDICIA, financial institutions are
subject to increased regulatory scrutiny and must comply with certain
operations, managerial and compensation standards to be developed by FDIC
regulations. Under FDICIA, institutions must be classified in one of five
defined categories (well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized). In the event an
institution's capital deteriorates to the 'undercapitalized' category or below,
FDICIA prescribes an increasing amount of regulatory intervention, including the
institution by a bank of a capital restoration plan, a guarantee of the plan by
a parent institution and the placement of a hold on increases in assets, number
of branches or lines of business. If capital has reached the significantly or
critically undercapitalized levels, further material restrictions can be
imposed, including restrictions on interest payable on accounts, dismissal of
management and (in critically undercapitalized situations) appointment of a
receiver. Critically undercapitalized institutions may not, beginning 60 days
after becoming critically undercapitalized, make any payment of principal or
interest on their subordinated debt. For well capitalized institutions,
64
<PAGE>
FDICIA provides authority for regulatory intervention where the institution is
deemed to be engaging in unsafe or unsound practices or receives a less than
satisfactory examination report rating for asset quality, management, earnings
or liquidity. All but well capitalized institutions are prohibited from
accepting brokered deposits without prior regulatory approval. Under such
guidelines, Republic Bank is classified as well capitalized.
FDICIA also requires the regulators to issue new rules establishing certain
minimum standards to which an institution must adhere including standards
requiring a minimum ratio of classified assets to capital, minimum earnings
necessary to absorb losses and a minimum ratio of market value to book value.
Additional regulations are required to be developed relating to internal
controls, loan documentation, credit underwriting, interest rate exposure, asset
growth and excessive compensation, fees and benefits. FDICIA also requires all
institutions with assets exceeding $150 million to have annual audits and
establish an independent audit committee comprised entirely of outside
directors. In addition, FDICIA mandates that each institution undergo an annual
on-site regulatory examination. Examinations of institutions with total assets
of $100 million or less that are well capitalized and well managed may be
conducted at 18-month intervals.
Republic Bank is also subject to numerous federal, state and local laws and
regulations which set forth specific restrictions and procedural requirements
with respect to the extension of credit, credit practices, the disclosure of
credit terms and discrimination in credit transactions.
In accordance with Federal law providing for deregulation of interest on
all deposits, banks and thrift organizations are now unrestricted by law or
regulation from paying interest at any rate on most time deposits. Commercial
banks have experienced an overall increase in their cost of funds over the past
few years as a result of this deregulation. It is not clear whether deregulation
and other changes in aspects of the banking industry will result in further
increases in the cost of funds in relation to prevailing lending rates.
Compliance with the extensive federal and state regulation of commercial
banking activities in the United States may substantially increase the
investment risks associated with the Common Stock, may be a greater burden on
Republic Bank than on its larger competitors and may materially increase
Republic Bank's cost of doing business.
From time to time proposals are made in the United States Congress and the
Pennsylvania Legislature and before bank regulatory authorities which would
alter the powers of, and place restrictions on, different types of banking
organizations. Among legislative proposals of significance to Republic Bank are
the relaxation of the restrictions on the acquisition of out-of-state banks by
bank holding companies, the expansion of the powers of banks and thrift
institutions and the relaxation of the restrictions upon the activities in which
bank holding companies may engage. It is impossible to predict the impact of
these proposals, if enacted, on the future business of Republic Bank.
PROFITABILITY, MONETARY POLICY AND ECONOMIC CONDITIONS
Bank profitability is principally dependent on interest rate differentials.
In general, the difference between the interest paid by a bank on its deposits
and other borrowings and the interest received by a bank on loans and securities
held in its investment portfolio comprise the major portion of a bank's
earnings. Thus, the earnings and growth of Republic Bank will be subject to the
influence of economic conditions, both domestic and foreign, on the levels of
and changes in interest rates. In addition to being affected by general economic
conditions, the earnings and growth of Republic Bank will be affected by the
policies of regulatory authorities, including the Pennsylvania Banking
Department, the FRB and the FDIC. An important function of the FRB is to
regulate the supply of money and other credit conditions in order to manage
interest rates. The monetary policies and regulations of the FRB have had a
significant effect on the operating results of commercial banks in the past and
are expected to continue to do so in the future. The effects of such policies
upon the future business, earnings and growth of First Republic Bank cannot be
determined. See--'Management's Discussion and Analysis of Financial Condition'
and 'Results of Operations.'
65
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS
SECURITY OWNERSHIP OF MANAGEMENT AND BENEFICIAL OWNERS
The following table sets forth information as of March 31, 1996 with
respect to the shares of Republic Common Stock beneficially owned by each
director and executive officer of Republic and by all directors and executive
officers as a group. Except as disclosed by the table, there are no other
entities or persons known to Republic to be the beneficial owner of more than
five (5%) percent of the shares of Republic Common Stock (based on 794,263
shares of Republic Common Stock outstanding as of March 31, 1996). The address
of each director and executive officer is Republic Bancorporation, Inc., 1515
Market Street, Philadelphia, PA 19102.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICALLY OF CLASS
NAME OWNED (1) (1)
- ------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Harry D. Madonna (2)..................................................... 42,971 5.27%
Kenneth Adelberg (3)..................................................... 31,645 3.94%
William W. Batoff (4).................................................... 18,807 2.34%
Daniel S. Berman (3)..................................................... 21,179 2.63%
Eustace W. Mita (5)...................................................... 24,222 3.00%
Neal I. Rodin (6)........................................................ 39,370 4.88%
Steven J. Shotz (7)...................................................... 39,347 4.84%
Rolf A. Stensrud (5)..................................................... 28,881 3.53%
Harris Wildstein......................................................... 35,510 4.47%
All directors and executive officers as a group (9) persons.............. 281,932 30.97%
</TABLE>
- ------------------
* Less than 1 %
(1) Calculated in accordance with Rule 13d-3 of the Exchange Act.
(2) Includes 21,842 options to purchase shares of Republic Common Stock, 2,865
shares held by Mr. Madonna's IRA account and 274 shares held jointly by Mr.
Madonna and Charlene Madonna.
(3) Includes options to purchase 9,928 shares of Republic Common Stock.
(4) Includes options to purchase 7,943 shares of Republic Common Stock.
(5) Includes options to purchase 11,914 shares of Republic Common Stock and
5,000 shares of Republic Common Stock held by Mita Leasing Corp., a company
controlled by Mr. Mita.
(6) Includes options to purchase 11,914 shares of Republic Common Stock and
26,173 shares of Republic Common Stock held jointly by Mr. Rodin and Sharon
Rodin.
(7) Includes 18,476 shares of Republic Common Stock held of record by the
Schotz, Miller, Glusman, Footer & Magarick, P.C. 401(k) Trust, 73 shares
held of record by JMS Inc. as custodian for Mr. Schotz and 17,871 options to
purchase shares of Republic Common Stock.
(8) Includes options to purchase 23,828 shares of Republic Common Stock.
66
<PAGE>
MARKET PRICE OF REPUBLIC COMMON STOCK AND DIVIDENDS
COMMON STOCK PRICES
Republic Common Stock is traded in the over-the-counter market and is
quoted under the symbol 'RPRT'.
The following table sets forth the high and low prices for the common stock
of Republic for the periods indicated (as reported on the NASD Electronic
Bulletin Board).
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
- --------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
1994
March 31, 1994................................................................. $ 9.00 $ 7.00
June 30, 1994.................................................................. 9.00 7.00
September 30, 1994............................................................. 9.00 7.00
December 31, 1994.............................................................. 9.00 7.00
1995
March 31, 1995................................................................. $ 9.00 $ 7.00
June 30, 1995.................................................................. 9.00 7.00
September 30, 1995............................................................. 9.00 7.50
December 31, 1995.............................................................. 9.75 8.75
1996
March 31, 1995................................................................. $ 10.00 $ 9.00
</TABLE>
DIVIDENDS
Republic has historically not paid any dividends on its Common Stock. In
addition to restrictions imposed by applicable Pennsylvania banking law, and/or
Pennsylvania corporate law, Republic is further restricted with respect to the
payment of dividends by the terms of its Subordinated Debentures. As long as the
Subordinated Debentures remain outstanding, Republic may not pay cash dividends
(or make similar distributions) on Republic Common Stock unless the ratio of (i)
consolidated income available for Fixed Charges to (ii) Fixed Charges is at
least 1.4 to 1.00 for the preceding four fiscal quarters. Fixed Charges are
defined as Republic's interest expense on its debt plus its lease expense.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information regarding
Republic's financial condition and results of operations for the three years
ended December 31, 1995, 1994 and 1993. In particular, Republic's participation
in the Refant Program significantly impacted first and second quarter results of
operations in 1993 and 1994, but was not active in 1995. There have been no
material adverse changes in Republic's financial condition since December 31,
1995. Investors should review Republic's audited financial statements for the
year ended December 31, 1995, included as Exhibit B to the Proxy Statement
Prospectus.
GENERAL
Republic, through Republic Bank, conducts a general commercial banking
business which consists of attracting deposits from the general public and
applying those funds to the origination of loans for commercial, consumer and
residential purposes. Republic's profitability depends primarily on net interest
income and non-interest income. Net interest income is the difference between
interest income generated from interest earning assets (i.e. loans and
investments) less the interest expense incurred on interest-bearing liabilities
(i.e. customer deposits and borrowed funds). Net interest income is affected by
the relative amounts of interest-earning assets and interest-bearing
liabilities, and the interest rate paid on these balances. Net interest income
is dependent upon Republic's interest rate spread, which is the difference
between the average yield earned on its interest-earning assets and the average
rate paid on its interest-bearing liabilities. When interest-earning assets
approximate or exceed interest-bearing liabilities, any positive interest rate
spread will generate net interest income. The interest rate spread is impacted
by interest rates, deposit flows and loan demands.
67
<PAGE>
Republic's profitability is also impacted by non-interest income, which
consists primarily of loan and service fees. During the years ended December 31,
1993 and 1994, Republic generated significant non-interest income from its
participation in the Refant Program. The Refant Program is operated through
Refant Partners, a Pennsylvania general partnership comprised of Republic
Services and a wholly owned subsidiary of Hewitt. The Refant Program enables
Republic Bank to make RALs to consumer taxpayers for whom Hewitt prepares and
electronically files federal income tax returns. The Refant Program began
operating in 1992 and began generating income for Republic in 1993. The Refant
Program was suspended for 1995, but has been reinstituted for the 1996 tax
season. Republic suspended the Refant Program for the 1995 tax season in
response to two procedural changes instituted by the Internal Revenue Service.
First, the Service revised its policy which previously had confirmed that an
individual return had passed a preliminary review. Second, prior to the 1995 tax
season, an individual RAL was based on the total of the withholding tax refund
and the earned income tax credit ('EITC'). Because of alleged fraud by
taxpayers, the Service announced that EITC payments would be made separately
from tax refunds and would be delayed four to six weeks. In addition, EITC
payments would be made directly to the recipient and could not be transmitted to
Refant Partners directly. In 1995, Republic Services and Hewitt restructured the
Refant Program to address these procedural changes. Expanded credit checks and
certain other criteria were put in place to substitute for the confirmation by
the Service. EITC payments are no longer eligible for RALs.
Republic's profitability is affected to a lesser extent by such factors as
the level of non-interest expenses, the provision for loan losses, and the
effective tax rate. Non-interest expenses consist of salaries and benefits,
occupancy related expenses, deposit insurance premiums paid to the FDIC, the
costs associated with opening of branch offices, and other operating expenses.
With the exception of the reinstitution of the Refant Program, which is
expected to have a strong positive effect on the earnings and profits of
Republic in 1996, Republic is not aware of any known trends, events or
uncertainties that will have or that are reasonably likely to have material
effects on either its or the Holding Company's liquidity, capital resources or
operations. Republic has recently undergone its annual joint examination by the
Pennsylvania Department of Banking and the Federal Reserve Bank of Philadelphia.
No recommendations by either the Department of Banking or the Federal Reserve
Bank would tend to have such an effect on Republic. In addition, Republic is not
aware of any legislative or regulatory proposals which, if they were
implemented, would tend to have such an effect.
PERFORMANCE OVERVIEW
Comparison of the Fiscal Years Ended December 31, 1995 and 1994. For the
fiscal year ended December 31, 1995, Republic reported net income of $603,000,
or $0.76 per share, as compared to net income of $807,000, or $1.02 per share,
for 1994, reflecting a decrease of $204,000 or 25%. The decrease in net income
was due primarily to the suspension of the Refant Program for the 1995 tax
season compared to the prior year's tax season. This decrease in income was
partially offset by a 27% increase in net interest income after provision for
loan losses to $3,788,000 in 1995, compared to $2,974,000 in 1994.
At December 31, 1995, Republic had total assets of $131 million,
representing an increase of nearly $25 million, or 23%, over December 31, 1994.
The increase was concentrated in a $10 million increase in the investment
portfolio and a $14 million increase in Republic's loan portfolio. Deposits
increased $28.4 million, or 32%, from $88 million at December 31, 1994 to $116.4
million at December 31, 1995. Management believes that the deposit growth was a
result, in part, of Republic's continuing effort to attract customer deposits by
offering rates at the higher end of the range of market rates of interest.
Management expects this practice to decrease in the future, since the opening of
Republic's new branch in suburban Philadelphia will enable Republic to gather
more core deposits (money-market accounts, savings accounts, demand deposits and
lower-yielding certificates of deposit) in its immediate service area. Further
expansion of additional branches will accelerate this trend. The pending merger
will also accelerate this trend, since First Executive Bank has a
proportionately-larger base of core deposits and an expanding branch network.
Republic's net loans totaled $85 million at December 31, 1995, representing
65% of total assets, an increase of $14 million or 19% from 1994. The majority
of Republic's loan portfolio consists of loans secured by commercial and
residential real estate. Republic increased its allowance for loan
68
<PAGE>
losses to $680,000 at December 31, 1995, as compared to $650,000 at December 31,
1994 as a result of $193,000 in net loans charged-off and a provision for loan
losses of $223,000 in 1995. Republic's loan loss allowance represented
approximately 0.8% of total loans at December 31, 1995 down slightly from 0.9%
at December 31, 1994. Republic believes that the December 31, 1995 allowance for
loan losses is sufficient to cover reasonably expected losses in the loan
portfolio.
Comparison of the Fiscal Years Ended December 31, 1994 and 1993. For the
year ended December 31, 1994, Republic reported net income of $807,000, or $1.02
per share, as compared to net income of $506,000, or $0.64 per share, for 1993.
The 1994 net income increase over the prior year was due principally to the
Refant Program, lower funding costs and growth in the loan and investment
portfolio. This increase in income was partially offset by increases in
non-interest expense resulting from increased salary, occupancy, legal and FDIC
insurance expenses.
Republic's total assets at December 31, 1994, were $106 million, an
increase of $4.4 million, or 4.4% from December 31, 1993. This increase was due
primarily to the increase in loans originated by Republic. Republic's net loans,
collateralized primarily by commercial and residential real estate, increased
during 1994 from $62 million to $71 million. This increase was funded by a $6
million decrease in federal funds sold and the sale of $3.4 million in
Subordinated Debentures.
As stated above, Republic's net loans at December 31, 1994, totaled $71
million or approximately 67% of total assets. The allowance for loan losses
increased from $460,000 at December 31, 1993, to $650,000 at December 31, 1994.
The loan loss allowance at December 31, 1994 represented approximately 0.9% of
total loans, a marginal increase from 0.7% at December 31, 1993. Republic
believes that the December 31, 1994 allowance for loan losses is sufficient to
cover reasonably expected losses in the loan portfolio.
69
<PAGE>
The following table presents average balance sheets for the years ending
December 31, 1995 and 1994, and reflects the average yield on Republic's assets
and weighted average cost of its liabilities for the periods presented. Such
yields and costs are derived by dividing actual income or expense by the daily
average balance of assets or liabilities, respectively, for the respective
periods. Non-accrual Loans are included in average Loans receivable.
AVERAGE BALANCE SHEET
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
INTEREST
AVERAGE INCOME/ YIELD/
BALANCE COST COST
---------------- -------------- ---------
<S> <C> <C> <C>
ASSETS:
Federal Funds......................................................... $ 2,952,591 $ 176,363 5.97%
Investment Securities:
Available for Sale.................................................. 1,770,000 130,980 7.40%
Held To Maturity.................................................... 32,917,260 1,885,987 5.73%
Loans Receivable...................................................... 78,489,258 7,709,488 9.82%
---------------- -------------- ---------
Total Interest Earning Assets................................. $ 116,129,109 $ 9,902,818 8.53%
---------------- -------------- ---------
Other Assets.......................................................... 4,138,647
Total Assets.......................................................... $ 120,267,756
----------------
----------------
LIABILITIES:
Demand Deposits..................................................... $ 8,938,645 $ 0 N/A
Money Markets & Savings............................................. 15,383,038 547,983 3.56%
Other Time Deposits................................................. 81,404,362 5,004,996 6.15%
Other Borrowings & Debt............................................. 4,430,991 337,859 7.62%
---------------- -------------- ---------
Total Deposits...................................................... $ 110,157,036 $ 5,890,838 5.35%
Total Interest Bearing Deposits..................................... $ 101,218,391 $ 5,890,838 5.82%
Other Liabilities................................................... 1,844,220
Equity.............................................................. 8,266,500
Total Liabilities & Shareholders' Equity............................ $ 120,267,756
----------------
----------------
Net Interest Spread................................................. $ 4,011,980 3.18%
-------------- ---------
-------------- ---------
Net Interest Margin................................................. $ 4,011,980 3.45%
-------------- ---------
-------------- ---------
Interest Earning Assets as a Percent of Interest Bearing
Liabilities...................................................... 115%
</TABLE>
70
<PAGE>
AVERAGE BALANCE SHEET
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
INTEREST
AVERAGE INCOME/ YIELD/
BALANCE COST COST
---------------- -------------- ---------
<S> <C> <C> <C>
ASSETS:
Federal Funds......................................................... $ 7,464,542 $ 278,183 3.73%
Investment Securities:
Available for Sale.................................................... 0 0 0
Held To Maturity...................................................... 26,262,580 1,441,555 5.49%
Loans Receivable...................................................... 69,837,538 5,520,658 7.91%
---------------- -------------- ---------
Total Interest Earning Assets................................. $ 103,564,660 $ 7,240,396 6.99%
-------------- ---------
Other Assets.......................................................... 3,334,834
Total Assets.......................................................... $ 106,899,494
----------------
----------------
LIABILITIES:
Demand Deposits..................................................... $ 7,259,745 $ 0 N/A
Money Markets & Savings............................................. 18,855,816 660,710 3.50%
Other Time Deposits................................................. 68,152,219 3,003,529 4.41%
Other Borrowings & Debt............................................. 3,691,286 280,449 7.60%
---------------- -------------- ---------
Total Deposits...................................................... $ 97,959,066 $ 3,944,688 4.03%
Total Interest Bearing Deposits..................................... $ 90,699,321 $ 3,944,688 4.35%
---------------- -------------- ---------
Other Liabilities................................................... 1,298,070
Equity.............................................................. 7,642,358
Total Liabilities & Shareholders' Equity............................ $ 106,899,494
----------------
----------------
Net Interest Spread................................................. $ 3,295,708 2.96%
-------------- ---------
-------------- ---------
Net Interest Margin $ 3,295,708 3.18%
-------------- ---------
-------------- ---------
Interest Earning Assets as a Percent of Interest Bearing
Liabilities...................................................... 114%
</TABLE>
71
<PAGE>
The following table analyzed the rate and volume variances between
Republic's interest-earning assets and interest bearing liabilities for the
fiscal years 1995 and 1994.
RATE VOLUME ANALYSIS
DECEMBER 31, 1994 TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
TOTAL
VARIANCE RATE VOLUME MIX
------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans Receivable....................................... $ 2,188,830 $ 1,339,028 $ 683,919 $ 165,883
Investment Securities:
Available for Sale................................... 130,980 0 130,980 0
Held to Maturity..................................... 444,432 63,154 365,276 16,002
Federal Funds Sold..................................... (101,820) 167,686 (168,148) (101,358)
------------- ------------- ------------- -----------
Total Interest Earning Assets.......................... 2,662,422 1,569,868 1,012,027 80,527
------------- ------------- ------------- -----------
------------- ------------- ------------- -----------
INTEREST EXPENSE
Money Market & Savings................................. ($ 112,727) $ 10,982 ($ 121,687) ($ 2,023)
Other Time Deposits.................................... 2,001,467 1,186,684 584,034 230,750
Other Borrowings....................................... 57,410 1,008 56,200 202
------------- ------------- ------------- -----------
Total Interest Bearing Liabilities..................... $ 1,946,150 $ 1,198,674 $ 518,547 $ 228,929
------------- ------------- ------------- -----------
------------- ------------- ------------- -----------
NET INTEREST INCOME $ 716,272
</TABLE>
NET INCOME
During the year ended December 31, 1995, net income was less than that for
1994 by $204,000, representing a decrease of 25%. Net income per average common
share outstanding for 1995 was $0.76, compared with $1.02 for 1994, reflecting a
decrease of 25%. Republic's net income in 1994 increased by 59% to $807,000 from
$506,000 in 1993. Net income per average common share outstanding was $1.02 in
1994, as compared with $0.64 for 1993.
Republic believes that the decrease in net income during 1995 is
attributable primarily to the suspension of the Refant Program. Net income in
1994 increased as a result of the Refant Program and lower funding costs as
compared to 1993, which included a $210,000 gain from the sale of securities.
Management believes that the reinstitution of the Refant Program for 1996
will have a material positive impact on Republic's net income and profits for
the year ending December 31, 1996.
NET INTEREST INCOME
Net interest income, which constitutes a significant source of income for
Republic, is the amount by which interest earned on assets exceeds the interest
paid on interest-bearing liabilities. The principal interest-earning assets are
loans made to businesses and individuals. Interest-bearing liabilities primarily
consist of time deposits, money market accounts, NOW accounts and savings
deposits. Time deposits comprise the largest portion of Republic's
interest-bearing liabilities and represent Republic's highest cost of funds. For
1995, Republic's average cost of interest-bearing liabilities was 5.7%, compared
to 4.5% in 1994 and 4.2% in 1993. Yields on interest-earning assets were 8.5%
for 1995, 7.6% for 1994 and 7.2% in 1993. Net interest income was positively
impacted in 1995 and 1994 by the lower interest rate environment.
72
<PAGE>
The following table presents interest income and expenses for the years
ending December 31, 1995 and 1994 with adjustments for non-interest income and
expenses, and income taxes.
INTEREST INCOME/EXPENSES
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,(000'S)
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Interest income........................................................ $ 9,902 $ 7,241
Interest expense....................................................... 5,891 3,944
--------- ---------
Net interest income.................................................... 4,011 3,297
Provision for loan losses.............................................. 223 323
--------- ---------
Net interest income after provision for loan losses.................... 3,788 2,974
Non-interest income.................................................... 155 1,096
Non-interest expense................................................... 3,049 2,833
--------- ---------
Income before income taxes............................................. 894 1,237
Income taxes........................................................... 291 430
--------- ---------
Net Income............................................................. $ 603 $ 807
</TABLE>
PROVISION FOR LOAN LOSSES
The provision for loan losses is an amount charged monthly to operating
expenses. In order to determine the amount of this provision, Republic's loan
officers conduct a monthly review of the loan portfolio evaluating actual losses
over a three-year period and current loan quality. This evaluation takes into
consideration such factors as changes in the nature and size of the loan
portfolio, overall portfolio quality, specific problem loans and current
economic conditions that may affect the borrowers' ability to pay. In the past,
Republic has experienced a low level of loan losses, due in part to its
conservative loan policy. Net charge-offs as a percentage of net loans were .24%
in 1995 and .19% in 1994.
The amounts added to the provision for loan losses were $223,000, $323,000
and $207,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
Net loan charge-offs for the years ended December 31, 1995, 1994 and 1993 were
$193,000, $133,000, and $87,000, respectively. The ratio of the allowance for
loan losses to nonperforming loans (nonaccrual loans and loans past due 90 days
or more) was 83% at December 31, 1995 and 164% at December 31, 1994. Management
believes that the current ratio is a prudent ratio to maintain and is in keeping
with standards used by banking regulatory authorities in evaluating the adequacy
of such provision. In an effort to avoid charge-offs, Republic actively pursues
delinquent borrowers. Management of Republic believes that the provision for
loan losses is sufficient to maintain the loan loss allowance at levels adequate
to cover reasonably expected losses from the loan portfolio. Although management
believes it uses the best information available to calculate the provision for
loan losses and the level of the loan loss allowance, future adjustments may be
necessary if economic conditions differ substantially from the assumptions used
or adverse developments arise with respect to Republic's non-performing or
performing loans. Material increases in Republic's loan loss allowance would
result in a decrease in Republic's net income and capital.
NON-INTEREST INCOME
Total non-interest income for 1995 was $155,000, compared with $1,096,000
for 1994, primarily as a result of the suspension of the Refant Program. Total
non-interest income for the year ended December 31, 1994 was $1,096,000, an
increase of $419,000 or 62% from 1993. This increase is primarily due to a
substantial increase in service fees on deposit accounts in 1994, the growth of
the Refant Program resulting in an increased number of RALs being made by
Republic.
In 1994 and 1993, non-interest income was also significantly impacted by
Republic's participation in the Refant Program. Refant Partners is a partnership
comprised of Republic's wholly-owned subsidiary and a wholly-owned subsidiary of
Hewitt. Consumers seeking a RAL from Republic are required to pay a flat loan
fee, regardless of the amount of the RAL. From this fee, Republic recognizes two
types of non-interest income, consisting of a fee to Republic for each RAL made
and
73
<PAGE>
Republic's share of partnership income from the Refant partnership. The fee
portion of the non-interest income is used by Republic to offset its cost of
funding the RALs and aggregated $175,000 in 1993 compared to $391,500 in 1994.
Republic's share of Refant partnership income represents 35% of each loan fee
charged to consumers, after deducting (i) the fee paid to Republic to cover
Republic's cost of funds, (ii) the expenses incurred by Refant in operating the
program, (iii) the 7% per annum interest payment to County Bank and (iv) the
management fee payable to Hewitt. Republic's share of Refant Partners'
partnership income was $196,000 for 1993 compared to $877,000 for 1994. The
program was suspended for 1995. Republic's share of Refant partnership income is
offset by the bad debt allowance attributable to the RALs. During 1994, Republic
made RALs aggregating approximately $138 million compared to $48 million in
1993.
NON-INTEREST EXPENSE
Non-interest expense for 1995 increased 7%, to $3,049,000 from $2,833,000
for 1994. Non-interest expense in 1994 represented an increase of $550,000 or
24% over 1993. These increases were the result of increased salary, occupancy
and FDIC expenses due to continued growth of Republic.
Salaries and employee benefits, which represented the largest component of
non-interest expense, totaled $1,592,000 in 1995, as compared with $1,284,000 in
1994 and $1,059,000 in 1993. These increases reflect increased staffing levels
due to an expanding customer base. Occupancy expense totaled $470,000 in 1995 as
compared with $425,000 in 1994 and $376,000 in 1993. The increase in occupancy
expense is a result of annual increases in rental payments required to be made
by Republic under the terms of the lease for its office space.
Although non-interest expense has increased in each of the past three
years, the ratio of total non-interest expense to average assets for 1995, 1994
and 1993 has been 2.3%, 2.6% and 2.2% respectively. The consistency in the
efficiency ratio from year to year is attributable to management's continuing
efforts to maintain the growth of non-interest expenses at a level equal to or
less than the growth in average assets.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity involves the ability of Republic to raise funds to support asset
growth or to reduce assets to meet deposit withdrawals and other borrowing
needs, maintain reserve requirements and otherwise operate itself on an ongoing
basis. During the past three years, the liquidity needs of Republic were
primarily met by cash on hand, deposits in other banks, federal funds sold and
securities purchased under agreements to resell.
Closely related to the concept of liquidity is the management of interest
earning assets and interest bearing liabilities. A principal objective of
Republic's asset/liability management strategy is to minimize Republic's
exposure to changes in interest rates by an ongoing review of the maturity and
repricing of interest-earning assets and interest-bearing liabilities. This
review is overseen by the Executive Committee of the Board of Directors, which
establishes policies to control interest rate sensitivity. Interest rate
sensitivity is the volatility of a bank's earnings resulting from a movement in
the market interest rates. As part of Republic's interest rate risk management
policy, the Executive Committee examines the extent to which its assets and
liabilities are interest rate sensitive and monitors Republic's interest rate
sensitivity gap. An interest rate sensitive asset or liability is one that,
within a defined time period, either matures or experiences an interest rate
change in line with general market rates. The interest rate sensitivity gap is
the difference between interest-earning assets and interest-bearing liabilities
scheduled to mature or reprice within such time period. A gap is considered
positive when the amount of interest rate sensitive assets exceeds the amount of
interest rate sensitive liabilities. A gap is considered negative when the
amount of interest rate sensitive liabilities exceeds interest rate sensitive
assets. During a period of rising interest rates, a negative gap would tend to
adversely affect net interest income, while a positive gap would tend to result
in an increase in net interest income. During a period of falling interest
rates, a negative gap would tend to result in an increase in net interest
income, while a positive gap would tend to adversely affect net interest income.
If the repricing of Republic's assets and liabilities were equally flexible and
moved concurrently, the impact of any increase or decrease in interest rates on
net interest income would be minimal.
Republic currently experiences a negative gap which suggests that
Republic's net yield on interest earning assets may increase during periods of
rising interest rates. A simple interest rate 'gap'
74
<PAGE>
analysis by itself may not be an accurate indicator of how net interest income
will be affected by changes in interest rates. Income associated with
interest-earning assets and costs associated with interest-bearing liabilities
may not be affected uniformly by changes in interest rates. In addition, the
magnitude and duration of changes in interest rates may have a significant
impact on net interest income. Although certain assets and liabilities may have
similar maturities or periods of repricing, they may react in different degrees
to changes in market interest rates. Interest rates on certain types of assets
and liabilities fluctuate in advance of changes in general market interest
rates, while interest rates on other types may lag behind changes in general
market rates. In addition, certain assets, such as adjustable rate mortgage
loans, have features (generally referred to as 'interest rate caps') which limit
changes in interest rates on a short-term basis and over the life of the asset.
In the event of a change in interest rates, prepayment and early withdrawal
levels also could deviate significantly from those assumed in calculating the
interest-rate gap. The ability of many borrowers to service their debts also may
decrease in the event of an interest rate increase.
Management's strategy is to maintain a balanced interest rate risk position
to protect its net interest margin from market fluctuations. To achieve this,
the Executive Committee reviews, on a monthly basis, the maturity and repricing
of assets and liabilities.
The principal interest earning assets are loans made to businesses and
individuals. Interest-bearing liabilities primarily consist of time deposits,
money market accounts, NOW accounts and savings deposits. Time deposits comprise
the largest portion of Republic's interest-bearing liabilities and represent
Republic's highest cost of funds. For 1995, Republic's average cost of
interest-bearing liabilities was 3.9%, compared to 4.5% in 1994 and 4.2% in
1993. Yields on interest-bearing assets were 6.8% for 1995, 7.6% for 1994 and
7.2% for 1993. Net interest income was positively impacted in 1995 by the lower
interest rate environment.
The tables beginning on the following page summarize Republic's total
interest earning assets and interest bearing liabilities as of December 31, 1995
and 1994, and the difference or gap between them on an actual and cumulative
basis for the periods indicated. The table also presents the gap between rate
sensitive assets and liabilities as a percentage of total assets at December 31,
1995 and December 31, 1994. To the extent loans presented in this table are on a
demand basis, they are categorized as to maturity based upon their stated
amortization schedule.
75
<PAGE>
GAP ANALYSIS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
BALANCE
DECEMBER 31, SIX ONE ONE/TWO TWO/FIVE
1995 MONTH YEAR YEAR YEAR FIXED TOTAL
------------ --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash........................... $ 2,884 $ $ $ $ $ 2,884 $ 2,884
Interest Bearing Bank
Balance...................... 39 39 39
Federal Funds Sold............. 933 933 933
Investments
Treasuries................... 1,002 1,002 0 1,002
Agencies..................... 11,350 11,350 0 11,350
CMO'S........................ 25,215 95 2,020 9,242 13,858 25,215
Equities..................... 785 785 785
Loans
Commercial Floating.......... 38,978 38,978 38,978
Commerical Fixed............. 45,452 3,058 2,165 7,000 26,312 6,917 45,452
Consumer..................... 892 90 90 180 532 0 892
Non Accrual.................. 518 518 518
Other........................ 23 23 23
Allowance for
Loan Losses.................. (60) (60) (60)
Other Assets................... 3,672 3,672 3,672
------------ --------- --------- --------- --------- --------- ---------
Total Assets............... $ 131,063 $ 55,578 $ 4,275 $ 16,422 $ 40,702 $ 14,096 $ 131,063
------------ --------- --------- --------- --------- --------- ---------
------------ --------- --------- --------- --------- --------- ---------
Cumulative Sens. Assets........ 55,568 59,843 76,265 116,967 131,063
Deposits
Non-Interest Demand.......... 12,570 12,570 12,570
Interest Bearing Demand...... 1,403 1,403 1,403
Savings...................... 234 234 234
Money Market................. 11,332 11,332 11,332
CD's......................... 90,885 53,909 19,508 1,471 15,997 0 90,885
Debentures................... 3,400 3,400 0 3,400
Other Liabilities............ 2,617 2,617 2,617
Capital...................... 8,622 8,622 8,622
------------ --------- --------- --------- --------- --------- ---------
Total Liabilities &
Capital.................. $ 131,063 $ 66,878 $ 19,508 $ 1,471 $ 19,397 $ 23,809 $ 131,063
------------ --------- --------- --------- --------- --------- ---------
------------ --------- --------- --------- --------- --------- ---------
Cumulative Sens. Liabilities... 66,878 86,386 87,857 107,254 131,063
Cumulative GAP................. (11,310) (26,543) (11,592) 9,713
Cumulative GAP/Assets.......... -8.63% -20.25% -8.84% 7.41%
</TABLE>
76
<PAGE>
GAP ANALYSIS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
BALANCE
DECEMBER 31, SIX ONE ONE/TWO TWO/FIVE
1994 MONTH YEAR YEAR YEAR FIXED TOTAL
------------ --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash........................... $ 1,148 $ $ $ $ 1,148 1,148
Interest Bearing Bank
Balance...................... 209 209 209
Federal Funds Sold............. 2,611 2,611 2,611
Investments
Treasuries................... 2,016 1,005 0 1,011 2,016
Agencies..................... 0 0 0 0
CMO'S........................ 25,402 60 60 2,080 23,202 25,402
Equities..................... 791 791 791
Loans
Commercial Floating.......... 33,652 33,652 33,652
Commerical Fixed............. 36,637 1,864 2,112 7,000 25,661 0 36,637
Consumer..................... 906 90 90 180 546 0 906
Non Accrual.................. 878 878 878
Other........................ 10 10 10
Allowance for Loan Losses...... (650) (650) (650)
Other Assets................... 2,593 2,593 2,593
------------ --------- --------- --------- --------- --------- ---------
Total Assets............... $ 106,203 $ 39,501 $ 2,262 $ 10,271 $ 49,409 $ 4,760 $ 106,203
------------ --------- --------- --------- --------- --------- ---------
------------ --------- --------- --------- --------- --------- ---------
Cumulative Sens. Assets........ 39,501 41,763 52,034 101,443 106,203
Deposits
Non-Interest Demand.......... 7,400 7,400 7,400
Interest Bearing Demand...... 1,710 1,710 1,710
Savings...................... 267 267 267
Money Market................. 15,362 15,362 15,362
CD's......................... 63,227 32,208 29,124 1,471 424 0 63,227
Repo's....................... 5,583 5,583 5,583
Debentures................... 3,400 3,400 0 3,400
Other Liabilities............ 1,254 1,254 1,254
Capital...................... 8,000 8,000 8,000
------------ --------- --------- --------- --------- --------- ---------
Total Liabilities &
Capital.................. $ 106,203 $ 55,130 $ 29,124 $ 1,471 $ 3,824 $ 16,654 $ 106,203
------------ --------- --------- --------- --------- --------- ---------
------------ --------- --------- --------- --------- --------- ---------
Cumulative Sens. Liabilities... 55,130 84,254 85,725 89,549 106,203
Cumulative GAP................. (15,629) (42,491) (33,691) 11,894 0
Cumulative GAP/Assets.......... -14.72% -40.01% -31.72% 11.20%
</TABLE>
77
<PAGE>
INVESTMENT SECURITIES
Republic's investments of approximately $38 million at December 31, 1995
consisted primarily of obligations of United States government agencies with
maturities of from one to five years. Of this total, $34 million of investment
securities owned by Republic are intended to be held to maturity, with the
balance of $4 million held as available for sale. Of the Held to Maturity
Portfolio, securities with an amortized cost of $24,887,000 consists of CMO's,
backed by securities of U.S. Government agencies. Of this amount, $15,881,000
are CMO's backed by FHLMC securities and $9,006,000 are backed by FNMA
securities. The Available For Sale portfolio consists entirely of Small Business
Association pooled loans. At December 31, 1995 and 1994, respectively, no
securities were pledged to secure public deposits and securities sold under
agreements to repurchase or for other purposes required or permitted by law.
Republic Bank's investment activities include managing an investment
securities portfolio valued at approximately $38 million on December 31, 1995.
Of this, approximately $25 million or 66% were collaterized mortgage
obligations. At December 31, 1995 and 1994, Republic Bank had Collateralized
Mortgage Obligations of $25,215,000 and $25,402,000, respectively. These CMO
debt securities are fixed rate REMICs and have average lives of between one and
two years, after principal payments commence. The principal payments are
expected to begin at various times during the period from February 1996 to
August 1998. The timing and speed of the principal paydowns of CMO's are heavily
dependent on the prepayments of the underlying collateral. If the underlying
collateral prepays according to its expected schedule, the cash flows and yields
from the CMOs will be predictable. However, if the prepayments of the underlying
collateral is faster than anticipated, the CMO will pay down at a more rapid
rate, and the average life of the CMO bond will be shortened. This would reduce
the yield to maturity if the CMO bonds were purchased at a premium, and increase
the yield to maturity if the CMO bonds were purchased at a discount. Conversely,
if the underlying collateral pays at a slower rate than expected, the CMO bond
will have a longer average life. This would increase the yield to maturity if
the CMO bonds were purchased at premium and reduce the yield to maturity if the
CMO bonds were purchased at a discount. With respect to CMOs, Republic Bank's
strategy is to invest in securities with shorter rather than longer lives in
order to minimize risk. All CMOs in Republic Bank's portfolio are backed by
securities of U.S. government agencies.
The following table analyses the maturity distribution and weighted average
yield of Republic Bank's investment securities at December 31, 1995.
REPUBLIC BANK
INVESTMENT SECURITIES MATURITY DISTRIBUTION
DECEMBER 31, 1995
U.S. GOVERNMENT AND AGENCIES AVAILABLE FOR SALE
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
IN ONE YEAR 1 TO 5 YEARS OVER 5 YEARS TOTAL
------------ ------------- ------------ ---------
<S> <C> <C> <C> <C>
Amoritized Cost............................................. $ 0 $ 0 $ 4,320 $ 4,320
Market Value................................................ $ 4,348 $ 4,348
Unrealized Gain/(Loss)...................................... $ 0 $ 0 $ 28 $ 28
Weighted Average Yield...................................... 0.00% 0.00% 7.35% 7.35%
</TABLE>
U.S. GOVERNMENT AND AGENCIES HELD TO MATURITY
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
IN ONE YEAR 1 TO 5 YEARS OVER 5 YEARS TOTAL
------------ ------------- ------------ ---------
<S> <C> <C> <C> <C>
Amoritized Cost............................................. $ 8,332 $ 0 $ 25,673 $ 34,004
Market Value................................................ $ 8,367 $ 0 $ 25,478 $ 33,846
Unrealized Gain/(Loss)...................................... $ 37 $ 0 ($ 195) ($ 158)
Weighted Average Yield...................................... 7.32% 0.00% 6.45% 6.67%
</TABLE>
78
<PAGE>
LOAN PORTFOLIO
The primary source of income for Republic is the interest and fees earned
on loans. At December 31, 1995, Republic's total assets were $131 million, as
compared to $106 million at December 31, 1994. At December 31, 1995, 1994 and
1993, Republic had net loans of $85.2 million, $71.4 million and $62.5 million,
respectively, representing 65%, 67% and 61%, respectively, of total assets of
$131 million, $106 million, and $102 million, respectively. Management believes
that the increase in net loans during the past three years is primarily
attributable to increased loan demand resulting from greater market acceptance
in Republic's service area, as well as the efforts of Republic's executive
officers and directors in generating loan activity.
Lending activities are conducted pursuant to a written policy which has
been adopted by Republic. The principal objectives of Republic's loan policies
are to provide superior return on equity to Republic's shareholders, increase
Republic's market share and contribute to the sound growth of Republic's
customer base. In order to achieve these objectives, Republic seeks to make
loans which assure the safety of deposits and capital, while generating
sufficient income to produce a superior rate of return on capital and assets.
Republic also seeks to establish full banking relationships with its borrowers.
Virtually all loans made by Republic are secured by commercial or residential
real estate. A typical loan in Republic's loan portfolio ranges in size between
$100,000 and $250,000, excluding participations.
Loans are stated at the amount of unpaid principal, reduced by unearned
discount and an allowance for loan losses. To the extent loans are on a demand
basis, they are categorized as to maturity based upon their stated amortization
schedule. The following table summarizes the loan portfolio of Republic by loan
category and amount for the periods indicated.
LOAN BREAKDOWN TABLE
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995(000'S) 1994(000'S)
-------------------- --------------------
AMOUNT % AMOUNT %
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Loans Collateralized By Real Estate:
One to Four Family Residential......................................... $ 26,641 31.0% $ 20,493 28.5%
Multi-Family Residential............................................... 140 0.2% 0 0.0%
Commercial and Other................................................... 34,353 40.0% 22,979 31.7%
--------- --------- --------- ---------
Total Loans Collateralized by Real Estate.............................. 61,134 71.2% 43,472 60.2%
Commercial and Business Loans.......................................... 23,183 27.0% 27,400 38.1%
All Other Loans........................................................ 1,546 1.8% 1,211 1.7%
--------- --------- --------- ---------
Total Loans............................................................ $ 85,863 100.0% $ 72,083 100.0%
</TABLE>
NON-PERFORMING LOANS
Generally, interest on loans is accrued and credited to income based upon
the principal balance outstanding. Loans are considered to be non-performing if
(a) they are on a non-accrual basis, (b) they are on an accrual basis, but are
contractually past due 90 days or more as to interest or principal or (c) terms
have been renegotiated because of a weakening in the position of the borrower to
provide a reduction or deferral of interest or principal. It is management's
policy to discontinue the accrual of interest income and classify a loan as
non-accrual when management believes, after considering economic and business
conditions and collection efforts, that the borrower's financial condition is
such that collection of interest is doubtful. On December 31, 1995, an aggregate
of $536,000 in loans were classified as non-accrual and $28,000 in loans were
classified as past due and accruing, compared with $878,000 and $190,000 on
December 31, 1994, respectively. The following table presents the principal
amounts of non-performing loans for the dates indicated.
79
<PAGE>
NON-PERFORMING LOANS
<TABLE>
<CAPTION>
DECEMBER 31 (000'S)
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Non accruing loans............................................................ $ 536 $ 878 $ 274
Accruing loans 90 days or more past due....................................... 28 190 174
Restructured loans............................................................ 0 0 0
--------- --------- ---------
Total non performing loans.................................................... 564 1,068 448
Other real estate owned....................................................... 295 0 0
--------- --------- ---------
Total non performing assets................................................... $ 859 $ 1,068 $ 448
--------- --------- ---------
--------- --------- ---------
Non performing loans to period end loans...................................... .66% 1.48% .71%
Non performing assets to total assets......................................... .66% 1.01% .44%
Non performing assets to loans and real estate owned.......................... 1.00% 1.48% .71%
</TABLE>
POLICIES AND PROCEDURES RELATING TO THE ACCRUAL OF INTEREST INCOME
Interest income is accrued as earned on a simple interest basis. Accrual of
interest is discontinued on a loan when management believes, after considering
economic and business conditions and collection efforts, that the borrower's
financial condition is such that collection of interest is doubtful. Loans on
which the accrual of interest had been discontinued or reduced amounted to
approximately $536,000 at December 31, 1995, consisting of four loans, compared
with $878,000 on December 31, 1994. At December 31, 1995, there were no
commitments to lend additional funds to borrowers whose loans were classified as
non-accrual.
ALLOWANCE FOR LOAN LOSSES
In originating loans, Republic recognizes that some degree of credit losses
will be experienced and that the risk of loss will vary with, among other
things, the type of loan being made, the creditworthiness of the borrower over
the term of the loan, the quality of the collateral for the loan, as well as
general economic conditions. It is management's policy to attempt to maintain an
adequate allowance for loan losses based on Republic's historical loan loss
experience, evaluation of economic conditions and regular reviews of
delinquencies and loan portfolio quality. Republic seeks to maintain a general
reserve as well as a specific reserve for individual loans when ultimate
collection is considered questionable by management after reviewing the current
status of loans which are contractually past due and considering the net
realizable value of the collateral for the loan.
In reviewing its loan portfolio, Republic has instituted a nine point
rating system based on factors including performance, adequacy of collateral,
prior history, financial and business conditions and collection efforts.
Outstanding loans receiving unfavorable ratings are reviewed monthly, while
loans given favorable ratings are reviewed on an annual basis.
Management continues to actively monitor Republic's asset quality and to
charge off loans against the allowance for loan losses when appropriate or to
provide specific loss allowances when necessary. At December 31, 1995, the
amount of the allowance for loan losses was approximately 0.8% of total net
loans outstanding. Although management believes it uses the best information
available to make determinations with respect to the allowance for loan losses,
future adjustments may be necessary if economic conditions differ from the
economic conditions in the assumptions used in making the initial
determinations. During 1995, Republic Bank recognized charge-offs in the amount
of $212,000.
The following chart shows an analysis of the Allowance for Loan Losses for
the years ended December 31, 1995 and 1994. All of such charged-off amounts
related to loans which had previously been classified non-accrual loans.
80
<PAGE>
The charge-offs were comprised of two credits, with one commercial credit
comprising a substantial portion of the charge-offs. The ratio of gross
charge-offs to average loans outstanding in 1995 was 0.25%. The same number for
1994 was 0.19%. In 1994, approximately $144,000 in loans were charged off.
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
12/31/95(000'S) 12/31/94(000'S)
-------------- --------------
<S> <C> <C>
Balance at the beginning of period.................................... $ 650 $ 460
Charge-offs:
Commercial.......................................................... 162 136
Real Estate Mortgage................................................ 50 0
Consumer Loans...................................................... 0 8
-------------- --------------
212 144
Recoveries:
Commercial.......................................................... 16 6
Real Estate Mortgage................................................ 2 0
Consumer Loans...................................................... 1 5
-------------- --------------
Net Charge-offs....................................................... 193 133
-------------- --------------
Additions charged to operations....................................... 223 323
Balance at the end of period.......................................... $ 680 $ 650
Average Loans Outstanding............................................. $ 78,489 $ 69,837
Ratio of net charge-offs during the period to average loans
outstanding during the period....................................... 0.25% 0.19%
</TABLE>
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes the loan loss experience of Republic for the
dates indicated.
ALLOWANCES FOR LOAN LOSSES
<TABLE>
<CAPTION>
DECEMBER 31 (000'S)
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Balance, beginning of year............................................. $ 650 $ 460 $ 340
Provision............................................................ 223 323 207
Chargeoffs........................................................... (212) (144) (87)
Recoveries........................................................... 19 11 --
--------- --------- ---------
Balance, end of year................................................... $ 680 $ 650 $ 460
--------- --------- ---------
--------- --------- ---------
</TABLE>
COMMITMENTS
In the normal course of its business, Republic makes commitments to extend
credit, and issues standby letters of credit. Generally, such commitments are
provided by Republic as a service to its customers. Commitments to extend credit
are agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee.
Since many of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. Republic evaluates each customer's creditworthiness on a case-by-
case basis. The type and amount of collateral obtained, if deemed necessary by
Republic upon extension of credit, are based on management's credit evaluation
of the borrower. Standby letters of credit are conditional commitments issued by
Republic to guarantee the performance of a customer to a third party. The credit
risk involved in issuing standby letters of credit is essentially the same as
that involved in extending loan facilities to customers and are based on
management's evaluation of the creditworthiness of the borrower and the quality
of the collateral. At December 31, 1995, 1994 and
81
<PAGE>
1993, firm loan commitments approximated $15,741,000, $7,423,000 and $9,537,000,
respectively, and commitments under standby letters of credit approximated
$419,000, $602,000 and $1,154,000, respectively.
DEPOSITS
Deposits are the major source of Republic's funds for lending and other
investment purposes. Deposit inflows are significantly influenced by general
interest rates and market conditions. Republic may use borrowings on a
short-term basis if necessary to compensate for reductions in the availability
of other sources of funds. Maturity terms, service fees and withdrawal penalties
for deposit activity are established by Republic periodically on the basis of
funds acquisition and liquidity requirements, market rates and federal
regulations. At December 31, 1995, deposits totaled $116.4 million, an increase
of $28.4 million or 32% over 1994. At December 31, 1994, deposits totaled $88
million, representing a slight decrease from deposits of $89 million at December
31, 1993. The increase in deposits was in part attributable to the interest
rates at the higher end of market rates offered by Republic, particularly money
market accounts and retail time deposits, which comprise a major portion of
Republic's core deposit base. Management expects this trend to decrease in the
future, since the opening of Republic's new branch in suburban Philadelphia will
enable Republic to gather more core deposits in its immediate service areas and
thus have less need to offer higher rates. Further expansion of additional
branches will accelerate this trend. The pending merger will also accelerate
this trend, since First Executive Bank has a proportionately-larger base of core
deposits and an expanding branch network.
One of the primary components of sound growth and profitability is core
deposit accumulation and retention. Core deposits consist of all deposits,
including demand, interest-bearing, non-interest bearing and money market, and
certificates of deposit of $100,000 or less. At December 31, 1995, core deposits
as defined above represented 93% of total deposits and 93% of total assets.
Volatile liabilities consist of certificates of deposit in excess of $100,000
and brokered deposits. At December 31, 1995, volatile liabilities represented
6.9% of total deposits and 6.2% of total assets. It is Republic's policy to
limit net loans and leases to 75% of total deposits. At December 31, 1995, net
loans and leases constituted 73.7% of total deposits.
In order to fund the Refant Program, Republic generally relies on some
brokered deposits, for which it may pay higher interest rates than for its
retail deposits. As discussed below, Federal law restricts the ability of
financial institutions to accept, renew or roll-over brokered deposits. These
restrictions currently do not apply to Republic; however Republic does not renew
or roll-over brokered deposits. Republic will seek to expand its deposit base
thereby reducing its need to obtain brokered deposits as a source of funding, by
expanding its customer base through the proposed merger and opening new
branches.
Regulations promulgated by the FDIC pursuant to the Federal Deposit
Insurance Corporation Improvement Act of 1993 ('FDICIA'), place limitations on
the ability of insured depository institutions to accept, renew, or roll-over
deposits by offering rates of interest which are significantly higher than the
prevailing rates of interest on deposits offered by other institutions having
the same type of charter in such depository institution's normal market area.
Under these regulations, 'well capitalized' depository institutions may accept,
renew, or roll-over such deposits without restriction, 'adequately capitalized'
depository institutions may accept, renew, or roll-over such deposits with a
waiver from the FDIC (subject to certain restrictions on payments of rates), and
'undercapitalized' depository institutions may not accept, renew or roll-over
such deposits. For the purposes of these regulations, Republic was a
'well-capitalized' depository institution at December 31, 1995.
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<PAGE>
As of December 31, 1995, Republic had total deposits of approximately
$116.4 million. The following table summarizes the composition of these
deposits.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
DEPOSITS 1995 1994
- -------------------------------------------------------------------- ---------------- --------------
<S> <C> <C>
Demand -- Non interest bearing...................................... $ 12,970,000 $ 7,400,000
Demand -- Interest bearing.......................................... 1,429,000 1,710,000
Money Market & Savings.............................................. 11,595,000 15,752,000
Certificates Under $100,000......................................... 82,357,000 52,620,000
Certificates Over $100,000.......................................... 8,070,000 10,484,000
---------------- --------------
Total deposits.................................................... $ 116,424,000 $ 87,966,000
---------------- --------------
---------------- --------------
</TABLE>
The following table represents the contractual maturity of time deposits
greater than $100,000 at December 31, 1995.
TIME DEPOSITS GREATER THAN $100,000
(IN THOUSANDS)
<TABLE>
<S> <C> <C> <C> <C> <C>
0 - 90 91 - 365 1 - 5 Over 5
Contractual Maturity................................... Days Days Years Years Totals
Amount................................................. $1,700 $2,341 $4,029 $0 $8,070
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
</TABLE>
CAPITAL RESOURCES
Republic is required to comply with certain 'risk-based' capital adequacy
guidelines issued by the FRB and the FDIC. The risk-based capital guidelines
assign varying risk weights to the individual assets held by a bank. The
guidelines also assign weights to the 'credit-equivalent' amounts of certain
off-balance sheet items, such as letters of credit and interest rate and
currency swap contracts. Under these guidelines, banks are expected to meet a
minimum target ratio for 'qualifying total capital' to weighted-risk assets of
8%, at least one-half of which is to be in the form of 'tier 1 capital.'
Qualifying total capital is divided into two separate categories or 'tiers.'
'Tier 1 capital' includes common stockholders' equity, certain qualifying
perpetual preferred stock and minority interests in the equity accounts of
consolidated subsidiaries, less goodwill. 'Tier 2 capital' components (limited
in the aggregate to one-half of total qualifying capital) include allowances for
credit losses (within limits), certain excess levels of perpetual preferred
stock and certain types of 'hybrid' capital instruments, subordinated debt and
other preferred stock. Republic's outstanding subordinated Debentures qualify as
'tier 2 capital' for purposes of the federal capital adequacy guidelines,
although the Debentures are treated as debt rather than capital under
Pennsylvania banking law. Applying the federal guidelines, the ratio of
qualifying total capital to weighted-risk assets, was 13.7% at December 31, 1995
and, as required by the guidelines, at least one-half of the qualifying total
capital consisted of tier 1 capital elements. Republic's total and tier 1
risk-based capital ratio's on December 31, 1994 were 13.7% and 9.1%,
respectively. As of that date, Republic's leveraged capital ratio was 7.55%. At
December 31, 1995, Republic exceeded the requirements for risk-based capital
adequacy.
Under FRB and FDIC regulations, a bank is deemed to be 'well capitalized'
when it has a 'leverage ratio' ('tier 1 capital to total assets') of at least
5%, a tier 1 capital to weighted-risk assets ratio of at least 6%, and a total
capital to weighted-risk assets ratio of at least 10%. At December 31, 1995, the
leverage ratio was 6.6%, tier 1 capital to weighted-risk assets was 9.1% and, as
set forth above, the total capital to weighted-risk assets ratio was 13.7%.
Accordingly, at December 31, 1995, Republic was 'well capitalized' under FRB and
FDIC regulations. See -- 'REGULATORY CAPITAL OF EXECUFIRST AND REPUBLIC.'
83
<PAGE>
RETURN ON AVERAGE EQUITY AND AVERAGE ASSETS
Two financial ratios typically used to measure the earnings performance of
a banking organization are return on average assets and return on average common
stockholders' equity. The following table summarizes Republic's return on equity
and assets for the periods indicated.
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Return on average assets........................................................... 0.50% 0.75%
Return on average equity........................................................... 7.29% 10.56%
Average Equity to Average Assets................................................... 7.17% 7.15%
</TABLE>
IMPACT OF INFLATION
The financial statements and related financial data presented herein have
been prepared in accordance with generally accepted accounting principles which
require the measurement of financial position and operating results in terms of
historical dollars without considering changes in the relative purchasing power
of money over time due to inflation. The primary impact of inflation on the
operation of Republic is reflected in increased operating costs. Unlike most
industrial companies, virtually all of the assets and liabilities of a financial
institution are monetary in nature. As a result, interest rates have a more
significant impact on a financial institution's performance than the effects of
general levels of inflation. Interest rates do not necessarily move in the same
direction or in the same magnitude as the price of goods and services.
Management believes that continuation of its efforts to manage the rates,
liquidity and interest sensitivity of Republic's assets and liabilities is
necessary to generate an acceptable return.
FEDERAL INCOME TAXATION
Under the Revenue Reconciliation Act of 1993, the maximum federal income
tax rate applicable to a corporation's taxable income in excess of $10 million
was increased from 34% to 35%, effective for taxable years beginning in 1993. In
addition, corporations become subject to an additional tax of 3% on taxable
income above $15 million, to a maximum tax of $100,000. The top rate on
corporate net capital gain also was increased to 35%.
In the initial years of its operation, Republic generated and subsequently
utilized net operating loss (NOL) carryforwards to offset taxable income. By
1994, Republic had exhausted these NOL carryforwards, and its income was subject
to corporate income taxation. To the extent Republic's taxable income (including
net capital gain) is less than $10 million, the changes implemented by the 1993
tax legislation will have no immediate impact on Republic.
84
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS
Security Ownership of Management and Beneficial Owners
The following table sets forth information as of April 12, 1996 with
respect to the shares of Republic Common Stock beneficially owned by each
director and executive officer of Republic and by all directors and executive
officers as a group. Except as disclosed by the table, there are no other
entities or persons known to Republic to be the beneficial owner of more than
five (5%) percent of the shares of Republic Common Stock (based on 794,263
shares of Republic Common Stock outstanding as of April 12, 1996). The address
of each director and executive officer is Republic Bancorporation, Inc., 1515
Market Street, Philadelphia, PA 19102.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENTAGE
NAME OWNED(1) OF CLASS(1)
- ------------------------------------------------------------------------------ ----------- -----------
<S> <C> <C>
Harry D. Madonna(2)........................................................... 42,971 5.27%
Kenneth Adelberg(3)........................................................... 31,645 3.94%
William W. Batoff(4).......................................................... 18,807 2.34%
Daniel S. Berman(3)........................................................... 21,179 2.63%
Eustace W. Mita(5)............................................................ 24,222 3.00%
Neal I. Rodin(6).............................................................. 39,370 4.88%
Steven J. Shotz(7)............................................................ 39,347 4.84%
Rolf A. Stensrud(8)........................................................... 28,881 3.53%
Harris Wildstein.............................................................. 35,510 4.47%
All directors and executive officers
as a group (9) persons...................................................... 281,932 30.97%
</TABLE>
* Less than 1%
(1) Calculated in accordance with Rule 13d-3 of the Exchange Act.
(2) Includes 21,842 options to purchase shares of Republic Common Stock, 2,865
shares held by Mr. Madonna's IRA account and 274 shares held jointly by Mr.
Madonna and Charlene Madonna.
(3) Includes options to purchase 9,928 shares of Republic Common Stock.
(4) Includes options to purchase 7,943 shares of Republic Common Stock.
(5) Includes options to purchase 11,914 shares of Republic Common Stock and
5,000 shares of Republic Common Stock held by Mita Leasing Corp., a company
controlled by Mr. Mita.
(6) Includes options to purchase 11,914 shares of Republic Common Stock and
26,173 shares of Republic Common Stock held jointly by Mr. Rodin and Sharon
Rodin.
(7) Includes 18,476 shares of Republic Common Stock held of record by the
Schotz, Miller, Glusman, Footer & Magarick, P.C. 401(k) Trust, 73 shares
held of record by JMS Inc. as custodian for Mr. Schotz and 17,871 options to
purchase shares of Republic Common Stock.
(8) Includes options to purchase 23,828 shares of Republic Common Stock.
85
<PAGE>
DESCRIPTION OF EXECUFIRST STOCK
FOR THE PURPOSES OF THE FOLLOWING DISCUSSION, ALL REFERENCES HEREIN TO THE
HOLDING COMPANY, THE HOLDING COMPANY COMMON STOCK OR THE HOLDING COMPANY
PREFERRED STOCK (AS HEREAFTER DEFINED), AS THE CASE MAY BE, SHALL BE DEEMED TO
INCLUDE A REFERENCE, AS APPROPRIATE, TO EXECUFIRST, EXECUFIRST COMMON STOCK OR
EXECUFIRST PREFERRED STOCK, AS THE CASE MAY BE.
AUTHORIZED STOCK
ExecuFirst is authorized to issue 20,000,000 shares of ExecuFirst Common
Stock and 10,000,000 shares of preferred stock, $.01 par value ('ExecuFirst
Preferred Stock'). Following consummation of the Merger, each share of
authorized ExecuFirst Common Stock will be automatically be deemed to be an
authorized share of Holding Company Common Stock and each share of authorized
ExecuFirst Preferred Stock will automatically be deemed to be an authorized
share of Holding Company Preferred Stock ('Holding Company Preferred Stock').
Every share of Holding Company Common Stock issued in the Merger will be
identical with all previously issued shares of ExecuFirst Common Stock in every
respect. No shares of Holding Company Preferred Stock will be issued in
connection with the Merger. Immediately following the Merger and in the event
that Proposal V is approved by the ExecuFirst shareholders at the ExecuFirst
Meeting, the Holding Company expects to have reserved for future issuance under
the Amended and Restated Stock Option Plan 100,778 shares of authorized but
unissued Holding Company Common Stock (assuming that options to purchase an
aggregate of 220,778 are issued to holders of Republic Stock Options). See --
'The Merger and Related Agreements -- Amended and Restated Stock Option Plan;
Treatment of Employee Stock Options.' The capital stock of the Holding Company
will represent non-withdrawable capital, will not be an account of an insurable
type, and will not be insured by the FDIC.
COMMON STOCK
Voting Rights. The holders of the Holding Company Common Stock possess
exclusive voting rights in the Holding Company, except to the extent that shares
of the Holding Company Preferred Stock issued in the future may have voting
rights, if any. Each holder of shares of the Holding Company Common Stock is
entitled to one vote for each share held of record on all matters submitted to a
vote of the Holding Company shareholders. No cumulative voting is allowed.
Dividends. The Holding Company may, from time to time, declare dividends
to the holders of the Holding Company Common Stock, who will be entitled to
share equally in any such dividends. The payment of dividends by the Holding
Company is subject to the earnings of the Holding Company, certain regulatory
limitations (including, but not limited to, the Written Agreements), the receipt
of dividends from First Republic Bank, and other factors. The payment of
dividends to the Holding Company by First Republic Bank is subject to the
discretion of First Republic Bank's Board of Directors and depends upon a
variety of factors, including First Republic Bank's operating results and
financial condition, regulatory limitations, tax considerations and other
factors (including, but not limited to the restriction imposed by the terms of
the Subordinated Debentures). See 'SPECIAL CONSIDERATIONS -- Continued Existence
of the Written Agreements; Restrictions on Payment of Dividends on Common
Stock.'
Liquidation. In the event of a liquidation, dissolution or winding up of
the Holding Company each holder of shares of the Holding Company Common Stock
will be entitled to receive, after payment of all debts and liabilities of the
Holding Company, a pro rata portion of all assets of the Holding Company
available for distribution to the holders of the Holding Company Common Stock.
If any Holding Company Preferred Stock is issued, the holders thereof may have a
priority in liquidation or dissolution over those holders of the Holding Company
Common Stock.
Restrictions on the Acquisition of ExecuFirst Common Stock. An amendment
to ExecuFirst's Articles of Incorporation, proposed for adoption at the
ExecuFirst Meeting, would restrict the voting rights of persons who hold
(directly or indirectly, or in combination with other shareholder(s) acting as a
group) more than 10% of the outstanding shares of ExecuFirst Common Stock (the
'Limit Amount'). If this amendment is approved by the ExecuFirst shareholders,
then, upon consummation of the Merger, once a Holding Company shareholder
acquires the Limit Amount, the Holding Company Board would be able to (i)
terminate all voting rights attributable to the Holding Company Common Stock
held by such shareholder, (ii) commence litigation to require divestiture of
such amount of Holding Company Common Stock so that after such divestiture such
shareholder would hold less than the Limit Amount, (iii) upon resolution of at
least two thirds of the Holding Company
86
<PAGE>
Board, waive the restriction imposed, or (iv) take such other action as is
appropriate under the circumstances. It is a condition to consummation of the
Merger, which condition may be waived by Republic that Proposal III, the above
described amendment to the Articles of Incorporation, be approved by
ExecuFirst's shareholders. See PROPOSAL III.
In addition to the proposed amendment to the Articles of Incorporation, the
Pennsylvania Control Share Acquisition Statute (Subchapter G, 2561-2568 of the
BCL) generally precludes a person who acquires voting shares of the Holding
Company in excess of specified thresholds of the voting power (i.e., 20%, 33%,
and 50%) from voting the shares held in excess of the applicable threshold,
unless voting rights for such shares are approved by the affirmative vote of (i)
the holders of a majority of the shares entitled to vote, excluding interested
shares and (ii) the holder of a majority of the shares entitled to vote
including the interested shares.
Other Characteristics. Holders of the Holding Company Common Stock do not
have preemptive rights with respect to any additional shares of the Holding
Company Common Stock which may be issued, nor do they have any redemption
rights. Upon consummation of the Merger, the shares of Holding Company Common
Stock to be issued to the Republic shareholders will be, when issued, fully paid
and non-assessable.
PREFERRED STOCK
None of the authorized shares of the Holding Company Preferred Stock are
currently outstanding or will be issued in the Merger. The Holding Company Board
is authorized to issue the Holding Company Preferred Stock and to fix and state
voting powers, designations, preferences or other special rights of such shares,
and the qualifications, limitations and restrictions thereof. The Holding
Company Preferred Stock may rank prior to Holding Company Common Stock as to
dividend rights or liquidation preferences, or both, and may have full or
limited voting rights. As of the date hereof there is no present intention to
issue any Holding Company Preferred Stock.
MARKET PRICE OF EXECUFIRST COMMON STOCK AND DIVIDENDS
Common Stock Prices
ExecuFirst Common Stock is traded NASDAQ Small-Cap Market under the symbol
'FXBC'.
The following table sets forth the high and low closing-bid prices for the
common stock of Republic for the periods indicated. Such prices reflect
inter-dealer prices, without retail mark-ups, mark-downs or commissions and may
not represent actual transactions.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
- ------------- --------- ---------
<S> <C> <C>
1994
March 31, 1994.................................................................. $ 4.50 $ 4.125
June 30, 1994................................................................... 4.50 4.00
September 30, 1994.............................................................. 4.375 3.00
December 31, 1994............................................................... 4.25 2.50
1995
March 31, 1995.................................................................. $ 3.875 $ 3.00
June 30, 1995................................................................... 4.25 3.50
September 30, 1995.............................................................. 5.50 3.50
December 31, 1995............................................................... 6.50 4.25
1996
March 31, 1996.................................................................. 6.50 5.50
</TABLE>
Dividends
ExecuFirst has not paid any dividends on its Common Stock. In addition to
restrictions imposed by applicable Pennsylvania banking law, and/or Pennsylvania
corporate law, ExecuFirst is further restricted with respect to the payment of
dividends by the terms of the Written Agreements which require ExecuFirst to
receive the prior approval of the Federal Reserve Bank and/or the Department of
Banking before paying any dividends.
87
<PAGE>
CERTAIN DIFFERENCES IN THE RIGHTS
OF EXECUFIRST AND REPUBLIC SHAREHOLDERS
GENERAL
Each of ExecuFirst and Republic are Pennsylvania corporations and as such
are subject to the provisions of the BCL and the Bank Holding Company Act. Upon
consummation of the Merger, shareholders of Republic will become shareholders of
the Holding Company (as ExecuFirst is herein referred to with respect to
post-Merger actions), and their rights as shareholders, as well as those of
existing ExecuFirst shareholders, will be governed by the Holding Company's
Articles of Incorporation and By-Laws.
ExecuFirst is, and therefore, the Holding Company will be, a Registered
Corporation (as defined by Section 2502 of the BCL) and as such is subject to
certain statutory requirements and/or afforded certain protections with respect
to the treatment of shareholders and corporate takeovers, among other matters.
The provisions relating to Registered Corporations are set forth in Sections
2501 to 2588 of the BCL.
Concurrently with the entering into the Plan of Merger by ExecuFirst and
Republic, certain provisions of ExecuFirst's By-Laws were amended by the
ExecuFirst Board and, effective upon consummation of the Merger, as amended will
constitute the By-Laws of the Holding Company. Following shareholder approval of
the Plan of Merger and the Merger and Proposals III and IV hereof, on or prior
to the Effective Time, Articles of Amendment amending ExecuFirst's Articles of
Incorporation will have been filed with the Secretary of State of the
Commonwealth of Pennsylvania and become effective. ExecuFirst's Articles of
Incorporation as so amended will constitute the Holding Company's Articles of
Incorporation. See 'PROPOSAL III' and 'PROPOSAL IV' relating to the amendments
to the Articles of Incorporation. The result of such actions will be that the
Holding Company's instruments of corporate governance setting forth the rights
of shareholders will be similar, in many respects, to the Republic instruments
of corporate governance.
Set forth below are the material differences between (i) the current rights
of Republic shareholders under the Republic Articles of Incorporation and
By-Laws and their rights under the Holding Company Articles of Incorporation and
By-Laws and (ii) the current rights of ExecuFirst shareholders under the current
ExecuFirst Articles of Incorporation and By-Laws (as amended) and their rights
under the Holding Company Articles of Incorporation. Each such discussion
assumes that the amendments to the Articles of Incorporation set forth herein as
Proposals III and IV are approved by ExecuFirst shareholders. In addition, in
each case where no material difference exists between the current rights of
existing ExecuFirst shareholders and such shareholders rights under the Holding
Company Articles of Incorporation, the description herein has been entitled
'ExecuFirst/Holding Company' to indicate that the pre-Merger and post-Merger
rights of existing ExecuFirst shareholders are unchanged. This summary does not
purport to be a complete discussion of, and is qualified in its entirety by
reference to, the BCL and the individual instruments of corporate governance of
each of the Holding Company, ExecuFirst and Republic.
AUTHORIZED CAPITAL
Republic. The authorized capital of Republic consists of 10,000,000 shares
of Republic Common Stock and 10,000,000 shares of preferred stock, $.01 par
value (the 'Republic Preferred Stock'). As of January 25, 1996, Republic had
outstanding 794,263 shares of Republic Common Stock and no shares of Republic
Preferred Stock.
ExecuFirst/Holding Company. A description of the authorized capital of
ExecuFirst/Holding Company is set forth herein under the caption 'Description of
ExecuFirst Stock.'
AMENDMENT TO ARTICLES OF INCORPORATION
Republic. In general, Republic's Articles of Incorporation may be amended
by the affirmative vote of the holders of a majority of the votes cast with
respect to any such amendment. The affirmative vote of the holders of 60% of the
votes cast is required to amend the following Articles: (i) Article 11,
concerning the restriction on holding more than 10% of the issued and
outstanding Republic Common Stock; (ii) Article 12, concerning the factors which
the Republic Board may, but is not legally obligated to, consider in determining
whether to oppose a tender offer or other offer for Republic's securities; and
(iii) Article 13, concerning voting requirements for amending the Articles of
Incorporation.
88
<PAGE>
ExecuFirst. Articles V through XI of ExecuFirst's Articles of
Incorporation may only be amended by the affirmative vote of 75% of the votes
entitled to be cast at a meeting of shareholders. See 'PROPOSAL III.'
Holding Company. The Holding Company's Articles of Incorporation may be
amended by the affirmative vote of the holders of at least 60% of the votes
entitled to be cast with respect to any such amendment.
AMENDMENT TO BY-LAWS
Republic. Republic's By-Laws may be amended by a vote of the shareholders
or, with respect to those matters that are not reserved expressly to the
shareholders by statute, by vote of a majority of the Republic Board.
ExecuFirst/Holding Company. The By-Laws may be amended by the affirmative
vote of a majority of the ExecuFirst Board or by the vote of shareholders
holding at least 75% of the total aggregate outstanding shares of ExecuFirst's
capital stock.
NUMBER OF DIRECTORS
Republic. Republic's By-Laws provide that the Republic Board will consist
of such number of directors as may be determined from time to time by the
Republic Board. As of the date hereof, the Republic Board consists of 9
directors.
ExecuFirst/Holding Company. ExecuFirst/Holding Company's By-Laws provide
that ExecuFirst/ Holding Company Board will consist of such number of directors
as may be determined from time to time by ExecuFirst/ Holding Company Board, but
in no event less than 5 or more than 25 directors. As of the date hereof, the
ExecuFirst/Holding Company Board consists of 8 directors. Upon consummation of
the Merger, the Holding Company Board will consist of 17 directors. See--
'EXECUFIRST--Directors and Officers'.
REMOVAL OF DIRECTORS BY SHAREHOLDERS
Republic. The entire Republic Board, any class of the Board, or any
individual director may be removed from office for cause by the affirmative vote
of a majority of the shares entitled to elect directors. The Republic Board may
be removed from office at any time, with or without cause, by the affirmative
vote of at least 75% of the shares entitled to elect directors.
ExecuFirst/Holding Company. One or more directors, or the entire Board,
may be removed from office for cause, by the affirmative vote of the holders of
at least 75% of the combined voting power of all classes of stock entitled to
elect directors.
DIRECTOR AND OFFICER INDEMNIFICATION
For a description of the indemnification provisions contained in the
Republic, ExecuFirst and the Holding Company Articles of Incorporation, see
'PROPOSAL IV.'
SHAREHOLDER MEETINGS
Republic. Special meetings of the Republic shareholders may be called by a
majority of the Republic Board, by the Chairman of the Board, or by holders of
not less than 20% of the shares entitled to elect directors.
ExecuFirst/Holding Company. Shareholders of Registered Corporations are
not entitled to call special meetings, except in the case of a special meeting
called by an Interested Shareholder for the purposes of approving a Business
Combination (as defined under Sections 2553 and 2555 of the BCL).
NOMINATIONS TO THE BOARD OF DIRECTORS
Republic. Republic's By-Laws provide that any shareholder wishing to
nominate directors for election must provide written notice to the Secretary of
Republic not less than 30 days and not more than 60 days before any meeting of
shareholders called for the election of directors. If less than 30 days' notice
of the meeting is given to shareholders, the nomination must be delivered or
mailed to the Secretary no later than the close of business on the seventh day
following the day on which notice
89
<PAGE>
of the meeting was mailed to the shareholders. Each such nomination must
include: (i) the consent of the person nominated; (ii) the name, age, business
address and residence address of the nominee; (iii) the principal occupation or
employment of the nominee; and (iv) the number of shares of Republic Common
Stock owned by the nominee.
ExecuFirst. ExecuFirst's Articles of Incorporation and By-Laws provide
that nominations for election to the ExecuFirst Board, other than those made by
or on behalf of the existing ExecuFirst Board, must be made in writing and must
be delivered or mailed to the President of ExecuFirst, not less than 14 days nor
more than 50 days prior to any meeting of shareholders called for the election
of directors. In the event that less than 21 days' notice of the meeting is
given to shareholders, such nomination must be mailed or delivered to the
President of the Corporation not later than the close of business on the seventh
day following the day on which the notice of meeting was given. Such
notification must contain the following information (to the extent know to the
notifying shareholder): (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total number of
shares of capital stock of ExecuFirst that will be voted for each proposed
nominee; (d) the name and residence address of the notifying shareholder; and
(e) the number of shares of capital stock of ExecuFirst owned by the notifying
shareholder.
Holding Company. The Holding Company's Articles of Incorporation and
By-Laws provide that, at all shareholder meetings following the annual meeting
to be held in 1996, shareholders may nominate directors for election to the
Holding Company Board by giving written notice to the Secretary of ExecuFirst in
accordance with Rule 14a-8 ('Rule 14a-8') promulgated under the Exchange Act.
With respect to an election to be held at a special meeting called for the
purpose of electing directors, the nomination must be made no later than the
close of business on the seventh day following the day on which notice of such
meeting is first given to shareholders. Each such nomination must contain (i)
the name and address of the of the nominee and of the shareholder who intends to
make the nomination; (ii) a representation that the shareholder is a holder of
record of stock entitled to vote at the meeting and intends to appear in person
or by proxy at the meeting to nominate the nominee; (iii) a description of all
arrangements or other understandings between the shareholder and the nominee or
any other person pursuant to which the nomination is being made by the
shareholder; (iv) such other information regarding the nominee as would have
been required to be included in a proxy statement filed pursuant to the proxy
rules of the SEC had the nominee been nominated by the Board; and (v) the
consent of the nominee to serve as director if elected.
SHAREHOLDER PROPOSALS
Republic. The Republic By-Laws do not contain a provision with respect to
shareholder proposals at annual meetings of shareholders.
ExecuFirst. The ExecuFirst By-Laws do not contain a provision with respect
to shareholder proposals at annual meetings of shareholders.
Holding Company. At all shareholder meetings following the annual meeting
to be held in 1996, shareholder proposals must be made in compliance with Rule
14a-8. With respect to any special meeting of the shareholders, written
shareholder proposals must be filed with the Secretary of the Holding Company no
later than the close of business on the seventh day following the day on which
notice of the special meeting is first given to shareholders.
ANTI-TAKEOVER PROVISIONS
Republic. Republic's Articles of Incorporation contain a limitation on the
amount of Republic stock which may be held by a person or group. Such provision
has the effect of rendering more difficult or discouraging a proxy contest or
the assumption of control by persons other than Republic's existing management
by ensuring that no person or entity may acquire or control a significant block
of Republic Stock without the prior approval of the Republic Board. For a
description of such limitations, See 'PROPOSAL III.' Republic's Articles of
Incorporation also provide for the division of the Republic Board into three
classes serving staggered three-year terms, require the affirmative vote of the
holders of 60% of the voting shares of Republic in order to amend the Articles
of Incorporation and do not permit cumulative voting for the election of
directors.
ExecuFirst. The Articles of Incorporation require the affirmative vote of
the holders of 75% of the voting shares of ExecuFirst in order to amend the
substantive provisions of the Articles of
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<PAGE>
Incorporation. See 'PROPOSAL IV.' Such a provision has the effect of making it
more difficult for shareholders to amend the substantive provisions, including
those related to the composition of and the election of ExecuFirst's Board of
the Articles of Incorporation without the approval and support of ExecuFirst's
management.
ExecuFirst/Holding Company.
(a) The Articles of Incorporation provide that, except as set forth below,
the affirmative vote 75% of the outstanding shares of voting stock is required
to approve or authorize certain business combinations ('Business Combinations')
of ExecuFirst or any of its subsidiaries with a 'Related Person.'
'Related Person' is defined as any person, or any 'affiliate' or
'associate' (as those terms are defined in Rule 12b-2 under the Exchange Act) of
such a person, which, together with its affiliates and associates, becomes the
'beneficial owner' (as defined under Rule 13d-3 of the Exchange Act) of an
aggregate of 10% or more of the outstanding voting stock of ExecuFirst (unless
such acquisition was approved in advance by two-thirds of the directors who were
members of the ExecuFirst Board immediately before the Related Person acquired
such shares ('Continuing Directors') or the person is a trustee or fiduciary of
any employee benefit plan of ExecuFirst or any of its subsidiaries).
'Business Combinations' are defined as (i) a proposed merger or
consolidation of ExecuFirst or any of its subsidiaries with a Related Person;
(ii) the sale, lease, exchange, transfer or other disposition (including a
mortgage of 10% or more of the assets of ExecuFirst or its subsidiaries
(determined on the basis of their consolidated fair market value) to a Related
Person; (iii) the purchase, lease, exchange, transfer or other disposition
(including a mortgage of 10% or more of the assets of a Related Person by or to
ExecuFirst or any of its subsidiaries; (iv) the issuance to a Related Person of
any securities of ExecuFirst or any of its subsidiaries other than pursuant to a
stock split or dividend, or a distribution of warrants or rights; or (v) a
recapitalization of ExecuFirst or any of its subsidiaries which would increase
the voting power of a Related Person.
Each of the above-described Business Combinations may be approved only by
the affirmative vote of at least 75% of the outstanding shares of voting stock
held by shareholders other than a Related Person except where (i) such a
business combination has been approved by at least two-thirds of the Continuing
Directors or (ii) the cash or fair market value of property, securities or other
consideration to be received by shareholders in such a business combination is
not less than the highest per share price paid by the Related Person for any
shares of ExecuFirst stock. Such a provision has the effect of discouraging
persons or entities from acquiring or controlling a significant block of
ExecuFirst Common Stock without the prior approval of the ExecuFirst Board by
restricting such persons or entities ability to enter into certain transactions
with ExecuFirst for a period of five years.
(b) The Articles of Incorporation provide that the provisions of Subchapter
E of the BCL shall not apply to ExecuFirst/Holding Company. Subchapter E
provides that when a person or group (the 'Controlling Person') acquires,
through means of any option, agreement, contract or other transaction, shares of
a corporation's capital stock representing 20% or more of the votes that all
shareholders would be entitled to cast in an election for directors (a 'Control
Transaction'), the shareholders of such a corporation have the right to require
such person or group to purchase all shares held by them. Following a Control
Transaction, a notice must be given to each shareholder by the Controlling
Person stating that (i) all shareholders are entitled to demand that they be
paid the fair value of their shares, (ii) that the fair value shall not be less
than the highest price paid per share by the Controlling Person at any time
during the 90-day period ending on and including the date of the Control
Transaction plus an increment representing any value, including, without
limitation, any proportion of any value payable for acquisition of control of a
corporation, that may be reflected in such price. A valuation procedure exists
in the event that a shareholder does not accept the fair value.
(c) The Articles of Incorporation also provide for the division of the
ExecuFirst/Holding Company Board into three classes, serving staggered
three-year terms, and do not permit cumulative voting.
Holding Company. The Holding Company's Articles of Incorporation contain a
limitation on the amount of Holding Company Common Stock which may be held by a
person or group. For a description of such limitation, See 'PROPOSAL III.' Such
provision has the effect of rendering more difficult or discouraging a proxy
contest or the assumption of control by persons other than First
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Republic's existing management by ensuring that no person or entity may acquire
or control a significant block of First Republic Stock without the prior
approval of the First Republic Board. For a description of such limitations, see
'PROPOSAL III.' First Republic's Articles of Incorporation also provide for the
division of the First Republic Board into three classes serving staggered
three-year terms, require the affirmative vote of the holders of 60% of the
voting shares of First Republic in order to amend the Articles of Incorporation
and do not permit cumulative voting for the election of directors.
CONSENT OF SHAREHOLDERS IN LIEU OF MEETING
The Bylaws of each of Republic, ExecuFirst and the Holding Company permit
any corporate action which could be taken by a vote at a meeting of shareholders
to be taken by the unanimous written consent of the shareholders.
Republic. Republic's By-Laws permit corporate action to be taken with the
written consent of shareholders who would have been entitled to cast the minimum
number of votes necessary to take such corporate action at a meeting of
shareholders.
Holding Company. Unless specifically provided otherwise in the Articles of
Incorporation of a Registered Corporation, corporate action may be taken without
a meeting only by unanimous written consent. The Holding Company Articles of
Incorporation do not contain a provision authorizing corporate action by less
than unanimous written consent.
QUORUM AND VOTING REQUIREMENTS
A quorum for the purpose of acting upon this Proposal II requires the
presence, in person or by proxy, of the holders of at least a majority of the
outstanding shares of ExecuFirst Common Stock.
The approval of this Proposal II requires the affirmative vote of a
majority of the votes cast by the holders of the shares of ExecuFirst Common
Stock present and voting, in person or by proxy.
A quorum for the purpose of acting upon this Proposal II requires the
presence, in person or by proxy, of the holders of at least a majority of the
outstanding shares of Republic Common Stock.
The approval of this Proposal II requires the affirmative vote of a
majority of the votes cast by the holders of the shares of Republic Common Stock
present and voting, in person or by proxy.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF EXECUFIRST RECOMMENDS THAT SHAREHOLDERS VOTE
'FOR' PROPOSAL II TO APPROVE THE PLAN OF MERGER AND THE MERGER.
THE BOARD OF DIRECTORS OF REPUBLIC RECOMMENDS THAT SHAREHOLDERS VOTE 'FOR'
PROPOSAL II TO APPROVE THE PLAN OF MERGER AND THE MERGER.
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PROPOSAL III
TO APPROVE AN AMENDMENT TO THE ARTICLES OF INCORPORATION
RELATING TO RESTRICTIONS ON THE ACQUISITION
OF EXECUFIRST COMMON STOCK
The ExecuFirst Board has approved, and proposed for shareholder approval,
an amendment to the Articles of Incorporation to provide that no shareholder may
have 'holdings' in excess of ten percent (10%) of the issued and outstanding
shares of ExecuFirst Common Stock without the approval of at least a two-thirds
majority vote of the ExecuFirst Board. The approval of the Plan of Merger and
the Merger is a condition precedent to the adoption of Proposal III,
notwithstanding the approval of Proposal III by ExecuFirst shareholders.
The following description of the amendment to the Articles of Incorporation
is qualified in its entirety by reference to the full text of such amendment set
forth in Annex E to this Prospectus/Joint Proxy Statement. The proposed
amendment defines 'holdings' to include shares of ExecuFirst Common Stock owned
of record, shares of ExecuFirst Common Stock as to which a shareholder has a
direct or indirect beneficial ownership (as such term is defined in Section
13(d) of the Securities Exchange Act), and shares of ExecuFirst Common Stock
owned of record or beneficially by other shareholders acting in concert. If any
shareholder acquires 'holdings' in excess of such 10% threshold, the ExecuFirst
Board may (i) terminate voting rights with respect to all shares of ExecuFirst
Common Stock held by such shareholder until such time this restriction is no
longer violated, (ii) commence litigation to require the divestiture of such
number of shares of ExecuFirst Common Stock so that following such divestiture,
such shareholder would no longer have holdings in excess of such 10% threshold,
or (iii) take such other action as is appropriate under the circumstances.
The Articles of Incorporation of Republic contain an identical provision.
Pursuant to the Plan of Merger, ExecuFirst has agreed to propose this amendment
for shareholder approval.
The purpose of the proposed amendment is to render more difficult or to
discourage a merger, tender offer or proxy contest or the assumption of control
by holders of large blocks of ExecuFirst Common Stock and to encourage anyone
contemplating such accumulation of ExecuFirst Common Stock to enter into
negotiations with ExecuFirst.
As a Pennsylvania corporation, ExecuFirst is subject to the Control Share
Acquisition Statute, Subchapter G of Chapter 25 of the BCL, which provides, in
pertinent part, that, when a person or entity (the 'Acquiring Person') acquires
(or determines to acquire) shares of a corporation's voting stock which would
entitle such Acquiring Person, for the first time, to cast (i) at least 20% but
less than 33 1/3%; (ii) at least 33 1/3% but less than 50%; or (iii) 50 % or
more of the votes entitled to be cast by all shareholders in an election of
directors (a 'Control Share Acquisition'), the shares of voting stock so
acquired ('Control Shares') shall not have any voting rights until and unless
such voting rights are restored by (a) the affirmative vote of the holders of a
majority of the corporation's voting stock exclusive of the Control Shares and
shares held by the corporation's officers, directors and certain employee
benefit plans and (b) the affirmative vote of holders of a majority of all
voting shares including such Control Shares.
Certain types of transactions are excluded from the definition of Control
Share Acquisitions, including, but not limited to, transfers by gift, devise,
bequest or otherwise through the laws of inheritance; transfers by settlers of
certain trusts; transfers in connection with divorce or separation proceedings;
transfers pursuant to a pledge or other security interest; and transfers from a
person who beneficially owns at least 20% of the voting shares of the
corporation and who acquired such shares prior to October 17, 1989. In addition,
certain categories of shares are not counted in determining whether a Control
Share Acquisition has occurred including, but not limited to, voting shares
which have been beneficially owned by the same natural person since January 1,
1988.
Voting rights which are restored by such separate votes of the shareholders
shall lapse in the event that the Control Share Acquisition is not consummated
within 90 days after such shareholder approval was obtained.
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Notwithstanding the approval by ExecuFirst shareholders of this PROPOSAL
III, ExecuFirst will remain subject to the provisions of Subchapter G in the
event of a Control Share Acquisition.
This proposal should not be viewed as part of a plan by the ExecuFirst's
Board to effect any further anti-takeover measures or as a response to any
particular take-over threat.
IT IS A CONDITION TO CONSUMMATION OF THE MERGER, WHICH CONDITION MAY BE
WAIVED BY THE PARTIES, THAT THE SHAREHOLDERS OF EXECUFIRST APPROVE THE ABOVE
DESCRIBED AMENDMENT TO THE ARTICLES OF INCORPORATION.
QUORUM AND VOTING REQUIREMENTS
A quorum for the purpose of acting upon this Proposal III requires the
presence, in person or by proxy, of the holders of at least a majority of the
outstanding shares of ExecuFirst Common Stock.
The approval of this Proposal III requires the affirmative vote of a
majority of the outstanding shares of ExecuFirst Common Stock.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE EXECUFIRST BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE 'FOR' THE
PROPOSAL TO ADOPT THE AMENDMENT TO THE ARTICLES OF INCORPORATION.
PROPOSAL IV
TO APPROVE AMENDMENTS TO THE ARTICLES OF INCORPORATION
RELATING TO (I) INDEMNIFICATION OF OFFICERS AND DIRECTORS
AND OTHER PERSONS DESIGNATED BY EXECUFIRST; (II) NOMINATIONS FOR
ELECTION TO THE BOARD OF DIRECTORS; AND (III) THE VOTE REQUIRED TO AMEND THE
ARTICLES OF INCORPORATION
The ExecuFirst Board has approved, and proposed for shareholder approval,
amendments to the Articles of Incorporation relating to (i) indemnification of
officers and directors of ExecuFirst, as well as certain other persons
designated by the ExecuFirst Board, with respect to any liability incurred in
connection with any proceeding in which such persons may be involved, as a party
or otherwise, by reason of the fact that they are or were serving as officers or
directors of ExecuFirst or as Authorized Representatives (as hereinafter
defined); (ii) the procedure for nominations for election to the ExecuFirst
Board by persons other than the ExecuFirst Board; and (iii) the vote required to
amend certain Articles of Incorporation. The approval of the Plan of Merger and
the Merger is a condition precedent to the adoption of Proposal IV,
notwithstanding the approval of Proposal IV by the ExecuFirst shareholders.
The following description of the amendment to the Articles of Incorporation
is qualified in its entirety by reference to the full text of such amendments
set forth in Annex E to this Prospectus/Joint Proxy Statement.
(I) INDEMNIFICATION OF OFFICERS AND DIRECTORS
ExecuFirst's Articles of Incorporation currently provide for (i) mandatory
indemnification of officers and directors (including former officers and
directors) of ExecuFirst to the fullest extent now or hereafter permitted by
applicable law, (ii) mandatory advancement or reimbursement of expenses to such
indemnified persons (subject to an undertaking to repay all amounts so advanced
in the event that it is determined that such person was not entitled to
indemnification (the 'Undertaking')) and (iii) indemnification, at the
discretion of the ExecuFirst Board, of employees or agents of ExecuFirst or of
directors, officers, employees, agents, fiduciaries or trustees of another
corporation, partnership, joint venture, trust, employee benefit plan or other
entity or enterprise so serving at the request of ExecuFirst ('Authorized
Representatives').
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The purposes of the proposed amendment are (i) to delineate with greater
specificity the parameters of indemnification and to expand and clarify its
procedures, and (ii) to provide the Republic directors (or Republic designees)
who will be appointed as members of the ExecuFirst Board with identical
indemnification to that currently provided to them by Republic.
The proposed amendment:
1. Expands the category of persons entitled to mandatory
indemnification to include officers, directors and any person so designated
by the ExecuFirst Board, including, but not limited to, Authorized
Representatives ('Indemnified Representatives');
2. Defines the term 'to the fullest extent permitted by applicable
law' to mean 'the maximum permitted by public policy, common law or
statute.' Indemnified Representatives will be entitled to elect to have the
right to indemnification or to advancement or reimbursement of expenses,
construed, at such person's option, on the basis of (i) the applicable law
on the date the amendment to the Articles of Incorporation is approved by
shareholders, (ii) the applicable law in effect at the time of the
occurrence of the event or events which give rise to indemnification, or
(iii) the applicable law in effect at the time indemnification or
advancement or reimbursement of expenses is sought.
3. Specifies that the acts by an Indemnified Representative which give
rise to indemnification are any actual or alleged breach or neglect of
duty, error, misstatement or misleading statement, negligence, or gross
negligence by an Indemnified Representative.
4. Provides that an Indemnified Representative will not be entitled to
indemnification (i) where such indemnification is expressly prohibited by
applicable law; (ii) where the conduct of the Indemnified Representative
has been finally determined (a) to constitute self-dealing, willful
misconduct or recklessness within the meaning of Sections 513(a)(2) and
1746(b) of the BCL or any superseding provision of law; (b) to be based
upon or attributable to the receipt by the Indemnified Representative of a
personal benefit from ExecuFirst to which the Indemnified Representative is
not legally entitled; or (iii) to the extent such indemnification has been
determined in a final adjudication to be otherwise unlawful. The ExecuFirst
Board will be authorized, at its discretion, to establish additional
categories of exemptions from mandatory indemnification.
5. Provides that, with respect to the Undertaking, the financial
ability of an Indemnified Representative to repay an advance shall not be a
prerequisite to the making of such an advance by ExecuFirst.
6. Provides that in the event that the indemnification provided for in
the Articles of Incorporation, or otherwise, is unavailable for any reason
with respect to any liability or portion thereof, ExecuFirst shall
contribute to any liability to which the Indemnified Representative may be
subject, in such proportion as is deemed appropriate to reflect the intent
of the Articles of Incorporation or otherwise.
7. Provides that with respect to any dispute related to the right to
indemnification, contribution or advancement of expenses (except with
respect to indemnification for liabilities arising under the Securities
Act) that ExecuFirst has undertaken to submit to a court for adjudication,
such dispute shall be decided by means of an arbitration proceeding, which
arbitration proceeding shall take place in Philadelphia in accordance with
the commercial arbitration rules of the American Arbitration Association
or, in certain circumstances, shall be conducted by arbitrators selected by
the presiding judge of the court of general jurisdiction in Philadelphia.
In any such arbitration proceeding, the party or parties challenging the
right of an Indemnified Representative to indemnification, contribution or
advancement of expenses will bear the burden of proof.
8. Provides that ExecuFirst may, to the fullest extent permitted by
applicable law, indemnify and advance or reimburse expenses for persons in
circumstances other than those specifically provided in the indemnification
provisions of the Articles of Incorporation.
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9. Provides that all rights under the indemnification provisions of
the Articles of Incorporation shall be deemed to be a contract between
ExecuFirst and the Indemnified Representative pursuant to which ExecuFirst
and each Indemnified Representative intend to be legally bound. Any repeal,
amendment or modification of such provisions shall be prospective and shall
not affect any rights or obligations then existing.
In the event that the above amendment to the Articles of Incorporation is
not approved by the shareholders of ExecuFirst, officers and directors of
ExecuFirst will continue to be entitled to mandatory indemnification to the
fullest extent permitted by applicable law.
(II) NOMINATIONS FOR ELECTION TO THE EXECUFIRST BOARD
ExecuFirst's Articles of Incorporation currently provides, in Article VII,
that nominations for election to the ExecuFirst Board, other than those made by
or on behalf of the then existing ExecuFirst Board, shall be made in writing not
less than 14 days nor more than 50 days prior to any meeting of shareholders
called for the purpose of electing directors. See 'CERTAIN DIFFERENCES BETWEEN
EXECUFIRST AND REPUBLIC SHAREHOLDERS.'
The proposed amendment provides that, following the 1996 annual meeting,
nominations for election to the ExecuFirst Board must be made in compliance with
Rule 14a-8 of the Securities Exchange Act. Rule 14a-8 provides, in pertinent
part, that such nomination must be received by the Corporate Secretary not later
than 120 calendar days prior to the day and month that the preceding year's
proxy was mailed to shareholders. A parallel provision is contained in
ExecuFirst's Amended and Restated By-Laws.
The purpose of the proposed amendment is to require greater advance notice
to the Holding Company of any proposed nominations to the ExecuFirst Board, and
would render it more difficult to place non-Board selected nominees in
nomination.
(III) VOTE REQUIRED FOR AMENDMENT OF THE ARTICLES OF INCORPORATION
ExecuFirst's Articles of Incorporation currently provides, in Article XI,
that the affirmative vote of the holders of at least 75% of the votes entitled
to be cast at a meeting of shareholders is required to amend the following
Articles:
1. Article V, setting forth the authorized capital stock of ExecuFirst
and the respective voting and other rights of each class of capital stock
and empowering the ExecuFirst Board, without shareholder approval, to issue
ExecuFirst Preferred Stock and to establish the rights and preferences
thereof. See 'DESCRIPTION OF EXECUFIRST STOCK';
2. Article VI, eliminating preemptive rights and disallowing
cumulative voting with respect to the election of directors;
3. Article VII, authorizing the ExecuFirst Board to establish the
number of directors, the procedures for nomination, election and removal of
directors and dividing the ExecuFirst Board into three classes serving
staggered three-year terms;
4. Article VIII, relating to the non-applicability of Subchapter E of
the BCL (relating to the rights of certain shareholders to demand payment
for the fair value of their stock upon the occurrence of a Control
Transaction) and imposing certain voting restrictions with respect to the
approval of a Business Combination with a Related Person. For a description
of Subchapter E of the BCL and Article VIII of the Articles of
Incorporation, See 'CERTAIN DIFFERENCES IN THE RIGHTS OF EXECUFIRST AND
REPUBLIC SHAREHOLDERS';
5. Article IX, setting forth the factors, including, but not limited
to,(a) the acceptability of the offer price based on the operating results
or financial condition of ExecuFirst, (b) the impact on ExecuFirst's
employees, depositors and customers and (c) the reputation and business
practices of any potential acquiror, which the ExecuFirst Board may, but is
not legally obligated to, consider in determining whether to oppose a
tender offer or other offer for ExecuFirst's securities;
6. Article X, concerning indemnification of officers and directors;
and
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7. Article XI, setting forth the requirement of the affirmative vote
of the holders of 75% of the voting shares of ExecuFirst in order to amend
Articles V-XI of the Articles of Incorporation.
The proposed amendment provides that Article XI shall be amended to provide
that the affirmative vote of the holders of at least 60% of the votes cast shall
be required to amend Articles V through XI of the Articles of Incorporation.
The purpose of the proposed amendment is to enable the Articles of
Incorporation to be more easily amended in the future by ensuring that
ExecuFirst shareholders owning only a small percentage of the issued and
outstanding ExecuFirst Common Stock are not able to defeat any proposed
alteration, change, amendment or repeal of any or all of the Articles of the
Articles of Incorporation. The ExecuFirst Board believes that this will enhance
the flexibility of ExecuFirst.
These proposals should not be viewed as part of a plan by the ExecuFirst
Board to effect any further anti-takeover measures or as a response to any
particular take-over threat.
IT IS A CONDITION TO CONSUMMATION OF THE MERGER, WHICH CONDITION MAY BE
WAIVED BY THE PARTIES, THAT THE SHAREHOLDERS OF EXECUFIRST APPROVE THE
ABOVE-DESCRIBED AMENDMENTS TO THE ARTICLES OF INCORPORATION.
QUORUM AND VOTING REQUIREMENTS
A quorum for the purpose of acting upon this Proposal IV requires the
presence, in person or by proxy, of the holders of at least a majority of the
outstanding shares of ExecuFirst Common Stock.
The approval of this Proposal IV requires the affirmative vote of the
holders of at least 75% of the outstanding shares of ExecuFirst Common Stock.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE EXECUFIRST BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE 'FOR' THE
PROPOSAL TO ADOPT THE AMENDMENTS TO THE ARTICLES OF INCORPORATION.
PROPOSAL V
TO APPROVE THE AMENDED AND RESTATED STOCK OPTION PLAN
THE 1988 PLAN AND THE AMENDED AND
RESTATED STOCK OPTION PLAN
In 1988, the ExecuFirst Board adopted the ExecuFirst Bancorp, Inc. Stock
Option Plan, which plan was amended by the shareholders in 1991 (as amended, the
'1988 Plan'). In connection with the Merger, the ExecuFirst Board has deemed it
appropriate to amend certain provisions of the 1988 Plan and present the Amended
and Restated Stock Option Plan for approval at the ExecuFirst Meeting. The
following description of the Amended and Restated Option Plan is qualified in
its entirety by reference to the full text as set forth in Annex E to this
Prospectus/Joint Proxy Statement.
The 1988 Plan provides for a Committee (the 'Committee') consisting of
three or more persons designated by the ExecuFirst Board, each of whom is
'disinterested' (as such term is defined under Rule 16b-3 under the Securities
Act) to administer and interpret the 1988 Plan. Full time officers and key
employees of ExecuFirst ('Participants,' Participants who are awarded grants are
hereinafter referred to as 'Optionees') are eligible to receive options under
the 1988 Plan. The Committee is authorized to issue options to purchase up to
200,000 shares of ExecuFirst Common Stock, which options may either be intended
to qualify as Incentive Stock Options ('ISOs') (within the meaning of section
422 of the Code) or to not so qualify ('NQSOs') the ISOs and the NQSOs are
sometimes hereinafter collectively referred to as the 'Options'). The Committee
is empowered to set a vesting period. The exercise price is the fair market
value on the date of grant as determined by the Committee (the 'Option Exercise
Price'). In the event that a Participant's employment is terminated for any
reason, other than death or disability, all Options terminate ninety days from
the date of termination. In the event of death or disability, all Options
terminate six months from the date of death or disability.
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Upon exercise of any option, the shares of ExecuFirst Common Stock issuable
thereunder ('Option Shares') are subject to ExecuFirst's right to repurchase
such Option Shares at the fair market value (the 'Repurchase Right'), which
right may be waived by ExecuFirst in its sole discretion. ExecuFirst may, at any
time prior to the exercise of an Option, require the Participant to enter into
an agreement conditioning the disposition of Option Shares. Without shareholder
approval, ExecuFirst may not amend the 1988 Plan to (i) increase the aggregate
number of Options issuable under such plan, (ii) extend the term during which
Options may be exercised, or (iii) make the Option Exercise Price less than the
fair market value.
The proposed Amended and Restated Stock Option Plan contains terms and
conditions which materially differ from those contained in the 1988 Plan,
including:
1. The Committee will consist of three or more outside directors (as
defined in section 162m of the Code), each of whom shall be 'disinterested'
(as defined under Rule 16b-3 under the Securities Act) directors who will
serve for a one year term and who will be indemnified by ExecuFirst with
respect to their service on the Committee and who will administer and
interpret the Amended and Restated Plan (except with respect to those
provisions of the Amended and Restated Plan dealing with grants to members
of the Committee);
2. Participants may include non-employee directors and consultants;
3. The Committee will be authorized to grant Options to purchase up to
an aggregate of 500,000 shares of ExecuFirst Common Stock;
4. Directors who serve as members of the Committee will receive an
automatic grant of immediately exercisable NQSOs to purchase 1,000 shares
of ExecuFirst Common Stock at the commencement of (in the case of directors
currently serving as members of the Committee, upon shareholder approval of
the Amended and Restated Stock Option Plan) and in consideration for their
service as a member of the Committee (a 'Committee Member's Grant').
5. The Committee will be authorized to grant Stock Appreciation Rights
('SARs');
6. The Committee will be authorized to grant shares of restricted
ExecuFirst Common Stock ('Restricted Stock'), which Restricted Stock may
not be sold, transferred, pledged or otherwise disposed of unless and until
the restrictions imposed by the Committee lapse;
7. A procedure for determining the fair market value with respect to
the Option Exercise Price has been set forth;
8. All Options granted under the Amended and Restated Stock Option
Plan shall immediately vest upon a Change of Control (as such term is
defined in the Amended and Restated Stock Option Plan);
9. In the case of a Participant who is disabled within the meaning of
section 22(e)(3) of the Code, Options granted to such Participant shall
remain exercisable for a period of one (1) year from the date of
disability;
10. At the discretion of the ExecuFirst Board, Participants shall be
permitted to pay the Option Exercise Price by issuing an interest bearing
promissory note or notes to ExecuFirst; and
11. The Repurchase Right has been deleted.
As of the date hereof, Options to purchase 83,000 Option Shares have been
previously granted under the 1988 Plan, of which 60,000 Options have been
previously granted to Zvi H. Muscal, Chairman, President and Chief Executive
Officer of ExecuFirst and 20,000 Options have been granted to eight (8)
non-executive officers of ExecuFirst and/or First Executive Bank. In the event
that the Amended and Restated Stock Option Plan is adopted by the shareholders,
all of such options will be deemed to have been granted under the Amended and
Restated Stock Option Plan.
As of the date hereof, all of ExecuFirst's officers and non-employee
directors and certain of its key employees (a total of approximately 20
persons), would have been eligible to receive grants under the Amended and
Restated Stock Option Plan. Upon consummation of the Merger, all of the officers
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and non-employee directors and certain key employees of ExecuFirst, a total of
approximately 32 persons would be eligible to receive grants.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences of an employee's participation in the
Amended and Restated Stock Option are complex and subject to change. The
following discussion is only a summary of the general rules and Participants
should consult their own tax advisors regarding their particular situation.
There are no federal income tax consequences to the Optionee or the
ExecuFirst upon the grant of ISOs or NQSOs. Upon the exercise of NQSOs, the
Optionee will realize ordinary income in the amount by which the fair market
value of the Option Shares exceeds the Option Exercise Price. ExecuFirst is
allowed a deduction for federal income tax purposes equal to the amount of
ordinary income recognized by the Optionee at the time of exercise of NQSOs. The
Optionee's holding period for purposes of determining whether any subsequently
realized gain or loss will be long-term or short-term will begin at the time the
Optionee recognizes ordinary income. If, at the time of issuance of the Option
Shares, the Optionee is subject to the restrictions of Section 16(b) of the
Exchange Act, then the optionee generally will recognize ordinary income as of
the later of (i) the date of exercise, or (ii) the expiration of six months from
the date of grant of the Option, based upon the difference between the fair
market value of the Option Shares at such time and the Option Exercise Price.
Except as provided below with respect to 'disqualifying dispositions,'
there generally are no regular federal income tax consequences upon the exercise
of an ISO. However, for purposes of computing any alternative minimum tax
liability, the amount by which the fair market value of the Option Shares at the
time of exercise exceeds the Option Exercise Price (or other tax basis in the
Option Shares) is an item of tax preference subject to the alternative minimum
tax applicable to the person exercising the Option. ExecuFirst is not entitled
to a deduction upon the exercise of an ISO. A sale of Option Shares acquired by
exercise of an ISO that does not occur within one year after the exercise, or
within two years after the grant of the Option, generally will result in the
recognition of long-term capital gain or loss in an amount equal to the
difference between the amount realized from the sale and the Participant's tax
basis in the Option Shares, assuming that the Option Shares were held as capital
assets. ExecuFirst is not entitled to any tax deduction in such event. However,
if the sale occurs within one year from the date of exercise or within two years
from the date of grant (a 'disqualifying disposition'), the Optionee will
recognize ordinary income equal to the extent of lesser of (i) the excess of the
fair market value of the Option Shares on the date of exercise of the Options
over the Option Exercise Price (or the Optionee's other tax basis in the
shares), or (ii) the excess of the amount realized on the sale of the Option
Shares over the Option Exercise Price (or the Optionee's other tax basis in the
shares). Any amount realized on a disqualifying disposition in excess of the
amount treated as ordinary income (or any loss realized) will be a long-term or
short-term capital gain (or loss), depending upon the length of time the Option
Shares were held and assuming that the shares were held as capital assets. If,
at the time of issuance of the Option Shares, the Optionee is subject to the
restrictions of Section 16(b) of the Exchange Act, then the fair market value of
Option Shares acquired upon exercise of an ISO generally will be determined as
of the later of (i) the time of exercise, or (ii) the expiration of six months
from the date of grant. ExecuFirst generally will be entitled to a tax deduction
on a disqualifying disposition in the amount and at the time the ordinary income
is recognized by the Optionee, assuming that such amount constitutes an ordinary
and necessary business expense to the employer corporation.
In the case of Restricted Stock a Participant will realize ordinary income
in an amount equal to the fair market value of such stock, at the time when the
Participant's rights with respect to such stock are no longer subject to a
substantial risk of forfeiture, less any amount paid for such stock, unless the
Participant made a written election (pursuant to section 83(b) of the Code),
filed with the Service within thirty (30) days after the date of transfer of the
Restricted Stock to include in ordinary income, as of the transfer date, the
excess (on such date) of the fair market value of such Restricted Stock
(determined without regard to any restriction) over any amount paid for such
stock. Dividends paid to the holder of Restricted Stock during a period of
restriction will be taxable as ordinary income unless the election under section
83(b) of the Code has been made. ExecuFirst will be entitled to a deduction
99
<PAGE>
under the Code at that time in an amount equal to the amount of ordinary income
that is realized by the participant assuming that such amount constitutes an
ordinary and necessary business expense to the employer corporation.
Under section 162(m) of the Code, ExecuFirst may be precluded from claiming
a federal income tax deduction for total remuneration in excess of $1,000,000
paid to the chief executive officer or to any of the other four most highly
compensated officers in any one taxable year. Total remuneration would include
amounts received upon the exercise of Options. An exception exists, however, for
'performance-based' remuneration, including amounts received upon the exercise
of stock options pursuant to a plan approved by shareholders that meets certain
requirements. The Amended and Restated Stock Option Plan, when approved by
shareholders, is intended to make option grants thereunder meet the requirements
of 'performance-based' remuneration.
Future benefits under the Amended and Restated Stock Option Plan are not
determinable since grants of Options, SARs and Restricted Stock are at the
discretion of the Committee (except with respect to automatic grants to members
of the Committee).
QUORUM AND VOTING REQUIREMENTS
A quorum for the purpose of acting upon this Proposal V requires the
presence, in person or by proxy, of the holders of at least a majority of the
outstanding shares of ExecuFirst Common Stock.
The approval of this Proposal V requires the affirmative vote of a majority
of the votes cast at the ExecuFirst Meeting.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF EXECUFIRST RECOMMENDS THAT THE SHAREHOLDERS VOTE
'FOR' THE PROPOSAL TO ADOPT THE AMENDED AND RESTATED OPTION PLAN.
100
<PAGE>
EXPERTS
The consolidated financial statements of ExecuFirst at December 31, 1995
and 1994, and for each of the three years in the period ended December 31, 1995,
which are incorporated by reference in this Prospectus/Joint Proxy Statement,
have been audited by Coopers and Lybrand, L.L.P. independent accountants, as set
forth in their reports thereon incorporated by reference herein, and are
included in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements of Republic at December 31, 1995 and
1994 and for each of the two years in the period ended December 31, 1995,
included in this Prospectus/Joint Proxy Statement, have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their report appearing
elsewhere herein and have been included herein in reliance upon the report of
such firm, given upon the authority of said firm as experts in accounting and
auditing.
LEGAL MATTERS
The validity of the ExecuFirst Common Stock issuable pursuant to the Merger
will be passed upon for ExecuFirst by Klehr, Harrison, Harvey, Branzburg &
Ellers, Philadelphia, Pennsylvania. Spector, Gadon & Rosen, P.C., Philadelphia,
Pennsylvania is acting as counsel for Republic in connection with certain legal
matters relating to the Merger.
OTHER MATTERS
Neither the Republic Board or the ExecuFirst Board intends to bring any
matters before the meeting other than those specifically set forth in the
notices of meeting and does not know of any matters to be brought before the
meeting by others. If any other matters properly come before the meeting, it is
the intention of the persons named in the accompanying proxy to vote such proxy
of ExecuFirst and Republic, respectively, in accordance with the best judgment
of the ExecuFirst proxy holder or as determined by a majority of the Republic
Board, as the case may be.
101
<PAGE>
SHAREHOLDER PROPOSALS
SHAREHOLDER PROPOSALS WITH RESPECT TO THE EXECUFIRST/HOLDING COMPANY MEETING
Any shareholder who intends to present a proposal for consideration at the
ExecuFirst Meeting must, on or before December 28, 1996, submit her or his
proposal to ExecuFirst and notify the Corporation that she or he intends to
appear personally at the ExecuFirst Meeting to present her or his proposal.
SHAREHOLDER PROPOSALS WITH RESPECT TO THE REPUBLIC MEETING
Any shareholder who intends to present a proposal for consideration at the
Republic Meeting must, on or before December 28, 1996, submit her or his
proposal to Republic and notify the Corporation that she or he intends to appear
personally at the Republic Meeting to present her or his proposal.
102
<PAGE>
<PAGE>
REPUBLIC BANCORPORATION, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1995 AND 1994
Consolidated Balance Sheets............................................................................. F-3
Consolidated Statements of Income....................................................................... F-4
Consolidated Statements of Shareholders' Equity......................................................... F-5
Consolidated Statements of Cash Flows................................................................... F-6
Notes to Consolidated Financial Statements.............................................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Republic Bancorporation, Inc.:
We have audited the accompanying consolidated balance sheets of Republic
Bancorporation, Inc. and subsidiaries (the 'Bank') as of December 31, 1995 and
1994, and the related consolidated statements of income, shareholders' equity,
and cash flows for the years then ended. These financial statements are the
responsibility of the Bank's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Bank at December 31, 1995 and
1994, and the results of their operations and their cash flows for the years
then ended, in conformity with generally accepted accounting principles.
March 1, 1996
Deloitte & Touche LLP
Philadelphia, Pennsylvania
F-2
<PAGE>
REPUBLIC BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks................................................................. $ 2,923 $ 1,357
Federal funds sold...................................................................... 933 2,611
----------- -----------
Cash and cash equivalents.......................................................... 3,856 3,968
----------- -----------
Investment securities held to maturity, at amortized cost (market value-- $33,846 and
$26,481 at December 31, 1995 and 1994 respectively)................................... 34,004 28,209
Investment securities available for sale, at market value (amortized cost-- $4,320 at
December 31, 1995..................................................................... 4,348
----------- -----------
Total investment securities........................................................ 38,352 28,209
----------- -----------
Loans................................................................................... 85,863 72,083
Allowances for loan losses.............................................................. (680) (650)
----------- -----------
Net loans.......................................................................... 85,183 71,433
----------- -----------
Premises and equipment, net............................................................. 321 234
Real estate owned....................................................................... 295
Accrued interest and other assets....................................................... 3,056 2,359
----------- -----------
TOTAL................................................................................... $ 131,063 $ 106,203
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Interest-bearing...................................................................... $ 103,854 $ 80,566
Noninterest-bearing................................................................... 12,570 7,400
----------- -----------
Total deposits..................................................................... 116,424 87,966
Borrowed funds.......................................................................... 5,583
Subordinated debt....................................................................... 3,400 3,400
Other liabilities....................................................................... 2,617 1,254
----------- -----------
Total liabilities.................................................................. 122,441 98,203
----------- -----------
Committments (Note 14)
SHAREHOLDERS' EQUITY:
Common stock, $2 par value, authorized 10,000,000 shares; issued and outstanding
794,263 shares..................................................................... 1,588 1,588
Paid-in capital....................................................................... 5,075 5,075
Retained earnings..................................................................... 1,940 1,337
Unrealized gain on securities available for sale, net of $9 tax....................... 19
----------- -----------
Total shareholders' equity......................................................... 8,622 8,000
----------- -----------
TOTAL................................................................................... $ 131,063 $ 106,203
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
REPUBLIC BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
INTEREST INCOME:
Loans.................................................................................... $ 7,710 $ 5,521
Investment securities.................................................................... 2,016 1,442
Federal funds sold....................................................................... 176 278
--------- ---------
Total interest income.............................................................. 9,902 7,241
--------- ---------
INTEREST EXPENSE:
Deposits................................................................................. 5,553 3,664
Long-term debt........................................................................... 276 255
Borrowed funds........................................................................... 62 25
Total interest expense............................................................. 5,891 3,944
--------- ---------
NET INTEREST INCOME................................................................... 4,011 3,297
PROVISION FOR LOAN LOSSES.................................................................. 223 323
--------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES........................................ 3,788 2,974
OTHER INCOME:
Refant income............................................................................ 877
Fee income............................................................................... 155 219
--------- ---------
Total other income................................................................. 155 1,096
--------- ---------
OTHER EXPENSES:
Salaries and employee benefits........................................................... 1,592 1,284
Occupancy................................................................................ 470 425
Professional fees........................................................................ 327 354
Insurance................................................................................ 142 288
Equipment................................................................................ 94 96
Other operating expenses................................................................. 424 386
--------- ---------
Total other expenses............................................................... 3,049 2,833
--------- ---------
INCOME BEFORE INCOME TAXES................................................................. 894 1,237
--------- ---------
INCOME TAXES:
Current: 370 413
Deferred................................................................................. (79) 17
--------- ---------
Total income taxes................................................................. 291 430
--------- ---------
NET INCOME................................................................................. $ 603 $ 807
--------- ---------
--------- ---------
NET INCOME PER COMMON SHARE................................................................ $ 0.76 $ 1.02
--------- ---------
--------- ---------
WEIGHTED AVERAGE NUMBER OF SHARES.......................................................... 794,263 794,263
--------- ---------
--------- ---------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
REPUBLIC BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
COMMON COMMON SECURITIES
STOCK STOCK PAID-IN AVAILABLE RETAINED
SHARES AMOUNT CAPITAL FOR SALE EARNINGS
--------- ----------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1994................................... 794,263 $ 1,588 $ 5,075 $ 530
Net income.............................................. 807
--------- ----------- --------- -----------
BALANCE, DECEMBER 31, 1994................................ 794,263 1,588 5,075 1,337
Net income.............................................. 603
Unrealized gain on securities available for sale, net of
taxes................................................ $ 19
--------- ----------- --------- ----- -----------
BALANCE, DECEMBER 31, 1995................................ 794,263 $ 1,588 $ 5,075 $ 19 $ 1,940
--------- ----------- --------- ----- -----------
--------- ----------- --------- ----- -----------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
REPUBLIC BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income............................................................................ $ 603 $ 807
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses....................................................... 223 323
Provision for depreciation and
amortization................................................................. 89 82
Net amortization of investment premium.......................................... 57 28
Changes in assets and liabilities which provided (used) cash:
Accrued interest and other assets............................................ (697) (349)
Other liabilities............................................................ 1,354 (344)
----------- -----------
Net cash provided by operating activities.................................. 1,629 547
----------- -----------
INVESTING ACTIVITIES:
Net increase in loans................................................................. (14,043) (9,295)
Purchase of investment securities..................................................... (10,352) (2,141)
Principal reductions on collateralized mortgage obligations........................... 180 383
Purchase of premises and equipment.................................................... (176) (73)
Purchase of other real estate......................................................... (225)
----------- -----------
Net cash used in investing activities...................................... (24,616) (11,126)
----------- -----------
FINANCING ACTIVITIES:
Net increase (decrease) in interest-bearing deposits.................................. 22,888 (3,284)
Net increase in noninteresting-bearing deposits....................................... 5,570 2,266
Increase (decrease) in borrowed funds................................................. (5,583) 1,583
Issuance of subordinated debt......................................................... 3,400
----------- -----------
Net cash provided by financing activities.................................. 22,875 3,965
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS................................................... (112) (6,614)
CASH AND CASH EQUIVALENTS, BEGINNlNG OF YEAR............................................ 3,968 10,582
----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR.................................................. $ 3,856 $ 3,968
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Transfer of loan receivable to real estate owned...................................... $ 70
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
REPUBLIC BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
1. NATURE OF BUSINESS
Republic Bank is a Pennsylvania state chartered bank organized to provide a
broad range of commercial and consumer banking services to small and medium
sized businesses, professionals, and other individuals in the Philadelphia
metropolitan area including the surrounding counties of Bucks, Chester, Delaware
and Montgomery. Republic Bank was incorporated on November 25, 1987 under the
laws of the Commonwealth of Pennsylvania and commenced business on September 6,
1988. On August 2, 1995, the Bank became the banking subsidiary of the parent
holding company Republic Bancorporation, Inc. (the 'Bank'). The Bank is a member
of the Federal Reserve System with its main office in Philadelphia,
Pennsylvania. In November 1995, the Bank opened a branch office in Ardmore,
Pennsylvania.
The Bank's two offices are located in an area intensely concentrated with
other financial institutions, most of which are substantially larger than the
Bank. The Bank has been able to compete with other financial institutions by
paying higher than market rates of interest on its deposits, while pricing most
loans at a floating rate of interest, thereby reducing its risk exposure to
changes in interest rates. The Bank's exposure to interest rate risk results
from the difference in maturities on interest-bearing liabilities and
interest-earning assets and the volatility of interest rates. Because the Bank's
assets have a shorter maturity than its liabilities, the Bank's earnings will
tend to be negatively affected during periods of declining interest rates.
Conversely, this mismatch should benefit the Bank during periods of rising
interest rates. Management monitors the relationship between the interest rate
sensitivity of the Bank's assets and liabilities.
The Bank is subject to examination and extensive regulation by the
Pennsylvania Banking Department and the Federal Reserve Board. Its deposits are
insured by the FDIC to the individual depositor limits established by law.
The principal business of the Bank consists primarily of attracting
deposits and applying those funds to the origination of loans. The Bank's income
is derived principally from interest and fees earned in connection with its
lending activities, and, to a lesser extent, interest and dividends on
investment securities and short-term investments. Its principal expenses are
interest paid on deposits and operating expenses.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- The consolidated financial statements
include the accounts of Republic Bancorporation, Inc. and its wholly owned
subsidiaries, Republic Bank and Republic Services, Inc. (the 'Bank'). All
intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates in the Preparation of Financial Statements -- The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The most significant of these
estimates in the preparation of the financial statements is the allowance for
loan losses.
Lending Activities -- The Bank's loan portfolio consists primarily of loans
for commercial and residential real estate. The Bank also offers various types
of traditional consumer loans, including revolving credit lines, home equity and
automobile loans. The Bank directs its commercial lending towards businesses
that otherwise do business with the Bank. Loans are made primarily to
individuals and are generally related to the borrower's business operations and
activities. In most situations, the loans are secured by real estate and assets
owned by the borrower's business and by the borrower's personal residences.
F-7
<PAGE>
REPUBLIC BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
The Bank is also engaged, via its wholly owned subsidiary, Republic
Services, Inc., in a tax refund anticipation loan ('RAL') program. The program
was formed in 1991. Due to certain changes initiated by the Internal Revenue
Service, the Bank withdrew from the program in November 1994. The Bank opted to
return to the program during the first quarter of 1996 and once again operates
through Refant Partners ('Refant'), a Pennsylvania General Partnership. Refant
is a joint venture between the Bank's wholly owned subsidiary and a wholly owned
subsidiary of Jackson Hewitt, Inc. ('Hewitt'). The Refant program enables the
Bank to make a high volume of short-term refund anticipation loans to consumer
taxpayers for whom Hewitt prepares and electronically files federal income tax
returns. The amount of each RAL is based upon the amount of the customer's
expected federal income tax refund.
Additionally, if based on credit, a customer seeking a RAL is denied, the
Bank engages in ACRs (Accelerated Check Refund). This process expedites the
turnaround period for an individual's income tax refund check. Hewitt files the
customer's return, after which the return remittance amount is wire transferred
to the Bank rather than sent via U.S. Mail. The Bank will then generate a check
for the return amount to the customer. This entire process can be completed in
approximately two weeks as compared to six weeks using the traditional
mail-reply method.
Investment Securities -- In 1994, the Bank adopted Statement of Financial
Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt
and Equity Securities. Under the new rules, debt securities that the Bank has
both the positive intent and ability to hold to maturity are carried at
amortized cost. Debt securities that the Bank does not have the positive intent
and ability to hold to maturity and all marketable equity securities will be
classified as available-for-sale or trading and carried at fair value.
Unrealized holding gains and losses on securities classified as available-for-
sale are carried as a separate component of shareholders' equity. Unrealized
holding gains and losses on securities classified as trading will be reported in
earnings. The amortized cost of debt securities classified as held for
investment is adjusted for amortization of premiums and accretion of discounts
to maturity. Such amortization is included in interest income from investments.
Interest and dividends are included in interest income from investments. The
cost of securities sold is based on the specific identification method. At
December 31, 1994, all investment securities were classified as held to
maturity. During 1995, the Bank adopted the Financial Accounting Standards Board
(the 'FASB') Special Report, A Guide to Implementation of Statement No. 115 on
Accounting for Certain Investments in Debt and Equity Securities -- Questions
and Answers (the 'Q&A Guide'). In accordance with the provisions of the Q&A
Guide, the Bank transferred certain securities from the classification of held
to maturity to available for sale.
Real Estate Owned -- Real estate owned is initially recorded at the lower
of carrying value of the loan or fair value at the date of foreclosure less
costs to dispose. Costs relating to the development and improvements of property
are capitalized and those relating to holding the property are charged to
expense.
Loans -- Interest on commercial loans is credited to operations based upon
the principal amount outstanding. Interest accruals are generally discontinued
when a loan becomes 90 days past due or when principal or interest is considered
doubtful of collection. Once identified as a nonaccrual loan, the loan is not
returned to accrual status until interest is received on a current basis and the
other factors indicating doubtful collection cease to exist. When interest
accruals are discontinued, interest credited to income in the current year is
reversed, and interest accrued in the prior year is charged to allowance for
loan losses.
F-8
<PAGE>
REPUBLIC BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Allowance for Loan Losses -- The allowance is maintained at a level
adequate to absorb probable losses. Management determines the adequacy of the
allowance based upon reviews of individual loans, recent loss experience,
current economic conditions, the risk characteristics of the various categories
of loans and other pertinent factors. Loans deemed uncollectible are charged to
the allowance. Provisions for loan losses and recoveries on loans previously
charged off are added to the allowance.
The Bank adopted SFAS No. 114 Accounting by Creditors for Impairment of a
Loan and No. 118, Accounting by Creditors for Impairment of a Loan -- Income
Recognition and Disclosures as of January 1, 1995. SFAS Nos. 114 and 118 require
that certain impaired loans be measured based either on the present value of
expected future cash flows discounted at the loan's effective interest rate, or
the loan's observable market price, or the fair value of the collateral if the
loan is collateral dependent. The adoption of SFAS Nos. 114 and 118 did not
result in additional provisions for loan losses.
Premises and Equipment -- Premises and equipment are stated at cost, less
allowances for depreciation and amortization. For furniture, fixtures and
equipment, the provision for depreciation is computed by the straight-line
method based on the estimated useful lives of the assets. Leasehold improvements
are amortized over the shorter of the estimated useful lives of the assets or
the related lease term.
Income Taxes -- Effective January 1, 1993, the Bank adopted SFAS No. 109,
Accounting for Income Taxes. Under SFAS No. 109, the deferred tax provision is
determined under the liability method. Under this method, deferred tax assets
and liabilities are determined based on differences between financial reporting
and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse.
Net Income Per Common Share -- Net income per share has been computed based
on the weighted average number of shares outstanding during the year. Shares
issuable upon exercise of stock options have not been recognized in computing
net income per common share since these instruments were either antidilutive or
had no material effect on the computation for the periods presented.
Cash Flow Information -- The Bank paid $4,571 and $3,890 in interest on
deposits and borrowed funds during the years ended December 31, 1995 and 1994,
respectively. The Bank made $290 and $443 of income tax payments during the
years ended December 31, 1995 and 1994, respectively.
Cash and Cash Equivalents -- The Bank considers cash and other liquid
securities with initial maturities of less than 90 days as cash equivalents.
NEW ACCOUNTING PRONOUNCEMENTS
In May 1995, the FASB issued SFAS No. 122, Accounting for Mortgage
Servicing Rights. The statement, which is effective for fiscal years beginning
after December 15, 1995, requires mortgage banking enterprises to recognize
servicing rights as assets, regardless of how such assets are acquired.
Management believes that adoption of SFAS No. 122 will not have a material
effect on the results of operations or the financial position of the Bank.
In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation. The statement, which is effective for the year ending December 31,
1996, requires expanded disclosures of stock-based compensation arrangements
with employees and encourages (but does not require) application of the 'fair
value' recognition provisions in the new standard. Management has not determined
what impact, if any, application of the statement will have on the Bank's
financial statements.
F-9
<PAGE>
REPUBLIC BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Reclassifications -- Certain reclassifications have been made to the 1994
consolidated financial statements to conform with the 1995 presentation.
3. INVESTMENT SECURITIES
<TABLE>
<CAPTION>
HELD TO MATURITY
--------------------------------------------------
DECEMBER 31, 1995
--------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
U.S. Agencies..................................................... $ 7,002 $ 35 $ 7,037
U.S. Treasury securities.......................................... 1,002 1,002
Collateralized mortgage obligations............................... 25,215 1 $ 194 25,022
Small Business Association pooled loan............................ 77 77
State of Israel bond.............................................. 25 25
----------- ----- ----------- ---------
Total debt securities........................................... 33,321 36 194 33,163
Federal Home Loan Bank stock...................................... 318 318
Federal Reserve Bank stock........................................ 200 200
Other investments................................................. 165 165
----------- ----- ----------- ---------
Total investments............................................... $ 34,004 $ 36 $ 194 $ 33,846
----------- ----- ----------- ---------
----------- ----- ----------- ---------
</TABLE>
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
--------------------------------------------------
DECEMBER 31, 1995
--------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Small Business Association pooled loans........................... $ 4,320 $ 28 $ 4,348
----------- ----- ----------- ---------
----------- ----- ----------- ---------
</TABLE>
<TABLE>
<CAPTION>
HELD TO MATURITY
--------------------------------------------------
DECEMBER 31, 1994
--------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities.......................................... $ 2,016 $ 2,016
Collateralized mortgage obligations............................... 25,402 $ 34 $ 1,762 23,674
Small Business Association pooled loan............................ 96 96
State of Israel bonds............................................. 25 25
----------- ----- ----------- ---------
Total debt securities........................................... 27,539 34 1,762 25,811
Federal Home Loan Bank stock...................................... 305 305
Federal Reserve Bank stock........................................ 200 200
Other investments................................................. 165 165
----------- ----- ----------- ---------
Total investments............................................... $ 28,209 $ 34 $ 1,762 $ 26,481
----------- ----- ----------- ---------
----------- ----- ----------- ---------
</TABLE>
F-10
<PAGE>
REPUBLIC BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
3. INVESTMENT SECURITIES -- (CONTINUED)
The maturity schedule of debt securities held at December 31, 1995 is as
follows:
<TABLE>
<CAPTION>
AMORTIZED MARKET
COST VALUE
----------- ---------
<S> <C> <C>
Due one year or less................................................................... $ 8,332 $ 8,367
After five years through ten years..................................................... 102 102
----------- ---------
8,434 8,469
Collateralized mortgage obligations.................................................... 24,887 24,694
Small Business Association pooled loans--
Available for sale................................................................... 4,320 4,348
----------- ---------
Total.................................................................................. $ 37,641 $ 37,511
----------- ---------
----------- ---------
</TABLE>
4. LOANS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Commercial and industrial............................................................... $ 23,183 $ 27,429
Commercial real estate.................................................................. 34,493 22,979
Residential real estate................................................................. 26,641 20,493
Consumer................................................................................ 1,546 1,182
--------- ---------
$ 85,863 $ 72,083
--------- ---------
--------- ---------
</TABLE>
Nonaccrual loans amounted to $517 and $878 at December 31, 1995 and 1994,
respectively. Interest income which would have been earned on these loans was
$48 and $26 for the years ended December 31, 1995 and 1994, respectively.
Interest actually paid on these loans was $0 and $75 for the years ended
December 31, 1995 and 1994.
Certain officers, directors, and their associates (related parties) have
loans and conduct other transactions with the Bank. Such transactions are made
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for other nonrelated party transactions. The
following is a summary of these transactions:
<TABLE>
<S> <C> <C>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
Balance, beginning of year................................................................ $ 2,380 $ 2,249
Additions............................................................................... 2,724 916
Payments................................................................................ (650) (785)
--------- ---------
Balance, end of year...................................................................... $ 4,454 $ 2,380
--------- ---------
--------- ---------
</TABLE>
The aggregate dollar amount of these loans available based on existing
commitments to related parties as of December 31, 1995 and 1994 was $3,997 and
$3,929, respectively.
F-11
<PAGE>
REPUBLIC BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
5. ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Balance, beginning of year.................................................................... $ 650 $ 460
Provision................................................................................... 223 323
Chargeoffs.................................................................................. (212) (144)
Recoveries.................................................................................. 19 11
--------- ---------
Balance, end of year.......................................................................... $ 680 $ 650
--------- ---------
--------- ---------
</TABLE>
The provision for loan losses charged to expense is based upon past loan
and loss experience and an evaluation of potential losses in the current loans
and lease portfolio, including the evaluation of impaired loans under SFAS Nos.
114 and 118. A loan is considered to be impaired when, based upon current
information and events, it is probable that the Bank will be unable to collect
all amounts due according to the contractual terms of the loan. An insignificant
delay or insignificant shortfall in amount of payments does not necessarily
result in the loan being identified as impaired. For this purpose, delays less
than 90 days are considered to be insignificant. As of December 31, 1995, 100%
of the impaired loan balance was measured for impairment based on the fair value
of the loans collateral. Impairment losses are included in the provision for
loan losses. SFAS Nos. 114 and 118 do not apply to large groups of smaller
balance homogeneous loans that are collectively evaluated for impairment, except
for those loans restructured under a troubled debt restructuring. Loans
collectively evaluated for impairment include consumer loans and residential
real estate loans, and are not included in the data that follows.
The following table summarizes impaired loan information.
<TABLE>
<CAPTION>
DECEMBER 31,
1995
---------------
<S> <C>
Impaired loans with related reserve for loan losses calculated
under SFAS No. 114..................................................................... $ 526
Impaired loans with no related reserve for loan losses calculated
under SFAS No. 114..................................................................... 10
------
$ 536
------
------
Average impaired loans................................................................... $ 452
Interest income recognized on impaired loans............................................. 0
Cash basis interest income recognized on impaired loans.................................. 0
</TABLE>
Interest payments on impaired loans are typically applied to principal
unless collectibility of the principal amount is fully assured, in which case
interest is recognized on the cash basis.
Commercial loans and commercial real estate loans are placed on nonaccrual
at the time the loan is 90 days delinquent unless the credit is well secured and
in the process of collection. Generally, commercial loans are charged off no
later than 120 days delinquent unless the loan is well secured and in the
process of collection, or other extenuating circumstances support collection.
Residential real estate loans are typically placed on nonaccrual at the time the
loan is 90 days delinquent. Other consumer loans are typically charged off at 90
days delinquent. In all cases, loans must be placed on nonaccrual or charged off
at an earlier date if collection of principal or interest is considered
doubtful.
F-12
<PAGE>
REPUBLIC BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
6. PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Furniture, fixtures, and equipment............................................................ $ 715 $ 601
Leasehold improvements........................................................................ 255 192
--------- ---------
970 793
Accumulated depreciation and amortization..................................................... (649) (559)
--------- ---------
$ 321 $ 234
--------- ---------
--------- ---------
</TABLE>
Depreciation expense amounted to $89 and $82 for the years ended December
31, 1995 and 1994, respectively.
7. DEPOSITS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
----------- ---------
<S> <C> <C>
Time deposits......................................................................... $ 95,384 $ 69,953
Certificates of deposit of $100,000 or more........................................... 8,070 10,484
Demand deposits....................................................................... 12,970 7,529
----------- ---------
$ 116,424 $ 87,966
----------- ---------
----------- ---------
</TABLE>
Certificates of deposit of $100,000 or more are scheduled to mature within
one year.
8. BORROWED FUNDS
Borrowings under fixed-coupon dollar reverse repurchase agreements at
December 31, 1994 totalled $5,583. There were no such borrowings at December 31,
1995.
Information concerning borrowings under fixed-coupon dollar reverse
repurchase agreements for the years ended December 31, 1995 and 1994 are
summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Average balance during the year........................................................... $ 589 $ 328
Average interest rate during the year..................................................... 5.82% 4.84%
Maximum month-end balance during the year................................................. $ 3,750 $ 5,583
Carrying value of securities underlying the agreements at end of year..................... $ -- $ 6,227
Estimated value........................................................................... $ -- $ 5,877
</TABLE>
Securities sold under dollar reverse repurchase agreements were delivered
to the broker-dealers who arranged the transactions. The broker-dealers may have
sold, loaned, or otherwise disposed of such securities to third parties in the
normal course of their operations, and have agreed to resell to the Bank
substantially identical securities at the maturities of the agreements. The
agreements at December 31, 1994 were scheduled to mature within one month.
Pursuant to collateral agreements with the Federal Home Loan Bank (FHLB),
advances are secured by all stock in the FHLB and qualifying first mortgage
loans. There were no advances from the FHLB outstanding at December 31, 1995 and
1994.
F-13
<PAGE>
REPUBLIC BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
8. BORROWED FUNDS -- (CONTINUED)
The Bank has a $2,000 noncontractual Federal Funds Line of Credit with PNC
Bank, N.A., a $3,000 noncontractual Federal Funds Line of Credit with Atlantic
Central Bankers Bank, N.A. and a $10,000 Secured Flexline with the FHLB.
9. SUBORDINATED DEBENTURES
In 1994, the Bank issued $3,400 of subordinate debentures due in 2001 in a
private placement with a broker. Interest on the debentures will accrue from
their date of issuance and will be paid semiannually at the annual rate of
8.15%. In January 1997, the debentures may be redeemed, at the option of the
Bank, in whole or in part, on any interest payment date, at a redemption price
equal to the principal amount of the debentures, plus accrued and unpaid
interest to the redemption date, together with a premium.
10. INCOME TAXES
The Bank's provision for income taxes differs from the amounts determined
by applying the statutory federal income tax rate to income before provision for
income taxes for the following reasons:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Tax at federal rate............................................................................ 34.0% 34.0%
Other.......................................................................................... (1.4) 0.8
--------- ---------
Total........................................................................................ 32.6% 34.8%
--------- ---------
--------- ---------
</TABLE>
Items that gave rise to significant portions of the deferred tax accounts
included in accrued interest and other assets in the accompanying consolidated
balance sheets at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Allowance for loan losses..................................................................... $ 178 $ 189
Property...................................................................................... 24 28
Other......................................................................................... (6) (109)
--------- ---------
Total....................................................................................... $ 196 $ 108
--------- ---------
--------- ---------
</TABLE>
11. STOCK OPTION PLAN
The Bank has a stock option plan for the purpose of providing additional
incentives to key employees, directors, and other individuals providing
significant service to the Bank. The maximum number of shares that may be
granted under the plan is 158,852. A total of 154,880 options, of which 31,770
are qualified stock options and 123,110 are nonqualified stock options, have
been granted. The exercise price is $6.25, $8.50 and $10.00 per share for
70,490, 70,491 and 13,899 options granted, respectively.
The outstanding options are exercisable one year from the date of the grant
and expire 10 years and a day from the date of grant. All options outstanding at
December 31, 1995 and 1994 are exercisable.
F-14
<PAGE>
REPUBLIC BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
12. DIRECTOR AND OFFICER ANNUITY PLAN
The Bank has an agreement with an insurance company to provide for an
annuity payment upon the retirement or death of the Bank's Directors and certain
officers, ranging from $15 to $25 per year for ten years. After five years of
service, the Director or officer shall be 50% vested in his accrued benefit. For
each additional year of service over five years, the Director or officer will be
vested an additional 10% per year until he is 100% vested after 10 years. The
accrued benefits under the plan at December 31, 1995 and 1994 totaled $146 and
$90, respectively. The expense for the years ended December 31, 1995 and 1994
was $56 and $46, respectively. The Bank has elected to fund the plan through the
purchase of certain life insurance contracts. The cash surrender value of these
contracts (owned by the Bank) aggregated $1,181 and $1,105 at December 31, 1995
and 1994, respectively, which is included in accrued interest and other assets.
13. BENEFIT PLAN
The Bank has a 401(k) plan for the benefit of its officers and employees.
Participation in the plan is voluntary and enables officers and employees to
invest up to 15% of their salary, subject to certain statutory restrictions, in
various investment options. On January 1, 1995, the Bank started contributing to
the Plan on behalf of its officers and employees. During the fiscal year ended
December 31, 1995, the Bank contributed $33, which was charged to expense.
14. COMMITMENTS
The Bank leases its main branch and executive offices under a noncancelable
operating lease with an initial lease term of 10 years with 3 renewal options of
3, 5, and 5 years, respectively. Rent during the initial lease term commenced at
$167 per year and will increase over the term of the lease to a maximum of $337
per year for the last four years of the lease. Rent during the option periods is
based on fair market values as determined by the landlord.
Future minimum lease payments for the initial lease term under the above
lease and other operating leases for its branch and certain equipment, consist
of the following for the year ending December 31:
<TABLE>
<CAPTION>
<S> <C>
1996.............................................................................. $ 390
1997.............................................................................. 377
1998.............................................................................. 97
1999.............................................................................. 42
2000.............................................................................. 43
Therafter......................................................................... 227
---------
$ 1,176
---------
---------
</TABLE>
Rent expense incurred on these operating leases totaled $427 and $395 for
the years ended December 31, 1995 and 1994, respectively.
In the normal course of business, the Bank makes commitments to extend
credit and issues standby letters of credit. Commitments to extend credit are
agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed
expiration dates or other termination classes and may require payment of a fee.
Since many of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The Bank evaluates each customer's creditworthiness on a
case-by-case basis. The type and amount of collateral obtained, if deemed
necessary by the Bank,
F-15
<PAGE>
REPUBLIC BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
14. COMMITMENTS -- (CONTINUED)
upon extension of credit is based on management's credit evaluation of the
borrower. Standby letters of credit are based on the management's credit
evaluation of the borrower. Standby letters of credit are conditional
commitments issued by the Bank to guarantee the performance of a customer to a
third party. The credit risk involved in issuing standby letters of credit is
essentially the same as that involved in extending loan facilities to customers.
At December 31, 1995 and 1994, firm loan commitments approximated $15,741 and
$7,423, respectively, and commitments under standby letters of credit
approximated $419 and $602.
15. REGULATORY MATTERS
The Bank is subject to a risk-based capital requirement under an FDIC
Statement of Policy which establishes a minimum ratio of qualifying total
capital to risk-weighted assets of 8% of which at least four percentage points
should be in the form of core capital (Tier 1). The Bank's total and Tier 1
risk-based capital ratios were 12.38% and 8.40%, respectively, at December 31,
1995 and 13.70% and 9.10%, respectively, at December 31, 1994.
In addition to the risk-based capital requirement noted above, the Bank is
subject to a minimum capital requirement under Part 325 of FDIC Rules and
Regulations which establishes a minimum 3% Tier 1 leveraged capital ratio
requirement based on average assets for those banks rated 1 under the CAMEL
rating system and at least 100 to 200 basis points above the 3% minimum for all
other banks or not less than 4%. The Bank's leveraged capital ratio was 6.58% as
of December 31, 1995 and 7.55% as of December 31, 1994.
State banking statutes restrict the Bank's payment of dividends on capital
stock to an amount which, following the payment of such dividend, will not
reduce additional paid-in capital to an amount less than 50 percent of capital
stock.
16. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
Disclosures about Fair Value of Financial Instruments. The estimated fair value
amounts have been determined by the Bank using available market information and
appropriate valuation methodologies. However, considerable judgment is
necessarily required to interpret market data to develop the stimulates of fair
value. Accordingly, the estimates presented herein are not necessarily
indicative of amounts the Bank could realize in a current market exchange. The
use of different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------
CARRYING FAIR
AMOUNT VALUE
----------- -----------
(000'S)
<S> <C> <C>
Asset:
Cash and cash equivalents.......................................................... $ 3,856 $ 3,856
Investment securities.............................................................. 38,352 38,194
Loans receivable................................................................... 85,183 86,400
Liabilities:
Demand deposits.................................................................... 12,570 12,570
Certificates of deposit............................................................ 103,854 102,900
</TABLE>
F-16
<PAGE>
REPUBLIC BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
16. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)
Cash and Cash Equivalents -- For cash and cash equivalents, the carrying
amount is a reasonable estimate of fair value.
Investment Securities -- For investment securities, fair values are based
on quoted market prices or dealer quotes, using a matrix approach.
Loans Receivable -- The fair value was estimated based on a determination
of the current market yield for a portfolio of loans with an average life the
same as the average life of the Bank's portfolio.
Demand, NOW, Money Market, Savings and Certificate accounts -- The fair
value of demand, NOW, money market and savings accounts is the amount payable on
demand at the reporting date. The fair value of certificates of deposit has been
determined by comparison of the current rates and maturities of groups of
existing deposits to rates currently offered on deposits of similar maturities.
Commitments to Extend Credit and Letters of Credit -- The majority of the
Bank's commitments to extend credit and letters of credit carry current market
interest rates if converted to loans. Because commitments to extend credit and
letters of credit are generally unassignable by either the Bank or the borrower,
they only have value to the Bank and borrower. The estimated fair value
approximates the recorded fee amounts.
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1995. Although management
is not aware of any factors that would significantly affect the fair value
amounts, such amounts have not been comprehensively revalued for purposes of
these financial statements since that date and, therefore, current estimates of
fair value may differ significantly from the amounts presented herein.
17. PROPOSED MERGER
On November 17, 1995, the Bank entered into a plan of merger with
ExecuFirst Bancorp, Inc. ('ExecuFirst') pursuant to which the Bank will be
merged with and into ExecuFirst; the merger is expected to occur in the second
quarter of 1996. Shares of the Bank will be exchanged for shares of ExecuFirst
in accordance with a formula based on their relative book values at the closing
date. The merger is subject to regulatory and shareholder approval, and will be
accounted for under the purchase method of accounting.
F-17
<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
ANNEX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF NOVEMBER 17, 1995
BY AND BETWEEN
REPUBLIC BANCORPORATION, INC.
AND
EXECUFIRST BANCORP, INC.
<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
I. THE MERGER; EFFECTS OF THE MERGER.................................................................... A-3
1.01 The Merger................................................................................ A-3
1.02 Effective Date and Effective Time......................................................... A-3
1.03 Amendment of ExecuFirst Articles and By-Laws.............................................. A-3
II. CONSIDERATION........................................................................................ A-3
2.01 Merger Consideration...................................................................... A-3
2.02 Stockholder Rights; Stock Transfers....................................................... A-4
2.03 Fractional Shares......................................................................... A-4
2.04 Exchange Procedures....................................................................... A-4
2.05 Dissenting Shares......................................................................... A-5
2.06 Options................................................................................... A-5
III. ACTIONS PENDING MERGER............................................................................... A-5
3.01 Ordinary Course........................................................................... A-6
3.02 Capital Stock............................................................................. A-6
3.03 Dividends, Etc............................................................................ A-6
3.04 Compensation.............................................................................. A-6
3.05 Benefit Plans............................................................................. A-6
3.06 Acquisitions and Dispositions............................................................. A-6
3.07 Amendments................................................................................ A-7
3.08 Accounting Methods........................................................................ A-7
3.09 Adverse Action............................................................................ A-7
3.10 Agreements................................................................................ A-7
IV. REPRESENTATIONS AND WARRANTIES....................................................................... A-8
4.01 Disclosure Letters........................................................................ A-8
4.02 Standard.................................................................................. A-8
4.03 Representations and Warranties of Republic................................................ A-8
4.04 Representations and Warranties of ExecuFirst.............................................. A-15
V. COVENANTS............................................................................................ A-21
5.01 Reasonable Best Efforts................................................................... A-21
5.02 Stockholder Approval...................................................................... A-21
5.03 Registration Statement.................................................................... A-21
5.04 Press Releases............................................................................ A-22
5.05 Access; Information....................................................................... A-22
5.06 Acquisition Proposals..................................................................... A-22
5.07 Affiliate Agreements...................................................................... A-22
5.08 Certain Modifications; Restructuring Charges.............................................. A-23
5.09 Takeover Laws............................................................................. A-23
5.10 No Rights Triggered....................................................................... A-23
5.11 Shares Listed............................................................................. A-23
5.12 Regulatory Applications................................................................... A-23
5.13 Indemnification........................................................................... A-24
5.14 Benefit Plans............................................................................. A-25
5.15 Accountant's Letter....................................................................... A-25
5.16 Stock Option Agreements................................................................... A-25
5.17 Notification of Certain Matters........................................................... A-25
</TABLE>
A-1
<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
VI. CONDITIONS TO CONSUMMATION OF THE MERGER............................................................. A-25
6.01 Shareholder Vote.......................................................................... A-25
6.02 Regulatory Approvals...................................................................... A-25
6.03 Third Party Consents...................................................................... A-25
6.04 No Injunction, Etc........................................................................ A-26
6.05 Pooling Letters........................................................................... A-26
6.06 Representations, Warranties and Covenants of ExecuFirst................................... A-26
6.07 Representations, Warranties and Covenants of Republic..................................... A-26
6.08 Effective Registration Statement.......................................................... A-26
6.09 Blue-Sky Permits.......................................................................... A-26
6.10 Tax Opinion............................................................................... A-26
6.11 Articles of Amendment..................................................................... A-26
6.12 Listing................................................................................... A-27
6.13 Dissenters Rights......................................................................... A-27
6.14 Fairness Opinion.......................................................................... A-27
6.15 Accountants' Letters...................................................................... A-27
6.16 Certain Director and Officer Positions.................................................... A-27
6.17 Consent of Republic Option Holders........................................................ A-27
6.18 Employment Agreements..................................................................... A-27
6.19 Chairman's Agreement...................................................................... A-27
6.20 Shareholders' Equity...................................................................... A-27
6.21 Delivery of Documents, Legal Opinion...................................................... A-28
VII. TERMINATION.......................................................................................... A-28
7.01 Termination............................................................................... A-28
7.02 Effect of Termination and Abandonment..................................................... A-28
VIII. OTHER MATTERS........................................................................................ A-29
8.01 Survival.................................................................................. A-29
8.02 Waiver; Amendment......................................................................... A-29
8.03 Counterparts.............................................................................. A-29
8.04 Governing Law............................................................................. A-29
8.05 Expenses.................................................................................. A-29
8.06 Confidentiality........................................................................... A-29
8.07 Notices................................................................................... A-29
8.08 Definitions............................................................................... A-30
8.09 Entire Understanding; No Third Party Beneficiaries........................................ A-30
8.10 Headings.................................................................................. A-30
</TABLE>
A-2
<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
AGREEMENT AND PLAN OF MERGER, dated as of the 17th day of November, 1995
(this 'Plan'), by and between Republic Bancorporation, Inc., a Pennsylvania
corporation ('Republic') and ExecuFirst Bancorp, Inc., a Pennsylvania
corporation ('ExecuFirst').
RECITALS
WHEREAS, the parties hereto desire that Republic merge with and into
ExecuFirst upon the terms and subject to the conditions set forth in this
Agreement; and
WHEREAS, the Board of Directors of each of Republic and ExecuFirst has
approved and adopted this Plan.
NOW, THEREFORE, in consideration of their mutual promises and obligations,
the parties hereto approve, adopt and make this Plan and prescribe the terms and
conditions hereof and the manner and basis of carrying it into effect, which
shall be as follows:
I. THE MERGER; EFFECTS OF THE MERGER
1.01 The Merger. At the Effective Time (as defined in Section 1.02):
(A) The Surviving Corporation. Republic shall merge with and into
ExecuFirst (the 'Merger'), the separate existence of Republic shall cease
and ExecuFirst shall survive and continue to exist as a Pennsylvania
corporation (the 'Surviving Corporation').
(B) Effect of the Merger. Subject to the satisfaction or waiver of
the conditions set forth in Article VI in accordance with the terms of this
Plan, the Merger shall become effective upon the filing in the office of
the Department of State of the Commonwealth of Pennsylvania of a
certificate of merger (the 'Certificate of Merger'), or such later date and
time as may be set forth in the Certificate of Merger, in accordance with
Section 1928 of the Pennsylvania Business Corporation Law of 1988 (the
'PABCL'). The Merger shall have the effects prescribed in Section 1929 of
the PABCL.
(C) Certificate of Incorporation and By-laws. The Certificate of
Incorporation and By-Laws of the Surviving Corporation shall be those in
effect at the Effective Time (as defined below) as described in Section
1.03 hereof.
1.02 Effective Date and Effective Time. Subject to the conditions to the
obligations of the parties to effect the Merger as set forth in Article VI, the
parties shall cause the effective date of the Merger (the 'Effective Date') to
occur on (1) the fifteenth (15) calendar day to occur after the last of the
conditions set forth in Article VI hereof have been satisfied or waived in
accordance with the terms of this Plan or (2) such other date to which the
parties may agree in writing. The time on the Effective Date when the Merger
shall become effective is referred to as the 'Effective Time.'
1.03 Amendment of ExecuFirst Articles and By-Laws. At or prior to the
Effective Time, as the case may be, the articles of incorporation of ExecuFirst
shall be amended in substantially the form as shall be agreed upon between the
parties (the 'Articles of Amendment') and the By-Laws of ExecuFirst shall be
amended in substantially the form attached hereto as Exhibit A (the 'Amended
By-Laws').
A-3
<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
II. CONSIDERATION
2.01 Merger Consideration. Subject to the provisions of this Plan, at the
Effective Time, automatically by virtue of the Merger and without any action on
the part of any stockholder:
(A) Outstanding ExecuFirst Common Stock. Each share of ExecuFirst
Common Stock (as defined in Section 4.04(B)) issued and outstanding
immediately prior to the Effective Time shall be unchanged and shall remain
issued and outstanding.
(B) Outstanding Republic Common Stock. Subject to section 2.05, each
share (excluding shares held by Republic or any of its subsidiaries, if any
(as defined in Section 8.08) ('Republic Treasury Shares')) of Republic
Common Stock (as defined in Section 4.03(B)) issued and outstanding
immediately prior to the Effective Time shall become and be converted into
the right to receive a number of shares of the Surviving Corporation's
Common Stock (as defined in Section 2.02) equal to the quotient obtained
from dividing the Republic Book Value Per Share (as defined below) by the
ExecuFirst Book Value Per Share (as defined below) (the 'Exchange Ratio').
The 'Republic Book Value Per Share' shall mean the quotient obtained
by dividing (x) the total shareholders' equity of Republic as reflected on
Republic's Financial Statements for the calendar quarter ended immediately
preceding the Effective Time, as determined in accordance with generally
accepted accounting principles consistently applied by (y) the number of
issued and outstanding shares of Republic Common Stock as of the Effective
Time, less the number of Republic Treasury Shares as of the Effective Time.
The 'ExecuFirst Book Value Per Share' shall mean the quotient obtained by
dividing (x) the total shareholders' equity of ExecuFirst as reflected on
ExecuFirst' Financial Statements for the calendar quarter ended immediately
preceding the Effective Time, as determined in accordance with generally
accepted accounting principles consistently applied; provided, however,
that subsequent changes after September 30, 1995 in the valuation reserve
accounted for in compliance with FAS No. 115 shall not be recognized as a
change in shareholders' equity as defined in this Agreement, by (y) the
number of issued and outstanding shares of ExecuFirst Common Stock as of
the Effective Time, less the number of shares of ExecuFirst Common Stock
held by ExecuFirst or any of its subsidiaries ('ExecuFirst Treasury
Shares').
2.02 Stockholder Rights; Stock Transfers. Each share of Republic Common
Stock, without any notice by the holder thereof, which is issued and outstanding
at the Effective Time, shall be converted into the right to receive shares of
common stock $.01 par value per share, of the Surviving Corporation (the
'Surviving Corporation Common Stock') in accordance with this Article II. At the
Effective Time, holders of Republic Common Stock shall have no rights as, and
shall cease to be stockholders of Republic, other than the right to receive the
consideration provided under this Article II. After the Effective Time, there
shall be no transfers on the stock transfer books of the Surviving Corporation
of shares of Republic Stock.
2.03 Fractional Shares. Notwithstanding any other provision hereof, no
fractional shares of the Surviving Corporation Common Stock and no certificates
or scrip therefor, or other evidence of ownership thereof, will be issued in the
Merger; instead, the Surviving Corporation shall pay to each holder of Republic
Common Stock who would otherwise be entitled to a fractional share an amount in
cash determined by multiplying such fraction by ExecuFirst Book Value Per Share.
2.04 Exchange Procedures. (A) As promptly as practicable after the
Effective Date, the Surviving Corporation shall send or cause to be sent to each
former holder of shares (other than Republic Treasury Shares) of Republic Common
Stock of record immediately prior to the Effective Date transmittal materials
for use in exchanging such stockholder's certificates formerly representing
Republic Stock ('Old Certificates') for the consideration set forth in this
Article II. The certificates representing the shares of Surviving Corporation
Common Stock ('New Certificates') into which shares of such stockholder's shares
of Republic Common Stock are converted on the Effective Date
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17. PROPOSED MERGER -- (CONTINUED)
and any check in respect of fractional share interests which such person shall
be entitled to receive will be delivered to such stockholder only upon delivery
to Midlantic Bank as Exchange Agent (the 'Exchange Agent') of Old Certificates
representing all of such shares of Republic Common Stock (or indemnity
satisfactory to the Surviving Corporation and the Exchange Agent if any of such
certificates are lost, stolen or destroyed,) owned by such stockholder. No
interest will be paid on any payments to be paid in lieu of fractional share
interests or dividends or distributions which any such person shall be entitled
to receive pursuant to this Article II upon such delivery. Old Certificates
surrendered for exchange by any Affiliate (as defined in Section 5.07) of
Republic shall not be exchanged for New Certificates until the Surviving
Corporation has received a written agreement from such person as specified in
Section 5.07.
(B) Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to any former holder of Republic Common Stock
for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
2.05 Dissenting Shares. Notwithstanding anything to the contrary contained
in this Agreement, shares of Republic Common Stock with respect to which
dissenters' rights, if any, are granted by reason of the Merger and the PABCL
and who do not vote in favor of the Merger and who otherwise comply with the
provisions of Subchapter D of Chapter 15 of the PABCL ('Republic Dissenting
Shares') shall not be entitled to shares of Surviving Corporation Common Stock
pursuant to Section 2.01 hereof, unless and until the holder thereof shall have
failed to perfect or shall have effectively withdrawn or lost such holder's
right to dissent from the Merger under the PABCL, and shall be entitled to
receive only the payment provided for by the PABCL. If any such holder shall
have failed to perfect or shall have effectively withdrawn or lost such holder's
dissenters' rights under the PABCL, such holder's Republic Dissenting Shares
shall thereupon be deemed to remain outstanding and entitled to shares of
Surviving Corporation Common Stock pursuant to this Agreement.
2.06 Options. In accordance with Section 5.02 hereof, ExecuFirst shall
submit to its shareholders for their approval an Amended and Restated Stock
Option Plan, in substantially the form attached hereto as Exhibit B (the
'Amended and Restated Surviving Corporation Option Plan'), to provide for the
award of long term incentives to (i) holders of Republic Stock Options (as
defined below) immediately prior to the Effective Date, and (ii) the officers
and key employees of the Surviving Corporation and its subsidiaries. From and
after the Effective Time, all employee and director stock options to purchase
shares of Republic Common Stock (each, a 'Republic Stock Option'), which are
then outstanding and unexercised, shall be converted into and become options to
purchase shares of the Surviving Corporation Common Stock, and the Surviving
Corporation shall assume each such Republic Stock Option in accordance with the
terms of the plan and agreement by which it is evidenced; provided, however,
that from and after the Effective Time (i) each such Republic Stock Option
assumed by the Surviving Corporation may be exercised solely to purchase shares
of the Surviving Corporation Common Stock pursuant to the Amended and Restated
Surviving Corporation Option Plan, (ii) the number of shares of the Surviving
Corporation Common Stock purchasable upon exercise of such Republic Stock Option
shall be equal to the number of shares of Republic Common Stock that were
purchasable under such Republic Stock Option immediately prior to the Effective
Time multiplied by the Exchange Ratio and rounding down to the nearest whole
share, with cash being paid for any fractional share interest that otherwise
would be purchasable, and (iii) the per share exercise price under each such
Republic Stock Option shall be equal to the product of (x) the exercise price of
such Republic Stock Option immediately prior to the Effective Date, and (y) the
quotient obtained by dividing 1 by the Exchange Ratio, and rounding up to the
nearest cent. The terms of each Republic Stock Option shall, in accordance with
its terms, be subject to further adjustment as appropriate to reflect any stock
split, stock dividend, recapitalization or other similar transaction with
respect to the Surviving Corporation Common Stock on or subsequent to the
Effective Date. It is intended that the foregoing assumption shall be effected
in a manner which is consistent with the requirements of Section 424 of the
Internal Revenue Code of 1986, as amended (the 'Code'), as to any Republic Stock
Option that is an 'incentive stock option' (as defined in Section 422 of the
Code).
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17. PROPOSED MERGER -- (CONTINUED)
III. ACTIONS PENDING MERGER
From the date hereof until the Effective Time, except as expressly
contemplated in this Plan, (i) without the prior written consent of ExecuFirst
(which consent shall not be unreasonably withheld or delayed) Republic will not,
and will cause each of its subsidiaries not to and (ii) without the prior
written consent of Republic (which consent shall not be unreasonably withheld or
delayed) ExecuFirst will not and will cause each of its subsidiaries not to:
3.01 Ordinary Course. Conduct the business of it and its subsidiaries
other than in the ordinary and usual course or, to the extent consistent
therewith, fail to use reasonable efforts to preserve intact their business
organizations and assets and maintain their rights, franchises and existing
relations with customers, suppliers, employees and business associates, or
take any action that would (i) affect the ability of any party to obtain
any necessary approvals of any Regulatory Authorities (as defined in
Section 4.03(H)) required for the transactions contemplated hereby without
the imposition of a condition, restriction or requirement which would so
materially and adversely impact the economic or business benefits to
ExecuFirst or Republic of the transactions contemplated by this Plan that,
had such condition or requirement been known, such party would not, in its
reasonable judgment, have entered into this Plan or (ii) adversely affect
its ability to perform any of its material obligations under this Plan.
3.02 Capital Stock. Other than (i) as Previously Disclosed in Section
4.03(B) of its Disclosure Letter (as defined in Section 4.01) with respect
to Republic or Section 4.04(B) of its Disclosure Letter with respect to
ExecuFirst, (ii) in connection with acquisitions of businesses permitted in
Section 3.06 or (iii) under the relevant Stock Option Agreement (as defined
in Section 5.16), or pursuant to options to purchase Republic Common Stock
or ExecuFirst Common Stock, as the case may be, which are outstanding as of
the date hereof (x) issue, sell or otherwise permit to become outstanding
any additional shares of capital stock, any stock appreciation rights, or
any Rights (as defined in Section 8.08), or declare or otherwise effect any
stock split, stock dividend, recapitalization or any similar transaction,
(y) enter into any agreement with respect to the foregoing, or (z) permit
any additional shares of capital stock to become subject to new grants of
employee stock options, stock appreciation rights, or similar stock-based
employee rights.
3.03 Dividends, Etc. (1) Make, declare or pay any dividend, (2)
except as Previously Disclosed in Section 3.03 of its Disclosure Letter,
directly or indirectly, combine, redeem, reclassify, purchase or otherwise
acquire, any shares of its capital stock or, (3) other than as Previously
Disclosed in Section 4.03(B) of its Disclosure Letter with respect to
Republic or Section 4.04(B) of its Disclosure Letter with respect to
ExecuFirst or as required by the relevant Stock Option Agreement, authorize
the creation or issuance of, or issue, any additional shares of its capital
stock or any Rights with respect thereto.
3.04 Compensation. Except as otherwise mutually agreed to by Republic
and ExecuFirst, or as Previously Disclosed in Section 3.04 of its
Disclosure Letter, enter into or amend any written employment, severance or
similar agreements or arrangements with any of its directors, officers or
employees, or grant any salary or wage increase or increase any employee
benefit (including incentive or bonus payments), except for (i) normal
individual increases in compensation to employees in the ordinary course of
business consistent with past practice or consistent with individual
increases for similarly situated employees, or (ii) other changes as may be
required by law or to satisfy obligations existing as of the date hereof.
3.05 Benefit Plans. Enter into or modify (except as specifically
provided in this Agreement or as may be required by applicable law or to
satisfy contractual obligations existing as of the date hereof, which to
the extent practicable have been Previously Disclosed in Section 3.05 of
its Disclosure Letter) any pension, retirement, stock option, stock
purchase, savings, profit sharing, deferred compensation, 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
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17. PROPOSED MERGER -- (CONTINUED)
directors, officers or other employees, including without limitation taking
any action that accelerates the vesting or exercise of any benefits payable
thereunder.
3.06 Acquisitions and Dispositions. Except as Previously Disclosed in
Section 3.06 of its Disclosure Letter and except for dispositions and
acquisitions of assets in the ordinary and usual course of business
consistent with past practice, dispose of or discontinue any portion of its
assets, business or properties, which is material to it and its
subsidiaries taken as a whole, or merge or consolidate with or acquire
(other than by way of foreclosures or acquisitions of control in a bona
fide fiduciary capacity or in satisfaction of debts previously contracted
in good faith, in each case in the ordinary and usual course of business
consistent with past practice) all or any portion of the business or
property of any other entity which is material to it and its subsidiaries
taken as a whole (any of the foregoing, a 'Business Combination
Transaction').
3.07 Amendments. Except, in the case of ExecuFirst by filing the
Articles of Amendment and adopting the Amended and Restated By Laws, in
substantially the form attached hereto as Exhibit A, amend its articles or
certificate of incorporation or By Laws.
3.08 Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be required
by generally accepted accounting principles or by regulation of any banking
or governmental authority having jurisdiction over Republic or ExecuFirst.
3.09 Adverse Actions. (1) Knowingly take any action that would, or is
reasonably likely to, prevent or impede the Merger from qualifying (i) for
pooling-of-interests accounting treatment or (ii) as a reorganization
within the meaning of Section 368(a) of the Code; provided, however, that
nothing contained herein shall limit the ability of Republic or ExecuFirst
to exercise its rights under the Stock Option Agreements; or (2) knowingly
take any action that is intended or is reasonably likely to result in (x)
any of its representations and warranties set forth in this Plan being or
becoming untrue in any material respect at any time prior to the Effective
Time, (y) any of the conditions to the Merger set forth in Article VI not
being satisfied or (z) a material violation of any provision of this Plan
except, in every case, as may be required by applicable law.
3.10 Agreements. Agree or commit to do anything prohibited by
Sections 3.01 through 3.09.
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17. PROPOSED MERGER -- (CONTINUED)
IV. REPRESENTATIONS AND WARRANTIES
4.01 Disclosure Letters. On or prior to the date hereof, ExecuFirst has
delivered to Republic and Republic has delivered to ExecuFirst a letter (as the
case may be, its 'Disclosure Letter') setting forth, among other things, items
the disclosure of which is necessary or appropriate in relation to any or all of
its representations, warranties and covenants; provided, that (i) no such item
is required to be set forth in a Disclosure Letter as an exception to a
representation or warranty if its absence is not reasonably likely to result in
the related representation or warranty being deemed untrue or incorrect under
the standards established by Section 4.02, and (ii) the mere inclusion of an
item in a Disclosure Letter shall not be deemed an admission by a party that
such item represents a material exception or fact, event or circumstance or that
such item is reasonably likely to result in a Material Adverse Effect (as
defined in Section 8.08).
4.02 Standard. No representation or warranty of Republic contained in
Section 4.03 (other than the representations and warranties contained in (i)
Sections 4.03(B) and (T)(ii), which shall be true and correct (except for
inaccuracies which are de minimis in amount) and (ii) Sections 4.03(E), (O) and
(T)(i), which shall be true and correct in all material respects) shall be
deemed untrue or incorrect, and shall not be deemed to have breached a
representation or warranty, as a consequence of the existence of any fact,
circumstance or event if such fact, circumstance or event, individually or taken
together with all other facts, circumstances or events inconsistent with any
paragraph of Section 4.03 is not reasonably likely to, have a Material Adverse
Effect. No representation or warranty of ExecuFirst contained in Section 4.04
(other than the representations and warranties contained in (i) Sections 4.04(B)
and (T)(ii), which shall be true and correct (except for inaccuracies which are
de minimis in amount) and (ii) Sections 4.04(E), (O), and (T)(i), which shall be
true and correct in all material respects) shall be deemed untrue or incorrect,
and shall not be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, circumstance or event if such fact,
circumstance or event, individually or taken together with all other facts,
circumstances or events inconsistent with any paragraph of Section 4.04 is not
reasonably likely to, have a Material Adverse Effect.
4.03 Representations and Warranties of Republic. Subject to Sections 4.01
and 4.02, Republic hereby represents and warrants to ExecuFirst as follows:
(A) Organization, Standing, and Authority. It is a corporation duly
organized and existing and in good standing under the laws of the
Commonwealth of Pennsylvania, with its principal executive offices located
in Philadelphia, Pennsylvania. It is duly qualified to do business and is
in good standing in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of
its business requires it to be so qualified. It has in effect all federal,
state, local, and foreign governmental authorizations necessary for it to
own or lease its properties and assets and to carry on its business as it
is now conducted.
(B) Shares. (1) As of the date hereof, Republic has 10,000,000
authorized shares of common stock, par value $.01 per share ('Republic
Common Stock'), and 10,000,000 authorized shares of preferred stock, par
value $.01 per share ('Republic Preferred Stock'; and, together with the
Republic Common Stock, 'Republic Stock'), (no other class or series of
capital stock being authorized), of which 794,263 shares of Republic Common
Stock, and no shares of Republic Preferred Stock, were issued and
outstanding as of October 31, 1995. The outstanding shares of its capital
stock are validly issued and outstanding, fully paid and nonassessable, and
subject to no preemptive rights (and were not issued in violation of any
preemptive rights). Except as Previously Disclosed in Section 4.03(B) of
its Disclosure Letter, there are no shares of its capital stock authorized
and reserved for issuance, it does not have any Rights issued or
outstanding with respect to its capital stock, and it does not have any
commitment to authorize, issue or sell any such shares or Rights, except
pursuant to this Plan or the relevant Stock Option Agreement. Since
September 30, 1995 it has issued no shares of its capital stock except
pursuant to plans or commitments Previously Disclosed in Section 4.03(B) of
its Disclosure Letter.
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17. PROPOSED MERGER -- (CONTINUED)
(2) The number of shares of Republic Common Stock which are
issuable upon exercise of the Republic Stock Option Agreement (as
defined in Section 5.16 hereof) as of the date hereof are Previously
Disclosed in Section 4.03(B) of its Disclosure Letter.
(C) Subsidiaries. (1) It has Previously Disclosed in Section 4.03(C)
of its Disclosure Letter a list of all its subsidiaries together with state
of incorporation for each such subsidiary and the states or jurisdictions
in which such subsidiary is qualified to conduct business, (2) no equity
securities of any of its significant subsidiaries (as defined in Section
8.08) are or may become required to be issued (other than to it or a
subsidiary of it) by reason of any rights), (3) there are no contracts,
commitments, understandings, or arrangements by which any of such
significant subsidiaries is or may be bound to sell or otherwise transfer
any shares of the capital stock of any such significant subsidiary (other
than to it or a subsidiary of it), (4) there are no contracts, commitments,
understandings, or arrangements relating to its rights to vote or to
dispose of such shares (other than to it or a subsidiary of it), and (5)
all of the shares of capital stock of each such significant subsidiary held
by it or its subsidiaries are fully paid and nonassessable and are owned by
it or its subsidiaries free and clear of any charge, mortgage, pledge,
security interest, restriction, claim, lien, or encumbrance ('Liens').
(2) Except as Previously Disclosed in Section 4.03(C) of its
Disclosure Letter, it does not own (other than in a bona fide fiduciary
capacity or in satisfaction of a debt previously contracted)
beneficially, directly or indirectly, any shares of any equity
securities or similar interests of any person, or any interest in a
partnership or joint venture of any kind.
(3) Except as Previously Disclosed in Section 4.03(C) of its
Disclosure Letter, each of its significant subsidiaries has been duly
organized and is validly existing and in good standing under the laws of
the jurisdiction in which it is incorporated or organized, and is duly
qualified to do business and in good standing, in the jurisdictions
where its ownership or leasing of property or the conduct of its
business requires it to be so qualified.
(D) Corporate Power. It and each of its significant subsidiaries has
the corporate power and authority to carry on its business as it is now
being conducted and to own all its properties and assets; and it has the
corporate power and authority to execute, deliver and perform its
obligations under this Plan and the Stock Option Agreements.
(E) Corporate Authority. Subject to receipt of the requisite approval
of its stockholders referred to in Section 6.01, this Plan and the Stock
Option Agreements and the transactions contemplated hereby and thereby have
been authorized by all necessary corporate action of it and this Plan is a
valid and binding agreement of it enforceable in accordance with its terms
(except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer, liquidation or similar
laws relating to, or affecting the enforcement of creditor's rights and
remedies or by other equitable principles of general application whether
enforceability is considered in a proceeding in equity or at law).
(F) No Default. Except as Previously Disclosed in Section 4.03(F) of
its Disclosure Letter, subject to receipt of the regulatory approvals and
expiration of the waiting periods referred to in Section 6.02, the
execution, delivery and performance of this Plan and the consummation of
the transactions contemplated hereby by it, do not and will not (i)
constitute a breach or violation of, or a default under, any law, rule or
regulation or any judgment, decree, order, Governmental permit or license,
or agreement, indenture or instrument of it or of any of its significant
subsidiaries or to which it or any of its significant subsidiaries or
properties is subject or bound, (ii) constitute a breach or violation of,
or a default under, its articles or certificate of incorporation or
by-laws, or (iii) require any consent or approval under any such law, rule,
regulation, judgment, decree, order, governmental permit or license
agreement, indenture or instrument.
(G) Financial Reports. Its balance sheets at December 31, 1994 and
September 30, 1995 and statement of operations and statement of cash flow
for the periods ended December 31, 1994 and September 30, 1995 ('Republic
Financial Statements') fairly present the financial position
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17. PROPOSED MERGER -- (CONTINUED)
and results of operation of the entity or entities to which it relates as
of its date or for each of the applicable periods, in each case in
accordance with generally accepted accounting principles consistently
applied during the periods involved, except in each case as may be noted
therein, subject to normal and recurring year-end audit adjustments in the
case of unaudited statements. It does not expect to make any material audit
or other adjustments to the Republic Financial Statements.
(H) Litigation; Regulatory Action. Except as Previously Disclosed in
Section 4.03(H) of its Disclosure Letter:
(1) no litigation, proceeding or controversy before any court or
governmental agency is pending against it or any of its subsidiaries
and, to the best of its knowledge, no such litigation, proceeding or
controversy has been threatened;
(2) to the best of its knowledge, upon reasonable investigation, no
litigation, proceeding or controversy before any court is pending
against any of its current officers or directors or its subsidiaries'
current officers and directors with respect to the business of Republic
and, to the best of its knowledge, no such litigation, proceeding or
controversy has been threatened;
(3) neither it nor any of its subsidiaries or properties is a party
to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or
similar submission to, any federal or state governmental agency or
authority charged with the supervision or regulation of financial
institutions or issuers of securities or engaged in the insurance of
deposits (including, without limitation, the Office of the Comptroller
of the Currency, the Board of Governors of the Federal Reserve System,
the Federal Deposit Insurance Corporation or the Commonwealth of
Pennsylvania Department of Banking) or the supervision or regulation of
it or any of its subsidiaries (collectively, the 'Regulatory
Authorities'); and
(4) neither it nor any of its subsidiaries has been advised by any
Regulatory Authority that such Regulatory Authority is contemplating
issuing or requesting (or is considering the appropriateness of issuing
or requesting) any such order, decree, agreement, memorandum or
understanding, commitment letter or similar submission.
(I) Compliance with Laws. Except as Previously Disclosed in Section
4.03 of its Disclosure Letter, it and each of its subsidiaries:
(1) is in compliance, in the conduct of its business, with all
applicable federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees applicable
thereto or to the employees conducting such businesses, including,
without limitation, all applicable state and federal securities laws,
the Bank Holding Company Act, the Equal Credit Opportunity Act, the Fair
Housing Act, the Community Reinvestment Act, the Home Mortgage
Disclosure Act and all other applicable fair lending laws and other laws
relating to discriminatory business practices, except in all cases which
individually or in the aggregate could not reasonably be expected to
have a Material Adverse Effect;
(2) has all permits, licenses, authorizations, orders and approvals
of, and have made all filings, applications and registrations with, all
Regulatory Authorities that are required in order to permit them to
conduct their businesses substantially as presently conducted; all such
permits, licenses, certificates of authority, orders and approvals are
in full force and effect and, to the best of its knowledge, no
suspension or cancellation of any of them is threatened; and
(3) has received, since December 31, 1994, no notification or
communication from any Regulatory Authority (i) asserting that it or any
of its subsidiaries is not in compliance with any of the statutes,
regulations, or ordinances which such Regulatory Authority enforces or
(ii) threatening to revoke any license, franchise, permit, or
governmental authorization or (iii) threatening or contemplating
revocation or limitation of, or which would have the effect of
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17. PROPOSED MERGER -- (CONTINUED)
revoking or limiting, federal deposit insurance (nor, to its knowledge,
do any grounds for any of the foregoing exist).
(J) Defaults; Properties. (1) Except as Previously Disclosed in
Section 4.03(J) of its Disclosure Letter, neither it nor any of its
subsidiaries is in default under any contract, agreement, commitment,
arrangement, lease, insurance policy, or other instrument to which it is a
party, by which its respective assets, business, or operations may be bound
or affected, or under which it or its respective assets, business, or
operations receives benefits, and there has not occurred any event that,
with the lapse of time or the giving of notice or both, would constitute
such a default.
(2) Except as Previously Disclosed in Section 4.03(J) of its
Disclosure Letters, it and its subsidiaries have good and marketable
title, free and clear of all Liens (other than Liens for current taxes
not yet delinquent or pledges to secure deposits) to all of the material
properties and assets, tangible or intangible. To its knowledge, all
buildings and all fixtures, equipment and other property and assets that
are material to its business on a consolidated basis and are held under
leases or subleases by it or its subsidiaries are held under valid
leases or subleases enforceable in accordance with their respective
terms (except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of
general applicability affecting creditors' rights or by general equity
principles).
(K) No Finders Fee. Except as Previously Disclosed in Section 4.03(K)
of its Disclosure Letter, all negotiations relative to this Plan and the
transactions contemplated hereby have been carried on by it directly with
the other parties hereto and no action has been taken by it that would give
rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other payment or commission as a result of the
execution and delivery hereof or the consummation of the transactions
contemplated hereby.
(L) Employee Benefit Plans. (1) Its Disclosure Letter on Section
4.03(L) contains a complete list of all bonus, vacation, deferred
compensation, pension, retirement, profit-sharing, thrift, savings,
employee stock ownership, stock bonus, stock purchase, restricted stock and
stock option plans, all employment or severance contracts, all medical,
dental, disability, health and life insurance plans, all other employee
benefit and fringe benefit plans, contracts or arrangements and any
applicable 'change of control' or similar provisions in any plan, contract
or arrangement maintained or contributed to by it or any of its
subsidiaries for the benefit of officers, former officers, employees,
former employees, directors, former directors, or the beneficiaries of any
of the foregoing ('Compensation and Benefit Plans').
(2) True and complete copies of its Compensation and Benefit Plans,
including, but not limited to, any trust instruments and/or insurance
contracts, if any, forming a part thereof, and all amendments thereto
have been supplied to the other party.
(3) Each of its Compensation and Benefit Plans has been
administered in compliance with the terms thereof. All 'employee benefit
plans' within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ('ERISA'), other than
'multiemployer plans' within the meaning of Section 3(37) of ERISA
('Multiemployer Plans'), covering employees or former employees of it
and its subsidiaries (its 'Benefit Plans'), to the extent subject to
ERISA, are in compliance with ERISA, the Code, the Age Discrimination in
Employment Act and other applicable laws. Each Benefit Plan of it or its
subsidiaries which is an 'employee pension benefit plan' within the
meaning of Section 3(2) of ERISA ('Pension Plan') and which is intended
to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service, and it
is not aware of any circumstances reasonably likely to result in the
revocation or denial of any such favorable determination letter. Except
as Previously Disclosed in Section 4.03(L) of its Disclosure Letter,
there is no pending or, to its knowledge, threatened litigation or
governmental audit, examination or investigation relating to the Benefit
Plans. Neither it nor
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17. PROPOSED MERGER -- (CONTINUED)
any of its subsidiaries has engaged in a transaction with respect to any
Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof, could subject it or any of its
subsidiaries to a tax or penalty imposed by either Section 4975 of the
Code or Section 502(i) of ERISA.
(4) No liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by it or any of its subsidiaries with
respect to any ongoing, frozen or terminated 'single-employer plan',
within the meaning of Section 4001(a)(15) of ERISA, currently or
formerly maintained by any of them, or the single-employer plan of any
entity which is considered one employer with it under Section
4001(a)(15) of ERISA or Section 414 of the Code (an 'ERISA Affiliate').
Neither it nor any of its subsidiaries presently contributes to a
Multiemployer Plan, nor have they contributed to such a plan within the
past five calendar years. No notice of a 'reportable event', within the
meaning of Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived, has been required to be filed for any
Pension Plan of it or any of its subsidiaries or by any ERISA Affiliate
within the past 12 months.
(5) All contributions, premiums and payments required to be made
under the terms of any Benefit Plan of it or any of its subsidiaries
have been made. Neither any Pension Plan of it or any of its
Subsidiaries nor any single-employer plan of an ERISA Affiliate of it or
any of its subsidiaries has an 'accumulated funding deficiency' (whether
or not waived) within the meaning of Section 412 of the Code or Section
302 of ERISA. Neither it nor any of its subsidiaries has provided, or is
required to provide, security to any Pension Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the Code.
(6) Under each Pension Plan of it or any of its subsidiaries which
is a single-employer plan as of the last day of the most recent plan
year ended prior to the date hereof, the actuarially determined present
value of all 'benefit liabilities', within the meaning of Section
4001(a)(16) of ERISA (as determined on the basis of the actuarial
assumptions contained in the Benefit Plan's most recent actuarial
valuation) did not exceed the then current value of the assets of such
Benefit Plan, and there has been no adverse change in the financial
condition of such Benefit Plan (with respect to either assets or
benefits) since the last day of the most recent Plan year.
(7) Except as Previously Disclosed in Section 4.03(L) of its
Disclosure Letter, neither it nor any of its subsidiaries has any
obligations for retiree health and life benefits under any plan.
(8) Except as Previously Disclosed in Section 4.03(L) of its
Disclosure Letter, neither the execution and delivery of this Plan nor
the consummation of the transactions contemplated hereby will (i) result
in any payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any
director or any employees or any of its subsidiaries under any
Compensation and Benefit Plan or otherwise from it or any of its
subsidiaries, (ii) increase any benefits otherwise payable under any
Compensation and Benefit Plan or (iii) result in any acceleration of the
time of payment or vesting of any such benefit.
(M) Labor Matters. Neither it nor any of its subsidiaries is a party
to, or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is
it or any of its subsidiaries the subject of a proceeding asserting that it
or any such subsidiary has committed an unfair labor practice (within the
meaning of the National Labor Relations Act) or seeking to compel it or
such subsidiary to bargain with any labor organization as to wages and
conditions of employment, nor is there any strike or other labor dispute
involving it or any of its subsidiaries, pending or, to the best of its
knowledge, threatened, nor is it aware of any activity involving it or any
of its subsidiaries' employees seeking to certify a collective bargaining
unit or engaging in any other organization activity.
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17. PROPOSED MERGER -- (CONTINUED)
(N) Insurance. It and its subsidiaries have taken all requisite
action (including without limitation the making of claims and the giving of
notices) pursuant to its directors' and officers' liability insurance
policy or policies in order to preserve all rights thereunder with respect
to all matters (other than matters arising in connection with this Plan and
the transactions contemplated hereby) that are known to it.
(O) Takeover Laws. It has taken all action required to be taken by it
in order to exempt this Plan, the relevant Stock Option Agreement and the
transactions contemplated hereby and thereby, from, and this Plan, and the
relevant Stock Option Agreement and the transactions contemplated hereby
and thereby are exempt from, the requirements of any 'moratorium', 'control
share', 'fair price' or other antitakeover laws and regulations
(collectively, 'Takeover Laws') of the Commonwealth of Pennsylvania.
(P) Environmental Matters. Except as Previously Disclosed in Section
4.03(P) of its Disclosure Letter:
(1) To its knowledge, it and each of its subsidiaries, the
Participation Facilities and the Loan/Fiduciary Properties (each as
defined below) are, and have been, in compliance with all Environmental
Laws (as defined below) and it has no knowledge of any circumstances
that with the passage of time or the giving of notice would be
reasonably likely to result in noncompliance.
(2) To its knowledge, there is no reasonable basis for any
proceeding and there is no proceeding pending or, to its knowledge,
threatened before any court, governmental agency or board or other forum
in which it or any of its subsidiaries or any Participation Facility has
been, or with respect to threatened proceedings, reasonably would be
expected to be, named as a defendant or potentially responsible party
(i) for alleged noncompliance (including by any predecessor) with any
Environmental Law, or (ii) relating to the presence, release or
threatened release into the environment of any Hazardous Material (as
defined below), whether or not occurring at or on a site owned, leased
or operated by it or any of its subsidiaries or any Participation
Facility.
(3) To its knowledge, there is no reasonable basis for any
proceeding and there is no proceeding pending or, to its knowledge,
threatened before any court, governmental agency or board or other forum
in which any Loan/Fiduciary Property (or it or any of its subsidiaries
in respect of any Loan/Fiduciary Property) has been, or with respect to
threatened proceedings, reasonably would be expected to be, named as a
defendant or potentially responsible party (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law, or (ii)
relating to the release or threatened release into the environment of
any Hazardous Material, whether or not occurring at or on a
Loan/Fiduciary Property.
(4) To its knowledge, during the period of (i) its or any of its
subsidiaries' ownership or operation of any of their respective current
properties, (ii) its or any of its subsidiaries' participation in the
management of any Participation Facility, or (iii) its or any of its
subsidiaries' holding of a security or other interest in a
Loan/Fiduciary Property, there have been no releases or threatened
releases of Hazardous Material in, on, from, under or affecting any such
property, Participation Facility or Loan/Fiduciary Property.
(5) To its knowledge, prior to the period of (i) its or any of its
subsidiaries' ownership or operation of any of their respective current
properties, (ii) its or any of its subsidiaries' participation in the
management of any Participation Facility, or (iii) its or any of its
subsidiaries' holding of a security or other interest in a
Loan/Fiduciary Property, there were no releases or threatened releases
of Hazardous Material in, on, under or affecting any such property,
Participation Facility or Loan/Fiduciary Property.
(6) The following definitions apply for purposes of this Section
4.03(P) and Section 4.04(P) 'Loan/Fiduciary Property' means any property
owned or operated by it or any of its subsidiaries or in which it or any
of its subsidiaries holds a security or other interest
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
(including, without limitation, a fiduciary interest), and, where
required by the context, includes any such property where it or any of
its subsidiaries constitutes the owner or operator of such property;
'Participation Facility' means any facility in which it or any of its
subsidiaries participates in the management and, where required by the
context, includes the owner or operator of such property; 'Environmental
Law' means (i) any federal, state and local law, statute, ordinance,
rule, regulation, code, license, permit, authorization, approval,
consent, legal doctrine, order, judgment, decree, injunction,
requirement or agreement with any governmental entity, relating to (a)
the protection, preservation or restoration of the environment,
(including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface land, subsurface land, plant
and animal life or any other natural resource), or to human health or
safety, or (b) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of Hazardous Material, in each case as
amended and as now in effect and includes, without limitation, the
federal Comprehensive Environmental Response Act, Comprehensive
Environmental and Liability Act, Water Pollution Control Act of 1972,
the federal Clean Air Act, the federal Clean Water Act, the federal
Resource Conservation and Recovery Act of 1976 (including the Hazardous
and Solid Waste Amendments thereto), the federal Solid Waste Disposal
Act, the federal Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act, the Federal Occupational Safety and
Health Act of 1970, and any similar state or local laws each as amended
and as now in effect, and (ii) any common law or equitable doctrine
(including. without limitation, injunctive relief and tort doctrines
such as negligence, nuisance, trespass and strict liability) that may
impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Hazardous
Material: 'Hazardous Material' means any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, under any Environmental Law, whether
by type or, and includes, without limitation, any oil or other petroleum
product, toxic waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste, solid waste or petroleum or
any derivative or by-product thereof, radon, radioactive material,
asbestos, asbestos containing material, urea formaldehyde foam
insulation, lead and polychlorinated biphenyl.
(Q) Tax Reports. Except as Previously Disclosed in Section 4.03(Q) of
its Disclosure Letter: (i) all reports and returns with respect to Taxes
(as defined below) that are required to be filed by or with respect to it
or its subsidiaries, including without limitation consolidated federal
income tax returns of it and its subsidiaries (collectively, the 'Tax
Returns'), have been timely filed, or requests for extensions have been
timely filed and have not expired, and such Tax Returns were true, complete
and accurate; (ii) all taxes (which shall include federal, state, local or
foreign income, gross receipts, windfall profits, severance, property,
production, sales, use, license, excise, franchise, employment, withholding
or similar taxes imposed on the income, properties or operations of it or
its subsidiaries, together with any interest, additions, or penalties with
respect thereto and any interest in respect of such additions or penalties,
collectively the 'Taxes') shown to be due on such Tax Returns have been
paid in full; (iii) all Taxes due with respect to completed and settled
examinations have been paid in full; (iv) no issues have been raised by the
relevant taxing authority in connection with the examination of any of such
Tax Returns; and (v) no waivers of statutes of limitations (excluding such
statutes that relate to years currently under examination by the Internal
Revenue Service) have been given by or requested with respect to any Taxes
of it or any of its subsidiaries.
(R) Pooling; Reorganization. As of the date hereof, it is aware of no
reason why the Merger will fail to qualify (i) for pooling-of-interests
accounting treatment or (ii) as a reorganization under Section 368(a) of
the Code.
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17. PROPOSED MERGER -- (CONTINUED)
(S) Regulatory Approvals. As of the date hereof, it is aware of no
reason why the regulatory approvals and consents referred to in Section
6.02 will not be received without the imposition of a condition or
requirement described in the proviso thereto.
(T) No Material Adverse Effect. Since December 31, 1994, except as
Previously Disclosed in Section 4.03(T) of its Disclosure Letter or in any
other Section of its Disclosure Letter, (i) it and its subsidiaries have
conducted their respective businesses in the ordinary and usual course
(excluding the incurrence of expenses related to this Plan and the
transactions contemplated hereby) and (ii) no event has occurred or
circumstance arisen that, individually or taken together with all other
facts, circumstances and events (described in any paragraph of Section 4.03
or otherwise), is reasonably likely to have a Material Adverse Effect with
respect to it. Notwithstanding Section 8.08 hereof, for the purpose of this
Section 4.03(T), Material Adverse Effect shall be deemed to include the
impact of (i) changes in banking and similar laws of general applicability
or interpretations thereof by courts or governmental authorities and (ii)
changes in generally accepted accounting principles or regulatory
accounting requirements applicable to banks and banking holding companies.
(U) Undisclosed Liabilities. Except as Previously Disclosed in
Section 4.03(U) of its Disclosure Letter, since September 30, 1995,
Republic has not incurred or become subject to any material liabilities
(absolute or contingent) except current liabilities incurred, and
liabilities under contracts entered into, in the ordinary course of its
business.
4.04 Representations and Warranties of ExecuFirst. Subject to Sections
4.01 and 4.02, ExecuFirst hereby represents and warrants to Republic as follows:
(A) Organization, Standing, and Authority. ExecuFirst is a
corporation duly organized and existing in good standing under the laws of
the Commonwealth of Pennsylvania, with its principal executive offices
located in Philadelphia, Pennsylvania. It is duly qualified to do business
and is in good standing in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of
its business requires it to be so qualified. It has in effect all federal,
state, local, and foreign governmental authorizations necessary for it to
own or lease its properties and assets and to carry on its business as it
is now conducted.
(B) Shares. (1) As of the date hereof, ExecuFirst has 20,000,000
authorized shares of common stock, each of par value $0.01 per share
('ExecuFirst Common Stock'), 10,000,000 authorized shares of Preferred
Stock, par value $0.01 per share ('ExecuFirst Preferred Stock' and,
together with ExecuFirst Common Stock 'ExecuFirst Stock') (no other class
or series of capital stock being authorized), of which 1,226,057 shares of
ExecuFirst Common Stock and no shares of ExecuFirst Preferred Stock were
issued and outstanding as of October 31, 1995. The outstanding shares of
its capital stock are validly issued and outstanding, fully paid and
nonassessable, and subject to no preemptive rights (and were not issued in
violation of any preemptive rights). Except as Previously Disclosed in
Section 4.04(B) of its Disclosure Letter, there are no shares of its
capital stock authorized and reserved for issuance, it does not have any
Rights issued or outstanding with respect to its capital stock, and it does
not have any commitment to authorize, issue or sell any such shares or
Rights, except pursuant to this Plan or the ExecuFirst Stock Option
Agreement. Since September 30, 1995 it has issued no shares of its capital
stock except pursuant to plans or commitments Previously Disclosed in
Section 4.04(B) of its Disclosure Letter.
(2) the number of shares of ExecuFirst Common Stock which are
issuable upon exercise of the ExecuFirst Stock Option Agreement (as
defined in Section 5.16 hereof) as of the date hereof are Previously
Disclosed in Section 4.04(B) of its Disclosure Letter.
(3) the shares of Surviving Corporation Common Stock to be issued
in exchange for shares of Republic Stock in the Merger, when issued in
accordance with the terms of this Plan will be duly authorized, validly
issued, fully paid and nonassessable.
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
(4) it has filed all reports, schedules, forms, statements and the
documents required to be filed by it with the Securities and Exchange
Commission (the 'SEC') and with the NASDAQ Market pursuant to the
reporting requirements of the Securities Exchange Act of 1934, as
amended (the 'Exchange Act') (all the foregoing 'ExecuFirst SEC
Documents'). As of their respective dates, none of ExecuFirst SEC
Documents, at the time they were filed with the SEC, contained any
untrue statement of material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statement therein, in light of the circumstances under which they were
made, not misleading.
(C) Subsidiaries. (1) It has Previously Disclosed in Section 4.04(C)
of its Disclosure Letter a list of all its subsidiaries together with state
of incorporation for each such subsidiary and the states or jurisdictions
in which such subsidiary is qualified to conduct business, (2) no equity
securities of any of its significant subsidiaries (as defined in Section
8.08) are or may become required to be issued (other than to it or a
subsidiary of it) by reason of any rights), (3) there are no contracts,
commitments, understandings, or arrangements by which any of such
significant subsidiaries is or may be bound to sell or otherwise transfer
any shares of the capital stock of any such significant subsidiary (other
than to it or a subsidiary of it), (4) there are no contracts, commitments,
understandings, or arrangements relating to its rights to vote or to
dispose of such shares (other than to it or a subsidiary of it), and (5)
all of the shares of capital stock of each such significant subsidiary held
by it or its subsidiaries are fully paid and nonassessable and are owned by
it or its subsidiaries free and clear of any Liens.
(2) Except as Previously Disclosed in Section 4.04(C) of its
Disclosure Letter, it does not own (other than in a bona fide fiduciary
capacity or in satisfaction of a debt previously contracted)
beneficially, directly or indirectly, any shares of any equity
securities or similar interests of any person, or any interest in a
partnership or joint venture of any kind.
(3) Except as Previously Disclosed in Section 4.04(C) of its
Disclosure Letter, each of its significant subsidiaries has been duly
organized and is validly existing in good standing under the laws of the
jurisdiction in which it is incorporated or organized, and is duly
qualified to do business and in good standing, in the jurisdictions
where its ownership or leasing of property or the conduct of its
business requires it to be so qualified.
(D) Corporate Power. It and each of its significant subsidiaries has
the corporate power and authority to carry on its business as it is now
being conducted and to own all its properties and assets; and it has the
corporate power and authority to execute, deliver and perform its
obligations under this Plan and the Stock Option Agreements.
(E) Corporate Authority. Subject to receipt of the requisite approval
of its stockholders referred to in Section 6.01, this Plan and the Stock
Option Agreements and the transactions contemplated hereby and thereby have
been authorized by all necessary corporate action of it and this Plan is a
valid and binding agreement of it, enforceable in accordance with its terms
(except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer, liquidation or similar
laws relating to, or affecting the enforcement of creditor's rights and
remedies or by other equitable principles of general application whether
enforceability is considered in a proceeding in equity or at law).
(F) No Default. Except as Previously Disclosed in Section 4.04(F) of
its Disclosure Letter, subject to receipt of the regulatory approvals and
expiration of the waiting periods referred to in Section 6.02 and the
required filings under federal and state securities laws, the execution,
delivery and performance of this Plan and the consummation of the
transactions contemplated hereby by it, do not and will not (i) constitute
a breach or violation of, or a default under, any law, rule or regulation
or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of it or of any of its significant
subsidiaries or to which it or any of its significant subsidiaries or
properties is subject or bound, (ii) constitute a breach or violation of,
or a default under, its articles or certificate of incorporation or
by-laws, or (iii) require any consent or
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
approval under any such law, rule, regulation, judgment, decree, order,
governmental permit or license agreement, indenture or instrument.
(G) Financial Reports. Its balance sheets at December 31, 1994 and
September 30, 1995 and statement of operations and statement of cash flow
for the periods ended December 31, 1994 and September 30, 1995 ('ExecuFirst
Financial Statements') fairly present the financial position and results of
operation of the entity or entities to which it relates as of its date or
for each of the applicable periods, in each case in accordance with
generally accepted accounting principles consistently applied during the
periods involved, except in each case as may be noted therein, subject to
normal and recurring year-end audit adjustments in the case of unaudited
statements. It does not expect to make any material audit or other
adjustments to the ExecuFirst Financial Statements.
(H) Litigation; Regulatory Action. Except as Previously Disclosed in
Section 4.04(H) of its Disclosure Letter:
(1) no litigation, proceeding or controversy before any court or
governmental agency is pending against it or any of its subsidiaries
and, to the best of its knowledge, no such litigation, proceeding or
controversy has been threatened;
(2) to the best of its knowledge, upon reasonable investigation, no
litigation, proceeding or controversy before any court is pending
against any of its current officers or directors or its subsidiaries'
current officers and directors with respect to the business of
ExecuFirst and, to the best of its knowledge, no such litigation,
proceeding or controversy has been threatened;
(3) neither it nor any of its subsidiaries or properties is a party
to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or
similar submission to, any Regulatory Authority; and
(4) neither it nor any of its subsidiaries has been advised by any
Regulatory Authority that such Regulatory Authority is contemplating
issuing or requesting (or is considering the appropriateness of issuing
or requesting) any such order, decree, agreement, memorandum or
understanding, commitment letter or similar submission.
(I) Compliance with Laws. Except as Previously Disclosed in Section
4.04(I) of its Disclosure Letter, it and each of its subsidiaries:
(1) is in compliance, in the conduct of its business, with all
applicable federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees applicable
thereto or to the employees conducting such businesses, including,
without limitation, all applicable state and federal securities laws,
the Bank Holding Company Act, the Equal Credit Opportunity Act, the Fair
Housing Act, the Community Reinvestment Act, the Home Mortgage
Disclosure Act and all other applicable fair lending laws and other laws
relating to discriminatory business practices, except in all cases which
individually or in the aggregate could not reasonably be expected to
have a Material Adverse Effect;
(2) has all permits, licenses, authorizations, orders and approvals
of, and have made all filings, applications and registrations with, all
Regulatory Authorities that are required in order to permit them to
conduct their businesses substantially as presently conducted; all such
permits, licenses, certificates of authority, orders and approvals are
in full force and effect and, to the best of its knowledge, no
suspension or cancellation of any of them is threatened; and
(3) has received, since December 31, 1994, no notification or
communication from any Regulatory Authority (i) asserting that it or any
of its subsidiaries is not in compliance with any of the statutes,
regulations, or ordinances which such Regulatory Authority enforces or
(ii) threatening to revoke any license, franchise, permit, or
governmental authorization or (iii) threatening or contemplating
revocation or limitation of, or which would have the effect of
A-17
<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
revoking or limiting, federal deposit insurance (nor, to its knowledge,
do any grounds for any of the foregoing exist).
(J) Defaults; Properties. (1) Except as Previously Disclosed in
Section 4.04(J) of its Disclosure Letter, neither it nor any of its
subsidiaries is in default under any contract, agreement, commitment,
arrangement, lease, insurance policy, or other instrument to which it is a
party, by which its respective assets, business, or operations may be bound
or affected, or under which it or its respective assets, business, or
operations receives benefits, and there has not occurred any event that,
with the lapse of time or the giving of notice or both, would constitute
such a default.
(2) Except as previously disclosed in Section 4.04(J) of its
Disclosure Letters, it and its subsidiaries have good and marketable
title, free and clear of all Liens (other than Liens for current taxes
not yet delinquent or pledges to secure deposits) to all of the material
properties and assets, tangible or intangible. To its knowledge, all
buildings and all fixtures, equipment and other property and assets that
are material to its business on a consolidated basis and are held under
leases or subleases by it or its subsidiaries are held under valid
leases or subleases, enforceable in accordance with their respective
terms (except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of
general applicability affecting creditors' rights or by general equity
principles).
(K) No Finders Fee. Except as Previously Disclosed in Section 4.04(K)
of its Disclosure Letter, all negotiations relative to this Plan and the
transactions contemplated hereby have been carried on by it directly with
the other parties hereto and no action has been taken by it that would give
rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other payment or commission as a result of the
execution and delivery hereof or the consummation of the transactions
contemplated hereby.
(L) Employee Benefit Plans. (1) Its Disclosure Letter on Section
4.04(L) contains a complete list of all Compensation and Benefit Plans.
(2) True and complete copies of its Compensation and Benefit Plans,
including, but not limited to, any trust instruments and/or insurance
contracts, if any, forming a part thereof, and all amendments thereto
have been supplied to the other party.
(3) Each of its Compensation and Benefit Plans has been
administered in compliance with the terms thereof. All Benefit Plans, to
the extent subject to ERISA, are in compliance with ERISA, the Code, the
Age Discrimination in Employment Act and other applicable laws. Each
Benefit Plan of it or its subsidiaries which is a Pension Plan and which
is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue
Service, and it is not aware of any circumstances reasonably likely to
result in the revocation or denial of any such favorable determination
letter. Except as Previously Disclosed in Section 4.04(L) of its
Disclosure Letter, there is no pending or, to its knowledge, threatened
litigation or governmental audit, examination or investigation relating
to the Benefit Plans. Neither it nor any of its subsidiaries has engaged
in a transaction with respect to any Benefit Plan that, assuming the
taxable period of such transaction expired as of the date hereof, could
subject it or any of its subsidiaries to a tax or penalty imposed by
either Section 4975 of the Code or Section 502(i) of ERISA.
(4) No liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by it or any of its subsidiaries with
respect to any ongoing, frozen or terminated 'single-employer plan',
within the meaning of Section 4001(a)(15) of ERISA, currently or
formerly maintained by any of them, or the single-employer plan of any
ERISA Affiliate. Neither it nor any of its subsidiaries presently
contributes to a Multiemployer Plan, nor have they contributed to such a
plan within the past five calendar years. No notice of a 'reportable
event', within the meaning of Section 4043 of ERISA for which the 30-day
reporting
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
requirement has not been waived, has been required to be filed for any
Pension Plan of it or any of its subsidiaries or by any ERISA Affiliate
within the past 12 months.
(5) All contributions, premiums and payments required to be made
under the terms of any Benefit Plan of it or any of its subsidiaries
have been made. Neither any Pension Plan of it or any of its
Subsidiaries nor any single-employer plan of an ERISA Affiliate of it or
any of its subsidiaries has an 'accumulated funding deficiency' (whether
or not waived) within the meaning of Section 412 of the Code or Section
302 of ERISA. Neither it nor any of its subsidiaries has provided, or is
required to provide, security to any Pension Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the Code.
(6) Under each Pension Plan of it or any of its subsidiaries which
is a single-employer plan as of the last day of the most recent plan
year ended prior to the date hereof, the actuarial determined present
value of all 'benefit liabilities', within the meaning of Section
4001(a)(16) of ERISA (as determined on the basis of the actuarial
assumptions contained in the Benefit Plan's most recent actuarial
valuation) did not exceed the then current value of the assets of such
Benefit Plan, and there has been no adverse change in the financial
condition of such Benefit Plan (with respect to either assets or
benefits) since the last day of the most recent Benefit Plan year.
(7) Except as Previously Disclosed in Section 4.04(L) of its
Disclosure Letter, neither it nor any of its subsidiaries has any
obligations for retiree health and life benefits under any plan.
(8) Except as Previously Disclosed in Section 4.04(L) of its
Disclosure Letter, neither the execution and delivery of this Plan nor
the consummation of the transactions contemplated hereby will (i) result
in any payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any
director or any employees or any of its subsidiaries under any
Compensation and Benefit Plan or otherwise from it or any of its
subsidiaries, (ii) increase any benefits otherwise payable under any
Compensation and Benefit Plan or (iii) result in any acceleration of the
time of payment or vesting of any such benefit.
(M) Labor Matters. Neither it nor any of its subsidiaries is a party
to, or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is
it or any of its subsidiaries the subject of a proceeding asserting that it
or any such subsidiary has committed an unfair labor practice (within the
meaning of the National Labor Relations Act) or seeking to compel it or
such subsidiary to bargain with any labor organization as to wages and
conditions of employment, nor is there any strike or other labor dispute
involving it or any of its subsidiaries, pending or, to the best of its
knowledge, threatened, nor is it aware of any activity involving it or any
of its subsidiaries' employees seeking to certify a collective bargaining
unit or engaging in any other organization activity.
(N) Insurance. It and its subsidiaries have taken all requisite
action (including without limitation the making of claims and the giving of
notices) pursuant to its directors' and officers' liability insurance
policy or policies in order to preserve all rights thereunder with respect
to all matters (other than matters arising in connection with this Plan and
the transactions contemplated hereby) that are known to it.
(O) Takeover Laws. It has taken all action required to be taken by it
in order to exempt this Plan, the relevant Stock Option Agreement and the
transactions contemplated hereby and thereby, from, and this Plan, and the
relevant Stock Option Agreement and the transactions contemplated hereby
and thereby are exempt from, the requirements of any Takeover Laws.
(P) Environmental Matters. Except as Previously Disclosed in Section
4.04(P) of its Disclosure Letter:
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17. PROPOSED MERGER -- (CONTINUED)
(1) To its knowledge, it and each of its subsidiaries, the
Participation Facilities and the Loan/Fiduciary Properties are, and have
been, in compliance with all Environmental Laws and it has no knowledge
of any circumstances that with the passage of time or the giving of
notice would be reasonably likely to result in noncompliance.
(2) To its knowledge, there is no reasonable basis for any
proceeding and there is no proceeding pending or, to its knowledge,
threatened before any court, governmental agency or board or other forum
in which it or any of its subsidiaries or any Participation Facility has
been, or with respect to threatened proceedings, reasonably would be
expected to be, named as a defendant or potentially responsible party
(i) for alleged noncompliance (including by any predecessor) with any
Environmental Law, or (ii) relating to the presence, release or
threatened release into the environment of any Hazardous Material,
whether or not occurring at or on a site owned, leased or operated by it
or any of its subsidiaries or any Participation Facility.
(3) There is no proceeding pending or, to its knowledge, threatened
before any court, governmental agency or board or other forum in which
any Loan/Fiduciary Property (or it or any of its subsidiaries in respect
of any Loan/Fiduciary Property) has been, or with respect to threatened
proceedings, reasonably would be expected to be, named as a defendant or
potentially responsible party (i) for alleged noncompliance (including
by any predecessor) with any Environmental Law, or (ii) relating to the
release or threatened release into the environment of any Hazardous
Material, whether or not occurring at or on a Loan/Fiduciary Property.
(4) To its knowledge, during the period of (i) its or any of its
subsidiaries' ownership or operation of any of their respective current
properties, (ii) its or any of its subsidiaries' participation in the
management of any Participation Facility, or (iii) its or any of its
subsidiaries' holding of a security or other interest in a
Loan/Fiduciary Property, there have been no releases or threatened
releases of Hazardous Material in, on, from, under or affecting any such
property, Participation Facility or Loan/Fiduciary Property.
(5) To its knowledge, prior to the period of (i) its or any of its
subsidiaries' ownership or operation of any of their respective current
properties, (ii) its or any of its subsidiaries' participation in the
management of any Participation Facility, or (iii) its or any of its
subsidiaries' holding of a security or other interest in a
Loan/Fiduciary Property, there were no releases or threatened releases
of Hazardous Material in, on, under or affecting any such property,
Participation Facility or Loan/Fiduciary Property.
(Q) Tax Reports. Except as Previously Disclosed in Section 4.04(Q) of
its Disclosure Letter: (i) all Tax Returns have been timely filed, or
requests for extensions have been timely filed and have not expired, and
such Tax Returns were true, complete and accurate; (ii) all Taxes have been
paid in full; (iii) all Taxes due with respect to completed and settled
examinations have been paid in full; (iv) no issues have been raised by the
relevant taxing authority in connection with the examination of any of such
Tax Returns; and (v) no waivers of statutes of limitations (excluding such
statutes that relate to years currently under examination by the Internal
Revenue Service) have been given by or requested with respect to any Taxes
of it or any of its subsidiaries.
(R) Pooling; Reorganization. As of the date hereof, it is aware of no
reason why the Merger will fail to qualify (i) for pooling-of-interests
accounting treatment or (ii) as a reorganization under Section 368(a) of
the Code.
(S) Regulatory Approvals. As of the date hereof, it is aware of no
reason why the regulatory approvals and consents referred to in Section
6.02 will not be received without the imposition of a condition or
requirement described in the proviso thereto.
(T) No Material Adverse Effect. Since December 31, 1994, except as
Previously Disclosed in Section 4.04(T) of its Disclosure Letter or in any
other Section of its Disclosure Letter, (i) it and its subsidiaries have
conducted their respective businesses in the ordinary and usual course
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17. PROPOSED MERGER -- (CONTINUED)
(excluding the incurrence of expenses related to this Plan and the
transactions contemplated hereby) and (ii) no event has occurred or
circumstance arisen that, individually or taken together with all other
facts, circumstances and events (described in any paragraph of Section 4.04
or otherwise), is reasonably likely to have a Material Adverse Effect with
respect to it. Notwithstanding Section 8.08 hereof, for the purpose of this
Section 4.04(T), Material Adverse Effect shall be deemed to include the
impact of (i) changes in banking and similar laws of general applicability
or interpretations thereof by courts or governmental authorities and (ii)
changes in generally accepted in accounting principles or regulatory
accounting requirements applicable to banks and banking holding companies.
(U) Undisclosed Liabilities. Except as Previously Disclosed in
Section 4.04(U) of its Disclosure Letter, since September 30, 1995,
Execufirst has not incurred or become subject to any material liabilities
(absolute or contingent) except current liabilities incurred, and
liabilities under contracts entered into, in the ordinary course of
business.
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17. PROPOSED MERGER -- (CONTINUED)
V. COVENANTS
Republic hereby covenants to and agrees with ExecuFirst, and ExecuFirst
hereby covenants to and agrees with Republic, that:
5.01 Reasonable Best Efforts. Subject to the terms and conditions of this
Plan, it shall use its reasonable best efforts in good faith to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary,
proper or desirable, or, advisable under applicable laws, so as to permit
consummation of the Merger as promptly as reasonably practicable and to
otherwise enable consummation of the transactions contemplated hereby and shall
cooperate fully with the other parties hereto to that end.
5.02 Stockholder Approvals. Each of them shall take, in accordance with
applicable law, National Association of Securities Dealers rules and its
respective articles or certificate of incorporation and by-laws, all action
necessary to convene, respectively, an appropriate meeting of stockholders of
ExecuFirst to consider and vote upon the issuance of the shares of the Surviving
Corporation Common Stock to be issued in the Merger pursuant to this Plan and to
vote on any other stockholder approval matters required for or incidental to
consummation of the Merger including the approval of the Amended and Restated
Surviving Corporation Option Plan (the 'ExecuFirst Meeting'), and an appropriate
meeting of stockholders of Republic to consider and vote upon the approval of
this Plan and to vote on any other stockholder approval matters required for or
incidental to consummation of the Merger (the 'Republic Meeting'; each of the
ExecuFirst Meeting and the Republic Meeting, a 'Meeting'), respectively, as
promptly as practicable after the Registration Statement (as defined in Section
5.03) is declared effective. Subject to Section 5.06 and the next succeeding
sentence, the Board of Directors of each of ExecuFirst and Republic will
recommend such approval, and each of ExecuFirst and Republic will take all
reasonable lawful action to solicit such approval by its respective
stockholders. The Board of Directors of ExecuFirst or Republic, acting on behalf
of ExecuFirst or Republic, respectively, may fail to make such recommendation,
or withdraw, modify or change any such recommendation if and only if such Board
of Directors, after having consulted with and considered the advice of outside
counsel, has determined that the making of such recommendation, or the failure
so to withdraw, modify or change its recommendation, would constitute a breach
of the fiduciary duties of such directors under applicable law. Notwithstanding
anything to the contrary contained herein, each of the Stock Option Agreements
shall be effective on its own terms and an obligation of each party, independent
of the provisions of this Section 5.02 and Section 5.06.
5.03 Registration Statement. (1) Each of ExecuFirst and Republic agrees to
cooperate in the preparation of a registration statement on Form S-4 (the
'Registration Statement') to be filed by ExecuFirst with the SEC in connection
with the issuance of the Surviving Corporation Common Stock in the Merger
(including the joint proxy statement and prospectus and other proxy solicitation
materials of ExecuFirst and Republic constituting a part thereof the 'Joint
Proxy Statement'). Each of Republic and ExecuFirst agrees to use all reasonable
efforts to cause the Registration Statement to be declared effective under the
Securities Act as promptly as reasonably practicable after filing thereof.
ExecuFirst also agrees to use all reasonable efforts to obtain all necessary
state securities law or 'Blue Sky' permits and approvals required to carry out
the transactions contemplated by this Agreement. Republic agrees to furnish to
ExecuFirst all information concerning Republic, its subsidiaries, officers,
directors and stockholders as may be reasonably requested in connection with the
foregoing.
(2) Each of Republic and ExecuFirst agrees, as to itself and its
subsidiaries, that none of the information supplied or to be supplied by it
for inclusion or incorporation by reference in (i) the Registration
Statement will, at the time the Registration Statement and each amendment
or supplement thereto, if any, becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Joint Proxy Statement and
any amendment or supplement thereto will, at the date of mailing to
stockholders and at the times of the ExecuFirst Meeting and the Republic
Meeting, contain any statement which, in the light of the circumstances
under which such statement is made, will be false or misleading with
respect to
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
any material fact, or which will omit to state any material fact necessary
in order to make the statements therein not false or misleading or
necessary to correct any statement in any earlier statement in the Joint
Proxy Statement or any amendment or supplement thereto.
(3) In the case of ExecuFirst, ExecuFirst will advise Republic,
promptly after ExecuFirst receives notice thereof, of the time when the
Registration Statement has become effective or any supplement or amendment
has been filed, of the issuance of any stop order or the suspension of the
qualification of the ExecuFirst Stock or for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of
the Registration Statement or for additional information.
5.04 Press Releases. Neither Republic nor ExecuFirst will, without the
prior approval of the other (which approval shall not be unreasonably withheld
or delayed), issue any press release or written statement for general
circulation relating to the transactions contemplated hereby.
5.05 Access; Information. Subject to the terms and conditions of that
certain Confidentiality Agreement dated as of August 30, 1995 by and between
Republic and ExecuFirst (the 'Confidentiality Agreement') (1) upon reasonable
notice, it shall afford the other parties and their officers, employees,
counsel, accountants and other authorized representatives, access, during normal
business hours throughout the period prior to the Effective Date, to all of its
properties, books, contracts, commitments and records and, during such period,
it shall furnish promptly to it (i) a copy of each material report, schedule and
other document filed by it pursuant to the requirements of federal or state
securities or banking laws, and (ii) all other information concerning the
business, properties and personnel of it as the other may reasonably request:
and (2) it will not use any information obtained pursuant to this Section 5.05
for any purpose unrelated to the consummation of the transactions contemplated
by this Plan and, if this Plan is terminated will hold all information and
documents obtained pursuant to this paragraph in confidence. No investigation by
either party of the business and affairs of another shall affect or be deemed to
modify or waive any representation, warranty, covenant or agreement in this
Plan, or the conditions to either party's obligation to consummate the
transactions contemplated by this Plan.
5.06 Acquisition Proposals. Without the prior written consent of the
other, neither Republic nor ExecuFirst shall, and each of them shall cause its
respective subsidiaries not to, solicit or encourage inquiries or proposals with
respect to, or engage in any negotiations concerning, or provide any
confidential information to, or have any discussions with, any such person
relating to, any tender offer or exchange offer for, or any proposal for the
acquisition of a substantial equity interest in, or a substantial portion of the
assets of, such party or any of its significant subsidiaries; provided, however,
that the Board of Directors of Republic or ExecuFirst on behalf of Republic or
ExecuFirst, respectively, may furnish or cause to be furnished information and
may participate in such discussions and negotiations directly or through its
representatives if such Board of Directors, after having consulted with and
considered the advice of outside counsel, has determined that the failure to
provide such information or participate in such negotiations and discussions
would cause the members of such Board of Directors to breach their fiduciary
duties under applicable laws; and provided, further, that the exercise of such
fiduciary duties by the Board of Directors shall not effect such parties
obligations, if any, under its applicable Stock Option Agreement. Subject to the
foregoing, it shall instruct its and its subsidiaries' officers, directors,
agents, advisors and affiliates to refrain from doing any of the foregoing.
5.07 Affiliate Agreements. (1) Not later than the 15th day prior to the
mailing of the Joint Proxy Statement, ExecuFirst shall deliver to Republic, and
Republic shall deliver to ExecuFirst, a schedule of each person that to the best
of its knowledge, is or is reasonably likely to be, as of the date of the
relevant Meeting, deemed to be an 'affiliate' of it (each, an 'Affiliate') as
that term is used in Rule 145 under the Securities Act or SEC Accounting Series
Releases 130 and 135.
(2) Each of Republic and ExecuFirst shall use its respective
reasonable best efforts to cause each person who may be deemed to be an
Affiliate of Republic or ExecuFirst, as the case may be, to execute and
deliver to Republic and ExecuFirst on or before the date of mailing of the
Joint
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
Proxy Statement an agreement in the form attached hereto as Exhibit C and
Exhibit D, respectively.
5.08 Certain Modifications; Restructuring Charges. Republic and ExecuFirst
shall consult with respect to their loan, litigation and real estate valuation
policies and practices (including loan classifications and levels of reserves)
and each shall make such modifications or changes to its policies and practices,
if any, and at such date prior to the Effective Time, as may be mutually agreed
upon. Republic and ExecuFirst shall also consult with respect to the character,
amount and timing of restructuring charges to be taken by each of them in
connection with the transactions contemplated hereby and shall take such charges
in accordance with generally accepted accounting principles, as may be mutually
agreed upon. Republic shall use its reasonable best efforts to assist ExecuFirst
in establishing a relationship with County Bank of Rehobeth Beach Delaware with
respect to the 'Refant Program'. To the extent that ExecuFirst participates in
the 'Refant Program' and derives net income therefrom, all of such net income
shall be added by ExecuFirst to its allowance for loan loss reserves (the 'Loan
Loss Reserves'); provided, however, that such net income and offsetting addition
shall not have any effect on shareholders' equity or net income of ExecuFirst.
In addition, following the execution of this Agreement and prior to the
Effective Time, (i) ExecuFirst shall use its reasonable best efforts to modify
its internal policies and procedures with respect to the determination of loan
classifications to make such policies and procedures more consistent with the
internal policies and procedures of Republic and, to accomplish such objective,
shall maintain the amount of $250,000 in excess of the amount of its allowance
for Loan Loss Reserves as calculated pursuant to the formula currently utilized
by ExecuFirst to determine the amount of such Loan Loss Reserves, and (ii)
Republic shall increase the amount of its Loan Loss Reserves by $250,000 at
ExecuFirst's request at any time prior to the Effective Time. No party's
representations, warranties and covenants contained in this Plan shall be deemed
to be untrue or breached in any respect for any purpose as a consequence of any
modifications or changes to such policies and practices which may be undertaken
on account of this Section 5.08. Subject to the terms of Section 5.05 hereof,
each of Republic and ExecuFirst shall be entitled to review any loan commitments
exceeding $100,000 in principal balance which have entered into by the other
party subsequent to the date hereof.
5.09 Takeover Laws. No party shall take any action that would cause the
transactions contemplated by this Plan and/or the Stock Option Agreements to be
subject to requirements imposed by any Takeover Law and each of them shall take
all necessary steps within its control to exempt (or ensure the continued
exemption of) the transactions contemplated by this Plan and the Stock Option
Agreement from, or if necessary, challenge the validity or applicability of, any
applicable Takeover Law, as now or hereafter in effect, including, without
limitation, Subchapter G of Chapter 25 of the PABCL, other Takeover Laws of the
Commonwealth of Pennsylvania or similar laws of any other State that purport to
apply to this Plan or the transactions contemplated hereby or thereby.
5.10 No Rights Triggered. Each of Republic and ExecuFirst shall take all
necessary steps to ensure that the entering into of this Plan and the Stock
Option Agreements and the consummation of the transactions contemplated hereby
and thereby and any other action or combination of actions, or any other
transactions contemplated hereby or thereby, do not and will not result in the
grant of any rights, other than rights granted by law, to any person (1) under
its articles or certificate of incorporation or by-laws, or (2) under any
material agreement to which it or any of its subsidiaries is a party.
5.11 Shares Listed. In the case of ExecuFirst, ExecuFirst shall use its
reasonable best efforts to list, as of the Effective Date, on the National
Association of Securities Dealers Automatic Quotation System ('NASDAQ') Small
Cap Market or the National Market System, if ExecuFirst qualifies for such
listing at the Effective Date, upon official notice of issuance, the shares of
the Surviving Corporation Common Stock to be issued to the holders of Republic
Stock in accordance with the terms of the Merger.
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
5.12. Regulatory Applications. (1) Each party shall promptly (i) prepare
and submit applications to the appropriate Regulatory Authorities and (ii) make
all other appropriate filings to secure all other approvals, consents and
rulings, which are necessary for it to consummate the Merger.
(2) Each of ExecuFirst and Republic agrees to cooperate with the other
and, subject to the terms and conditions set forth in this Agreement, use
its reasonable best efforts to prepare and file all necessary
documentation, to effect all necessary applications, notices, petitions,
filings and other documents, and to obtain all necessary permits, consents,
orders, approvals and authorizations of, or any exemption by, all third
parties and Regulatory Authorities necessary or advisable to consummate the
transactions contemplated by this Plan, including without limitation the
regulatory approvals referred to in Section 6.02. Each of ExecuFirst and
Republic shall have the right to review in advance, and to the extent
practicable each will consult with the other, in each case subject to
applicable laws relating to the exchange of information, with respect to
all material written information submitted to, any third party or any
Regulatory Authorities in connection with the transactions contemplated by
this Plan. In exercising the foregoing right, each of the parties hereto
agrees to act reasonably and as promptly as practicable. Each party hereto
agrees that it will consult with the other party hereto with respect to the
obtaining of all material permits, consents, approvals and authorizations
of all third parties and Regulatory Authorities necessary or advisable to
consummate the transactions contemplated by this Plan and each party will
keep the other parties apprised of the status of material matters relating
to completion of the transactions contemplated hereby.
(3) Each party agrees, upon request, to furnish the other parties with
all information concerning itself, its subsidiaries, directors, officers
and stockholders and such other matters as may be reasonably necessary or
advisable in connection with any filing, notice or application made by or
on behalf of such other party or any of its subsidiaries to any Regulatory
Authority.
5.13 Indemnification. (A) For six years after the Effective Date, the
Surviving Corporation shall indemnify, defend and hold harmless the present and
former directors and officers of Republic and its subsidiaries (each, an
'Indemnified Party') against all costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, 'Costs') incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, the transactions contemplated by
this Plan) to the fullest extent that such persons are indemnified under the
laws of the Commonwealth of Pennsylvania and Republic's Articles of
Incorporation and By-laws as in effect on the date hereof; provided that any
determination required to be made with respect to whether an officer's or
director's conduct complies with the standards set forth under the Commonwealth
of Pennsylvania law and such Articles of Incorporation and By-laws shall be made
by independent counsel (which shall not be counsel that provides material
services to the Surviving Corporation) selected by the Surviving Corporation and
reasonably acceptable to such officer or director; and provided, further, that
in the absence of applicable Pennsylvania judicial precedent to the contrary,
such counsel, in making such determination, shall presume such officer's or
director's conduct complied with such standard and the Surviving Corporation
shall have the burden to demonstrate that such officer's or director's conduct
failed to comply with such standard.
(B) If, in the determination of the Surviving Corporation, it shall be
economically feasible, the Surviving Corporation shall maintain Republic's
existing directors' and officers' liability insurance policy (or a policy
providing comparable coverage amount on terms no less favorable, including
ExecuFirst's existing policy if it meets the foregoing standard) covering
the present and former directors and officers of Republic who are currently
covered by such insurance for a period of three years after the Effective
Date.
(C) Any Indemnified Party wishing to claim indemnification under
Section 5.13(A), upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly notify the Surviving
Corporation thereof; provided, that the failure so to notify shall not
affect the
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
obligations of the Surviving Corporation under Section 5.13(A) unless and
to the extent such failure materially increases the Surviving Corporation's
liability under such subsection (A).
(D) If the Surviving Corporation or any of its successors or assigns
shall consolidate with or merge into any other entity and shall not be the
continuing or surviving entity of such consolidation or merger or shall
transfer all or substantially all of its assets to any entity, then and in
each case, proper provision shall be made so that the successors and
assigns of the Surviving Corporation shall assume the obligations set forth
in this Section 5.13.
(E) The Surviving Corporation shall pay all reasonable Costs,
including attorneys' fees, that may be incurred by any Indemnified Party in
enforcing the indemnity and other obligations provided for in this Section
5.13. The rights of each Indemnified Party hereunder shall be in addition
to any other rights such Indemnified Party may have under applicable law.
5.14 Benefit Plans. As soon as administratively practicable after the
Effective Date, the Surviving Corporation shall use its best efforts to take all
reasonable action so that employees of Republic and its subsidiaries who
thereafter become employees of the Surviving Corporation or its subsidiary shall
be covered by all employee benefit plans, practices and arrangements generally
covering employees of ExecuFirst, or such other plans as Republic and ExecuFirst
shall mutually agree shall be adopted by the Surviving Corporation (the
'Surviving Corporation Plans') and shall be given credit under the Surviving
Corporation Plans for all purposes of service with Republic as if it had been
service with ExecuFirst. The Surviving Corporation and its subsidiaries shall
honor in accordance with their terms all employment, severance, consulting and
other compensation contracts, disclosed in Section 4.03(L) of the Republic
Disclosure Letter, between Republic or any of its subsidiaries and any current
or former directors, officers or employees thereof.
5.15 Accountant's Letter. Each of Republic and ExecuFirst shall use its
reasonable best efforts to deliver to the other party, and such other party's
directors and officers who sign the Registration Statement, a letter of
independent auditors, dated (i) the date on which the Registration Statement
shall become effective and (ii) a date shortly prior to the Effective Date, and
addressed to such other party, and such directors and officers, in form and
substance customary for 'comfort' letters delivered by independent accountants
in accordance with Statement of Accounting Standards No. 72.
5.16 Stock Option Agreements. Concurrent with the execution and delivery
of this Plan (i) Republic shall enter into a Stock Option Agreement with
ExecuFirst (the 'Republic Stock Option Agreement') in substantially the form
attached hereto as Exhibit E, pursuant to which Republic shall grant to
ExecuFirst an option to purchase, under certain circumstances, shares of
Republic Common Stock, and (ii) ExecuFirst shall enter into a Stock Option
Agreement with Republic (the 'ExecuFirst Stock Option Agreement'; and, together
with the Republic Stock Option Agreement, the 'Stock Option Agreements') in
substantially the form attached hereto as Exhibit F, pursuant to which
ExecuFirst shall grant to Republic an option to purchase, under certain
circumstances, shares of ExecuFirst Common Stock.
5.17 Notification of Certain Matters. Each of Republic and ExecuFirst
shall give prompt notice to the other of any fact, event or circumstance known
to it that (i) is reasonably likely, individually or taken together with all
other facts, events and circumstances known to it, to result in any Material
Adverse Effect,with respect to it or (ii) would cause or constitute a material
breach of any of its representations, warranties, covenants or agreements
contained herein.
VI. CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of each of the parties to consummate the Merger is
conditioned upon the satisfaction at or prior to the Effective Time of each of
the following, any of which, except Sections 6.01 or 6.02, may be waived by the
party receiving the benefit of such condition:
6.01 Shareholder Vote. Approval of this Plan by the requisite vote of
the shareholders of Republic and approval of this Plan by the requisite
vote of shareholders of ExecuFirst;
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17. PROPOSED MERGER -- (CONTINUED)
6.02 Regulatory Approvals. Procurement by ExecuFirst and Republic of
all requisite approvals and consents of Regulatory Authorities and the
expiration of the statutory waiting period or periods relating thereto;
provided, however, that no such approval or consent shall have imposed any
condition or requirement which would so materially and adversely impact the
economic or business benefits to ExecuFirst or Republic of the transactions
contemplated by this Plan that, had such condition or requirement been
known, such party would not, in its reasonable judgment, have entered into
this Plan;
6.03 Third Party Consents. All consents or approvals of all persons
(other than Regulatory Authorities and the shareholders of each of Republic
and ExecuFirst) required for the consummation of the Merger shall have been
obtained and shall be in full force and effect, unless the failure to
obtain any such consent or approval is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Republic or
ExecuFirst;
6.04 No Injunction, Etc. No order, decree or injunction of any court
or agency of competent jurisdiction shall be in effect, and no law, statute
or regulation shall have been enacted or adopted, that enjoins, prohibits
or makes illegal consummation of any of the transactions contemplated
hereby;
6.05 Pooling Letters. ExecuFirst and Republic shall have received a
letter from one or more nationally recognized accounting firms, dated the
date of or shortly prior to each of the mailing date of the Joint Proxy
Statement and the Effective Date, to the effect that such accounting
firm(s) are not aware of any facts or circumstances which might cause the
Merger not to qualify for pooling of interests accounting treatment;
provided, however, that in the event that either party has taken any action
that would adversely affect such qualification, each party will take any
action as the other party requests to cure such effect to the extent
curable.
6.06 Representations, Warranties and Covenants of ExecuFirst. (i)
Each of the representations and warranties contained herein of ExecuFirst
shall be true and correct as of the date of this Plan and upon the
Effective Date with the same effect as though all such representations and
warranties had been made on the Effective Date, except for any such
representations and warranties made as of a specified date, which shall be
true and correct as of such date, in any case subject to the standards
established by Section 4.02, (ii) each and all of the agreements and
covenants of ExecuFirst to be performed and complied with pursuant to this
Plan on or prior to the Effective Date shall have been duly performed and
complied with in all material respects, and (iii) Republic shall have
received a certificate signed by the Chief Executive Officer of ExecuFirst,
dated the Effective Date, to the effect set forth in clauses (i) and (ii);
6.07 Representations, Warranties and Covenants of Republic. (i) Each
of the representations and warranties contained herein of Republic shall be
true and correct as of the date of this Plan and upon the Effective Date
with the same effect as though all such representations and warranties had
been made on the Effective Date, except for any such representations and
warranties made as of a specified date, which shall be true and correct as
of such date, in any case subject to the standards established by Section
4.02, (ii) each and all of the agreements and covenants of Republic to be
performed and complied with pursuant to this Plan on or prior to the
Effective Date shall have been duly performed and complied with in all
material respects, and (iii) ExecuFirst shall have received a certificate
signed by the Chief Executive Officer of Republic, dated the Effective
Date, to the effect set forth in clauses (i) and (ii);
6.08 Effective Registration Statement. The Registration Statement
shall have become effective and no stop order suspending the effectiveness
of the Registration Statement shall have been issued and no proceedings for
that purpose shall have been initiated or threatened by the SEC or any
other Regulatory Authority;
6.09 Blue-Sky Permits. ExecuFirst shall have received all state
securities laws and 'blue sky' permits necessary to consummate the Merger;
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17. PROPOSED MERGER -- (CONTINUED)
6.10 Tax Opinion. ExecuFirst and Republic shall have received an
opinion from Klehr, Harrison, Harvey, Branzburg & Ellers and Spector Gadon
& Rosen, P.C., respectively, special tax counsel to ExecuFirst and
Republic, to the effect that (i) the Merger constitutes a reorganization
under Section 368 of the Code, and (ii) no gain or loss will be recognized
by stockholders of Republic who receive shares of ExecuFirst Stock, or in
exchange for their shares of Republic Stock, except that gain or loss may
be recognized as to cash received in lieu of fractional share interests; in
rendering their opinion, they may require and rely upon representations and
agreements contained in certificates of officers of ExecuFirst, Republic;
6.11 Articles of Amendment. The Articles of Amendment shall have
become effective in accordance with the PABCL and the Amended and Restated
By-Laws, attached hereto as Exhibit A, shall have been adopted;
6.12 Listing. The shares of the Surviving Corporation Common Stock
issuable pursuant to this Plan shall have been approved for listing on
NASDAQ Small Cap Market or, if eligible, the National Market System,
subject to official notice of issuance.
6.13 Dissenters Rights. Less than 5% of Republic Stock have exercised
their dissenters rights in accordance with Subchapter D of Chapter 15 of
the PABCL.
6.14 Fairness Opinion. Each of Republic and ExecuFirst shall have
received an opinion from its financial advisor, in form and substance
reasonably satisfactory to its Board of Directors, to the effect that the
Merger is fair, from a financial point of view, to its shareholders.
6.15 Accountants' Letters. Each of Republic and ExecuFirst shall have
received the accountant's letter as described in Section 5.15 hereof.
6.16 Certain Director and Officer Positions. (1) ExecuFirst shall
have caused the Board of Directors of the Surviving Corporation to be
increased to 18 members. Nine members of Republic's Board of Directors, or
the designees of Republic who are reasonably acceptable to ExecuFirst,
('Former Republic Directors') shall be nominated by ExecuFirst (subject to
any applicable legal restrictions) and elected or appointed as directors of
the Surviving Corporation at, or as promptly as practicable after, the
Effective Time, provided, however, that if, at or for a reasonable period
after the Effective Time, the members of ExecuFirst's then existing Board
of Directors (the 'ExecuFirst Directors') or the Former Republic Directors
would constitute less than 50% of the membership of the Surviving
Corporation's Board of Directors, the ExecuFirst Directors or Former
Republic Directors, as the case may be, shall have the right to appoint
such number of directors as shall be required (and the non-appointing
directors shall make such actions as are reasonably necessary to cause such
appointment to occur) in order that the ExecuFirst Directors and Former
Republic Directors each constitute 50% of the Board of Directors of the
Surviving Corporation.
(2) The Surviving Corporation agrees to cause four Former Republic
Directors to be elected or appointed as members of the Executive
Committee of the Board of Directors of the Surviving Corporation at, or
as promptly as practicable after, the Effective Time (which Executive
Committee shall at such time consist of not more than eight members).
(3) At the Effective Time, the Surviving Corporation's Board of
Directors shall elect or appoint as officers of the Surviving
Corporation the persons set forth in the protocol approved and adopted
by each party hereto on or prior to the date hereof.
6.17 Consent of Republic Option Holders. ExecuFirst shall have
received duly executed and valid consents from each employee option holder
of Republic, consenting to the conversion of such options into options to
purchase shares of the Surviving Corporation Common Stock.
6.18 Employment Agreements. ExecuFirst shall have entered into an
employment agreement or an amended and restated employment agreement, as
the case may be, with those persons so designated in the protocol described
in Section 6.16(3), in substantially the form as shall be agreed upon
between the parties hereto.
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17. PROPOSED MERGER -- (CONTINUED)
6.19 Chairman's Agreement. ExecuFirst shall have entered into an
agreement with the Chairman of the Board of Republic ('Republic's
Chairman') on substantially the terms agreed to between the parties,
pursuant to which Republic's Chairman shall serve as Chairman of the Board
of the Surviving Corporation.
6.20 Shareholders Equity. (1) The total shareholders' equity of
ExecuFirst, as determined in accordance with generally accepted accounting
principles constantly applied, shall not be less than $6,000,000.
(2) The total shareholders' equity of Republic, as determined in
accordance with generally accepted accounting principles constantly
applied, shall not be less than $6,979,000.
6.21 Delivery of Documents. All other documents, including, without
limitation, legal opinions in substantially the form attached hereto as
Exhibit G, officer and incumbency certificates and other closing documents
customary for transactions of a similar nature, which are reasonably
requested by the other party shall have been delivered to such requesting
party or to have been delivered under this Agreement.
VII. TERMINATION
7.01 Termination. This Plan may be terminated, and the Merger may be
abandoned:
(A) Mutual Consent. At any time prior to the Effective Time, by the
mutual consent of ExecuFirst and Republic, if the Board of Directors of
each so determines by vote of a majority of the members of its entire
Board.
(B) Breach. At any time prior to the Effective Time, by ExecuFirst or
Republic, if its Board of Directors so determines by vote of a majority of
the members of its entire Board, in the event of either: (i) a breach by
the other party of any representation or warranty contained herein (subject
to the standard established by Section 4.02), which breach cannot be or has
not been cured within 30 days after the giving of written notice to the
breaching party of such breach; or (ii) a material breach by the other
party of any of the covenants or agreements contained herein, which breach
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching party of such breach.
(C) Delay. At any time prior to the Effective Time, by ExecuFirst or
Republic, if its Board of Directors so determines by vote of a majority of
the members of its entire Board, in the event that the Merger is not
consummated by June 30, 1996, except to the extent that the failure of the
Merger then to be consummated arises out of or results from the knowing
action or inaction of the party seeking to terminate pursuant to this
Section 7.01(C).
(D) No Approval, Dissenters Rights. By Republic or ExecuFirst, if its
Board of Directors so determines by a vote of a majority of the members of
its entire Board, in the event (i) the consent of the Board of Governors of
the Federal Reserve System for consummation of the Merger and the other
transactions contemplated by the Merger shall have been denied by final
nonappealable action of such Regulatory Authority or (ii) any stockholder
approval required by Section 6.01 herein is not obtained at the Republic
Meeting or the ExecuFirst Meeting, or (iii) more than % of Republic Stock
exercised their dissenters rights in accordance with Subchapter D of
Chapter 15 of the PABCL.
(E) Failure to Recommend, Etc. At any time prior to the Republic
Meeting, by ExecuFirst if the Board of Directors of Republic shall have
failed to make its recommendation referred to in Section 5.02, withdrawn
such recommendation or modified or changed such recommendation in a manner
adverse to the interests of ExecuFirst; or at any time prior to the
ExecuFirst Meeting, by Republic if the Board of Directors of ExecuFirst
shall have failed to make its recommendation referred to in Section 5.02,
withdrawn such recommendation or modified or changed such recommendation in
a manner adverse to the interests of Republic.
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
7.02 Effect of Termination and Abandonment. In the event of termination of
this Plan and the abandonment of the Merger pursuant to this Article VII, no
party to this Plan shall have any liability or further obligation to any other
party hereunder except (i) as set forth in Section 8.01, (ii) that each of the
Stock Option Agreements shall be governed by its own terms as to termination and
(iii) that termination will not relieve a breaching party from liability for any
willful breach of this Plan giving rise to such termination; provided, however,
that, notwithstanding anything to the contrary herein, the sole remedy of either
party hereto for a termination of the Plan resulting from (x) the exercise of
its fiduciary duties under the PABCL or any other applicable law or statute by
the Board of Directors of either party or (y) the failure of either party to
satisfy any condition or covenant hereof provided it has used its reasonable
best efforts to so satisfy such condition or covenant, shall be such rights as
are granted pursuant to the Stock Option Agreements only.
VIII. OTHER MATTERS
8.01 Survival. All representations, warranties, agreements and covenants
contained in this Plan shall not survive the Effective Time or termination of
this Plan if this Plan is terminated prior to the Effective Time; provided,
however, if the Effective Time occurs, the agreements of the parties in Sections
5.13, 8.01, 8.04 and 8.09 shall survive the Effective Time, and if this Plan is
terminated prior to the Effective Time, the agreements of the parties in
Sections 5.05(2), 7.02, 8.01, 8.02, 8.04, 8.05, 8.06, 8.07 and 8.09, shall
survive such termination.
8.02 Waiver; Amendment. Prior to the Effective Time, any provision of this
Plan may be (i) waived by the party benefitted by the provision, or (ii) amended
or modified at any time, by an agreement in writing among the parties hereto
approved by their respective Boards of Directors and executed in the same manner
as this Plan, except that, after the Republic Meeting the consideration to be
received by the stockholders of Republic for each share of Republic Stock shall
not thereby be decreased.
8.03 Counterparts. This Plan may be executed in one or more counterparts,
each of which shall be deemed to constitute an original.
8.04 Governing Law. This Plan shall be governed by, and interpreted in
accordance with, the laws of the Commonwealth of Pennsylvania.
8.05 Expenses. Each party hereto will bear all expenses incurred by it in
connection with this Plan and the transactions contemplated hereby prior to the
date hereof. All expenses related to (i) the preparation, printing and
distribution of any joint proxy materials and (ii) the preparation, printing,
distribution costs and SEC registration fees related to the Registration
Statement shall be shared pro-rata between the parties in proportion to the
number of shareholders of each of Republic and ExecuFirst.
8.06 Confidentiality. Except as otherwise provided in Section 5.05(2) or
in the Confidentiality Agreement, each of the parties hereto and their
respective agents, attorneys and accountants will maintain the confidentiality
of all information provided in connection herewith which has not been publicly
disclosed or as it is advised by counsel that any such information or document
is required by law or applicable NASDAQ rule or requirement to be disclosed,
provided, however, that such required disclosure shall be subject to prior
review by each party hereto.
8.07 Notices. All notices, requests and other communications hereunder to
a party shall be in writing and shall be deemed given if personally delivered,
telecopied (with confirmation) or mailed by registered or certified mail (return
receipt requested) to such party at its address set forth below or such other
address as such party may specify by notice to the parties hereto.
<TABLE>
<S> <C>
If to ExecuFirst, to: ExecuFirst Bancorp, Inc.
1513 Walnut Street
Philadelphia, PA 19102
Attn: Zvi H. Muscal
</TABLE>
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
<TABLE>
<S> <C>
With a copy to: Stephen T. Burdumy, Esquire
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
If to Republic, to: Republic Bancorporation, Inc.
1515 Market Street
Philadelphia, PA 19107
Attn: Harry D. Madonna, Esquire
With copies to: Edward G. Fitzgerald, Jr., Esquire
Spector Gadon & Rosen, P.C.
1700 Market Street
Philadelphia, PA 19102
</TABLE>
8.08 Definitions. Any term defined anywhere in this Plan shall have the
meaning ascribed to it for all purposes of this Plan (unless expressly noted to
the contrary), in addition:
(1) the term 'Material Adverse Effect' shall mean, with respect to
Republic or ExecuFirst, respectively, any effect that (i) is material and
adverse to the financial position, results of operations or business of
Republic and its subsidiaries taken as a whole, or ExecuFirst and its
subsidiaries taken as a whole, respectively, or (ii) materially impairs the
ability of Republic or ExecuFirst, respectively, to perform its obligations
under this Plan or the consummation of the Merger and the other
transactions contemplated by this Plan; provided, however, that Material
Adverse Effect shall not be deemed to include the impact of (a) changes in
banking and similar laws of general applicability or interpretations
thereof by courts, (b) changes in generally accepted accounting principles
or regulatory accounting requirements applicable to banks and bank holding
companies generally, (c) actions or omissions of Republic or ExecuFirst
taken with the prior informed consent of Republic or ExecuFirst, as
applicable, in contemplation of the transactions contemplated hereby, (d)
circumstances affecting regional bank holding companies generally, and (e)
the effects of the Merger and of the actions contemplated by Section 5.08;
(2) the term 'person' shall mean any individual, bank savings
association, corporation, partnership, association, joint stock company,
business trust or unincorporated organization;
(3) the term 'Previously Disclosed' by a party shall mean information
set forth in its Disclosure Letter or a schedule that is delivered by that
party to the other parties prior to the execution of this Plan and
specifically designated as information 'Previously Disclosed' pursuant to
this Plan;
(4) the term 'Rights' means, with respect to any person, securities or
obligations convertible into or exchangeable for, or giving any person any
right to subscribe for or acquire, or any options, calls or commitments
relating to, shares of capital stock of such person;
(5) the terms 'subsidiary' and 'significant subsidiary' shall have the
meanings set forth in Rule 1-02 of Regulation S-X of the SEC; and
(6) the term 'willful breach' shall mean a knowing, intentional and
deliberate act or failure to act.
8.09 Entire Understanding; No Third Party Beneficiaries. This Plan, the
Stock Option Agreements, the Confidentiality Agreement and the Exhibits hereto
and thereto together represent the entire understanding of the parties hereto
with reference to the transactions contemplated hereby and thereby and supersede
any and all other oral or written agreements heretofore made. Except for Section
5.13, nothing in this Plan expressed or implied, is intended to confer upon any
person, other than the parties hereto or their respective successors, any
rights, remedies, obligations or liabilities under or by reason of this Plan.
A-30
<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
8.10 Headings. The headings contained in this Plan are for reference
purposes only and are not part of this Plan.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
REPUBLIC BANCORPORATION, INC.
By: __________________________________________
Title: President
EXECUFIRST BANCORP, INC.
By: __________________________________________
Title:
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
ANNEX B
SUBCHAPTER D. DISSENTERS RIGHTS
Section 1572. Definitions
The following words and phrases when used in this subchapter shall have the
meanings given to them in this section unless the context clearly indicates
otherwise:
'Corporation.' The issuer of the shares held or owned by the dissenter
before the corporate action or the successor by merger, consolidation,
division, conversion or otherwise of that issuer. A plan of division may
designate which of the resulting corporations is the successor corporation
for the purposes of this subchapter. The successor corporation in a
division shall have sole responsibility for payments to dissenters and
other liabilities under this subchapter except as otherwise provided in the
plan of division.
'Dissenter.' A shareholder or beneficial owner who is entitled to and
does assert dissenters rights under this subchapter and who has performed
every act required up to the time involved for the assertion of those
rights.
'Fair value.' The fair value of shares immediately before the
effectuation of the corporate action to which the dissenter objects, taking
into account all relevant factors, but excluding any appreciation or
depreciation in anticipation of the corporate action.
'Interest.' Interest from the effective date of the corporate action
until the date of payment at such rate as is fair and equitable under all
the circumstances, taking into account all relevant factors, including the
average rate currently paid by the corporation on its principal bank loans.
Section 1573. Record and beneficial holders and owners
(A) Record holders of shares. -- A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares of the
same class or series beneficially owned by any one person and discloses the name
and address of the person or persons on whose behalf he dissents. In that event,
his rights shall be determined as if the shares as to which he has dissented and
his other shares were registered in the names of different shareholders.
(B) Beneficial owners of shares. -- A beneficial owner of shares of a
business corporation who is not the record holder may assert dissenters rights
with respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the corporation
not later than the time of the assertion of dissenters rights a written consent
of the record holder. A beneficial owner may not dissent with respect to some
but less than all shares of the same class or series owned by the owner, whether
or not the shares so owned by him are registered in his name.
Section 1574. Notice of intention to dissent
If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect no
change in the beneficial ownership of his shares from the date of such filing
continuously through the effective date of the proposed action and must refrain
from voting his shares in approval of such action. A dissenter who fails in any
respect shall not acquire any right to payment of the fair value of his shares
under this subchapter. Neither a proxy nor a vote against the proposed corporate
action shall constitute the written notice required by this section.
Section 1575. Notice to demand payment
(A) General rule. -- If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all
B-1
<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
dissenters who gave due notice of intention to demand payment of the fair value
of their shares and who refrained from voting in favor of the proposed action.
If the proposed corporate action is to be taken without a vote of shareholders,
the corporation shall send to all shareholders who are entitled to dissent and
demand payment of the fair value of their shares a notice of the adoption of the
plan or other corporate action. In either case, the notice shall:
(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment.
(2) Inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is
received.
(3) Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the
shares.
(4) Be accompanied by a copy of this subchapter.
(B) Time for receipt of demand for payment. -- The time set for receipt of
the demand and deposit of certificated shares shall be not less than 30 days
from the mailing of the notice.
Section 1576. Failure to comply with notice to demand payment, etc.
(A) Effect of failure of shareholder to act. -- A shareholder who fails to
timely demand payment, or fails (in the case of certificated shares) to timely
deposit certificates, as required by a notice pursuant to section 1575 (relating
to notice to demand payment) shall not have any right under this subchapter to
receive payment of the fair value of his shares.
(B) Restriction on uncertificated shares. -- If the shares are not
represented by certificates, the business corporation may restrict their
transfer from the time of receipt of demand for payment until effectuation of
the proposed corporate action or the release of restrictions under the terms of
section 1577(a) (relating to failure to effectuate corporate action).
(C) Rights retained by shareholder. -- The dissenter shall retain all other
rights of a shareholder until those rights are modified by effectuation of the
proposed corporate action.
Section 1577. Release of restrictions or payment for shares
(A) Failure to effectuate corporate action. -- Within 60 days after the
date set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares from
any transfer restrictions imposed by reason of the demand for payment.
(B) Renewal of notice to demand payment. -- When uncertificated shares have
been released from transfer restrictions and deposited certificates have been
returned, the corporation may at any later time send a new notice conforming to
the requirements of section 1575 (relating to notice to demand payment), with
like effect.
(C) Payment of fair value of shares. -- Promptly after effectuation of the
proposed corporate action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are certificated)
have deposited their certificates the amount that the corporation estimates to
be the fair value of the shares, or give written notice that no remittance under
this section will be made. The remittance or notice shall be accompanied by:
(1) The closing balance sheet and statement of income of the issuer of
the shares held or owned by the dissenter for a fiscal year ending not more
than 16 months before the date of remittance or notice together with the
latest available interim financial statements.
(2) A statement of the corporation's estimate of the fair value of the
shares.
B-2
<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of this
subchapter.
(D) Failure to make payment. -- If the corporation does not remit the
amount of its estimate of the fair value of the shares as provided by subsection
(c), it shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such certificate
or on the records of the corporation relating to any such uncertificated shares
that such demand has been made. If shares with respect to which notation has
been so made shall be transferred, each new certificate issued therefor or the
records relating to any transferred uncertificated shares shall bear a similar
notation, together with the name of the original dissenting holder or owner of
such shares. A transferee of such shares shall not acquire by such transfer any
rights in the corporation other than those that the original dissenter had after
making demand for payment of their fair value.
Section 1578. Estimate by dissenter of fair value of shares
(A) General rule. -- If the business corporation gives notice of its
estimate of the fair value of the shares, without remitting such amount, or
remits payment of its estimate of the fair value of a dissenter's shares as
permitted by section 1577(c) (relating to payment of fair value of shares) and
the dissenter believes that the amount stated or remitted is less than the fair
value of his shares, he may send to the corporation his own estimate of the fair
value of the shares, which shall be deemed a demand for payment of the amount or
the deficiency.
(B) Effect of failure to file estimate. -- Where the dissenter does not
file his own estimate under subsection (a) within 30 days after the mailing by
the corporation of its remittance or notice, the dissenter shall be entitled to
no more than the amount stated in the notice or remitted to him by the
corporation.
Section 1579. Valuation proceedings generally
(A) General rule. -- Within 60 days after the latest of:
(1) effectuation of the proposed corporate action;
(2) timely receipt of any demands for payment under section 1575
(relating to notice to demand payment); or
(3) timely receipt of any estimates pursuant to section 1578 (relating
to estimate by dissenter of fair value of shares);
if any demands for payment remain unsettled, the business corporation may file
in court an application for relief requesting that the fair value of the shares
be determined by the court.
(B) Mandatory joinder of dissenters. -- All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the application shall be served on
each such dissenter. If a dissenter is a nonresident, the copy may be served on
him in the manner provided or prescribed by or pursuant to 42 Pa.C.S. Ch. 53
(relating to bases of jurisdiction and interstate and international procedure).
(C) Jurisdiction of the court. -- The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.
(D) Measure of recovery. -- Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found to
exceed the amount, if any, previously remitted, plus interest.
(E) Effect of corporation's failure to file application. -- If the
corporation fails to file an application as provided in subsection (a), any
dissenter who made a demand and who has not already settled his claim against
the corporation may do so in the name of the corporation at any time within 30
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
days after the expiration of the 60-day period. If a dissenter does not file an
application within the 30-day period, each dissenter entitled to file an
application shall be paid the corporation's estimate of the fair value of the
shares and no more, and may bring an action to recover any amount not previously
remitted.
Section 1580. Costs and expenses of valuation proceedings
(A) General rule. -- The costs and expenses of any proceeding under section
1579 (relating to valuation proceedings generally), including the reasonable
compensation and expenses of the appraiser appointed by the court, shall be
determined by the court and assessed against the business corporation except
that any part of the costs and expenses may be apportioned and assessed as the
court deems appropriate against all or some of the dissenters who are parties
and whose action in demanding supplemental payment under section 1578 (relating
to estimate by dissenter of fair value of shares) the court finds to be
dilatory, obdurate, arbitrary, vexatious or in bad faith.
(B) Assessment of counsel fees and expert fees where lack of good faith
appears. -- Fees and expenses of counsel and of experts for the respective
parties may be assessed as the court deems appropriate against the corporation
and in favor of any or all dissenters if the corporation failed to comply
substantially with the requirements of this subchapter and may be assessed
against either the corporation or a dissenter, in favor of any other party, if
the court finds that the party against whom the fees and expenses are assessed
acted in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner in
respect to the rights provided by this subchapter.
(C) Award of fees for benefits to other dissenters. -- If the court finds
that the services of counsel for any dissenter were of substantial benefit to
other dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefited.
B-4
<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
ANNEX C
FAIRNESS OPINION OF
BERWIND FINANCIAL GROUP
[FORM OF FAIRNESS OPINION]
January __, 1996
Board of Directors
ExecuFirst Bancorp, Inc.
1513 Walnut Street
Philadelphia, PA 19102
Directors:
You have requested our opinion as to the fairness, from a financial point
of view, to the shareholders of ExecuFirst Bancorp, Inc. ('ExecuFirst') of the
financial terms of the proposed merger between Republic Bancorporation, Inc.
('Republic') and ExecuFirst whereby Republic will be merged with and into
ExecuFirst with ExecuFirst surviving. The terms of the proposed merger (the
'Proposed Merger') between Republic and ExecuFirst are set forth in the
Agreement and Plan of Merger (the 'Agreement') dated November 17, 1995, and
provide that each outstanding share of Republic common stock will be converted
into the common stock of ExecuFirst subject to certain terms and conditions as
set forth in Section 2.01 of the Agreement, with cash to be paid in lieu of
fractional shares.
Berwind Financial Group, L.P., as part of its investment banking business,
regularly is engaged in the valuation of assets, securities and companies in
connection with various types of asset and security transactions, including
mergers, acquisitions, private placements and valuations for various other
purposes, and in the determination of adequate consideration in such
transactions.
In arriving at our opinion, we have, among other things: (i) reviewed the
historical financial performances, current financial positions and general
prospects of Republic and ExecuFirst, (ii) reviewed the Agreement, (iii)
reviewed and analyzed stock market performance of ExecuFirst as well as of
institutions we deemed comparable to the combined entity, (iv) studied and
analyzed the pro forma consolidated financial and operating data, including
projections, of Republic and ExecuFirst, (v) considered the terms and conditions
of the Proposed Merger between Republic and ExecuFirst as compared with the
terms and conditions of comparable bank mergers and acquisitions, particularly
those deemed to be mergers of equals, (vi) compared ExecuFirst and the combined
entity from a financial point of view to peer institutions we deemed relevant,
(vii) met and/or communicated with certain members of Republic and ExecuFirst's
senior management to discuss their respective operations, historical financial
statements, and future prospects, and (viii) conducted such other financial
analyses, studies and investigations as we deemed appropriate.
Our opinion is given in reliance on information and representations made or
given by Republic and ExecuFirst, and their respective officers, directors,
auditors, counsel and other agents, and on filings, releases and other
information issued by Republic and ExecuFirst including financial statements,
financial projections, and stock price data as well as certain information from
recognized
C-1
<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
independent sources. We have not independently verified the information
concerning Republic and ExecuFirst nor other data which we have considered in
our review and, for purposes of the opinion set forth below, we have assumed and
relied upon the accuracy and completeness of all such information and data.
Additionally, we assume that the Proposed Merger is, in all respects, lawful
under applicable law.
With regard to financial and other information relating to the general
prospects of Republic and ExecuFirst both as independent institutions and as a
combined institution, we have assumed that such information has been reasonably
prepared and reflects the best currently available estimates and judgments of
the managements of Republic and ExecuFirst as to Republic's, ExecuFirst's and
their combined entity's most likely future performance. We have also assumed,
without independent verification, that the loan loss reserve will be adequate on
a pro forma basis for the combined entity. In rendering our opinion, we have
assumed that in the course of obtaining the necessary regulatory approvals for
the Proposed Merger, and in preparation of the final proxy statement, no
conditions will be imposed that will have a material adverse effect on the
contemplated benefits of the Proposed Merger to ExecuFirst.
Our opinion is based upon information provided to us by the managements of
Republic and ExecuFirst, as well as market, economic, financial, and other
conditions as they exist and can be evaluated only as of the date hereof and
speaks to no other period. Our opinion pertains only to the financial
consideration of the Proposed Merger and does not constitute a recommendation to
the Board of ExecuFirst and does not constitute a recommendation to ExecuFirst's
shareholders as to how such shareholders should vote on the Agreement.
Based on the foregoing, it is our opinion that, as of the date hereof, the
Proposed Merger between Republic and ExecuFirst is fair, from a financial point
of view, to the shareholders of ExecuFirst.
Sincerely,
BERWIND FINANCIAL GROUP, L.P.
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
ANNEX D
FAIRNESS OPINION OF
JANNEY MONTGOMERY SCOTT
[ FORM OF FAIRNESS OPINION ]
, 1995
Board of Directors
Republic Bancorporation, Inc.
1515 Market Street
Philadelphia, PA 19103
Members of the Board:
Republic Bancorporation, Inc. ('Republic') and ExecuFirst Bancorporation,
Inc. ('ExecuFirst') have entered into an Agreement providing for the proposed
merger ('Proposed Merger') of Republic with and into ExecuFirst, the separate
existence of Republic shall cease and ExecuFirst shall survive and continue to
exist as a Pennsylvania corporation (the 'Surviving Corporation'). The terms of
the Proposed Merger are set forth in the Agreement and Plan of Merger (the
'Agreement') dated November 17, 1995, and provide that holders of Republic
securities receive the consideration ('Consideration') as set forth in Section
2.1 of the Agreement. You have requested our opinion, from a financial point of
view, as to the fairness of the Consideration to be received in the Proposed
Merger by the holders of Republic's securities.
Janney Montgomery Scott, Inc., as part of its investment banking business,
regularly is engaged in the valuation of assets, securities and companies in
connection with various types of asset and securities transactions, including
mergers, acquisitions, private placements and valuations for various other
purposes, and in the determination of adequate consideration in such
transactions.
In arriving at our opinion, we have, among other things: (i) reviewed the
historical financial performances, current financial positions and general
prospects of Republic and ExecuFirst, (ii) reviewed the Agreement and Plan of
Merger, (iii) reviewed the Prospectus/Joint Proxy Statement, (iv) reviewed and
analyzed the stock market performance of Republic and ExecuFirst, (v) studied
and analyzed the consolidated financial and operating data of Republic and
ExecuFirst, (vi) considered the terms and conditions of the Proposed Merger
between Republic and ExecuFirst as compared with the terms and conditions of
comparable bank mergers of equals and bank acquisition, (vii) met with certain
members of Republic's and ExecuFirst's senior management to discuss their
respective operations, historical financial statements, and future prospects,
and (viii) conducted such other financial analyses, studies and investigations
as we deemed appropriate.
Our opinion is given in reliance on information and representations made or
given by Republic and ExecuFirst, and their respective officers, directors,
auditors, counsel and other agents, and on filings, releases and other
information issued by Republic and ExecuFirst including financial statements,
financial projections and stock price data as well as certain information from
recognized independent sources. We have not independently verified the
information concerning Republic and ExecuFirst nor other data which we have
considered in our review and, for purposes of the opinion set forth below, we
have assumed and relied upon the accuracy and completeness of all such
information
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17. PROPOSED MERGER -- (CONTINUED)
and data. Additionally, we assume that the Proposed Merger is, in all respects,
lawful under applicable law.
With regard to financial and other information relating to the general
prospects of Republic and ExecuFirst, we have assumed that such information has
been reasonably prepared and reflects the best currently available estimates and
judgments of the managements of Republic and ExecuFirst as to Republic's and
ExecuFirst's most likely future performance. In rendering our opinion, we have
assumed that in the course of obtaining the necessary regulatory approvals of
the Proposed Merger, and in preparation of the final proxy statement, no
conditions will be imposed that will have a material adverse effect on the
contemplated benefits of the Proposed Merger to Republic.
Our opinion is based upon information provided to us by the managements of
Republic and ExecuFirst, as well as market, economic, financial and other
conditions as they exist and can be evaluated only as of the date hereof and
speaks to no other period. Our opinion pertains only to the financial
consideration of the Proposed Merger and does not constitute a recommendation to
the Board of Directors of Republic and does not constitute a recommendation to
Republic's shareholders as to how such shareholders should vote on the
Agreement.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Consideration is fair, from a financial point of view, to the
holders of Republic's securities.
Sincerely,
JANNEY MONTGOMERY SCOTT INC.
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
ANNEX E
PROPOSAL II
ARTICLE XII -- OWNERSHIP LIMITATION
A. Except as provided in paragraph B, no shareholder may have Holdings (as
defined in paragraph D of this Article), that exceed ten percent (10%) of the
issued and outstanding shares of common stock.
B. Upon the resolution of at least two-thirds of the Board of Directors,
the restriction imposed by paragraph A may be waived with respect to the
Holdings of any shareholders.
C. If any shareholder acquires Holdings which cause the violation of the
restriction contained in paragraph A, the Board of Directors may (i) terminate
all voting rights attributable to the Holdings of such shareholder during the
time that paragraph A is being violated; (ii) commence litigation to require
divestiture of such amount of the Holdings so that after such divestiture the
shareholder would no longer be in violation of the restriction contained in
paragraph A; or (iii) take such other action as is appropriate under the
circumstances.
D. Holdings means (i) the common stock the shareholder owns of record;
(ii) the common stock to which the shareholder has direct or indirect beneficial
ownership (as such term is defined in Section 13(d) of the Securities Exchange
Act of 1934 and the regulations thereunder in effect on the date hereof,
'Section 13(d)'); and (iii) the common stock owned of record or beneficially by
other shareholder(s) acting together with the shareholder as a group (as such
term is defined in Section 13(d)) for the purpose of acquiring, holding or
disposing of common stock (a 'SHAREHOLDER GROUP'). The Board of Directors'
determination of the existence and membership of a Shareholder Group, of a
shareholder's Holdings and of the record and beneficial ownership of common
stock shall be final and conclusive, absent proof of bad faith.
PROPOSAL III
ARTICLE VII -- BOARD OF DIRECTORS
D. At all Annual Meetings of shareholders commencing after the Annual
Meeting of Shareholders to be held in 1996, if any, any stockholder who desires
to propose nominees to the Board of Directors must provide for the receipt of a
written notice of the intention to nominate a person or persons for election as
directors by the Secretary of the Corporation: (i) with respect to an election
to be held at any annual meeting of shareholders in accordance with the
provision of Rule 14a-8, and (ii) with respect to an election to be held at a
special meeting of shareholders for the election of directors, the close of
business on the seventh (7th) day following the day on which notice of such
meeting is first given to shareholders. The notice is required to contain: (i)
the name and address of the shareholder who intends to make the nomination and
of the person or persons to be nominated; (ii) a representation that the
shareholder is a holder of record of stock entitled to vote at the meeting and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (iii) a description of all arrangements or
understandings between the shareholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder; (iv) such other information
regarding each nominee proposed by such shareholder as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had each nominee been nominated or intended
to be nominated, by the Board of Directors of the Corporation; and (v) the
consent of each nominee to serve as a director of the Company if so elected. The
chairman of any meeting of shareholders to elect directors and the Board of
Directors may refuse to recognize the nomination of any person not made in
compliance with the foregoing.
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17. PROPOSED MERGER -- (CONTINUED)
ARTICLE X -- INDEMNIFICATION AND INSURANCE
A. The corporation shall indemnify an indemnified representative against
any liability incurred in connection with any proceeding in which the
indemnified representative may be involved as a party or otherwise by reason of
the act that such person is or was serving in an indemnified capacity,
including, without limitation, liabilities resulting from any actual or alleged
breach or neglect of duty, error, misstatement or misleading statement,
negligence, gross negligence or act giving rise to strict or products liability,
except:
(1) where such indemnification is expressly prohibited by applicable
law;
(2) where the conduct of the indemnified representative has been
finally determined pursuant to paragraph F or otherwise:
(i) to constitute willful misconduct or recklessness within the
meaning of 15 Pa.C.S. 513(b) and 1746(b) or any superseding provision of
law sufficient in the circumstances to bar indemnification against
liabilities arising from the conduct; or
(ii) to be based upon or attributable to the receipt by the
indemnified representative from the corporation of a personal benefit to
which the indemnified representative is not legally entitled; or
(iii) to the extent such indemnification has been finally
determined in a final adjudication pursuant to paragraph F to be
otherwise unlawful.
(3) with respect to expenses or the payment of profits arising from
the purchase or sale of securities of the corporation in violation of
Section 16(b) of the Securities Exchange Act of 1934;
(4) expenses or liabilities of any type whatsoever (including, but not
limited to, judgments, fines and amounts paid in settlement) which have
been paid directly to, or for the benefit of, such person by directors'
liability insurance whose premiums are paid for by the corporation or by an
individual or entity other than such director or officer;
(5) amounts paid in settlement of any proceeding without the written
consent of the corporation or;
The Board of Directors of the corporation is hereby authorized, at any time by
resolution, to add to the above list of exceptions from the right of
indemnification, but any such additional exception shall not apply with respect
to any event, act or omission which has occurred prior to the date that the
Board of Directors in fact adopts such resolution. Any such additional exception
may, at any time after its adoption, be amended, supplemented, waived or
terminated by further resolution of the Board of Directors of the corporation.
If an indemnified representative is entitled to indemnification in respect
of a portion, but not all, of any liabilities to which such person may be
subject, the corporation shall indemnify such indemnified representative to the
maximum extent for such portion of the liabilities.
The termination of a proceeding by judgment, order, settlement or
conviction or upon a plea of nolo contendere or its equivalent shall not of
itself create a presumption that the indemnified representative is not entitled
to indemnification.
For purposes of this Article X:
(1) 'indemnified capacity' means any and all past, present and future
service by an indemnified representative in one or more capacities as a
director, officer, employee or agent of the corporation, or, at the request
of the corporation, as a director, officer, employee, agent, fiduciary or
trustee of another corporation, partnership, joint venture, trust, employee
benefit plan or other entity or enterprise;
(2) 'indemnified representative' means any and all directors and
officers of the corporation and any other person designated as an
indemnified representative by the Board of Directors of the
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
corporation (which may, but not, include any person serving at the request
of the corporation, as a director, officer, employee, agent, fiduciary or
trustee of another corporation, partnership, joint venture, trust, employee
benefit plan or other entity or enterprise):
(3) 'liability' means any damage, judgment, amount paid in settlement,
fine, penalty, punitive damages, excise tax assessed with respect to an
employee benefit plan, or cost or expense, of any nature (including,
without limitation, attorneys' fees and disbursements); and
(4) 'proceeding' means any threatened, pending or completed action,
suit, appeal or other proceeding of any nature, whether civil, criminal,
administrative or investigative, whether formal or informal, and whether
brought by or in the right of the corporation, a class of its security
holders or otherwise.
(5) 'to the fullest extent permitted by applicable law'means the
maximum extent permitted by public policy, common law or statute. Any
person covered by this Article X may, to the fullest extent permitted by
applicable law, elect to have the right to indemnification or to
advancement or reimbursement of expenses, interpreted, at such person's
option (i) on the basis of the applicable law on the date this Article X
was approved by shareholders, or (ii) on the basis of the applicable law in
effect at the time of the occurrence of the event or events giving rise to
the proceeding, or (iii) on the basis of the applicable law in effect at
the time indemnification or advancement or reimbursement of expenses is
sought.
(6) The corporation shall have the right to appoint the attorney for
an indemnified representative provided such appointment is not unreasonable
under the circumstances.
B. Notwithstanding any other provision of this Article X, the corporation
shall not indemnify under this Article X an indemnified representative for any
liability incurred in a proceeding initiated (which shall not be deemed to
include counterclaims or affirmative defenses) or participated in as an
intervenor or amicus curiae by the person seeking indemnification unless such
initiation of or participation in the proceeding is authorized, either before or
after its commencement, by the affirmative vote of a majority of the directors
in office. This section does not apply to a reimbursement of expenses incurred
in successfully prosecuting or defending an arbitration under paragraph F or
otherwise successfully prosecuting or defending the rights of an indemnified
representative granted by or pursuant to this Article X.
C. The corporation shall pay the expenses (including attorneys' fees and
disbursements) incurred in good faith by an indemnified representative in
advance of the final disposition of a proceeding described in paragraph A or the
initiation of or participation in which is authorized pursuant to paragraph B
upon receipt of an undertaking by or on behalf of the indemnified representative
to repay the amount if it is ultimately determined pursuant to paragraph F that
such person is not entitled to be indemnified by the corporation pursuant to
this Article X. The financial ability of an indemnified representative to repay
an advance shall not be a prerequisite to the making of such advance.
D. To further effect, satisfy or secure the indemnification obligations
provided herein or otherwise, the corporation may maintain insurance, obtain a
letter of credit, act as self-insurer, create a reserve, trust, escrow, cash
collateral or other fund or account, enter into indemnification agreements,
pledge or grant a security interest in any assets or properties of the
corporation, or use any other mechanism or arrangement whatsoever in such
amounts, at such costs, and upon such other terms and conditions as the Board of
Directors shall deem appropriate. Absent fraud, the determination of the Board
of Directors with respect to such amounts, costs, terms and conditions shall be
conclusive against all security holders, officers and directors and shall not be
subject to voidability.
E. An indemnified representative shall be entitled to indemnification
within thirty (30) days after a written request for indemnification has been
delivered to the Secretary of the corporation.
F. Any dispute related to the right to indemnification, contribution or
advancement of expenses as provided under this Article X, except with respect to
indemnification for liabilities arising under the
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17. PROPOSED MERGER -- (CONTINUED)
Securities Act of 1933 that the corporation has undertaken to submit to a court
for adjudication, shall be decided only by arbitration in the metropolitan area
in which the principal executive offices of the corporation are located at the
time, in accordance with the commercial arbitration rules then in effect of the
American Arbitration Association, before a panel of three arbitrators, one of
whom shall be selected by the corporation, the second of whom shall be selected
by the indemnified representative and third of whom shall be selected by the
other two arbitrators. In the absence of the American Arbitration Association,
or if for any reason arbitration under the arbitration rules of the American
Arbitration Association cannot be initiated, or if one of the parties fails or
refuses to select an arbitrator or if the arbitrators selected by the
corporation and the indemnified representative cannot agree on the selection of
the third arbitrator within thirty (30) days after such time as the corporation
and the indemnified representative have each been notified of the selection of
the other's arbitrator, the necessary arbitrator or arbitrators shall be
selected by the presiding judge of the court of general jurisdiction in such
metropolitan area.
The party or parties challenging the right of an indemnified representative
to the benefits of this Article X shall have the burden of proof.
The corporation shall reimburse an indemnified representative for the
expenses (including attorneys' fees and disbursements) incurred unsuccessfully
prosecuting or defending such arbitration.
Any award entered by the arbitrators shall be final, binding and
nonappealable and judgment may be entered thereon by any party in accordance
with applicable law in any court of competent jurisdiction, except that the
corporation shall be entitled to interpose as a defense in any such judicial
enforcement proceeding any prior final judicial determination adverse to the
indemnified representative in a proceeding not directly involving
indemnification under this Article X. This arbitration provision shall be
specifically enforceable.
G. If the indemnification provided for in this Article X or otherwise is
unavailable for any reason in respect of any liability or portion thereof, the
corporation shall contribute to the liabilities to which the indemnified
representative may be subject in such proportion as is appropriate to reflect
the intent of this Article X or otherwise.
H. To the extent that an authorized representative of the corporation has
been successful on the merits or otherwise in defense of any action or
proceeding referred to in 15 Pa.C.S. 1741 or 1742 or in defense of any claim,
issue or matter therein, such person shall be indemnified against expenses
(including attorneys' fees and disbursements) actually and reasonably incurred
by such person in connection therewith.
I. The corporation may, to the fullest extent permitted by applicable law,
indemnify and advance or reimburse expenses for, persons in all situations other
than that covered by this Article X.
J. All rights under this Article X shall be deemed a contract between the
corporation and the indemnified representative pursuant to which the corporation
and each indemnified representative intend to be legally bound. Any repeal,
amendment or modification hereof shall be prospective only and shall not affect
any rights or obligations then existing.
K. The rights granted by this Article X shall not be deemed exclusive of
any other rights to which those seeking indemnification, contribution or
advancement of expenses may be entitled under any statute, agreement, vote of
shareholders or disinterested directors or otherwise both as to action in an
indemnified capacity and as to action in any other capacity. The
indemnification, contribution and advancement of expenses provided by or granted
pursuant to this Article X shall continue as to a person who has ceased to be an
indemnified representative in respect of matters arising prior to such time, and
shall inure to the benefit of the heirs, executors, administrators and personal
representatives of such a person.
L. Each person who shall act as an indemnified representative of the
corporation shall be deemed to be doing so in reliance upon the rights provided
in this Article X.
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17. PROPOSED MERGER -- (CONTINUED)
ARTICLE XI -- AMENDMENTS
These Articles of Incorporation may be amended, subject to the provisions
of the laws of the Commonwealth of Pennsylvania, at any regular or special
meeting of the shareholders for which adequate notice has been given, by the
affirmative vote of the holders of outstanding shares of stock of the
Corporation representing a majority of the votes entitled to be cast; provided,
however, that Article V through Article XII, including this Article XI, may be
amended only by the affirmative vote of holders of outstanding shares
representing at least sixty percent (60%) of the votes entitled to be cast for
that purpose.
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
ANNEX F
HOLDING COMPANY
AMENDED AND RESTATED STOCK OPTION AND RESTRICTED STOCK PLAN
The purpose of the Amended and Restated Stock Option and Restricted Stock
Plan (the 'PLAN') of the Holding Company (the 'COMPANY') is to promote the
interests of the Company by providing incentives to (i) designated officers and
other employees of the Company or a Subsidiary Corporation (as defined herein),
(ii) non-employee members of the Company's Board of Directors (the 'BOARD') and
(iii) independent contractors and consultants (who may be individuals or
entities) who perform services for the Company, to enable the Company to attract
and retain them and to encourage them to acquire a proprietary interest, or to
increase their proprietary interest, in the Company. The Company believes that
the Plan will cause participants to contribute materially to the growth of the
Company, thereby benefitting the Company's shareholders. For purposes of the
Plan, the terms 'PARENT CORPORATION' and 'SUBSIDIARY CORPORATION' shall have the
meanings set forth in subsections (e) and (f) of Section 424 of the Internal
Revenue Code of 1986, as amended (the 'CODE').
1. ADMINISTRATION
(a) Except with respect to Committee Grants (as hereinafter defined), the
Plan shall be administered and interpreted by a committee of the Board (the
'COMMITTEE') consisting of not less than three persons, all of whom shall be
'OUTSIDE DIRECTORS' within the meaning of Section 162(m) of the Code and each of
whom shall be a 'DISINTERESTED PERSON' as defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the 'EXCHANGE ACT') (a 'COMMITTEE
MEMBER'). With respect to Eligible Participants (as hereinafter defined), the
Committee shall have the sole authority to determine (i) who is eligible to
receive Grants (as defined in Section 2 below) under the Plan, (ii) the type,
size and terms of each Grant under the Plan (subject to Section 4 below), (iii)
the time when each Grant will be made and the duration of any exercise or
restriction period; (iv) any restrictions on resale applicable to the shares to
be issued or transferred pursuant to the Grant; and (v) any other matters
arising under the Plan. The Committee may, if it so desires, base any of the
foregoing determinations upon the recommendations of management of the Company.
The Committee shall have full power and authority to administer and interpret
the Plan and to adopt or amend such rules, regulations, agreements and
instruments as it may deem appropriate for the proper administration of the
Plan. The Committee's interpretations of the Plan and all determinations made by
the Committee pursuant to the powers vested in it hereunder shall be conclusive
and binding on all persons having any interests in the Plan or in any Grants
under the Plan. No person acting under this subsection shall be held liable for
any action or determination made in good faith with respect to the Plan or any
Grant under the Plan.
(b) Each member of the Committee shall be indemnified and held harmless by
the Company against any cost or expense (including counsel fees) reasonably
incurred by him or her, or liability (including any sum paid in settlement of a
claim with the approval of the Company) arising out of any act or omission to
act in connection with the Plan, unless arising out of such member's own fraud
or bad faith, to the extent permitted by applicable law. Such indemnification
shall be in addition to any rights of indemnification the members may have as
directors or otherwise under the Articles of Incorporation or By-Laws of the
Company, any agreement of shareholders or disinterested directors or otherwise.
2. GRANTS
(a) Grants to Eligible Participants. With respect to Eligible
Participants, incentives under the Plan shall consist of Incentive Stock Options
(as defined in Section 5(b) below), Nonqualified Stock Options (as defined in
Section 5(b) below), Restricted Stock Grants (as defined in Section 6 below) or
SARs (as defined in Section 7 below) (hereinafter collectively referred to as
'GRANTS'). All Grants, except with respect to Committee Grants as specifically
provided in Section 2(b) hereof, shall be
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17. PROPOSED MERGER -- (CONTINUED)
subject to the terms and conditions set forth herein and to such other terms and
conditions of any nature as long as they are not inconsistent with the Plan as
the Committee deems appropriate and specifies in writing to the participant (the
'GRANT LETTER'). The Committee shall approve the form and provisions of each
Grant Letter. Grants under any section of the Plan need not be uniform as among
the participants receiving the same type of Grant, and Grants under two or more
sections of the Plan may be combined in one Grant Letter.
(b) Committee Grants. A Committee Member shall be entitled to receive a
Committee Grant in accordance with this Section 2(b).
i) Committee Members shall receive a Nonqualified Stock Option to
purchase One Thousand (1,000) shares of Common Stock (as hereinafter
defined) (subject to adjustment as provided in Section 3(b) hereof) of the
Company at an exercise price equal to the higher of the fair market value
(as defined herein) or the book value of a share of Common Stock on the
date of grant, at the commencement of and in consideration for their
service to the Company as a Committee Member and such Committee Grant shall
become exercisable, with respect to 100% of the shares of Common Stock
underlying such Committee Grant, on the date of grant. Committee Grants
shall be exercisable for a period of ten years from the date of grant.
ii) Upon the occurrence of (a) a Change In Control (as defined in
Section 9 hereof or (b) a sale or exchange of assets of the Company or (c)
dissolution, liquidation, merger or consolidation of the Company (in which
the Company is not the surviving corporation), all restrictions imposed
under any Committee Grant shall immediately lapse.
iii) Each Committee Member who receives a Committee Grant pursuant to
this Section 2(b) shall receive a written agreement setting forth the terms
and conditions of such grant including, but not limited to, the
restrictions set forth in this Section 2(b) (the 'COMMITTEE GRANT LETTER').
iv) Except as otherwise provided in this Section 2(b), Committee
Grants shall be subject to the provisions of this Plan applicable to
Nonqualified Stock Options granted to other persons.
v) Notwithstanding any other provision of the Plan, this Section 2(b)
may not be amended more than once every six months, except for amendments
necessary to conform the plan to changes in the provisions of the Code or
the Employee Retirement Income Security Act of 1974 ('ERISA'), or the rules
promulgated thereunder.
vi) The provisions of this Section 2(b) are intended to operate
automatically and not require administration. To the extent that any
administrative determinations may be required, such determination shall be
made by a member or members of the Board of Directors who is/are not
eligible to be granted Options under this Section 2(b), but in no event
shall such determinations affect the eligibility of Committee Members, the
timing of the grants or the number of shares of Common Stock subject to
Committee Grants hereunder.
3. SHARES SUBJECT TO THE PLAN
(a) The aggregate number of shares of the Common Stock, par value $.01
('COMMON STOCK'), of the Company that may be issued or transferred under the
Plan is 500,000, subject to adjustment pursuant to Section 3(b) below. Such
shares may be authorized but unissued shares or reacquired shares. If and to the
extent that options granted under the Plan terminate, expire or are canceled
without having been exercised (including shares canceled as part of an exchange
of Grants), or if any shares of restricted stock are forfeited, the shares
subject to such Grant shall again be available for subsequent Grants under the
Plan.
(b) If any change is made to the Common Stock (whether by reason of merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
combination of shares, or exchange of shares or any other change in capital
structure made without receipt of consideration), then unless such event or
change results in the termination of all outstanding Grants and Committee Grants
under the Plan, the Committee shall preserve the value of the outstanding Grants
and Committee Grants by
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
adjusting the maximum number and class of shares issuable under the Plan to
reflect the effect of such event or change in the Company's capital structure,
and by making appropriate adjustments to the number and class of shares, the
exercise price of each outstanding option and otherwise, except that any
fractional shares resulting from such adjustments shall be eliminated by
rounding any portion of a share equal to .500 or greater up, and any portion of
a share equal to less than .500 down, in each case to the nearest whole number.
4. ELIGIBILITY FOR PARTICIPATION
Officers and other employees of the Company or a Subsidiary Corporation,
non-employee members of the Board who are not members of the Committee, and
independent contractors and consultants who perform services for the Company
shall be eligible to participate in the Plan (hereinafter referred to
individually as an 'ELIGIBLE PARTICIPANT' and collectively as 'ELIGIBLE
PARTICIPANTS'). Only Eligible Participants who are officers or other employees
of the Company or a Subsidiary Corporation shall be eligible to receive
Incentive Stock Options. All Eligible Participants shall be eligible to receive
Nonqualified Stock Options, Restricted Stock Grants and SARs. The Committee
shall select from among the Eligible Participants those who will receive Grants
(such Eligible Participants and Committee Members who receive Committee Grants
pursuant to Section 2(b) are hereinafter referred to as 'GRANTEES') and, except
in the case of Committee Grants made pursuant to Section 2(b) hereof, shall
determine the number of shares of Common Stock subject to each Grant; provided,
however, that the maximum number of shares of Common Stock which may be subject
to Grants awarded to any Grantee shall not exceed 500,000. The Committee may, if
it so desires, base any such selections or determinations upon the
recommendations of management of the Company. Nothing contained in the Plan
shall be construed to limit in any manner whatsoever the right of the Company to
grant rights or options to acquire Common Stock or awards of Common Stock
otherwise than pursuant to the Plan.
5. STOCK OPTIONS
(a) Number of Shares. The Committee, in its sole discretion, shall
determine the number of shares of Common Stock that will be subject to each
option.
(b) Type of Option and Option Price.
(1) The Committee may grant options qualifying as incentive stock options
within the meaning of Section 422 of the Code ('INCENTIVE STOCK OPTIONS') and
other stock options ('NONQUALIFIED STOCK OPTIONS'), in accordance with the terms
and conditions set forth herein, or may grant any combination of Incentive Stock
Options and Nonqualified Stock Options (hereinafter referred to collectively as
'STOCK OPTIONS'). The option price per share of an Incentive Stock Option shall
be the fair market value (as defined herein) of a share of Common Stock on the
date of grant. If the Grantee of an Incentive Stock Option owns Common Stock (as
determined under section 424(d) of the Code) possessing more than 10% of the
total combined voting power of all classes of stock of the Company or a Parent
Corporation or Subsidiary Corporation, the option price per share in the case of
an Incentive Stock Option shall not be less than 110% of the fair market value
of a share of Common Stock on the date of grant and such option by its terms is
not exercisable after the expiration of five (5) years from the date of grant.
(2) For all valuation purposes under the Plan, the fair market value of a
share of Common Stock shall be determined in accordance with the following
provisions:
(A) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded in the over-the-counter market
(but not on the Nasdaq National Market segment of The Nasdaq Stock Market),
the fair market value shall be the mean between the last reported bid and
asked prices of one share of Common Stock on the date in question in the
over-the-counter market, as such prices are reported by the National
Association of Securities Dealers through its Nasdaq system or any
successor system. If there are no reported bid and asked prices on the date
in question, then the mean between the last reported bid and asked prices
on the next
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17. PROPOSED MERGER -- (CONTINUED)
preceding date for which such quotations exist shall be determinative of
fair market value. If the Common Stock is traded over-the-counter on the
Nasdaq National Market segment of The Nasdaq Stock Market, the fair market
value shall be the closing selling price of one share of Common Stock on
the date in question as such price is reported by the National Association
of Securities Dealers through such system or any successor system. If there
is no reported closing selling price for the Common Stock on the date in
question, then the closing selling price on the next preceding date for
which such quotation exists shall be determinative of fair market value.
(B) If the Common Stock is at the time listed or admitted to trading
on any stock exchange, then the fair market value shall be the closing
selling price of one share of Common Stock on the date in question on the
stock exchange determined by the Committee to be the primary market for the
Common Stock, as such prices are officially quoted on such exchange. If
there is no reported closing selling price of Common Stock on such exchange
on the date in question, then the fair market value shall be the closing
selling price on the next preceding date for which such quotation exists.
(C) If the Common Stock is at the time neither listed nor admitted to
trading on any stock exchange nor traded in the over-the-counter market
(or, the Committee determines that the value as determined pursuant to
Section 5(b)(2)(A) or (B) above does not reflect fair market value), then
the Committee shall determine fair market value after taking into account
such factors as it deems appropriate.
(c) Exercise Period. The Committee shall determine the option exercise
period of each Stock Option. The exercise period shall not exceed ten years from
the date of grant. Notwithstanding any determinations by the Committee regarding
the exercise period of any Stock Option, all outstanding Stock Options shall be
immediately exercisable upon a Change of Control of the Company (as defined in
Section 9 below).
(d) Vesting of Options and Restrictions on Shares. The vesting period for
Stock Options shall commence on the date of grant and shall end on the date or
dates, determined by the Committee, that shall be specified in the Grant Letter.
The Committee may impose upon the shares of Common Stock issuable upon the
exercise of a Stock Option such restrictions as it deems appropriate and
specifies in the Grant Letter. During any period in which such restrictions
apply, the provisions of Section 6(d) below shall be applicable to such shares,
and the Committee, in such circumstances as it deems equitable, may determine
that all such restrictions shall lapse. Notwithstanding any other provision of
the Plan, all outstanding Stock Options shall become immediately exercisable
upon a Change of Control of the Company (as defined in Section 9 below).
(e) Manner of Exercise. A Grantee may exercise a Stock Option by
delivering a duly completed notice of exercise to the Committee, together with
payment of the option price. Such notice may include instructions authorizing
the Company to deliver the certificates representing the shares of Common Stock
issuable upon the exercise of such Stock Option to any designated registered
broker or dealer ('DESIGNATED BROKER'). Such instructions shall designate the
account into which the shares are to be deposited. The Grantee may tender such
notice of exercise, which has been properly executed by the Grantee, and the
aforementioned delivery instructions to any Designated Broker.
(f) Termination of Employment, Disability or Death.
(1) If a Grantee who is an employee ceases to be an employee (in the
case of an Incentive Stock Option) or ceases to be an Eligible Participant
(in the case of a Nonqualified Stock Option) for any reason (other than, in
the case of an individual, the death of such individual) any Stock Option
which is otherwise exercisable by the Grantee shall terminate unless
exercised within three months after the date on which the Grantee ceases to
be an employee or an Eligible Participant, as the case may be (or within
such other period of time, which may be longer or shorter than three
months, as may be specified in the Grant Letter), but in any event no later
than the date of expiration of the option exercise period, except that in
the case of an individual Grantee who is
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
disabled within the meaning of Section 22(e)(3) of the Code, such period
shall be one year rather than three months (except as otherwise provided in
the Grant Letter).
(2) In the event of the death of an individual Grantee while he or she
is an Eligible Participant or within not more than three months after the
date on which the Grantee ceases to be an Eligible Participant (or within
such other period of time, which may be longer or shorter than three
months, as may be specified in the Grant Letter), any Stock Option which
was otherwise exercisable by the Grantee at the date of death may be
exercised by the Grantee's personal representative at any time prior to the
expiration of one year from the date of death, but in any event no later
than the date of expiration of the option exercise period.
(g) Satisfaction of Option Price. The Grantee shall pay the option price
in full at the time of exercise in cash, or, with the consent of the Committee
in its sole discretion, by delivering shares of Common Stock already owned by
the Grantee and having a fair market value on the date of exercise equal to the
option price or a combination of cash and shares of Common Stock provided,
however, that in lieu of payment in full in such manner, a Grantee may with the
approval of the Board in its sole discretion, be entitled to pay for the shares
purchased upon exercise of the Stock Option by payment to the Company in cash or
by certified or bank check a sum equal at least to the par value of the Common
Stock, with the remainder of the purchase price satisfied by the issuance of an
interest bearing promissory note or notes, in a form and having terms, including
rate of interest and collateral security, satisfactory to the Board in its sole
discretion. The Grantee shall also pay the amount of withholding tax due, if
any, at the time of exercise. Shares of Common Stock shall not be issued or
transferred upon any purported exercise of a Stock Option until the option price
and the withholding obligation are fully paid.
(h) Limits on Incentive Stock Options. Each Grant of an Incentive Stock
Option shall provide that:
(1) the Stock Option is not transferable by the Grantee, except, in
the case of an individual Grantee, by will or the laws of descent and
distribution;
(2) the Stock Option is exercisable only by the Grantee, except as
otherwise provided herein or in the Grant Letter in the event of the death
of an individual Grantee;
(3) the aggregate fair market value of the Common Stock determined as
of the date of the Grant with respect to which Incentive Stock Options are
exercisable for the first time by a Grantee during any calendar year under
the Plan and under any other stock option plan of the Company shall not
exceed $100,000; and
(4) unless the Grantee could otherwise transfer Common Stock issued
pursuant to the Stock Option without incurring liability under Section
16(b) of the Securities and Exchange Act of 1934, as amended (the 'EXCHANGE
ACT'), at least six months must elapse from the date of acquisition of the
Stock Option until the date of disposition of the Common Stock issued upon
exercise thereof.
6. RESTRICTED STOCK GRANTS
The Committee may issue shares of Common Stock to an Eligible Participant
pursuant to an incentive or long range compensation plan, program or contract
approved by the Committee (a 'RESTRICTED STOCK GRANT'). The following provisions
are applicable to Restricted Stock Grants:
(a) General Requirements. Shares of Common Stock issued pursuant to
Restricted Stock Grants will be issued in consideration for cash or
services rendered having a value, as determined by the Board, at least
equal to the par value thereof. All conditions and restrictions imposed
under each Restricted Stock Grant, and the period of years during which the
Restricted Stock Grant will remain subject to such restrictions, shall be
set forth in the Grant Letter and designated therein as the 'RESTRICTION
PERIOD.' All restrictions imposed under any Restricted Stock Grant shall
lapse on such date or dates as the Committee may approve until the
restrictions have lapsed as to 100%
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17. PROPOSED MERGER -- (CONTINUED)
of the shares, except that upon a Change of Control of the Company, all
restrictions on the transfer of the shares which have not been forfeited
prior to such date shall lapse. In addition, the Committee, in
circumstances that it deems equitable, may determine as to any or all
Restricted Stock Grants, that all the restrictions shall lapse,
notwithstanding any Restriction Period.
(b) Number of Shares. The Committee, in its sole discretion, shall
determine the number of shares of Common Stock that will be granted in each
Restricted Stock Grant.
(c) Requirement of Relationship with Company. If the Eligible
Participant s relationship with the Company (as an employee, non-employee
member of the Board, independent contractor or consultant, as the case may
be) terminates during the period designated in the Grant Letter as the
Restriction Period, the Restricted Stock Grant shall terminate as to all
shares covered by the Grant as to which restrictions on transfer have not
lapsed, and such shares shall be immediately returned to the Company. The
Committee may, in its sole discretion, provide for complete or partial
exceptions to the provisions of this Section 6(c).
(d) Restrictions on Transfer and Legend on Stock Certificate. During
the Restriction Period, an Eligible Participant may not sell, assign,
transfer, pledge or otherwise dispose of the shares of Common Stock to
which such Restriction Period applies except to a Successor Grantee
pursuant to Section 8 below. Each certificate representing a share of
Common Stock issued or transferred under a Restricted Stock Grant shall
contain a legend giving appropriate notice of the restrictions in the
Grant. The Grantee shall be entitled to have the legend removed from the
stock certificate or certificates representing any such shares as to which
all restrictions have lapsed.
7. STOCK APPRECIATION RIGHTS
(a) General Provisions. The Committee may grant stock appreciation rights
('SARS') to any Eligible Participant in tandem with any Stock Option, for all or
a portion of the applicable Stock Option, either at the time the Stock Option is
granted or at any time thereafter while the Stock Option remains outstanding.
(b) Number of SARs. The number of SARs granted to an Eligible Participant
which shall be exercisable during any given period of time shall not exceed the
number of shares of Common Stock which the Eligible Participant may purchase
upon the exercise of the related Stock Option during such period.
(c) Settlement Amount. Upon an Eligible Participant s exercise of some or
all of the Eligible Participant's SARs, the Eligible Participant shall receive
in settlement of such SARs an amount equal to the stock appreciation (as defined
herein) for the number of SARs exercised, payable in cash, Common Stock or a
combination thereof. The 'STOCK APPRECIATION' for a SAR is the difference
between the option price specified for the related Stock Option and the fair
market value of the underlying Common Stock on the date of exercise of the SAR;
provided that the maximum value of any stock appreciation right shall be limited
to the exercise price of the tandem Stock Option with respect to which it is
issued.
(d) Settlement Election. Upon the exercise of any SARs, the Eligible
Participants shall have the right to elect the portions of the settlement amount
that the Eligible Participant desires to receive in cash and shares of Common
Stock, respectively. For purposes of calculating the number of shares of Common
Stock to be received upon settlement, shares of Common Stock shall be valued at
their fair market value on the date of exercise of the SARs. Notwithstanding the
foregoing, the Committee shall have the right (i) to disapprove an Eligible
Participant's election to receive such settlement in whole or in part in cash,
and to require that shares of Common Stock be delivered in lieu of cash or (ii)
to require that settlement be made in cash. If shares of Common Stock are to be
received upon exercise of an SAR, cash shall be delivered in lieu of any
fractional share.
(e) Exercise. A SAR is exercisable only during the period when the Stock
Option to which it is related is also exercisable. SARs shall be exercisable
only at the same time and to the same extent as,
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
and shall terminate and no longer be exercisable upon the termination or
immediately after the exercise of, the tandem Stock Options or applicable
portion thereof.
8. TRANSFERABILITY OF OPTIONS AND GRANTS
Only a Grantee (or, in the case of an individual Grantee, his or her
authorized legal representative on behalf of Grantee) may exercise rights under
a Grant. No individual Grantee may transfer those rights except by will or by
the laws of descent and distribution or, in the case of a Grant other than an
Incentive Stock Option and to the extent permitted under Rule 16b-3 of the
Exchange Act and by the Committee in its sole discretion, (a) pursuant to a
qualified domestic relations order as defined under the Code or Title I of ERISA
or the rules thereunder and (b) to a trust for the benefit of a member of the
Grantee's immediate family. Upon the death of an individual Grantee, the
personal representative or other person entitled to succeed to the rights of the
Grantee ('SUCCESSOR GRANTEE') may exercise such rights. A Successor Grantee
shall furnish proof satisfactory to the Company of such person's right to
receive the Grant or the Committee Grant under the Grantee's will or under the
applicable laws of descent and distribution.
9. CHANGE OF CONTROL OF THE COMPANY
As used herein, a 'CHANGE OF CONTROL' shall be deemed to have occurred when
(a) any 'PERSON' (as such term is used in Section 13(d) and 14(d) of the
Exchange Act) becomes the 'BENEFICIAL OWNER', directly or indirectly, of
securities of the Company representing thirty (30%) percent or more of the
combined voting power of the Company's then outstanding securities or (b) the
Company becomes a subsidiary of another corporation or is merged or consolidated
into another corporation or if substantially all of its assets shall have been
sold to an unaffiliated party or parties unless thereafter (1) directors of the
Company immediately prior thereto continue to constitute at least fifty (50%)
percent of the directors of the surviving entity or purchaser or (2) the
Company's securities continue to represent, or are converted into securities
which represent, more than sixty-six and two thirds(66 2/3%) percent of the
combined voting power of the surviving entity or purchaser, or (c) fifty (50%)
percent or more of the Board is comprised of persons who were not nominated by
the Board for election as directors, or (d) the Board adopts a plan of complete
liquidation of the Company.
10. CERTAIN CORPORATE CHANGES
(a) Sale or Exchange of Assets, Dissolution or Liquidation or Merger or
Consolidation Where the Company Does Not Survive. If all or substantially all
of the assets of the Company are to be sold or exchanged, the Company is to be
dissolved or liquidated, or the Company is a party to a merger or consolidation
with another corporation in which the Company will not be the surviving
corporation, then, at least ten days prior to the effective date of such event,
the Company shall give each Grantee with any outstanding Grants (including
Committee Grants) written notice of such event. Each such Grantee shall
thereupon have the right to exercise in full any installments of such Grants
(including Committee Grants) not previously exercised (whether or not the right
to exercise such installments has accrued pursuant to such Grants (including
Committee Grants)), within ten days after such written notice is sent by the
Company. Any installments of such Grants (including Committee Grants) not so
exercised shall thereafter lapse and be of no further force or effect.
(b) Merger or Consolidation Where the Company Survives. If the Company is
a party to a merger or consolidation in which the Company will be the surviving
corporation, then the Committee may, in its sole discretion, elect to give each
Grantee with any outstanding Grants (including Committee Grants) written notice
of such event. If such notice is given, each such Grantee shall thereupon have
the right to exercise in full any installments of such Grants (including
Committee Grants) not previously exercised (whether or not the right to exercise
such installments has accrued pursuant to such Grants (including Committee
Grants)), within ten days after such written notice is sent by the Company. Any
installments of such Grants (including Committee Grants) not so exercised shall
thereafter lapse and be of no further force or effect.
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
11. SHAREHOLDER APPROVAL
This Plan is subject to and no options shall be exercisable hereunder until
after approval of this Plan by holders of a majority of the shares of the stock
of the Company present or represented by a proxy in a separate vote at a duly
held meeting of the shareholders of the Company within twelve months after the
date of the adoption of the Plan by the Board. If the Plan is not so approved by
shareholders, the Plan and all Grants (including Committee Grants) hereunder
shall terminate and be of no force or effect.
12. AMENDMENT AND TERMINATION OF THE PLAN
(a) Amendment. The Board may amend or terminate the Plan at any time;
provided that the approval of the shareholders of the Company shall be required
in respect of any amendment that (i) materially increases the benefits accruing
to Eligible Participants under the Plan, (ii) increases the aggregate number of
shares of Common Stock that may be issued or transferred under the Plan (other
than by operation of Section 3(b) above), (iii) materially modifies the
requirements as to eligibility for participation in the Plan; or (iv) modifies
the provisions for determining the fair market value of a share of Common Stock.
(b) Termination of Plan. The Plan shall terminate on November 14, 2005 (as
set forth in Section 19 below) unless earlier terminated by the Board or unless
extended by the Board with the approval of the shareholders.
(c) Termination and Amendment of Outstanding Grants. A termination or
amendment of the Plan that occurs after a Grant (including Committee Grants) is
made shall not result in the termination or amendment of the Grant (including
Committee Grants) unless the Grantee consents or unless the Committee acts under
Section 20(b) below. The termination of the Plan shall not impair the power and
authority of the Committee with respect to an outstanding Grant. Whether or not
the Plan has terminated, an outstanding Grant may be terminated or amended under
Section 20(b) below or may be amended by agreement of the Company and the
Grantee which is consistent with the Plan.
13. FUNDING OF THE PLAN
The Plan shall be unfunded. The Company shall not be required to establish
any special or separate fund or to make any other segregation of assets to
assure the payment of any Grants under the Plan. In no event shall interest be
paid or accrued on any Grant, including unpaid installments of Grants.
14. RIGHTS OF ELIGIBLE PARTICIPANTS
Nothing in the Plan shall entitle any Eligible Participant or other person
to any claim or right to any Grant under the Plan. Neither the Plan nor any
action taken hereunder shall be construed as giving any Eligible Participant or
Grantee any rights to be retained by the Company in any capacity, whether as an
employee, non-employee member of the Board, independent contractor, consultant
or otherwise.
15. WITHHOLDING OF TAXES
The Company shall have the right to deduct from all Grants paid in cash any
federal, state or local taxes required by law to be withheld with respect to
such Grants paid in cash. In the case of Grants paid in Common Stock, the
Company shall have the right to require the Grantee to pay to the Company the
amount of any taxes which the Company is required to withhold in respect of such
Grants or to take whatever action it deems necessary to protect the interests of
the Company in respect of such tax liabilities, including, without limitation,
withholding a portion of the shares of Common Stock otherwise deliverable
pursuant to the Plan. The Company's obligation to issue or transfer shares of
Common Stock upon the exercise of a Stock Option or SAR or the acceptance of a
Restricted Stock Grant shall be conditioned upon the Grantee's compliance with
the requirements of this section to the satisfaction of the Committee.
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
16. AGREEMENTS WITH GRANTEES
Each Grant made under the Plan shall be evidenced by a Grant Letter
containing such terms and conditions as the Committee shall approve.
17. REQUIREMENTS FOR ISSUANCE OF SHARES
No Common Stock shall be issued or transferred under the Plan unless and
until all applicable legal requirements have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Stock Option, Restricted Stock Grant or SAR on the Grantee's undertaking in
writing to comply with such restrictions on any subsequent disposition of the
shares of Common Stock issued or transferred thereunder as the Committee shall
deem necessary or advisable as a result of any applicable law, regulation or
official interpretation thereof, and certificates representing such shares may
be legended to reflect any such restrictions.
18. HEADINGS
The section headings of the Plan are for reference only. In the event of a
conflict between a section heading and the content of a section of the Plan, the
content of the section shall control.
19. EFFECTIVE DATE OF THE PLAN
The Plan shall be effective as of November 14, 1995, subject to the
approval of the Company's shareholders within 12 months after such effective
date.
20. MISCELLANEOUS
(a) Substitute Grants. The Committee may make a Grant to an employee, a
non-employee director, or an independent contractor or consultant of another
corporation, if such person shall become an Eligible Participant by reason of a
corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company or a Subsidiary Corporation
and such other corporation. Any such Grant shall be made in substitution for a
stock option or restricted stock grant granted by the other corporation
('SUBSTITUTED STOCK INCENTIVES'), but the terms and conditions of the substitute
Grant may vary from the terms and conditions required by the Plan and from those
of the Substituted Stock Incentives. The Committee shall prescribe the
provisions of the substitute Grants.
(b) Compliance with Law. The Plan, the exercise of Grants and the
obligations of the Company to issue or transfer shares of Common Stock under
Grants shall be subject to all applicable laws and required approvals by any
governmental or regulatory agencies. The Committee (or, in the case of Committee
Grants, the Board) may revoke any Grant if it is contrary to law or modify any
Grant to bring it into compliance with any valid and mandatory government
regulations. The Committee may also adopt rules regarding the withholding of
taxes on payments to Grantees. The Committee may, in its sole discretion, agree
to limit its authority under this section.
(c) Ownership of Stock. A Grantee or Successor Grantee shall have no
rights as a shareholder with respect to any shares of Common Stock covered by a
Grant until the shares are issued or transferred to the Grantee or Successor
Grantee on the stock transfer records of the Company.
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
ANNEX G
EXECUFIRST BANCORP, INC. STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of November 17, 1995 (the 'Agreement'), by
and between ExecuFirst Bancorp, Inc., a Pennsylvania corporation ('Issuer'), and
Republic Bancorporation, Inc. a Pennsylvania corporation ('Grantee').
RECITALS
(A) The Plan. Grantee and Issuer have on a date prior to the date hereof,
entered into an Agreement and Plan of Merger, dated as of November 17, 1995 (the
'Plan'), providing for, among other things, the merger of Issuer with and into
the Grantee, with the Issuer being the surviving corporation.
(B) Condition to Plan. As a condition and inducement to Grantee's
execution of the Plan and Grantee's agreement referred to in the next sentence,
Grantee has required that Issuer agree, and Issuer has agreed, to grant Grantee
the Option (as hereinafter defined). As a condition and inducement to Issuer's
execution of the Plan and this Agreement, Grantee has agreed to grant an option
to Issuer on terms and conditions substantially identical to those of the Option
and this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. Defined Terms. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Plan.
2. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the
'Option') to purchase a number of shares of common stock, par value $.01
per share ('Issuer Common Stock'), of Issuer up to 243,985 of such shares
(as adjusted as set forth herein, the 'Option Shares', which shall include
the Option Shares before and after any transfer of such Option Shares, but
in no event shall the number of Option Shares for which this Option is
exercisable exceed 19.9% of the issued and outstanding shares of Issuer
Common Stock) at a purchase price per Option Share (as adjusted as set
forth herein, the 'Purchase Price') equal to $5.00 per share of Issuer
Common Stock.
3. Transferability of Option. The Option granted hereunder may not be
transferred by the Grantee except to a 'Parent Corporation' or a
'Subsidiary Corporation', as such terms are defined in subsections (e) and
(f), respectively, of Section 424 of the Internal Revenue Code of 1986, as
amended.
4. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or the Plan, and (ii) no preliminary or
permanent injunction or other order against the delivery of shares covered
by the Option issued by any court of competent jurisdiction in the United
States shall be in effect, the Holder may exercise the Option, in whole or
in part, at any time and from time to time following the occurrence of a
Purchase Event (as hereinafter defined); provided that the Option shall
terminate and be of no force and effect upon the earliest to occur of (A)
the Effective Time, (B) termination of the Plan in accordance with the
terms thereof prior to the occurrence of a Purchase Event (other than a
termination resulting from a willful breach by the Issuer of any covenant
contained therein) or (C) twelve (12) months after termination of the Plan
if such termination follows the occurrence of a Purchase Event or is due to
a willful breach by the Issuer of any covenant, representation or warranty
contained therein; provided, however, that any purchase of shares upon
exercise of the Option shall be subject to compliance with applicable law.
The term 'Holder' shall mean the holder or holders of the Option from time
to time, and which initially is
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
Grantee. The rights set forth in Section 9 hereof shall terminate when the
right to exercise the Option terminates (other than as a result of a
complete exercise of the Option) as set forth herein.
(b) As used herein, a 'Purchase Event' means any of the following
events:
(i) Without Grantee's prior written consent, Issuer shall have
recommended, proposed or announced an intention to authorize, recommend
or propose, or entered into an agreement with any person (other than
Grantee or any subsidiary of Grantee) to effect (A) a merger,
consolidation or similar transaction involving Issuer or any of its
significant subsidiaries (other than transactions solely between
Issuer's subsidiaries that are not violative of the Plan), (B) the
disposition, by sale, lease, exchange or otherwise, of assets or
deposits of Issuer or any of its significant subsidiaries representing
in either case 22.5% or more of the consolidated assets or deposits of
Issuer and its subsidiaries or (C) the issuance, sale or other
disposition by Issuer of (including by way of merger, consolidation,
share exchange or any similar transaction) securities representing 22.5%
or more of the voting power of the Issuer or any of its significant
subsidiaries (each of (A), (B) or (C) an 'Acquisition Transaction'); or
(ii) any person (other than Grantee or any subsidiary of Grantee
shall have acquired beneficial ownership (as such term is defined in
Rule 13d-3 promulgated under the Exchange Act) of or the right to
acquire beneficial ownership of, or any 'group' (as such term is defined
in Section 13(d)(3) of the Exchange Act), other than a group of which
Grantee or Issuer or any affiliates or persons participating with any
affiliate or any subsidiary of Grantee or Issuer shall have been formed
to have acquired beneficial ownership of or has the right to acquire
beneficial ownership of, 22.5% or more of the voting power of Issuer or
any of its significant subsidiaries.
(c) Issuer shall notify Grantee promptly in writing of the occurrence
of any Purchase Event, it being understood that the giving of such notice
by Issuer shall not be a condition to the right of Holder to exercise the
Option.
(d) In the event Holder wishes to exercise the Option or any part
thereof, it shall send to Issuer a written notice (the date of which being
herein referred to as the 'Notice Date') specifying (i) the total number of
Option Shares it intends to purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 15
business days from the Notice Date for the closing (the 'Closing') of such
purchase (the 'Closing Date'); provided that the first notice of exercise
shall be sent to Issuer within 180 days after the first Purchase Event of
which Grantee has been notified and if no such notification is given within
such 180 day time period, the right to exercise shall expire. If prior
notification to or approval of any Regulatory Authority is required in
connection with such purchase, Issuer shall cooperate with the Holder in
the filing of the required notice of application for approval and the
obtaining of such approval and the Closing shall occur immediately
following such regulatory approvals (and any mandatory waiting periods).
Any exercise of the Option shall be deemed to occur on the Notice Date
relating thereto.
5. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated
by Issuer, an amount equal to the Purchase Price multiplied by the number
of Option Shares to be purchased on such Closing Date, and (ii) present and
surrender this Agreement to the Issuer at the address of the Issuer
specified in Section 13(f).
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section
4(a), (i) Issuer shall deliver to Holder (A) a certificate or certificates
representing the Option Shares to be purchased at such Closing, which
Option Shares shall be free and clear of all Liens and subject to no
preemptive rights, and (B) if the Option is exercised in part only, an
executed new agreement with the same terms as this Agreement evidencing the
right to purchase the balance of the shares of Issuer Common Stock
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<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
purchasable hereunder, and (ii) Holder shall deliver to Issuer a letter
agreeing that Holder shall not offer to sell or otherwise dispose of such
Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.
(c) In addition to any other legend that is required by applicable
law, certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as
follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE 'SECURITIES ACT') AND
ARE 'RESTRICTED SECURITIES' AS THAT TERM IS DEFINED IN RULE 144 UNDER
THE SECURITIES ACT. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER
THE SECURITIES ACT OR A VALID EXEMPTION THEREFROM. THE SHARES ARE
SUBJECT TO FURTHER RESTRICTIONS WITH RESPECT TO SALE OF TRANSFER
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF NOVEMBER
17, 1995. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the portion of the above legend relating
to the Securities Act shall be removed by delivery of substitute certificates
without such legend if Holder shall have delivered to Issuer a copy of a letter
from the staff of the SEC, or an opinion of counsel in form and substance
reasonably satisfactory to Issuer and its counsel, to the effect that such
legend is not required for purposes of the Securities Act.
(d) Upon the giving by Holder to Issuer of the written notice of
exercise of the Option provided for under Section 4(d), the tender of the
applicable purchase price in immediately available funds and the tender of
this Agreement to Issuer, Holder shall be deemed to be the holder of record
of the shares of Issuer Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall then be
closed or that certificates representing such shares of Issuer Common Stock
shall not then be actually delivered to Holder. Issuer shall pay all
expenses, and any and all United States federal, state, and local taxes and
other charges that may be payable in connection with the preparation,
issuance and delivery of stock certificates under this Section in the name
of Holder or its assignee, transferee, or designee.
(e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued shares of Issuer
Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other
options, warrants, convertible securities and other rights to purchase
Issuer Common Stock, (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by
any other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by Issuer, (iii) promptly to take all
action as may from time to time be required (including (A) complying with
all premerger notification, reporting and waiting period requirements and
(B) in the event prior approval of or notice to any Regulatory Authority is
necessary before the Option may be exercised, cooperating fully with Holder
in preparing such applications or notices and providing such information to
such Regulatory Authority as it may require) in order to permit Holder to
exercise the Option and Issuer duly and effectively to issue shares of the
Issuer Common Stock pursuant hereto, and (iv) promptly to take all action
provided herein to protect the rights of Holder against dilution.
6. Representations and Warranties of Issuer. Issuer hereby represents
and warrants to Grantee (and Holder, if different than Grantee) as follows:
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17. PROPOSED MERGER -- (CONTINUED)
(a) Corporate Authority. Issuer has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby; the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Issuer and the Issuer's
Board of Directors, by at least a two-thirds vote, has waived any
restriction on ownership imposed by its articles of incorporation
('Articles of Incorporation') with respect to this Option, and no other
corporate proceedings on the part of Issuer are necessary to authorize
this Agreement or to consummate the transactions so contemplated.
(b) Beneficial Ownership. To the best knowledge of Issuer, except
for First Fidelity Bank, N.A., or its affiliate or designee, as of the
date of this Agreement, no person or group has beneficial ownership of
more than 10% of the issued and outstanding shares of Issuer Common
Stock.
(c) Shares Reserved for Issuance; Capital Stock. Issuer has taken
all necessary corporate action to authorize and reserve and permit it to
issue, and at all times from the date hereof through the termination of
this Agreement in accordance with its terms, will have reserved for
issuance upon the exercise of the Option, that number of shares of
Issuer Common Stock equal to the maximum number of shares of Issuer
Common Stock at any time and from time to time purchasable upon exercise
of the Option, and all such shares, upon issuance pursuant to the
Option, will be duly authorized, validly issued, fully paid and
nonassessable, and will be delivered free and clear of all claims,
liens, encumbrances, and security interests (other than those created by
this Agreement) and not subject to any preemptive rights.
(d) No Violations. The execution, delivery and performance of this
Agreement does not or will not, and the consummation by Issuer of any of
the transactions contemplated hereby will not, constitute or result in
(A) a breach or violation of, or a default under, its Articles of
Incorporation or by-laws ('By-Laws'), or the comparable governing
instruments of any of its subsidiaries, or (B) a breach or violation of,
or a default under, any agreement, lease, contract, note, mortgage,
indenture, arrangement or other obligation of it or any of its
subsidiaries (with or without the giving of notice, the lapse of time or
both) or under any law, rule, ordinance or regulation or judgment,
decree, order, award or governmental or nongovernmental permit or
license to which it or any of its subsidiaries is subject, that would,
in any case give any other person the ability to prevent or enjoin
Issuer's performance under this Agreement in any material respect.
7. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that Grantee has full corporate power and
authority to enter into this Agreement and, subject to obtaining the
approvals referred to in this Agreement, to consummate the transactions
contemplated by this Agreement; the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of
Grantee; and this Agreement has been duly executed and delivered by
Grantee.
8. Adjustment upon Changes in Issuer Capitalization, etc. (a) In the
event of any change in Issuer Common Stock by reason of a stock dividend,
stock split, split-up, recapitalization, combination, exchange of shares,
or similar transaction, the type and number of shares or securities subject
to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements
governing such transaction so that Holder shall receive, upon exercise of
the Option, the number and class of shares or other securities or property
that Holder would have received in respect of Issuer Common Stock if the
Option had been exercised immediately prior to such event, or the record
date therefor, as applicable. If any additional shares of Issuer Common
Stock are issued after the date of this Agreement (other than pursuant to
an event described in the first sentence of this Section 8(a), upon
exercise of any option to purchase Issuer Common Stock outstanding on the
date hereof or upon conversion into
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17. PROPOSED MERGER -- (CONTINUED)
Issuer Common Stock of any convertible security of Issuer outstanding on
the date hereof), the number of shares of Issuer Common Stock subject to
the Option shall be adjusted so that, after such issuance it, together with
any share of Issuer Common Stock previously issued pursuant hereto, equals
19.9% of the number of shares of Issuer Common Stock then issued and
outstanding, without giving effect to any shares subject to or issued
pursuant to the Option. No provision of this Section 8 shall be deemed to
affect or change, or constitute authorization for any violation of, any of
the covenants or representations in the Plan.
(b) In the event that Issuer shall enter into an agreement (i) to
consolidate with or merge into any person, other than Grantee or one of
its subsidiaries, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any person,
other than Grantee or one of its subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Issuer
Common Stock shall be changed into or exchanged for stock or other
securities of Issuer or any other person or cash or any other property
or the outstanding shares of Issuer Common Stock immediately prior to
such merger shall after such merger represent less than 50% of the
outstanding shares and share equivalents of the merged company, or (iii)
to sell or otherwise transfer all or substantially all of its assets or
deposits to any person, other than Grantee or one of its subsidiaries,
then, and in each such case, the agreement governing such transaction
shall be subject to this Agreement in accordance with the terms provided
herein and make proper provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions
set forth herein, be converted into, or exchanged for, an option (the
'Substitute Option'), at the election of Holder, of either (x) the
Acquiring Corporation (as hereinafter defined), (y) any person that
controls the Acquiring Corporation, or (z) in the case of a merger
described in clause (ii), Issuer (such person being referred to as
'Substitute Option Issuer').
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to Holder. Substitute Option
Issuer shall also enter into an agreement with Holder in substantially
the same form as this Agreement, which shall be applicable to the
Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock (as hereinafter defined) as is equal
to the Assigned Value (as hereinafter defined) multiplied by the number
of shares of Issuer Common Stock for which the Option was theretofore
exercisable, divided by the Average Price (as hereinafter defined). The
exercise price of Substitute Option per share of Substitute Common Stock
(the 'Substitute Option Price') shall then be equal to the Purchase
Price multiplied by a fraction in which the numerator is the number of
shares of Issuer Common Stock for which the Option was theretofore
exercisable and the denominator is the number of shares of the
Substitute Common Stock for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(1) 'Acquiring Corporation' shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving person, or (iii) the transferee of all or
substantially all of Issuer's assets (or a substantial part of the
assets of its subsidiaries taken as a whole).
(2) 'Substitute Common Stock' shall mean the shares of capital
stock (or similar equity interest) with the greatest voting power in
respect of the election of directors (or persons similarly
responsible for the direction of the business and affairs) of the
Substitute Option Issuer.
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17. PROPOSED MERGER -- (CONTINUED)
(3) 'Assigned Value' shall mean the highest of (w) the price
per share of Issuer Common Stock at which a Tender Offer or an
Exchange Offer therefor has been made, (x) the price per share of
Issuer Common Stock to be paid by any third party pursuant to an
agreement with Issuer, and (y) the highest closing price for shares
of Issuer Common stock within the six month period immediately
preceding the consolidation, merger, or sale in question and (z) in
the event of a sale of all or substantially all of Issuer's assets
or deposits an amount equal to (i) the sum of the price paid in such
sale for such assets (and/or deposits) and the current market value
of the remaining assets of Issuer, as determined by a nationally or
regionally recognized investment banking firm selected by Holder
divided by (ii) the number of shares of Issuer Common Stock
outstanding at such time. In the event that a Tender Offer or an
Exchange Offer is made for Issuer Common Stock or an agreement is
entered into for a merger or consolidation involving consideration
other than cash, the value of the securities or other property
issuable or deliverable in exchange for Issuer Common Stock shall be
determined by a nationally or regionally recognized investment
banking firm selected by Holder.
(4) 'Average Price' shall mean the average closing price of a
share of Substitute Common Stock for the one year immediately
preceding the consolidation, merger, or sale in question, but in no
event higher than the closing price or the purchase price of the
shares of Substitute Common Stock on the day preceding such
consolidation, merger or sale; provided that if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with
respect to the Purchase Price, a share of common stock issued by
Issuer, the person merging into Issuer or by any company which
controls such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.9% of the
aggregate of the shares of Substitute Common Stock outstanding prior to
exercise of the Substitute Option. In the event that the Substitute
Option would be exercisable for more than 19.9% of the aggregate of the
shares of Substitute Common Stock but for the limitation in the first
sentence of this Section 8(f), Substitute Option Issuer shall make a
cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in the first
sentence of this Section 8(f) over (ii) the value of the Substitute
Option after giving effect to the limitation in the first sentence of
this Section 8(f). This difference in value shall be determined by a
nationally-recognized investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in
Section 8(b) unless prior to the entering of such transaction the
Acquiring Corporation and any person that controls the Acquiring
Corporation assumed in writing all the obligations of Issuer hereunder
and took all other actions that may be necessary so that the provisions
of this Section 8 are given full force and effect (including, without
limitation, any action that may be necessary so that the holders of the
other shares of common stock issued by Substitute Option Issuer are not
entitled to exercise any rights by reason of the issuance or exercise of
the Substitute Option and the shares of Substitute Common Stock are
otherwise in no way distinguishable from or have lesser economic value
(other than any diminution in value resulting from the fact that the
Substitute Common Stock are restricted securities, as defined in Rule
144 under the Securities Act or any successor provision) than other
shares of common stock issued by Substitute Option Issuer).
9. Repurchase at the Option of Holder. (a) Subject to the last
sentence of Section 4(a), at the demand of Holder at any time commencing
upon the first occurrence of a Repurchase Event (as defined in Section
9(d)) and ending 12 months immediately thereafter, Issuer shall repurchase
from Holder (i) the Option or any part of the Option or (ii) any or all
shares of Issuer Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The dates on which
Holder may exercise its rights under this Section 9 are referred to
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17. PROPOSED MERGER -- (CONTINUED)
as the 'Request Dates'. Such repurchase shall be at an aggregate price (the
'Section 9 Repurchase Consideration') equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to
which Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number
of shares of Issuer Common Stock with respect to which the Option has
not been exercised; and
(iii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7) paid (or, in the
case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Holder for
each share of Issuer Common Stock with respect to which the Option has
been exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 9, Issuer shall,
within 10 business days after any Request Date, pay the Section 9
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment, Holder shall surrender to Issuer the
Option or any part of the Option and the certificates evidencing the shares
of Issuer Common Stock purchased thereunder with respect to which Holder
then has exercised its rights under this Section 9, and Holder shall
warrant that it has sole record and beneficial ownership of such shares and
that the same are then free and clear of all Liens. Notwithstanding the
foregoing, to the extent that prior notification to or approval of any
Regulatory Authority is required in connection with the payment of all or
any portion of the Section 9 Repurchase Consideration, Holder shall have
the ongoing option to revoke its request for repurchase pursuant to Section
9, in whole or in part, or to require that Issuer deliver from time to time
that portion of the Section 9 Repurchase Consideration that it is not then
so prohibited from paying and promptly file the required notice or
application for approval and expeditiously process the same (and each party
shall cooperate with the other in the filing of any such notice or
application and the obtaining of any such approval). If any Regulatory
Authority disapproves of any part of Issuer's proposed repurchase pursuant
to this Section 9, Issuer shall promptly give notice of such fact to
Holder. If any Regulatory Authority prohibits the repurchase in part but
not in whole, then Holder shall have the right (i) to revoke the repurchase
request or (ii) to the extent permitted by such Regulatory Authority,
determine whether the repurchase should apply to the Option and/or Option
Shares and to what extent to each, and Holder shall thereupon have the
right to exercise the Option as to the number of Option Shares for which
the Option was exercisable at the Request Date less the sum of the number
of shares covered by the Option in respect of which payment has been made
pursuant to Section 9(a)(ii) and the number of shares covered by the
portion of the Option (if any) that has been repurchased. Holder shall
notify Issuer of its determination under the preceding sentence within five
(5) business days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Holder's
rights under this Section 9 shall terminate on the date of termination of
this Option pursuant to Section 4(a).
(c) For purposes of this Agreement, the 'Applicable Price' means the
highest of (i) the highest price per share of Issuer Common Stock paid for
any such share by the person or groups described in Section 9(d)(i), (ii)
the price per share of Issuer Common Stock received by holders of Issuer
Common Stock in connection with any merger or other business combination
transaction described in Section 8(b)(i), 8(b)(ii) or 8(b)(iii), or (iii)
the highest closing sales price per share of Issuer Common Stock quoted on
the NASDAQ Small Cap market or the National Daily Quotation Bureau, as the
case may be; provided, however, that in the event of a sale of less than
all of Issuer's assets, the Applicable Price shall be the sum of the price
paid in such sale for such assets and the current market value of the
remaining assets of Issuer as determined by a nationally or regionally
recognized investment banking firm selected by Holder, divided by the
number of
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17. PROPOSED MERGER -- (CONTINUED)
shares of the Issuer Common Stock outstanding at the time of such sale. If
the consideration to be offered, paid or received pursuant to either of the
foregoing clauses (i) or (ii) shall be other than in cash, the value of
such consideration shall be determined in good faith by an independent
nationally or regionally recognized investment banking firm selected by
Holder and reasonably acceptable to Issuer, which determination shall be
conclusive for all purposes of this Agreement.
(d) As used herein, 'Repurchase Event' shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired
beneficial ownership of (as such term is defined in Rule 13d-3 promulgated
under the Exchange Act), or the right to acquire beneficial ownership of,
or any 'group' (as such term is defined under the Exchange Act) shall have
been formed which beneficially owns or has the right to acquire beneficial
ownership of, 50% or more of the then outstanding shares of Issuer Common
Stock, or (ii) any of the transactions described in Section 8(b)(i),
8(b)(ii) or 8(b)(iii) shall be consummated.
10. Registration Rights. (a) If Issuer at any time after the exercise
of the Option proposes for any reason to register any shares of Issuer
Common Stock under the Securities Act or in the event that any registration
pursuant to this Section 10(a) shall be, in whole or in part, an
underwritten offering of securities of such Issuer Common Stock, Issuer
will at each such time promptly give written notice to any Holder,
including Grantee and any permitted transferee ('Selling Shareholders') of
its intention to do so and, upon the written request of any Selling
Shareholder given within 30 days after receipt of any such notice (which
request shall specify the number of shares of Issuer Common Stock intended
to be included in such registration by the Selling Shareholder), Issuer
will cause all such shares for which a Selling Shareholder requests
participation in such registration, to be so registered; provided, however,
that Issuer may elect to not cause any such shares to be so registered (i)
if the managing underwriters, if any, in good faith object to the inclusion
of such shares for valid business reasons, or (ii) in the case of a
registration solely to implement an employee benefit plan or a registration
filed on Form S-4 of the Securities Act or any successor Form; provided,
further, however, that such election pursuant to (i) may only be made two
times. If some, but not all, the shares of Issuer Common Stock, with
respect to which Issuer shall have received requests for registration
pursuant to this Section 10(a), shall be excluded from such registration,
Issuer shall make appropriate allocation of shares to be registered among
the Selling Shareholders desiring to register their shares pro rata in the
proportion that the number of shares requested to be registered by each
such Selling Shareholder bears to the total number of shares requested to
be registered by all such Selling Shareholders then desiring to have Issuer
Common Stock registered for sale.
(b) Conditions to Registration. Issuer shall use all reasonable
efforts to cause each registration statement referred to in Section 10(a)
above to become effective and to obtain all consents or waivers of other
parties which are required therefor and to keep such registration statement
effective; provided, however, that Issuer shall not be required to maintain
the effectiveness of any registration statement after the expiration of
nine months from the effective date of such registration statement. Issuer
shall use all reasonable efforts to make any filings. and take all steps,
under all applicable state securities laws to the extent necessary to
permit the sale or other disposition of the Option Shares so registered in
accordance with the intended method of distribution for such shares;
provided, however, that Issuer shall not be required to consent to general
jurisdiction or qualify to do business in any state where it is not
otherwise required to so consent to such jurisdiction or to so qualify to
do business.
(c) Expenses. Except where applicable state law prohibits such
payments, Issuer will pay all expenses (including without limitation
registration fees, qualification fees, blue sky fees and expenses
(including the fees and expenses of counsel), legal expenses, including the
reasonable fees and expenses of one counsel to the holders whose Option
Shares are being registered, printing expenses and the costs of special
audits or 'cold comfort' letters, expenses of underwriters, excluding
discounts and commissions but including liability insurance if Issuer so
desires or the underwriters so require, and the reasonable fees and
expenses of any necessary special experts) in connection with each
registration pursuant to Section 10(a) above (including
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17. PROPOSED MERGER -- (CONTINUED)
the related offerings and sales by holders of Option Shares) and all other
qualifications, notifications or exemptions pursuant to Section 10(a)
above.
(d) Indemnification. In connection with any registration under
Section 10(a) above Issuer hereby indemnifies the Selling Shareholders, and
each underwriter thereof, including each person, if any, who controls such
holder or underwriter within the meaning of Section 15 of the Securities
Act, against all expenses, losses, claims, damages and liabilities caused
by any untrue, or alleged untrue, statement of a material fact contained in
any registration statement or prospectus or notification or offering
circular (including any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission, or alleged omission, to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such
expenses, losses, claims, damages or liabilities of such indemnified party
are caused by any untrue statement or alleged untrue statement that was
included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Selling Shareholders, or by such underwriter, as the
case may be, for all such expenses, losses, claims, damages and liabilities
caused by any untrue, or alleged untrue, statement, that was included by
Issuer in any such registration statement or prospectus or notification or
offering circular (including any amendments or supplements thereto) in
reliance upon, and in conformity with, information furnished in writing to
Issuer by such holder or such underwriter, as the case may be, expressly
for such use.
Promptly upon receipt by a party indemnified under this Section 10(d)
of notice of the commencement of any action against such indemnified party
in respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 10(d), such indemnified party shall
notify the indemnifying party in writing of the commencement of such
action, but the failure so to notify the indemnifying party shall not
relieve it of any liability which it may otherwise have to any indemnified
party under this Section 10(d). In case notice of commencement of any such
action shall be given to the indemnifying party as above provided, the
indemnifying party shall be entitled to participate in and, to the extent
it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense of such action at its own expense, with counsel
chosen by it and satisfactory to such indemnified party. The indemnified
party shall have the right to employ separate counsel in any such action
and participate in the defense thereof, but the fees and expenses of such
counsel (other than reasonable costs of investigation) shall be paid by the
indemnified party unless (i) the indemnifying party either agrees to pay
the same, (ii) the indemnifying party fails to assume the defense of such
action with counsel satisfactory to the indemnified art , or (iii) the
indemnified party has been advised by counsel that one or more legal
defenses may be available to the indemnifying party that may be contrary to
the interest of the indemnified party, in which case the indemnifying party
shall be entitled to assume the defense of such action notwithstanding its
obligation to bear fees and expenses of such counsel. No indemnifying party
shall be liable for any settlement entered into without its consent, which
consent may not be unreasonably withheld.
If the indemnification provided for in this Section 10(d) is
unavailable to a party otherwise entitled to be indemnified in respect of
any expenses, losses, claims, damages or liabilities referred to herein,
then the indemnifying party, in lieu of indemnifying such party otherwise
entitled to be indemnified, shall contribute to the amount paid or payable
by such party to be indemnified as a result of such expenses, losses,
claims, damages or liabilities in such proportion as is appropriate to
reflect the relative benefits received by Issuer, the Selling Shareholders
and the underwriters from the offering of the securities and also the
relative fault of Issuer, the Selling Shareholders and the underwriters in
connection with the statements or omissions which resulted in such
expenses, losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable by a party as
a result of the expenses, losses, claims,
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17. PROPOSED MERGER -- (CONTINUED)
damages and liabilities referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim; provided,
however, that in no case shall any Selling Shareholder be responsible, in
the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11
(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Any
obligation by any holder to indemnify shall be several and not joint with
other holders.
In connection with any registration pursuant to Section 10(a) above,
Issuer and each Selling Shareholder (other than Grantee) shall enter into
an agreement containing the indemnification provisions of this Section
10(d).
(e) Miscellaneous Reporting. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to
permit the expeditious sale at any time of any Option Shares by the Selling
Shareholders thereof in accordance with and to the extent applicable and
permitted by any rule or regulation promulgated by the SEC from time to
time, including, without limitation, Rule 144A. Issuer shall at its expense
provide the Selling Shareholders with any information necessary in
connection with the completion and filing of any reports or forms required
to be filed by them under the Securities Act or the Exchange Act, or
required pursuant to any state securities laws or the rules of any stock
exchange.
(f) Issue Taxes. Issuer will pay all stamp taxes in connection with
the issuance and the sale of the Option Shares and in connection with the
exercise of the Option, and will save the Selling Shareholders harmless,
without limitation as to time, against any and all liabilities, with
respect to all such taxes.
11. Quotation; Listing. If Issuer Common Stock or any other
securities to be acquired in connection with the exercise of the Option are
then authorized for quotation or trading or listing on the NASDAQ or any
securities exchange or market, Issuer, upon the request of Holder, will
promptly file an application, if required, to authorize for quotation or
trading or listing the shares of Issuer Common Stock or other securities to
be acquired upon exercise of the Option on the NASDAQ or such other
securities exchange or market and will use its best efforts to obtain
approval, if required, of such quotation or listing as soon as practicable.
12. Division of Option. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Holder, upon
presentation and surrender of this Agreement at the principal office of
Issuer for other Agreements providing for Options of different
denominations entitling the holder thereof to purchase in the aggregate the
same number of shares of Issuer Common Stock purchasable hereunder. The
terms 'Agreement' and 'Option' as used herein include any other Agreements
and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer,
whether or not the Agreement so lost, stolen, destroyed or mutilated shall
at any time be enforceable by anyone.
13. Miscellaneous.
(a) Expenses. 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
provided, however, that the Issuer shall bear and pay all fees, costs and
expenses incurred in connection with Section 10 hereof.
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17. PROPOSED MERGER -- (CONTINUED)
(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
(c) Entire Agreement: No Third-Party Beneficiaries;
Severability. This Agreement, together with the Plan and the other
documents and instruments referred to herein and therein, between Grantee
and Issuer (i) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof and (ii) is not intended to
confer upon any person other than the parties hereto (other than the
indemnified parties under Section 10(d) and any transferees of the Option
Shares or any permitted transferee of this Agreement pursuant to Section
13(h)) any rights or remedies hereunder. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent
jurisdiction or Regulatory Authority to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
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 Authority determines that the Option does not permit Holder to
acquire, or does not require Issuer to repurchase, the full number of
shares of Issuer Common Stock as provided in Section 5 (as may be adjusted
herein), it is the express intention of Issuer to allow Holder to acquire
or to require Issuer to repurchase such lesser number of shares as may be
permissible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Pennsylvania without regard
to any applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied
(with confirmation) or mailed by registered or certified mail (return
receipt requested) to the parties at the addresses set forth in the Plan
(or at such other address for a party as shall be specified by like
notice).
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by
any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other party, except that Holder
may assign this Agreement to a wholly-owned subsidiary of Holder and Holder
may assign its rights hereunder in whole or in part after the occurrence of
a Purchase Event. Subject to the preceding sentence, this Agreement shall
be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
(i) Further Assurances. In the event of any exercise of the Option by
the Holder, Issuer and the Holder shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such
exercise.
(j) Specific Performance. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may have for
any failure to perform this Agreement.
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17. PROPOSED MERGER -- (CONTINUED)
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
EXECUFIRST BANCORP, INC.
By: __________________________________
Title:
REPUBLIC BANCORPORATION, INC.
By: __________________________________
Title:
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17. PROPOSED MERGER -- (CONTINUED)
ANNEX H
REPUBLIC BANCORPORATION, INC. STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of November 17, 1995 (the 'Agreement'), by
and between Republic Bancorporation, Inc., a Pennsylvania corporation
('Issuer'), and ExecuFirst Bancorp, Inc. a Pennsylvania corporation ('Grantee').
RECITALS
(A) The Plan. Grantee and Issuer have on a date prior to the date hereof,
entered into an Agreement and Plan of Merger, dated as of November 17, 1995 (the
'Plan'), providing for, among other things, the merger of Issuer with and into
the Grantee, with the Grantee being the surviving corporation.
(B) Condition to Plan. As a condition and inducement to Grantee's
execution of the Plan and Grantee's agreement referred to in the next sentence,
Grantee has required that Issuer agree, and Issuer has agreed, to grant Grantee
the Option (as hereinafter defined). As a condition and inducement to Issuer's
execution of the Plan and this Agreement, Grantee has agreed to grant an option
to Issuer on terms and conditions substantially identical to those of the Option
and this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. Defined Terms. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Plan.
2. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the
'Option') to purchase a number of shares of common stock, par value $.01
per share ('Issuer Common Stock'), of Issuer up to 158,058 of such shares
(as adjusted as set forth herein, the 'Option Shares', which shall include
the Option Shares before and after any transfer of such Option Shares, but
in no event shall the number of Option Shares for which this Option is
exercisable exceed 19.9% of the issued and outstanding shares of Issuer
Common Stock) at a purchase price per Option Share (as adjusted as set
forth herein, the 'Purchase Price') equal to $8.50 per share of Issuer
Common Stock.
3. Transferability of Option. The Option granted hereunder may not be
transferred by the Grantee except to a 'Parent Corporation' or a
'Subsidiary Corporation', as such terms are defined in subsections (e) and
(f), respectively, of Section 424 of the Internal Revenue Code of 1986, as
amended.
4. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or the Plan, and (ii) no preliminary or
permanent injunction or other order against the delivery of shares covered
by the Option issued by any court of competent jurisdiction in the United
States shall be in effect, the Holder may exercise the Option, in whole or
in part, at any time and from time to time following the occurrence of a
Purchase Event (as hereinafter defined); provided that the Option shall
terminate and be of no force and effect upon the earliest to occur of (A)
the Effective Time, (B) termination of the Plan in accordance with the
terms thereof prior to the occurrence of a Purchase Event (other than a
termination resulting from a willful breach by the Issuer of any covenant,
representation or warranty contained therein) or (C) twelve (12) months
after termination of the Plan if such termination follows the occurrence of
a Purchase Event or is due to a willful breach by the Issuer of any
covenant contained therein; provided, however, that any purchase of shares
upon exercise of the Option shall be subject to compliance with applicable
law. The term 'Holder' shall mean the holder or holders of the Option from
time to time, and which initially is
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17. PROPOSED MERGER -- (CONTINUED)
Grantee. The rights set forth in Section 9 hereof shall terminate when the
right to exercise the Option terminates (other than as a result of a
complete exercise of the Option) as set forth herein.
(b) As used herein, a 'Purchase Event' means any of the following
events:
(i) Without Grantee's prior written consent, Issuer shall have
recommended, proposed or announced an intention to authorize, recommend
or propose, or entered into an agreement with any person (other than
Grantee or any subsidiary of Grantee) to effect (A) a merger,
consolidation or similar transaction involving Issuer or any of its
significant subsidiaries (other than transactions solely between
Issuer's subsidiaries that are not violative of the Plan), (B) the
disposition, by sale, lease, exchange or otherwise, of assets or
deposits of Issuer or any of its significant subsidiaries representing
in either case 22.5% or more of the consolidated assets or deposits of
Issuer and its subsidiaries or (C) the issuance, sale or other
disposition by Issuer of (including by way of merger, consolidation,
share exchange or any similar transaction) securities representing 22.5%
or more of the voting power of the Issuer or any of its significant
subsidiaries (each of (A), (B) or (C) an 'Acquisition Transaction'); or
(ii) any person (other than Grantee or any subsidiary of Grantee
shall have acquired beneficial ownership (as such term is defined in
Rule 13d-3 promulgated under the Exchange Act) of or the right to
acquire beneficial ownership of, or any 'group' (as such term is defined
in Section 13(d)(3) of the Exchange Act), other than a group of which
Grantee or Issuer or any affiliates or persons participating with any
affiliate or any subsidiary of Grantee or Issuer shall have been formed
to have acquired beneficial ownership of or has the right to acquire
beneficial ownership of, 25% or more of the voting power of Issuer or
any of its significant subsidiaries.
(c) Issuer shall notify Grantee promptly in writing of the occurrence
of any Purchase Event, it being understood that the giving of such notice
by Issuer shall not be a condition to the right of Holder to exercise the
Option.
(d) In the event Holder wishes to exercise the Option or any part
thereof, it shall send to Issuer a written notice (the date of which being
herein referred to as the 'Notice Date') specifying (i) the total number of
Option Shares it intends to purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 15
business days from the Notice Date for the closing (the 'Closing') of such
purchase (the 'Closing Date'); provided that the first notice of exercise
shall be sent to Issuer within 180 days after the first Purchase Event of
which Grantee has been notified and if no such notification is given within
such 180 day time period, the right to exercise shall expire. If prior
notification to or approval of any Regulatory Authority is required in
connection with such purchase, Issuer shall cooperate with the Holder in
the filing of the required notice of application for approval and the
obtaining of such approval and the Closing shall occur immediately
following such regulatory approvals (and any mandatory waiting periods).
Any exercise of the Option shall be deemed to occur on the Notice Date
relating thereto.
5. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated
by Issuer, an amount equal to the Purchase Price multiplied by the number
of Option Shares to be purchased on such Closing Date, and (ii) present and
surrender this Agreement to the Issuer at the address of the Issuer
specified in Section 13(f).
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section
4(a), (i) Issuer shall deliver to Holder (A) a certificate or certificates
representing the Option Shares to be purchased at such Closing, which
Option Shares shall be free and clear of all Liens and subject to no
preemptive rights, and (B) if the Option is exercised in part only, an
executed new agreement with the same terms as this Agreement evidencing the
right to purchase the balance of the shares of Issuer Common Stock
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17. PROPOSED MERGER -- (CONTINUED)
purchasable hereunder, and (ii) Holder shall deliver to Issuer a letter
agreeing that Holder shall not offer to sell or otherwise dispose of such
Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.
(c) In addition to any other legend that is required by applicable
law, certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as
follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE 'SECURITIES ACT') AND
ARE 'RESTRICTED SECURITIES' AS THAT TERM IS DEFINED IN RULE 144 UNDER
THE SECURITIES ACT. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER
THE SECURITIES ACT OR A VALID EXEMPTION THEREFROM. THE SHARES ARE
SUBJECT TO FURTHER RESTRICTIONS WITH RESPECT TO SALE OF TRANSFER
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF NOVEMBER
17, 1995. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the portion of the above legend
relating to the Securities Act shall be removed by delivery of substitute
certificates without such legend if Holder shall have delivered to Issuer a
copy of a letter from the staff of the SEC, or an opinion of counsel in
form and substance reasonably satisfactory to Issuer and its counsel, to
the effect that such legend is not required for purposes of the Securities
Act.
(d) Upon the giving by Holder to Issuer of the written notice of
exercise of the Option provided for under Section 3(e), the tender of the
applicable purchase price in immediately available funds and the tender of
this Agreement to Issuer, Holder shall be deemed to be the holder of record
of the shares of Issuer Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall then be
closed or that certificates representing such shares of Issuer Common Stock
shall not then be actually delivered to Holder. Issuer shall pay all
expenses, and any and all United States federal, state, and local taxes and
other charges that may be payable in connection with the preparation,
issuance and delivery of stock certificates under this Section in the name
of Holder or its assignee, transferee, or designee.
(e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued shares of Issuer
Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other
options, warrants, convertible securities and other rights to purchase
Issuer Common Stock, (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by
any other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by Issuer, (iii) promptly to take all
action as may from time to time be required (including (A) complying with
all premerger notification, reporting and waiting period requirements and
(B) in the event prior approval of or notice to any Regulatory Authority is
necessary before the Option may be exercised, cooperating fully with Holder
in preparing such applications or notices and providing such information to
such Regulatory Authority as it may require) in order to permit Holder to
exercise the Option and Issuer duly and effectively to issue shares of the
Issuer Common Stock pursuant hereto, and (iv) promptly to take all action
provided herein to protect the rights of Holder against dilution.
6. Representations and Warranties of Issuer. Issuer hereby represents
and warrants to Grantee (and Holder, if different than Grantee) as follows:
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17. PROPOSED MERGER -- (CONTINUED)
(a) Corporate Authority. Issuer has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby; the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Issuer and the Issuer's
Board of Directors, by at least a two-thirds vote, has waived the
restriction of ownership imposed in Section 11.1 of its certificate of
incorporation ('Certificate of Incorporation') with respect to this
Option, and no other corporate proceedings on the part of Issuer are
necessary to authorize this Agreement or to consummate the transactions
so contemplated.
(b) Beneficial Ownership. To the best knowledge of Issuer, as of
the date of this Agreement, no person or group has beneficial ownership
of more than 10% of the issued and outstanding shares of Issuer Common
Stock.
(c) Shares Reserved for Issuance; Capital Stock. Issuer has taken
all necessary corporate action to authorize and reserve and permit it to
issue, and at all times from the date hereof through the termination of
this Agreement in accordance with its terms, will have reserved for
issuance upon the exercise of the Option, that number of shares of
Issuer Common Stock equal to the maximum number of shares of Issuer
Common Stock at any time and from time to time purchasable upon exercise
of the Option, and all such shares, upon issuance pursuant to the
Option, will be duly authorized, validly issued, fully paid and
nonassessable, and will be delivered free and clear of all claims,
liens, encumbrances, and security interests (other than those created by
this Agreement) and not subject to any preemptive rights.
(d) No Violations. The execution, delivery and performance of this
Agreement does not or will not, and the consummation by Issuer of any of
the transactions contemplated hereby will not, constitute or result in
(A) a breach or violation of, or a default under, its Articles of
Incorporation or by-laws ('ByLaws'), or the comparable governing
instruments of any of its subsidiaries, or (B) a breach or violation of,
or a default under, any agreement, lease, contract, note, mortgage,
indenture, arrangement or other obligation of it or any of its
subsidiaries (with or without the giving of notice, the lapse of time or
both) or under any law, rule, ordinance or regulation or judgment,
decree, order, award or governmental or nongovernmental permit or
license to which it or any of its subsidiaries is subject, that would,
in any case give any other person the ability to prevent or enjoin
Issuer's performance under this Agreement in any material respect.
7. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that Grantee has full corporate power and
authority to enter into this Agreement and, subject to obtaining the
approvals referred to in this Agreement, to consummate the transactions
contemplated by this Agreement; the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of
Grantee; and this Agreement has been duly executed and delivered by
Grantee.
8. Adjustment upon Changes in Issuer Capitalization, etc. (a) In the
event of any change in Issuer Common Stock by reason of a stock dividend,
stock split, split-up, recapitalization, combination, exchange of shares,
or similar transaction, the type and number of shares or securities subject
to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements
governing such transaction so that Holder shall receive, upon exercise of
the Option, the number and class of shares or other securities or property
that Holder would have received in respect of Issuer Common Stock if the
Option had been exercised immediately prior to such event, or the record
date therefor, as applicable. If any additional shares of Issuer Common
Stock are issued after the date of this Agreement (other than pursuant to
an event described in the first sentence of this Section 8(a), upon
exercise of any option to purchase Issuer Common Stock outstanding on the
date hereof or upon conversion into Issuer Common Stock of any convertible
security of Issuer outstanding on the date hereof), the
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17. PROPOSED MERGER -- (CONTINUED)
number of shares of Issuer Common Stock subject to the Option shall be
adjusted so that, after such issuance it, together with any share of Issuer
Common Stock previously issued pursuant hereto, equals 19.9% of the number
of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option. No
provision of this Section 8 shall be deemed to affect or change, or
constitute authorization for any violation of, any of the covenants or
representations in the Plan.
(b) In the event that Issuer shall enter into an agreement (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) to permit any person, other than Grantee
or one of its subsidiaries, to merge into Issuer and Issuer shall be the
continuing or surviving corporation, but, in connection with such merger,
the then outstanding shares of Issuer Common Stock shall be changed into or
exchanged for stock or other securities of Issuer or any other person or
cash or any other property or the outstanding shares of Issuer Common Stock
immediately prior to such merger shall after such merger represent less
than 50% of the outstanding shares and share equivalents of the merged
company, or (iii) to sell or otherwise transfer all or substantially all of
its assets or deposits to any person, other than Grantee or one of its
subsidiaries, then, and in each such case, the agreement governing such
transaction shall be subject to this Agreement in accordance with the terms
provided herein and make proper provisions so that the Option shall, upon
the consummation of any such transaction and upon the terms and conditions
set forth herein, be converted into, or exchanged for, an option (the
'Substitute Option'), at the election of Holder, of either (x) the
Acquiring Corporation (as hereinafter defined), (y) any person that
controls the Acquiring Corporation, or (z) in the case of a merger
described in clause (ii), Issuer (such person being referred to as
'Substitute Option Issuer').
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to Holder. Substitute Option
Issuer shall also enter into an agreement with Holder in substantially the
same form as this Agreement, which shall be applicable to the Substitute
Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock (as hereinafter defined) as is equal to
the Assigned Value (as hereinafter defined) multiplied by the number of
shares of Issuer Common Stock for which the Option was theretofore
exercisable, divided by the Average Price (as hereinafter defined). The
exercise price of Substitute Option per share of Substitute Common Stock
(the 'Substitute Option Price') shall then be equal to the Purchase Price
multiplied by a fraction in which the numerator is the number of shares of
Issuer Common Stock for which the Option was theretofore exercisable and
the denominator is the number of shares of the Substitute Common Stock for
which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(1) 'Acquiring Corporation' shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing
or surviving person, or (iii) the transferee of all or substantially all
of Issuer's assets (or a substantial part of the assets of its
subsidiaries taken as a whole).
(2) 'Substitute Common Stock' shall mean the shares of capital
stock (or similar equity interest) with the greatest voting power in
respect of the election of directors (or persons similarly responsible
for the direction of the business and affairs) of the Substitute Option
Issuer.
(3) 'Assigned Value'shall mean the highest of (w) the price per
share of Issuer Common Stock at which a Tender Offer or an Exchange
Offer therefor has been made, (x) the price per share of Issuer Common
Stock to be paid by any third party pursuant to an
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17. PROPOSED MERGER -- (CONTINUED)
agreement with Issuer, and (y) the highest closing price for shares of
Issuer Common stock within the six month period immediately preceding
the consolidation, merger, or sale in question and (z) in the event of a
sale of all or substantially all of Issuer's assets or deposits an
amount equal to (i) the sum of the price paid in such sale for such
assets (and/or deposits) and the current market value of the remaining
assets of Issuer, as determined by a nationally or regionally recognized
investment banking firm selected by Holder divided by (ii) the number of
shares of Issuer Common Stock outstanding at such time. In the event
that a Tender Offer or an Exchange Offer is made for Issuer Common Stock
or an agreement is entered into for a merger or consolidation involving
consideration other than cash, the value of the securities or other
property issuable or deliverable in exchange for Issuer Common Stock
shall be determined by a nationally or regionally recognized investment
banking firm selected by Holder.
(4) 'Average Price' shall mean the average closing price of a share
of Substitute Common Stock for the one year immediately preceding the
consolidation, merger, or sale in question, but in no event higher than
the closing price or the purchase price of the shares of Substitute
Common Stock on the day preceding such consolidation, merger or sale;
provided that if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to the Purchase Price, a
share of common stock issued by Issuer, the person merging into Issuer
or by any company which controls such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.9% of the aggregate
of the shares of Substitute Common Stock outstanding prior to exercise of
the Substitute Option. In the event that the Substitute Option would be
exercisable for more than 19.9% of the aggregate of the shares of
Substitute Common Stock but for the limitation in the first sentence of
this Section 7(f), Substitute Option Issuer shall make a cash payment to
Holder equal to the excess of (i) the value of the Substitute Option
without giving effect to the limitation in the first sentence of this
Section 8(f) over (ii) the value of the Substitute Option after giving
effect to the limitation in the first sentence of this Section 8(f). This
difference in value shall be determined by a nationally-recognized
investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in Section
8(b) unless prior to the entering of such transaction the Acquiring
Corporation and any person that controls the Acquiring Corporation assumed
in writing all the obligations of Issuer hereunder and took all other
actions that may be necessary so that the provisions of this Section 8 are
given full force and effect (including, without limitation, any action that
may be necessary so that the holders of the other shares of common stock
issued by Substitute Option Issuer are not entitled to exercise any rights
by reason of the issuance or exercise of the Substitute Option and the
shares of Substitute Common Stock are otherwise in no way distinguishable
from or have lesser economic value (other than any diminution in value
resulting from the fact that the Substitute Common Stock are restricted
securities, as defined in Rule 144 under the Securities Act or any
successor provision) than other shares of common stock issued by Substitute
Option Issuer).
9. Repurchase at the Option of Holder. (a) Subject to the last
sentence of Section 4(a), at the demand of Holder at any time commencing
upon the first occurrence of a Repurchase Event (as defined in Section
9(d)) and ending 12 months immediately thereafter, Issuer shall repurchase
from Holder (i) the Option or any part of the Option or (ii) any or all
shares of Issuer Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The dates on which
Holder may exercise its rights under this Section 9 are referred to as the
'Request Dates'. Such repurchase shall be at an aggregate price (the
'Section 9 Repurchase Consideration') equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to
which Holder then has beneficial ownership;
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17. PROPOSED MERGER -- (CONTINUED)
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number
of shares of Issuer Common Stock with respect to which the Option has
not been exercised; and
(iii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7) paid (or, in the
case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Holder for
each share of Issuer Common Stock with respect to which the Option has
been exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 9, Issuer shall,
within 10 business days after any Request Date, pay the Section 9
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment, Holder shall surrender to Issuer the
Option or any part of the Option and the certificates evidencing the shares
of Issuer Common Stock purchased thereunder with respect to which Holder
then has exercised its rights under this Section 9, and Holder shall
warrant that it has sole record and beneficial ownership of such shares and
that the same are then free and clear of all Liens. Notwithstanding the
foregoing, to the extent that prior notification to or approval of any
Regulatory Authority is required in connection with the payment of all or
any portion of the Section 9 Repurchase Consideration, Holder shall have
the ongoing option to revoke its request for repurchase pursuant to Section
9, in whole or in part, or to require that Issuer deliver from time to time
that portion of the Section 9 Repurchase Consideration that it is not then
so prohibited from paying and promptly file the required notice or
application for approval and expeditiously process the same (and each party
shall cooperate with the other in the filing of any such notice or
application and the obtaining of any such approval). If any Regulatory
Authority disapproves of any part of Issuer's proposed repurchase pursuant
to this Section 8, Issuer shall promptly give notice of such fact to
Holder. If any Regulatory Authority prohibits the repurchase in part but
not in whole, then Holder shall have the right (i) to revoke the repurchase
request or (ii) to the extent permitted by such Regulatory Authority,
determine whether the repurchase should apply to the Option and/or Option
Shares and to what extent to each, and Holder shall thereupon have the
right to exercise the Option as to the number of Option Shares for which
the Option was exercisable at the Request Date less the sum of the number
of shares covered by the Option in respect of which payment has been made
pursuant to Section 9(a)(ii) and the number of shares covered by the
portion of the Option (if any) that has been repurchased. Holder shall
notify Issuer of its determination under the preceding sentence within five
(5) business days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Holder's
rights under this Section 9 shall terminate on the date of termination of
this Option pursuant to Section 4(a).
(c) For purposes of this Agreement, the 'Applicable Price' means the
highest of (i) the highest price per share of Issuer Common Stock paid for
any such share by the person or groups described in Section 8(d)(i), (ii)
the price per share of Issuer Common Stock received by holders of Issuer
Common Stock in connection with any merger or other business combination
transaction described in Section 8(b)(i), 8(b)(ii) or 8(b)(iii), or (iii)
the highest closing sales price per share of Issuer Common Stock quoted on
the NASDAQ Small Cap market or the National Daily Quotation Bureau, as the
case may be; provided, however, that in the event of a sale of less than
all of Issuer's assets, the Applicable Price shall be the sum of the price
paid in such sale for such assets and the current market value of the
remaining assets of Issuer as determined by a nationally or regionally
recognized investment banking firm selected by Holder, divided by the
number of shares of the Issuer Common Stock outstanding at the time of such
sale. If the consideration to be offered, paid or received pursuant to
either of the foregoing clauses (i) or (ii) shall be other than in cash,
the value of such consideration shall be determined in good faith by an
independent nationally or regionally recognized investment banking firm
selected by Holder and reasonably acceptable to Issuer, which determination
shall be conclusive for all purposes of this Agreement.
H-7
<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
(d) As used herein, 'Repurchase Event' shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired
beneficial ownership of (as such term is defined in Rule 13d-3 promulgated
under the Exchange Act), or the right to acquire beneficial ownership of,
or any 'group' (as such term is defined under the Exchange Act) shall have
been formed which beneficially owns or has the right to acquire beneficial
ownership of, 50% or more of the then outstanding shares of Issuer Common
Stock, or (ii) any of the transactions described in Section 8(b)(i),
8(b)(ii) or 8(b)(iii) shall be consummated.
10. Registration Rights. (a) If Issuer at any time after the exercise
of the Option proposes for any reason to register any shares of Issuer
Common Stock under the Securities Act or in the event that any registration
pursuant to this Section 10(a) shall be, in whole or in part, an
underwritten offering of securities of such Issuer Common Stock, Issuer
will at each such time promptly give written notice to any Holder,
including Grantee and any permitted transferee ('Selling Shareholders') of
its intention to do so and, upon the written request of any Selling
Shareholder given within 30 days after receipt of any such notice (which
request shall specify the number of shares of Issuer Common Stock intended
to be included in such registration by the Selling Shareholder), Issuer
will cause all such shares for which a Selling Shareholder requests
participation in such registration, to be so registered; provided, however,
that Issuer may elect to not cause any such shares to be so registered (i)
if the managing underwriters, if any, in good faith object to the inclusion
of such shares for valid business reasons, or (ii) in the case of a
registration solely to implement an employee benefit plan or a registration
filed on Form S-4 of the Securities Act or any successor Form; provided,
further, however, that such election pursuant to (i) may only be made two
times. If some, but not all, the shares of Issuer Common Stock, with
respect to which Issuer shall have received requests for registration
pursuant to this Section 10(a), shall be excluded from such registration,
Issuer shall make appropriate allocation of shares to be registered among
the Selling Shareholders desiring to register their shares pro rata in the
proportion that the number of shares requested to be registered by each
such Selling Shareholder bears to the total number of shares requested to
be registered by all such Selling Shareholders then desiring to have Issuer
Common Stock registered for sale.
(b) Conditions to Registration. Issuer shall use all reasonable
efforts to cause each registration statement referred to in Section 10(a)
above to become effective and to obtain all consents or waivers of other
parties which are required therefor and to keep such registration statement
effective; provided, however, that Issuer shall not be required to maintain
the effectiveness of any registration statement after the expiration of
nine months from the effective date of such registration statement. Issuer
shall use all reasonable efforts to make any filings. and take all steps,
under all applicable state securities laws to the extent necessary to
permit the sale or other disposition of the Option Shares so registered in
accordance with the intended method of distribution for such shares;
provided, however, that Issuer shall not be required to consent to general
jurisdiction or qualify to do business in any state where it is not
otherwise required to so consent to such jurisdiction or to so qualify to
do business.
(c) Expenses. Except where applicable state law prohibits such
payments, Issuer will pay all expenses (including without limitation
registration fees, qualification fees, blue sky fees and expenses
(including the fees and expenses of counsel), legal expenses, including the
reasonable fees and expenses of one counsel to the holders whose Option
Shares are being registered, printing expenses and the costs of special
audits or 'cold comfort' letters, expenses of underwriters, excluding
discounts and commissions but including liability insurance if Issuer so
desires or the underwriters so require, and the reasonable fees and
expenses of any necessary special experts) in connection with each
registration pursuant to Section 10(a) above (including the related
offerings and sales by holders of Option Shares) and all other
qualifications, notifications or exemptions pursuant to Section 10(a)
above.
(d) Indemnification. In connection with any registration under
Section 10(a) above Issuer hereby indemnifies the Selling Shareholders, and
each underwriter thereof, including each person, if any, who controls such
holder or underwriter within the meaning of Section 15 of the Securities
H-8
<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
Act, against all expenses, losses, claims, damages and liabilities caused
by any untrue, or alleged untrue, statement of a material fact contained in
any registration statement or prospectus or notification or offering
circular (including any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission, or alleged omission, to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such
expenses, losses, claims, damages or liabilities of such indemnified party
are caused by any untrue statement or alleged untrue statement that was
included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Selling Shareholders, or by such underwriter, as the
case may be, for all such expenses, losses, claims, damages and liabilities
caused by any untrue, or alleged untrue, statement, that was included by
Issuer in any such registration statement or prospectus or notification or
offering circular (including any amendments or supplements thereto) in
reliance upon, and in conformity with, information furnished in writing to
Issuer by such holder or such underwriter, as the case may be, expressly
for such use.
Promptly upon receipt by a party indemnified under this Section 10(d)
of notice of the commencement of any action against such indemnified party
in respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 10(d), such indemnified party shall
notify the indemnifying party in writing of the commencement of such
action, but the failure so to notify the indemnifying party shall not
relieve it of any liability which it may otherwise have to any indemnified
party under this Section 10(d). In case notice of commencement of any such
action shall be given to the indemnifying party as above provided, the
indemnifying party shall be entitled to participate in and, to the extent
it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense of such action at its own expense, with counsel
chosen by it and satisfactory to such indemnified party. The indemnified
party shall have the right to employ separate counsel in any such action
and participate in the defense thereof, but the fees and expenses of such
counsel (other than reasonable costs of investigation) shall be paid by the
indemnified party unless (i) the indemnifying party either agrees to pay
the same, (ii) the indemnifying party fails to assume the defense of such
action with counsel satisfactory to the indemnified art , or (iii) the
indemnified party has been advised by counsel that one or more legal
defenses may be available to the indemnifying party that may be contrary to
the interest of the indemnified party, in which case the indemnifying party
shall be entitled to assume the defense of such action notwithstanding its
obligation to bear fees and expenses of such counsel. No indemnifying party
shall be liable for any settlement entered into without its consent, which
consent may not be unreasonably withheld.
If the indemnification provided for in this Section 10(d) is
unavailable to a party otherwise entitled to be indemnified in respect of
any expenses, losses, claims, damages or liabilities referred to herein,
then the indemnifying party, in lieu of indemnifying such party otherwise
entitled to be indemnified, shall contribute to the amount paid or payable
by such party to be indemnified as a result of such expenses, losses,
claims, damages or liabilities in such proportion as is appropriate to
reflect the relative benefits received by Issuer, the Selling Shareholders
and the underwriters from the offering of the securities and also the
relative fault of Issuer, the Selling Shareholders and the underwriters in
connection with the statements or omissions which resulted in such
expenses, losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable by a party as
a result of the expenses, losses, claims, damages and liabilities referred
to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or
defending any action or claim; provided, however, that in no case shall any
Selling Shareholder be responsible, in the aggregate, for any amount in
excess of the net offering proceeds attributable to its Option Shares
included in the offering. No person guilty of fraudulent misrepresentation
(within the
H-9
<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
meaning of Section 11 (f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Any obligation by any holder to indemnify shall be
several and not joint with other holders.
In connection with any registration pursuant to Section 10(a) above,
Issuer and each Selling Shareholder (other than Grantee) shall enter into
an agreement containing the indemnification provisions of this Section
10(d).
(e) Miscellaneous Reporting. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to
permit the expeditious sale at any time of any Option Shares by the Selling
Shareholders thereof in accordance with and to the extent applicable and
permitted by any rule or regulation promulgated by the SEC from time to
time, including, without limitation, Rule 144A. Issuer shall at its expense
provide the Selling Shareholders with any information necessary in
connection with the completion and filing of any reports or forms required
to be filed by them under the Securities Act or the Exchange Act, or
required pursuant to any state securities laws or the rules of any stock
exchange.
(f) Issue Taxes. Issuer will pay all stamp taxes in connection with
the issuance and the sale of the Option Shares and in connection with the
exercise of the Option, and will save the Selling Shareholders harmless,
without limitation as to time, against any and all liabilities, with
respect to all such taxes.
11. Quotation; Listing. If Issuer Common Stock or any other
securities to be acquired in connection with the exercise of the Option are
then authorized for quotation or trading or listing on the NASDAQ or any
securities exchange or market, Issuer, upon the request of Holder, will
promptly file an application, if required, to authorize for quotation or
trading or listing the shares of Issuer Common Stock or other securities to
be acquired upon exercise of the Option on the NASDAQ or such other
securities exchange or market and will use its best efforts to obtain
approval, if required, of such quotation or listing as soon as practicable.
12. Division of Option. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Holder, upon
presentation and surrender of this Agreement at the principal office of
Issuer for other Agreements providing for Options of different
denominations entitling the holder thereof to purchase in the aggregate the
same number of shares of Issuer Common Stock purchasable hereunder. The
terms 'Agreement' and 'Option' as used herein include any other Agreements
and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer,
whether or not the Agreement so lost, stolen, destroyed or mutilated shall
at any time be enforceable by anyone.
13. Miscellaneous.
(a) Expenses. 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
provided, however, that the Issuer shall bear and pay all fees, costs and
expenses incurred in connection with Section 10 hereof.
(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
H-10
<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
(c) Entire Agreement: No Third-Party Beneficiaries;
Severability. This Agreement, together with the Plan and the other
documents and instruments referred to herein and therein, between Grantee
and Issuer (i) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof and (ii) is not intended to
confer upon any person other than the parties hereto (other than the
indemnified parties under Section 10(d) and any transferees of the Option
Shares or any permitted transferee of this Agreement pursuant to Section
13(h)) any rights or remedies hereunder. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent
jurisdiction or Regulatory Authority to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
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 Authority determines that the Option does not permit Holder to
acquire, or does not require Issuer to repurchase, the full number of
shares of Issuer Common Stock as provided in Section 5 (as may be adjusted
herein), it is the express intention of Issuer to allow Holder to acquire
or to require Issuer to repurchase such lesser number of shares as may be
permissible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Pennsylvania without regard
to any applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied
(with confirmation) or mailed by registered or certified mail (return
receipt requested) to the parties at the addresses set forth in the Plan
(or at such other address for a party as shall be specified by like
notice).
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by
any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other party, except that Holder
may assign this Agreement to a wholly-owned subsidiary of Holder and Holder
may assign its rights hereunder in whole or in part after the occurrence of
a Purchase Event. Subject to the preceding sentence, this Agreement shall
be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
(i) Further Assurances. In the event of any exercise of the Option by
the Holder, Issuer and the Holder shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such
exercise.
(j) Specific Performance. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may have for
any failure to perform this Agreement.
H-11
<PAGE>
17. PROPOSED MERGER -- (CONTINUED)
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
REPUBLIC BANCORPORATION, INC.
By: __________________________________
Title:
EXECUFIRST BANCORP, INC.
By: __________________________________
Title:
H-12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 1741 through 1750 of Subchapter C, Chapter 17, of the Pennsylvania
Business Corporation Law of 1988, as amended (the 'BCL'), contain provisions for
mandatory and discretionary indemnification of a corporation's directors,
officers and other personnel, and related matters.
Under Section 1741, subject to certain limitations, a corporation has the
power to indemnify directors and officer under certain prescribed circumstances
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with an action or
proceeding, whether civil, criminal, administrative or investigative (other than
derivative actions), to which any of them is a party or is threatened to be made
a party by reason of his being a representative, director or officer of the
corporation or serving at the request of the corporation as a representative of
another corporation, partnership, joint venture, trust or other enterprise, if
he acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the corporation and, with respect to any
criminal proceeding, had no reasonable cause to believe his conduct was
unlawful.
Section 1742 permits indemnification in derivative actions if the
appropriate standard of contact is met, except in respect of any claim, issue or
matter as to which the person has been adjudged to be liable to the corporation
unless and only to the extent that the proper court determines upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, the person is fairly and reasonably entitled to indemnity for the
expenses that the court deems proper.
Under Section 1743, indemnification is mandatory to the extent that the
officer or director has been successful on the merits or otherwise in defense of
any action or proceeding referred to in Section 1741 or 1742.
Section 1744 provides that, unless ordered by a court, any indemnification
under Section 1741 or 1742 shall be made by the corporation only as authorized
in the specific case upon a determination that the representative met the
applicable standard of conduct, and such determination will be made by (i) the
board of directors by a majority vote of a quorum of directors not parties to
the action or proceeding; (ii) if a quorum is not obtainable, or if obtainable
and a majority of disinterested directors so directs, by independent legal
counsel; or (iii) by the shareholders.
Section 1745 provides that expenses incurred by an officer, director,
employee or agent in defending a civil or criminal action or proceeding may be
paid by the corporation in advance of the final disposition of such action or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation.
Section 1746 provides generally that, except in any case where the act or
failure to act giving rise to the claim for indemnification is determined by a
court to have constituted willful misconduct or recklessness, the
indemnification and advancement of expenses provided by Subchapter 17C of the
BCL shall not be deemed exclusive of any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding that office.
Section 1747 also grants a corporation the power to purchase and maintain
insurance on behalf of any director or officer against any liability incurred by
him in his capacity as officer or director, whether or not the corporation would
have the power to indemnify him against the liability under Subchapter 17C of
the BCL.
II-1
<PAGE>
Sections 1748 and 1749 extend the indemnification and advancement of
expenses provisions contained in Subchapter 17C of the BCL to successor
corporations in fundamental changes and to representatives serving as
fiduciaries of employee benefit plans.
Section 1750 provides that the indemnification and advancement of expense
provided by, or granted pursuant to, Subchapter 17C of the BCL shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs and personal representative of such person.
ExecuFirst's Articles of Incorporation and By-Laws currently provide for
(i) mandatory indemnification of officers and directors (including former
officers and directors) of ExecuFirst to the fullest extent now or hereafter
permitted by applicable law, (ii) mandatory advancement or reimbursement of
expenses to such indemnified persons (subject to an undertaking to repay all
amounts so advanced in the event that it is determined that such person was not
entitled to indemnification and (iii) indemnification, at the discretion of the
ExecuFirst Board, of employees or agents of ExecuFirst or of directors,
officers, employees, agents, fiduciaries or trustees of another corporation,
partnership, joint venture, trust, employee benefit plan or other entity or
enterprise so serving at the request of ExecuFirst.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following documents are filed as a part of this Registration Statement.
(Exhibit numbers correspond to the exhibits required by Item 601 of Regulation
S-B for a Registration Statement on Form S-4.)
(a) Exhibits
The following exhibits are filed herewith or incorporated herein by
reference.
<TABLE>
<S> <C>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
2.1 Agreement and Plan of Merger, dated as of November 17, 1995, by and among the Registrant, Republic and
Bancorporation, Inc. ('Republic') (incorporated by reference to Annex A to the Proxy
Statement/Prospectus included as part of this Registration Statement).
2.2* Amendment to the Agreement and Plan of Merger.
5.1* Opinion of Klehr, Harrison, Harvey, Branzburg & Ellers as to the legality of the Registrant's Common
Stock being registered hereby.
8.1** Form of Tax opinion of Klehr, Harrison, Harvey, Branzburg & Ellers.
8.2* Tax opinion of Spector, Gadon & Rosen.
10.1** Form of Amended and Restated Employment Agreement by and between the Registrant and Zvi H. Muscal.
10.2** Form of Amended and Restated Employment Agreement by and between the Registrant and George S. Rapp.
10.3** Form of Employment Agreement by and between the Registrant and Rolf A. Stensrud.
10.4** Form of Employment Agreement by and between the Registrant and Kevin J. Gallagher.
10.5* Form of Agreement by and between the Registrant and Harry D. Madonna.
23.1* Consent of Klehr, Harrison, Harvey, Branzburg & Ellers with respect to the legality of securities being
registered (contained in Exhibit 5.1).
23.2** Consent of Klehr, Harrison, Harvey, Branzburg & Ellers with respect to certain tax matters (contained in
Exhibit 8.1).
23.3* Consent of Spector, Gadon & Rosen with respect to certain tax matters (contained in Exhibit 8.2).
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
23.4* Consent of Coopers & Lybrand, L.L.P. independent accountants, with respect to financial statements of
the Registrant.
23.5* Consent of Deloitte & Touche LLP, independent auditors, with respect to financial statements of
Republic.
23.6** Form of Consent of Berwind Financial Group with respect to its fairness opinion.
23.7** Form of Consent of Janney Montgomery Scott with respect to its fairness opinion.
24.1** Power of Attorney.
99** Consents of Persons to be named as directors.
</TABLE>
- ------------------
* Filed herewith.
** Previously Filed
(b) Financial Statement Schedules
Financial statement schedules with respect to Republic Bancorporation, Inc.
have been omitted since they are either not required, not applicable, or the
required information is shown in the consolidated financial statements, or notes
thereto, contained in the Proxy Statement/Prospectus filed as part of this
Registration Statement.
(c) Reports, Opinions and Appraisals
The opinion of Berwind Financial Group (attached as Annex C to the Proxy
Statement/Prospectus filed as a part of this Registration Statement).
The opinion of Janney Montgomery Scott (attached as Annex D to the Proxy
Statement/ Prospectus filed as a part of this Registration Statement).
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities
II-3
<PAGE>
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(d) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the Registration Statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that such
a claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(f) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(g) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to the Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Philadelphia, Commonwealth of Pennsylvania, on this 23rd day of April
1996.
EXECUFIRST BANCORP, INC.
BY: ________/S_/__ZVI H. MUSCAL_______
Zvi H. Muscal
Chairman of the Board, President
and Chief Executive Officer
<TABLE>
<S> <C> <C>
SIGNATURE TITLE(S) DATE
- ------------------------------------------ ----------------------------------------- -----------------------
/s/ ZVI H. MUSCAL Chairman of the Board, President and April 23, 1996
- ------------------------------------------ Chief Executive Officer (Principal
Zvi H. Muscal Executive Officer)
/s/ MICHAEL J. BRADLEY Director* April 23, 1996
- ------------------------------------------
Michael J. Bradley
/s/ JOHN F. D'APRIX Director* April 23, 1996
- ------------------------------------------
John F. D'Aprix
/s/ SHELDON E. GOLDBERG Director* April 23, 1996
- ------------------------------------------
Sheldon E. Goldberg
/s/ GERALD LEVINSON Director* April 23, 1996
- ------------------------------------------
Gerald Levinson
/s/ JAMES E. SCHLEIF Director* April 23, 1996
- ------------------------------------------
James E. Schleif
/s/ JOHN M. O'DONNELL Director* April 23, 1996
- ------------------------------------------
John M. O'Donnell
/s/ ALLEN L. KRAMER Director* April 23, 1996
- ------------------------------------------
Allen L. Kramer
/s/ GEORGE RAPP Executive Vice President and Chief April 23, 1996
- ------------------------------------------ Operating Officer (Principal Financial
George Rapp and Accounting Officer)
</TABLE>
- ------------------
* A power of attorney authorizing Zvi H. Muscal and George Rapp to sign the
Registration Statement on behalf of each director of the Registrant was
previously filed.
II-5
<PAGE>
EXHIBIT 2.2
AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER
This Amendment, by and between Republic Bancorporation, Inc. and ExecuFirst
Bancorp, Inc. dated as of November 17, 1995. The Agreement and Plan of Merger by
and between Republic Bancorporation, Inc. ('Republic') and ExecuFirst Bancorp,
Inc. ('ExecuFirst') dated as of November 17, 1995, is hereby amendment and
supplemented as follows:
1. Section 2.01, Merger Consideration, is hereby amended as follows:
a) to insert the parenthetical (i) in line ten of the second
paragraph of subsection (B) immediately preceding the phrase 'provided,
however'; and
b) to insert the phrase, '(ii) that to the extent that ExecuFirst
recognizes a deferred tax asset, the amount of such deferred tax asset
shall be deducted from shareholders' equity as defined in this
Agreement, in line ten of the second paragraph of subsection (B)
immediately preceding the phrase 'by (y)'.
2. Section 2.3, Exchange Procedures, is amended to delete the last
sentence of Subsection (A) in its entirety.
3. Section 3.09, Adverse Actions, is hereby amended to delete the
phrase '(1) knowingly take any action that would, or is reasonably likely
to, prevent or impede the merger from qualifying (i) for
pooling-of-interest accounting treatment or (ii) as a reorganization within
the meaning of Section 368(a) of the Code; provided, however that nothing
contained herein shall limit the ability of Republic or ExecuFirst to
exercise its rights under the Option Agreements and to insert in its place
the phrase (1) knowingly take any action that would, or is reasonably
likely to, prevent or impede the merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code;'.
4. Section 4.03(R), Representations and Warranties of
Republic-Pooling; Reorganization, shall be deleted in its entirety and the
following paragraph substituted in its stead:
(R) Reorganization. As of the date hereof, it is aware of no reason
why the Merger will fail to qualify as a reorganization under Section
368(A) of the Code.
5. Section 4.04, Representations and Warranties of ExecuFirst;
Reorganization, shall be deleted in its entirety and the following
paragraph substituted in its stead:
(R) Reorganization. As of the date hereof, it is aware of no reason
why the Merger will fail to qualify as a reorganization under Section
368(A) of the Code.
6. Section 5.07, Affiliate Agreements, shall be deleted in its
entirety and the phrase 'intentionally omitted' shall be inserted in its
stead.
7. Section 6.05, Pooling Letters, shall be deleted in its entirety and
the phrase 'intentionally omitted' shall be inserted in its stead.
8. Section 8.05, Expenses, shall be deleted in its entirety and the
following shall be inserted in its stead:
All fees and expenses incurred by ExecuFirst in connection with
this Plan and the transactions contemplated thereby, including, but not
limited to, certain legal, accounting and investment bank fees and
expenses related to the preparation and distribution of the
Prospectus/Joint Proxy Statement and the Registration Statement, will be
reimbursed by Republic upon consummation of the Merger.
2
<PAGE>
In the event that the Merger is not consummated, except as set
forth below, all fees and expenses incurred in connection with this Plan
and the transactions contemplated thereby will be paid by the party
incurring such expenses.
All expenses related to the preparation and distribution of the
Prospectus/Joint Proxy Statement and the Registration Statement shall be
shared pro-rata between the parties in proportion to the number of
shareholders of each of Republic and ExecuFirst.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in counterparts by its duly authorized officers, as of this day of
January, 1996.
REPUBLIC BANCORPORATION, INC.
By:_______/s/ ROLF A. STENSRUD______
Rolf A. Stensrud
EXECUFIRST BANCORP, INC.
By:__________/s/ ZVI MUSCAL_________
Zvi Muscal
3
<PAGE>
EXHIBIT 5.1
KLEHR, HARRSION, HARVEY, BRANZBURG & ELLERS
1401 WALNUT STREET
PHILADELPHIA, PA 19102
April 22, 1996
ExecuFirst Bancorp, Inc.
1513 Walnut Street
Philadelphia, PA 19102
Dear Sirs:
We have acted as counsel to ExecuFirst Bancorp, Inc., a Pennsylvania
corporation (the 'Corporation'), in connection with the registration on Form S-4
(the 'Registration Statement') under the Securities Act of 1933, as amended (the
'Securities Act'), of the offer to exchange a maximum of 1,985,658 shares of the
Corporation's common stock, par value $.01 (the 'ExecuFirst Shares') for all of
the issued and outstanding shares of common stock of Republic Bancorporation,
Inc. ('Republic Common Stock').
We have reviewed the Corporation's Certificate of Incorporation and
By-Laws, and are relying upon the originals, or copies certified or otherwise
identified to our satisfaction, of the corporate records of the Corporation and
such other instruments, certificates and representations of public officials,
officers and representatives of the Corporation as we have deemed necessary as a
basis for the opinion set forth below. In addition, we have assumed, without
independent verification, the genuineness of the signatures and the authenticity
of all documents furnished to us as originals and the conformance of all copies
to their respective originals.
Based upon the foregoing, and subject to the qualifications set forth
herein, we are of the opinion that:
The ExecuFirst Shares, when issued in exchange for shares of Republic
Common Stock pursuant to the terms set forth in the Registration Statement, will
be duly authorized, validly issued, fully paid and non-assessable.
We are members of the Bar of the Supreme Court of Pennsylvania and do not
express any opinion as to the matters governed by the laws other than the law of
the Commonwealth of Pennsylvania and the United States of America.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the caption 'Legal
Matters' contained therein. In giving such consent, we do not thereby admit that
we come within the category of persons whose consent is required under Section 7
of the Securities Act, or the Rules and Regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
KLEHR, HARRISON, HARVEY,
BRANZBURG & ELLERS
<PAGE>
EXHIBIT 8.1
[LETTERHEAD OF
KLEHR, HARRISON, HARVEY, BRANSBURG & ELLERS]
[FORM OF TAX OPINION]
April 23, 1996
(215) 569-4143
Execufirst Bancorp, Inc.
1513 Walnut Street
Philadelphia, PA 19102
Gentlemen:
We have acted as counsel to ExecuFirst Bancorp, Inc., a corporation
organized under the laws of the Commonwealth of Pennsylvania ('ExecuFirst') in
connection with the proposed merger (the 'Merger') of Republic Bancorporation,
Inc., a corporation organized under the laws of the Commonwealth of Pennsylvania
('Republic'), with and into ExecuFirst which, upon consummation of the Merger,
will change its corporate name to First Republic Bancorp, Inc., ('First
Republic'). You have requested our opinion regarding certain U.S. federal income
tax consequences of the Merger.
In rendering our opinion, we have reviewed the Agreement and Plan of
Merger, dated as of November 17, 1995 (as same may be amended), by and between
ExecuFirst and Republic (the 'Merger Agreement'), the Prospectus/Joint Proxy
Statement to stockholders of ExecuFirst and Republic (the 'Prospectus/Joint
Proxy Statement'), and such other materials as we have deemed necessary or
appropriate as a basis for our opinion.
In rendering our opinion, we have assumed that the Merger will be
consummated in accordance with the Merger Agreement and that the
Prospectus/Joint Proxy Statement accurately reflects the material facts of the
Merger and those surrounding ExecuFirst and Republic. In addition, as to any
facts material to this opinion which we did not independently establish or
verify, we have relied upon the facts contained in the statements and
representations of officers and other representatives of ExecuFirst and
Republic, which facts may in certain instances derive from the best knowledge of
such persons without duty of inquiry, and we have assumed that such statements
and representations will be updated by officers and other representatives of
ExecuFirst and Republic as of the consummation date of the Merger.
In rendering our opinion, we have considered the applicable provisions of
the Internal Revenue Code of 1986, as amended (the 'Code'), Treasury
regulations, pertinent judicial authorities, administrative rulings of the
Internal Revenue Service, and such other authorities as we have considered
relevant. Such laws, regulations, judicial authorities and rulings are subject
to change at any time. Any such change could affect the continuing validity of
the opinions set forth below.
On the basis of, and subject to the foregoing, and in reliance upon the
representations described above, we are of the opinion that, under present law,
for U.S. federal income tax purposes:
1. The Merger will be treated as a reorganization within the meaning
of section 368(a) of the Code.
2. No gain or loss will be recognized by ExecuFirst or Republic solely
as a result of the Merger;
3. No gain or loss will be recognized by holders of Republic common
stock upon their receipt of First Republic common stock in exchange for
their Republic common stock, except that Republic shareholders who receive
cash in lieu of fractional shares of First Republic common
<PAGE>
stock will recognize gain or loss equal to the difference, if any, between
such proceeds and the tax basis of Republic common stock allocated to their
fractional share interests. Such gain or loss, if any, will be capital gain
or loss if the fractional share interests exchanged are held as capital
assets on the date of the Merger and will be long-term capital gain or loss
if the holding period for the fractional share interests (including the
holding period of Republic common stock attributed thereto) exceeds one
year on the date of the Merger;
4. The tax basis of First Republic common stock received by holders of
Republic common stock will be the same as the tax basis of the Republic
common stock exchanged therefor less the tax basis, if any, allocated to
fractional share interests;
5. The holding period of First Republic common stock in the hands of
holders of Republic common stock will include the holding period of their
Republic common stock exchanged therefor, provided that such Republic
common stock is held as a capital asset on the date of the Merger; and
6. In general, a dissenting holder of Republic common stock receiving
solely cash in exchange therefor will recognize gain or loss equal to the
difference, if any, between the cash received and the dissenting holder's
tax basis in the Republic common stock. Such gain or loss, if any,
generally will be capital gain or loss if the Republic common stock for
which the dissenter receives cash is held as a capital asset on the date of
the Merger, and will be long-term capital gain or loss if the dissenting
holder has held the Republic common stock for more than one year on the
date of the Merger.
This opinion addresses only the specific tax opinions set forth above, and
does not address any other federal, state, local, foreign or other tax
consequences that may result from the Merger.
This opinion is being furnished pursuant to Section 6.10 of the Merger
Agreement. Any material changes in the facts from those set forth or assumed
herein or in the Prospectus/Joint Proxy Statement may affect the conclusions
stated herein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form S-4 (Reg. No. 333-00673) of ExecuFirst and to the
reference to our firm under the captions 'THE MERGER--Certain Federal Income Tax
Consequences' and 'LEGAL MATTERS' in the Prospectus forming a part of the
Registration Statement. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the Rules and Regulations of the
Commission promulgated thereunder.
Very truly yours,
KLEHR, HARRISON, HARVEY,
BRANZBURG & ELLERS
2
<PAGE>
EXHIBIT 10.1
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement ('Amended Employment
Agreement') is made as of the day of , 1996, by and among
EXECUFIRST BANCORP, INC., a Pennsylvania corporation, (the 'Parent'), FIRST
EXECUTIVE BANK, a Pennsylvania corporation, (the 'Company') and ZVI H. MUSCAL
(the 'Executive') and hereby amends and restates that certain Employment
Agreement ('Employment Agreement') by and among the Parent, the Company and
Executive dated as of the 1st day of November, 1992.
BACKGROUND OF AGREEMENT
The Parent owns all of the outstanding shares of capital stock of the
Company. The Executive has, for many years, served the Parent as its Chairman of
the Board, President and Chief Executive Officer and the Company as its
President and Chief Executive Officer and is recognized as having been
instrumental in the growth, development and success of the Company. The Parent
and the Company desire that the Executive continue to serve in such capacities
and the Executive desires to continue to so serve. The parties are entering into
this Agreement to provide for the relationships and obligations of each of the
parties hereto with respect to such employment and, in certain circumstances,
with respect to the period following his employment.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby
and in consideration of the mutual covenants herein contained, agree as follows:
1. Employment. The Parent and the Company hereby employ the
Executive, and the Executive hereby accepts employment, upon the terms and
conditions set forth herein.
2. Capacities and Duties. The Executive shall serve the Parent in the
positions of its President and Chief Executive Officer and shall serve the
Company in the positions of its Chairman of the Board and Co-Chief
Executive Officer. The Executive agrees to devote the substantial portion
of his business time and energy to the business of the Parent and the
Company. Nothing in this Agreement shall prevent the Executive from
engaging in such business or professional activities or from investing his
assets in such form or manner as will not materially interfere with the
services to be rendered by the Executive hereunder or to prevent the
Executive from acting as a director, trustee, officer of or upon a
committee of, any other firm, trust or corporation, nor shall the
provisions hereof prohibit the Executive from engaging in charitable,
civic, governmental and/or other personal activities in each case where
such positions do not materially interfere with the services to be rendered
by the Executive hereunder.
3. Compensation and Other Benefits.
3.1 Base Salary. The Company agrees to pay, and the Executive agrees
to accept, as his base salary for all services to be rendered by him
hereunder a salary at the rate of $220,000 per annum, payable in equal
weekly, bimonthly or monthly installments consistent with present
practices. The base salary shall not be increased any time during the one
year period from the effective date of that certain merger between Parent
and Republic Bancorporation, Inc. pursuant to that certain Merger Agreement
dated as of November 17, 1995 (the 'Merger'). Beginning on the one year
anniversary from the effective date of the Merger, and annually thereafter,
the Compensation Committee of the Board of Directors of the Parent or the
Board of Directors of the Company may determine an appropriate increase in
the Executive's base salary, based on the performance of the Company and
the Executive, general economic conditions, the Executive's
responsibilities and other pertinent factors.
1
<PAGE>
3.2 Bonus. During the period of employment, the Company's Board of
Directors, in its sole discretion, may from time to time award the
Executive bonuses based on his performance and other pertinent factors and
shall consider awarding such bonuses at least annually; provided, however,
that while not being legally required to pay any bonus, the Company agrees
to take into account, in determining the amount, if any, of a bonus, the
factors described in Section 3.1 of this Agreement.
3.3 Incentive Compensation. The Executive shall be eligible to
participate in any short and long term incentive compensation programs
created by the Parent or the Company, as determined by their respective
Boards of Directors.
3.4 Stock Options. The Executive shall be eligible to participate in
the Parent's Stock Option Plan, as determined by the Board of Directors of
the Parent, or the relevant committee thereof, in their or its sole
discretion. Pursuant to such Plan, the Executive shall be eligible to
receive options, in the sole discretion of the Parent, to purchase shares
of the common stock of the Parent. The options will be subject to all terms
and conditions of the Stock Option Plan.
3.5 Life Insurance. During the period of employment, the Company, at
its sole expense, will provide the Executive with term life insurance
coverage in an amount equal to three times the Executive's then base
salary. The policy shall be owned by the Executive who shall have all
incidents of ownership of the policy, including, without limitation, the
right to name the beneficiary thereof.
3.6 Vacation. The Executive will be entitled to paid vacation in
accordance with policies established by the Board of Directors of Parent or
Company, to be taken at such time as is satisfactory to the Executive.
3.7 Retirement Plan. During the period of employment, the Company
shall pay all funds required pursuant to the terms of the Supplemental
Retirement Plan, ('Retirement Plan') dated April 3, 1991 established by the
Company for the benefit of the Executive.
3.8 Other Benefit Plans. The Executive shall be entitled to the
benefits of such group medical, travel, accident, and savings investment
plans which the Parent or the Company shall make available from time to
time to its employees occupying senior executive positions.
3.9 Disability and Disability Insurance. During the term of
employment, the Company, at its sole expense, will provide the Executive
with the same amount and type of disability insurance which is in force on
the date of this Agreement. Moreover, if the Executive is unable, by reason
of illness, physical or mental incapacity or other disability (determined
as hereinafter provided) to perform his regular duties hereunder, the
Company shall continue to pay the full compensation and provide all
benefits to be provided hereunder until the Company exercises its right of
termination herein set forth. Should the disability continue for more than
six (6) consecutive months or should the disability exist for more than
eight (8) months in any twelve (12) month period, the Company shall have
the right to terminate the Executive's employment by giving the Executive
thirty (30) days written notice of its intention so to do. If the Executive
shall resume his duties within thirty (30) days after such notice is given,
and shall perform such duties on a regular basis in accordance with the
terms of this Agreement for six (6) consecutive months thereafter, the
Executive's employment hereunder shall continue in full force and effect
and the notice of intention to terminate shall have no further force or
validity. However, if the disability continues for more than six (6)
consecutive months and the Company does not elect to terminate his
employment, the Executive shall be entitled to receive disability pay only
in accordance with the said disability insurance policy plus social
security disability benefits, if any, plus such portion of his base salary
so that the total amount received by the Executive shall equal two-thirds
of his then current base salary.
The Executive shall be deemed disabled for purposes of this Agreement
either (i) if he is deemed disabled for the purposes of any disability
policy, group or individual, paid for by the Company and at the time in
effect, or (ii) if no such policy is then in effect, by an independent
2
<PAGE>
referee licensed to practice medicine, selected by the Board of Directors
of the Company and approved by the Executive, or in the event the parties
are unable to agree on a single referee, then by a panel of three (3)
independent referees licensed to practice medicine, one of whom shall be
selected by the Board of Directors of the Company, one by the Executive and
the third by the other two referees.
3.10 Annual Physical Examination. The Executive agrees to take an
annual physical examination before a doctor licensed to practice medicine
satisfactory to the Company, and the Company agrees to pay for the costs of
such examination. The Executive agrees to disclose the results of the
physical examination to the Chairman of the Board of the Company.
4. Expenses and Auto.
4.1 Expenses. The Executive is authorized to incur reasonable and
ordinary expenses during the period of employment and the Company shall pay
directly or reimburse the Executive for all expenses incurred by the
Executive relating to the business or affairs of the Parent or the Company
including, without limitation, expenses with respect to entertainment,
travel and similar items, provided, however, that such expenses are part of
an annual budget approved by the Board of Directors of Company and monthly
expenses shall be approved by the Chairman of the Board of the Parent. It
is understood that the Company will pay directly or reimburse the Executive
for club dues and dues for professional society memberships.
4.2 Auto. During the period of employment, the Company shall provide
for the Executive's use a full size, American made automobile, similar to a
Lincoln Continental, which shall be replaced every two years. The Company
shall pay or reimburse the Executive for all reasonable expenses associated
with the operation, maintenance and insurance of such automobile, including
a car telephone, as long as such telephone is used primarily for business
purposes.
5. Period of Employment. The 'period of employment' under this
Agreement shall continue until January 31, 2000. Thereafter, the 'period of
employment' shall continue and shall be automatically renewed for
successive one year terms unless either party gives written notice to the
other of an intention to terminate at least one hundred eighty (180) days
prior to the renewal date.
6. Termination. In addition to termination of the period of
employment pursuant to Section 5, the period of employment hereunder shall
terminate as hereinafter provided:
6.1 Death. The period of employment shall terminate upon the death of
the Executive; provided, however, if the Executive dies during the period
of employment, his then current base salary will continue to be paid by the
Company to the Executive's designated beneficiary for a period of six (6)
months. If no such beneficiary is designated, such payment shall be made to
his spouse if she is then living and if not to his estate.
6.2 Disability. If the Executive should become disabled during the
period of employment, the period of employment shall terminate as provided
in Section 3.9 of this Agreement. Upon such disability, the Executive shall
be entitled to the compensation as provided in Section 3.9 hereof.
6.3 Good Cause. The period of employment may be terminated by the
Company for 'Good Cause'. The term 'Good Cause' shall mean only (i) the
willful failure by the Executive to discharge his material duties hereunder
or follow the reasonable policies of the Board which shall persist for
thirty (30) days after written notice from the Company setting forth with
particularity the allegations in this regard or (ii) an unappealable
judicial determination or admission by the Executive that the Executive has
committed a criminal act which (a) caused or sought to cause economic
benefit to accrue to the Executive and (b) relates to, adversely affects or
is likely to adversely affect his duties under this Employment Agreement.
Upon termination for Good Cause, the Executive will cease to receive any
payments hereunder, provided that payments
3
<PAGE>
under plans and policies referred to in Section 3 will be determined in
accordance with the provisions of the applicable plans or policies.
In case of any dispute or disagreement arising out of the termination
of the Executive for Good Cause as set forth above, the Executive and the
Company agree to submit the dispute or disagreement to the American
Arbitration Association ('AAA') in accordance with the AAA's voluntary
Labor Arbitration Rules for a resolution within thirty (30) days after
submission to three arbitrators to be designated by the AAA. Any decision
or award by these arbitrators shall be final and binding and the award
rendered shall not be appealable. In addition, the prevailing party in the
arbitration proceeding shall be entitled to recover attorney's fees, all
reasonable out-of-pocket costs and disbursements, as well as any and all
charges which may be made for the arbitration's cost and the fees of the
arbitrators.
6.4 Voluntary Termination. If the Executive voluntarily terminates
employment during the period of employment, he will cease to be entitled to
receive any payments hereunder following the effective date of such
termination provided that payments under the programs and policies
described in Section 3 will be determined in accordance with the provisions
of the applicable plans and policies.
In addition, a percentage of each of the stock options issued to the
Executive from the commencement of his employment on June 1, 1988 to the
date of termination, to the extent not exercised, shall be forfeited in
accordance with the following schedule:
<TABLE>
<S> <C>
PERCENT OF STOCK
DATE OF TERMINATION OPTIONS FORFEITED
- ------------------------------------------------------------------- -------------------------
On or before June 30, 1996 35%
After July 1, 1996 and on or before June 30, 1997 30%
After July 1, 1997 and on or before June 30, 1998 25%
After June 30, 1998 and on or before June 30, 1999 20%
</TABLE>
Those options issued to Executive which are not forfeited in
accordance with the above schedule shall continue to be subject to all
terms (including forfeiture provisions) of the Stock Option Plan. The
foregoing percentage of stock options shall relate to each issue of stock
options received by the Executive during the period of employment under
this Agreement and during the period of employment of prior Employment
Agreements.
6.5 Termination by the Company Other Than For Cause. If, prior to the
end of the period of employment, the Parent or the Company terminates the
Executive's employment, other than for Good Cause or disability, the
Company shall continue, for the balance of the period of employment to (i)
pay the Executive the annual base salary otherwise payable to the Executive
pursuant to this Agreement, and (ii) provide the Executive with the
benefits referred to in Section 3.5, 3.6, 3.7, 3.8 and 3.9 of this
Agreement.
7. Non-Competition and Non-Disclosure.
7.1 Covenant Not to Compete. Without the prior consent of the Board
of Directors of the Company evidenced in a writing executed by an
authorized officer, during the period of employment and for a period of two
years after the termination of the period of employment pursuant to either
Section 6.2, 6.3, or 6.4 of this Agreement, the Executive shall not
directly or indirectly become an officer, employee, agent, partner,
director or a greater than five percent (5%) stockholder of any banking or
financial service business or holding company or affiliate thereof
operating in the Pennsylvania counties of Philadelphia, Bucks, Montgomery,
Delaware, or Chester, the New Jersey Counties of Burlington, Camden and
Gloucester and the Delaware County of Wilmington or in any other county or
metropolitan area in which the Company has an office.
7.2 Non-Disclosure. Without the prior consent of the Board of
Directors of the Company evidenced in a writing executed by an authorized
officer, during the period of employment and
4
<PAGE>
thereafter, the Executive shall not knowingly disclose to anyone or use or
otherwise exploit for the benefit of anyone other than the Company any
Confidential Information. The term 'Confidential Information' shall mean
information belonging to the Company which is material to the Company and
not generally known or available to the public (whether or not in written
or tangible form) and the knowledge of which could benefit an institution
which is in competition with the Company. However, the term 'Confidential
Information' shall not include any information which is or shall become
public other than as the result of any act or omission by the Executive. It
is understood that the Executive shall be entitled to disclose Confidential
Information as required by law or pursuant to legal process.
7.3 Remedies. The Executive acknowledges that the provisions and
restrictions set forth in Sections 7.1 and 7.2 are reasonable and necessary
for the protection of the legitimate interests of the Company. The
Executive further acknowledges that the provisions and restrictions are
unique and, if there is a material breach or threatened breach of any of
these provisions or restrictions, the Company may have no adequate remedy
at law, and could result in irreparable harm to the Company. Therefore, the
Executive agrees that upon a breach or threatened breach of such provisions
or restrictions, the Company shall be entitled, in addition to other
remedies which may be available to it, to institute a maintain proceedings
at law or in equity, to recover damages or to obtain specific performance
or an injunction.
7.4 Reduction Of Restrictions By Court Action. Each provision hereof,
including without limitation the periods of time, geographical areas and
types and scopes of restrictions on the activities of such person specified
herein are and are intended to be divisible, and if any portion thereof
(including any sentence, clause or part) shall be held contrary to law or
invalid or unenforceable in any respect in any jurisdiction, or as to one
or more periods of time, areas or business activities or any part thereof,
the remaining provisions shall not be affected but shall remain in full
force and effect as to the other remaining parts, and any such invalid or
unenforceable provision shall be deemed, without further action on the part
of any person, modified, amended and limited to the extent necessary to
render the same valid and enforceable in such jurisdiction.
8. No Duty to Mitigate. In the event of the failure of Company to
comply with the terms hereof, or in the event of the termination of the
period of employment by the Parent or the Company other than for Good Cause
or disability, as such terms are herein defined, the Executive shall not be
required to seek other employment in order to mitigate the amounts
recoverable for such action. However, if the Executive voluntarily obtains
other employment, the Company shall be entitled to set off against the
amounts the Company is required to pay or benefits it is required to
provide to the Executive under the Agreement, any sums or comparable
benefits earned by Employee in other employment during the period the
Company is required to make such payments.
9. Notices. Any notice, request, consent, demand, offer, acceptance
or other communication required or permitted under this Agreement shall be
made in writing and shall be deemed to have been duly given if personally
delivered or if mailed by first class registered or certified mail, postage
prepaid, return receipt requested (and shall be deemed delivered on the
date received for delivery by the Postal Service whether or not accepted),
or by telefax, telecopier or similar transmission on the date received, if
the appropriate telefax, telecopier or transmission number is included in
the address, or by Federal Express or similar overnight delivery service,
charges prepaid, on the date received, addressed to the parties hereto at
their respective addresses as follows:
9.1 If to the Executive:
238 Ardleigh Road
Penn Valley, PA 19072
9.2 If to the Company:
1513 Walnut Street
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Philadelphia, PA 19103
Attention: Chairman of the Board
with a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
Attention: Stephen T. Burdumy, Esquire--Fax No. (215) 568-3206
The designation of the person to be notified or the address or
transmission number of such person for the purpose of such notice may be
changed from time to time by a similar notice to be effective ten (10) days
after such change is supplied.
10. Indemnification. The Company shall indemnify the Executive
against such matters and at least to such extent as is provided under
Article 10 of the by-laws of the Company as in effect on the date hereof.
In addition, the Company shall include the Executive within the coverage of
any directors and officers indemnification insurance policy to the full
extent that any other senior executive officer or the Company is so
covered. Such coverage or such other coverage as the Company may provide in
its reasonable judgment for other senior executive officers and directors
of the Company shall be provided for the Executive for five (5) years after
the termination of the term of employment.
11. Attorneys' Fees. In the event that either of the parties hereto
shall institute any action or proceeding against the other party relating
to this Agreement, the unsuccessful party in such action or proceeding
shall reimburse the successful party for its disbursements incurred in
connection therewith and for his or its reasonable attorneys' fees.
12. Entire Agreement. This Agreement and The Retirement Plan
constitutes the full and complete understanding and agreement of the
parties with respect to the subject matter of this Agreement and supersedes
all prior understandings and agreements concerning the subject matter of
this Agreement, including, without limitation, the Employment Agreement,
dated as of June 1, 1988, the Employment Agreement dated November 1, 1987,
and the Employment Agreement dated as of November 1, 1992, and may not be
modified or amended orally, but only by an agreement in writing, signed by
the party against whom enforcement of any waiver, change, modification,
amendment, extension or discharge is sought.
13. Binding Effect. This Agreement and the rights and obligation of
the parties shall bind and inure to the benefit of each of the parties and
shall also bind and inure to the benefit of any successor or successors of
the Parent or Company by reorganization, merger, sale or consolidation and
any assignee of all or substantially all of its business and properties,
but, except as to any successor or assignee of the Parent or Company,
neither this Agreement nor any rights or benefits hereunder may be assigned
by the Executive.
14. Representation of Company. Company represents and warrants that
the execution of this Agreement by the Company has been duly authorized by
resolution of its Board of Directors.
15. Captions. Section captions contained in this Agreement are
inserted only as a matter of convenience and shall not be deemed to affect
the construction of any of the terms hereof.
16. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania or any other
regulatory bodies as might have jurisdiction hereof.
17. Severability. If any term or provision of this Agreement is held
to be invalid or unenforceable for any reason, such invalidity or
unenforceability shall not affect any other term or provision hereof, and
this Agreement shall continue in full force and effect as if such invalid
or unenforceable term or provision (to the extent of the invalidity or
unenforceability) had not been contained herein.
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18. Joint Liability. The Parent shall be jointly and severally liable
with the Company to perform all of the Company's obligations set forth in
this Agreement.
19. Submission to Jurisdiction and Consent to Service. Each party
hereto agrees to submit to the personal jurisdiction of, and any legal
action or proceeding arising out of or relating to this Agreement may be
instituted in, any court of the Commonwealth of Pennsylvania or of the
United States of America or for the Eastern District of Pennsylvania as any
person or entity asserting the rights may elect. Each of the parties hereby
waives any objection which such party may have to the laying of venue of
any such proceeding in any such courts and each hereby irrevocably
designates the Secretary of State of the Commonwealth of Pennsylvania as
its agent to accept and acknowledge, on its behalf, service of any and all
process in any such proceeding brought in any such court, and agrees and
consents that any such service of process upon such agent, when coupled
with immediate notice of such service to such party in conformity with the
provisions of Section 9 of this Agreement, shall be taken and held to be
valid service of process.
Notwithstanding the foregoing, no legal action or proceeding arising
out of or relating to this Agreement may be instituted until the parties
have attempted in good faith to resolve the dispute or claim first by
negotiating promptly with each other in good faith in face to face
negotiations conducted in front of an independent mediator at the office of
such mediator. The mediator shall be selected by the parties. However, if
the parties are unable to agree to a mediator within fifteen (15) business
days after the dispute first arose, the mediator shall be selected by a
representative designated by the Company and a representative designated by
the Executive. The recommendations of the mediator shall not be binding
upon the parties.
20. Effective Date of Agreement. This Agreement shall become
effective on the effective date of the Merger. In the event the Merger is
not consummated, this Agreement shall become null and void and the
Employment Agreement dated as of November 1, 1992 shall be reinstated.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
EXECUFIRST BANCORP, INC.
By: __________________________________
Attest: ______________________________
Secretary
FIRST EXECUTIVE BANK
By: __________________________________
Attest: ______________________________
Secretary
EXECUTIVE:
_____________________________________
Zvi H. Muscal
7
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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT, entered into this day of , 1995, by and between
, a Pennsylvania Bank ('Bank'), and GEORGE S. RAPP ('Executive').
WHEREAS, Bank desires to employ Executive as Executive Vice President and
Chief Operating Officer, subject to the terms and conditions of this Agreement,
and
WHEREAS, Executive desires to be employed in such capacity by Bank;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, receipt and sufficiency of which is
hereby acknowledged, and intending to be legally bound hereby, the parties agree
as follows:
1. Term. This Agreement shall commence upon the date hereof and shall
continue until terminated as provided for in Paragraph 4 below.
2. Duties and Employment. The Bank hereby employs Executive as
Executive Vice President and Chief Operating Officer of the Bank pursuant
to the terms hereof. Executive shall faithfully perform such duties as are
customarily required of an Executive Vice President and Chief Operating
Officer and shall devote his entire working time, energy and attention to
those duties and to such other appropriate duties as may be assigned to him
by the President and the Board of Directors of the Bank (the 'Board').
3. Compensation.
(a) Regular Compensation. For all services rendered by Executive
under this Agreement, Bank shall pay Executive in accordance with the
normal payment practices of Bank an annual salary of One Hundred Five
Thousand Dollars ($105,000).
(b) Compensation Plans. Executive shall be eligible to participate in
any bonus stock purchase or grant, stock option, deferred compensation or
other compensation plans presently or hereafter maintained by the Bank for
its senior executives. Eligibility in no way guarantees Executive's receipt
of any bonus, stock grant, stock option or other compensation pursuant to
such plans, which is in the sole discretion of the Board or its designated
Compensation Committee or any committee performing a similar function.
Executive shall also be eligible to participate in any retirement or
savings plan presently or hereafter maintained for the benefit of all
employees of Bank.
(c) Benefits. Bank shall maintain such basic medical, hospitalization
and major medical insurance coverage for Executive and his dependents as it
maintains for its Executives from time to time. During the term hereof, the
Bank shall, at its expense, provide the Executive with term life insurance
coverage for his benefit, or his named beneficiary's benefit, in principal
amount at least equal to twice his then current base salary hereunder.
Executive shall be entitled to four (4) weeks paid vacation during the term
hereof, or any extension thereof.
(d) Automobile Allowance. During the term of this Agreement, the Bank
shall provide the Executive, at the Bank's expense and for the Executive's
use, a mid-size American automobile. During the term hereof, Bank shall
provide at the Bank's expense and for the Executive's use, an acceptable
parking place.
(e) Travel Expense. During the term of this Agreement, Executive
shall be reimbursed for normal and reasonable travel expenses incurred on
behalf of the Bank.
(f) Entertainment Expense. Executive will be reimbursed for all
reasonable expenses incurred by Executive in fulfillment of his duties on
behalf of the Bank, including entertainment, business meals and the like.
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(g) Approvals. All expenses incurred by the Executive under
subparagraphs (e) and (f) hereof must be approved by the Chairman or
President of the Bank or the Chairman of the parent company of the Bank.
4. Termination.
(a) This Agreement shall terminate on the day before the first
anniversary of the date hereof (the 'Termination Date'). This Agreement
shall be renewed automatically for additional one year terms from year to
year on the anniversary hereof (also a 'Termination Date'), unless either
party gives the other party written notice of an intention to terminate at
least ninety (90) days prior to the Termination Date.
(b) This Agreement shall automatically terminate upon the death of
Executive.
(c) This Agreement shall automatically terminate upon Executive's
'total disability', defined as the inability of the Executive to provide
meaningful services to the Bank in the judgment of the Chief Executive
Officer or the Board of the Bank, for ninety (90) days in any 180 day
period or any consecutive forty-five (45) day period.
If the Company and the Executive disagree as to the Executive's status
of Total Disability, the Executive shall be examined by a physician
appointed jointly by a physician for the Company and a physician for the
Executive, and the decision of such physician jointly chosen shall be
binding upon the Company and the Executive. The fees and expenses of the
physician so jointly selected shall be paid by the Company. In the event
that the physician for the Company and the Executive cannot mutually agree
on an examining physician, then such physician shall be chosen by the
Philadelphia County Medical Society. The fees and expenses of the physician
so chosen shall be paid by the Company.
(d) In the event the Executive is found to have engaged in conduct
detrimental to the Bank in the sole discretion of the Board, the Bank shall
notify the Executive stating the nature of the conduct. In the event that
the Executive fails to cure such conduct to the satisfaction of the Board
within thirty days from the date of such notice, the Bank may terminate
Executive at the end of such thirty day period.
5. Payments to Executive Upon Termination.
(a) In the event of the termination of Executive's employment pursuant
to Paragraphs 4(a), (b) or (c), as consideration for Executive's services
to Bank prior to Executive's termination, Bank shall continue to pay to
Executive, or to his estate, as the case may be, for the duration of the
Severance Period, such compensation in such manner as had been received by
Executive immediately prior to termination. The 'Severance Period' for
purposes of Paragraph 4(a), (b) and shall (c) be a period of time
commencing at the termination and continuing for the greater of (i) the
remaining term of this Agreement, or (ii) ninety (90) days. In the event of
the termiantion of Executive's employment pursuant to Paragraph 4(d), Bank
shall not be obligated to pay any compensation to Executive following such
termination.
(b) Bank shall have the option to accelerate payment of the sum(s) due
during the Severance Period and to pay such sum(s) in such lump payment(s)
as Bank shall deem appropriate, provided that all such payments shall be
made during the Severance Period and the amount of such payments shall not
be greater than would have resulted from payment in accordance with Bank's
standard practices.
6. Confidentiality. Executive acknowledges that, in the course of his
employment by Bank, he will have access to confidential information, trade
secrets, and unique business procedures which are the valuable property of
Bank. Executive agrees not to disclose for any reason, directly or
indirectly, any confidential, trade secret or other proprietary
information, as determined by Bank in its reasonable discretion, at any
time, during or after the period Executive is employed by Bank, for any
purpose other than to perform his assigned duties on behalf of Bank.
7. Remedy. Bank and Executive acknowledge and agree that any breach
of Paragraph 6 of this Agreement by Executive would cause irreparable
injury to Bank and that Bank's remedy at
2
<PAGE>
law for any breach of any of Executive's obligations hereunder would be
inadequate, and Executive agrees and consents that temporary and permanent
injunctive relief may be granted in any proceeding which may be brought to
enforce any provision of Paragraph 6 hereof without necessity of proof that
Bank's remedy at law is inadequate.
8. Notices. Any and all notices, designations, consents, offers,
acceptances, or any other communications provided for herein shall be given
in writing by registered or certified mail, return receipt requested at the
addresses set forth below.
If to the Bank:
If to the Executive:
or to such other addresses as either party may designate by notice in
writing as provided herein.
9. Invalid Provisions. The invalidly or unenforceability of any
particular provision of this Agreement shall not affect the other
provisions hereof, and the Agreement shall be construed in all respects as
if such invalid or unenforceable provisions were omitted.
10. Modification. No change or modification of this Agreement shall
be enforceable against any party unless the same be in writing and signed
by the party against whom enforcement is sought.
11. Entire Agreement. This Agreement represents the entire agreement
between the parties with respect to the subject matters hereof, and
supersedes all prior agreements and understandings with respect thereto.
12. Headings. Any headings preceding the text of the several
paragraphs hereof are inserted solely for the convenience of reference and
shall not constitute a part of this Agreement, nor shall they affect its
meaning, construction or effect.
13. Successors; Assigns. This Agreement shall inure to the benefit of
and be binding upon the parties herein, and their respective heirs,
executors, administrators, successors and, to the extent permitted herein,
assigns. Notwithstanding the foregoing, Executive may not assign his
rights, or delegate his duties, hereunder.
14. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and seals
the date and year above first written.
Attest:
<TABLE>
<S> <C>
By:
Secretary ROLF A. STENSRUD, PRESIDENT
(CORPORATE SEAL)
(SEAL)
Witness GEORGE S. RAPP
</TABLE>
3
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT, entered into this day of , 1996, by and among
, a Pennsylvania bank holding company ('Parent'), , a
Pennsylvania banking corporation ('Bank') and Rolf A. Stensrud ('Executive'),
WHEREAS, Parent desires to employ Executive as Executive Vice President of
Parent, subject to the terms and conditions of this Agreement; and WHEREAS, Bank
desires to employ Executive as President and Co-Chief Executive Officer of Bank,
subject to the terms and conditions of this Agreement; and
WHEREAS, Executive desires to be employed in such capacities by Bank and
Parent;
NOW THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, receipt and sufficiency of which is
hereby acknowledged, and intending to be legally bound hereby, the parties agree
as follows:
1. Term. This Agreement shall commence upon the date hereof and shall
continue until terminated as provided for in Paragraph 4 below.
2. Duties and Employment. The Bank hereby employs Executive as
President and Co-Chief Executive Officer of the Bank and the Parent hereby
employs Executive as Executive Vice President of Parent, pursuant to the
terms hereof. Executive shall faithfully perform such duties as are
customarily required of a President and Co-Chief Executive Officer, and of
an Executive Vice President, or of such other position or duties as may be
assigned to Executive by the Board of Directors of the Bank or Parent
collectively, (the 'Board') and shall devote his entire time, energy and
attention to those duties and to such other duties as may be reasonably
assigned to him by either Board; provided that nothing contained herein
shall prohibit Executive from making personal investments (provided that
such investments do not interfere with his duties hereunder) or
participating or engaging in community, charitable and educational affairs
that do not interfere with his duties hereunder.
3. Compensation.
(a) Regular Compensation. For all services rendered by Executive
under this Agreement, Bank shall pay Executive in accordance with the
normal payment practices of Bank an annual salary of One Hundred and
Seventy-five Thousand Dollars ($175,000).
(b) Compensation Plans. Executive shall be eligible to participate in
any bonus stock purchase or grant, stock option, deferred compensation or
other compensation plans presently or hereafter maintained by the Bank or
Parent for its senior executives except those solely for the benefit of Mr.
Zvi Muscal, Co-Chief Executive Officer of the Bank and President of the
Parent. Eligibility in no way guarantees Executive's receipt of any bonus,
stock grant, stock option or other compensation pursuant to such plans,
which is in the sole discretion of the Board of the Parent or Bank or their
designated Compensation Committees or any committee performing a similar
function. The Boards or their designated committees shall consider awarding
any such bonus at least annually. While not being legally required to pay
any bonus, the Boards agree to take into account, in determining the
amount, if any, of a bonus, the performance of the Bank and Parent and
Executive, general economic conditions, Executive's responsibilities and
other pertinent factors. Executive shall also be eligible to participate in
any retirement or savings plan presently or hereafter maintained for the
benefit of all employees of Bank or the Parent.
(c) Benefits. Bank shall maintain such medical, life, and disability
insurance coverage and such retirement plan for Executive and his
dependents as it now maintains for executives or such substantially similar
coverages and plans as may hereafter be adopted by Bank from time to time,
with the exception of any plan or arrangement for the sole benefit of Mr.
Muscal. Executive shall be entitled to vacation in accordance with standard
policies for all senior executives of the Bank.
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(d) Automobile Allowance. During the term of this Agreement, the Bank
shall provide for Executive's use a full size American-made automobile,
similar to a Lincoln Continental, which shall be replaced every two years.
The Bank shall pay or reimburse the Executive for all reasonable expenses
associated with the operation, maintenance and insurance of such
automobile, including expenses for a parking space convenient to the Bank,
and including a car telephone, as long as such telephone is used primarily
for business use.
(e) Travel Expense. During the term of this Agreement, Executive
shall be reimbursed for normal and reasonable travel expenses incurred on
behalf of the Bank and the Parent.
(f) Entertainment Expense. Executive will be reimbursed for all
reasonable expenses incurred by Executive in fulfillment of his duties on
behalf of the Bank and the Parent, including entertainment, business meals
and the like.
(g) Other Benefits. Executive will be reimbursed for expenses of one
lunch club and the annual dues for one golf club approved by the Board of
the Bank or its designated Compensation Committee or any committee
performing a similar function.
(h) Approvals. All expenses incurred by the Executive under
subparagraphs, (e) and (f) hereof must be approved by the Chairman of the
Board of the Parent.
4. Term; Termination.
(a) This Agreement shall terminate on the day before the third
anniversary of the date hereof (the 'Termination Date') unless extended
pursuant to the terms hereof. This Agreement shall be renewed automatically
for additional one year terms from year to year on the anniversary thereof,
unless either Parent or Bank gives notice to Executive or Executive gives
notice to Bank of an intention not to renew at least 180 days prior to such
anniversary.
(b) Executive may terminate this Agreement upon six (6) months written
notice to Bank.
(c) Bank may terminate Executive at any time for any reason or no
reason upon six (6) months written notice to Executive.
(d) This Agreement shall automatically terminate upon the death of
Executive without additional payments of salary or other benefits to
Executive except as may be required by law.
(e) This Agreement shall automatically terminate upon Executive's
'total disability', defined as the inability of the Executive to provide
meaningful services to the Bank or Parent in the judgment of either Board,
for either: (i) 180 days in any 12 month period or (ii) any consecutive
ninety (90) day period. Bank or Parent may terminate Executive immediately
for 'good cause,' For purposes of this Agreement, 'good cause' shall mean
(i) breach of a fiduciary duty to Bank or Parent involving personal profit
or which causes harm to the Bank or Parent, (ii) conviction of a felony or
willful violation of any banking law or regulation or an indictment or
return of any information, or an arrest involving a crime of moral
turpitude, (iii) negligent performance of the duties under this Agreement
which results in a material impairment of Bank's financial condition, (iv)
an order from any regulatory authority to terminate the Executive for
breach of any law or regulations, or (v) a failure of the Executive to
comply with a direct order of the Board.
(f) Executive may terminate this Agreement for 'good reason.' For
purposes of this Agreement, 'good reason' shall mean (i) a failure by the
Bank or Parent to comply in any material respect with any material
provision of this Agreement, which failure has not been cured within thirty
(30) days after a notice of such noncompliance has been given by Executive
to Bank.
5. Payments to Executive Upon Termination.
(a) In the event of the termination of Executive's employment pursuant
to Paragraphs 4 (a), (c), or (U), as consideration for Executive's services
to Bank prior to Executive's termination, Bank shall continue to pay to
Executive, or to his estate, as the case may be, for the duration of the
Severance Period, such compensation and benefits in such manner as had been
received by Executive immediately prior to termination. For purposes of
Paragraphs 4 (a), (c) and (g), the 'Severance Period' shall be a period of
time commencing at the termination and continuing for
2
<PAGE>
the greater of: (I) the remaining term of this Agreement -1 or, (II) one
year. For purposes of Paragraph 4, the 'Severance Period' shall be a period
of time commencing at the termination and continuing for the time when
benefits commence under any disability insurance policy maintained by the
Bank or Parent for the benefit of Executive.
(b) Under no circumstances shall Bank be obligated to pay any
compensation to Executive following termination pursuant to paragraphs 4(d)
and 4(f) hereof.
(c) Bank or Parent shall have the option to accelerate payment of the
sum(s) due during the Severance Period and to pay such sum(s) in such lump
payment(s) as Bank or Parent shall deem appropriate provided that all such
payments shall be made during the Severance Period and such amount of such
payments shall not be greater than would have resulted from payment in
accordance with Bank's standard practices or as otherwise provided in this
Agreement.
6. Confidentiality. Executive acknowledges that, in the course of his
employment by Bank, he will have access to confidential information, trade
secrets, and unique business procedures which are the valuable property of
Bank or Parent. Executive agrees not to disclose for any reason, directly
or indirectly, any confidential, trade secret or other proprietary
information, as determined by Bank or Parent in their reasonable
discretion, at any time, during or after the period Executive is employed
by Bank or Parent, for any purpose other than to perform his assigned
duties on behalf of Bank or Parent.
7. Remedy. Bank, Parent and Executive acknowledge and agree that any
breach of Paragraph 6 of this Agreement would cause irreparable injury to
Bank or Parent, as the case may be, and that Bank's or Parent's remedy at
law for any breach of any of Executive's obligations under Paragraph 6
hereof would be inadequate, and Executive agrees and consents that
temporary and permanent injunctive relief may be granted in any proceeding
which may be brought to enforce any provision of Paragraph 6 hereof without
the necessity of proof that Bank's remedy at law is inadequate.
8. Indemnification. The Bank and Parent, jointly and severally, shall
indemnify Executive against such matters and at least to such extent as is
provided in the by-laws or Certificate of Incorporation of the Bank or
Parent for the benefit of their respective Officers or Directors as in
effect on the date hereof.
9. Notices. Any and all notices, designations, consents, offers,
acceptances, or any other communications provided for herein shall be given
in writing by registered or certified mail, return receipt requested to the
addresses set forth below.
If to Parent:
1515 Market Street
Philadelphia, PA 19102
Attn: Chairman of the Board
If to Bank:
1515 Market Street
Philadelphia, PA 19102
Attn: Chairman of the Board
If to Executive:
Rolf A. Stensrud
or to such other or additional Person or Persons or such other
address as either party may designate to the other party in
writing or by like notice.
10. Invalid Provisions. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other
provisions hereof, and the Agreement shall be construed in all respects as
if such invalid or unenforceable provisions were omitted.
11. Modification. No change or modification of this Agreement shall
be enforceable against any party unless the same be in writing and signed
by the party against whom enforcement is sought.
3
<PAGE>
12. Entire Agreement. This Agreement represents the entire agreement
between the parties with respect to the subject matter hereof, and
supersedes all prior agreements and understandings with respect thereto.
13. Representation of Bank and Parent. The Bank and Parent represent
and warrant that the execution of this Agreement by the Bank and Parent
have been duly authorized by resolution of their respective Boards of
Directors.
14. Headings. Any headings preceding the text of the several
paragraphs hereof are inserted solely for the convenience of reference and
shall not constitute a part of this Agreement, nor shall they affect its
meaning, construction or effect.
15. Successors; Assigns. This Agreement shall inure to the benefit
of, and be binding upon, the parties hereto, and their respective heirs,
executors, administrators, successors and, to the extent permitted herein,
assigns. Notwithstanding the foregoing, Executive may not assign his
rights, or delegate his duties hereunder.
16. Joint Liability. The Parent shall be jointly and severally liable
with the Bank to perform all of the Bank's obligations set forth in this
Agreement.
17. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and seals
the date and year above first written.
Attest
________________________________________________________________________________
Secretary
(CORPORATE SEAL)
________________________________________________________________________________
Secretary
(CORPORATE SEAL)
________________________________________________________________________________
__________________________________________________________________________(BANK)
By: ____________________________________________________________________________
____________________________________________________________________________
(Vice) President
________________________________________________________________________(PARENT)
By: ____________________________________________________________________________
____________________________________________________________________________
(Vice) President
____________________________________________________________________________
4
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT, entered into this day of , 1995, by
and between , a Pennsylvania Bank ('Bank'), and KEVIN
GALLAGHER ('Executive').
WHEREAS, Bank desires to employ Executive as Executive Vice President and
Chief Operating Officer, subject to the terms and conditions of this Agreement,
and
WHEREAS, Executive desires to be employed in such capacity by Bank;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, receipt and sufficiency of which is
hereby acknowledged, and intending to be legally bound hereby, the parties agree
as follows:
1. Term. This Agreement shall commence upon the date hereof and shall
continue until terminated as provided for in Paragraph 4 below.
2. Duties and Employment. The Bank hereby employs Executive as
Executive Vice President and Chief Operating Officer of the Bank pursuant
to the terms hereof. Executive shall faithfully perform such duties as are
customarily required of an Executive Vice President and Chief Operating
Officer and shall devote his entire working time, energy and attention to
those duties and to such other appropriate duties as may be assigned to him
by the President and the Board of Directors of the Bank (the 'Board').
3. Compensation.
(a) Regular Compensation. For all services rendered by Executive
under this Agreement, Bank shall pay Executive in accordance with the
normal payment practices of Bank an annual salary of One Hundred Five
Thousand Dollars ($105,000).
(b) Compensation Plans. Executive shall be eligible to participate in
any bonus stock purchase or grant, stock option, deferred compensation or
other compensation plans presently or hereafter maintained by the Bank for
its senior executives. Eligibility in no way guarantees Executive's receipt
of any bonus, stock grant, stock option or other compensation pursuant to
such plans, which is in the sole discretion of the Board or its designated
Compensation Committee or any committee performing a similar function.
Executive shall also be eligible to participate in any retirement or
savings plan presently or hereafter maintained for the benefit of all
employees of Bank.
(c) Benefits. Bank shall maintain such basic medical, hospitalization
and major medical insurance coverage for Executive and his dependents as it
maintains for its Executives from time to time. During the term hereof, the
Bank shall, at its expense, provide the Executive with term life insurance
coverage for his benefit, or his named beneficiary's benefit, in principal
amount at least equal to twice his then current base salary hereunder.
Executive shall be entitled to four (4) weeks paid vacation during the term
hereof, or any extension thereof.
(d) Automobile Allowance. During the term of this Agreement, the Bank
shall provide the Executive, at the Bank's expense and for the Executive's
use, a mid-size American automobile. During the term hereof, Bank shall
provide at the Bank's expense and for the Executive's use, an acceptable
parking place.
(e) Travel Expense. During the term of this Agreement, Executive
shall be reimbursed for normal and reasonable travel expenses incurred on
behalf of the Bank.
(f) Entertainment Expense. Executive will be reimbursed for all
reasonable expenses incurred by Executive in fulfillment of his duties on
behalf of the Bank, including entertainment, business meals and the like.
(g) Approvals. All expenses incurred by the Executive under
subparagraphs (e) and (f) hereof must be approved by the Chairman or
President of the Bank or the Chairman of the parent company of the Bank.
4. Termination.
(a) This Agreement shall terminate on the day before the first
anniversary of the date hereof (the 'Termination Date'). This Agreement
shall be renewed automatically for additional one year terms from year to
year on the anniversary hereof (also a 'Termination Date'), unless either
party gives the other party written notice of an intention to terminate at
least ninety (90) days prior to the Termination Date.
(b) This Agreement shall automatically terminate upon the death of
Executive.
(c) This Agreement shall automatically terminate upon Executive's
'total disability', defined as the inability of the Executive to provide
meaningful services to the Bank in the judgment of the Chief Executive
Officer or the Board of the Bank, for ninety (90) days in any 180 day
period or any consecutive forty-five (45) day period.
If the Company and the Executive disagree as to the Executive's status
of Total Disability, the Executive shall be examined by a physician
appointed jointly by a physician for the Company and a physician for the
Executive, and the decision of such physician jointly chosen shall be
binding upon the Company and the Executive. The fees and expenses of the
physician so jointly selected shall be paid by the Company. In the event
that the physician for the Company and the Executive cannot mutually agree
on an examining physician, then such physician shall be chosen by the
Philadelphia County Medical Society. The fees and expenses of the physician
so chosen shall be paid by the Company.
(d) In the event the Executive is found to have engaged in conduct
detrimental to the Bank in the sole discretion of the Board, the Bank shall
notify the Executive stating the nature of the conduct. In the event that
the Executive fails to cure such conduct to the satisfaction of the Board
within thirty days from the date of such notice, the Bank may terminate
Executive at the end of such thirty day period.
5. Payments to Executive Upon Termination.
(a) In the event of the termination of Executive's employment pursuant
to Paragraphs 4(a), (b) or (c), as consideration for Executive's services
to Bank prior to Executive's termination, Bank shall continue to pay to
Executive, or to his estate, as the case may be, for the duration of the
Severance Period, such compensation in such manner as had been received by
Executive immediately prior to termination. The 'Severance Period' for
purposes of Paragraph 4(a), (b) and shall (c) be a period of time
commencing at the termination and continuing for the greater of (i) the
remaining term of this Agreement, or (ii) ninety (90) days. In the event of
the termination of Executive's employment pursuant to Paragraph 4(d), Bank
shall not be obligated to pay any compensation to Executive following such
termination.
(b) Bank shall have the option to accelerate payment of the sum(s) due
during the Severance Period and to pay such sum(s) in such lump payment(s)
as Bank shall deem appropriate, provided that all such payments shall be
made during the Severance Period and the amount of such payments shall not
be greater than would have resulted from payment in accordance with Bank's
standard practices.
6. Confidentiality. Executive acknowledges that, in the course of his
employment by Bank, he will have access to confidential information, trade
secrets, and unique business procedures which are the valuable property of
Bank. Executive agrees not to disclose for any reason, directly or
indirectly, any confidential, trade secret or other proprietary
information, as determined by Bank in its reasonable discretion, at any
time, during or after the period Executive is employed by Bank, for any
purpose other than to perform his assigned duties on behalf of Bank.
7. Remedy. Bank and Executive acknowledge and agree that any breach
of Paragraph 6 of this Agreement by Executive would cause irreparable
injury to Bank and that Bank's remedy at law for any breach of any of
Executive's obligations hereunder would be inadequate, and
1
<PAGE>
Executive agrees and consents that temporary and permanent injunctive
relief may be granted in any proceeding which may be brought to enforce any
provision of Paragraph 6 hereof without necessity of proof that Bank's
remedy at law is inadequate.
8. Notices. Any and all notices, designations, consents, offers,
acceptances, or any other communications provided for herein shall be given
in writing by registered or certified mail, return receipt requested at the
addresses set forth below.
If to the Bank:
If to the Executive:
or to such other addresses as either party may designate by notice in
writing as provided herein.
9. Invalid Provisions. The invalidly or unenforceability of any
particular provision of this Agreement shall not affect the other
provisions hereof, and the Agreement shall be construed in all respects as
if such invalid or unenforceable provisions were omitted.
10. Modification. No change or modification of this Agreement shall
be enforceable against any party unless the same be in writing and signed
by the party against whom enforcement is sought.
11. Entire Agreement. This Agreement represents the entire agreement
between the parties with respect to the subject matters hereof, and
supersedes all prior agreements and understandings with respect thereto.
12. Headings. Any headings preceding the text of the several
paragraphs hereof are inserted solely for the convenience of reference and
shall not constitute a part of this Agreement, nor shall they affect its
meaning, construction or effect.
13. Successors; Assigns. This Agreement shall inure to the benefit of
and be binding upon the parties herein, and their respective heirs,
executors, administrators, successors and, to the extent permitted herein,
assigns. Notwithstanding the foregoing, Executive may not assign his
rights, or delegate his duties, hereunder.
14. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and seals
the date and year above first written.
Attest:
<TABLE>
<S> <C>
By:
Secretary ROLF A. STENSRUD, PRESIDENT
(CORPORATE SEAL)
(SEAL)
Witness KEVIN GALLAGHER
</TABLE>
2
<PAGE>
AGREEMENT
THIS AGREEMENT, entered into this _____ day of _______, 1996, by and
between FIRST REPUBLIC BANCORP, INC. ("First Republic") a Pennsylvania
corporation, and Harry D. Madonna ("Chairman").
WHEREAS, Chairman has served as Chairman of the Board and Chairman of
the Executive Committee of Republic Bancorporation, Inc. ("Republic") and
Republic Bank, a wholly-owned subsidiary of Republic ("Republic Bank"); and
WHEREAS, Chairman has been instrumental in effecting the merger
between ExecuFirst Bancorp, Inc. ("ExecuFirst") and Republic, with First
Republic being the surviving corporation and in dealing with the federal and
state regulators regarding the merger; and
WHEREAS, First Republic believes that Chairman's service as a
director, Chairman of First Republic and Co-Chairman of the Executive Committee
of First Republic and as a director and Co-Chairman of the Executive Committee
of the subsidiary bank is essential for the continuing and future success of
First Republic, and
WHEREAS, Chairman desires to serve in such capacity for the benefit
of First Republic;
NOW THEREFORE, in consideration of the mutual promises contained
herein, and other good and valuable consideration, receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby, the
parties agree as follows:
1. Chairman shall receive such benefits, remunerations and
reimbursement of expenses from First Republic as have been provided to him as of
November 17, 1995 as Chairman of Republic.
2. (a) Upon the consummation of the merger between Republic and
ExecuFirst, First Republic shall issue options to Chairman to purchase the
common stock of First Republic which will enable Chairman to purchase that
number of shares of common stock of First Republic equal to Three Percent (3%)
of the outstanding shares of common stock of First Republic at the date of the
consummation of the merger. The options shall have an exercise price equal to
the fair market value on the date of grant, as defined below, shall have a term
of ten (10) years from the date of issuance and will be subject to all of the
terms and conditions of exercise found in First Republic's Stock Option Plan as
it may be amended from time to time, except as explicitly stated herein.
(b) "Fair Market Value on the Date of Grant" shall mean the
average of the closing bid and asked prices for ExecuFirst's Common Stock as
reported on the NASDAQ quotation system for the ninety days prior to the date of
grant.
3. In addition, upon consummation of the merger, the Board of
Directors of each of First Republic and the subsidiary bank shall, subject to
the exercise of their respective fiduciary duties, elect Chairman as Chairman of
the Board and Co-Chairman of the Executive Committee of First Republic and a
director and Co-Chairman of the Executive Committee of the subsidiary bank for a
term of at least three (3) years or during his term as a director of First
Republic and/or the subsidiary bank, whichever is less.
4. GENERAL PROVISIONS
.
A. This Agreement shall inure to the benefit of and be binding
upon First Republic and its successors and assigns and to Chairman and his
heirs, executors and administrators.
B. No modification of this Agreement shall be binding or
enforceable in any court unless in writing and signed by the parties hereto.
This writing represents the entire agreement and understanding of the parties
with respect to the subject matters hereof, and shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
applicable to contracts made and to be performed in Pennsylvania.
C. If any provision of this Agreement shall be or shall become
illegal or unenforceable in whole or in part, for any reason whatsoever, the
remaining provisions shall nevertheless be deemed valid, binding and subsisting.
D. The headings in the sections of this Agreement are for
convenience only and they shall not affect the interpretation of this Agreement.
E. The waiver by either party of a breach or violation of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any subsequent breach or violation thereof.
5. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed, certified or registered mail, return receipt
requested, with postage prepaid to the following addresses or to such other
address as either party may designate by like notice:
A. If to Chairman to:
Harry D. Madonna, Esquire
5 Clayton Place
Newtown Square, PA 19073
B. If to the First Republic, to:
President
First Republic Bancorp, Inc.
1513 Walnut Street
Philadelphia, PA 19102
and to such other or additional Person or Persons as either party shall have
designated to the other party in writing by like notice.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals the date and year above first written.
First Republic Bancorp, Inc.
By:________________________________________
Zvi H. Muscal, President
------------------------------------------
HARRY D. MADONNA
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of ExecuFirst Bancorp, Inc. on Form S-4 of our report dated January 26, 1996, on
our audits of the consolidated financial statements of ExecuFirst Bancorp, Inc.
as of December 31, 1995 and 1994 and for the years ended December 31, 1995 and
1994, which report is included in the Annual Report on Form 10-KSB. We also
consent to the reference to our firm under the caption 'Experts.'
COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
April 22, 1996
<PAGE>
EXHIBIT 23.5
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 2 to Registration Statement No.
333-000673 of ExecuFirst Bankcorp, Inc. of our report on the consolidated
financial statements of Republic Bancorporation, Inc. for the years ended
December 31, 1995 and 1994 dated March 1, 1996, appearing in the Prospectus,
which is part of such Registration Statement, and the reference to us under the
heading 'Experts' in such Prospectus.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
April 22, 1996
<PAGE>
EXHIBIT 23.6
APRIL 3, 1996
CONSENT OF BERWIND FINANCIAL GROUP, L.P.
We hereby consent to the use of our opinion letter dated ___________ to the
Board of Directors of ExecuFirst Bancorp, Inc. and to the references to our firm
in the Proxy Statement/Prospectus which forms a part of the Registration
Statement on Form S-4 relating to the proposed merger of Republic
Bancorporation, Inc. with and into ExecuFirst Banccorp, Inc., to form First
Republic Bancorp, Inc.
In giving this consent, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
BERWIND FINANCIAL GROUP, L.P
<PAGE>
EXHIBIT 23.7
APRIL 3, 1996
CONSENT OF JANNEY MONTGOMERY SCOTT INC.
We hereby consent to the use of our opinion letter dated ___________ to the
Board of Directors of Republic Bancorporation, Inc. and to the references to our
firm in the Proxy Statement/Prospectus which forms a part of the Registration
Statement on Form S-4 relating to the proposed merger of Republic Bancorporation
with and into ExecuFirst Bancorp, Inc., to form First Republic Bancorp, Inc.
In giving this consent, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
JANNEY MONTGOMERY SCOTT INC.
<PAGE>
CONSENT
Consents of Persons Not Signing Registration Statement Named in
Registration Statement As About to Become Directors
The undersigned hereby consents to the use of his name in a Registration
Statement filed by Execufirst Bancorp, Inc. (the 'Corporation') on Form S-4
(File No. 333-000673), and any amendments thereto, in connection with the
registration of approximately 1,985,658 shares of the Corporation's Common
Stock, being offered to the present shareholders of Republic Bancorporation,
Inc. in connection with the proposed merger of Republic Bancorporation, Inc.
with and into Execufirst Bancorp, Inc.
/S_/__HARRY D. MADONNA________________
Harry D. Madonna
<PAGE>
CONSENT
Consents of Persons Not Signing Registration Statement Named in
Registration Statement As About to Become Directors
The undersigned hereby consents to the use of his name in a Registration
Statement filed by Execufirst Bancorp, Inc. (the 'Corporation') on Form S-4
(File No. 333-000673), and any amendments thereto, in connection with the
registration of approximately 1,985,658 shares of the Corporation's Common
Stock, being offered to the present shareholders of Republic Bancorporation,
Inc. in connection with the proposed merger of Republic Bancorporation, Inc.
with and into Execufirst Bancorp, Inc.
/S_/__KENNETH ADELBERG________________
Kenneth Adelberg
<PAGE>
CONSENT
Consents of Persons Not Signing Registration Statement Named in
Registration Statement As About to Become Directors
The undersigned hereby consents to the use of his name in a Registration
Statement filed by Execufirst Bancorp, Inc. (the 'Corporation') on Form S-4
(File No. 333-000673), and any amendments thereto, in connection with the
registration of approximately 1,985,658 shares of the Corporation's Common
Stock, being offered to the present shareholders of Republic Bancorporation,
Inc. in connection with the proposed merger of Republic Bancorporation, Inc.
with and into Execufirst Bancorp, Inc.
/S_/__DANIEL S. BERMAN _______________
Daniel S. Berman
<PAGE>
CONSENT
Consents of Persons Not Signing Registration Statement Named in
Registration Statement As About to Become Directors
The undersigned hereby consents to the use of his name in a Registration
Statement filed by Execufirst Bancorp, Inc. (the 'Corporation') on Form S-4
(File No. 333-000673), and any amendments thereto, in connection with the
registration of approximately 1,985,658 shares of the Corporation's Common
Stock, being offered to the present shareholders of Republic Bancorporation,
Inc. in connection with the proposed merger of Republic Bancorporation, Inc.
with and into Execufirst Bancorp, Inc.
/S_/__WILLIAM W. BATOFF ______________
William W. Batoff
<PAGE>
CONSENT
Consents of Persons Not Signing Registration Statement Named in
Registration Statement As About to Become Directors
The undersigned hereby consents to the use of his name in a Registration
Statement filed by Execufirst Bancorp, Inc. (the 'Corporation') on Form S-4
(File No. 333-000673), and any amendments thereto, in connection with the
registration of approximately 1,985,658 shares of the Corporation's Common
Stock, being offered to the present shareholders of Republic Bancorporation,
Inc. in connection with the proposed merger of Republic Bancorporation, Inc.
with and into Execufirst Bancorp, Inc.
/S_/__EUSTACE W. MITA_________________
Eustace W. Mita
<PAGE>
CONSENT
Consents of Persons Not Signing Registration Statement Named in
Registration Statement As About to Become Directors
The undersigned hereby consents to the use of his name in a Registration
Statement filed by Execufirst Bancorp, Inc. (the 'Corporation') on Form S-4
(File No. 333-000673), and any amendments thereto, in connection with the
registration of approximately 1,985,658 shares of the Corporation's Common
Stock, being offered to the present shareholders of Republic Bancorporation,
Inc. in connection with the proposed merger of Republic Bancorporation, Inc.
with and into Execufirst Bancorp, Inc.
/S_/__NEIL I. RODIN __________________
Neil I. Rodin
<PAGE>
CONSENT
Consents of Persons Not Signing Registration Statement Named in
Registration Statement As About to Become Directors
The undersigned hereby consents to the use of his name in a Registration
Statement filed by Execufirst Bancorp, Inc. (the 'Corporation') on Form S-4
(File No. 333-000673), and any amendments thereto, in connection with the
registration of approximately 1,985,658 shares of the Corporation's Common
Stock, being offered to the present shareholders of Republic Bancorporation,
Inc. in connection with the proposed merger of Republic Bancorporation, Inc.
with and into Execufirst Bancorp, Inc.
/S_/__STEVE J. SHOTZ _________________
Steve J. Shotz
<PAGE>
CONSENT
Consents of Persons Not Signing Registration Statement Named in
Registration Statement As About to Become Directors
The undersigned hereby consents to the use of his name in a Registration
Statement filed by Execufirst Bancorp, Inc. (the 'Corporation') on Form S-4
(File No. 333-000673), and any amendments thereto, in connection with the
registration of approximately 1,985,658 shares of the Corporation's Common
Stock, being offered to the present shareholders of Republic Bancorporation,
Inc. in connection with the proposed merger of Republic Bancorporation, Inc.
with and into Execufirst Bancorp, Inc.
/S_/__ROLF A. STENSRUD _______________
Rolf A. Stensrud
<PAGE>
CONSENT
Consents of Persons Not Signing Registration Statement Named in
Registration Statement As About to Become Directors
The undersigned hereby consents to the use of his name in a Registration
Statement filed by Execufirst Bancorp, Inc. (the 'Corporation') on Form S-4
(File No. 333-000673), and any amendments thereto, in connection with the
registration of approximately 1,985,658 shares of the Corporation's Common
Stock, being offered to the present shareholders of Republic Bancorporation,
Inc. in connection with the proposed merger of Republic Bancorporation, Inc.
with and into Execufirst Bancorp, Inc.
/S_/__HARRIS WILDSTEIN _______________
Harris Wildstein
<PAGE>
EXHIBIT 99.2
EXECUFIRST BANCORP, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS--MAY 29, 1996
The undersigned shareholder of EXECUFIRST BANCORP, INC. (the 'Company'),
revoking all previous proxies, hereby constitutes and appoints George Rapp and
Madeline McLaughlin, and each of them acting individually, as the attorney and
proxy of the undersigned, with full power of substitution, for and in the name
and stead of the undersigned, to attend the Annual Meeting of Shareholders of
the Company to be held on Wednesday, May 29, 1996 at .M. at
, Pennsylvania, and to vote all shares of Common Stock of the Company
which the undersigned would be entitled to vote if personally present at such
Annual Meeting, and at any adjournment or postponement thereof; provided that
said proxies are authorized and directed to vote as indicated with respect to
the following matters:
PROPOSAL I
/ / FOR all nominees for director named below.
/ / WITHHOLD AUTHORITY to vote for all nominees for director named below.
/ / FOR all nominees for director named below, except WITHHOLD AUTHORITY to
vote for the nominee(s) whose name(s) is (are) lined through.
Nominees: Michael J. Bradley, Gerald Levinson, and John O'Donnell.
PROPOSAL II
/ / FOR the proposal to approve the Agreement and Plan of Merger and the
Merger of Republic Bancorporation, Inc. with and into the Company.
/ / AGAINST
/ / ABSTAIN
PROPOSAL III
/ / FOR the proposal to approve the amendment to the Company's Amended and
Restated Articles of Incorporation relating to a restriction on ownership
of the Company's common stock.
/ / AGAINST
/ / ABSTAIN
PROPOSAL IV
/ / FOR the proposal to approve amendments to the Company's Amended and
Restated Articles of Incorporation relating to (i) indemnification of
officers and directors; (ii) nominations to the Board of Directors; and
(iii) the vote required to amend certain provisions of the Articles of
Incorporation.
/ / AGAINST
/ / ABSTAIN
(Continued and to be signed on the other side)
<PAGE>
PROPOSAL V
/ / FOR the proposal to adopt the Company's Amended and Restated Stock Option
Plan.
/ / AGAINST
/ / ABSTAIN
PROPOSAL VI
In their discretion, the proxies will vote upon such other business as may
properly come before the Annual Meeting.
This Proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholders. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED 'FOR' THE NOMINEES FOR DIRECTOR; 'FOR' THE APPROVAL OF THE PLAN OF MERGER
AND THE MERGER; 'FOR' APPROVAL OF THE AMENDMENTS TO THE ARTICLES OF
INCORPORATION; AND 'FOR' THE APPROVAL OF THE AMENDED AND RESTATED STOCK OPTION
PLAN. This proxy also delegates discretionary authority to vote with respect to
any other business which may properly come before the meeting or any adjournment
or postponement thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE ANNUAL REPORT, NOTICE OF
SAID MEETING AND THE PROXY STATEMENT FURNISHED IN CONNECTION THEREWITH. The
undersigned also hereby ratifies all that the said attorneys and proxies may do
by virtue hereof and hereby confirms that this proxy shall be valid and may be
voted whether or not the shareholder's name is signed as set forth below or a
seal is affixed or the description, authority or capacity of the person signing
is given or other defect of signature exists.
NOTE: PLEASE MARK, DATE AND SIGN THIS PROXY CARD AND RETURN IT IN THE
ENCLOSED ENVELOPE. Please sign this proxy exactly as it appears in address
below. If shares are registered in more than one name, all owners should sign.
If signing in a fiduciary or representative capacity, such as attorney-in-fact,
executor, administrator, trustee or guardian, please give full title and attach
evidence of authority. Corporations please sign with full corporate name by a
duly authorized officer and affix the corporate seal.
Date , 1995
(SEAL)
(Shareholder's Signature)
(SEAL)
(Shareholder's Signature)
SHARES
<PAGE>
EXHIBIT 99.3
REPUBLIC BANCORPORATION, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS--MAY 28, 1996
The undersigned shareholder of REPUBLIC BANCORPORATION, INC. (the
'Company'), revoking all previous proxies, hereby constitutes and appoints
and , and each of them acting individually, as the attorney
and proxy of the undersigned, with full power of substitution, for and in the
name and stead of the undersigned, to attend the Special Meeting of Shareholders
of the Company to be held on Tuessday, May 28,1996 at 10:00 A.M. in the
Company's offices located at 1515 Market Street, Philadelphia, Pennsylvania, and
to vote all shares of Common Stock of the Company which the undersigned would be
entitled to vote if personally present at such Special Meeting, and at any
adjournment or postponement thereof; provided that said proxies are authorized
and directed to vote as indicated with respect to the following matters:
PROPOSAL I
/ / FOR the proposal to approve the Agreement and Plan of Merger and the
Merger of the Company with and into ExecuFirst Bancorp, Inc.
/ / AGAINST
/ / ABSTAIN
In their discretion, the proxies will vote upon such other business as may
properly come before the Annual Meeting.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholders. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED 'FOR' THE APPROVAL OF THE PLAN OF MERGER AND THE MERGER. This proxy
also delegates discretionary authority to vote with respect to any other
business which may properly come before the meeting or any adjournment or
postponement thereof.
(Continued and to be signed on the other side)
<PAGE>
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE ANNUAL REPORT, NOTICE OF
SAID MEETING AND THE PROXY STATEMENT FURNISHED IN CONNECTION THEREWITH. The
undersigned also hereby ratifies all that the said attorneys and proxies may do
by virtue hereof and hereby confirms that this proxy shall be valid and may be
voted whether or not the shareholder's name is signed as set forth below or a
seal is affixed or the description, authority or capacity of the person signing
is given or other defect of signature exists.
DATE _________________________, 1995
_____________________________ (SEAL)
(SHAREHOLDER'S SIGNATURE)
_____________________________ (SEAL)
(SHAREHOLDER'S SIGNATURE)
_____________________________ SHARES
NOTE: PLEASE MARK, DATE AND SIGN THIS PROXY CARD AND RETURN IT IN THE ENCLOSED
ENVELOPE. PLEASE SIGN THIS PROXY EXACTLY AS IT APPEARS IN ADDRESS BELOW. IF
SHARES ARE REGISTERED IN MORE THAN ONE NAME, ALL OWNERS SHOULD SIGN. IF SIGNING
IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, SUCH AS ATTORNEY-IN-FACT, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AND ATTACH EVIDENCE
OF AUTHORITY. CORPORATIONS PLEASE SIGN WITH FULL CORPORATE NAME BY A DULY
AUTHORIZED OFFICER AND AFFIX THE CORPORATE SEAL.
