EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made and
entered into as of May 6, 2003, by and among COMMUNITY BANK SYSTEM, INC., a
Delaware corporation ("CBSI"), PB ACQUISITION CORP., a New York corporation
("Merger Sub"), and PEOPLES BANKCORP, INC., a New York corporation ("PBI").
WHEREAS, CBSI is a bank holding company, the principal banking
subsidiary of which is Community Bank, N.A., a national banking association
("Community Bank");
WHEREAS, Merger Sub is a newly formed, wholly-owned subsidiary
of CBSI;
WHEREAS, PBI is a savings and loan holding company, the
principal banking subsidiary of which is Ogdensburg Federal Savings and Loan
Association, a federal stock savings and loan association ("OFSLA");
WHEREAS, the respective Boards of Directors of CBSI, Merger
Sub and PBI have each determined that it is in the best interests of their
respective shareholders for CBSI to acquire PBI through the merger (the
"Merger") of Merger Sub with and into PBI, and a subsequent merger (the
"Short-Form Merger") of the Surviving Corporation (as defined below) into and
with CBSI, in each case upon the terms and subject to the conditions set forth
herein;
WHEREAS, simultaneously with the consummation of the Merger
and the Short-Form Merger, OFSLA, which shall become a wholly-owned subsidiary
of CBSI as a result of the Merger and the Short-Form Merger, shall merge (the
"Bank Merger") with and into Community Bank, with Community Bank continuing as
the surviving bank, pursuant to a plan of merger;
WHEREAS, it is the current intention of CBSI to operate, after
the consummation of the Bank Merger, the existing business of OFSLA as a branch
of Community Bank;
WHEREAS, in furtherance of such acquisition, the respective
Boards of Directors of CBSI, Merger Sub and PBI have each approved this
Agreement and the Merger in accordance with the General Corporation Law of the
State of Delaware (the "DGCL") and the Business Corporation Law of the State of
New York (the "NYBCL") and upon the terms and conditions set forth herein;
WHEREAS, upon the consummation and effectiveness of the
Merger, all of the issued and outstanding shares of common stock, par value
$0.01 per share, of PBI ("PBI Common Stock"), other than the Dissenting Shares
(as defined below), shall be converted into the right to receive cash, without
interest, as provided in Article II of this Agreement; and
WHEREAS, concurrently with the execution of this Agreement,
and as a condition and inducement to CBSI's willingness to enter into this
Agreement, all executive officers and directors of PBI are entering into a
Voting Agreement (collectively, the "Voting Agreements"), substantially in the
form attached hereto as EXHIBIT A;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants, representations, and agreements herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
"Advisory Board" is defined in Section 5.11 hereof.
"Agreement" is defined in the preamble hereof.
"Bank Holding Company Act" shall mean the Bank Holding Company
Act of 1956, as amended.
"Bank Merger" is defined in the preamble of this Agreement.
"CBSI" is defined in the preamble of this Agreement.
"Certificate" is defined in Section 2.2(c) hereof.
"Closing Date" shall mean the date specified pursuant to
Section 5.9 hereof as the date on which the parties hereto shall close the
transactions contemplated herein.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commission" or "SEC" shall mean the Securities and Exchange
Commission.
"Community Bank" is defined in the preamble of this Agreement.
"DGCL" is defined in the preamble of this Agreement.
"Dissenting Shares" is defined in Section 2.4 hereof.
"Effective Time" is defined in Section 2.1(b) hereof.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" is defined in Section 2.13 hereof.
"ESOP" is defined in Section 2.2(d) hereof.
"ESOP Trustees" is defined in Section 2.2(d) hereof.
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"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Exchange Agent" is defined in Section 2.5 hereof.
"Executive Employment Agreements" shall mean, collectively (i)
the Employment Agreement, dated as of January 13, 1999, by and between OFSLA and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as amended by the First Amendment thereto dated January 12,
2000 and the Second Amendment thereto dated January 10, 2001, and (ii) the
Employment Agreement, dated as of January 13, 1999, by and between OFSLA and
▇▇▇▇ ▇. ▇▇▇▇▇▇, as amended by the First Amendment thereto dated January 12, 2000
and the Second Amendment thereto dated January 10, 2001.
"FDIA" shall mean the Federal Deposit Insurance Act.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of Governors of
the Federal Reserve System.
"Indemnified Parties" is defined in Section 5.11(d) hereof.
"Intellectual Property" means domestic and foreign letters
patent, patents, patent applications, patent licenses, software licensed or
owned, know-how licenses, trade names, common law and other trademarks, service
marks, licenses of trademarks, trade names and/or service marks, trademark
registrations and applications, service ▇▇▇▇ registrations and applications and
copyright registrations and applications.
"IRS" means the Internal Revenue Service.
"Material Adverse Effect" shall mean, with respect to any
party, a material adverse effect on the business, results of operations or
financial condition of such party and its Subsidiaries, taken as a whole, or a
material adverse effect on such party's ability to consummate the transactions
contemplated hereby; provided, however, that in determining whether a Material
Adverse Effect has occurred there shall be excluded any effect on the referenced
party the primary cause of which is (i) any change in banking or similar laws,
rules or regulations of general applicability or interpretations thereof by
courts or governmental authorities, (ii) any change in generally accepted
accounting principles or regulatory accounting requirements applicable to banks
or their holding companies generally, (iii) general changes in conditions,
including interest rates, in the banking industry or in the global or United
States economy or financial markets, with respect to clause (i), (ii) or (iii),
to the extent that such a change does not materially affect the referenced party
to a materially different extent than other similarly situated banking
organizations, and (iv) any action or omission of the referenced party or any of
its Subsidiaries taken with the prior written consent of the other party to this
Agreement in contemplation of the Merger. No payments made or expenses incurred
in accordance with
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Section 3.12(k), (l) or (m), in itself, shall be deemed to constitute a Material
Adverse Effect on PBI.
"Maximum Amount" is defined in Section 5.10(c)(3) hereof.
"Merger" is defined in the preamble of this Agreement.
"Merger Consideration" is defined in Section 2.2(a) hereof.
"Merger Sub" is defined in the first paragraph of this
Agreement.
"MRP" is defined in Section 2.2(c) hereof.
"NYBCL" is defined in the preamble of this Agreement.
"NYSE" shall mean the New York Stock Exchange.
"OCC" shall mean the Office of the Comptroller of Currency.
"OFSLA" is defined in the preamble of this Agreement.
"OTS" shall mean the Office of Thrift Supervision.
"PBI" is defined in the preamble of this Agreement.
"PBI Common Stock" is defined in the preamble of this
Agreement.
"PBI Financial Statements" shall mean (i) the consolidated
balance sheets of PBI as of March 31, 2003 and as of December 31, 2002, and the
related consolidated statements of operations, cash flows and changes in
shareholders' equity (including related notes, if any) for the three months
ended March 31, 2003 and each of the three years ended December 31, 2002, 2001
and 2000, respectively, as filed by PBI in its SEC Documents, and (ii) the
consolidated balance sheets of PBI and related consolidated statements of
operations, cash flows and changes in shareholders' equity (including related
notes, if any) as filed by PBI in its SEC Documents as of dates or with respect
to periods ended subsequent to March 31, 2003.
"PBI Proxy Statement" shall mean the proxy statement, together
with any supplements thereto and related materials, sent to the shareholders of
PBI to solicit their votes in connection with this Agreement and the Merger.
"PBI Shareholders' Meeting" shall mean the special meeting of
the shareholders of PBI to be called for the purpose of approving this Agreement
and the transactions contemplated thereby.
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"Person" shall mean an individual, corporation, partnership,
bank, limited liability company, trust, association, unincorporated
organization, other entity or group (as defined in Section 13(d)(3) of the
Exchange Act).
"Previously Disclosed" shall mean disclosed prior to the
execution hereof in (i) an SEC Document filed with the SEC subsequent to January
1, 2002 and prior to the date hereof or (ii) a letter dated of even date
herewith from the party making such disclosure and delivered to the other party
prior to the execution hereof, or schedules attached to this Agreement. Any
information disclosed by one party to the other for any purpose hereunder shall
be deemed to be disclosed for all purposes hereunder provided that the relevance
of the disclosed information to the representations or warranties in question is
reasonably apparent. The inclusion of any matter in such letter shall not be
deemed an admission or otherwise to imply that any such matter is material for
purposes of this Agreement.
"Rights" shall mean warrants, options, rights, convertible
securities and other arrangements or commitments which obligate an entity to
issue or dispose of any of its capital stock, and stock appreciation rights,
performance units and other similar stock-based rights whether they obligate the
issuer thereof to issue stock or other securities or to pay cash.
"SEC Documents" shall mean all reports and registration
statements filed, or required to be filed, by a party hereto pursuant to the
Securities Laws.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Securities Laws" shall mean the Securities Act; the Exchange
Act; the Investment Company Act of 1940, as amended; the Investment Advisers Act
of 1940, as amended; the Trust Indenture Act of 1939, as amended; and the rules
and regulations of the Commission promulgated thereunder.
"Short-Form Merger" is defined in the preambles to this
Agreement.
"Stock Option" is defined in Section 2.2(b) hereof.
"Stock Option Plans" is defined in Section 2.2(b) hereof.
"Subsidiary" shall mean with respect to any party, any Person
which is consolidated with such party for financial reporting purposes.
"Superior Proposal" is defined in Section 5.13 hereof.
"Surviving Corporation" is defined in Section 2.1(a) hereof.
"Takeover Laws" is defined in Section 5.12 hereof.
"Takeover Proposal" is defined in Section 5.13 hereof.
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"Taxes" shall mean all taxes, however denominated, including
any interest, penalties, criminal sanctions or additions to tax (including,
without limitation, any underpayment penalties for insufficient estimated tax
payments) or other additional amounts that may become payable in respect thereof
(or in respect of a failure to file any Tax Return when and as required),
imposed by any federal, state, local or foreign government or any agency or
political subdivision of any such government, which taxes shall include, without
limiting the generality of the foregoing, all income taxes, payroll and
employment taxes, withholding taxes (including withholding taxes in connection
with amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other Person), unemployment insurance taxes, social security (or
similar) taxes, sales and use taxes, excise taxes, franchise taxes, gross
receipts taxes, occupation taxes, real and personal property taxes, stamp taxes,
value added taxes, transfer taxes, profits or windfall profits taxes, licenses
in the nature of taxes, estimated taxes, severance taxes, duties (custom and
others), workers' compensation taxes, premium taxes, environmental taxes
(including taxes under Section 59A of the Code), disability taxes, registration
taxes, alternative or add-on minimum taxes, estimated taxes, and other fees,
assessments, charges or obligations of the same or of a similar nature.
"Tax Returns" shall mean all returns, reports, estimates,
information statements or other written submissions, and any schedules or
attachments thereto, required or permitted to be filed pursuant to the statutes,
rules and regulations of any federal, state, local or foreign government Tax
authority, including but not limited to, original returns and filings, amended
returns, claims for refunds, information returns and accounting method change
requests.
"Transaction Documents" shall mean, collectively, the Voting
Agreements, the Option Agreement, any instruments to effect the Bank Merger or
the Short-Form Merger, and certificates and other documents contemplated thereby
or by this Agreement.
"Voting Agreement" is defined in the preamble of this
Agreement.
For purposes of this Agreement, the terms "PBI," "OFSLA," "CBSI,"
"Community Bank" and "Subsidiary" include all of the respective predecessors
thereof (including without limitation, any previously acquired Person).
ARTICLE II
THE MERGER
2.1 The Merger.
(a) At the Effective Time, and upon the terms and
subject to the conditions of this Agreement, Merger Sub shall be merged with and
into PBI, the separate existence of Merger Sub shall cease and PBI shall
continue as the surviving corporation and a wholly-owned subsidiary of CBSI. PBI
as the surviving corporation after the Merger is hereinafter sometimes referred
to as the "Surviving Corporation."
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(b) As promptly as practicable, but no later than 30
days, after the satisfaction or waiver of the conditions set forth in Article
VI, the parties shall cause the Merger to be consummated by filing articles of
merger as contemplated by the NYBCL, together with any required related
documents, with the Department of State of the State of New York, in such form
as required by, and executed in accordance with, the relevant provisions of the
NYBCL (the time of such filing, or the time specified in such filing as the
effective time for the Merger, as applicable, being the "Effective Time").
2.2 Merger Consideration. At the Effective Time, by virtue of the
Merger and without any further action by the parties:
(a) PBI Common Stock. Each share of PBI Common Stock
issued and outstanding immediately prior to the Effective Time (other than
shares to be cancelled pursuant to Section 2.2(e) and Dissenting Shares, if any)
shall be cancelled and shall be converted automatically into the right to
receive $30.00 in cash, without interest, for each share of PBI Common Stock
(the "Merger Consideration").
(b) Stock Options. At the Effective Time each
outstanding option (whether or not such option is then vested or exercisable) to
purchase shares of PBI Common Stock (a "Stock Option") granted under Peoples
Bankcorp, Inc. 2000 Stock Option and Incentive Plan (the "Stock Option Plan")
shall be cancelled and extinguished in consideration and exchange for a cash
payment from CBSI equal to the product of (i) the per share difference between
the Merger Consideration and the exercise price of such Stock Option, and (ii)
the number of shares of PBI Common Stock underlying such Stock Option. The cash
payment to each holder of the Stock Options shall be subject to all applicable
federal and state tax withholding obligations. Prior to the Effective Time, PBI
shall take all such action as is necessary to terminate the Stock Option Plan
and all outstanding Stock Options effective as of the Effective Time, and shall
provide written notice to each holder of an outstanding Stock Option of the
cancellation thereof and a cash payment in exchange therefor as of the Effective
Time, pursuant to this Section 2.2(b).
(c) Management Recognition Plan. At the Effective Time,
each undistributed share of PBI Common Stock subject to an outstanding award
under the Peoples Bankcorp, Inc. Management Recognition Plan (the "MRP")
(whether or not such share is then vested) shall be cancelled and extinguished
in consideration and exchange for a cash payment from CBSI equal to the Merger
Consideration. The cash payment to each participant of MRP shall be subject to
all applicable federal and state tax withholding obligations. Prior to the
Effective Time, PBI shall take all such action as is necessary to terminate the
MRP, the associated trust and all outstanding awards under the MRP, all
effective as of the Effective Time, and shall provide written notice to each
holder of an outstanding award of the cancellation thereof and a cash payment in
exchange therefor as of the Effective Time, pursuant to this Section 2.2(c). Any
shares of PBI Common Stock held in the trust established for the purposes of the
MRP, but not subject to an outstanding award thereunder at the Effective Time,
shall be cancelled without any consideration and no payment or distribution
shall be made with respect thereto.
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(d) Employee Stock Ownership Plan. At the Effective
Time, each share of PBI Common Stock held by the trustees (the "ESOP Trustees")
for the Peoples Bankcorp, Inc. Employee Stock Ownership Plan (the "ESOP"),
whether or not then allocated to accounts of ESOP participants, shall be
cancelled and extinguished in consideration and exchange for the rights to
receive a cash payment from CBSI equal to the Merger Consideration. In addition,
prior to the Effective Time, PBI shall take all such action as is necessary or
reasonably appropriate to terminate the ESOP. Such action shall include, but
shall not be limited to, applying to the IRS for a favorable determination that
the termination of the ESOP does not adversely affect the tax-qualified status
of the ESOP. As soon as practical after the Effective Time, the outstanding
balance of the ESOP loan, plus accrued interest, shall be repaid in full by the
ESOP Trustees with cash attributable to the Merger Consideration received in
exchange for the shares of PBI Common Stock then held in the ESOP's loan
suspense account. The remaining cash then held in the ESOP's loan suspense
account shall be allocated to the accounts of ESOP participants in proportion to
their relative ESOP account balances.
(e) Treasury Shares, Etc. Each share of PBI Common Stock
held in treasury by PBI or owned by any Subsidiary of PBI, CBSI or any
Subsidiary of CBSI (in each case other than shares held directly or indirectly
in trust accounts, managed accounts and the like or otherwise held in a
fiduciary capacity for the benefit of third parties) immediately prior to the
Effective Time, other than shares held by the trusts established for the
purposes of MRP or ESOP, shall be cancelled without any consideration and no
payment or distribution shall be made with respect thereto.
(f) Merger Sub Common Stock. Each share of common stock
of Merger Sub outstanding immediately prior to the Effective Time shall remain
unchanged and shall constitute the common stock of the Surviving Corporation.
2.3 Effect of Merger.
Upon the Effective Time of the Merger:
(a) The certificate of incorporation and bylaws of
Merger Sub, each as in effect immediately prior to the Effective Time, shall be
the certificate of incorporation and bylaws, respectively, of the Surviving
Corporation, in each case until amended in accordance with the NYBCL.
(b) All respective assets, rights, franchises, and
interest of PBI and Merger Sub in and to every type of property shall be vested
in the Surviving Corporation by virtue of the Merger without any deed or other
transfer; and the Surviving Corporation, without any order or other action on
the part of any court or otherwise, shall hold and enjoy all rights of property,
franchises and interest, in the same manner and to the same extent as such
rights, franchises and interests were held and enjoyed by PBI and Merger Sub
immediately prior to the Effective Time.
(c) The Surviving Corporation shall be liable for all of
the liabilities of PBI and Merger Sub and shall be bound by and subject to all
of the obligations and contracts of PBI
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and Merger Sub. All rights of creditors and obligees and all liens on property
of PBI and Merger Sub shall be preserved and unimpaired.
(d) The directors and officers of Merger Sub immediately
prior to the Effective Time shall be the directors and officers, respectively,
of the Surviving Corporation.
2.4 Dissenting Shares. Notwithstanding any other provision
contained in this Agreement, no shares of PBI Common Stock that are issued and
outstanding as of the Effective Time and that are held by a shareholder who has
properly exercised his or her appraisal rights (such shares being collectively
referred to herein as "Dissenting Shares") under the NYBCL shall be converted
into the right to receive the Merger Consideration as provided in Section 2.2
unless and until the holder shall have failed to perfect, or shall have
effectively withdrawn or lost, such holder's right to dissent from the Merger
under the NYBCL and to receive such consideration as may be determined to be due
with respect to such Dissenting Shares pursuant to and subject to the
requirements of the NYBCL. If any holder of Dissenting Shares shall have so
failed to perfect or effectively withdrawn or lost such holder's right to
dissent from the Merger, each of such holder's shares of PBI Common Stock shall
thereupon no longer be deemed Dissenting Shares and to have become, as of the
Effective Time, the right to receive the Merger Consideration pursuant to
Section 2.2.
2.5 Procedure to Exchange PBI Stock for Merger Consideration.
(a) Immediately prior to the Effective Time, CBSI shall
cause to be deposited with American Stock Transfer & Trust Company (or any other
bank or trust company selected by CBSI and reasonably acceptable to PBI) (the
"Exchange Agent"), for exchange in accordance with this Article II, such amount
of cash as is sufficient to pay the aggregate Merger Consideration into which
the outstanding shares of PBI Common Stock shall be converted pursuant to
Section 2.2 of this Agreement. CBSI shall use its commercially reasonable
efforts to cause the Exchange Agent to mail, as soon as practicable after the
Effective Time but no later than three (3) business days following the Effective
Time, to all holders of record of PBI Common Stock, excluding any holders of
Dissenting Shares, letters of transmittal specifying the procedures for delivery
of such holders' certificates formerly representing PBI Common Stock to the
Exchange Agent in exchange for the Merger Consideration into which the shares of
PBI Common Stock represented by such certificates shall have been converted
pursuant to this Article II. As soon as practicable, after surrender to the
Exchange Agent of the certificates of PBI Common Stock in accordance with the
instructions of the letter of transmittal, the Exchange Agent shall distribute
to the former holders of shares of PBI Common Stock a check for the Merger
Consideration that each such holder is entitled to receive pursuant to this
Agreement. In no event shall the holder of any such surrendered certificates be
entitled to receive interest on any amounts to be received in the Merger. If
payment of the Merger Consideration is to be made to a Person other than the
Person in whose name the surrendered certificate is registered in the stock
transfer books of PBI, it shall be a condition of payment that the certificate
so surrendered shall be properly endorsed and otherwise in proper form for
transfer and the Person requesting such exchange shall have paid all transfer
and other taxes required by reason of the payment of the Merger Consideration to
a Person other than the registered holder of the surrendered
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certificate or established to the satisfaction of the Exchange Agent that such
taxes are not payable.
(b) At any time following the expiration of six (6)
months following the Effective Time, the Surviving Corporation shall be entitled
to direct the Exchange Agent to deliver to it any funds which had been deposited
with the Exchange Agent and not disbursed to holders of the PBI Common Stock
(including, without limitation, all interest and other earnings on such funds),
and thereafter such holders shall be entitled to look to the Surviving
Corporation only as general creditors thereof with respect to any Merger
Consideration that may be payable upon due surrender of their certificates.
(c) At the Effective Time, the stock transfer books of
PBI shall be closed and no transfer of PBI Common Stock shall thereafter be made
or recognized. If, after the Effective Time, certificates representing such
shares are presented for transfer, they shall be cancelled and exchanged for the
Merger Consideration as provided in this Section.
(d) In the event any certificate shall have been lost,
stolen, destroyed or mutilated, upon the making of an affidavit of that fact by
the Person claiming such certificate to be lost, stolen, destroyed or mutilated
and, if required by CBSI, the making of an indemnity agreement in a form
reasonably requested by CBSI and/or the posting by such Person of a bond in such
amount as CBSI may reasonably direct as indemnity against any claim that may be
made against it with respect to such certificate, the Exchange Agent will issue
in exchange for such lost, stolen, destroyed or mutilated certificate the Merger
Consideration deliverable in respect thereof pursuant to this Agreement.
(e) Neither CBSI nor the Surviving Corporation shall be
liable to any former holder of shares of PBI Common Stock for any dividends or
distributions with respect thereto or any Merger Consideration payable in
respect thereof delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
2.6 Liquidation Account. The liquidation account established by
OFSLA pursuant to the plan of conversion adopted by it in connection with its
conversion from a mutual federal savings and loan association to a stock federal
savings and loan association shall, to the extent required by applicable law, be
maintained by Community Bank after the Bank Merger for the benefit of those
persons and entities who were savings account holders of OFSLA on the
eligibility and supplemental eligibility record dates for such conversion and
who continue, from time to time, to have rights therein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PBI
PBI hereby represents and warrants to CBSI and Merger Sub as
follows:
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3.1 Capital Structure of PBI.
(a) Capital Stock. The authorized capital stock of PBI
consists solely of 500,000 shares of preferred stock, par value $0.01 per share
("PBI Preferred Stock"), and 3,000,000 shares of PBI Common Stock, of which 0
and 135,798 shares, respectively, are issued and outstanding and 0 and 3,470
shares, respectively, are held in treasury. None of the shares of PBI's capital
stock has been issued in violation of the preemptive rights of any Person.
Except as set forth in Section 3.1(b), (c) or (d), there are no outstanding
options, warrants, agreements, arrangements, commitments or any similar rights
in existence for the purchase of or issuance of, or which encumber in any way,
PBI Preferred Stock, PBI Common Stock or any equity interest in any Subsidiary
of PBI. All outstanding shares of PBI Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable.
(b) Stock Options. An aggregate of 13,439 shares of PBI
Common Stock are reserved for existing and future grants under the Stock Option
Plans, pursuant to which options to purchase a total of 6,048 shares of PBI
Common Stock are issued and outstanding on the date hereof. For each outstanding
Stock Option, the name of the holder thereof, the grant date, the number of
shares of PBI Common Stock subject thereto, the exercise price per share and the
vesting schedule thereof are as presented in Schedule 3.1(b).
(c) MRP Awards. An aggregate of 2,956 shares of PBI
Common Stock are held by the trust established for the purpose of the MRP, and
unvested awards under the MRP in respect of a total of 1,778 shares of PBI
Common Stock are outstanding on the date hereof. For each outstanding award
under the MRP, the name of the holder thereof, the grant date, the number of
shares of PBI Common Stock subject thereto, and the vesting schedule thereof
have been Previously Disclosed.
(d) ESOP Awards. An aggregate of 10,751 shares of PBI
Common Stock are held by the ESOP Trustees for the benefit of the ESOP
Participants.
3.2 Organization, Standing and Authority of PBI. Each of PBI and
its Subsidiaries is a duly organized corporation, validly existing and in good
standing under the laws of its incorporation with full corporate power and
authority to own, lease and operate the properties it purports to own, lease or
operate and to carry on its business as now conducted, except where the failure
to be in good standing or to have such power or authority would not have a
Material Adverse Effect on PBI. Each of PBI and its Subsidiaries is duly
licensed or qualified to do business in the states of the United States and
foreign jurisdictions where its ownership or leasing of property or the conduct
of its business requires such qualification, except where the failure to be so
licensed or qualified would not have a Material Adverse Effect on PBI. PBI is
registered as a savings and loan holding company under the Home Owners' Loan
Act. The certificate or articles of incorporation and bylaws of PBI and each of
its Subsidiaries, copies of which have previously been furnished to CBSI, are
true, correct and complete copies of such documents as in effect or the date
hereof.
3.3 Ownership of PBI Subsidiaries; Capital Structure of PBI
Subsidiaries. A true and complete list of all of PBI's Subsidiaries, together
with the jurisdiction of incorporation of each
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Subsidiary and the percentage of each Subsidiary's outstanding capital stock
owned by PBI or another subsidiary of PBI, has been Previously Disclosed. Except
as previously disclosed, PBI does not, directly or indirectly, own any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any Person.
3.4 Authorized and Effective Agreement.
(a) PBI has all requisite corporate power and authority
to enter into and perform all of its obligations under this Agreement and each
of the Transaction Documents to which it is a party. The execution and delivery
of this Agreement and each such Transaction Agreement and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
PBI, except for the affirmative vote by the holders of a majority of the votes
cast by the holders of PBI Common Stock entitled to vote thereon, which is the
only shareholder vote required to approve the Merger pursuant to PBI's
certificate of incorporation and bylaws. The Board of Directors of PBI has
approved and adopted this Agreement and the Merger, and directed that this
Agreement be submitted to PBI's shareholders for approval at a special meeting
to be held in accordance with this Agreement. The Board of Directors of PBI has
unanimously recommended that the shareholders of PBI approve this Agreement and
the Merger.
(b) This Agreement and each Transaction Document to which
PBI is a party have been duly executed and delivered by PBI and, assuming the
representation contained in Section 4.2(b) hereof is true and correct, this
Agreement constitutes the legal, valid and binding obligations of PBI,
enforceable against PBI in accordance with its terms, except that such
enforceability may be subject to bankruptcy, insolvency and other laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
(c) Neither the execution and delivery by PBI of this
Agreement or any Transaction Document to which it is a party, nor consummation
of the transactions contemplated hereby or thereby, nor compliance by PBI with
any of the provisions hereof or thereof shall (i) conflict with or result in a
breach of any provision of the certificate of incorporation or bylaws of PBI,
(ii) assuming the consents and approvals contemplated by Section 5.3 hereof and
the consents and approvals which are Previously Disclosed are duly obtained,
constitute or result in a breach of any term, condition or provision of, or
constitute a default under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of PBI or any of its
Subsidiaries pursuant to, any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which PBI or any of its
Subsidiaries is a party, or (iii) assuming the consents and approvals
contemplated by Section 5.3 hereof and the consents and approvals which are
Previously Disclosed are duly obtained, conflict with or violate any law, order,
writ, injunction, decree, statute, rule or regulation applicable to PBI or any
of its Subsidiaries or their respective assets; except, in case of clauses (ii)
and (iii) above, for any such breach, default, right, lien, charge,
encumbrances, violation or conflict which, individually or in the aggregate,
would not have a Material Adverse Effect on PBI.
12
(d) Other than as contemplated by Section 5.3 hereof, no
consent, approval or authorization of, or declaration, notice, filing or
registration with, any governmental or regulatory authority, or any other
Person, is required to be made or obtained by PBI or OFSLA on or prior to the
Closing Date in connection with the execution, delivery and performance of this
Agreement or any of the Transaction Documents to which PBI is a party or the
consummation of the transactions contemplated hereby or thereby. As of the date
hereof, PBI is not aware of any reason that the condition set forth in Section
6.1(b) of this Agreement would not be satisfied.
3.5 Regulatory Filings. Each of PBI and its Subsidiaries has filed
all reports required by statute or regulation to be filed with any federal or
state bank regulatory agency, and such reports were prepared in accordance with
the applicable statutes, regulations and instructions in existence as of the
date of filing of such reports in all material respects.
3.6 SEC Documents; Financial Statements; Books and Records; Minute
Books. PBI has filed all forms, reports and documents required to be filed with
the SEC since January 1, 2000. The SEC Reports (i) were prepared in all material
respects in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The PBI Financial Statements filed by PBI
in SEC Documents prior to the date of this Agreement fairly present, and the PBI
Financial Statements filed by PBI in SEC Documents after the date of this
Agreement will fairly present, the consolidated financial position of PBI as of
the dates indicated and the consolidated income, changes in shareholders' equity
and cash flows of PBI and its consolidated Subsidiaries for the periods then
ended and each such financial statement has been or will be, as the case may be,
prepared in conformity with generally accepted accounting principles applicable
to financial institutions applied on a consistent basis, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount, and may not contain certain related notes as may be permitted by the
applicable rules promulgated by the SEC. The books and records of PBI and each
of its Subsidiaries fairly reflect in all material respects the transactions to
which it is a party or by which its properties are subject or bound. Such books
and records have been properly kept and maintained and are in compliance with
all applicable legal and accounting requirements in all material respects. The
minute books of PBI and each of its Subsidiaries contain records which are
accurate in all material respects of all corporate actions of its shareholders
and Board of Directors (including committees of its Board of Directors).
3.7 Material Adverse Change. PBI has not, on a consolidated basis,
suffered any change in its financial condition, results of operations or
business since December 31, 2002 which, individually or in the aggregate with
any other such changes, would constitute a Material Adverse Effect with respect
to PBI.
3.8 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 3.8, neither PBI nor any of its Subsidiaries has any liability
(contingent or otherwise) that is material to PBI
13
on a consolidated basis, or that, when combined with all similar
liabilities, would be material to PBI on a consolidated basis, except as
disclosed in the PBI Financial Statements contained in an SEC Document filed
prior to the date hereof and except for liabilities incurred in the ordinary
course of business consistent with past practice since March 31, 2003.
3.9 Properties. PBI and its Subsidiaries have good and marketable
title free and clear of all liens, encumbrances, charges, defaults or equitable
interests to all of the properties and assets, real and personal, which are
material to the business of PBI on a consolidated basis, and which are reflected
on the PBI Financial Statements as of March 31, 2003 or acquired after such
date, except (i) liens for taxes not yet due and payable, (ii) pledges to secure
deposits and other liens incurred in the ordinary course of banking business as
reflected in the books and records of PBI, (iii) such imperfections of title,
easements and encumbrances, if any, as are not material in character, amount or
extent, and (iv) dispositions and encumbrances for adequate consideration in the
ordinary course of business consistent with past practice. All leases pursuant
to which PBI or any of its Subsidiaries, as lessee, leases real and personal
property which, individually or in the aggregate, are material to the business
of PBI on a consolidated basis are valid and enforceable against the lessor in
accordance with their respective terms. All tangible property used in the
business of PBI is in good condition, reasonable wear and tear excepted, and is
usable in the ordinary course of business consistent with PBI's past practices.
3.10 Loans.
(a) Each loan reflected as an asset in the PBI Financial
Statements (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and what they purport to be, and such
documents comply in all material respects with all applicable laws, rules and
regulations, (ii) to the extent secured, has been secured by valid liens and
security interests which have been perfected, (iii) is the legal, valid and
binding obligation of the obligor named therein, enforceable in accordance with
its terms, except that the enforceability thereof may be subject to bankruptcy,
insolvency, fraudulent conveyance and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles, in
each case other than loans as to which the failure to satisfy the foregoing
standards, individually or in the aggregate, would not have a Material Adverse
Effect on PBI, and (iv) was solicited, originated and existed, and will exist at
the Effective Time, in material compliance with all applicable loan policies of
PBI or OFSLA. The information (including electronic information and information
contained on tapes and computer disks) with respect to all loans of PBI and its
Subsidiaries furnished to CBSI by PBI is, as of the respective dates indicated
therein, true and complete in all material respects.
(b) The allowance for loan losses reflected on the PBI
Financial Statements, as of their respective dates, is in all material respects
consistent with the requirements of generally accepted accounting principles to
provide for reasonably anticipated losses with respect to the loan portfolio of
PBI and its Subsidiaries based upon information available at the time.
3.11 Tax Matters.
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(a) PBI and each of its Subsidiaries have timely filed
federal income tax returns for each year through December 31, 2001 and has
timely filed, or caused to be filed, all other Tax Returns required to be filed
with respect to PBI or any of its Subsidiaries. All Taxes due by or on behalf of
PBI or any of its Subsidiaries have been paid or adequate reserves have been
established on the PBI Financial Statements for the payment of such Taxes.
Neither PBI nor any of its Subsidiaries will have any liability for any such
Taxes in excess of the amounts so paid or reserves or accruals so established,
except where such liability would not, individually or in the aggregate, have a
Material Adverse Effect on PBI.
(b) All Tax Returns filed by PBI and each of its
Subsidiaries are complete and accurate in all material respects. Neither PBI nor
any of its Subsidiaries is delinquent in the payment of any Tax, and none of
them has requested any extension of time within which to file any Tax Returns
which have not since been filed. No audit examination, deficiency, adjustment,
refund claim or litigation with respect to Tax Returns, paid Taxes, unpaid Taxes
or Tax attributes of PBI has been proposed, asserted or assessed (tentatively or
otherwise). There are currently no agreements in effect with respect to PBI or
any of its Subsidiaries to extend the period of limitations for the assessment
or collection of any Tax.
(c) Neither the transactions contemplated hereby nor the
termination of the employment of any employees of PBI prior to or following
consummation of the transactions contemplated hereby will result in PBI or any
of its Subsidiaries (or any successor thereof) making or being required to make
any "excess parachute payment" as that term is defined in Section 280G of the
Code.
(d) Except as Previously Disclosed, neither PBI nor any
of its Subsidiaries is a party to any agreement providing for the allocation or
sharing of, or indemnification for, Taxes.
(e) Except as Previously Disclosed, neither PBI nor any
of its Subsidiaries is required to include in income any adjustment in any
taxable period ending after the date hereof pursuant to Section 481(a) of the
Code.
(f) Neither PBI nor any of its Subsidiaries has executed
or entered into any written agreement with any Tax authority conceding or
agreeing to any treatment of Taxes or Tax attributes, including, without
limitation, an Internal Revenue Service Form 870 or Form 870-AD, closing
agreement or special closing agreement, affecting PBI or any of its Subsidiaries
pursuant to Section 7121 of the Code or any predecessor provision thereof or any
similar provision of state, local or foreign law, which agreement would have a
material impact on the calculation of the Taxes of CBSI or any of its
Subsidiaries after the Effective Time.
3.12 Employee Benefit Plans.
(a) Schedule 3.12(a) hereto sets forth a true and
complete list of each PBI Plan. For purposes of this Section 3.12, the term "PBI
Plan" means each bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance pay, medical, life or other insurance,
profit-sharing, or pension plan, program, agreement or arrangement, and each
other employee benefit plan, program, agreement or arrangement, sponsored,
maintained or
15
contributed to or required to be contributed to by PBI or by any trade or
business, whether or not incorporated, that together with PBI would be deemed a
"single employer" under Section 414 of the Code (an "ERISA Affiliate") for the
benefit of any employee or director or former employee or former director of PBI
or any ERISA Affiliate of PBI.
(b) With respect to each of the PBI Plans, PBI has made
available to CBSI true and complete copies of each of the following documents:
(a) the PBI Plan and related documents (including all amendments thereto); (b)
the most recent annual reports, financial statements, and actuarial reports, if
any; (c) the most recent summary plan description, together with each summary of
material modifications, required under ERISA with respect to such PBI Plan and
all material communications relating to each such PBI Plan; and (d) the most
recent determination letter received from the IRS with respect to each PBI Plan
that is intended to be qualified under the Code and all material communications
to or from the IRS or any other governmental or regulatory agency or authority
relating to each PBI Plan.
(c) To the knowledge of PBI, no liability under Title IV
of ERISA has been incurred by PBI or any ERISA Affiliate of PBI that has not
been satisfied in full, and no condition exists that presents a material risk to
PBI or any ERISA Affiliate of PBI of incurring a liability under such Title,
other than liability for premium payments to the Pension Benefit Guaranty
Corporation, which premiums have been or will be paid when due.
(d) Neither PBI nor, to the knowledge of PBI, any ERISA
Affiliate of PBI, nor any of the PBI Plans, nor, to the knowledge of PBI, any
trust created thereunder, nor any trustee or administrator thereof has engaged
in a prohibited transaction (within the meaning of Section 406 of ERISA and
Section 4975 of the Code) in connection with which PBI or any ERISA Affiliate of
PBI could reasonably be expected to, either directly or indirectly, incur any
material liability or material cost.
(e) Full payment has been made, or will be made in
accordance with Section 404(a)(6) of the Code, of all amounts that PBI or any
ERISA Affiliate of PBI is required to pay under Section 412 of the Code or under
the terms of the PBI Plans.
(f) Except as Previously Disclosed, the fair market value
of the assets held under each PBI Plan that is subject to Title IV of ERISA
equals or exceeds the actuarial present value of all accrued benefits under each
such PBI Plan. No PBI Plan subject to Section 412 of the Code has an
"accumulated funding deficiency" within the meaning of Section 412(a) of the
Code. No reportable event under Section 4043 of ERISA has occurred with respect
to any PBI Plan other than any reportable event occurring by reason of the
transactions contemplated by this Agreement or a reportable event for which the
requirement of notice to the PBGC has been waived.
(g) Except as Previously Disclosed, none of the PBI Plans
is a "multiemployer pension plan," as such term is defined in Section 3(37) of
ERISA, a "multiple employer welfare arrangement," as such term is defined in
Section 3(40) of ERISA, or a single employer plan that has two or more
contributing sponsors, at least two of whom are not under common control, within
the meaning of Section 4064(a) of ERISA.
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(h) A favorable determination letter has been issued by
the Internal Revenue Service with respect to each of the PBI Plans that is
intended to be "qualified" within the meaning of Section 401(a) of the Code to
the effect that such plan is so qualified and, to the knowledge of PBI, no
condition exists that could adversely affect the qualified status of any such
PBI Plan. Each of the PBI Plans that is intended to satisfy the requirements of
Section 125 or 501(c)(9) of the Code satisfies such requirements in all material
respects. Each of the PBI Plans has been operated and administered in all
material respects in accordance with its terms and applicable laws, including
but not limited to ERISA and the Code.
(i) There are no actions, suits or claims pending, or, to
the knowledge of PBI, threatened or anticipated (other than routine claims for
benefits) against any PBI Plan, the assets of any PBI Plan or against PBI or any
ERISA Affiliate of PBI with respect to any PBI Plan. There is no judgment,
decree, injunction, rule or order of any court, governmental body, commission,
agency or arbitrator outstanding against or in favor of any PBI Plan or any
fiduciary thereof, other than rules of general applicability. There are no
pending or, to the knowledge of PBI, threatened audits, examinations or
investigations by any governmental body, commission or agency involving any PBI
Plan.
(j) Except as set forth in Schedule 3.12(j), the
consummation of the transactions contemplated by this Agreement will not result
in, and is not a precondition to, (i) any current or former employee or director
of PBI or any ERISA Affiliate of PBI becoming entitled to severance pay,
unemployment compensation or any similar payment, (ii) any acceleration in the
time of payment or vesting, or increase in the amount, of any compensation due
to any such current or former employee or director, or (iii) any renewal or
extension of the term of any agreement regarding compensation for any such
current or former employee or director.
(k) PBI shall take, and/or PBI shall cause OFSLA to take,
all such action as is necessary or reasonably appropriate to withdraw from and
terminate OFSLA's participation in the multiple employer defined benefit pension
plan known as the "Financial Institutions Retirement Fund" as of July 1, 2003,
in accordance with the terms thereof, contributing such amounts to the trust for
the plan as may be required by the terms thereof, or by the sponsor thereof, as
a result of such withdrawal.
(l) Prior to the Effective Time, PBI shall take, and/or
PBI shall cause OFSLA to take, all such action as is necessary or reasonably
appropriate to withdraw from and terminate OFSLA's participation in the multiple
employer Code section 401(k)/profit sharing plan known as the "Financial
Institutions Thrift Plan" as of or prior to the Closing Date in accordance with
the terms thereof.
(m) To the extent reasonably requested to do so by CBSI
or Community Bank, prior to the Effective Time, PBI shall take all such action
as is necessary or reasonably appropriate to terminate all employee welfare
benefit plans (as defined in ERISA section 3(1)) maintained by PBI as of a date
prior to the Effective Time.
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(n) Notwithstanding anything to the contrary in this
Agreement, any action taken by PBI or OFSLSA in accordance with Section 3.12(k),
(l) or (m) shall not, of and in itself, be deemed to constitute a breach of any
covenant, agreement, representation or warranty contained in this Agreement.
3.13 Material Contracts.
(a) Except as set forth in Schedule 3.13, neither PBI nor
any of its Subsidiaries is a party to, and is bound by, (i) any material
contract, as defined in Item 601(b)(10) of Regulation S-K promulgated by the
SEC, which has not been filed as an exhibit to PBI's SEC Documents or any other
material agreement or similar arrangement (any contract or commitment which
could reasonably be expected to involve expenditures or receipt by PBI or any of
its Subsidiaries in excess of $25,000 in the aggregate shall be deemed material
for these purposes) whether or not made in the ordinary course of business
(other than loans or loan commitments and funding transactions in the ordinary
course of business consistent with past practice of OFSLA) or any agreement
restricting the nature or geographic scope of its business activities in any
material respect, (ii) any agreement, indenture or other instrument relating to
the borrowing of money by PBI or any of its Subsidiaries or the guarantee by PBI
of any of its Subsidiaries of any such obligation, other than instruments
relating to transactions entered into in the ordinary course of business
consistent with past practice, (iii) any agreement, arrangement or commitment
relating to the employment of a consultant who was a director or executive
officer or to the employment, election, retention in office or severance of any
present or former director or officer, or (iv) any contract, agreement or
understanding with a labor union, in each case whether written or oral.
(b) Neither PBI nor any of its Subsidiaries is in default
under any material agreement, commitment, arrangement, lease, insurance policy
or other instrument whether entered into in the ordinary course of business or
otherwise and whether written or oral, and there has not occurred any event
that, with the lapse of time or giving of notice or both, would constitute such
a default, except for such defaults which would not, individually or in the
aggregate, have a Material Adverse Effect on PBI.
3.14 Legal Proceedings. Except as set forth on Schedule 3.14, there
are no actions, suits or proceedings instituted, pending or, to the knowledge of
PBI, threatened against PBI or any of its Subsidiaries or against any asset,
interest or right of PBI or any of its Subsidiaries that, if decided against PBI
or any of its Subsidiaries, would, individually or in the aggregate, have a
Material Adverse Effect on PBI. There are no actual or, to the knowledge of PBI,
threatened actions, suits or proceedings which present a claim to restrain or
prohibit the transactions contemplated herein or to impose any material
liability or restrictions in connection therewith. There are no actions, suits
or proceedings instituted, pending or, to the knowledge of PBI, threatened
against any present or former director or officer of PBI or any of its
Subsidiaries, that would reasonably be expected to give rise to a claim for
indemnification.
3.15 Compliance with Laws. PBI and each of its Subsidiaries is in
compliance in all material respects with all statutes and regulations applicable
to the conduct of its business, and neither PBI nor any of its Subsidiaries has
received notification from any agency or department
18
of federal, state or local government (i) asserting a violation of any such
statute or regulation, (ii) threatening to revoke any license, franchise, permit
or government authorization or (iii) in any way restricting or limiting its
operations. Neither PBI nor any of its Subsidiaries is subject to any regulatory
or supervisory cease and desist order, agreement, directive, memorandum of
understanding or commitment which would, individually or in the aggregate, have
a Material Adverse Effect on PBI, or has received any communication
contemplating any of the foregoing.
3.16 Labor Matters. With respect to their employees, neither PBI
nor its Subsidiaries is a party to any collective bargaining or other similar
agreement with any labor organization, group or association or has engaged in
any unfair labor practice. Since January 1, 2001, neither PBI nor its
Subsidiaries has experienced any attempt by organized labor or its
representatives to make PBI or any of its Subsidiaries conform to demands of
organized labor relating to their employees or to enter into a binding agreement
with organized labor that would cover the employees of PBI or any of its
Subsidiaries. To the knowledge of PBI, there is no unfair labor practice charge
or other complaint by any employee or former employee of PBI or any of its
Subsidiaries against any of them pending before any court, arbitrator or
governmental agency arising out of PBI's or such Subsidiary's activities or such
employee's employment with PBI or such Subsidiary. There is no strike, work
stoppage or labor disturbance pending or, to the knowledge of PBI, threatened
against PBI or any of its Subsidiaries, and neither PBI nor any of its
Subsidiaries has experienced any such strike, stoppage or disturbance since
January 1, 2001.
3.17 Brokers and Finders. Except as set forth on Schedule 3.17,
neither PBI nor any of its Subsidiaries, nor any of their respective officers,
directors or employees, has engaged any broker, finder or financial advisor or
become obligated to or incurred any liability for any fees or commissions in
connection with the transactions contemplated herein.
3.18 Insurance. Each of PBI and its Subsidiaries currently
maintains insurance in amounts reasonably adequate for their operations. Neither
PBI nor any of its Subsidiaries has received any notice of a material premium
increase over current rates or cancellation with respect to any of their
insurance policies or bonds, and within the last three years, neither PBI nor
any of its Subsidiaries has been refused any insurance coverage sought or
applied for, and neither PBI nor any of its Subsidiaries has any reason to
believe that existing insurance coverage cannot be renewed as and when the same
shall expire, upon terms and conditions as favorable as those presently in
effect. PBI has Previously Disclosed a list of all outstanding claims as of the
date hereof by PBI or any of its Subsidiaries under any insurance policy. The
deposits of OFSLA are insured by the FDIC in accordance with the FDIA, and OFSLA
has paid all assessments and filed all reports required by the FDIA. No
proceedings for the revocation or termination of such deposit insurance are
pending or, to the best knowledge of PBI, threatened.
3.19 Environmental Liability. Neither PBI nor any of its
Subsidiaries has received any written notice of any legal, administrative,
arbitral or other proceeding, claim or action and, to the knowledge of PBI,
there is no governmental investigation of any nature pending, in each case that
would reasonably be expected to result in the imposition on PBI or any of its
Subsidiaries of any liability arising under any local, state or federal
environmental statute, regulation or ordinance including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended; there are no facts or circumstances which
19
would reasonably be expected to form the basis for any such proceeding, claim,
action or governmental investigation that would impose any such liability; and
neither PBI nor any of its Subsidiaries is subject to any agreement, order,
judgment, decree or memorandum by or with any court, governmental authority,
regulatory agency or third party imposing any such liability. A true, complete
and correct copy of the closure letter issued by the New York State Department
of Environmental Conservation in respect of OFSLA's principal offices has been
Previously Disclosed.
3.20 Administration of Trust Accounts. PBI and each of its
Subsidiaries have properly administered all common trust funds and collective
investment funds and all accounts for which each of them acts as a fiduciary or
agent, including but not limited to accounts for which it serves as a trustee,
agent, custodian, personal representative, guardian, conservator or investment
advisor, in accordance with the terms of the governing documents and applicable
state and federal law and regulation and common law, except where the failure to
do so would not, individually or in the aggregate, have a Material Adverse
Effect on PBI. Neither PBI nor any of its Subsidiaries, nor any of their
respective directors, officers or employees acting on behalf of PBI or any of
its Subsidiaries, has committed any breach of trust with respect to any such
common trust fund or collective investment fund or fiduciary or agency account,
and the accountings for each such common trust fund or collective investment
fund or fiduciary or agency account are true and correct in all material
respects and accurately reflect the assets of such common trust fund or
collective investment fund or fiduciary or agency account, except for such
breaches and failures to be true, correct and accurate which would not,
individually or in the aggregate, have a Material Adverse Effect on PBI.
3.21 Intellectual Property. Each of PBI and its Subsidiaries owns
the entire right, title and interest in and to, or has valid licenses with
respect to, all of the Intellectual Property necessary in all material respects
to conduct their respective businesses and operations as presently conducted,
except where the failure to do so would not, individually or in the aggregate,
have a Material Adverse Effect on PBI. The ownership, licensing or use of
Intellectual Property by PBI or any of its Subsidiaries does not conflict with,
infringe, misappropriate or otherwise violate the Intellectual Property rights
of any other Person. None of such Intellectual Property is subject to any
outstanding order, decree, judgment, stipulation, settlement, lien, charge,
encumbrance or attachment, which order, decree, judgment, stipulation,
settlement, lien, charge, encumbrance or attachment would, individually or in
the aggregate, have a Material Adverse Effect on PBI. Except as Previously
Disclosed, upon consummation of the transactions contemplated by this Agreement,
the Surviving Corporation will be entitled to continue to use all such
Intellectual Property without the payment of any fees, licenses or other
payments.
3.22 Certain Information. On the date the PBI Proxy Statement (or
any supplement or amendment thereto) is first mailed to the shareholders of PBI,
and at all times subsequent thereto up to and including the time of the PBI
Shareholders' Meeting, the PBI Proxy Statement and all amendments or supplements
thereto, with respect to all information set forth or incorporated by reference
therein (other than any information furnished by CBSI relating to CBSI or any of
its Subsidiaries specifically for inclusion in the PBI Proxy Statement) (i)
shall comply in all material respects with the applicable provisions of the
Securities Laws, and (ii) contain any statement
20
which, at the time and in the light of the circumstances under which it is made,
is false or misleading with respect to any material fact, or omit to state a
material fact necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of a proxy for the same meeting or subject
matter which has become false or misleading. All information concerning PBI and
its directors, officers, and shareholders included (or submitted for inclusion)
in any application and furnished by it pursuant to Sections 5.2 or 5.3 of this
Agreement shall be true, correct and complete in all material respects.
3.23 Risk Management Instruments. All interest rate swaps, caps,
floors, option agreements, futures and forward contracts and other similar risk
management arrangements to which PBI or any of its Subsidiaries is a party,
whether entered into for PBI's own account, or for the account of one or more of
such Subsidiaries or their customers, were entered into (i) in accordance with
prudent business practices and all applicable laws, rules, regulations and
regulatory policies and (ii) with parties reasonably believed to be financially
responsible; and each of them constitutes the valid and legally binding
obligation of PBI or such Subsidiary, enforceable in accordance with its terms
(except that enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
equity principles), and neither PBI nor any of its Subsidiaries nor to PBI's
knowledge, any other party thereto, is in breach of any of its obligations under
any such agreement or arrangement. PBI has previously made available to CBSI all
of such agreements and arrangements that are in effect as of the date of this
Agreement.
3.24 Interested Party Transactions. Except as Previously Disclosed,
there are no events, relationships or transactions that would be required to be
reported under Item 404 of Regulation S-K promulgated by the SEC.
3.25 Takeover Statutes Not Applicable; No Rights Agreement. The
Board of Directors of PBI has taken all actions, if any, so that the
restrictions contained in Section 912 of the NYBCL applicable to a "business
combination" (as defined therein) will not apply to the execution or delivery of
this Agreement or any Transaction Document to which PBI is a party, or to the
consummation of the Merger or the other transactions contemplated hereby or
thereby. PBI has no shareholder rights agreement or plan or other similar plan,
agreement or arrangement.
3.26 Investment Securities. Except for pledges to secure public and
trust deposits, Federal Reserve borrowings, repurchase agreements and reverse
repurchase agreements entered into in arms'-length transactions pursuant to
normal commercial terms and conditions and other pledges required by law, none
of the investments reflected in the PBI Financial Statements, and none of the
material investments made by PBI or any of its Subsidiaries since December 31,
2001, is subject to any restriction (contractual, statutory or otherwise) that
would materially impair the ability of the entity holding such investment freely
to dispose of such investment at any time.
3.27 Capitalization. PBI and OFSLA are "well capitalized" as such
term is defined in the rules and regulations promulgated by the Federal Reserve
Board and the FDIC.
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3.28 CRA, Anti-Money Laundering and Customer Information Security.
Neither PBI nor OFSLA is aware of, has been advised of, or has reason to believe
that any facts or circumstances exist which would cause OFSLA: (i) to be deemed
not to be in satisfactory compliance in any material respect with the Community
Reinvestment Act of 1977, as amended (the "CRA") and the regulations promulgated
thereunder, or to be assigned a rating for CRA purposes by federal or state bank
regulators of lower than "satisfactory," or (ii) to be deemed to be operating in
violation in any material respect of the federal Bank Secrecy Act, as amended
and its implementing regulations (31 CFR part 103), the USA Patriot Act of 2001,
Public Law 107-56 (the "USA Patriot Act") and the regulations promulgated
thereunder, any order issued with respect to anti-money laundering by the U.S.
Treasury's Office of Foreign Assets Control, or any other applicable anti-money
laundering statute, rule or regulation; or (iii) to be deemed not to be in
satisfactory compliance in any material respect with the privacy of customer
information requirements contained in Title V of the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act of
1999 and regulations promulgated thereunder as well as the provisions of the
Information Security Program adopted by OFSLA pursuant to 12 CFR Part 364.
Furthermore, the Board of Directors of OFSLA has adopted, and OFSLA has
implemented, an anti-money laundering program that meets the requirements in all
material respects of Section 352 of the USA Patriot Act and the regulations
thereunder.
3.29 Agreements with and Examination by Banking Authorities.
Neither PBI nor any of its Subsidiaries is a party to any commitment, letter
(other than letters addressed to regulated depository institutions generally),
written agreement, memorandum of understanding, order to cease and desist with,
is subject to any order or directive specifically naming or referring to PBI or
any of its Subsidiaries by, has been required to adopt any board resolution by,
any federal or state governmental entity charged with the supervision or
regulation of banks or bank holding companies or engaged in the insurance of
bank deposits which is currently in effect and restricts materially the conduct
of its business, or in any manner relates to its capital adequacy, loan loss
allowances or reserves, ability to perform its obligations hereunder, and
neither PBI nor any of its Subsidiaries has received written notification from
any such federal or state governmental entity that any such Person may be
required to enter into, or otherwise be subject to, any such commitment, letter,
written agreement, memorandum of understanding or cease or desist order. Neither
PBI nor any of its Subsidiaries has been informed by any bank regulator that it
is contemplating issuing or requesting any such order, directive, agreement,
memorandum of understanding, commitment letter or similar submission. Neither
PBI nor any of its Subsidiaries is a party to any agreement or arrangement
entered into in connection with the consummation of a federally assisted
acquisition of a depository institution pursuant to which PBI or any of its
Subsidiaries is entitled to receive financial assistance or indemnification from
any governmental agency. Except for normal periodic examinations (the "Bank
Examinations") conducted by the Federal Reserve Board, the FDIC, or the OTC in
the regular course of the business of PBI and its Subsidiaries, since January 1,
2001, no bank regulator has initiated any proceeding or, to the best knowledge
of PBI, investigation into the business or operations of the PBI or any of its
Subsidiaries. PBI and its Subsidiaries have resolved all material violations,
criticisms or exceptions by any bank regulator with respect to any Bank
Examination.
3.30 Disclosure. None of the representations and warranties of PBI
contained in this Agreement or any of the Transaction Documents to which it is a
party, or any of the written
22
information or documents furnished by PBI to CBSI in connection therewith, taken
as a whole, contains or will contain any untrue statement of a material fact, or
omits to state any material fact required to be stated or necessary to make any
such information or document, in light of the circumstances, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CBSI AND MERGER SUB
CBSI and Merger Sub hereby represent and warrant to PBI as
follows:
4.1 Organization, Standing and Authority of CBSI and Merger Sub.
Each of CBSI and Merger Sub is a duly organized corporation, validly existing
and in good standing under the laws of its incorporation with full corporate
power and authority to own, lease and operate the properties it purports to own,
lease or operate and to carry on its business as now conducted, except where the
failure to be in good standing or to have such power or authority would not have
a Material Adverse Effect on CBSI. Each of CBSI and Merger Sub is duly licensed
or qualified to do business in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires such qualification, except where the failure to be so licensed
or qualified would not have a Material Adverse Effect on CBSI.
4.2 Authorized and Effective Agreement.
(a) Each of CBSI and Merger Sub has all requisite
corporate power and authority to enter into and perform all of its obligations
under this Agreement and each of the Transaction Documents to which it is a
party. The execution and delivery of this Agreement and each such Transaction
Agreement and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action
in respect thereof on the part of CBSI and Merger Sub, as the case may be.
(b) This Agreement and each Transaction Document to which
CBSI or Merger Sub is a party have been duly executed and delivered by CBSI or
Merger Sub, respectively, and, assuming the representation contained in Section
3.4(b) hereof is true and correct, this Agreement constitutes the legal, valid
and binding obligations of CBSI or Merger Sub, as the case may be, enforceable
against such party in accordance with its terms, except that such enforceability
may be subject to bankruptcy, insolvency and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
(c) Neither the execution and delivery by CBSI or Merger
Sub of this Agreement or any Transaction Document to which it is a party, nor
consummation of the transactions contemplated hereby or thereby, nor compliance
by CBSI or Merger Sub with any of the provisions hereof or thereof shall (i)
conflict with or result in a breach of any provision of the certificate or
articles of incorporation or bylaws of CBSI or Merger Sub, (ii) assuming the
consents and approvals contemplated by Section 5.3 hereof and the consents and
approvals
23
which are Previously Disclosed are duly obtained, constitute or result in a
breach of any term, condition or provision of, or constitute a default under, or
give rise to any right of termination, cancellation or acceleration with respect
to, or result in the creation of any lien, charge or encumbrance upon any
property or asset of CBSI or any of its Subsidiaries pursuant to, any note,
bond, mortgage, indenture, license, agreement or other instrument or obligation
to which CBSI or any of its Subsidiaries is a party, or (iii) assuming the
consents and approvals contemplated by Section 5.3 hereof and the consents and
approvals which are Previously Disclosed are duly obtained, conflict with or
violate any law, order, writ, injunction, decree, statute, rule or regulation
applicable to CBSI or any of its Subsidiaries or their respective assets;
except, in case of clauses (ii) and (iii) above, for any such breach, default,
right, lien, charge, encumbrances, violation or conflict which, individually or
in the aggregate, would not have a Material Adverse Effect on CBSI.
(d) Other than as contemplated by Section 5.3 hereof, no
consent, approval or authorization of, or declaration, notice, filing or
registration with, any governmental or regulatory authority, or any other
Person, is required to be made or obtained by CBSI or Merger Sub on or prior to
the Closing Date in connection with the execution, delivery and performance of
this Agreement or any of the Transaction Documents to which it is a party or the
consummation of the transactions contemplated hereby or thereby. As of the date
hereof, neither CBSI nor Merger Sub is aware of any reason that the condition
set forth in Section 6.1(b) of this Agreement would not be satisfied.
4.3 Regulatory Filings. Each of CBSI and its Subsidiaries has
filed all reports required by statute or regulation to be filed with any federal
or state bank regulatory agency, and such reports were prepared in accordance
with the applicable statutes, regulations and instructions in existence as of
the date of filing of such reports in all material respects.
4.4 Legal Proceedings. There are no actions, suits or proceedings
instituted, pending or, to the knowledge of CBSI, threatened against CBSI or any
of its Subsidiaries or against any asset, interest or right of CBSI or any of
its Subsidiaries that, if decided against CBSI or any of its Subsidiaries,
would, individually or in the aggregate, have a material adverse effect on the
ability of CBSI to perform its obligations under this Agreement or any
Transaction Document to which it is a party. There are no actual or threatened
actions, suits or proceedings which present a claim to restrain or prohibit the
transactions contemplated in this Agreement or any Transaction Document to which
CBSI or Merger Sub is a party.
4.5 Certain Information. On the date the PBI Proxy Statement (or
any supplement or amendment thereto) is first mailed to the shareholders of PBI,
and at all times subsequent thereto up to and including the time of the PBI
Shareholders' Meeting, the PBI Proxy Statement and all amendments or supplements
thereto, with respect to all information set forth therein furnished by CBSI or
Merger Sub relating to CBSI or any of its Subsidiaries specifically for
inclusion in the PBI Proxy Statement, (i) shall comply in all material respects
with the applicable provisions of the Securities Laws, and (ii) contain any
statement which, at the time and in the light of the circumstances under which
it is made, is false or misleading with respect to any material fact, or omit to
state a material fact necessary in order to make the statements therein not
false or misleading or necessary to correct any statement in any earlier
communication with respect to
24
the solicitation of a proxy for the same meeting or subject matter which has
become false or misleading. All information concerning CBSI and Merger Sub and
their respective directors, officers, and shareholders included (or submitted
for inclusion) in any application and furnished by it pursuant to Sections 5.2
or 5.3 of this Agreement shall be true, correct and complete in all material
respects.
4.6 Financial Resources. CBSI has, or will have prior to the
Effective Time, sufficient cash funds to pay the aggregate Merger Consideration
and the other amounts required under Section 2.2. On the date hereof, CBSI is,
and at the Effective Time, CBSI will be at least "well capitalized," as such
term is defined in the rules and regulations promulgated by the FDIC.
4.7 CRA, Anti-Money Laundering and Customer Information Security.
Neither CBSI nor Community Bank is aware of, has been advised of, or has reason
to believe that any facts or circumstances exist which would cause Community
Bank: (i) to be deemed not to be in satisfactory compliance in any material
respect with the Community Reinvestment Act of 1977, as amended (the "CRA") and
the regulations promulgated thereunder, or to be assigned a rating for CRA
purposes by federal or state bank regulators of lower than "satisfactory," or
(ii) to be deemed to be operating in violation in any material respect of the
federal Bank Secrecy Act, as amended and its implementing regulations (31 CFR
part 103), the USA Patriot Act of 2001, Public Law 107-56 (the "USA Patriot
Act") and the regulations promulgated thereunder, any order issued with respect
to anti-money laundering by the U.S. Treasury's Office of Foreign Assets
Control, or any other applicable anti-money laundering statute, rule or
regulation; or (iii) to be deemed not to be in satisfactory compliance in any
material respect with the privacy of customer information requirements contained
in Title V of the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act of 1999 and regulations promulgated
thereunder as well as the provisions of the Information Security Program adopted
by Community Bank pursuant to 12 CFR Part 364. Furthermore, the Board of
Directors of Community Bank has adopted, and Community Bank has implemented, an
anti-money laundering program that meets the requirements in all material
respects of Section 352 of the USA Patriot Act and the regulations thereunder.
4.8 Agreements with and Examination by Banking Authorities.
Neither CBSI nor any of its Subsidiaries is a party to any commitment, letter
(other than letters addressed to regulated depository institutions generally),
written agreement, memorandum of understanding, order to cease and desist with,
is subject to any order or directive specifically naming or referring to CBSI or
any of its Subsidiaries by, has been required to adopt any board resolution by,
any federal or state governmental entity charged with the supervision or
regulation of banks or bank holding companies or engaged in the insurance of
bank deposits which is currently in effect and restricts materially the conduct
of its business, or in any manner relates to its capital adequacy, loan loss
allowances or reserves, ability to perform its obligations hereunder, and
neither CBSI nor any of its Subsidiaries has received written notification from
any such federal or state governmental entity that any such Person may be
required to enter into, or otherwise be subject to, any such commitment, letter,
written agreement, memorandum of understanding or cease or desist order. Neither
CBSI nor any of its Subsidiaries has been informed by any bank regulator that it
is contemplating issuing or requesting any such order, directive, agreement,
memorandum of understanding, commitment letter or similar submission. Neither
CBSI nor any of its Subsidiaries is a party to any agreement or arrangement
entered into in connection with the
25
consummation of a federally assisted acquisition of a depository institution
pursuant to which CBSI or any of its Subsidiaries is entitled to receive
financial assistance or indemnification from any governmental agency. Except for
the Bank Examinations conducted by the Federal Reserve Board, the FDIC, or the
OCC in the regular course of the business of CBSI and its Subsidiaries, since
January 1, 2001, no bank regulator has initiated any proceeding or, to the best
knowledge of CBSI, investigation into the business or operations of the CBSI or
any of its Subsidiaries. CBSI and its Subsidiaries have resolved all material
violations, criticisms or exceptions by any bank regulator with respect to any
Bank Examination.
ARTICLE V
COVENANTS
5.1 PBI Shareholders' Meeting. PBI shall call and give notice of
the PBI Shareholders' Meeting as promptly as practicable after the 30th day
following the date a preliminary PBI Proxy Statement contemplated by Section 5.2
is filed with the SEC (unless the PBI Proxy Statement becomes subject to SEC
review, in which case no later than the 20th day after the SEC notifies PBI that
it is satisfied with the revisions made pursuant to, and PBI's response in
respect of, SEC's comments and that it has no further comments), for the purpose
of voting upon the approval of this Agreement, and PBI shall use all reasonable
efforts to hold the PBI Shareholders' Meeting as soon as practicable, subject to
the applicable notice requirements under the NYBCL, provided that PBI shall have
received an opinion from its financial advisors, dated within five (5) days of
the mailing date of the PBI Proxy Statement, that the Merger is fair to PBI
Shareholders from a financial point of view, which opinion PBI shall use all
commercially reasonable efforts to cause to be issued as expeditiously as
possible. Subject to the fiduciary duties of the Board of Directors of NYBCL, as
determined after consultation with outside counsel and financial advisors, if
any, (i) the Board of Directors of PBI shall recommend that the shareholders
vote in favor of the approval of this Agreement, and (ii) PBI shall solicit from
its shareholders proxies in favor of approval of this Agreement and shall take
all other action necessary or desirable to secure the vote of shareholders to
obtain such approval. Notwithstanding any withdrawal, modification or change in
any recommendation of the Board of Directors of PBI, to the extent permitted by
law, PBI agrees to hold the PBI Shareholders' Meeting within the time period
specified above.
5.2 PBI Proxy Statement. Within 60 days after the date hereof, PBI
shall prepare and file a PBI Proxy Statement with the SEC, and CBSI and Merger
Sub shall cooperate in the preparation of the PBI Proxy Statement to be mailed
to the shareholders of PBI in connection with obtaining their approval of this
Agreement and the Merger. PBI will advise CBSI, promptly after it receives
notice thereof, any request by the SEC for the amendment or supplement of the
PBI Proxy Statement or for additional information. If, at any time prior to the
Effective Time, any event or circumstance relating to a party to this Agreement,
or its directors, officers or 5% or greater shareholders, shall be discovered by
such party that pursuant to the Exchange Act should be set forth in an amendment
or a supplement to the PBI Proxy Statement, such party shall promptly notify the
other party.
26
5.3 Applications. As promptly as practicable, but no later than 30
days, after the date hereof, and after a reasonable opportunity for review by
the other party and its counsel, CBSI, Merger Sub and PBI shall submit any
requisite applications for prior approval of, and notices with respect to, the
transactions contemplated herein to the OCC, the OTS and the Federal Reserve
Board, and each of the parties hereto shall, and shall cause its Subsidiaries
to, submit any applications, notices or other filings to any other state or
federal government agency, department or body, the approval of which is required
or desirable for consummation of the Merger, the Bank Merger or the Short-Form
Merger. PBI, on one hand, and CBSI and Merger Sub, on the other hand, each
represents and warrants to the other that all information concerning it and its
directors, officers, shareholders and Subsidiaries included (or submitted for
inclusion) in any such application and furnished by it shall be true, correct
and complete in all material respects. Each party agrees to consult with the
other parties with respect to obtaining all necessary approvals and consents and
each will keep the other apprised of the status of matters relating to such
approvals and consents.
5.4 Best Efforts.
(a) Subject to the terms and conditions of this
Agreement, CBSI, Merger Sub and PBI shall each use reasonable best efforts in
good faith to (i) furnish such information as may be required or desirable in
connection with the preparation of the documents referred to in Sections 5.2 and
5.3 above, and (ii) take or cause to be taken all action necessary or desirable
on its part so as to permit consummation of the Merger, the Bank Merger and the
Short-Form Merger at the earliest possible date, including, without limitation,
(1) obtaining the consent or approval of Person whose consent or approval is
required for consummation of the transactions contemplated hereby, provided that
PBI shall not agree to make any payments or modifications to agreements in
connection therewith without the prior written consent of CBSI, which consent
shall not be unreasonably withheld, and (2) requesting the delivery of
appropriate opinions, consents and letters from its counsel and independent
auditors. Subject to the terms and conditions of this Agreement, no party hereto
shall take or fail to take, or cause or permit its Subsidiaries to take or fail
to take, or to the best of its ability permit to be taken or omitted to be taken
by any third party, any action that would substantially impair the prospects of
completing the Merger, the Bank Merger and the Short-Form Merger, that would
materially delay such completion.
(b) Each party hereto shall give prompt notice to the
other party of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be reasonably likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate at any time from
the date hereof to the Closing Date such that the condition set forth in Section
6.2(a) or 6.3(a), as applicable, would not be met if such failure to be true or
accurate were to occur or be continuing on the Closing Date, and (ii) any
material failure of any party to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder, and each party
shall use all reasonable best efforts in good faith to remedy such failure.
(c) From the date of this Agreement through the Effective
Time, to the extent permitted by law, PBI shall cause OFSLA to provide such
assistance to Community Bank as
27
reasonably necessary for Community Bank to prepare for the conversion and
transfer in connection with the Merger all information concerning the loans,
deposits and other assets and liabilities of OFSLA into Community Bank's own
data processing system, with a view to facilitating the integration of Community
Bank's and OFSLA's systems and otherwise combining Community Bank's and OFSLA's
operations upon consummation of the Merger. Such assistance shall include
providing Community Bank with computer file instructions with respect to the
information in its data processing system regarding the assets and liabilities
of OFSLA, together with operational procedures designed to implement the
transfer of such information to Community Bank, provided that the
confidentiality of customer information shall be preserved and no information
shall be transferred until the Effective Time. After execution of this
Agreement, OFSLA and Community Bank shall each designate an individual to serve
as liaison concerning the transfer of data processing information and other
similar operational matters. All out-of-pocket expenses reasonably incurred by
PBI or OFSLA, and approved in writing in advance by CBSI, in complying with the
covenants set forth in Section 5.4(c) shall be reimbursed promptly by CBSI upon
the provision of adequate written evidence of such expenses.
(d) Each party shall provide, and shall request its
auditors to provide, the other party with such historical financial information
regarding it (and related audit reports and consents) as the other party may
reasonably request for disclosure purposes under the Securities Laws.
5.5 Investigation and Confidentiality. PBI, CBSI and Merger Sub
each will keep the other advised of all material developments relevant to its
and its Subsidiaries' businesses and to consummation of the transactions
contemplated herein. PBI, CBSI and Merger Sub each may make or cause to be made
such investigation of the financial and legal condition of the other as such
party reasonably deems necessary or advisable in connection with the
transactions contemplated herein, provided, however, that such investigation
shall be reasonably related to such transactions and the party conducting such
investigation shall use its reasonable best efforts to minimize any disruptions
to the operations of the other party. CBSI, Merger Sub and PBI agree to furnish
the other and the other's advisors with such financial data and other
information with respect to its business and properties as such other party
shall from time to time reasonably request. No investigation pursuant to this
Section 5.5 shall affect or be deemed to modify any representation or warranty
made by, or the conditions to the obligations to consummate the Merger of, any
party hereto. Each party hereto shall hold all information furnished by the
other party or any of such party's Subsidiaries or representatives pursuant to
this Agreement in confidence and in accordance with the confidentiality
agreement dated July 3, 2002, between PBI and CBSI (the "Confidentiality
Agreement").
5.6 Press Releases and Other Public Disclosures. PBI and CBSI
shall agree with each other as to the form and substance of any press release
related to this Agreement or the transactions contemplated hereby, and shall
consult and agree with each other as to the form and substance of other public
disclosures related thereto, including without limitation, any communications
with securities market professionals and investors, provided, however, that
nothing contained herein shall prohibit any party, following notification to the
other party, from making any disclosure which is required by applicable law or
NYSE rules.
28
5.7 Actions Pending the Merger.
(a) Prior to the Closing Date, and except as otherwise
provided for by this Agreement or consented to or approved in writing by the
other party hereto, each of CBSI and PBI shall, and shall cause each of its
Subsidiaries to, use its reasonable best efforts to preserve its properties,
business and relationships with customers, employees and other persons.
(b) Except with the prior written consent of CBSI (which
consent will not be unreasonably withheld) or as expressly permitted by this
Agreement, PBI shall not, and shall not permit any of its Subsidiaries to:
(1) carry on its business other than in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, or incur an obligation in excess of $25,000 in the
aggregate or which requires performance over more than one year (other than
loans, investments and FHLB borrowings booked in the usual, regular and ordinary
course of business);
(2) declare, set aside, make or pay any dividend
or other distribution in respect of its capital stock or earnings other than its
regular annual cash dividends on PBI Common Stock in amounts not in excess of
$0.075 per share paid in the fourth quarter of 2003;
(3) issue any shares of its capital stock or
permit any treasury shares to become outstanding, other than pursuant to the
exercise of Stock Options which are outstanding on the date hereof; redeem,
purchase or otherwise acquire any shares of its capital stock or any securities
or obligations convertible into or exchangeable for any shares of its capital
stock;
(4) incur any additional debt obligation or
other obligation for borrowed money other than in the ordinary course of
business consistent with past practice;
(5) issue, grant or authorize any Rights (or
amend or modify the terms or exercisability of any outstanding Rights),
including without limitation, any Stock Options or any awards under the ESOP or
MRP, except as otherwise set forth herein, or effect any recapitalization,
reclassification, stock dividend, stock split or like change in capitalization,
or redeem, repurchase or otherwise acquire any shares of its capital stock;
(6) amend or otherwise change its certificate of
incorporation or articles of association or bylaws; impose, or suffer the
imposition, on any share of capital stock of PBI of any lien, charge or
encumbrance;
(7) merge or consolidate with, or acquire
control over, any Person or create any Subsidiary;
(8) waive or release any material right or
cancel or compromise any material debt or claim other than in the ordinary
course of business consistent with past practice with prior notice to CBSI;
29
(9) sell, liquidate, pledge or encumber or
dispose of, or acquire any, assets with a value in excess of $25,000 (other than
assets acquired in foreclosure, in lieu of foreclosure or other legal
proceedings relating to collateral for loans in each case in the ordinary course
of business consistent with past practice); make any capital expenditure in
excess of $25,000 in the aggregate; or establish new branches or other similar
facilities, close existing branches or similar facilities or enter into or
modify any leases or other contracts relating thereto;
(10) increase the rate of compensation of, pay or
agree to pay any bonus to, or provide any additional employee benefit or
incentive (including without limitation, any "change of control" or severance
payment) to, any of its directors, officers or employees except as required by
law or contractual obligation in effect as of the date hereof; or become party
to, adopt, terminate, amend, or commit itself to, any pension, retirement,
profit sharing or welfare benefit plan or agreement or employment agreement,
other than in the ordinary course of business consistent with past practice or
except as required by existing plans or agreements; or accelerate the vesting of
any deferred compensation, except as otherwise set forth herein;
(11) except as set forth on Schedule 5.7(b)(11),
change its lending, investment, asset/liability management or other material
banking policies in any material respect except as may be required by changes in
applicable law, or as required by the OTS;
(12) change its methods of accounting in effect
at December 31, 2002, except as required by changes in generally accepted
accounting principles concurred in by its independent certified public
accountants, or change any of its methods of reporting income, deductions or
other items for federal income tax purposes from those employed in the
preparation of its federal income tax returns for the year ended December 31,
2002, except as required by applicable law;
(13) take any action that is intended or result
in any of its representations or warranties in this Agreement being or becoming
untrue in any material respects at any time prior to the Effective Time, or in
any of the conditions to the Merger set forth in Article VI not being satisfied,
except as may be required by law; or
(14) agree to do any of the foregoing or take any
other action which would in any manner interfere with, impede, delay, or make
more costly the consummation of the transactions contemplated hereby.
(c) CBSI shall not, except with the prior written consent
of PBI (which consent shall not unreasonably be withheld) or as expressly
permitted by this Agreement, carry on its business other than in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted; provided, however, that nothing herein shall be construed to prevent
CBSI from acquiring or agreeing to acquire any Person, by merging or
consolidating with, by purchasing an equity interest in or a portion of the
assets of, or by any other manner, such Person or taking actions reasonably
related thereto, so long as such transaction would not materially delay or
prevent the consummation of the transactions contemplated by this Agreement.
30
5.8 Certain Policies. Immediately prior to the Effective Time, PBI
shall, consistent with generally accepted accounting principles and on a basis
mutually satisfactory to it and CBSI, modify and change its loan, litigation and
real estate valuation policies and practices (including loan classifications and
levels of reserves) so as to be applied on a basis that is consistent with that
of CBSI. Prior to the Effective Time, PBI and CBSI shall review the adequacy of
reserves for loan losses currently established by PBI and, if deemed warranted
by both parties under generally accepted accounting principles, PBI shall make
mutually acceptable changes to such reserves. Following the approval of this
Agreement by the shareholders of PBI and the receipt of all requisite regulatory
approvals for the Merger, PBI shall cooperate with CBSI in planned actions
discussed as part of the due diligence process which are designed to improve the
short and long-term profitability of PBI and eliminate or reduce any potential
earnings per share dilution of CBSI upon consummation of the Merger, including
but not limited to those actions set forth on Schedule 5.8 hereto. No additional
provision for loan and real estate owned taken by PBI pursuant to this Section
5.8 at the request of CBSI, shall be deemed in and of itself to be a breach or
violation of any representation, warranty, covenant, condition or other
provisions of this Agreement.
5.9 Closing; Articles of Merger. The transactions contemplated by
this Agreement shall be consummated at a closing to be held at the offices of
the law firm of Bond, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, PLLC, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ on the first business day, or other mutually agreeable time,
following satisfaction or waiver of the conditions to consummation of the Merger
set forth in Article VI hereof.
5.10 Employee Benefits.
(a) CBSI or its Subsidiaries shall offer continued
employment to the current employees of PBI or any of its Subsidiaries, and those
employees who accept such offer to continue as employees of CBSI or its
Subsidiaries after the Effective Time shall (i) for a one year period
immediately following the Effective Time, receive compensation that is no less
than what they were receiving on the date hereof from PBI, and be entitled to
receive employee benefits, as a whole and subject to clause (ii) of this
sentence, no less favorable than those received by CBSI's or its Subsidiaries'
other employees who are similarly situated, and (ii) be given credit for past
service with PBI for purposes of determining eligibility for and vesting of
employee benefits (but not for pension benefit accrual purposes) under all
welfare and retirement programs maintained by CBSI or its Subsidiaries in which
such employees participate following the Merger. Nothing contained in this
Section 5.10(a) shall be construed to guarantee continued employment of any
employees of PBI or any of its Subsidiaries, or to prevent CBSI or its
Subsidiaries from changing the amount of compensation paid to any such employees
(other than within the one-year period described in clause (i) of the first
sentence of this Section 5.10(a)) or to modify, amend or supplement any employee
benefits offered by CBSI or its Subsidiaries, in each case except as otherwise
provided by applicable law or the terms of an existing employment contract. CBSI
acknowledges and agrees that the consummation of the Merger constitutes a Change
of Control, as such term is used in each of the Executive Employment Agreements,
and CBSI agrees to cause Community Bank, as the surviving entity of the Bank
Merger, to comply with the requirements of each of the Executive Employment
Agreements.
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(b) Except as otherwise set forth herein, prior to the
Effective Time, PBI shall take all actions that may be reasonably requested by
CBSI in writing upon advance notice of not less than 30 days with respect to (i)
causing one or more PBI Plans to terminate as of the Effective Time or for
benefit accrual and entitlements to cease as of the Effective Time, (ii) causing
the continuation on and after the Effective Time of any contract, arrangement or
insurance policy relating to any PBI Plan for such period as may be requested by
CBSI, or (iii) cooperating with CBSI to facilitate the merger of any PBI Plan
into any CBSI Plan as of or following the Effective Time.
(c) The ESOP shall be terminated as of, or prior to, the
Effective Time. As of the Effective Time, all shares held by the PBI ESOP shall
be converted into the right to receive the Merger Consideration in respect of
each share of PBI Common Stock. As soon as administratively practicable
following the Effective Time all outstanding indebtedness of the PBI ESOP shall
be repaid in full, in accordance with Section 5.10(c) of the ESOP and the
balance remaining with respect to unallocated shares previously held by the ESOP
shall be allocated and distributed to ESOP participants as provided in the ESOP
and in accordance with applicable law and regulations, subject to receipt of a
favorable determination letter from the Internal Revenue Service and unless
otherwise required by applicable law. Notwithstanding anything in this Section
5.10(c) to the contrary, distributions may be made from the ESOP to terminated
employees of PBI or OFSLA as soon as administratively practicable after the
determination of final allocations and the receipt of a determination letter
from the IRS, unless CBSI determines that it is appropriate to make earlier
distributions.
(d) (1) In the event of any threatened or actual
claim, action, suit, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action, suit,
proceeding or investigation in which any person (the "Indemnified Party") who is
now, or has been at any time prior to the date of this Agreement, or who becomes
prior to the Effective Time, a director or officer of PBI is, or is threatened
to be, made a party based in whole or in part on, or arising in whole or in part
out of, or pertaining to (i) the fact that he is or was a director, officer or
employee of PBI or any of its Subsidiaries, or (ii) this Agreement or any of the
transactions contemplated hereby, whether in any case asserted or arising before
or after the Effective Time, the parties hereto agree to cooperate and use their
best efforts to defend against and respond thereto. For a period of six years
after the Effective Time, CBSI shall indemnify and hold harmless, to the fullest
extent permitted by law, each such Indemnified Party against any losses, claims,
damages, liabilities, costs, expenses (including reasonable attorney's fees and
expenses in advance of the final disposition of any claim, suit, proceeding or
investigation to each Indemnified Party to the fullest extent permitted by the
DGCL upon receipt of any undertaking required by the DGCL), judgments, fines and
amounts paid in settlement in connection with any such threatened or actual
claim, action, suit, proceeding or investigation, and in the event of any such
threatened or actual claim, action, suit, proceeding or investigation (whether
asserted or arising before or after the Effective Time), the Indemnified Parties
may retain counsel reasonably satisfactory to them after consultation with CBSI;
provided, however, that (1) CBSI shall have the right to assume the defense
thereof with counsel reasonably acceptable to the Indemnified Parties and upon
such assumption CBSI shall not be liable to any Indemnified Party for any legal
expenses of other counsel or any other expenses subsequently incurred by any
Indemnified Party in connection with the defense thereof,
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except that if CBSI elects not to assume such defense or counsel for the
Indemnified Parties reasonably advises the Indemnified Parties that there are
issues which raise conflicts of interest between CBSI and the Indemnified
Parties, the Indemnified Parties may retain counsel reasonably satisfactory to
them after notification, and CBSI shall pay the reasonable fees and expenses of
such counsel for the Indemnified Parties; (2) CBSI shall be obligated pursuant
to this paragraph to pay for only one firm of counsel for all Indemnified
Parties; (3) CBSI shall not be liable for any settlement effected without its
prior written consent, which consent shall not be unreasonably withheld, and (4)
CBSI shall have no obligation hereunder to any Indemnified Party when and if a
court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and nonappealable, that indemnification of
such Indemnified Party in the manner contemplated hereby is prohibited by
applicable law. Any Indemnified Party wishing to claim indemnification under
this Section 5.10(d), upon becoming aware of any such claim, action, suit,
proceeding or investigation, shall promptly notify CBSI thereof, provided that
the failure of any Indemnified Party to so notify CBSI shall relieve it of its
obligations to indemnify hereunder to the extent that such failure materially
prejudices CBSI.
(2) CBSI agrees that all rights to
indemnification and all limitations on liability existing in favor of the
directors, officers and employees of PBI and any of its Subsidiaries as provided
in their respective certificates of incorporation, bylaws or similar governing
documents as in effect as of the date of this Agreement with respect to matters
occurring prior to the Effective Time shall survive the Merger, and shall
continue in full force and effect, and shall be honored by such entities or
their respective successors as if they were the indemnifying party thereunder,
without any amendment thereto, for a period of six years from the Effective
Time.
(3) CBSI will use its reasonable best efforts
directly or indirectly to cause the persons who served as directors or officers
of PBI on or before the Effective Time to be covered by PBI's existing
directors' and officers' liability insurance policy (provided that CBSI may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are not less advantageous than such
policy) but in no event shall any insured person be entitled under this Section
to insurance coverage more favorable than that provided to him or her in such
capacities as of the date hereof with respect to acts or omissions resulting
from their service as such on or prior to the Effective Time. Such insurance
coverage shall commence at the Effective Time and will be provided for a period
of no less than three years after the Effective Time; provided, however, that in
no event shall CBSI be required to expend more than 200% of the current amount
expended by PBI to maintain or procure insurance coverage pursuant hereto (the
"Maximum Amount"). If the amount of premiums necessary to maintain or procure
said insurance coverage exceeds the Maximum Amount, CBSI shall use its
reasonable best efforts in its good faith discretion to maintain the most
advantageous policies of directors' and officers' liability insurance obtainable
for a premium equal to the Maximum Amount. PBI agrees to renew any such existing
insurance or to purchase any "discovery period" insurance provided for
thereunder at CBSI's request.
(4) In the event that CBSI or any of its
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its
33
properties and assets to any Person, then, in each such case, to the extent
necessary, proper provisions shall be made so that the successors and assigns of
CBSI assume the obligations set forth in this Section 5.10(d).
(5) The provisions of this Section 5.10(d) are
intended to be for the benefit of, and shall be enforceable by, each Indemnified
Party and his or her representatives.
5.11 Advisory Board.
(a) Promptly following the Effective Time, CBSI shall
cause to be formed a six-member advisory board (the "Advisory Board") comprised
of the five members of the Board of Directors of PBI, and the President and
Chief Executive Officer of CBSI, the function of which is to advise Community
Bank on deposit, lending and financial services activities in PBI's former
market area and to insure a smooth transition of business relationships in
connection with the Merger and the continued development of business
relationships throughout such market area. Each member of the Advisory Board,
other than the President and Chief Executive Officer of CBSI, shall be granted
500 restricted shares of common stock of CBSI, one-half of which shares shall
vest after the completion of each year of service on the Advisory Board, in
consideration for his or her services on the Advisory Board for a two-year term
following the Effective Time. In the event that any member of the Advisory Board
ceases to serve on the Advisory Board prior to the expiration of its two-year
term for any reason, any restricted shares which had not theretofore vested
shall be forfeited by such member. The Advisory Board shall meet no more than
six times per year.
(b) If at any time during the period commencing with the
Effective Time, and ending on the date immediately following the date on which
the Advisory Board terminates, the shares of CBSI's common stock are changed
into a different number or class of shares by reason of any reclassification,
recapitalization, stock split, combination, exchange of shares, or readjustment,
or a stock dividend thereon is declared with a record date within said period,
the number and/or class of restricted shares granted to the Advisory Board
members under this section will be adjusted to take into account any such
reclassification, recapitalization, stock split, combination, exchange,
readjustment, or stock dividend. In addition, if at any time during the period
described above, CBSI consummates a transaction pursuant to which (i) CBSI's
corporate existence will be terminated through a statutory merger with or
transfer of substantially all of its assets to another corporation, (ii) CBSI
exchanges substantially all of its common stock with capital stock of another
corporation as part of a plan under which CBSI will be liquidated by the
transferee, or (iii) CBSI will be liquidated, then in each such case any
unvested shares of restricted stock granted under Section 5.11(a) will
automatically vest without the requirement of further action by any Person,
effective immediately prior to the consummation of such transaction.
5.12 Takeover Laws. No party hereto shall take any action that
would cause the transactions contemplated by this Agreement or any of the
Transaction Documents to be subject to the 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) all such transactions from, or if
necessary challenge the validity or applicability of, any applicable Takeover
Law, as
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now or hereafter in effect. For purposes of this Section, "Takeover Laws" shall
mean Section 912 of the NYBCL.
5.13 No Solicitation.
(a) Subject to Section 5.13(b) hereof, from and after the
date of this Agreement until the earlier of the Closing or the termination of
this Agreement in accordance with its terms, neither PBI nor any Person acting
on behalf of PBI shall, directly or indirectly, (a) solicit, initiate or respond
to discussions or engage in negotiations with any Person (whether such
negotiations are initiated by PBI or otherwise) or take any other action
intended or designed to facilitate the efforts of any Person, other than CBSI,
relating to the possible acquisition, recapitalization or other business
combination involving PBI or any of its Subsidiaries (whether by way of merger,
purchase of capital stock, purchase of assets or otherwise) or any material
portion of its capital stock or assets (with any such efforts by any such
Person, including a firm proposal to make such an acquisition, to be referred to
as "Takeover Proposal"), (b) provide non-public information with respect to PBI
or any of its Subsidiaries to any Person, other than CBSI and its professional
advisors or PBI's professional advisors, or (c) enter into an agreement with any
Person, other than CBSI, providing for a possible Takeover Proposal. If PBI
receives any offer or proposal relating to a Takeover Proposal, PBI shall
immediately notify CBSI thereof, including information as to the identity of the
party making any such offer or proposal and the specific terms of such offer or
proposal, as the case may be.
(b) (i) Notwithstanding anything to the contrary
contained in Section 5.13(a), prior to the Closing or the termination of this
Agreement in accordance with its terms, PBI may, to the extent the Board of
Directors of PBI determines, in good faith, after consultation with outside
legal counsel, that the Board's fiduciary duties require it to do so,
participate in discussions or negotiations with, and, subject to the
requirements of Section 5.13(c), furnish non-public information, and afford
access to the properties, books or records of PBI or any of its Subsidiaries to
any Person after such Person has delivered to PBI in writing, an unsolicited
bona fide Takeover Proposal with respect to PBI or any of its Subsidiaries
(which has not been withdrawn) which the Board of Directors of PBI in its good
faith judgment determines, after reasonable inquiry and consultation with its
financial advisor (i) would be reasonably likely to result in a transaction more
favorable than that contemplated by this Agreement to the shareholders of PBI
(which judgment must be reasonable), and (ii) that the Person making such
Takeover Proposal is financially capable of consummating such Takeover Proposal
or that the financing necessary to consummate such Takeover Proposal, to the
extent required, is then committed or is capable of being obtained by such
Person (a "Superior Proposal"). In addition, notwithstanding the provisions of
Section 5.13(a) above, in connection with a submitted, written bona fide
Takeover Proposal or potential Takeover Proposal, PBI shall refer any third
party to this Section 5.13 or make a copy of this Section 5.13 available to such
third party.
(ii) In the event PBI or any of its Subsidiaries
receives a Superior Proposal, nothing contained in this Agreement (but subject
to the terms of this Section 5.13(b)) will prevent the Board of Directors of PBI
from recommending such Superior Proposal to the shareholders of PBI, if the
Board determines, in good faith, after consultation with outside legal counsel,
that such action is required by its fiduciary duties; in such case, the Board of
Directors
35
of PBI may withdraw, modify or refrain from making its recommendations set forth
in the relevant sections in this Agreement, and, to the extent it does so, PBI
may refrain from soliciting proxies to secure the affirmative vote of its
shareholders as contemplated by Section 5.1; provided, however, that PBI shall
(A) provide CBSI at least 48 hours prior notice of any meeting of the Board of
Directors of PBI at which such Board of Directors is reasonably expected to
consider a Superior Proposal, (B) not recommend to its shareholders a Superior
Proposal for a period of not less than the greater of two full business days and
48 hours after CBSI's receipt of a copy of such Superior Proposal and the
identity of the third party, and (C) not enter into a definitive agreement
relating to such Superior Proposal unless CBSI fails to match the terms of the
Super Proposal within the greater of two full business days and 48 hours after
CBSI's receipt of a copy of such Superior Proposal and the identity of the third
party; and provided, further, that unless this Agreement is terminated pursuant
to Article VII, nothing contained in this Section 5.13(b) shall limit PBI's
obligation to hold and convene a special meeting of its shareholders (regardless
of whether the recommendation of the Board of Directors of PBI shall have been
withdrawn, modified or not yet made) or to provide the shareholders of PBI with
material information relating to such meeting.
(c) Notwithstanding anything to the contrary herein,
neither PBI nor any of its Subsidiaries shall provide any non-public information
to a third party unless: (x) PBI provides such non-public information pursuant
to a nondisclosure agreement with terms regarding the protection of oral or
written confidential information at least as restrictive as such terms in the
confidentiality agreement heretofore entered into by the parties hereto; and (y)
such non-public information has been previously delivered or made available to
CBSI.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent to Obligations of CBSI and PBI. The
respective obligations of the parties to effect the Merger shall be subject to
satisfaction or waiver of the following conditions at or prior to the Closing
Date:
(a) All corporate action necessary to authorize the
execution, delivery and performance of this Agreement and the other Transaction
Documents (including the Bank Merger) and consummation of the transactions
contemplated hereby and thereby, including without limitation the shareholder
approvals contemplated by Section 5.1 hereof, shall have been duly and validly
taken;
(b) The parties hereto shall have received all regulatory
approvals required or mutually deemed necessary in connection with the
transactions contemplated by this Agreement, including the Bank Merger and the
Short-Form Merger, all notice periods and waiting periods required after the
granting of any such approvals shall have passed and all conditions contained in
any such approval required to have been satisfied prior to consummation of such
transactions shall have been satisfied; and
36
(c) There shall not have been instituted, pending or
threatened in writing any action or proceeding by any governmental authority or
administrative agency or in a court of competent jurisdiction, nor shall there
be in any effect any judgment, order, decree or injunction of any governmental
authority, administrative agency or court of competent jurisdiction, or any
other legal restraint, preventing or seeking to prevent the consummation of the
transactions contemplated by this Agreement.
6.2 Conditions Precedent to Obligations of PBI. The obligations of
PBI to effect the Merger shall be subject to satisfaction of the following
additional conditions at or prior to the Closing Date unless waived by PBI
pursuant to Section 7.4 hereof:
(a) The representations and warranties of CBSI and Merger
Sub set forth in Article IV hereof shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date (or, in the case of any representation and
warranty which specifically relates to an earlier date, as of such earlier
date), except as otherwise contemplated by this Agreement or consented to in
writing by PBI; provided, however, that (i) in determining whether or not the
condition contained in this paragraph (a) is satisfied, no effect shall be given
to any qualifications or exceptions in such representations and warranties
relating to materiality or Material Adverse Effect, but (ii) the condition
contained in this paragraph (a) shall be deemed to be satisfied unless the
failure of such representations and warranties to be so true and correct
constitute, individually or in the aggregate, a Material Adverse Effect on CBSI;
(b) CBSI and Merger Sub shall have in all material
respects performed all obligations and complied with all covenants required by
this Agreement to be performed or complied with at or prior to the Closing Date;
and
(c) Each of CBSI and Merger Sub shall have delivered to
PBI a certificate, dated the Closing Date and signed by their respective
President and Chief Executive Officer, to the effect that the conditions set
forth in paragraphs (a) and (b) of this Section have been satisfied.
(d) PBI shall have received a written certification
signed by an authorized officer of the Exchange Agent confirming that the
Exchange Agent holds in its possession cash or other immediately available funds
sufficient to satisfy the requisite payment of the aggregate Merger
Consideration under this Agreement.
6.3 Conditions Precedent to Obligations of CBSI and Merger Sub.
The obligations of CBSI and Merger Sub to effect the Merger
shall be subject to satisfaction of the following additional conditions at or
prior to the Closing Date, unless waived by CBSI pursuant to Section 7.4 hereof:
(a) The representations and warranties of PBI set forth
in Article III hereof shall be true and correct in all material respects as of
the date of this Agreement and as of the Closing Date as though made on and as
of the Closing Date (or, in the case of any representation
37
and warranty which specifically relates to an earlier date, as of such earlier
date), except as otherwise contemplated by this Agreement or consented to in
writing by CBSI and Merger Sub; provided, however, that (i) in determining
whether or not the condition contained in this paragraph (a) is satisfied, no
effect shall be given to any qualifications or exceptions in such
representations and warranties relating to materiality or Material Adverse
Effect but (ii) the condition contained in this paragraph (a) shall be deemed to
be satisfied unless the failure of such representations and warranties to be so
true and correct constitute, individually or in the aggregate, a Material
Adverse Effect on PBI;
(b) PBI shall have in all material respects performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with at or prior to the Closing Date;
(c) PBI shall have delivered to CBSI a certificate, dated
the Closing Date and signed by its Chairman and President, to the effect that
the conditions set forth in paragraphs (a) and (b) of this Section have been
satisfied;
(d) PBI shall have received a Voting Agreement from each
of its directors and executive officers, and such Voting Agreement shall be in
full force and effect; and
(e) To the extent that any material lease, license, loan,
financing agreement or other contract or agreement set forth on Schedule 6.3(e)
requires the consent of or waiver from the other party thereto as a result of
the transactions contemplated by this Agreement, such consent or waiver shall
have been obtained.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, either before or after approval by the shareholders
of PBI:
(a) by the mutual written consent duly authorized by the
respective Boards of Directors of the parties hereto;
(b) by CBSI in writing, if PBI has, or by PBI in writing,
if CBSI has, breached (i) any covenant or agreement contained herein or (ii) any
representation or warranty contained herein, and in either case if (x) to the
extent that such breach is curable, such breach has not been cured within 30
days after the date on which written notice thereof is given to the breaching
party, and (y) such breach would entitle the non-breaching party not to
consummate the transactions contemplated hereby under Article V hereof;
provided, however, that PBI shall not be entitled to terminate this Agreement
under this Section 7.1(b) for any breach or alleged breach of any of the
representations and warranties of CBSI contained in Sections 4.6 if and to the
extent that CBSI is capable of delivering the aggregate Merger Consideration at
the Closing, and in Sections 4.3, 4.7 or 4.8 if and to the extent that any
inaccuracy or breach of any such
38
representation does not prevent, or materially hinder or delay, the receipt of
requisite regulatory approvals;
(c) by any party hereto in writing, if the applications
for prior approval referred to in Section 5.3 hereof have been finally denied,
and the time period for appeals and requests for reconsideration has expired, or
if any governmental entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the Merger, the Bank
Merger or the Short-Form Merger;
(d) by any party hereto in writing, if the shareholders
of PBI do not approve this Agreement and the transactions contemplated thereby
at the special meetings duly called for that purpose;
(e) by any party hereto in writing, if the Merger shall
not have been consummated by the close of business on March 31, 2004, unless the
failure to so consummate by such date shall be principally due to the failure of
the party seeking to terminate this Agreement to perform or observe the
covenants and agreements set forth herein;
(f) by CBSI, if (i) the Board of Directors of PBI shall
withdraw, modify or change its approval or recommendation of this Agreement or
the transactions contemplated thereby in a manner adverse to CBSI, or PBI shall
have failed to include in the PBI Proxy Statement the recommendation of its
Board of Directors in favor of the approval of this Agreement or the
transactions contemplated thereby; (ii) following its receipt of a Takeover
Proposal or the public announcement of a Takeover Proposal, PBI shall fail to
timely comply with the covenants contained in Section 5.2; (iii) the Board of
Directors of PBI shall have recommended to the shareholders of PBI a Superior
Proposal, or PBI shall have executed a letter of intent, a definitive agreement
or similar document with respect to a Superior Proposal; (iv) a tender offer or
exchange offer for 25% or more of the outstanding shares of PBI Common Stock is
commenced and PBI shall not have sent to its shareholders, within 10 business
days after the commencement of such tender or exchange offer, a statement that
the Board of Directors of PBI recommends rejection of such tender or exchange
offer; (v) a Takeover Proposal (other than a tender or exchange offer covered by
clause (iv) of this Section 7.1(f)) with respect to PBI is publicly announced
and, upon CBSI's request, PBI fails to issue a press release announcing its
opposition to such Takeover Proposal within three (3) business days after such
request; or (vi) the Board of Directors of PBI shall have resolved to take any
action described in clauses (i) and (iii) of this Section 7.1(f); or
(g) by PBI, if the Board of Directors of PBI shall have
recommended to the shareholders of PBI a Superior Proposal, or PBI shall have
executed a letter of intent, a definitive agreement or similar document with
respect to a Superior Proposal, in each case in accordance with Section 5.12,
provided that PBI has complied with all provisions thereof.
7.2 Effect of Termination. In the event this Agreement is
terminated pursuant to Section 7.1 hereof, this Agreement shall become void and
have no effect, except that (i) the provisions relating to confidentiality,
break-up fees and expenses set forth in Sections 5.5 and 7.3 hereof,
respectively, shall survive any such termination and (ii) a termination pursuant
to Section
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7.1 shall not relieve the breaching party from liability for any willful breach
of such covenant or agreement or representation or warranty giving rise to such
termination.
7.3 Fees and Expenses.
(a) Except as set forth in this Section 7.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, whether
or not such transactions are consummated.
(b) In the event that this Agreement is terminated (i) by
CBSI pursuant to Section 7.1(b) (but only in the event of a willful or knowing
breach of a representation, warranty or covenant of PBI) or Section 7.1(f), or
by either party pursuant to Section 7.1(d) or (e) after a Takeover Proposal from
a third party is received by PBI or made public (unless CBSI or Merger Sub is
then in breach of its representations, warranties or covenants contained in this
Agreement such that conditions set forth in Section 6.2(a) or (b) would not be
satisfied, and PBI shall have given written notice to that effect prior to such
termination), or (ii) by PBI pursuant to Section 7.1(g), then PBI shall pay in
immediately available funds to an account designated by CBSI, no later than
three (3) business days after the date of such termination, all out-of-pocket
costs and expenses (including limitation, professional fees of legal counsel,
financial advisors and accountants, and their expenses) actually incurred by
CBSI and its Subsidiaries in connection with the Merger, the Bank Merger and the
Short-Form Merger, and this Agreement, such costs and expenses not to exceed
$35,000 in the aggregate. In addition, in such event, if (x) PBI or OFSLA shall
have consummated a transaction with a third party with respect to a Takeover
Proposal within one year of the termination of this Agreement, or (y) within
such one-year period, any third party Person consummates a tender or exchange
offer for 25% or more of the outstanding PBI Common Stock, then PBI shall pay in
immediately available funds to an account designated by CBSI, no later than
three (3) business days after the date of the applicable triggering event, a fee
equal to ONE HUNDRED SIXTY THOUSAND DOLLARS ($160,000), as liquidated damages
and not as a penalty.
7.4 Survival of Representations, Warranties and Covenants. All
representations, warranties and covenants in this Agreement or in any instrument
delivered pursuant hereto shall expire on, and be terminated and extinguished
at, the Effective Time other than covenants that by their terms are to survive
or be performed after the Effective Time; provided, that no such
representations, warranties or covenants shall be deemed to be terminated or
extinguished so as to deprive CBSI, Merger Sub or PBI (or any director, officer
or controlling Person thereof) of any defense in law or equity which otherwise
would be available against the claims of any Person, including, without
limitation, any shareholder or former shareholder of either CBSI or PBI, the
aforesaid representations, warranties and covenants being material inducements
to the consummation by CBSI, Merger Sub and PBI of the transactions contemplated
herein.
7.5 Waiver. Except where not permitted by law, CBSI, Merger Sub or
PBI, by written instrument signed by an executive officer of such party, may at
any time (whether before or after approval of this Agreement by the shareholders
of PBI) extend the time for the performance of any of the obligations or other
acts of the other party, and may waive (i) any inaccuracies of such other party
in the representations or warranties contained in this Agreement
40
or any document delivered pursuant hereto, (ii) compliance with any of the
covenants, undertakings or agreements of such other party, or satisfaction of
any of the conditions precedent to its obligations, contained herein or (iii)
the performance by such other party of any of its obligations set out herein or
therein. No failure or delay on the part of any party hereto in the exercise of
any right hereunder shall impair such right or be construed as a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right.
7.6 Amendment or Supplement. This Agreement may be amended or
supplemented at any time prior to the Effective Time only by mutual agreement of
the parties hereto or thereto. Any such amendment or supplement must be in
writing and approved by their respective Boards of Directors; provided, however,
that, after approval of this Agreement by the respective shareholders of PBI, no
amendment may be made which by law requires further approval by such
shareholders without obtaining such further approval.
ARTICLE VIII
MISCELLANEOUS
8.1 Entire Agreement. This Agreement and the Transaction Documents
contain the entire agreement between the parties with respect to the
transactions contemplated hereunder and supersede all prior arrangements or
understandings with respect thereto, written or oral, other than documents
referred to herein. The terms and conditions of this Agreement shall inure to
the benefit of and be binding upon the parties hereto and thereto and their
respective successors. Except as specifically set forth herein, nothing in this
Agreement, expressed or implied, is intended to confer upon any party, other
than the parties hereto and thereto, and their respective successors, any
rights, remedies, obligations or liabilities.
8.2 No Assignment. No party hereto may assign any of its rights or
obligations under this Agreement to any other Person.
8.3 Alternative Structure. Notwithstanding any provision of this
Agreement to the contrary, CBSI may, with the written consent of PBI, which
consent shall not be unreasonably withheld, elect, subject to the filing of all
necessary applications and the receipt of all required regulatory approvals, to
modify the structure of the acquisition of PBI set forth herein, provided, that
(i)the consideration to be paid to the holders of the PBI Common Stock is not
thereby changed in kind or reduced in amount as a result of such modification,
(ii) such modification will not materially delay or jeopardize the consummation
of the transactions contemplated by the Agreement, and (iii) any such
modification would not result in treatment for Federal income tax purposes of
receipt by a PBI Shareholder of the Merger Consideration as a taxable dividend.
8.4 Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by facsimile
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transmission or overnight express or by registered or certified mail, postage
prepaid, addressed as follows:
If to PBI:
Peoples Bankcorp., Inc.
Ogdensburg Federal Savings and Loan Association
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇, President
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a required copy to:
▇▇▇▇▇▇▇▇ Ronon ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to CBSI or Merger Sub:
Community Bank System, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President and Chief Executive
Officer
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a required copy to:
Bond, ▇▇▇▇▇▇▇▇▇ & King, PLLC
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
8.5 Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
8.6 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
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8.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and entirely to be performed within such jurisdiction, except to
the extent federal law may be applicable.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have caused this Agreement to be executed by their duly
authorized officers, all as of the day and year first above written.
COMMUNITY BANK SYSTEM, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Executive Officer
PB ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Treasurer
PEOPLES BANKCORP, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
44