Exhibit 99.2
AGREEMENT AND PLAN OF MERGER
between
FIRST LEESPORT BANCORP, INC.
and
MERCHANTS OF SHENANDOAH BAN-CORP
January 12, 1999
AGREEMENT
TABLE OF CONTENTS
Page
BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
THE MERGERS
Section 1.01 Definitions. . . . . . . . . . . . . . . . . . . 1
Section 1.02 The Merger . . . . . . . . . . . . . . . . . . . 6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF MERCHANTS
Section 2.01 Organization . . . . . . . . . . . . . . . . . . 13
Section 2.02 Capitalization . . . . . . . . . . . . . . . . . 14
Section 2.03 Authority; No Violation. . . . . . . . . . . . . 15
Section 2.04 Consents . . . . . . . . . . . . . . . . . . . . 16
Section 2.05 Financial Statements . . . . . . . . . . . . . . 16
Section 2.06 Taxes. . . . . . . . . . . . . . . . . . . . . . 17
Section 2.07 No Material Adverse Effect . . . . . . . . . . . 17
Section 2.08 Contracts. . . . . . . . . . . . . . . . . . . . 17
Section 2.09 Ownership of Property; Insurance Coverage. . . . 18
Section 2.10 Legal Proceedings. . . . . . . . . . . . . . . . 19
Section 2.11 Compliance With Applicable Law . . . . . . . . . 20
Section 2.12 ERISA. . . . . . . . . . . . . . . . . . . . . . 20
Section 2.13 Brokers, Finders and Financial Advisors. . . . . 22
Section 2.14 Environmental Matters. . . . . . . . . . . . . . 22
Section 2.15 Loan Portfolio . . . . . . . . . . . . . . . . . 23
Section 2.16 Information to be Supplied . . . . . . . . . . . 23
Section 2.17 Related Party Transactions . . . . . . . . . . . 23
Section 2.18 Loans. . . . . . . . . . . . . . . . . . . . . . 23
Section 2.19 CRA Compliance . . . . . . . . . . . . . . . . . 23
Section 2.20 Accounting for the Merger; Reorganization. . . . 24
Section 2.21 Fairness Opinion . . . . . . . . . . . . . . . . 24
Section 2.22 Year 2000 Compliance . . . . . . . . . . . . . . 24
Section 2.23 Quality of Representations . . . . . . . . . . . 24
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FIRST LEESPORT
Section 3.01 Organization . . . . . . . . . . . . . . . . . . 24
Section 3.02 Capital Structure. . . . . . . . . . . . . . . . 25
Section 3.03 Authority; No Violation. . . . . . . . . . . . . 26
Section 3.04 Consents . . . . . . . . . . . . . . . . . . . . 27
Section 3.05 Financial Statements . . . . . . . . . . . . . . 28
Section 3.06 Taxes. . . . . . . . . . . . . . . . . . . . . . 28
Section 3.07 No Material Adverse Effect . . . . . . . . . . . 29
Section 3.08 Ownership of Property; Insurance Coverage. . . . 29
Section 3.09 Legal Proceedings. . . . . . . . . . . . . . . . 30
Section 3.10 Compliance With Applicable Law . . . . . . . . . 30
Section 3.11 Securities Documents . . . . . . . . . . . . . . 31
Section 3.12 Brokers and Finders. . . . . . . . . . . . . . . 31
Section 3.13 Environmental Matters. . . . . . . . . . . . . . 31
Section 3.14 Loan Portfolio . . . . . . . . . . . . . . . . . 32
Section 3.15 Information to be Supplied . . . . . . . . . . . 32
Section 3.16 Loans. . . . . . . . . . . . . . . . . . . . . . 32
Section 3.17 CRA Compliance . . . . . . . . . . . . . . . . . 32
Section 3.18 Accounting for the Merger; Reorganization. . . . 32
Section 3.19 Year 2000 Compliance . . . . . . . . . . . . . . 33
Section 3.20 First Leesport Common Stock. . . . . . . . . . . 33
Section 3.21 Quality of Representations . . . . . . . . . . . 33
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.01 Conduct of Business. . . . . . . . . . . . . . . 33
Section 4.02 Access; Confidentiality. . . . . . . . . . . . . 37
Section 4.03 Regulatory Matters and Consents. . . . . . . . . 38
Section 4.04 Taking of Necessary Action . . . . . . . . . . . 38
Section 4.05 Certain Agreements . . . . . . . . . . . . . . . 39
Section 4.06 No Other Bids and Related Matters. . . . . . . . 41
Section 4.07 Duty to Advise; Duty to Update the Merchants
Disclosure Schedule . . . . . . . . . . . . . . . . . . . 41
Section 4.08 Duty to Advise; Duty to Update the First
Leesport's Disclosure Schedule. . . . . . . . . . . . . . 42
Section 4.09 Additional Undertakings by Merchants and First
Leesport. . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 4.10 Employee Benefits and Termination Benefits . . . 44
ARTICLE V
CONDITIONS
Section 5.01 Conditions to Merchants's Obligations under
this Agreement. . . . . . . . . . . . . . . . . . . . . . 45
Section 5.02 Conditions to First Leesport's Obligations
under this Agreement. . . . . . . . . . . . . . . . . . . 47
ARTICLE VI
TERMINATION, WAIVER AND AMENDMENT
Section 6.01 Termination. . . . . . . . . . . . . . . . . . . 49
Section 6.02 Effect of Termination. . . . . . . . . . . . . . 50
ARTICLE VII
MISCELLANEOUS
Section 7.01 Expenses . . . . . . . . . . . . . . . . . . . . 51
Section 7.02 Non-Survival of Representations and
Warranties. . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.03 Amendment, Extension and Waiver. . . . . . . . . 51
Section 7.04 Entire Agreement . . . . . . . . . . . 51
Section 7.05 No Assignment. . . . . . . . . . . . . . . . . . 52
Section 7.06 Notices. . . . . . . . . . . . . . . . . . . . . 52
Section 7.07 Captions . . . . . . . . . . . . . . . . . . . . 53
Section 7.08 Counterparts . . . . . . . . . . . . . . . . . . 53
Section 7.09 Severability . . . . . . . . . . . . . . . . . . 53
Section 7.10 Governing Law. . . . . . . . . . . . . . . . . . 53
Exhibit 1 Affiliate Agreement
Exhibit 2 Form of Opinion of First Leesport's Counsel
Exhibit 3 Form of Tax Opinion of First Leesport's Counsel
Exhibit 4 Form of Opinion of Merchants' Counsel
PAGE 4
AGREEMENT
THIS AGREEMENT AND PLAN OF MERGER, dated as of
January 12, 1999, is made by and between FIRST LEESPORT BANCORP,
INC. ("First Leesport"), a Pennsylvania business corporation,
having its principal place of business in Leesport, Pennsylvania,
and MERCHANTS OF SHENANDOAH BAN-CORP ("Merchants"), a
Pennsylvania business corporation, having its principal place of
business in Shenandoah, Pennsylvania.
BACKGROUND
1. First Leesport and Merchants desire for Merchants
to merge with and into First Leesport, with First Leesport
surviving such merger, in accordance with the applicable laws of
the Commonwealth of Pennsylvania and the plan of merger set forth
herein.
2. At or prior to the execution and delivery of this
Agreement, certain directors, officers, and affiliates of
Merchants have executed in favor of First Leesport, a Letter
Agreement dated January 12, 1999, in the form attached hereto as
Exhibit 1.
3. First Leesport and Merchants desire to provide the
terms and conditions governing the transactions contemplated
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of
the mutual covenants, agreements, representations and warranties
herein contained, the parties hereto, intending to be legally
bound, do hereby agree as follows:
ARTICLE I
THE MERGERS
Section 1.01 Definitions. As used in this Agreement,
the following terms shall have the indicated meanings (such
meanings to be equally applicable to both the singular and plural
forms of the terms defined):
Acquisition Transaction shall have the meaning
given to that term in Section 4.06.
Affiliate means, with respect to any Person, any
Person who directly, or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under
common control with, such Person and, without limiting the
generality of the foregoing, includes any executive officer
or director of such Person and any Affiliate of such
executive officer or director.
Agreement means this agreement, and any amendment
or supplement hereto.
Applications means the applications for regulatory
approval which are required by the transactions contemplated
hereby.
Articles of Merger means the articles of merger to
be executed by First Leesport and Merchants and to be filed
in the PDS, in accordance with the laws of the Commonwealth
of Pennsylvania.
BCL means the Pennsylvania Business Corporation
Law of 1988, as amended.
BHC Act means the Bank Holding Company Act of
1956, as amended.
Closing Date means the date specified by the
parties within five (5) business days after satisfaction or
waiver (subject to applicable law) of the conditions
(excluding conditions that, by their terms cannot be
satisfied until the Closing Date) set forth in Article V, or
such other date as First Leesport and Merchants shall agree.
CRA means the Community Reinvestment Act of 1977,
as amended, and the rules and regulations promulgated from
time to time thereunder.
Dissenting Merchants Shares has the meaning given
to that term in Section 1.02(e)(iii).
Effective Date means the date upon which the
Articles of Merger shall be filed in the PDS, and shall be
the same as the Closing Date.
Employee Benefit Plans has the meaning given to
that term in Section 2.12 of this Agreement.
Environmental Law means any federal, state, local
or foreign law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, order,
judgment, decree, injunction or agreement with any
Regulatory Authority relating to (i) the protection,
preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface
soil, plant and animal life or any other natural resource),
and/or (ii) the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling,
production, release or disposal of any substance presently
listed, defined, designated or classified as hazardous,
toxic, radioactive or dangerous, or otherwise regulated,
whether by type or by quantity, including any material
containing any such substance as a component.
ERISA means the Employee Retirement Income
Security Act of 1974, as amended.
Exchange Act means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated
from time to time thereunder.
Exchange Ratio has the meaning given to that term
in Section 1.02(e)(ii) of this Agreement.
FDIA means the Federal Deposit Insurance Act, as
amended.
FDIC means the Federal Deposit Insurance
Corporation.
FNBL means The First National Bank of Leesport,
the wholly owned banking subsidiary of First Leesport.
FRB means the Board of Governors of the Federal
Reserve System.
First Leesport Common Stock has the meaning given
to that term in Section 3.02(a) of this Agreement.
First Leesport Disclosure Schedule means a
disclosure schedule delivered by First Leesport to Merchants
pursuant to Article III of this Agreement.
First Leesport Financials means (i) the audited
consolidated financial statements of First Leesport as of
December 31, 1997 and for the three years ended December 31,
1997, including the notes thereto, and (ii) the unaudited
interim consolidated financial statements of First Leesport
as of each calendar quarter thereafter included in
Securities Documents filed by First Leesport.
First Leesport Market Price means, as of any date,
the average of the closing sale prices (or if unavailable
for any day, the mean between the high bid and low asked
prices for such day) of a share of First Leesport Common
Stock, as reported by Nasdaq or, if not so reported, by an
independent source in the over-the-counter market, for each
of the thirty (30) consecutive trading days commencing
thirty-one (31) trading days prior to the date of
determination.
First Leesport Regulatory Reports means the Annual
Reports of First Leesport on Form FRY-6 and any Current
Report of First Leesport on Form FRY-6A filed with the FRB
from December 31, 1997 through the Closing Date and the
Reports of Condition and Income of FNBL and accompanying
schedules for each calendar quarter, beginning with the
quarter ended March 31, 1997 through the Closing Date.
First Leesport Subsidiaries means any corporation,
50% or more of the capital stock of which is owned, either
directly or indirectly, by First Leesport, except any
corporation the stock of which is held in the ordinary
course of the lending activities of FNBL.
GAAP means generally accepted accounting
principles as in effect at the relevant date.
IRC means the Internal Revenue Code of 1986, as
amended.
IRS means the Internal Revenue Service.
Material Adverse Effect shall mean, with respect
to First Leesport or Merchants, any adverse effect on its
assets, financial condition or operations which is material
to its assets, financial condition or results of operations
on a consolidated basis, except for any material adverse
effect caused by (i) any change in the value of the
respective investment portfolios of First Leesport or
Merchants resulting from a change in interest rates
generally or (ii) any change occurring after the date hereof
in any federal or state law, rule or regulation or in GAAP,
which change affects banking institutions generally,
including any changes affecting the Bank Insurance Fund or
the Savings Association Insurance Fund.
MBP means Merchants Bank of Pennsylvania, the
wholly owned banking subsidiary of Merchants.
Merchants Common Stock means the common stock of
Merchants described in Section 2.02(a).
Merchants Disclosure Schedule means a disclosure
schedule delivered by Merchants to First Leesport pursuant
to Article II of this Agreement.
Merchants Financials means (i) the audited
consolidated financial statements of Merchants as of
December 31, 1997 and for the three years ended December 31,
1997, including the notes thereto, (ii) the unaudited
interim consolidated financial statements of Merchants as of
and for each calendar quarter thereafter.
Merchants Regulatory Reports means the Annual
Reports of Merchants on Form FRY-6 and any Current Report of
Merchants on Form FRY-6A filed with the FRB from
December 31, 1997 through the Closing Date and the Reports
of Condition and Income of MBP and accompanying schedules
for each calendar quarter, beginning with the quarter ended
March 31, 1997 through the Closing Date.
Merchants Subsidiaries means any corporation, 50%
or more of the capital stock of which is owned, either
directly or indirectly, by Merchants, except any
corporation the stock of which is held in the ordinary
course of the lending activities of MBP.
Merger means the merger of Merchants with and into
First Leesport, with First Leesport surviving such merger,
contemplated by this Agreement.
NASD means the National Association of Securities
Dealers, Inc.
Nasdaq means the Small Cap Market tier of The
Nasdaq Stock Market operated by the NASD.
PDB means the Department of Banking of the
Commonwealth of Pennsylvania.
PDS means the Department of State of the
Commonwealth of Pennsylvania.
Person means any individual, corporation,
partnership, joint venture, association, trust or "group"
(as that term is defined under the Exchange Act).
Prospectus/Proxy Statement means the
prospectus/proxy statement, together with any supplements
thereto, to be transmitted to holders of Merchants Common
Stock in connection with the transactions contemplated by
this Agreement.
Registration Statement means the registration
statement on Form S-4, including any pre-effective or
post-effective amendments or supplements thereto, as filed
with the SEC under the Securities Act with respect to the
First Leesport Common Stock to be issued in connection with
the transactions contemplated by this Agreement.
Regulatory Agreement has the meaning given to that
term in Section 2.11 of this Agreement.
Regulatory Authority means any banking agency or
department of any federal or state government, including
without limitation, the FDIC, the OCC, the FRB, the PDB, or
the respective staffs thereof.
Rights means warrants, options, rights,
convertible securities and other capital stock equivalents
which obligate an entity to issue its securities.
SEC means the Securities and Exchange Commission.
Securities Act means the Securities Act of 1933,
as amended, and the rules and regulations promulgated from
time to time thereunder.
Securities Documents means all registration
statements, schedules, statements, forms, reports, proxy
material, and other documents required to be filed under the
Securities Laws.
Securities Laws means the Securities Act and the
Exchange Act and the rules and regulations promulgated from
time to time thereunder.
Subsidiary means any corporation or other entity,
50% or more of the capital stock or ownership interests of
which are owned, either directly or indirectly, by another
entity, except any corporation or other entity the capital
stock or ownership interests of which are held in the
ordinary course of the lending activities of a bank.
Section 1.02 The Merger.
(a) Closing. The closing will take place at
10:00 a.m. on the Closing Date at the offices of ▇▇▇▇▇▇▇ & ▇▇▇,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, unless another
time and place are agreed to by the parties hereto; provided, in
any case, that all conditions to closing set forth in Article V
have been satisfied or waived at or prior to the Closing Date.
On the Closing Date, First Leesport and Merchants shall cause the
Articles of Merger to be duly executed and to be filed in the
PDS.
(b) The Merger. Subject to the terms and
conditions of this Agreement, on the Effective Date: Merchants
shall merge with and into First Leesport; the separate existence
of Merchants shall cease; First Leesport shall be the surviving
corporation in the Merger; and all of the property (real,
personal and mixed), rights, powers and duties and obligations of
Merchants shall be taken and deemed to be transferred to and
vested in First Leesport, as the surviving corporation in the
Merger, without further act or deed; all debts, liabilities and
duties of each of Merchants and First Leesport shall thereafter
be the responsibility of First Leesport as the surviving
corporation; all in accordance with the applicable laws of the
Commonwealth of Pennsylvania.
(c) First Leesport's Articles of Incorporation
and Bylaws. On and after the Effective Date, the articles of
incorporation and the bylaws of First Leesport, as the surviving
corporation in the Merger, as in effect on the Effective Date
shall continue to be the articles of incorporation and bylaws of
the surviving corporation, until thereafter altered, amended or
repealed.
(d) Boards of Directors and Officers of First
Leesport, FNBL and MBP.
(i) On the Effective Date, the Board of
Directors of First Leesport, as the surviving corporation in the
Merger, shall take such actions as may be necessary to cause the
Board of Directors of First Leesport to consist of (A) those
persons holding such office immediately prior to the Effective
Date and (B) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, one of whom shall be designated to serve in each
of Class I, Class II and Class III of the Board of Directors of
First Leesport. First Leesport agrees to appoint ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇. to the Class with the shortest remaining term as of
the Effective Date, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ to the Class with the longest
remaining term as of the Effective Date and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ to
the remaining Class. First Leesport shall cause Messrs ▇▇▇▇▇▇
and Cali to be nominated for re-election, and shall recommend
each of them for election, to the Board of Directors of First
Leesport for one additional three-year term at any annual or
special meeting of shareholders of First Leesport at which the
Class in which he is serving is considered for re-election and
shall cause ▇▇. ▇▇▇▇▇▇▇▇ to be nominated for re-election, and
shall recommend him for election, to the Board of Directors of
First Leesport for two additional three-year terms at any annual
or special meeting of shareholders of First Leesport at which the
Class in which he is serving is considered for re-election.
(ii) On the Effective Date, the officers of
First Leesport, as the surviving corporation in the Merger, shall
consist of (A) those persons duly elected and holding office
immediately prior to the Effective Date and (B) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇,
who shall be elected an Executive Vice President of First
Leesport, each to hold office until his or her successor is
elected and qualified or otherwise in accordance with applicable
law, and the articles of incorporation and bylaws of First
Leesport.
(iii) On the Effective Date, First Leesport
shall take such action as may be necessary to cause the directors
of FNBL to consist of (A) those persons holding such office
immediately prior to the Effective Date and (B) ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇. First Leesport shall take such action as may be
necessary to cause ▇▇. ▇▇▇▇▇▇▇▇ to be elected to the Board of
Directors of FNBL for a period of three (3) years from the
Effective Date. In the event that MBP is merged or combined with
FNBL on a date prior to two (2) years from the Effective Date
pursuant to Section 4.09(b)(iv) hereof, First Leesport shall take
such action as may be necessary to cause two (2) additional
individuals designated by the directors of MBP holding such
office immediately prior to the Effective Date, who are
reasonably acceptable to First Leesport, to be elected to the
Board of Directors of FNBL through a period ending three (3)
years from the Effective Date.
(iv) On the Effective Date, the officers of
FNBL and MBP, respectively, shall consist of those persons duly
elected and holding office immediately prior to the Effective
Date, each to hold office until his or her successor is elected
and qualified or otherwise in accordance with applicable law, and
the articles of association or incorporation and bylaws of FNBL
or MBP.
(v) On the Effective Date, First Leesport
shall take such action as may be necessary to cause the directors
of MBP to consist of (i) those persons holding such office
immediately prior to the Effective Date (the "Existing MBP
Directors") and (ii) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. First Leesport
shall take such action as may be necessary to cause the Existing
MBP Directors to be elected to the Board of Directors of MBP for
a period of two (2) years from the Effective Date. Nothing
contained in this subsection, however, shall prevent First
Leesport, as the sole shareholder of MBP, from appointing or
electing additional members to the Board of Directors of MBP at
any time sufficient to constitute a majority of the members of
the Board of Directors of MBP. Notwithstanding the foregoing, in
the event that MBP is merged or combined with FNBL or another
banking subsidiary of First Leesport on a date prior to two (2)
years from the Effective Date pursuant to Section 4.09(b)(iv)
hereof, First Leesport shall establish and maintain an advisory
board (the "MBP Advisory Board") through the remainder of such
two (2) year period from the Effective Date. The MBP Advisory
Board shall consist of the Existing MBP Directors. Until the
annual meeting of shareholders of MBP to be held in 2000, the fee
schedule for meetings of the Board of Directors of MBP existing
on the date of this Agreement shall not be decreased for meetings
of the Board of Directors of MBP or the MBP Advisory Board, as
the case may be, unless otherwise agreed by the Existing MBP
Directors. Existing MBP Directors who, as of the Effective Date,
have attained the mandatory retirement age of seventy (70) years
under the applicable retirement policies of First Leesport shall
be permitted to continue to serve on the MBP Board of Directors
or the MBP Advisory Board, as the case may be, until the annual
meeting of shareholders of MBP to be held in 2000 notwithstanding
the existence of such retirement policies.
(e) Conversion of Shares.
(i) First Leesport Common Stock.
(A) Each share of First Leesport Common
Stock issued and outstanding immediately prior to the
Effective Date shall, on and after the Effective Date,
continue to be issued and outstanding as an identical share
of First Leesport Common Stock. Shares of First Leesport
Common Stock owned by Merchants (other than shares held in
trust, managed, custodial or nominee accounts and the like
that in any such case are beneficially owned by third
parties (any such shares, "trust account shares") and shares
acquired in respect of debts previously contracted (any such
shares, "DPC shares")) shall become treasury stock
of First Leesport.
(B) Each share of First Leesport Common
Stock issued and held in the treasury of First Leesport as
of the Effective Date, if any, shall, on and after the
Effective Date, continue to be issued and held in the
treasury of First Leesport.
(ii) Merchants Common Stock.
(A) Subject to the provisions of
Section 1.02(e)(iii) hereof with respect to dissenting
shares, each share of Merchants Common Stock issued and
outstanding immediately prior to the Effective Date (other
than shares then owned by First Leesport, if any) shall, on
the Effective Date, by reason of the Merger and without any
action on the part of the holder thereof, be converted into
and become a right to receive:
(x) if the First Leesport Market
Price determined as of the Effective Date is greater
than or equal to $20.00 and less than or equal to
$28.00, then 1.5854 shares of fully paid and
nonassessable shares of First Leesport Common Stock;
and
(y) if the First Leesport Market
Price determined as of the Effective Date is less than
$20.00, then that number (rounded to the nearest
hundredth) of shares of fully paid and nonassessable
shares of First Leesport Common Stock equal to $31.71
divided by the First Leesport Market Price determined
as of the Effective Date; or
(z) if the First Leesport Market
Price determined as of the Effective Date is greater
than $28.00, then that number (rounded to the nearest
hundredth) of shares of fully paid and nonassessable
shares of First Leesport Common Stock equal to $44.39
divided by the First Leesport Market Price as of the
Effective Date.
The number of shares of first Leesport Common Stock into which
each share of Merchants Common Stock shall be converted as
determined pursuant to any of Sections 1.02(e)(ii)(A)(x),
1.02(e)(ii)(A)(y) or 1.02(e)(ii)(A)(z), is hereinafter referred
to as the "Exchange Ratio".
(B) Each share of Merchants Common
Stock (other than trust account shares or DPC shares) owned
by First Leesport or a First Leesport Subsidiary on the
Effective Date, if any, shall be cancelled.
(C) Each share of Merchants Common
Stock issued and held in the treasury of Merchants or owned
by Merchants or any Merchants Subsidiary (other than trust
account shares or DPC shares) as of the Effective Date, if
any, shall be cancelled, and no cash, stock or other
property shall be delivered in exchange therefor.
(D) No fraction of a whole share of
First Leesport Common Stock and no scrip or certificates
therefor shall be issued in connection with the Merger. Any
former holder of Merchants Common Stock who would otherwise
be entitled to receive a fraction of a share of First
Leesport Common Stock shall receive, in lieu thereof, cash
in an amount equal to such fraction of a share multiplied by
the First Leesport Market Price determined as of the
Effective Date.
(iii) Dissenting Shareholders of Merchants.
If there are holders of Merchants Common Stock who dissent
from the Merger and exercise and perfect the right to obtain
valuation of and payment for their shares ("Dissenting
Merchants Shares") pursuant to Section 1930(a) and
Subchapter D of Chapter 15 of the BCL, the following
provisions will govern payments to be made in respect of
Dissenting Merchants Shares:
(A) all payments in respect of
Dissenting Merchants Shares, if any, will be made directly
by First Leesport, as the surviving corporation in the
Merger; and
(B) Dissenting Merchants Shares, if
any, will be deemed to have been retired and cancelled
immediately prior to the Merger, with the effect that no
conversion thereof will occur pursuant to Section
1.02(e)(ii) hereof.
(f) Surrender and Exchange of Merchants Stock
Certificates.
(i) Exchange of Certificates. Each holder
of shares of Merchants Common Stock, other than holders of
Dissenting Merchants Shares, who surrenders to First
Leesport (or its agent) the certificate or certificates
representing such shares will be entitled to receive, as
soon as practicable after the Effective Date, in exchange
therefor a certificate or certificates for the number of
whole shares of First Leesport Common Stock into which such
holder's shares of Merchants Common Stock have been
converted pursuant to the Merger, together with a check for
cash in lieu of any fractional share in accordance with
Section 1.02(e)(ii)(D) hereof.
(ii) Rights Evidenced by Certificates. Each
certificate for shares of First Leesport Common Stock issued
in exchange for certificates for shares of
Merchants Common Stock pursuant to Section 1.02(f)(i) hereof
will be dated the Effective Date and be entitled to
dividends and all other rights and privileges pertaining to
such shares of stock from and after the Effective Date.
Until surrendered, each certificate theretofore evidencing
shares of Merchants Common Stock will, from and after the
Effective Date, evidence solely the right to receive
certificates for shares of First Leesport Common Stock
pursuant to Section 1.02(f)(i) hereof and a check for cash
in lieu of any fractional share in accordance with
Section 1.02(e)(ii)(D) hereof. If certificates for shares
of Merchants Common Stock are exchanged for First Leesport
Common Stock at a date following one or more record dates
for the payment of dividends or of any other distribution on
the shares of First Leesport Common Stock, First Leesport
will pay cash in an amount equal to dividends theretofore
payable on such First Leesport Common Stock and pay or
deliver any other distribution to which holders of shares of
First Leesport Common Stock have theretofore become
entitled. No interest will accrue or be payable in respect
of dividends or cash otherwise payable under this
Section 1.02(f) upon surrender of certificates for shares of
First Leesport Common Stock. Notwithstanding the foregoing,
no party hereto will be liable to any holder of First
Leesport Common Stock for any amount paid upon advice of
legal counsel and in good faith to a public official or
agency pursuant to any applicable abandoned property,
escheat or similar law. Until such time as certificates for
shares of Merchants Common Stock are surrendered by a
Merchants shareholder to First Leesport for exchange, First
Leesport shall have the right to withhold dividends or any
other distributions on the shares of First Leesport Common
Stock issuable to such shareholder.
(iii) Exchange Procedures. Each certificate
for shares of Merchants Common Stock delivered for exchange
under this Section 1.02(f) must be endorsed in blank by the
registered holder thereof or be accompanied by a power of
attorney to transfer such shares endorsed in blank by such
holder. If more than one certificate is surrendered at one
time and in one transmittal package for the same shareholder
account, the number of whole shares of First Leesport Common
Stock for which certificates will be issued pursuant to this
Section 1.02(f) will be computed on the basis of the
aggregate number of shares represented by the certificates
so surrendered. If shares of First Leesport Common Stock or
payments of cash are to be issued or made to a person other
than the one in whose name the surrendered certificate is
registered, the certificate so surrendered must be properly
endorsed in blank, with signature(s) guaranteed, or
otherwise in proper form for transfer, and the person to
whom certificates for shares of First Leesport Common Stock
is to be issued or to whom cash is to be paid shall pay any
transfer or other taxes required by reason of such issuance
or payment to a person other than the registered
holder of the certificate for shares of Merchants Common
Stock which are surrendered. As promptly as practicable
after the Effective Date, First Leesport shall send or cause
to be sent to each shareholder of record of Merchants Common
Stock transmittal materials for use in exchanging
certificates representing Merchants Common Stock for
certificates representing First Leesport Common Stock into
which the former have been converted in the Merger.
Certificates representing shares of First Leesport Common
Stock and checks for cash in lieu of fractional shares shall
be mailed to former shareholders of Merchants as soon as
reasonably possible but in no event later than twenty (20)
business days following the receipt of certificates
representing former shares of Merchants Common Stock duly
endorsed or accompanied by the materials referenced herein
and delivered by certified mail, return receipt requested
(but in no event earlier than the second business day
following the Effective Date).
(iv) Closing of Stock Transfer Books;
Cancellation of Merchants Certificates. Upon the Effective
Date, the stock transfer books for Merchants Common Stock
will be closed and no further transfers of shares of
Merchants Common Stock will thereafter be made or
recognized. All certificates for shares of Merchants Common
Stock surrendered pursuant to this Section 1.02(g) will be
cancelled by First Leesport.
(g) Anti-Dilution Provisions. If First Leesport
shall, at any time before the Effective Date, (A) issue a
dividend in shares of First Leesport Common Stock, (B) combine
the outstanding shares of First Leesport Common Stock into a
smaller number of shares, (C) subdivide the outstanding shares of
First Leesport Common Stock, or (D) reclassify the shares of
First Leesport Common Stock, or set a record date prior to the
Effective Date with respect to any of the foregoing, then, in any
such event, the number of shares of First Leesport Common Stock
to be delivered to Merchants shareholders who are entitled to
receive shares of First Leesport Common Stock in exchange for
shares of Merchants Common Stock shall be adjusted so that each
Merchants shareholder shall be entitled to receive in the Merger
such number of shares of First Leesport Common Stock as such
shareholder would have been entitled to receive if the Effective
Date had occurred immediately prior to such event or the record
date for such event. (By way of illustration, if First Leesport
shall declare a stock dividend of 10% payable with respect to a
record date on or prior to the Effective Date, the Exchange Ratio
determined pursuant to Sections 1.02(e)(ii) shall be adjusted
upward by 10%.)
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF MERCHANTS
Merchants hereby represents and warrants to First
Leesport that, except as specifically set forth in the Merchants
Disclosure Schedule (which Merchants Disclosure Schedule
qualifies and represents exceptions to all of the representations
and warranties of Merchants contained in this Agreement taken as
a whole and does not relate to particular representations and
warranties) delivered to First Leesport by Merchants on the date
hereof:
Section 2.01 Organization.
(a) Merchants is a corporation duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. Merchants is a bank holding
company duly registered under the BHC Act. Merchants has the
corporate power and authority to carry on its business and
operations as now being conducted and to own and operate the
properties and assets now owned and being operated by it.
Merchants is not qualified or licensed to do business as a
foreign corporation in any other jurisdiction and is not required
to be so qualified or licensed as the result of the ownership or
leasing of property or the conduct of its business, except where
the failure to be so qualified or licensed would not have a
Material Adverse Effect with respect to Merchants.
(b) MBP is a Pennsylvania state banking
institution duly organized and validly existing under the laws of
the Commonwealth of Pennsylvania. MBP has the corporate power
and authority to carry on its business and operations as now
being conducted and to own and operate the properties and assets
now owned and being operated by it. MBP is not qualified or
licensed to do business as a foreign corporation in any other
jurisdiction and is not required to be so qualified or licensed
as the result of the ownership or leasing of property or the
conduct of its business, except where the failure to be so
qualified or licensed would not have a Material Adverse Effect
with respect to Merchants.
(c) There are no Merchants Subsidiaries other
than MBP. There are no MBP Subsidiaries.
(d) The deposits of MBP are insured by the FDIC
to the extent provided in the Federal Deposit Insurance Act.
(e) The respective minute books of Merchants and
MBP accurately record, in all material respects, all material
corporate actions of their respective shareholders and boards of
directors (including committees) through the date of this
Agreement.
(f) Prior to the date of this Agreement,
Merchants has delivered to First Leesport true and correct copies
of the articles of incorporation and bylaws of
Merchants and MBP, respectively, as in effect on the date hereof.
Section 2.02 Capitalization.
(a) The authorized capital stock of Merchants
consists of 1,000,000 shares of common stock, par value $2.00 per
share, of which, at the date of this Agreement, 305,721 shares
are outstanding, validly issued, fully paid and nonassessable,
and free of preemptive rights. Merchants is not bound by any
subscription, option, warrant, call, commitment, agreement or
other Right of any character relating to the purchase, sale or
issuance or voting of, or right to receive dividends or other
distributions on any shares of the capital stock of Merchants or
any other security of Merchants or any securities representing
the right to vote, purchase or otherwise receive any shares of
the capital stock or any other security of Merchants.
(b) The authorized capital stock of MBP consists
of 3,000 shares of common stock, par value $2.00 per share, of
which, at the date of this Agreement, 3,000 shares are
outstanding, validly issued, fully paid, nonassessable, free of
preemptive rights and owned by Merchants. Neither Merchants nor
any Merchants Subsidiary has or is bound by any subscription
option, warrant, call, commitment, agreement or other Right of
any character relating to the purchase, sale or issuance or
voting of, or right to receive dividends or other distributions
on any shares of the capital stock of any Merchants Subsidiary or
any other security of any Merchants Subsidiary or any securities
representing the right to vote, purchase or otherwise receive any
shares of the capital stock or any other security of any
merchants Subsidiary. Either Merchants or MBP owns all of the
outstanding shares of capital stock of each merchants Subsidiary
free and clear of all liens, security interests, pledges,
charges, encumbrances, agreements and restrictions of any kind or
nature.
(c) Neither Merchants nor any Merchants
Subsidiary owns any equity interest, directly or indirectly, in
any other company or controls any other company, except for
equity interests held in the investment portfolio of MBP, equity
interests held by MBP in a fiduciary capacity, and equity
interests held in connection with the commercial loan activities
of MBP. There are no subscriptions, options, warrants, calls,
commitments, agreements or other Rights outstanding and held by
Merchants or any Merchants Subsidiary with respect to any other
company's capital stock or the equity of any other person.
(d) To Merchants's knowledge, without any
independent investigation, no person or "group" (as that term is
used in Section 13(d)(3) of the Exchange Act), is the beneficial
owner (as defined in Section 13(d) of the Exchange Act) of 5% or
more of the outstanding shares of Merchants Common Stock, except
as disclosed in reasonable detail (using the principles described
in Item 403 of the SEC's Regulation S-K) in the
Merchants Disclosure Schedule.
Section 2.03 Authority; No Violation.
(a) Merchants has full corporate power and
authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery
of this Agreement by Merchants and the consummation by Merchants
of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of Merchants and,
except for approval by the shareholders of Merchants, no other
corporate proceedings on the part of Merchants are necessary to
complete the transactions contemplated hereby and by the Plan of
Merger. This Agreement has been duly and validly executed and
delivered by Merchants and, subject to approval of the
shareholders of Merchants and receipt of the required approvals
from Regulatory Authorities described in Section 3.04 hereof,
constitutes the valid and binding obligation of Merchants,
enforceable against Merchants in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity.
(b) (A) The execution and delivery of this
Agreement by Merchants, (B) subject to approval of the
shareholders of Merchants and receipt of approvals from the
Regulatory Authorities referred to in Section 3.04 hereof and
Merchants' and First Leesport's compliance with any conditions
contained therein, the consummation of the transactions
contemplated hereby, and (C) compliance by Merchants with any of
the terms or provisions hereof will not (i) conflict with or
result in a breach of any provision of the articles of
incorporation or bylaws of Merchants or any Merchants Subsidiary;
(ii) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to
Merchants, any Merchants Subsidiary or any of their respective
properties or assets; or (iii) violate, conflict with, result in
a breach of any provisions of, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a
default) under, result in the termination of, accelerate the
performance required by, or result in a right of termination or
acceleration or the creation of any lien, security interest,
charge or other encumbrance upon any of the properties or assets
of Merchants or any Merchants Subsidiary under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement, commitment or other
instrument or obligation to which Merchants or any Merchants
Subsidiary is a party, or by which they or any of their
respective properties or assets may be bound or affected, except
for such violations, conflicts, breaches or defaults under
clause (ii) or (iii) hereof which, either individually or in the
aggregate, will not have a Material Adverse Effect with respect
to Merchants.
Section 2.04 Consents. Except for the consents,
approvals, filings and registrations from or with the Regulatory
Authorities referred to in Section 3.04 hereof and compliance
with any conditions contained therein, and the approval of this
Agreement by the shareholders of Merchants, no consents or
approvals of, or filings or registrations with, any public body
or authority are necessary, and no consents or approvals of any
third parties are necessary, or will be, in connection with
(a) the execution and delivery of this Agreement by Merchants and
(b) the completion by Merchants of the transactions contemplated
hereby. Merchants has no reason to believe that any required
consents or approvals will not be received or will be received
with conditions, limitations or restrictions unacceptable to it
or which would adversely impact Merchants's ability to complete
the transactions contemplated by this Agreement.
Section 2.05 Financial Statements.
(a) Merchants has previously delivered, or will
deliver, to First Leesport the Merchants Regulatory Reports. The
Merchants Regulatory Reports have been, or will be, prepared in
all material respects in accordance with applicable regulatory
accounting principles and practices throughout the periods
covered by such statements, and fairly present, or will fairly
present in all material respects, the financial position, results
of operations and changes in shareholders' equity of Merchants as
of and for the periods ended on the dates thereof, in accordance
with applicable regulatory accounting principles applied on a
consistent basis.
(b) Merchants has previously delivered to First
Leesport the Merchants Financials. The Merchants Financials have
been, or will be, prepared in accordance with generally accepted
accounting principles and practices applied on a consistent basis
throughout the periods covered by such statements, and fairly
present, or will fairly present, the consolidated financial
position, results of operations and cash flows of Merchants as of
and for the periods ending on the dates thereof, in accordance
with generally accepted accounting principles applied on a
consistent basis, except where changes in accounting principles
from one year to the next have been disclosed therein.
(c) At the date of each balance sheet included in
the Merchants Financials or the Merchants Regulatory Reports,
neither Merchants nor any Merchants Subsidiary had, or will have,
any liabilities, obligations or loss contingencies of any nature
(whether absolute, accrued, contingent or otherwise) of a type
required to be reflected in such Merchants Financials or
Merchants Regulatory Reports or in the footnotes thereto which
are not fully reflected or reserved against therein or fully
disclosed in a footnote thereto, except for liabilities,
obligations and loss contingencies which are not material in the
aggregate and which are incurred in the ordinary course of
business, consistent with past practice, and subject, in the case
of any unaudited statements, to normal, recurring audit
adjustments and the absence of footnotes.
Section 2.06 Taxes.
(a) Merchants and the Merchants Subsidiaries are
members of the same affiliated group within the meaning of IRC
Section 1504(A). Merchants has duly filed, and will file, all
federal, state and local tax returns required to be filed by or
with respect to Merchants or any Merchants Subsidiary on or prior
to the Closing Date (all such returns being accurate and correct
in all material respects) and has duly paid or will pay, or made
or will make, provisions for the payment of all federal, state
and local taxes which have been incurred by or are due or claimed
to be due from Merchants or any Merchants Subsidiary by any
taxing authority or pursuant to any tax sharing agreement or
arrangement (written or oral) on or prior to the Closing Date
other than taxes which (i) are not delinquent or (ii) are being
contested in good faith.
(b) No consent pursuant to IRC Section 341(f) has
been filed (or will be filed prior to the Closing Date) by or
with respect to Merchants or any Merchants Subsidiary.
Section 2.07 No Material Adverse Effect. Merchants
has not suffered any Material Adverse Effect since December 31,
1997.
Section 2.08 Contracts.
(a) Neither Merchants nor any Merchants
Subsidiary is a party to or subject to: (i) any employment,
consulting or severance contract or arrangement with any past or
present officer, director or employee of Merchants or any
Merchants Subsidiary, except for "at will" arrangements; (ii) any
plan, arrangement or contract providing for bonuses, pensions,
options, deferred compensation, retirement payments, profit
sharing or similar arrangements for or with any past or present
officers, directors or employees of Merchants or any Merchants
Subsidiary; (iii) any collective bargaining agreement with any
labor union relating to employees of Merchants or any Merchants
Subsidiary; (iv) any agreement which by its terms limits the
payment of dividends by Merchants or any Merchants Subsidiary;
(v) any instrument evidencing or related to indebtedness for
borrowed money whether directly or indirectly, by way of purchase
money obligation, conditional sale, lease purchase, guaranty or
otherwise, in respect of which Merchants or any Merchants
Subsidiary is an obligor to any person, which instrument
evidences or relates to indebtedness other than deposits,
repurchase agreements, bankers acceptances and "treasury tax and
loan" accounts established in the ordinary course of business and
transactions in "federal funds" or which contains financial
covenants or other restrictions (other than those relating to the
payment of principal and interest when due) which would be
applicable on or after the Closing Date to First Leesport or any
First Leesport Subsidiary; (vi) any contract (other
than this Agreement) limiting the freedom of Merchants or any
Merchants Subsidiary to engage in any type of banking or
bank-related business permissible under law or (vii) any other
material contract.
(b) True and correct copies of agreements, plans,
arrangements and instruments referred to in Section 2.08(a) have
been provided to First Leesport on or before the date hereof, are
listed on the Merchants Disclosure Schedule and are in full force
and effect on the date hereof. Neither Merchants, any Merchants
Subsidiary nor, to the knowledge of Merchants, any other party to
any such contract, plan, arrangement or instrument) has breached
any provision of, or is in default in any respect under any term
of, any such contract, plan, arrangement or instrument which
breach has resulted in or will result in a Material Adverse
Effect with respect to Merchants. No party to any material
contract, plan, arrangement or instrument will have the right to
terminate any or all of the provisions of any such contract,
plan, arrangement or instrument as a result of the transactions
contemplated by this Agreement. None of the employees (including
officers) of Merchants, possess the right to terminate their
employment as a result of the execution of this Agreement. No
plan, employment agreement, termination agreement, or similar
agreement or arrangement to which Merchants or any Merchants
Subsidiary is a party or under which Merchants or any Merchants
Subsidiary may be liable contains provisions which permit an
employee or independent contractor to terminate it without cause
and continue to accrue future benefits thereunder. No such
agreement, plan or arrangement (x) provides for acceleration in
the vesting of benefits or payments due thereunder upon the
occurrence of a change in ownership or control of Merchants or
any Merchants Subsidiary absent the occurrence of a subsequent
event; (y) provides for benefits which may cause the disallowance
of a federal income tax deduction under IRC Section 280G; or
(z) requires Merchants or any Merchants Subsidiary to provide a
benefit in the form of Merchants Common Stock or determined by
reference to the value of Merchants Common Stock.
Section 2.09 Ownership of Property; Insurance
Coverage.
(a) Merchants and the Merchants Subsidiaries
have, or will have as to property acquired after the date hereof,
good and, as to real property, marketable title to all assets and
properties owned by Merchants or any Merchants Subsidiary in the
conduct of its business, whether such assets and properties are
real or personal, tangible or intangible, including assets and
property reflected in the balance sheets contained in the
Merchants Regulatory Reports and in the Merchants Financials or
acquired subsequent thereto (except to the extent that such
assets and properties have been disposed of for fair value, in
the ordinary course of business, since the date of such balance
sheets), subject to no encumbrances, liens, mortgages, security
interests or pledges, except (i) those items that secure
liabilities for borrowed money and that are described
in the Merchants Disclosure Schedule or permitted under
Article IV hereof and (ii) statutory liens for amounts not yet
delinquent or which are being contested in good faith. Merchants
and the Merchants Subsidiaries, as lessee, have the right under
valid and subsisting leases of real and personal properties used
by Merchants or such Merchants Subsidiary in the conduct of its
business to occupy or use all such properties as presently
occupied and used by it.
(b) With respect to all agreements pursuant to
which Merchants or any Merchants Subsidiary has purchased
securities subject to an agreement to resell, if any, Merchants
or such Merchants Subsidiary, has a valid, perfected first lien
or security interest in the securities or other collateral
securing the repurchase agreement, and the value of such
collateral equals or exceeds the amount of the debt secured
thereby.
(c) Merchants and the Merchants Subsidiaries
currently maintain insurance in amounts considered by Merchants
to be reasonable for their respective operations and similar in
scope and coverage to that maintained by other businesses
similarly engaged. Neither Merchants nor any Merchants
Subsidiary has received notice from any insurance carrier that
(i) such insurance will be cancelled or that coverage thereunder
will be reduced or eliminated or (ii) premium costs with respect
to such policies of insurance will be substantially increased.
There are presently no material claims pending under such
policies of insurance and no notices have been given by Merchants
or any Merchants Subsidiary under such policies. All such
insurance is valid and enforceable and in full force and effect,
and within the last three years Merchants and each Merchants
Subsidiary has received each type of insurance coverage for which
it has applied and during such periods has not been denied
indemnification for any material claims submitted under any of
its insurance policies.
Section 2.10 Legal Proceedings. Neither Merchants nor
any merchants Subsidiary is a party to any, and there are no
pending or, to the best of Merchants's knowledge, threatened
legal, administrative, arbitration or other proceedings, claims
(whether asserted or unasserted), actions or governmental
investigations or inquiries of any nature (i) against Merchants
or any Merchants Subsidiary, (ii) to which the assets of
Merchants or any Merchants Subsidiary are or may be subject,
(iii) challenging the validity or propriety of any of the
transactions contemplated by this Agreement, or (iv) which could
adversely affect the ability of Merchants to perform under this
Agreement or the Plan of Merger, except for any proceedings,
claims, actions, investigations or inquiries referred to in
clauses (i) or (ii) which, if adversely determined, individually
or in the aggregate, could not be reasonably expected to have a
Material Adverse Effect with respect to Merchants.
Section 2.11 Compliance With Applicable Law.
(a) Merchants and each Merchants Subsidiary holds
all licenses, franchises, permits and authorizations necessary
for the lawful conduct of its businesses under, and have complied
in all material respects with, applicable laws, statutes, orders,
rules or regulations of any federal, state or local governmental
authority relating to them, other than where such failure to hold
or such noncompliance will neither result in a limitation in any
material respect on the conduct of its businesses nor otherwise
have a Material Adverse Effect with respect to Merchants.
(b) Neither Merchants nor any Merchants
Subsidiary has received any notification or communication from
any Regulatory Authority (i) asserting that it is not in
compliance with any of the statutes, regulations or ordinances
which such Regulatory Authority enforces; (ii) threatening to
revoke any license, franchise, permit or governmental
authorization which is material to it; (iii) requiring or
threatening to require it, or indicating that it may be required,
to enter into a cease and desist order, agreement or memorandum
of understanding or any other agreement restricting or limiting,
or purporting to restrict or limit, in any manner its operations,
including without limitation any restriction on the payment of
dividends; or (iv) directing, restricting or limiting, or
purporting to direct, restrict or limit, in any manner its
operations, including without limitation any restriction on the
payment of dividends (any such notice, communication, memorandum,
agreement or order described in this sentence is hereinafter
referred to as a "Regulatory Agreement"). Neither Merchants nor
any Merchants Subsidiary has consented to or entered into any
Regulatory Agreement, except as heretofore disclosed to First
Leesport.
Section 2.12 ERISA. Merchants has previously
delivered to First Leesport true and complete copies of all
employee pension benefit plans within the meaning of ERISA
Section 3(2), profit sharing plans, stock purchase plans,
deferred compensation and supplemental income plans, supplemental
executive retirement plans, employment agreements, annual or long
term incentive plans, settlement plans, policies and agreements,
group insurance plans, and all other employee welfare benefit
plans within the meaning of ERISA Section 3(1) (including
vacation pay, sick leave, short-term disability, long-term
disability, and medical plans) and all other employee benefit
plans, policies, agreements and arrangements ("Employee Benefit
Plans"), all of which are set forth in the Merchants Disclosure
Schedule, maintained or contributed to for the benefit of the
employees or former employees (including retired employees) and
any beneficiaries thereof or directors or former directors of
Merchants or any Merchants Subsidiary, together with (i) the most
recent actuarial (if any) and financial reports relating to those
plans which constitute "qualified plans" under IRC
Section 401(a), (ii) the most recent annual reports relating to
such plans filed by them, respectively, with any government
agency, and (iii) all rulings and determination letters
which pertain to any Merchants Employee Benefit Plans. To the
best of Merchants' knowledge, neither Merchants nor any pension
plan maintained by Merchants, has incurred, directly or
indirectly, within the past six (6) years any liability under
Title IV of ERISA (including to the Pension Benefit Guaranty
Corporation) or to the IRS with respect to any pension plan
qualified under IRC Section 401(a) except liabilities to the
Pension Benefit Guaranty Corporation pursuant to ERISA
Section 4007, all of which have been fully paid, nor has any
reportable event under ERISA Section 4043(b) occurred with
respect to any such pension plan. With respect to each Merchants
Employee Benefit Plan that is subject to Title IV of ERISA, the
present value of the accrued benefits under such plan, based upon
the actuarial assumptions used for funding purposes in the plan's
most recent actuarial report did not, as of its latest valuation
date, exceed the then current value of the assets of such plan
allocable to such accrued benefits. With respect to each
Merchants Employee Benefit Plan, Merchants will have made on or
prior to the Closing Date, all payments required to be made by it
prior to the Closing Date and will have at least accrued as of
the Closing Date all payments due but not yet payable so that
there will not have been nor will there be any accumulated
funding deficiencies (as defined in ERISA or the Code) or waivers
of such deficiencies. Merchants has not incurred or is subject
to any liability under ERISA Section 4201 for a complete or
partial withdrawal from a multi-employer plan. To the best of
Merchants' knowledge, all "employee benefit plans," as defined in
ERISA Section 3(3), comply, and within the past six (6) years
have complied, in all material respects with (i) relevant
provisions of ERISA and (ii), in the case of plans intended to
qualify for favorable income tax treatment, provisions of the IRC
relevant to such treatment. To the best of Merchants' knowledge,
no prohibited transaction (which shall mean any transaction
prohibited by ERISA Section 406 and not exempt under ERISA
Section 408 or any transaction prohibited under IRC Section 4975)
has occurred within the past six (6) years with respect to any
employee benefit plan maintained by Merchants that would result
in the imposition, directly or indirectly, of an excise tax under
IRC 4975 or other penalty under ERISA or the IRC, which,
individually or in the aggregate, has resulted in or will result
in a Material Adverse Effect with respect to Merchants.
Merchants provides continuation coverage under group health plans
for separating employees and "qualified beneficiaries" in
accordance with the provisions of IRC Section 4980B(f). Such
group health plans are in compliance with Section 1862(b)(1) of
the Social Security Act. There are no pending actions, claims or
lawsuits which have been asserted or instituted against any of
Merchants's Employee Benefit Plans, the assets of any of the
trusts under such Plans, the plan sponsor, the plan administrator
or against any fiduciary of any of Merchants Employee Benefit
Plans (other than routine benefit claims) nor does Merchants have
knowledge of facts which could form the basis of any such action,
claim or lawsuit. There are no investigations or audits of any
of Merchants Employee Benefit Plans, any trusts under such plans,
the plan sponsor, the plan administrator or any
fiduciary of any of Merchants's Employee Benefit Plans which have
been threatened or instituted nor does Merchants have knowledge
of facts which could form the basis for any such investigation or
audit. No event has occurred or will occur which will result in
liability to Merchants in connection with any Employee Benefit
Plan established, maintained, or contributed to (currently or
previously) by Merchants or by any other entity which, together
with Merchants, constitute elements of either (i) a controlled
group of corporations (within the meaning of IRC Section 414(b)),
(ii) a group of trades or businesses under common control (within
the meaning of IRC Sections 414(c) or 4001), (iii) an affiliated
service group (within the meaning of IRC Section 414(m)), or
(iv) another arrangement covered by IRC Section 414(o).
Section 2.13 Brokers, Finders and Financial Advisors.
Neither Merchants nor any Merchants Subsidiary, nor any of their
respective officers, directors, employees or agents, has employed
any broker, finder or financial advisor in connection with the
transactions contemplated by this Agreement or in connection with
any other transaction, except for ▇▇▇▇ ▇▇▇▇ & Co., Inc., whose
engagement letter with Merchants is included in the Merchants
Disclosure Schedule, or incurred any liability or commitment for
any fees or commissions to any such person in connection with the
transactions contemplated by this Agreement or in connection with
any other transaction, which has not been reflected in the
Merchants Financials.
Section 2.14 Environmental Matters. To the knowledge
of Merchants, neither Merchants nor any Merchants Subsidiary, nor
any properties owned or operated by Merchants has been or is in
violation of or liable under any Environmental Law which
violation or liability, individually or in the aggregate,
resulted in, or will result, in a Material Adverse Effect with
respect to Merchants. There are no actions, suits or
proceedings, or demands, claims, notices or investigations
(including without limitation notices, demand letters or requests
for information from any environmental agency) instituted or
pending, or to the knowledge of Merchants, threatened, relating
to the liability of any property owned or operated by Merchants
under any Environmental Law.
Section 2.15 Loan Portfolio. The allowance for loan
losses reflected, and to be reflected, in the Merchants
Regulatory Reports, and shown, and to be shown, on the balance
sheets contained in the Merchants Financials have been, and will
be, established in accordance with the requirements of generally
accepted accounting principles and all applicable regulatory
criteria.
Section 2.16 Information to be Supplied. The
information to be supplied by Merchants for inclusion in the
Registration Statement (including the Prospectus/Proxy Statement)
will not, at the time the Registration Statement is declared
effective pursuant to the Securities Act, contain any untrue
statement of a material fact or omit to state any
material fact necessary in order to make the statements therein
not misleading. The information supplied, or to be supplied, by
Merchants for inclusion in the Applications will, at the time
such documents are filed with any Regulatory Authority, be
accurate in all material aspects.
Section 2.17 Related Party Transactions. Except as
disclosed in the footnotes to the Merchants Financials, neither
Merchants nor any Merchants Subsidiary is a party to any
transaction (including any loan or other credit accommodation)
with any Affiliate of Merchants. Any such transaction (a) was
made in the ordinary course of business, (b) was made on
substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable
transactions with other Persons, and (c) did not involve more
than the normal risk of collectability or present other
unfavorable features. No loan or credit accommodation to any
Affiliate of Merchants is presently in default or, during the
three year period prior to the date of this Agreement, has been
in default or has been restructured, modified or extended.
Merchants has not been notified that principal and interest with
respect to any such loan or other credit accommodation will not
be paid when due or that the loan grade classification accorded
such loan or credit accommodation by Merchants is inappropriate.
Section 2.18 Loans. Each loan reflected as an asset
in the Merchants Financial Statements (i) is evidenced by notes,
agreements or other evidences of indebtedness which are true,
genuine and correct (ii) to the extent secured, has been secured
by valid liens and security interests which have been perfected,
and (iii) is the legal, valid and binding obligation of the
obligor named therein, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent conveyance and
other laws of general applicability relating to or affecting
creditors' rights and to general equity principles, in each case
other than loans as to which the failure to satisfy the foregoing
standards would not have a Material Adverse Effect on Merchants.
Section 2.19 CRA Compliance. MBP is in material
compliance with the applicable provisions of the CRA, and, as of
the date hereof, MBP has received a CRA rating of "satisfactory"
or better. MBP knows of no fact or circumstance or set of facts
or circumstances which would cause MBP to fail to comply with
such provisions in a manner which would have a Material Adverse
Effect with respect to Merchants.
Section 2.20 Accounting for the Merger;
Reorganization. As of the date hereof, Merchants does not have
any reason to believe that the Merger will fail to qualify
(i) for "pooling of interests" accounting treatment under
generally accepted accounting principles or (ii) as a
reorganization under Section 368(a) of the IRC.
Section 2.21 Fairness Opinion. Merchants has received
a written opinion from ▇▇▇▇, ▇▇▇▇ & Co., Inc. to the effect that,
as of the date hereof, the consideration to be received by
shareholders of Merchants pursuant to this Agreement is fair,
from a financial point of view, to such shareholders.
Section 2.22 Year 2000 Compliance. Merchants and each
Merchants Subsidiary is in compliance in all material respects
with the Year 2000 compliance time-frames established in releases
or publications of Regulatory Authorities applicable to it and
the safety and soundness and other guidelines for Year 2000
business risk issued from time to time by the Federal Financial
Institutions Examination Council, except to the extent that the
failure to so comply would not have a Material Adverse Effect
with respect to Merchants.
Section 2.23 Quality of Representations. The
representations made by Merchants in this Agreement are true,
correct and complete in all material respects, and do not omit
statements necessary to make them not misleading under all facts
and circumstances.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FIRST LEESPORT
First Leesport hereby represents and warrants to
Merchants that, except as set forth in the First Leesport
Disclosure Schedule (which First Leesport Disclosure Schedule
qualifies and represents exceptions to all of the representations
and warranties of First Leesport contained in this Agreement
taken as a whole and does not relate solely to particular
representations and warranties) delivered by First Leesport to
Merchants on or prior to the date hereof:
Section 3.01 Organization.
(a) First Leesport is a corporation duly
organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania. First Leesport is a bank
holding company duly registered under the BHC Act. First
Leesport has the corporate power and authority to carry on its
business and operations as now being conducted and to own and
operate the properties and assets now owned and being operated by
it. First Leesport is not qualified or licensed to do business
as a foreign corporation in any other jurisdiction and is not
required to be so qualified or licensed as the result of the
ownership or leasing of property or the conduct of its business,
except where the failure to be so qualified or licensed would not
have a Material Adverse Effect with respect to First Leesport.
(b) FNBL is a national banking association duly
organized and validly existing under the laws of the United
States of America. FNBL has the corporate power and authority to
carry on its business and operations as now being conducted and
to own and operate the properties and assets now owned and being
operated by it. Neither FNBL nor any other First
Leesport Subsidiary is qualified or licensed to do business as a
foreign corporation in any other jurisdiction and neither is
required to be so qualified or licensed as the result of the
ownership or leasing of property or the conduct of its business,
except where the failure to be so qualified or licensed would not
have a Material Adverse Effect with respect to First Leesport.
(c) There are no First Leesport Subsidiaries
other than FNBL or as disclosed in First Leesport's Securities
Documents. There are no FNBL Subsidiaries other than ▇▇▇▇▇▇ &
▇▇▇▇, Inc.
(d) The deposits of FNBL are insured by the FDIC
to the extent provided in the Federal Deposit Insurance Act.
(e) The respective minute books of First Leesport
and FNBL accurately record, in all material respects, all
material corporate actions of their respective shareholders and
boards of directors (including committees) through the date of
this Agreement.
(f) Prior to the execution of this Agreement,
First Leesport has delivered to Merchants true and correct copies
of the articles of incorporation and bylaws of First Leesport and
the articles of association and bylaws of FNBL as in effect on
the date hereof.
Section 3.02 Capital Structure.
(a) The authorized capital stock of First
Leesport consists of (a) 2,000,000 shares of common stock, $5.00
par value ("First Leesport Common Stock"), of which, at the date
of this Agreement, 1,264,655 shares are outstanding, validly
issued, fully paid and nonassessable, and free of preemptive
rights. Except as disclosed in First Leesport's Securities
Documents or in connection with any employee benefit, stock
option or incentive plans of First Leesport, neither First
Leesport nor any First Leesport Subsidiary has or is bound by any
subscription, option, warrant, call, commitment, agreement, plan
or other Right of any character relating to the purchase, sale or
issuance or voting of, or right to receive dividends or other
distributions on any shares of First Leesport Common Stock or any
other security of First Leesport or any securities representing
the right to vote, purchase or otherwise receive any shares of
First Leesport Common Stock or any other security of First
Leesport.
(b) The authorized capital stock of FNBL consists
of 100,000 shares of common stock, par value $10.00 per share, of
which at the date of this Agreement, all of the outstanding
shares are validly issued, fully paid, nonassessable, free of
preemptive rights and owned by First Leesport. Neither First
Leesport nor any First Leesport Subsidiary has or is bound by any
subscription, option, warrant, call, commitment, agreement or
other Right of any character relating to the purchase,
sale or issuance or voting of, or right to receive dividends or
other distributions on any shares of the capital stock of any
First Leesport Subsidiary or any other security of any First
Leesport Subsidiary or any securities representing the right to
vote, purchase or otherwise receive any shares of the capital
stock or any other security of any First Leesport Subsidiary.
Either First Leesport or FNBL owns all of the outstanding shares
of capital stock of each First Leesport Subsidiary free and clear
of all liens, security interests, pledges, charges, encumbrances,
agreements and restrictions of any kind or nature.
(c) Neither First Leesport nor any First Leesport
Subsidiary, owns any equity interest, directly or indirectly,
treasury stock, in any other company or controls any other
company, except for equity interests held in the investment
portfolios of First Leesport Subsidiaries, equity interests held
by FNBL in a fiduciary capacity, equity interests held in
connection with the commercial loan activities of FNBL, and
equity interests disclosed in First Leesport's Securities
Documents. There are no subscriptions, options, warrants, calls,
commitments, agreements or other Rights outstanding and held by
First Leesport or any First Leesport Subsidiary with respect to
any other company's capital stock or the equity of any other
person.
(d) To First Leesport's knowledge, without any
independent investigation, no person or "group" (as that term is
used in Section 13(d)(3) of the Exchange Act) is the beneficial
owner (as defined in Section 13(d) of the Exchange Act) of 5% or
more of the outstanding shares of First Leesport Common Stock.
Section 3.03 Authority; No Violation.
(a) First Leesport has full corporate power and
authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery
of this Agreement by First Leesport and the consummation by First
Leesport of the transactions contemplated hereby have been duly
and validly approved by the Board of Directors of First Leesport,
and except for approval by the shareholders of First Leesport, no
other corporate proceedings on the part of First Leesport are
necessary to complete the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by
First Leesport and, subject to the approval of the shareholders
of First Leesport and receipt of the required approvals of
Regulatory Authorities described in Section 3.04 hereof,
constitutes the valid and binding obligation of First Leesport,
enforceable against First Leesport in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity.
(b) (A) The execution and delivery of this
Agreement by First Leesport, (B) subject to the approval of the
shareholders of First Leesport and receipt of approvals
from the Regulatory Authorities referred to in Section 3.04
hereof and Merchants' and First Leesport's compliance with any
conditions contained therein, the consummation of the
transactions contemplated hereby, and (D) compliance by First
Leesport with any of the terms or provisions hereof will not
(i) conflict with or result in a breach of any provision of the
articles of incorporation or bylaws of First Leesport or any
First Leesport Subsidiary; (ii) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to First Leesport, any First Leesport
Subsidiary or any of their respective properties or assets; or
(iii) violate, conflict with, result in a breach of any
provisions of, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default),
under, result in the termination of, accelerate the performance
required by, or result in a right of termination or acceleration
or the creation of any lien, security interest, charge or other
encumbrance upon any of the properties or assets of First
Leesport or any First Leesport Subsidiary under, any of the
terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which First Leesport or any First
Leesport Subsidiary is a party, or by which they or any of their
respective properties or assets may be bound or affected, except
for such violations, conflicts, breaches or defaults under
clause (ii) or (iii) hereof which, either individually or in the
aggregate, will not have a Material Adverse Effect with respect
to First Leesport.
Section 3.04 Consents. Except for any required
consents, approvals, filings and registrations from or with the
FRB, the PDB, the SEC, and state "blue sky" authorities, and
compliance with any conditions contained therein, and the
approval of this Agreement by the shareholders of First Leesport,
no consents or approvals of, or filings or registrations with,
any public body or authority are necessary, and no consents or
approvals of any third parties are necessary, or will be, in
connection with (a) the execution and delivery of this Agreement
by First Leesport and (b) the completion by First Leesport of the
transactions contemplated hereby. First Leesport has no reason
to believe that any required consents or approvals will not be
received or will be received with conditions, limitations or
restrictions unacceptable to it or which would adversely impact
First Leesport's ability to complete the transactions
contemplated by this Agreement.
Section 3.05 Financial Statements.
(a) First Leesport has previously delivered, or
will deliver, to Merchants the First Leesport Regulatory Reports.
The First Leesport Regulatory Reports have been, or will be,
prepared in all material respects in accordance with applicable
regulatory accounting principles and practices throughout the
periods covered by such statements, and fairly present, or will
fairly present in all material respects, the financial
position, results of operations and changes in shareholders'
equity of First Leesport as of and for the periods ended on the
dates thereof, in accordance with applicable regulatory
accounting principles applied on a consistent basis.
(b) First Leesport has previously delivered, or
will deliver, to Merchants the First Leesport Financials. The
First Leesport Financials have been, or will be, prepared in
accordance with generally accepted accounting principles and
practices applied on a consistent basis throughout the periods
covered by such statements, and fairly present, or will fairly
present, the consolidated financial position, results of
operations and cash flows of First Leesport as of and for the
periods ending on the dates thereof, in accordance with generally
accepted accounting principles, except where changes in
accounting principles from one year to the next have been
disclosed therein.
(c) At the date of each balance sheet included in
the First Leesport Financials or the First Leesport Regulatory
Reports, neither First Leesport nor any First Leesport Subsidiary
(as the case may be) had or will have any liabilities,
obligations or loss contingencies of any nature (whether
absolute, accrued, contingent or otherwise) of a type required to
be reflected in such First Leesport Financials or the First
Leesport Regulatory Reports or in the footnotes thereto which are
not fully reflected or reserved against therein or disclosed in a
footnote thereto, except for liabilities, obligations or loss
contingencies which are not material in the aggregate and which
are incurred in the ordinary course of business, consistent with
past practice, and subject, in the case of any unaudited
statements, to normal, recurring audit adjustments and the
absence of footnotes.
Section 3.06 Taxes.
(a) First Leesport and the First Leesport
Subsidiaries are members of the same affiliated group within the
meaning of IRC Section 1504(a). First Leesport has duly filed,
and will file, all federal, state and local tax returns required
to be filed by or with respect to First Leesport and all First
Leesport Subsidiaries on or prior to the Closing Date (all such
returns being accurate and correct in all material respects) and
has duly paid or will pay, or made or will make, provisions for
the payment of all federal, state and local taxes which have been
incurred by or are due or claimed to be due from First Leesport
and any First Leesport Subsidiary by any taxing authority or
pursuant to any tax sharing agreement or arrangement (written or
oral) on or prior to the Closing Date other than taxes which
(i) are not delinquent or (ii) are being contested in good faith.
(b) No consent pursuant to IRC Section 341(f) has
been filed (or will be filed prior to the Closing Date) by or
with respect to First Leesport or any First Leesport Subsidiary.
Section 3.07 No Material Adverse Effect. First
Leesport has not suffered any Material Adverse Effect since
December 31, 1997.
Section 3.08 Ownership of Property; Insurance
Coverage.
(a) First Leesport and the First Leesport
Subsidiaries have, or will have as to property acquired after the
date hereof, good and, as to real property, marketable title to
all assets and properties owned by First Leesport or any First
Leesport Subsidiary in the conduct of its business, whether such
assets and properties are real or personal, tangible or
intangible, including assets and property reflected in the
balance sheets contained in the First Leesport Regulatory Reports
and in the First Leesport Financials or acquired subsequent
thereto (except to the extent that such assets and properties
have been disposed of for fair value, in the ordinary course of
business, since the date of such balance sheets), subject to no
encumbrances, liens, mortgages, security interests or pledges,
except (i) those items that secure liabilities for borrowed money
and (ii) statutory liens for amounts not yet delinquent or which
are being contested in good faith. First Leesport and the First
Leesport Subsidiaries, as lessee, have the right under valid and
subsisting leases of real and personal properties used by First
Leesport and such First Leesport Subsidiary in the conduct of its
business to occupy and use all such properties as presently
occupied and used by each of them.
(b) With respect to all agreements pursuant to
which First Leesport or any First Leesport Subsidiary has
purchased securities subject to an agreement to resell, if any,
First Leesport or such First Leesport Subsidiary, as the case may
be, has a valid, perfected first lien or security interest in the
securities or other collateral securing the repurchase agreement,
and the value of such collateral equals or exceeds the amount of
the debt secured thereby.
(c) First Leesport and the First Leesport
Subsidiaries currently maintain insurance in amounts considered
by First Leesport to be reasonable for their respective
operations and similar in scope and coverage to that maintained
by other businesses similarly engaged. Neither First Leesport
nor any First Leesport Subsidiary has received notice from any
insurance carrier that (i) such insurance will be cancelled or
that coverage thereunder will be reduced or eliminated or
(ii) premium costs with respect to such insurance will be
substantially increased. There are presently no material claims
pending under such policies of insurance and no notices have been
given by First Leesport or any First Leesport Subsidiary under
such policies. All such insurance is valid and enforceable and
in full force and effect, and within the last three years First
Leesport and each First Leesport Subsidiary has
received each type of insurance coverage for which it has applied
and during such periods has not been denied indemnification for
any material claims submitted under any of its insurance
policies.
Section 3.09 Legal Proceedings. Neither First
Leesport nor any First Leesport Subsidiary is a party to any, and
there are no pending or, to the best of First Leesport's
knowledge, threatened legal, administrative, arbitration or other
proceedings, claims (whether asserted or unasserted), actions or
governmental investigations or inquiries of any nature
(i) against First Leesport or any First Leesport Subsidiary,
(ii) to which the assets of First Leesport or any First Leesport
Subsidiary are or may be subject, (iii) challenging the validity
or propriety of any of the transactions contemplated by this
Agreement, or (iv) which could adversely affect the ability of
First Leesport to perform under this Agreement, except for any
proceedings, claims, actions, investigations or inquiries
referred to in clauses (i) or (ii) which, individually or in the
aggregate, could not be reasonably expected to have a Material
Adverse Effect with respect to First Leesport.
Section 3.10 Compliance With Applicable Law.
(a) First Leesport and each First Leesport
Subsidiary holds all licenses, franchises, permits and
authorizations necessary for the lawful conduct of its business
under, and have complied in all material respects with,
applicable laws, statutes, orders, rules or regulations of any
federal, state or local governmental authority relating to them,
other than where such failure to hold or such noncompliance will
neither result in a limitation in any material respect on the
conduct of its business nor otherwise have a Material Adverse
Effect with respect to First Leesport.
(b) Neither First Leesport nor any First Leesport
Subsidiary has received any notification or communication from
any Regulatory Authority (i) asserting that it is not in
compliance with any of the statutes, regulations or ordinances
which such Regulatory Authority enforces; (ii) threatening to
revoke any license, franchise, permit or governmental
authorization which is material it; (iii) requiring or
threatening to require or indicating that it may be required, to
enter into a cease and desist order, agreement or memorandum of
understanding or any other agreement restricting or limiting, or
purporting to restrict or limit, in any manner its operations,
including without limitation any restriction on the payment of
dividends; or (iv) directing, restricting or limiting, or
purporting to direct, restrict or limit, in any manner its
operations, including without limitation any restriction on the
payment of dividends (any such notice, communication, memorandum,
agreement or order described in this sentence is hereinafter
referred to as a "Regulatory Agreement"). Neither First Leesport
nor any First Leesport Subsidiary has consented to or entered
into any Regulatory Agreement, except as heretofore
disclosed to Merchants.
Section 3.11 Securities Documents. First Leesport has
delivered, or will deliver, to Merchants copies of its (i) annual
reports on SEC Form 10-KSB for the year ended December 31, 1997
(ii) quarterly reports on SEC Form 10-QSB for the quarters ended
March 31, 1998, June 30, 1998, and September 30, 1998, and
(iii) proxy statement dated March 9, 1998 used in connection with
its annual meeting of shareholders held in April 1998. Such
reports and such proxy materials complied, at the time filed with
the SEC, in all material respects, with the Exchange Act and the
applicable rules and regulations of the SEC.
Section 3.12 Brokers and Finders. Neither First
Leesport nor any First Leesport Subsidiary, nor any of their
respective officers, directors, employees or agents, has employed
any broker, finder or financial advisor, or incurred any
liability for any fees or commissions to any such person, in
connection with the transactions contemplated by this Agreement
or in connection with any other transaction, except for ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & Co., Inc., or incurred any liability or commitment for
any fees or commissions to any such person in connection with the
transactions contemplated by this Agreement or in connection with
any other transaction, which has not been reflected in the First
Leesport Financials.
Section 3.13 Environmental Matters. To the knowledge
of First Leesport, neither First Leesport nor any First Leesport
Subsidiary, nor any properties owned or operated by First
Leesport or any First Leesport Subsidiary has been or is in
violation of or liable under any Environmental Law which
violation or liability, individually or in the aggregate,
resulted in or will result in a Material Adverse Effect with
respect to First Leesport. There are no actions, suits or
proceedings, or demands, claims, notices or investigations
(including without limitation notices, demand letters or requests
for information from any environmental agency) instituted or
pending, or to the knowledge of First Leesport, threatened,
relating to the liability of any property owned or operated by
First Leesport or any First Leesport Subsidiary under any
Environmental Law.
Section 3.14 Loan Portfolio. The allowance for loan
losses reflected, and to be reflected, in the First Leesport
Regulatory Reports, and shown, and to be shown, on the balance
sheets contained in the First Leesport Financials have been, and
will be, established in accordance with the requirements of
generally accepted accounting principles and all applicable
regulatory criteria.
Section 3.15 Information to be Supplied. The
information to be supplied by First Leesport and FNBL for
inclusion in the Registration Statement (including the
Prospectus/Proxy Statement) will not, at the time the
Registration Statement is declared effective pursuant to the
Securities Act, contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements therein not misleading. The information supplied, or
to be supplied, by First Leesport for inclusion in the
Applications will, at the time such documents are filed with any
Regulatory Authority, be accurate in all material aspects.
Section 3.16 Loans. Each loan reflected as an asset
in the First Leesport Financial Statements (i) is evidenced by
notes, agreements or other evidences of indebtedness which are
true, genuine and correct (ii) to the extent secured, has been
secured by valid liens and security interests which have been
perfected, and (iii) is the legal, valid and binding obligation
of the obligor named therein, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance
and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles, in each case
other than loans as to which the failure to satisfy the foregoing
standards would not have a Material Adverse Effect with respect
to First Leesport.
Section 3.17 CRA Compliance. FNBL is in material
compliance with the applicable provisions of the CRA, and, as of
the date hereof, Bank has received a CRA rating of "satisfactory"
or better. Neither First Leesport nor FNBL know of any fact or
circumstance or set of facts or circumstances which would cause
FNBL to fail to comply with such provisions in a manner which
would have a Material Adverse Effect with respect to First
Leesport.
Section 3.18 Accounting for the Merger;
Reorganization. As of the date hereof, First Leesport does not
have any reason to believe that the Merger will fail to qualify
(i) for "pooling of interests" accounting treatment under
generally accepted accounting principles, or (ii) as a
reorganization under Section 368(a) of the IRC.
Section 3.19 Year 2000 Compliance. First Leesport and
each First Leesport Subsidiary is in compliance in all material
respects with the Year 2000 compliance time-frames established in
releases or publications of Regulatory Authorities applicable to
it and the safety and soundness and other guidelines for
Year 2000 business risk issued from time to time by the Federal
Financial Institutions Examination Counsel, except to the extent
that the failure so to comply would not have a Material Adverse
Effect with respect to First Leesport.
Section 3.20 First Leesport Common Stock. The shares
of First Leesport Common Stock to be issued and delivered to
Merchants shareholders in accordance with this Agreement, when so
issued and delivered, will be validly authorized and issued and
fully paid and nonassessable, and no shareholder of First
Leesport shall have any preemptive right with respect thereto.
Section 3.21 Quality of Representations. The
representations made by First Leesport in this Agreement are
true, correct and complete in all material respects and do not
omit statements necessary to make the representations not
misleading under the circumstances.
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.01 Conduct of Business. From the date of
this Agreement to the Closing Date, Merchants and each Merchants
Subsidiary will conduct its business and engage in transactions,
including extensions of credit, only in the ordinary course and
consistent with past practice and policies, except as otherwise
required by this Agreement or with the written consent of First
Leesport. Merchants will use its reasonable good faith efforts,
and will cause each Merchants Subsidiary to use its reasonable
good faith efforts, to (i) preserve its business organizations
intact, (ii) maintain good relationships with employees, and
(iii) preserve for itself the good will of customers of Merchants
and each Merchants Subsidiary and others with whom business
relationships exist. From the date hereof to the Closing Date,
except as otherwise consented to or approved by First Leesport in
writing or as permitted or required by this Agreement, Merchants
will not and Merchants will not permit any Merchants Subsidiary
to:
(i) amend or change any provision of its
articles of incorporation or bylaws;
(ii) change the number of authorized or
issued shares of its capital stock or issue or grant any
option, warrant, call, commitment, subscription, Right or
agreement of any character relating to its authorized or
issued capital stock or any securities convertible into
shares of such stock, or split, combine or reclassify any
shares of capital stock, or declare, set aside or pay any
dividend or other distribution in respect of capital stock,
or redeem or otherwise acquire any shares of capital stock,
except that Merchants may to pay a regular semi-annual cash
dividend, not to exceed $0.35 per share of Merchants Common
Stock outstanding, consistent with past practice as to
record and payment dates; provided, however, that, if the
Effective Date occurs prior to the record date for the
payment by Merchants of its semi-annual dividend payable in
July 1999, Merchants shall be permitted to pay immediately
prior to the Effective Date, provided that such payment is
consistent with pooling of interests accounting
requirements, a pro-rated cash dividend for the first and
second quarters of 1999 in an amount determined by
(i) multiplying $0.35 by a fraction, the numerator of which
is the number of days elapsed from January 1, 1999 through
the Effective date and the denominator of which is 180 and
(ii) subtracting the amount of the quarterly cash dividend,
if any, to be received by former shareholders of Merchants
from First Leesport for such period from the
amount determined under clause (i). Subject to applicable
accounting rules regarding the pooling of interests method
of accounting, each party shall use its best efforts to
cooperate in the declaration and timing of payment of
dividends to assure that neither a windfall nor a detriment
to each party's respective shareholders shall occur
concerning the amount and timing of the payment of
dividends. Subject to applicable regulatory restrictions,
if any, MBP may pay a cash dividend, in the aggregate,
sufficient to fund any dividend by Merchants permitted
hereunder;
(iii) grant any severance or termination pay
(other than pursuant to written policies or written
agreements of Merchants or any Merchants Subsidiary in
effect on the date hereof and provided to First Leesport
prior to the date hereof) to, or enter into any new or amend
any existing employment agreement with, or increase the
compensation of, any employee, officer or director of
Merchants or any Merchants Subsidiary, except for routine
periodic increases, individually and in the aggregate, in
accordance with past practice and increases disclosed in the
Merchants Disclosure Schedule, or hire or agree to hire any
additional employees;
(iv) merge or consolidate Merchants or any
Merchants Subsidiary or with any other corporation; sell or
lease all or any substantial portion of the assets or
business of Merchants or any Merchants Subsidiary; make any
acquisition of all or any substantial portion of the
business or assets of any other person, firm, association,
corporation or business organization other than in
connection with the collection of any loan or credit
arrangement between Merchants or any Merchants Subsidiary
and any other person; enter into a purchase and assumption
transaction with respect to deposits and liabilities; permit
the revocation or surrender by any Merchants Subsidiary of
its certificate of authority to maintain, or file an
application for the relocation of, any existing branch
office, or file an application for a certificate of
authority to establish a new branch office;
(v) sell or otherwise dispose of any asset
of Merchants or any Merchants Subsidiary other than in the
ordinary course of business consistent with past practice;
subject any asset of Merchants or any Merchants Subsidiary
to a lien, pledge, security interest or other encumbrance
(other than in connection with deposits, repurchase
agreements, bankers acceptances, "treasury tax and loan"
accounts established in the ordinary course of business and
transactions in "federal funds" and the satisfaction of
legal requirements in the exercise of trust powers) other
than in the ordinary course of business consistent with past
practice; incur any indebtedness for borrowed money (or
guarantee any indebtedness for borrowed money),
except in the ordinary course of business consistent with
past practice;
(vi) take any action which would result in
any of the representations and warranties of Merchants set
forth in this Agreement becoming untrue as of any date after
the date hereof or in any of the conditions set forth in
Article V hereof not being satisfied;
(vii) change any method, practice or
principle of accounting, except as may be required from time
to time by GAAP (without regard to any optional early
adoption date) or any Regulatory Authority responsible for
regulating Merchants or any Merchants Subsidiary;
(viii) waive, release, grant or transfer any
rights of value or modify or change in any material respect
any existing material agreement to which Merchants or any
Merchants Subsidiary is a party, other than in the ordinary
course of business, consistent with past practice;
(ix) implement any pension, retirement,
profit sharing, bonus, welfare benefit or similar plan or
arrangement that was not in effect on the date of this
Agreement, or materially amend any existing plan or
arrangement except to the extent such amendments do not
result in an increase in cost, except as may be required by
law;
(x) purchase any security for its investment
portfolio not rated "A" or higher by either Standard &
Poor's Corporation or ▇▇▇▇▇'▇ Investor Services, Inc.;
(xi) make any new loan or other credit
facility commitment (including without limitation, lines of
credit and letters of credit) to any borrower or group of
affiliated borrowers in excess of $250,000 in the aggregate,
or increase, compromise, extend, renew or modify any
existing loan or commitment outstanding in excess of
$250,000, except for any commitment disclosed on the
Merchants Disclosure Schedule; provided, however, that, with
respect to any loan or commitment that deviates in any
manner from the lending policies or procedures of Merchants
in effect on the date hereof, the dollar amount set forth in
this subsection (xi) shall be $100,000;
(xii) except as set forth on the Merchants
Disclosure Schedule, enter into, renew, extend or modify any
other transaction with any Affiliate;
(xiii) enter into any interest rate swap or
similar commitment, agreement or arrangement; or
(xiv) intentionally and knowingly take any
action that would preclude satisfaction of the condition to
closing contained in Section 5.02(k) relating to financial
accounting treatment of the Merger; or
(xv) agree to do any of the foregoing.
For purposes of this Section 4.01, it shall not be
considered in the ordinary course of business for Merchants or
any Merchants Subsidiary to do any of the following: (i) make
any capital expenditure of $15,000 or more not disclosed on
Merchants Disclosure Schedule 4.01, without the prior written
consent of First Leesport; (ii) make any sale, assignment,
transfer, pledge, hypothecation or other disposition of any
assets having a book or market value, whichever is greater, in
the aggregate in excess of $15,000, other than pledges of assets
to secure government deposits, to exercise trust powers, sales of
assets received in satisfaction of debts previously contracted in
the normal course of business, issuance of loans, or transactions
in the investment securities portfolio by Merchants or any
Merchants Subsidiary or repurchase agreements made, in each case,
in the ordinary course of business; or (iii) undertake or enter
any lease, contract or other commitment for its account, other
than in the normal course of providing credit to customers as
part of its banking business, involving a payment by Merchants or
any Merchants Subsidiary of more than $15,000 annually, or
containing a material financial commitment and extending beyond
12 months from the date hereof. Notwithstanding anything in this
Section 4.01 to the contrary, Merchants or MBP shall be permitted
to take actions and make capital expenditures to complete the
projects identified in the "Five-Year Strategic Business Plan of
Merchants of Shenandoah Ban-Corp and its wholly owned subsidiary,
Merchants Bank of Pennsylvania" (the "Merchants Business Plan")
previously delivered to First Leesport.
Section 4.02 Access; Confidentiality.
(a) From the date of this Agreement through the
Closing Date, Merchants or First Leesport, as the case may be,
shall afford to, and shall cause each of its Subsidiaries to
afford to, the other party and its authorized agents and
representatives, complete access to their respective properties,
assets, books and records and personnel, at reasonable hours and
after reasonable notice for the purpose of undertaking a
comprehensive due diligence investigation; and the officers of
Merchants and First Leesport will furnish any person making such
investigation on behalf of the other party with such financial
and operating data and other information with respect to the
businesses, properties, assets, books and records and personnel
as the person making such investigation shall from time to time
reasonably request.
(b) Merchants and First Leesport each agree to
conduct such investigation and discussions hereunder in a manner
so as not to interfere unreasonably with normal
operations and customer and employee relationships of the other
party.
(c) In addition to the access permitted by
subparagraph (a) above, from the date of this Agreement through
the Closing Date, MBP shall permit employees of FNBL reasonable
access to and participation in matters relating to problem loans,
loan restructurings and loan work-outs, provided that nothing
contained in this subparagraph shall be construed to grant FNBL
or any of its employees any final decision-making authority with
respect to such matters.
(d) If the transactions contemplated by this
Agreement shall not be consummated, Merchants and First Leesport
will each destroy or return all documents and records obtained
from the other party or its representatives, during the course of
its investigation and will cause all information with respect to
the other party obtained pursuant to this Agreement or
preliminarily thereto to be kept confidential, except to the
extent such information becomes public through no fault of the
party to whom the information was provided or any of its
representatives or agents and except to the extent disclosure of
any such information is legally required. Merchants and First
Leesport shall each give prompt notice to the other party of any
contemplated disclosure where such disclosure is so legally
required.
Section 4.03 Regulatory Matters and Consents.
(a) First Leesport and Merchants will prepare all
Applications and make all filings for, and use their best efforts
to obtain as promptly as practicable after the date hereof, all
necessary permits, consents, approvals, waivers and
authorizations of all Regulatory Authorities necessary or
advisable to consummate the transactions contemplated by this
Agreement.
(b) Merchants will furnish First Leesport with
all information concerning Merchants as may be necessary or
advisable in connection with any Application or filing made by or
on behalf of First Leesport to any Regulatory Authority in
connection with the transactions contemplated by this Agreement.
(c) First Leesport will promptly furnish
Merchants with copies of all material written communications to,
or received by First Leesport or any First Leesport Subsidiary
from, any Regulatory Authority in respect of the transactions
contemplated hereby.
(d) First Leesport will furnish Merchants with
(i) copies of all Applications at least five (5) business days
prior to filing with any Regulatory Authority and provide
Merchants a reasonable opportunity to suggest changes to such
Applications, which suggested changes First Leesport may, in its
reasonable discretion accept or reject, (ii) copies of
all Applications filed by First Leesport and (iii) copies of all
documents filed by First Leesport under the Exchange Act.
(e) Merchants will cooperate with First Leesport
in the foregoing matters and will furnish First Leesport with all
information concerning Merchants and any Merchants Subsidiary as
may be necessary or advisable in connection with any Application
or filing (including the Registration Statement and any report
filed with the SEC) made by or on behalf of First Leesport to any
Regulatory Authority in connection with the transactions
contemplated by this Agreement, and such information will be
accurate and complete in all material respects. In connection
therewith, Merchants and any Merchants Subsidiary will provide
certificates and other documents reasonably requested by First
Leesport.
Section 4.04 Taking of Necessary Action.
(a) First Leesport and Merchants shall each use
its best efforts in good faith, and each of them shall cause
their respective Subsidiaries to use their best efforts in good
faith, to (i) furnish such information as may be required in
connection with the preparation of the documents referred to in
Section 4.03 of this Agreement and (ii) take or cause to be taken
all action necessary or desirable on its part using its best
efforts so as to permit completion of the Merger including,
without limitation, (A) obtaining the consent or approval of each
individual, partnership, corporation, association or other
business or professional entity whose consent or approval is
required or desirable for consummation of the transactions
contemplated hereby (including assignment of leases without any
change in terms), provided that shall not agree to make any
payments or modifications to agreements in connection therewith
without the prior written consent of First Leesport, and
(B) requesting the delivery of appropriate opinions, consents and
letters from its counsel and independent auditors. No party
hereto shall take, or cause, or to the best of its ability permit
to be taken, any action that would substantially impair the
prospects of completing the Merger; provided that nothing herein
contained shall preclude First Leesport or Merchants from
exercising its rights under this Agreement.
(b) First Leesport and Merchants shall promptly
prepare a Prospectus/Proxy Statement to be mailed to their
respective shareholders in connection with the meetings of such
shareholders and transactions contemplated hereby, and to be
filed by First Leesport with the SEC in the Registration
Statement, which Prospectus/Proxy statement shall conform in all
material respects to all applicable legal requirements. First
Leesport shall, as promptly as practicable following the
preparation thereof, file the Registration Statement with the SEC
and Merchants and First Leesport shall use all reasonable efforts
to have the Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing.
First Leesport shall advise Merchants, promptly after
First Leesport receives notice thereof, of the time when the
Registration Statement has become effective or any supplement or
amendment has been filed, of the issuance of any stop order or
the suspension of the qualification of the shares of capital
stock issuable pursuant to the Registration Statement, or the
initiation or threat of any proceeding for any such purpose, or
of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information. First
Leesport shall use its best efforts to obtain, prior to the
effective date of the Registration Statement, all necessary state
securities laws or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement. First
Leesport shall provide Merchants with as many copies of such
Registration Statement and all amendments thereto promptly upon
the filing thereof as Merchants may reasonably request.
Section 4.05 Certain Agreements.
(a) In the event of any threatened or actual
claim, action, suit, proceeding or investigation, whether civil,
criminal or administrative, whether or not brought by or in the
name of Merchants, in which any person who is now, or has been at
any time prior to the date of this Agreement, or who becomes
prior to the Effective Date, a director or officer or employee of
Merchants (the "Indemnified Parties") is, or is threatened to be,
made a party to a suit based in whole or in part on, or arising
in whole or in part out of, or pertaining to (i) the fact that he
is or was a director, officer or employee of Merchants, any
Merchants Subsidiary, or any of their respective predecessors or
(ii) this Agreement or any of the transactions contemplated
hereby, whether in any case asserted or arising before or after
the Effective Date, the parties hereto agree to cooperate and use
their best efforts to defend against and respond thereto to the
maximum extent permitted by the BCL, and the articles of
incorporation and bylaws of Merchants. On or after the Effective
Date, First Leesport shall indemnify, defend and hold harmless
all prior and then-existing directors and officers of Merchants
and any Merchants Subsidiary, against (i) all losses, claims,
damages, costs, expenses, liabilities or judgments or amounts
that are paid in settlement (with the approval of First Leesport
which approval shall not be unreasonably withheld) of or in
connection with any claim, action, suit, proceeding or
investigation, whether or not brought by or in the name of
Merchants, based in whole or in part on or arising in whole or in
part out of the fact that such person is or was a director,
officer or employee of Merchants, or any Merchants Subsidiary,
whether pertaining to any matter existing or occurring at or
prior to or after the Effective Date and whether asserted or
claimed prior to, or at or after, the Effective Date
("Indemnified Liabilities") and (ii) all Indemnified Liabilities
based in whole or in part on, or arising in whole or in part out
of, or pertaining to this Agreement or the transactions
contemplated hereby, to the same extent as such officer, director
or employee may be indemnified by Merchants as of the date hereof
including the right to advancement of expenses,
provided, however, that any such officer, director or employee of
Merchants may not be indemnified by First Leesport if such
indemnification is prohibited by applicable law.
(b) First Leesport shall use its reasonable best
efforts to maintain Merchants existing directors' and officers'
liability insurance policy (or a policy providing comparable
coverage amounts on terms generally no less favorable, including
First Leesport's existing policy if it meets the foregoing
standard) covering persons who are currently covered by such
insurance for a period of six years after the Effective Date;
provided, however, that in no event shall First Leesport be
obligated to expend, in order to maintain or provide insurance
coverage pursuant to this Section 4.05(b), any amount per annum
in excess of 150% of the amount of the annual premiums paid as of
the date hereof by Merchants for such insurance (the "Maximum
Amount"). If the amount of the annual premiums necessary to
maintain or procure such insurance coverage exceeds the Maximum
Amount, First Leesport shall use all reasonable efforts to
maintain the most advantageous policies of directors' and
officers' insurance obtainable for an annual premium equal to the
Maximum Amount.
(c) On or prior to the Effective Date, First
Leesport shall enter into an employment agreement with ▇▇▇▇▇▇▇ ▇.
▇▇▇▇, to be effective as of the Effective Date, in the form set
forth in the First Leesport Disclosure Schedule.
Section 4.06 No Other Bids and Related Matters. So
long as this Agreement remains in effect, Merchants shall not and
shall not authorize or permit any Merchants Subsidiary, or any of
their respective directors, officers, employees or agents, to
directly or indirectly (i) respond to, solicit, initiate or
encourage any inquiries relating to, or the making of any
proposal which relates to, an Acquisition Transaction (as defined
below), (ii) recommend or endorse an Acquisition Transaction,
(iii) participate in any discussions or negotiations regarding an
Acquisition Transaction, (iv) provide any third party (other than
First Leesport or an Affiliate of First Leesport) with any
nonpublic information in connection with any inquiry or proposal
relating to an Acquisition Transaction, or (v) enter into an
agreement with any other party with resect to an Acquisition
Transaction. Notwithstanding the foregoing, the Board of
Directors of Merchants may respond to unsolicited inquiries
relating to an Acquisition Transaction or the Board of Directors
of Merchants may recommend or endorse an Acquisition transaction,
in each case, if it receives a written opinion (subject only to
normal and customary qualifications) of outside counsel that the
failure to do so would constitute a breach of their fiduciary
duty. In the event of any such response by Merchants, First
Leesport shall have the right, but not the obligation, to
terminate this Agreement at any time thereafter without penalty
or further liability. As used in this Agreement, "Acquisition
Transaction" shall mean any of the following transactions: (i) a
merger or consolidation, or any similar transaction,
involving Merchants or MBP, (ii) a purchase, lease or other
acquisition of all or a substantial portion of the assets or
liabilities of Merchants or MBP, or (iii) a purchase or other
acquisition (including by way of share exchange, tender offer,
exchange offer or otherwise) of 20% or more of the outstanding
shares of Merchants Common Stock. Merchants shall notify First
Leesport immediately if (i) any such discussions or negotiations
are sought to be initiated with it by any other person, or
(ii) if any such requests for information, inquiries, proposals
or communications are received from any other person, except
analysts, Regulatory Authorities and holders of Merchants Common
Stock in the ordinary course of business.
Section 4.07 Duty to Advise; Duty to Update the
Merchants Disclosure Schedule. Merchants shall promptly advise
First Leesport of any change or event having a Material Adverse
Effect on it or which it believes would or would be reasonably
likely to cause or constitute a material breach of any of its
representations, warranties or covenants set forth herein.
Merchants shall update the Merchants Disclosure Schedule as
promptly as practicable after the occurrence of an event or fact
which, if such event or fact had occurred prior to the date of
this Agreement, would have been disclosed in the Merchants
Disclosure Schedule. The delivery of such updated Disclosure
Schedule shall not relieve Merchants from any breach or violation
of this Agreement and shall not have any effect for the purposes
of determining the satisfaction of the condition set forth in
Sections 5.02(c) hereof.
Section 4.08 Duty to Advise; Duty to Update the First
Leesport's Disclosure Schedule. First Leesport shall promptly
advise Merchants of any change or event having a Material Adverse
Effect on it or on any First Leesport Subsidiary or which it
believes would or would be reasonably likely to cause or
constitute a material breach of any of its representations,
warranties or covenants set forth herein. First Leesport shall
update the First Leesport Disclosure Schedule as promptly as
practicable after the occurrence of an event or fact which, if
such event or fact had occurred prior to the date of this
Agreement, would have been disclosed in the First Leesport
Disclosure Schedule. The delivery of such updated Disclosure
Schedule shall not relieve First Leesport from any breach or
violation of this Agreement and shall not have any effect for the
purposes of determining the satisfaction of the condition set
forth in Sections 5.01(c) hereof.
Section 4.09 Additional Undertakings by Merchants and
First Leesport.
(a) From and after the date of this Agreement,
Merchants shall:
(i) Shareholder Meeting. Submit this
Agreement to its shareholders for approval at a meeting to
be held as soon as practicable, and use its best
efforts to cause its Board of Directors to recommend
approval of this Agreement to Merchants shareholders.
(ii) Board and Committee Minutes. Merchants
shall provide First Leesport, within 30 days after any
meeting of the Board of Directors of Merchants, or any
committee thereof, or any senior management committee, a
copy of the minutes of such meeting, except that with
respect to any meeting held within 30 days of the Closing
Date, such minutes shall be provided prior to the Closing
Date.
(b) From and after the date of this Agreement,
First Leesport shall:
(i) Shareholder Meeting. Submit this
Agreement to its shareholders for approval at a meeting to
be held as soon as practicable, and use its best efforts to
cause its Board of Directors to recommend approval of this
Agreement to First Leesport shareholders.
(ii) Delivery of Securities Documents.
Deliver to Merchants copies of all reports filed with the
SEC under the Exchange Act promptly upon the filing thereof;
(iii) Election of Directors. Upon
consummation of the Merger and subject to all applicable
legal requirements, elect the additional directors of First
Leesport and cause the election of the additional directors
of each of FNBL and MBP, respectively, as provided in
Section 1.02(d) of this Agreement;
(iv) Subsidiary Status of MBP. For a period
of two (2) years from the Effective Date, First Leesport
shall maintain MBP as a separate operating banking
subsidiary under the name "Merchants Bank of Pennsylvania,"
provided that MBP shall adopt and be subject to policies and
procedures of First Leesport, including without limitation
lending and credit quality standards and employee benefits
and human resource policies and procedures, applicable to
First Leesport and its banking subsidiaries.
Notwithstanding the foregoing, First Leesport may, prior to
the expiration of such two (2) year period, cause the merger
or combination of MBP with another banking subsidiary of
First Leesport or change the name of MBP upon the unanimous
vote of the Board of Directors of First Leesport provided
further that any written consent of First Leesport as sole
shareholder of FNBL or MBP to any such merger or combination
shall only be authorized by the unanimous vote of the Board
of Directors of First Leesport;
(v) Strategic Business Plan. Permit
Merchants and MBP to take actions and make capital
expenditures to complete the projects identified
in the Merchants Business Plan referenced in Section 4.01;
and
(vi) Interim Financial Results. Use its
reasonable best efforts to publish as soon as possible, but
in no event later than thirty (30) days after the end of the
first full calendar month in which there are at least thirty
(30) days of post-Merger combined operations, combined
revenues and net income figures as contemplated by and in
accordance with the terms of SEC Accounting Series Release
No. 135, provided that First Leesport may delay publishing
such information for such period of time as it, in its good
faith reasonable judgment, deems necessary or desirable to
achieve a bona fide corporate purpose determined by the
Board of Directors of First Leesport.
(c) From and after the date of this Agreement,
First Leesport and Merchants shall each:
(i) Filings and Approvals. Cooperate with
the other in the preparation and filing, as soon as
practicable, of (A) the Applications, (B) the Registration
Statement and related filings under state securities laws
covering the First Leesport Common Stock to be issued
pursuant to the Merger, (C) all other documents necessary to
obtain any other approvals and consents required to effect
the completion of the Merger, and (D) all other documents
contemplated by this Agreement;
(ii) Public Announcements. Cooperate and
cause their respective officers, directors, employees and
agents to cooperate in good faith, consistent with their
respective legal obligations, in the preparation and
distribution of, and agree upon, prior to the release or
dissemination thereof, the form and substance of, any press
release related to this Agreement and the transactions
contemplated hereby, and any other public disclosures
related thereto, including without limitation communications
to their respective shareholders, internal announcements and
customer disclosures, but nothing contained herein shall
prohibit either party from making any disclosure which its
counsel deems legally necessary;
(iii) Maintenance of Insurance. Maintain,
and cause their respective Subsidiaries to maintain,
insurance in such amounts as are reasonable to cover such
risks as are customary in relation to the character and
location of its properties and the nature of its business;
(iv) Maintenance of Books and Records.
Maintain, and cause their respective Subsidiaries to
maintain, books of account and records in accordance with
generally accepted accounting principles applied on a basis
consistent with those principles used in preparing
the financial statements heretofore delivered; and
(v) Taxes. File all federal, state, and
local tax returns required to be filed by them or their
respective Subsidiaries on or before the date such returns
are due (including any extensions) and pay all taxes shown
to be due on such returns on or before the date such payment
is due.
Section 4.10 Employee Benefits and Termination
Benefits.
(a) Employee Benefits. As of the Effective Date,
Merchants or MBP employees who become employees of First Leesport
or of any First Leesport Subsidiary shall be entitled to full
credit for each year of service with Merchants or MBP for
purposes of determining eligibility for participation and
vesting, but not benefit accrual, in First Leesport's employee
benefit plans, programs and policies. The employee benefits
provided to former employees of Merchants or MBP after the
Effective Date shall be substantially similar to the employee
benefits, in the aggregate, provided by First Leesport or the
First Leesport Subsidiaries to their similarly situated
employees. Subject to the foregoing, after the Effective Date,
First Leesport may discontinue, amend or convert to a First
Leesport plan any particular benefit or welfare plan of Merchants
or MBP, subject to such plan's provisions and applicable law.
(b) Severance Policy. First Leesport agrees to
cause FNBL to provide any employee of Merchants or MBP whose
employment is involuntarily terminated other than for cause
within one year after the Effective Date or who within such
one-year period is offered but declines to accept employment at a
location more than 35 miles from such employee's work location
with Merchants or MBP severance benefits at least as favorable as
those set forth in the severance plan of First Leesport and FNBL
set forth in and made a part of the First Leesport Disclosure
Schedule provided such employees execute such documentation as
First Leesport or FNBL may reasonably require. The benefits
payable under this subsection shall not apply to any employee or
MBP who enters into a written employment agreement with First
Leesport or FNBL.
ARTICLE V
CONDITIONS
Section 5.01 Conditions to Merchants's Obligations
under this Agreement. The obligations of Merchants hereunder
shall be subject to satisfaction at or prior to the Closing Date
of each of the following conditions, unless waived by Merchants
pursuant to Section 7.03 hereof:
(a) Corporate Proceedings. All action required
to be taken by, or on the part of, First Leesport to authorize
the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated
by this Agreement, shall have been duly and validly taken by
First Leesport; and Merchants shall have received certified
copies of the resolutions evidencing such authorizations;
(b) Covenants. The obligations and covenants of
First Leesport required by this Agreement to be performed by
First Leesport at or prior to the Closing Date shall have been
duly performed and complied with in all material respects;
(c) Representations and Warranties. The
representations and warranties of First Leesport set forth in
this Agreement shall be true and correct, as of the date of this
Agreement, and as of the Closing Date as though made on and as of
the Closing Date, except as to any representation or warranty
(i) which specifically relates to an earlier date or (ii) where
the breach of the representation or warranty would not, either
individually or in the aggregate, constitute a Material Adverse
Effect with respect to First Leesport;
(d) Approvals of Regulatory Authorities. First
Leesport shall have received all required approvals of Regulatory
Authorities of the Merger, and delivered copies thereof to
Merchants; and all notice and waiting periods required thereunder
shall have expired or been terminated;
(e) No Material Adverse Effect. Since
December 31, 1997, there shall not have occurred any Material
Adverse Effect with respect to First Leesport;
(f) No Injunction. There shall not be in effect
any order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits consummation of the
transactions contemplated hereby;
(g) Officer's Certificate. First Leesport shall
have delivered to Merchants a certificate, dated the Closing Date
and signed, without personal liability, by its chairman or
president, to the effect that the conditions set forth in
subsections (a) through (e) of this Section 5.01 have been
satisfied, to the best knowledge of the officer executing the
same;
(h) Opinion of First Leesport's Counsel.
Merchants shall have received an opinion of ▇▇▇▇▇▇▇ & ▇▇▇, P.C.,
counsel to First Leesport, dated the Closing Date, in form and
substance reasonably satisfactory to Merchants and its counsel to
the effect set forth on Exhibit 2 attached hereto;
(i) Registration Statement. The Registration
Statement shall be effective under the Securities Act and no
proceedings shall be pending or threatened by the SEC to suspend
the effectiveness of the Registration Statement; and all required
approvals by state securities or "blue sky" authorities with
respect to the transactions contemplated by this
Agreement, shall have been obtained;
(j) Tax Opinion. Merchants shall have received
an opinion of ▇▇▇▇▇▇▇ & ▇▇▇, P.C., in form and substance
reasonably satisfactory to Merchants and its counsel to the
effect set forth on Exhibit 3 attached hereto;
(k) Investment Banking Opinion. Merchants shall
have received an updated written opinion of ▇▇▇▇, ▇▇▇▇ & Co.,
Inc., as of a date within five (5) days of mailing the
Prospectus/Proxy Statement, to the effect that the Exchange Ratio
is fair, from a financial point of view, to the shareholders of
Merchants;
(l) Approval of Merchants' Shareholders. This
Agreement shall have been approved by the shareholders of
Merchants by such vote as is required under Merchants's articles
of incorporation and bylaws and by applicable law;
(m) Approval of First Leesport's Shareholders.
This Agreement shall have been approved by the shareholders of
First Leesport by such vote as is required under First Leesport's
articles of incorporation and bylaws and by Nasdaq requirements
applicable to it; and
(n) Pooling Letter. First Leesport shall have
received an opinion from its independent auditors, in a form
reasonably acceptable to Merchants, to the effect that the Merger
will be accounted for as a "pooling of interests" for financial
accounting purposes.
Section 5.02 Conditions to First Leesport's
Obligations under this Agreement. The obligations of First
Leesport hereunder shall be subject to satisfaction at or prior
to the Closing Date of each of the following conditions, unless
waived by First Leesport pursuant to Section 7.03 hereof:
(a) Corporate Proceedings. All action required
to be taken by, or on the part of, Merchants to authorize the
execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated by this Agreement,
shall have been duly and validly taken by Merchants; and First
Leesport shall have received certified copies of the resolutions
evidencing such authorizations;
(b) Covenants. The obligations and covenants of
Merchants, required by this Agreement to be performed by it at or
prior to the Closing Date shall have been duly performed and
complied with in all material respects;
(c) Representations and Warranties. The
representations and warranties of Merchants set forth in this
Agreement shall be true and correct as of the date of this
Agreement, and as of the Closing Date as though made on and as of
the Closing Date, except as to any representation or
warranty (i) which specifically relates to an earlier date or
(ii) where the breach of the representation or warranty would
not, either individually or in the aggregate, result in a
Material Adverse Effect with respect to Merchants;
(d) Approvals of Regulatory Authorities. First
Leesport shall have received all required approvals of Regulatory
Authorities for the Merger, without the imposition of any term or
condition that would have a Material Adverse Effect on First
Leesport upon completion of the Merger; and all notice and
waiting periods required thereunder shall have expired or been
terminated;
(e) No Material Adverse Effect. Since
December 31, 1997, there shall not have occurred any Material
Adverse Effect with respect to Merchants;
(f) No Injunction. There shall not be in effect
any order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits consummation of the
transactions contemplated hereby;
(g) Officer's Certificate. Merchants shall have
delivered to First Leesport a certificate, dated the Closing Date
and signed, without personal liability, by its chairman of the
board or president, to the effect that the conditions set forth
in subsections (a) through (e) of this Section 5.02 have been
satisfied, to the best knowledge of the officer executing the
same;
(h) Opinions of Merchants' Counsel. First
Leesport shall have received an opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
P.C., counsel to Merchants, dated the Closing Date, in form and
substance reasonably satisfactory to First Leesport and its
counsel to the effect set forth on Exhibit 4 attached hereto;
(i) Registration Statement. The Registration
Statement shall be effective under the Securities Act and no
proceedings shall be pending or threatened by the SEC to suspend
the effectiveness of the Registration Statement; and all required
approvals by state securities or "blue sky" authorities with
respect to the transactions contemplated by this Agreement, shall
have been obtained;
(j) Tax Opinion. First Leesport shall have
received an opinion of ▇▇▇▇▇▇▇ & ▇▇▇, P.C., its counsel,
substantially to the effect set forth on Exhibit 4 attached
hereto;
(k) Investment Banking Opinion. First Leesport
shall have received a written opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.,
Inc., as of a date within five (5) days of mailing the
Prospectus/Proxy Statement, to the effect that the consideration
payable to shareholders of Merchants pursuant to this
Agreement, is fair from a financial point of view, to First
Leesport;
(l) Approval of Merchants's Shareholders. This
Agreement shall have been approved by the shareholders of
Merchants by such vote as is required by the articles of
association of Merchants and by law;
(m) Affiliate Letters. First Leesport shall have
received, within fifteen (15) days of the date of this Agreement
signed copies of the letter attached hereto as Exhibit 1 from all
required executive officers and from at least a majority of all
directors and affiliates of Merchants;
(n) Approval of First Leesport's Shareholders.
This Agreement shall have been approved by the shareholders of
First Leesport by such vote as is required under First Leesport's
articles of incorporation and bylaws and by Nasdaq requirements
applicable to it; and
(o) Pooling Letter. First Leesport shall have
received an opinion from its independent auditors, in a form
reasonably satisfactory to First Leesport, to the effect that the
Merger will be treated as a "pooling of interests" for financial
accounting purposes.
ARTICLE VI
TERMINATION, WAIVER AND AMENDMENT
Section 6.01 Termination. This Agreement may be
terminated on or at any time prior to the Closing Date:
(a) By the mutual written consent of the parties
hereto; or
(b) By First Leesport or Merchants:
(i) if, in the case of termination by
Merchants, there shall have been any breach of any
representation or warranty of First Leesport which results
in a Material Adverse Effect with respect to First Leesport,
on the one hand, or, in the case of termination by First
Leesport, there shall have been any breach of any
representation or warranty of Merchants which results in a
Material Adverse Effect with respect to Merchants, on the
other hand, and such breach cannot be, or shall not have
been, remedied within 30 days after receipt by such other
party of notice in writing specifying the nature of such
breach and requesting that it be remedied;
(ii) if, in the case of termination by
Merchants, there shall have been any breach of any material
covenant or other obligation of First Leesport, on the one
hand, or, in the case of termination by First Leesport,
there shall have been any breach of any material
covenant or other obligation of Merchants, on the other
hand, and such breach cannot be, or shall not have been,
remedied within 30 days after receipt by such other party of
notice in writing specifying the nature of such breach and
requesting that it be remedied;
(iii) if the Closing Date shall not have
occurred on or before September 30, 1999, unless the failure
of such occurrence shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe
its agreements set forth in this Agreement required to be
performed or observed by such party on or before the Closing
Date;
(iv) if either party has been informed in
writing by a Regulatory Authority whose approval or consent
has been requested that such approval or consent is unlikely
to be granted, unless the failure of such occurrence shall
be due to the failure of the party seeking to terminate this
Agreement to perform or observe its agreements set forth
herein required to be performed or observed by such party on
or before the Closing Date; or
(v) any shareholder vote contemplated by
this Agreement is not obtained; or
(c) By Merchants if, prior to the Closing Date,
First Leesport shall have entered into a written agreement with
respect to a transaction to acquire a party other than Merchants
(i) involving the issuance by First Leesport of more than 500,000
shares of First Leesport Common Stock or Rights to acquire First
Leesport Common Stock or (ii) resulting, after giving effect to
such issuance, in pro forma dilution stated in terms of earnings
per share, calculated by reference to the historical income
statements of First Leesport and such other party for the most
recently completed twelve calendar months immediately prior to
the date of such written agreement, which exceeds 1%.
Section 6.02 Effect of Termination.
(a) If this Agreement is terminated pursuant to
Section 6.01 hereof, this Agreement shall forthwith become void
(other than Section 4.02(d), Section 6.02(b) and Section 7.01
hereof, which shall remain in full force and effect), and there
shall be no further liability on the part of First Leesport or
Merchants to the other, except for any liability arising out of
any breach of any covenant or other agreement contained in this
Agreement.
(b) If shareholders of Merchants fail to approve
this Agreement after public disclosure of an Acquisition
Transaction involving a party other than First Leesport or an
Affiliate of First Leesport and within twelve months following
the date of termination of this Agreement thereafter, a Person
other than First Leesport or an affiliate of First
Leesport, enters into an agreement with Merchants pursuant to
which such Person or Affiliate would (i) merge or consolidate, or
enter into any similar transaction, with Merchants or
(ii) acquire all or substantially all of the assets of Merchants,
then Merchants shall immediately pay to First Leesport a fee of
$250,000, which fee shall include reimbursement to First Leesport
for its costs and expenses, including legal fees and expenses,
incurred in connection with this Agreement and the transactions
contemplated hereby. Nothing in this Section 6.02(b) shall
constitute a waiver of limitation, in whole or in part, of any
legal or equitable rights which First Leesport may possess
against any Person or Affiliate relating to this Agreement, or
relating to First Leesport's relationship with Merchants or for
any act or omission of such Person, including any tortious
interference with this Agreement or otherwise wrongfully inducing
or causing any breach of any such agreement.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Expenses. Except for the cost of
printing and mailing the Proxy Statement/Prospectus which shall
be shared equally, each party hereto shall bear and pay all costs
and expenses incurred by it in connection with the transactions
contemplated hereby, including fees and expenses of its own
financial consultants, accountants and counsel.
Section 7.02 Non-Survival of Representations and
Warranties. All representations, warranties, agreements and
covenants set forth in this Agreement, shall terminate on the
Closing Date, except for covenants to be performed after the
Closing Date, which will continue until performed.
Section 7.03 Amendment, Extension and Waiver. Subject
to applicable law, at any time prior to the consummation of the
transactions contemplated by this Agreement, the parties may
(a) amend this Agreement, (b) extend the time for the performance
of any of the obligations or other acts of either party hereto,
(c) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, or
(d) waive compliance with any of the agreements or conditions
contained in Articles IV and V hereof or otherwise provided that
any amendment, extension or waiver granted after shareholders of
Merchants or First Leesport shall have approved this Agreement
shall not modify either the amount or form of consideration to be
provided hereby to holders of Merchants Common Stock without the
approval of such shareholders. This Agreement may not be amended
except by an instrument in writing authorized by the respective
Boards of Directors and signed, by duly authorized officers, on
behalf of the parties hereto. Any agreement on the part of a
party hereto to any extension or waiver shall be valid only if
set forth in an instrument in writing signed by a duly authorized
officer on behalf of such party, but such waiver or failure to
insist on strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
Section 7.04 Entire Agreement. This Agreement,
including the documents and other writings referred to herein or
delivered pursuant hereto, contains the entire agreement and
understanding of the parties with respect to its subject matter.
This Agreement supersedes all prior arrangements and
understandings between the parties, both written or oral with
respect to its subject matter. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective successors; provided, however, that nothing in this
Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto and their respective
successors, any rights, remedies, obligations or liabilities
other than pursuant to Sections 1.02(d), 1.02(f), 4.05,
4.09(b)(iv), 4.09(b)(v), 4.09(b)(vi) and 4.10.
Section 7.05 No Assignment. Neither party hereto may
assign any of its rights or obligations hereunder to any other
person, without the prior written consent of the other party
hereto.
Section 7.06 Notices. All notices or other
communications hereunder shall be in writing and shall be deemed
given if delivered personally, mailed by prepaid registered or
certified mail (return receipt requested), or sent by telecopy,
addressed as follows:
(a) If to First Leesport, to:
First Leesport Bancorp., Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.,
President and Chief Executive
Officer
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ & ▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Merchants, to:
Merchants of Shenandoah Ban-Corp.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇,
President and Chief Executive
Officer
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇., Esquire
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Section 7.07 Captions. The captions contained in this
Agreement are for reference purposes only and are not part of
this Agreement.
Section 7.08 Counterparts. This Agreement may be
executed in any number of counterparts, and each such counterpart
shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
Section 7.09 Severability. If any provision of this
Agreement or the application thereof to any person or
circumstance shall be invalid or unenforceable to any extent, the
remainder of this Agreement and the application of such
provisions to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent
permitted by law.
Section 7.10 Governing Law. This Agreement shall be
governed by and construed in accordance with the domestic
internal law (without regard to the law of conflicts of law) of
the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their duly authorized officers as of
the day and year first above written.
FIRST LEESPORT BANCORP, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Attest: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇
MERCHANTS OF SHENANDOAH BAN-CORP
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Attest: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
Exhibit 1
January 12, 1999
First Leesport Bancorp, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
First Leesport Bancorp, Inc. ("First Leesport") and
Merchants of Shenandoah Ban-Corp ("Merchants") desire to enter
into an agreement dated as of January 12, 1999 ("Agreement"),
pursuant to which, subject to the terms and conditions set forth
therein, (a) Merchants will merge with and into First Leesport,
with First Leesport surviving the merger, and (b) shareholders of
Merchants will receive common stock of First Leesport in
exchange for common stock of Merchants outstanding on the closing
date (the foregoing, collectively, referred to herein as the
"Merger").
First Leesport has required, as an inducement to its
execution and delivery to Merchants of the Agreement, that the
undersigned, being directors, executive officers and major
shareholders of Merchants, execute and deliver to First Leesport
this Letter Agreement.
Each of the undersigned, in order to induce First Leesport
to execute and deliver to Merchants the Agreement, hereby
irrevocably:
(a) Agrees to be present (in person or by proxy) at
all meetings of shareholders of Merchants called to vote for
approval of the Merger so that all shares of common stock of
Merchants then owned by the undersigned will be counted for the
purpose of determining the presence of a quorum at such meetings
and to vote all such shares in favor of approval and adoption of
the Agreement and the transactions contemplated thereby
(including any amendments or modifications of the terms thereof
approved by the Board of Directors of Merchants);
(b) Agrees not to vote or execute any written consent
to rescind or amend in any manner any prior vote or written
consent, as a shareholder of Merchants, to approve or adopt the
Agreement;
(c) Agrees not to take any actions with the intent to
prevent or hinder the Merger from being consummated;
(d) Agrees not to solicit or initiate any negotiations
or discussions with any party other than First Leesport with
respect to any offer, sale, transfer or other
disposition of, any shares of common stock of Merchants now or
hereafter owned by the undersigned;
(e) Agrees not to offer, sell, transfer or otherwise
dispose of any shares of common stock of First Leesport received
in the Merger, except (i) at such time as a registration
statement under the Securities Act of 1933, as amended
("Securities Act") covering sales of such First Leesport common
stock is effective and a prospectus is made available under the
Securities Act, (ii) within the limits, and in accordance with
the applicable provisions of, Rule 145(d) under the Securities
Act, or (iii) in a transaction which, in the opinion of counsel
satisfactory to First Leesport or as described in a "no-action"
or interpretive letter from the staff of the Securities and
Exchange Commission ("SEC"), is not required to be registered
under the Securities Act; and acknowledges and agrees that First
Leesport is under no obligation to register the sale, transfer or
other disposition of First Leesport common stock by the
undersigned or on behalf of the undersigned, or to take any other
action necessary to make an exemption from registration
available;
(f) Notwithstanding the foregoing, agrees not to sell,
or in any other way reduce the risk of the undersigned relative
to, any shares of common stock of Merchants or of common stock of
First Leesport, during the period commencing thirty days prior to
the effective date of the Merger and ending on the date on which
financial results covering at least thirty days of post-Merger
combined operations of First Leesport and Merchants have been
published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies;
(g) Agrees that First Leesport shall not be bound by
any attempted sale of any shares of First Leesport common stock,
and First Leesport's transfer agent shall be given an appropriate
stop transfer order and shall not be required to register any
such attempted sale, unless the sale has been effected in
compliance with the terms of this Letter Agreement; and further
agrees that the certificate representing shares of First Leesport
common stock owned by the undersigned may be endorsed with a
restrictive legend consistent with the terms of this Letter
Agreement;
(h) Acknowledges and agrees that the provisions of
subparagraphs (e), (f) and (g) hereof, to the extent the
undersigned can control any of the following persons or entities,
also apply to shares of First Leesport common stock received in
the Merger (or any shares of Merchants common stock or of First
Leesport common stock, whether or not received in the Merger, for
the period referred to in subparagraph (g) above) owned by
(i) his or her spouse, (ii) any of his or her relatives or
relatives of his or her spouse occupying his or her home,
(iii) any trust or estate in which he or she, his or her spouse,
or any such relative owns at least a 10% beneficial interest or
of which any of them serves as trustee, executor or in
any similar capacity, and (iv) any corporation or other
organization in which the undersigned, any affiliate of the
undersigned, his or her spouse, or any such relative owns at
least 10% of any class of equity securities or of the equity
interest;
(i) Represents that the undersigned has no plan or
intention to sell, exchange, or otherwise dispose of any shares
of First Leesport common stock to be received in the Merger prior
to expiration of the time period referred to in subparagraph (f)
hereof; and
(j) Represents that the undersigned has the capacity
to enter into this Letter Agreement and that it is a valid and
binding obligation enforceable against the undersigned in
accordance with its terms, subject to bankruptcy, insolvency and
other laws affecting creditors' rights and general equitable
principles.
________________________
It is understood and agreed that the provisions of
subparagraphs (a) through (d) of this Letter Agreement relate
solely to the capacity of the undersigned as a shareholder or
other beneficial owner of shares of Merchants common stock and is
not in any way intended to affect the exercise by the undersigned
of the undersigned's responsibilities as a director or officer of
Merchants. It is further understood and agreed that such
subparagraphs of this Letter Agreement are not in any way
intended to affect the exercise by the undersigned of any
fiduciary responsibility which the undersigned may have in
respect of any shares of Merchants common stock held by the
undersigned as of the date hereof.
________________________
The obligations set forth herein shall terminate
concurrently with any termination of the Agreement.
________________________
This Letter Agreement may be executed in two or more
counterparts, each of which shall be deemed to constitute an
original, but all of which together shall constitute one and the
same Letter Agreement.
________________________
This Letter Agreement shall terminate concurrently with any
termination of the Agreement in accordance with its terms.
________________________
The undersigned intend to be legally bound hereby.
Sincerely,
PAGE 3
Exhibit 2
FORM OF OPINION OF COUNSEL TO FIRST LEESPORT
Merchants shall have received from counsel to First
Leesport, an opinion, dated as of the Closing Date, substantially
to the effect that, subject to customary exceptions and
qualifications:
(a) First Leesport has full corporate power to carry
out the transactions contemplated in the Agreement. The
execution and delivery of the Agreement and the consummation of
the transactions contemplated thereunder have been duly and
validly authorized by all necessary corporate action on the part
of First Leesport, and the Agreement constitutes a valid and
legally binding obligation of First Leesport, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium,
receivership, conservatorship, and other laws affecting
creditors' rights generally, and as may be limited by the
exercise of judicial discretion in applying principles of equity.
Subject to satisfaction of the conditions set forth in the
Agreement, neither the transactions contemplated in the
Agreement, nor compliance by First Leesport with any of the
respective provisions thereof, will (i) conflict with or result
in a breach or default under (A) the articles of incorporation or
bylaws of First Leesport, or, (B) based solely on certificates of
officers and without independent verification, to the knowledge
of such counsel, any note, bond, mortgage, indenture, license,
agreement or other material instrument or obligation to which
First Leesport or FNBL is a party; or (ii) based solely on
certificates of officers and without independent verification, to
the knowledge of such counsel, result in the creation or
imposition of any material lien or encumbrance upon the property
of First Leesport or FNBL, except such material lien, instrument
or obligation that has been disclosed pursuant to the Agreement;
or (iii) violate in any material respect any order, writ,
injunction or decree known to such counsel, or any federal or
Pennsylvania statute, rule or regulation applicable to First
Leesport or FNBL.
(b) FNBL is a validly existing national banking
association organized and in good standing under the laws of the
United States of America. The deposits of FNBL are insured to
the maximum extent provided by law by the Federal Deposit
Insurance Corporation.
(c) There is, to the knowledge of such counsel, no
legal, administrative, arbitration or governmental proceeding or
investigation pending or threatened to which First Leesport or
FNBL is a party which would, if determined adversely to First
Leesport or FNBL, have a material adverse effect on the
consolidated financial condition or results of operation of First
Leesport, taken as a whole, or which presents a claim to restrain
or prohibit the transactions contemplated by the Agreement.
(d) To the knowledge of such counsel, no consent,
approval, authorization or order of any federal or state court or
federal or state governmental agency or body is required for the
consummation by First Leesport of the transactions contemplated
by the Agreement, except for such consents, approvals,
authorizations or orders as have been obtained.
(e) Upon the filing and effectiveness of the Articles
of Merger with the PDS with respect to the Merger, the Merger
will have been effected in compliance with all applicable federal
and Pennsylvania laws and regulations in all material respects.
(f) The shares of First Leesport Common Stock to be
issued in connection with the Merger have been duly authorized
and will, when issued in accordance with the terms of the
Agreement, be validly issued, fully paid and nonassessable, free
and clear of any mortgage, pledge, lien, encumbrance or claim
(legal or equitable).
Such counsel shall also provide a statement to the
following effect:
By way of supplemental information, such counsel advise
that, on the sole basis of such counsel's participation in
conferences with officers and employees of First Leesport in
connection with the Proxy Statement/Prospectus, and without other
independent investigation or inquiry, such counsel has no reason
to believe that the Proxy Statement/Prospectus, including any
amendments or supplements thereto (except for the financial
information, financial schedules and other financial or
statistical data contained therein and except for any information
supplied by Merchants or MBP for inclusion therein, as to which
counsel need express no belief), as of the date of mailing
thereof, contained any untrue statement of a material fact with
respect to First Leesport or omitted to state any material fact
with respect to First Leesport necessary to make any statement
therein with respect to First Leesport, in light of the
circumstances under which it was made, not misleading. Counsel
may state in delivering such statement, that such counsel has not
independently verified and does not assume the responsibility for
the accuracy, completeness or fairness of any information or
statements contained in the Proxy Statement/Prospectus, except
with respect to identified statements of law or regulations or
legal conclusions relating to First Leesport or FNBL or the
transactions contemplated in the Agreement.
PAGE 2
Exhibit 3
FORM OF TAX OPINION OF COUNSEL TO FIRST LEESPORT
First Leesport and Merchants shall have received an opinion
from counsel to First Leesport, substantially to the effect that,
under the provisions of the IRC:
1. Provided the Merger qualifies as a statutory merger
under applicable law, the transfer by Merchants of all of its
assets to First Leesport in exchange for First Leesport Common
Stock (including fractional share interests) and the assumption
by First Leesport of all of Merchants' liabilities will
constitute a reorganization within the meaning of
Section 368(a)(1)(A) of the IRC.
2. The Merger will constitute a reorganization within the
meaning of Sections 368(a)(1)(A) of the IRC.
3. First Leesport and Merchants will each be "a party to a
reorganization" within the meaning of Section 368(b) of the IRC.
4. Neither First Leesport nor Merchants will recognize any
gain or loss by reason of the Merger upon the transfer of
Merchants' assets to First Leesport in exchange solely for First
Leesport common stock (including fractional share interests) and
the assumption by First Leesport of the liabilities of Merchants.
5. The basis of the Merchants' assets in the hands of
First Leesport will be the same as the basis of such assets in
the hands of Merchants immediately prior to the Merger.
6. The holding period of the Merchants' assets in the
hands of First Leesport will include the period during which such
assets were held by Merchants prior to the Merger.
7. No gain or loss will be recognized by the shareholders
of Merchants on the receipt of First Leesport Common Stock
(including fractional share interests) solely in exchange for
their shares of Merchants Common Stock.
8. The basis of the First Leesport Common Stock (including
fractional share interests) to be received by the shareholders of
Merchants in the Merger will be the same as the basis of the
Merchants Common Stock surrendered in exchange therefor.
9. The holding period of the First Leesport Common Stock
(including fractional share interests) to be received by the
shareholders of Merchants in the Merger will include the period
during which the shareholders of Merchants held their Merchants
Common Stock, provided the shares of Merchants Common Stock are
held as a capital asset on the Effective Date.
10. The payment of cash in lieu of fractional share
interests of First Leesport Common Stock will be treated as if
the fractional share interests were distributed as part of the
Merger and then redeemed by First Leesport. Such cash payments
will be treated as having been received as distributions in full
payment in exchange for the fractional share interests redeemed,
as provided in Section 302(a) of the IRC.
11. As provided in Section 381(c)(2) of the IRC and related
Treasury regulations, First Leesport will succeed to and take
into account the earnings and profits, or deficit in earnings and
profits, of Merchants as of the effective date of the Merger.
Any deficit in the earnings and profits of First Leesport or
Merchants will be used only to offset the earnings and profits
accumulated after the Merger.
12. Pursuant to Section 381(a) of the IRC and related
Treasury regulations, First Leesport will succeed to and take
into account the items of Merchants described in Section 381(c)
of the IRC. Such items will be taken into account by First
Leesport subject to the conditions and limitations of
Sections 381, 382, 383, and 384 of the IRC and the Treasury
regulations thereunder.
PAGE 2
Exhibit 4
FORM OF OPINION OF COUNSEL TO MERCHANTS
First Leesport shall have received from counsel to
Merchants an opinion, dated as of the Closing Date, substantially
to the effect that, subject to customary exceptions and
qualifications:
(a) Merchants has full corporate power to carry out
the transactions contemplated in the Agreement. The execution
and delivery of the Agreement and the consummation of the
transactions contemplated thereunder have been duly and validly
authorized by all necessary corporate action on the part of
Merchants, and the Agreement constitutes a valid and legally
binding obligation of Merchants, in accordance with its terms,
except as may be limited by bankruptcy, insolvency,
reorganization, moratorium, receivership, conservatorship, and
other laws affecting creditors' rights generally, and as may be
limited by the exercise of judicial discretion in applying
principles of equity. Subject to satisfaction of the conditions
set forth in the Agreement, neither the transactions contemplated
in the Agreement, nor compliance by Merchants with any of the
respective provisions thereof, will (i) conflict with or result
in a breach or default under (A) the articles of incorporation or
bylaws of Merchants, or (B) based solely on certificates of
officers and without independent verification, to the knowledge
of such counsel, any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which Merchants is
a party; or (ii) based solely on certificates of officers, to the
knowledge of such counsel, result in the creation or imposition
of any material lien, instrument or encumbrance upon the property
of Merchants or MBP, except such material lien, instrument or
obligation that has been disclosed to First Leesport pursuant to
the Agreement, or (iii) violate in any material respect any
order, writ, injunction, or decree known to such counsel, or any
statute, rule or regulation applicable to Merchants or MBP.
(b) MBP is a validly existing state-chartered banking
institution organized and in good standing under the laws of the
Commonwealth of Pennsylvania. The deposits of MBP are insured to
the maximum extent provided by law by the Federal Deposit
Insurance Corporation.
(c) There is, to the knowledge of such counsel, no
legal, administrative, arbitration or governmental proceeding or
investigation pending or threatened to which Merchants or MBP is
a party which would, if determined adversely to Merchants or MBP,
have a material adverse effect on the business, properties,
results of operations, or condition, financial or otherwise, of
Merchants taken as a whole or which presents a claim to restrain
or prohibit the transactions contemplated by the Agreement.
(d) To the knowledge of such counsel, no consent,
approval, authorization, or order of any federal or state court
or federal or state governmental agency or body, or of any third
party, is required for the consummation by MBP of the
transactions contemplated by the Agreement, except for such
consents, approvals, authorizations or orders as have been
obtained.
Such counsel shall also provide a statement to the
following effect:
By way of supplemental information, such counsel
advises that on the sole basis of such counsel's participation in
conferences with officers and employees of Merchants in
connection with the preparation of the Prospectus/Proxy Statement
and without other independent investigation or inequity, such
counsel has no reason to believe that the Prospectus/Proxy
Statement, including any amendments or supplements thereto
(except for the financial information, financial statements,
financial schedules and other financial or statistical data
contained therein and except for any information supplied by
First Leesport or FNBL for inclusion therein, as to which counsel
need express no belief), as of the date of mailing thereof,
contained any untrue statement of a material fact or omitted to
state a material fact necessary to make any statement therein, in
light of the circumstances under which it was made, not
misleading. Counsel may state in delivering such statement, that
such counsel has not independently verified and does not assume
any responsibility for the accuracy, completeness or fairness of
any information or statements contained in the Prospectus/Proxy
Statement, except with respect to identified statements of law or
regulations or legal conclusions relating to Merchants or MBP or
the transactions contemplated in the Agreement.