AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BENEFICIAL SAVINGS BANK MHC
BENEFICIAL MUTUAL BANCORP, INC.
AND
BENEFICIAL MUTUAL SAVINGS BANK
AND
FMS FINANCIAL CORPORATION
AND
FARMERS AND MECHANICS BANK
DATED AS OF OCTOBER 12, 2006
TABLE OF CONTENTS
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RECITALS...................................................................................................... 1
ARTICLE I
DEFINITIONS....................................................................................................2
ARTICLE II
THE MERGER....................................................................................................11
2.1 The Merger..................................................................................11
2.2 Effect of the Merger........................................................................11
2.3 Conversion of Shares Upon Merger............................................................12
2.4 FMS Stock Options...........................................................................12
2.5 Merger Consideration........................................................................12
2.6 Exchange of FMS Common Stock................................................................16
2.7 Tax-Free Reorganization.....................................................................18
2.8 Reserved....................................................................................19
2.9 Minority Stock Offering.....................................................................19
2.10 Alternative Structure.......................................................................19
ARTICLE III
OTHER AGREEMENTS..............................................................................................19
3.1 Confidentiality; Access.....................................................................19
3.2 Disclosure Schedules........................................................................20
3.3 Duties Concerning Representations...........................................................20
3.4 Deliveries of Information; Consultation.....................................................21
3.5 Directors' and Officers' Indemnification and Insurance......................................21
3.6 Letter(s) of Accountants....................................................................22
3.7 Legal Conditions to Merger..................................................................22
3.8 Stock Listings..............................................................................22
3.9 Announcements...............................................................................22
3.10 Best Efforts................................................................................22
3.11 Employee and Managerial Matters.............................................................23
3.12 Employee Benefit Matters....................................................................23
3.13 Listing of Bancorp Common Stock.............................................................24
3.14 Affiliates..................................................................................24
3.15 Disclosure Controls.........................................................................24
3.16 Appointment to Bancorp Board of Directors...................................................25
3.17 Advisory Board..............................................................................25
3.18 Meeting of FMS Shareholders.................................................................26
3.19 Voting Agreement............................................................................26
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FMS.........................................................................26
4.1 Organization and Qualification; Subsidiaries................................................26
4.2 Certificate of Incorporation and Bylaws.....................................................27
4.3 Capitalization..............................................................................27
4.4 Authorization; Enforceability...............................................................28
4.5 No Violation or Conflict....................................................................28
4.6 Title to Assets; Leases.....................................................................28
4.7 Litigation..................................................................................29
4.8 Securities and Banking Reports; Books and Records...........................................29
4.9 Absence of Certain Changes..................................................................30
4.10 Buildings and Equipment.....................................................................30
4.11 FMS Existing Contracts......................................................................31
4.12 Investment Securities.......................................................................31
4.13 Contingent and Undisclosed Liabilities......................................................31
4.14 Insurance Policies..........................................................................31
4.15 Employee Benefit Plans......................................................................31
4.16 No Violation of Law.........................................................................32
4.17 Brokers.....................................................................................33
4.18 Taxes.......................................................................................33
4.19 Real Estate.................................................................................34
4.20 Governmental Approvals......................................................................34
4.21 No Pending Acquisitions.....................................................................34
4.22 Labor Matters...............................................................................34
4.23 Indebtedness................................................................................35
4.24 Permits.....................................................................................35
4.25 Disclosure..................................................................................35
4.26 Information Supplied........................................................................35
4.27 Vote Required...............................................................................35
4.28 Opinion of Financial Advisor................................................................36
4.29 Environmental Protection....................................................................36
4.30 Controls and Procedures.....................................................................36
4.31 Community Reinvestment Act..................................................................38
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BANCORP.....................................................................38
5.1 Organization and Capitalization; Business...................................................38
5.2 Authorization; Enforceability...............................................................39
5.3 No Violation or Conflict....................................................................39
5.4 Litigation..................................................................................39
5.5 Governmental Approvals......................................................................40
5.6 Cash Payment................................................................................40
5.7 Compliance with Laws........................................................................40
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5.8 Consummation................................................................................40
5.9 Banking Reports; Books and Records..........................................................40
5.10 Absence of Certain Changes..................................................................41
5.11 Taxes.......................................................................................41
5.12 Title to Assets; Leases.....................................................................42
5.13 Contingent and Undisclosed Liabilities......................................................42
5.14 Insurance Policies..........................................................................42
5.15 Employee Benefit Plans......................................................................43
5.16 Labor Matters...............................................................................44
5.17 Disclosure..................................................................................44
5.18 Information Supplied........................................................................44
5.19 Environmental Protection....................................................................45
5.20 Community Reinvestment Act..................................................................45
ARTICLE VI
CONDUCT OF BUSINESS BY FMS PENDING THE MERGER.................................................................46
6.1 Conduct of Business by FMS Until the Effective Time.........................................46
6.2 Acquisition Transactions....................................................................51
6.3 Minority Stock Offering.....................................................................52
6.4 Formation of Merger Corp. ..................................................................52
6.5 Change in Bank Control Act Filings..........................................................52
6.6 FMS Options.................................................................................53
ARTICLE VII
CONDITIONS PRECEDENT TO THE MERGER............................................................................53
7.1 Conditions to Each Parties Obligations to Effect the Merger.................................53
7.2 Conditions to Obligation of Bancorp.........................................................54
7.3 Conditions to Obligation of FMS.............................................................55
ARTICLE VIII
TERMINATION...................................................................................................56
8.1 Termination.................................................................................56
8.2 Effect of Termination.......................................................................58
8.3 Bancorp Termination Payment.................................................................60
ARTICLE IX
MISCELLANEOUS.................................................................................................61
9.1 Entire Agreement; Amendment.................................................................61
9.2 Governing Law...............................................................................61
9.3 Assignment..................................................................................61
9.4 Notices.....................................................................................61
9.5 Counterparts; Headings......................................................................62
9.6 Interpretation..............................................................................62
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9.7 Severability................................................................................62
9.8 Specific Performance........................................................................63
9.9 No Reliance.................................................................................63
9.10 Further Assurances..........................................................................63
EXHIBITS
Exhibit A Corporate Merger Agreement
Exhibit B Mid-Tier Merger Agreement
Exhibit C Bank Merger Agreement
Exhibit D Form of Voting Agreement
Exhibit E Form of Affiliate's Letters
Exhibit F Directors and Officers of Bancorp
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of October 12, 2006, by and
among Beneficial Savings Bank, MHC, a federally chartered mutual holding
company, Beneficial Mutual Bancorp, Inc., a federally chartered mid-tier holding
company and wholly owned subsidiary of Beneficial MHC, Beneficial Mutual Savings
Bank, a Pennsylvania-chartered savings bank and wholly owned subsidiary of
Bancorp, FMS Financial Corporation, a New Jersey chartered corporation and
savings and loan holding company, and Farmers and Mechanics Bank, a federally
chartered savings bank and wholly owned subsidiary of FMS.
RECITALS
WHEREAS, the respective Boards of Directors of Beneficial MHC, Bancorp,
BMSB, FMS and FMB have determined that it is in the best interest of their
respective companies and shareholders or depositors, as the case may be, to
consummate the business combination transactions provided for herein, subject to
the terms and conditions set forth herein;
WHEREAS, FMS will merge with and into Merger Corp., a federally chartered
interim corporation to be formed as a subsidiary of Bancorp, with Merger Corp.
being the surviving entity and simultaneously with, or as soon thereafter as
practicable, Merger Corp. will be merged with and liquidated into Bancorp;
WHEREAS, FMB will merge with and into BMSB with BMSB as the surviving
entity;
WHEREAS, all of the directors and executive officers of FMS have agreed, in
their capacity as shareholders of FMS, to vote their shares of FMS Common Stock
in favor of this Agreement pursuant to separate voting agreements (in the form
attached as Exhibit D hereto);
WHEREAS, the Merger will be conducted immediately following a Minority
Stock Offering by Bancorp; and
WHEREAS, the transactions provided herein are subject to various regulatory
approvals and other conditions specified herein.
NOW, THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, hereby agree that:
ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
specified:
Acquisition. "Acquisition" shall mean any of the following involving FMS or
FMB on the one hand, or Beneficial MHC, Bancorp or BMSB on the other hand, other
than the Merger and the Minority Stock Offering:
(a) any merger, consolidation, share exchange, business combination or
other similar transaction;
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 24.9% or more of assets in a single transaction or series of
related transactions, excluding from this calculation any such transactions
undertaken in the ordinary course of business and consistent with past practice;
(c) any sale of 24.9% or more of the outstanding shares of capital
stock (or securities convertible or exchangeable into or otherwise evidencing,
or an agreement or instrument evidencing, the right to acquire capital stock);
(d) the filing of an acquisition application (or the giving of
acquisition notice), whether in draft or final form, under HOLA or under any
other applicable Law with respect to it;
(e) any person shall have acquired beneficial ownership or the right
to acquire beneficial ownership of, or any "group" (as such term is defined
under Section 13(d) of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder) shall have been formed which beneficially owns or has
the right to acquire beneficial ownership of, 24.9% or more of the then
outstanding shares of capital stock; or
(f) any public announcement of a proposal, plan or intention to do any
of the foregoing.
Acquisition Proposal. "Acquisition Proposal" shall mean the making of any
proposal by any Person concerning an Acquisition.
Affiliate. "Affiliate" shall mean, with respect to any Person, any other
Person who directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with the first Person, including
without limitation all directors and executive officers of the first Person.
Affiliate Letter. "Affiliate Letter" shall mean a letter from each
Affiliate of FMS substantially in the form of Exhibit E attached to this
Agreement.
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Agreement. "Agreement" shall mean this Agreement and Plan of Merger,
together with the Exhibits attached hereto and together with the Disclosure
Schedules, as the same may be amended or supplemented from time to time in
accordance with the terms hereof.
Bancorp. "Bancorp" shall mean Beneficial Mutual Bancorp, Inc., a federally
chartered mid-tier holding company and wholly owned subsidiary of Beneficial
Savings Bank MHC.
Bancorp Common Stock. "Bancorp Common Stock" shall mean the common stock,
$1.00 par value per share of Bancorp.
Bancorp Disclosure Schedule. "Bancorp Disclosure Schedule" shall mean the
disclosure schedule, dated the date of this Agreement, delivered by Bancorp to
FMS contemporaneously with the execution and delivery of this Agreement and as
the same may be amended from time to time after the date of this Agreement and
prior to the Closing Date in accordance with the terms of this Agreement.
Bancorp Subsidiaries. "Bancorp Subsidiaries" shall mean BMSB, a
wholly-owned subsidiary of Bancorp, and the following wholly-owned subsidiaries
of BMSB: Beneficial Investment Center, LLC, ▇▇▇▇▇▇▇ Corporation, Beneficial
Insurance Services, LLC and BSB Union Corporation, which constitute all of the
direct and indirect subsidiaries of Bancorp.
Beneficial MHC. "Beneficial MHC" shall mean Beneficial Savings Bank MHC, a
federally chartered mutual holding company.
BMSB. "BMSB" shall mean Beneficial Mutual Savings Bank, a
Pennsylvania-chartered savings bank headquartered in Philadelphia, Pennsylvania,
which is a wholly owned subsidiary of Bancorp.
Buildings. "Buildings" shall mean all buildings, fixtures, structures and
improvements (including without limitation stand-alone automated teller machines
or similar devices) used by a Person or an Affiliate and located on the Person's
Real Estate.
CERCLA. "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as the same may be in effect from time
to time.
Closing. "Closing" shall mean the conference to be held at 9:00 a.m.,
Eastern Time, on the Closing Date at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Aguggia
LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or such other time and
place as the parties may mutually agree to in writing, at which the transactions
contemplated by this Agreement shall be consummated.
Closing Date. "Closing Date" shall mean the date of the Effective Time or
such other date as the parties may mutually agree to in writing.
Code. "Code" shall mean the Internal Revenue Code of 1986, as amended, as
the same may be in effect from time to time.
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Contracts. "Contracts" shall mean all of the contracts, agreements, leases,
relationships and commitments, written or oral, to which the relevant Person is
a party or by which it is bound.
Control. "Control," as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise. "Control," as used
with respect to securities or other property, shall mean the power to exercise
or direct the exercise of any voting rights associated therewith, or the power
to dispose or direct the disposition thereof, or both.
Disclosure Schedules. "Disclosure Schedules" shall mean the FMS Disclosure
Schedule and the Bancorp Disclosure Schedule.
Employee Benefit Plans. "Employee Benefit Plans" shall mean any pension
plan, profit sharing plan, bonus plan, incentive compensation plan, deferred
compensation plan, stock ownership plan, stock purchase plan, stock option plan,
stock appreciation plan, employee benefit plan, employee benefit policy,
retirement plan, fringe benefit program, insurance plan, severance plan,
disability plan, health care plan, sick leave plan, death benefit plan, or any
other plan or program to provide retirement income, fringe benefits or other
benefits to former or current employees of the relevant Person.
Environmental Claim. "Environmental Claim" shall mean any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
directives, claims, Liens, investigations, proceedings or notices of
noncompliance or violation (written or oral) by any Person alleging potential
liability (including, without limitation, potential liability for enforcement,
investigatory costs, cleanup costs, governmental response costs, removal costs,
remedial costs, natural resources damages, property damages, personal injuries,
or penalties) arising out of, based on or resulting from: (A) the presence, or
release into the environment, of any Hazardous Materials at any location,
whether or not owned by a Person or any of its Subsidiaries; or (B)
circumstances forming the basis of any violation or alleged violation, of any
Environmental Law; or (C) any and all claims by any Person seeking damages,
contribution, indemnification, cost, recovery, compensation or injunctive relief
resulting from the presence or Release of any Hazardous Materials.
Environmental Laws. "Environmental Laws" shall mean all federal, state,
local or foreign statutes, Laws, rules, ordinances, codes, policies, guidelines,
and regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), including, without limitation, Laws
and regulations relating to Releases or threatened Releases of Hazardous
Materials, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials.
Environmental Permits. "Environmental Permits" shall mean environmental,
health and safety permits and governmental authorizations necessary for their
operations of a Person under Environmental Laws.
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Equipment. "Equipment" shall mean all equipment, boilers, furniture,
fixtures, motor vehicles, furnishings, office equipment, computers and other
items of tangible personal property owned by the relevant Person which are
either presently used, or are used on the Closing Date, by the relevant Person
in the conduct of its business.
ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may be in effect from time to time.
Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, as the same may be in effect from time to time.
FDIA. "FDIA" shall mean the Federal Deposit Insurance Act, as the same my
be in effect from time to time.
FDIC. "FDIC" shall mean the Federal Deposit Insurance Corporation.
FHLB of New York. "FHLB of New York" shall mean the Federal Home Loan Bank
of New York.
FHLB of Pittsburgh. "FHLB of Pittsburgh" shall mean the Federal Home Loan
Bank of Pittsburgh.
FMB. "FMB" shall mean Farmers and Mechanics Bank, a federally chartered
stock savings bank headquartered in Burlington, New Jersey.
FMS. "FMS" shall mean FMS Financial Corporation, a New Jersey chartered
corporation headquartered in Burlington, New Jersey, which is registered as a
unitary savings and loan holding company under HOLA and the rules and
regulations of the OTS promulgated thereunder.
FMS Common Stock. "FMS Common Stock" shall mean all of the authorized
shares of common stock, $.10 par value per share, of FMS.
FMS Disclosure Schedule. "FMS Disclosure Schedule" shall mean the
disclosure schedule, dated the date of this Agreement, delivered by FMS to
Bancorp contemporaneously with the execution and delivery of this Agreement and
as the same may be amended from time to time after the date of this Agreement
and prior to the Closing Date in accordance with the terms of this Agreement.
FMS Executives. "FMS Executives" shall mean the individuals who serve as
executive officers of FMS or FMB.
FMS Existing Indebtedness. "FMS Existing Indebtedness" shall mean all
Indebtedness of FMS and the FMS Subsidiaries, all of which is listed on the FMS
Disclosure Schedule.
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FMS Existing Liens. "FMS Existing Liens" shall mean all Liens affecting any
of the assets and properties of FMS or any FMS Subsidiary (except for Liens for
current taxes not yet due and payable, pledges to secure deposits and such
imperfections of title, easements and other encumbrances, if any, as do not
materially detract from the value of or substantially interfere with the present
use of the property affected thereby), all of which are listed and briefly
described on the FMS Disclosure Schedule.
FMS Existing Litigation. "FMS Existing Litigation" shall mean all pending
or, to the Knowledge of FMS, threatened claims, suits, audit inquiries, charges,
workers compensation claims, litigation, arbitrations, proceedings, governmental
investigations, citations and actions of any kind against FMS or any FMS
Subsidiary, or affecting any assets or the business of FMS or any FMS
Subsidiary, all of which are listed and briefly described on the FMS Disclosure
Schedule.
FMS Existing Plans. "FMS Existing Plans" shall mean all Employee Benefit
Plans of FMS and the FMS Subsidiaries including any tax-qualified Benefit Plans
of such entities that have been terminated since December 31, 2004, all of which
are listed on the FMS Disclosure Schedule.
FMS Meeting. "FMS Meeting" shall mean the special or annual meeting of the
FMS Shareholders for the purpose of approving the Merger, this Agreement and the
transactions contemplated by this Agreement, and for such other purposes as may
be necessary or desirable.
FMS Real Estate. "FMS Real Estate" shall mean the parcels of real property
identified in the legal descriptions set forth in the FMS Disclosure Schedule.
FMS Shareholders. "FMS Shareholders" shall mean all Persons owning shares
of FMS Common Stock on the relevant date of inquiry.
FMS Stock Option Plan. "FMS Stock Option Plan" shall mean the FMS Financial
Corporation Stock Option Plan.
FMS Stock Options. "FMS Stock Options" shall mean all options to purchase
shares of FMS Common Stock granted pursuant to the FMS Stock Option Plan that
are outstanding as of the relevant time of inquiry, whether or not such options
are exercisable prior to the Effective Time.
FMS Subsidiaries. "FMS Subsidiaries" shall mean those Subsidiaries of FMS
listed on the FMS Disclosure Schedule pursuant to Section 4.1(c) of this
Agreement.
Fraction Payment. "Fraction Payment" shall mean any cash paid for
fractional share interests paid pursuant to Section 2.6(c) of this Agreement.
Hazardous Materials. "Hazardous Materials" shall mean: (a) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, and transformers or other
equipment that contain dielectric
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fluid containing regulated levels of polychlorinated biphenyls (PCBs) and radon
gas; (b) any chemicals, materials or substances which are now defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes, restricted hazardous
wastes," "toxic substances," "toxic pollutants," or words of similar import,
under any Environmental Law; and (c) any other chemical, material, substance or
waste, exposure to which is now prohibited, limited or regulated by any
governmental authority.
HOLA. "HOLA" shall mean the Home Owners' Loan Act, as the same may be in
effect from time to time, including the rules and regulations of the OTS
promulgated thereunder.
Indebtedness. "Indebtedness" shall mean all liabilities or obligations
(except deposit accounts) of the relevant Person, whether primary or secondary,
absolute or contingent: (a) for borrowed money; (b) evidenced by notes, bonds,
debentures or similar instruments; or (c) secured by Liens on any assets of the
relevant Person.
Investment Securities. "Investment Securities" shall mean all investment
securities of the relevant Person permitted to be held by the relevant Person
under Law.
IRS. "IRS" shall mean the United States Internal Revenue Service.
Knowledge. "Knowledge" of a Person shall mean, for purposes of this
Agreement, when any fact or matter is stated to be "to the Knowledge" of that
Person or words of similar import, the actual knowledge of the existence or
nonexistence of such fact or matter by the executive officers and the Person and
its Subsidiaries.
Law. "Law" shall mean any federal, state, local or other law, rule,
regulation, policy or governmental requirement of any kind, and the rules,
regulations and orders promulgated thereunder by any regulatory agencies or
other Persons.
Lien. "Lien" shall mean, with respect to any asset: (a) any mortgage,
pledge, lien, charge, claim, restriction, reservation, condition, easement,
covenant, lease, encroachment, title defect, imposition, security interest or
other encumbrance of any kind; and (b) the interest of a vendor or lessor under
any conditional sale agreement, financing lease or other title retention
agreement relating to such asset.
Material Adverse Effect. "Material Adverse Effect" shall mean any change or
effect that is or is reasonably likely to be materially adverse to the financial
condition or results of operations of the relevant Person and its Subsidiaries,
taken as a whole or that would reasonably be expected to materially and
adversely affect the ability of the relevant Person to consummate the
transactions contemplated in this Agreement or to perform their material
obligations hereunder; provided, however, that "Material Adverse Effect" shall
not be deemed to include (i) the impact of actions or omissions of a Party taken
with the prior written consent of the other in contemplation of the transactions
contemplated by this Agreement, (ii) changes in laws and regulations or
interpretations thereof that are generally applicable to the banking or savings
institutions industries, (iii) changes in generally accepted accounting
principles, (iv) expenses incurred in connection with this Agreement and the
Merger including payments to be made
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pursuant to employment and severance agreements and the termination of other
benefit plans, or (v) changes attributable to or resulting from changes in
general economic conditions generally affecting financial institutions including
changes in interest rates.
Material Contract. "Material Contract" shall mean any Contract of a Person
or any of its subsidiaries which constitutes:
(a) a lease of, or agreement to purchase or sell, any capital assets
involving in excess of $25,000 as to any asset or $100,000 in the aggregate;
(b) any management, consulting, employment, personal service,
severance, agency or other contract or contracts providing for employment or
rendition of services and which: (i) are in writing, or (ii) create other than
an at will employment relationship; or (iii) provide for any commission, bonus,
profit sharing, incentive, retirement, consulting or additional compensation;
(c) any agreements or notes evidencing any Indebtedness;
(d) a power of attorney (whether revocable or irrevocable) given to
any other person by the Person that is in force;
(e) an agreement by the Person not to compete in any business or in
any geographical area;
(f) an agreement restricting the Person's right to use or disclose any
information in its possession;
(g) a partnership, joint venture or similar arrangement;
(h) a license involving payments in excess of $10,000;
(i) an agreement or arrangement with any Affiliate which is not a
Subsidiary;
(j) an agreement for data processing services;
(k) any assistance agreement, supervisory agreement, memorandum of
understanding, consent order, cease and desist order or other regulatory order
or decree with or by the SEC, OTS, FDIC, P.D.B. or any other regulatory
authority; or
(l) any other agreement or set of related agreements or series of
agreements which: (i) involve an amount in excess of $25,000 on an annual basis
or $100,000 in the aggregate; or (ii) is not in the ordinary course of business
of the Person or any Subsidiary of the Person.
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Merger. "Merger" shall mean collectively the Corporate Merger, the
Mid-Tier Merger, the Bank Merger and any other mergers by interim corporate
entities necessary to effectuate the transactions contemplated by this
Agreement.
Merger Corp. "Merger Corp." shall mean a federally chartered corporation
to be formed by Bancorp for the purpose of effecting the transactions
contemplated by this Agreement.
N.J.S.A. "N.J.S.A." shall mean the New Jersey Statutes Annotated.
OTS. "OTS" shall mean the Office of Thrift Supervision, United States
Department of the Treasury, or any successor agency.
Permits. "Permits" shall mean all licenses, permits, approvals,
franchises, qualifications, permissions, agreements, orders and governmental
authorizations required for the conduct of the business of the relevant Person.
Permitted Liens. "Permitted Liens" shall mean those FMS or FMB Existing
Liens which are expressly noted as Permitted Liens on a Disclosure Schedule.
Person. "Person" shall mean a natural person, corporation, bank, trust,
partnership, association, governmental entity, agency or branch or department
thereof, or any other legal entity.
P.D.B. "P.D.B." shall mean the Pennsylvania Department of Banking.
Proxy Statement. "Proxy Statement" shall mean the proxy statement of FMS
to be filed with the SEC and to be distributed to the FMS Shareholders in
connection with the FMS Special Meeting and the approval of the Merger by the
FMS Shareholders and which shall also constitute a prospectus with respect to
the shares of Bancorp Common Stock to be issued in the Merger.
Registration Statement. "Registration Statement" shall mean a registration
statement on Form S-1 (or other appropriate form) to be filed under the
Securities Act by Bancorp in connection with the Merger for purposes of
registering the shares of Bancorp Common Stock to be issued in the Merger
pursuant to this Agreement and in connection with the Minority Stock Offering
for purposes of registering the shares of Bancorp Common Stock to be issued in
the Minority Stock Offering.
Regulatory Approvals. "Regulatory Approvals" shall mean all of the
approvals which are conditions precedent to consummating the Merger and the
Minority Stock Offering, as specified in Section 7.1(c) of this Agreement.
Release. "Release" shall mean any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the atmosphere, soil, surface water, groundwater or property.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
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Securities Act. "Securities Act" shall mean the Securities Act of 1933, as
amended, as the same may be in effect from time to time.
Subsidiary. "Subsidiary" shall mean any corporation, financial
institution, joint venture, partnership, limited liability company, trust or
other business entity: (i) 25% or more of any outstanding class of whose voting
interests is directly or indirectly owned by the relevant Person, or is held by
it with power to vote; (ii) the election of a majority of whose directors,
trustees, general partners or comparable governing body is controlled in any
manner by the relevant Person; or (iii) with respect to the management or
policies of which the relevant Person has the power, directly or indirectly, to
exercise a controlling influence. Subsidiary shall include an indirect
Subsidiary of the relevant Person which is controlled in any manner specified
above through one or more corporations or financial institutions which are
themselves Subsidiaries.
Other Defined Terms. The following additional terms are defined in the
specific Section to which they relate:
TERM SECTION
--------------------- -------
Acquisition Agreement 8.1(k)
Bank Merger 2.2(b)
Bancorp Proposal 6.2(b)
Bancorp Reports 5.9(a)
Benchmark Price 8.3(d)
Cash Consideration 2.5(a)(i)
Cash Conversion Number 2.5(b)(i)
Cash Election 2.5(d)(iii)
Cash Election Number 2.5(d)(iii)
Cash Election Shares 2.5(d)(iii)
Cash Proration Factor 2.5(e)(ii)
Certificates 2.5(d)(ii)
COBRA 3.12(d)
Corporate Merger 2.2 (a)
Costs 8.2(c)
Disclosure Schedule Change 3.2(d)
Effective Time 2.1
Election Deadline 2.5(d)(ii)
Election Form 2.5(d)(i)
Exchange Agent 2.6(a)
Exchange Fund 2.6(e)
Exchange Ratio 2.5(a)(ii)
Bancorp Reports 5.9
FMS Approvals 4.1(a)
FMS Reports 4.8
Indemnified Parties 3.5(a)
Minority Stock Offering 2.9(a)
Mixed Election 2.5(d)(iii)
10
Merger Consideration 2.5(a)
Non-Election 2.5(d)(iii)
Non-Election Shares 2.5(d)(iii)
Non-Election Proration Factor 2.5(e)(ii)
Representative 2.5(d)(i)
Shortfall Number 2.5(e)(ii)
Special Payment 8.3(a)
Special Payment Event 8.3(a)
Stock Consideration 2.5(a)(ii)
Stock Conversion Number 2.5(b)(ii)
Stock Election 2.5(d)(iii)
Stock Election Number 2.5(d)(iii)
Stock Election Shares 2.5(d)(iii)
Stock Proration Factor 2.5(e)(i)
Superior Proposal 6.2(a)
ARTICLE II
THE MERGER
2.1 The Merger. This Agreement provides for the merger of FMS with and into
Merger Corp., whereby the stock of FMS and Merger Corp. outstanding as of the
Effective Time will be converted as described herein. The consummation of the
Merger shall be effected as promptly as practicable after the satisfaction or
waiver of the conditions set forth in Article VII of this Agreement. The Merger
shall become effective on the later of the date and time specified in Articles
of Merger filed with the OTS and the date and time specified in the Certificate
of Merger to be filed with the New Jersey Office of the Secretary of State
pursuant to the N.J.S.A. The date and time on which the Merger shall become
effective is referred to in this Agreement as the "Effective Time."
2.2 Effect of the Merger.
(a) The Corporate Merger. FMS shall merge with and into Merger Corp.
with Merger Corp. as the surviving entity (the "Corporate Merger"). Merger Corp.
and FMS shall enter into the Corporate Merger Agreement substantially in the
form of Exhibit A attached hereto. Immediately thereafter, Merger Corp. shall
merge with and into Bancorp with Bancorp as the surviving entity in accordance
with the Mid-Tier Merger Agreement substantially in the form of Exhibit B
attached hereto.
(b) FMB shall merge with and into BMSB with BMSB as the surviving
institution (the "Bank Merger"). The Bank Merger shall be effected pursuant to
the Bank Merger Agreement substantially in the form of Exhibit C attached
hereto. As a result of the Bank Merger, the existence of FMB shall cease and
BMSB shall be the surviving association and continue to existence as a savings
bank under the laws of Pennsylvania.
(c) Charter and Bylaws of Bancorp. The Charter of Bancorp as in effect
immediately prior to the Effective Time shall be the Charter of Bancorp
immediately after the
11
Effective Time. The Bylaws of Bancorp as in effect immediately prior to the
Effective Time shall be the Bylaws of Bancorp immediately after the Effective
Time.
(d) Directors and Officers of Bancorp. As of the Effective Time, the
directors and officers of Bancorp shall be the directors and officers of Bancorp
serving immediately prior the Effective Time, plus the current members of FMS's
Board appointed to Bancorp's Board pursuant to Section 3.16.
2.3 Conversion of Shares Upon Merger. At the Effective Time, by virtue of
the Merger and without any action on the part of Bancorp, FMS or holders of FMS
Common Stock, the following shall occur:
(a) FMS Common Stock. Subject to Section 2.3(b) and Section 2.6(c),
each share of FMS Common Stock issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive the Merger
Consideration, as defined and pursuant to Section 2.5.
(b) FMS Common Stock Held by FMS. All shares of FMS Common Stock
(other than shares of FMS Common Stock held directly or indirectly in trust
accounts, managed accounts and the like or otherwise held in a fiduciary
capacity that are beneficially owned by third parties) that are (i) owned by FMS
as treasury stock, or (ii) owned directly or indirectly by FMS or any of its
wholly owned subsidiaries, shall be cancelled and no Merger Consideration or
other consideration shall be delivered in exchange therefore.
2.4 FMS Stock Options. Upon the satisfaction of all conditions set forth in
Article VII of this Agreement, immediately prior to the Effective Time, each
holder of an option that is outstanding under the FMS Stock Option Plan
immediately prior to the Effective Time, whether or not the option is then
exercisable, shall receive from FMS in cancellation of such option (such
cancellation to be reflected in a written agreement) a cash payment in an amount
determined by multiplying the number of shares of FMS Common Stock subject to
option by such holder by an amount equal to the difference between the Cash
Consideration and the per share exercise price of such option, net of any cash
which must be withheld under federal and state income tax requirements.
Immediately thereafter, FMS shall cancel each such option.
2.5 Merger Consideration.
(a) Subject to the provisions of this Section 2.5, each share of FMS
Common Stock issued and outstanding immediately prior to the Effective Time
(excluding shares to be cancelled pursuant to Section 2.3(b)) shall be converted
at the election of the holder thereof, subject to and in accordance with the
procedures set forth in this Agreement, into:
(i) the right to receive in cash from Bancorp, without interest,
an amount equal to $28.00 (the "Cash Consideration");
13
(ii) the right to receive from Bancorp that number of shares of
Bancorp Common Stock equal to the Exchange Ratio (as defined below) (the "Stock
Consideration"). The "Exchange Ratio" shall be equal to 2.80; or
(iii) the right to receive a combination of the foregoing in
accordance with the procedures set forth in this Agreement.
"Merger Consideration" means the Stock Consideration, the Cash
Consideration or any combination thereof.
(b) Maximum Conversion Numbers. Subject to adjustment pursuant to
Section 2.5(c): (i) the total number of shares of FMS Common Stock to be
converted into the right to receive Cash Consideration for such shares
(including any such shares subject to the cash portion of a Mixed Election (as
defined below)), shall be 42.5% of the number of shares of FMS Common Stock
outstanding immediately prior to the Effective Time (excluding shares to be
cancelled pursuant to Section 2.3(b)) (the "Cash Conversion Number"); (ii) the
total number of shares of FMS Common Stock to be converted into the right to
receive Stock Consideration for such shares (including any such shares subject
to the stock portion of a Mixed Election) shall be 57.5% of the number of shares
of FMS Common Stock outstanding immediately prior to the Effective Time
(excluding shares to be cancelled pursuant to Section 2.3(b)) (the "Stock
Conversion Number"); and (iii) the maximum number of shares of Bancorp Common
Stock which may be issued as Stock Consideration will be equal to the Exchange
Ratio multiplied by the Stock Conversion Number and the maximum amount of cash
which will be paid as Cash Consideration will be equal to the Cash Consideration
multiplied by Cash Conversion Number.
(c) Adjustments.
(i) Adjustments To the Cash Conversion Number and the Stock
Conversion Number Dependent Upon Minority Offering Appraisal. The Cash
Conversion Number and Stock Conversion Number will be adjusted to ensure the
OTS' requirement that the percentage of Stock Consideration issued to FMS
Shareholders as Merger Consideration is less than 50% of the amount of stock
issued by Bancorp publicly in the Minority Stock Offering is satisfied. In
addition, to the extent necessary to maintain the aggregate pro forma tangible
book value of the shares of Bancorp Common Stock to be issued in the Merger at
not less than $65.609 million: (A) the Cash Conversion Number will decrease to
no lower than 35% of the number of shares of FMS Common Stock outstanding
immediately prior to the Effective Time (excluding shares to be cancelled
pursuant to Section 2.3(b)); and (B) the Stock Conversion Number will increase
to no greater than 65% of the number of shares of FMS Common Stock outstanding
immediately prior to the Effective Time (excluding shares to be canceled
pursuant to Section 2.3(b)). For purposes of this provision, pro forma tangible
book value per share shall be as disclosed in the final appraisal as approved by
the OTS in connection with the Minority Stock Offering.
(ii) Adjustment for Dilution and Other Matters. If, between the
date of this Agreement and the Effective Time, each of the outstanding shares of
FMS Common Stock shall have been changed into a different number of shares or
into a different class by reason of
14
any stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Exchange Ratio shall be adjusted
appropriately to provide the holders of FMS Common Stock the same economic
effect as contemplated by this agreement prior to such event.
(d) Election Procedures.
(i) All elections contemplated by Section 2.5(a) shall be made on
a form designed for that purpose prepared by FMS and reasonably acceptable to
Bancorp (an "Election Form"). Holders of record of shares of FMS Common stock
who hold such shares as nominees, trustees or in other representative capacities
("Representatives") may submit multiple Election Forms, provided that such
Representative certifies that each such Election Form covers all the shares of
FMS Common Stock held by each such Representative for a particular beneficial
owner.
(ii) The Election Form shall be mailed on the same date as the
date on which the Proxy Statement is mailed to all holders of record of shares
of FMS Common Stock as of the record date of the FMS Meeting. Thereafter FMS and
Bancorp shall each use its reasonable and diligent efforts to mail the Election
Form to all persons who become record holders of shares of FMS Common Stock
during the period between the record date for the Stockholders' Meeting and 5:00
p.m., Eastern Time, on the day five (5) business days prior to the date of the
FMS Meeting. In order to be effective, an Election Form must be received by the
Exchange Agent (as defined below), on or before 5:00 p.m., Eastern Time, on the
business day prior to the FMS Meeting (the "Election Deadline"). An election
shall have been properly made only if the Exchange Agent shall have actually
received a properly completed Election Form by the Election Deadline. An
Election Form shall be deemed properly completed only if accompanied by one or
more certificates theretofore representing FMS Common Stock ("Certificate(s)")
(or customary affidavits and, if required by Bancorp pursuant to Section 2.6(a),
indemnification regarding the loss or destruction of such Certificates or the
guaranteed delivery of such Certificates) representing all shares of FMS Common
Stock covered by such Election Form, together with duly executed transmittal
materials included with the Election Form. Subject to the terms of this
Agreement and the Election Form, the Exchange Agent shall have reasonable
discretion to determine wither any election has been properly or timely made and
to disregard immaterial defects in any Election Form, and any good faith
decisions of the Exchange Agent regarding such matters shall be binding and
conclusive. All elections will be revocable unit the Election Deadline and
thereafter shall be irrevocable.
(iii) Each Election Form shall entitle the holder of shares of
FMS Common Stock (or the beneficial owner through appropriate and customary
documentation and instructions) to (i) elect to receive the Cash Consideration
for all of such holder's shares (a "Cash Election"); (i i) elect to receive the
Stock Consideration for all of such holder's shares (a "Stock Election"), (iii)
elect to receive the Cash Consideration with respect to some of such holder's
shares and the Stock Consideration with respect to such holder's remaining
shares (a "Mixed Election"), or (iv) make no election or indicate that such
holder has no preference as to the receipt of the Cash Consideration or the
Stock Consideration (a "Non-Election"). Shares of FMS Common Stock as to which a
valid Cash Election has been made (including pursuant to a Mixed Election) are
referred to herein as "Cash Election Shares." The aggregate number of shares of
FMS Common Stock as to which a valid Cash Election is made is referred to herein
as the "Cash Election Number." Shares of FMS Common Stock as to which a valid
Stock Election has been made (including pursuant to a Mixed Election) are
referred to herein as "Stock Election Shares." The aggregate number of shares of
▇▇
▇▇▇ ▇▇▇▇▇▇ Stock as to which a valid Stock Election is made is referred to
herein as the "Stock Election Number." Shares of FMS Common Stock as to which a
Non-Election is deemed in effect are referred to as "Non-Election Shares." All
shares of FMS Common Stock of a holder whose properly completed Election Form is
not received by the Exchange Agent prior to the Election Deadline shall be
deemed to be Non-Election Shares. If the Exchange Agent shall have determined
that any purported election was not properly made, such purported election shall
be deemed to be of no force and effect and the shares of FMS Common Stock
subject to such purported election shall for purposes hereof be deemed to be
Non-Election Shares.
(e) Proration Procedures. As soon as practicable after the Election
Deadline, Bancorp shall cause the Exchange Agent to effect the allocation among
holders of FMS Common Stock of rights to receive the Cash Consideration and the
Stock Consideration as follows:
(i) If the Stock Election Number exceeds the Stock Conversion
Number, then:
(A) all Cash Election Shares and all Non-Election Shares
shall be converted into the right to receive the Cash Consideration, and
(B) each holder of Stock Election Shares shall have the
right to receive:
(1) the number of shares of FMS Common Stock equal to
the product obtained by multiplying (a) the number of Stock Election
Shares held by such holder by (b) the Exchange Ratio by (c) a fraction
(rounded to four decimal places) the numerator of which is the Stock
Conversion Number (as adjusted pursuant to Section 2.5(c)) and the
denominator of which is the Stock Election Number (the "Stock
Proration Factor"), and
(2) cash in an amount equal to the product obtained by
multiplying (a) the number of Stock Election shares held by such
holder by (b) the Cash Consideration by (c) one minus the Stock
Proration Factor.
Except as provided herein and except as may be required by Section
2.5(c)(ii), no other change shall be made with respect to the number of
shares of Bancorp Common Stock that may be received in respect to shares of
FMS Common Stock as to which a Stock Election has been made.
(ii) If the Stock Election Number is less than the Stock
Conversion Number (as adjusted pursuant to Section 2.5(c)) (the amount by which
the Stock Conversion
15
Number exceeds the Stock Election Number being referred to herein as the
"Shortfall Number"), then all Stock Election Shares shall be converted into the
right to receive the Stock Consideration and the Non-Election Shares and Cash
Election Shares shall be treated in the following manner:
(A) if the Shortfall Number is less than or equal to the
number of Non-Election Shares, then
(1) all Cash Election Shares shall be converted into
the right to receive the Cash Consideration; and
(2) each holder of Non-Election Shares shall have the
right to receive (a) the number of shares of Bancorp Common Stock
equal to the product obtained by multiplying (x) the number of
Non-Election Shares held by such holder by (y) the Exchange Ratio by
(z) a fraction (rounded to four decimal places) the numerator of which
is the Shortfall Number and the denominator of which is the total
number of Non-Election Shares (the "Non-Election Proration Factor")
and (b) cash in an amount equal to the product obtained by multiplying
(x) the number of Non-Election Shares held by such holder by (y) the
Cash Consideration by (z) one minus the Non-Election Proration Factor;
or
(B) if the Shortfall Number exceeds the number of
Non-Election Shares, then:
(1) all Non-Election Shares shall be converted into the
right to receive the Stock Consideration; and
(2) each holder of Cash Election Shares shall have the
right to receive (a) the number of shares of Bancorp Common Stock
equal to the product obtained by multiplying (x) the number of Cash
Election Shares held by such holder by (y) the Exchange Ratio by (z) a
fraction (rounded to four decimal places) the numerator of which is
the amount by which the Shortfall Number exceeds the number of
Non-Election Shares and the denominator of which is the Cash Election
Number (the "Cash Proration Factor") and (b) cash in an amount equal
to the product obtained by multiplying (x) the number of Cash Election
Shares held by such holder by (y) the Cash Consideration by (z) one
minus the Cash Proration Factor.
2.6 Exchange of FMS Common Stock.
(a) Surrender of Certificates. As soon as practicable after the
Effective Time but in no event later than five (5) business days following the
Effective Time a firm selected by Bancorp and reasonably acceptable to FMS (the
"Exchange Agent"), pursuant to documentation reasonably acceptable to Bancorp
and FMS consistent with the terms hereof, shall mail to each holder of record of
a Certificate who did not previously submit a properly completed Election Form
together with duly executed transmittal materials prior to the Election
Deadline:
16
(i) a form letter of transmittal which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates (or a lost certificate affidavit and bond
in a form reasonably acceptable to the Exchange Agent) to the Exchange Agent;
and
(ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration (in the form or forms
determined in accordance with the provisions of Section 2.5). Upon surrender of
a Certificate for cancellation to the Exchange Agent) or a lost certificate
affidavit and bond in a form reasonably acceptable to the Exchange Agent),
together with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive, in exchange therfor, (i) a certificate
evidencing the whole number of shares of Bancorp Common Stock into which the
shares of FMS Common Stock theretofore represented by the Certificate so
surrendered, shall have been converted pursuant to the provisions of Section
2.5, if any, plus (ii) a check for the aggregate amount of cash, without
interest, which such holder would be entitled to receive pursuant to Section
2.5, if any, including any cash amount payable in lieu of fractional shares in
accordance with Section 2.6(c). Certificates so surrendered shall be cancelled.
Bancorp shall direct the Exchange Agent to make such deliveries within five (5)
business days of the receipt of all required documentation. If any Bancorp
Common Stock to be exchanged for shares of FMS Common Stock is to be delivered
in a name other than that in which the Certificate surrendered for exchange is
registered, it shall be a condition to the exchange that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer,
that all signatures shall be guaranteed by a member firm of any national
securities exchange in the United States or the National Association of
Securities Dealers, Inc., or by a commercial bank or trust company or other
financial institution acceptable to Bancorp having an office in the United
States, and that the person requesting the payment shall either (a) pay to the
Exchange Agent any transfer or other taxes required by reason of the payment to
a person other than the registered holder of the Certificate surrendered, or (b)
establish to the satisfaction of the Exchange Agent that such taxes have been
paid or are not payable. From and after the Effective Time, there shall be no
transfers on the stock transfer books of FMS of any shares of FMS Common Stock
outstanding immediately prior to the Effective Time and any such shares of FMS
Common Stock presented to the Exchange Agent shall be cancelled in exchange for
the Merger Consideration payable with respect thereto as provided in Section 2.5
above.
(b) Failure to Exchange FMS Common Stock. No dividends or other
distributions declared after the Effective Time with respect to Bancorp Common
Stock payable to the holders of record thereof after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to Bancorp
Common Stock represented thereby and no cash payment in lieu of fractional
shares shall be paid to any holder until the holder of record shall surrender
such Certificate. Subject to the effect, if any, of applicable law, after the
subsequent surrender and exchange of a Certificate the holder thereof shall be
entitled to receive any such dividends or distributions, without interest
thereon, which theretofore became payable with respect to the Bancorp Common
Stock represented by such Certificate. All dividends or other distributions
declared on or after the Effective Time with respect to the Bancorp Common Stock
and payable to the holders of record thereof on or after the Effective Time
which are payable to the holder of a Certificate not theretofore surrendered and
exchanged for Bancorp
17
Common Stock pursuant to this Section 2.6(b) shall be paid or delivered by
Bancorp to the Exchange Agent, in trust, for the benefit of such holders. All
such dividends and distributions held by the Exchange Agent for payment or
delivery to the holders of unsurrendered Certificates unclaimed at the end of
one (1) year from the Effective Time shall be repaid or redelivered by the
Exchange Agent to Bancorp after which time any holder of Certificates who has
not theretofore surrendered such Certificates to the Exchange Agent, subject to
applicable law, shall look only to Bancorp for payment or delivery of such
dividends or distributions, as the case may be. Any shares of Bancorp Common
Stock or other consideration delivered or made available to the Exchange Agent
pursuant to this Section 2.6(b) and not exchanged for Certificates within one
(1) year after the Effective Time shall be returned by the Exchange Agent to
Bancorp which shall thereafter act as exchange agent subject to the rights of
holders of unsurrendered Certificates hereunder.
(c) Fractional Shares. No certificates or scrip representing
fractional shares of Bancorp Common Stock shall be issued upon the surrender or
exchange of Certificates, no dividend or distribution of Bancorp shall relate to
any fractional shares, and such fractional shares interests will not entitle the
owner thereof to vote or assert any rights of a stockholder of Bancorp. In lieu
of any fractional share of Bancorp Common Stock, Bancorp shall cause to be paid
to each holder of shares of FMS Common Stock who otherwise would be entitled to
receive a fractional share of Bancorp Common Stock an amount of cash, rounded to
the nearest cent (without interest), equal to the product of such fraction
multiplied by the Cash Consideration.
(d) Escheat. Notwithstanding anything in this Agreement to the
contrary, neither the Exchange Agent nor any party hereto shall be liable to a
former holder of FMS Common Stock for any consideration delivered to a public
official pursuant to applicable escheat or abandoned property laws.
(e) Exchange Fund. On the date the Effective Time occurs, Bancorp
shall deposit, or cause to be deposited, with the Exchange Agent for the benefit
of the holders of FMS Common Stock, for exchange in accordance with the terms of
this Agreement, an aggregate amount of cash, sufficient to pay the aggregate
Cash Consideration payable pursuant to Section 2.5 of this Agreement (plus an
additional amount of cash sufficient to cover amounts payable in lieu of any
fractional shares of FMS Common Stock ("Election Fund")).
(f) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund as directed by Bancorp. Any interest and
other income resulting from such investments shall be paid to Bancorp. In the
event the cash in the Exchange Fund shall be insufficient to fully satisfy all
of the payment obligations to be made by the Exchange Agent hereunder, then
Bancorp shall promptly deposit cash into the Exchange Fund in an amount which is
equal to the deficiency in the amount of cash required to fully satisfy such
payment obligations.
2.7 Tax-Free Reorganization. The parties intend that this Agreement be a
plan of reorganization within the meaning of Section 368(a) of the Code and that
the Merger be a tax-free reorganization under Section 368(a) of the Code to the
extent that shares of FMS Common Stock are exchanged for shares of Bancorp
Common Stock as described in this Agreement. No
18
party shall voluntarily take or cause to be taken any action which would
disqualify the Merger as a tax-free reorganization under Section 368 of the
Code.
2.8 Reserved.
2.9 Minority Stock Offering.
In connection with the Merger and subject to the requirements of Section
6.3 of this Agreement, Bancorp will take all steps necessary to conduct an
offering of shares of Bancorp Common Stock in accordance with the applicable
regulations of the OTS ("Minority Stock Offering"). Such shares shall be offered
for sale at a price of $10.00 per share. Following the Minority Stock Offering
and the Merger, no more than 49% of the outstanding shares of Bancorp Common
Stock shall be owned by parties other than Beneficial MHC.
Following the Minority Stock Offering and the Merger, Beneficial MHC will
own at least 51% of Bancorp Common Stock issued and outstanding, and the Bancorp
Common Stock issued in the Minority Stock Offering to parties other than
Beneficial MHC and in the Merger to the former FMS Shareholders shall constitute
up to 49% of the issued and outstanding shares of Bancorp Common Stock.
The amount of Bancorp Common Stock to be offered to parties other than
Beneficial MHC will be determined so that the total of Bancorp Common Stock
issued to parties other than Beneficial MHC in the Minority Stock Offering, plus
shares of Bancorp Common Stock issued to FMS Shareholders in the Merger as well
as shares reserved for options or the other future compensation programs for
directors and employees of Bancorp and its Subsidiaries, would constitute less
than 50% of the total Bancorp Common Stock issued and outstanding, and the
balance would be owned by Beneficial MHC.
2.10 Alternative Structure. Notwithstanding anything in this Agreement to
the contrary, Bancorp may specify (subject to FMS's approval, which shall not be
unreasonably withheld) that any of its or Beneficial MHC's direct or indirect
subsidiaries, and FMS and any of its direct or indirect subsidiaries shall enter
into transactions other than those described in this Article II, in order to
effect the purposes of this Agreement, and Bancorp and FMS shall take all action
necessary and appropriate to effect, or cause to be affected, such transactions;
provided, however, that (i) other than a change in structure required by a
regulatory agency having jurisdiction over the transactions contemplated by this
Agreement, no such specification shall materially and adversely affect the
timing of the consummation of the transactions contemplated herein; or (ii) no
such specifications shall materially and adversely affect the tax treatment or
economic benefits of the Merger to the holders of FMS Common Stock or to
Beneficial MHC, its members or Subsidiaries.
ARTICLE III
OTHER AGREEMENTS
3.1 Confidentiality; Access. The Confidentiality Agreement previously
entered into between Bancorp and FMS shall remain in full force and effect. Upon
reasonable notice, each
19
party shall afford to the other's officers, employees, accountants, legal
counsel and other representatives access, during normal business hours, to all
of its and its Subsidiaries' properties, books, contracts, commitments and
records; provided that FMS shall have the right to redact any information from
such materials which relates to assessments, analyses or discussions of a
possible Acquisition engaged in by it prior to the date of this Agreement, or
which, relates to matters or issues concerning its evaluation of the Merger or
its obligations under this Agreement, or that would impair its Board of
Directors' ability to discharge its fiduciary duties.
3.2 Disclosure Schedules.
(a) Contemporaneously with the execution and delivery of this
Agreement, FMS is delivering to Bancorp the FMS Disclosure Schedule. The FMS
Disclosure Schedule is deemed to constitute an integral part of this Agreement
and to modify the representations, warranties, covenants or agreements of FMS
contained in this Agreement to the extent that such representations, warranties,
covenants or agreements expressly refer to the FMS Disclosure Schedule.
(b) Contemporaneously with the execution and delivery of this
Agreement, Bancorp is delivering to FMS the Bancorp Disclosure Schedule. The
Bancorp Disclosure Schedule is deemed to constitute an integral part of this
Agreement and to modify the representations, warranties, covenants or agreements
of Bancorp contained in this Agreement to the extent that such representations,
warranties, covenants or agreements expressly refer to the Bancorp Disclosure
Schedule.
(c) All capitalized terms used in the Disclosure Schedules shall have
the definitions specified in this Agreement. All descriptions or listings of
documents contained in the Disclosure Schedules are qualified in their entirety
by reference to the documents so described, true copies of which heretofore have
been delivered or made available to the other. Except as expressly stated to the
contrary in the Disclosure Schedules, disclosure of a matter or document in a
Disclosure Schedule shall not be deemed to be an acknowledgment that such matter
is material or outside the ordinary course of business of the disclosing party.
Disclosure of any matter or event in any of the schedules included in Disclosure
Schedule shall be deemed disclosure for purposes of any and all other schedules
included therein without the need of specific cross reference or duplication,
provided, however, that disclosure of an agreement or other document in a
listing of agreements or documents without any summary or description of the
substance thereof shall be deemed disclosure only for purposes of the schedule
in which such agreement or other document is listed.
(d) Updates. At least 15 days prior to the Closing Date and
immediately prior to the Closing Date, each party shall, to the extent a matter
required to be reported occurs, update its Disclosure Schedule by written notice
to the other to reflect any matters which have occurred from and after the date
of this Agreement which, if existing on the date of this Agreement, would have
been required to be described in the Disclosure Schedule.
3.3 Duties Concerning Representations. Each party to this Agreement shall:
(a) to the extent within its control, use best efforts to cause all of its
representations and warranties
20
contained in this Agreement to be true and correct in all material respects at
the Effective Time with the same force and effect as if such representations and
warranties had been made on and as of the Effective Time; and (b) use best
efforts to cause all of the conditions precedent set forth in Article VII of
this Agreement to be satisfied. Neither party shall take any action, nor agree
to commit to take any action, which would or reasonably can be expected to: (i)
adversely affect the ability of either Bancorp or FMS to obtain the Regulatory
Approvals; (ii) adversely affect a party's ability to perform its covenants or
agreements under this Agreement; or (iii) result in any of the conditions to the
Merger set forth in Article VII not being satisfied.
3.4 Deliveries of Information; Consultation. From time to time prior to the
Effective Time, and subject to the limitations on access rights under Section
3.1 of this Agreement and to the Confidentiality Agreement:
(a) Deliveries. FMS and Bancorp shall furnish promptly to the other:
(i) a copy of each significant report, schedule and other document filed by or
received by it or its Subsidiaries pursuant to the requirements of federal or
state securities or banking Laws promptly after such documents are available;
(ii) its consolidated monthly financial statements (as prepared in accordance
with its normal accounting procedures) promptly after such financial statements
are available; (iii) a summary of any action taken by its, or its Subsidiaries',
Boards of Directors, or any committee thereof; and (iv) all other significant
information concerning it and its Subsidiaries' business, properties and
personnel as the other may reasonably request.
(b) Consultation. Representatives of FMS and Bancorp shall confer and
consult with one another on a regular and frequent basis to report on
operational matters and the general status of their respective ongoing business
operations.
(c) Regulatory Matters. Representatives of FMS and Bancorp shall
discuss with one another any matters directly affecting them in which any state
or federal regulator of FMS or Bancorp or any of their respective Subsidiaries,
is involved.
(d) Litigation. FMS and Bancorp shall provide prompt notice to the
other of any litigation, arbitration, proceeding, governmental investigation,
citation or action of any kind which may be commenced, threatened or proposed by
any Person concerning the legality, validity or propriety of the transactions
contemplated by this Agreement. If any such litigation is commenced against any
party to this Agreement, the parties shall cooperate in all respects in
connection with such litigation.
3.5 Directors' and Officers' Indemnification and Insurance.
(a) Indemnification. For a period of six (6) years following the
Effective Time, Bancorp shall indemnify, and advance expenses in matters that
may be subject to indemnification to, persons who served as directors or
officers of FMS or FMB or any FMS Subsidiaries on or before the Effective Time
("Indemnified Parties") with respect to liabilities and claims (and related
expenses, including fees and disbursements of counsel) made against them
resulting from their service as such prior to the Effective Time in accordance
with and
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subject to the requirements and other provisions of the Certificate of
Incorporation and Bylaws of FMS in effect as of the date hereof and applicable
provisions of Law.
(b) Director and Officer Liability Insurance. Bancorp shall purchase
or cause FMS to purchase and keep in force for a period of six (6) years
following the Effective Time directors' and officers' liability insurance to
provide coverage for acts or omissions of the type and in the amount currently
covered by FMS's and the FMB's existing directors' and officers' liability
insurance for acts or omissions occurring on or prior to the Effective Time.
(c) Parties Benefited. The provisions of this Section 3.5 are intended
to be for the benefit of, and shall be enforceable by, each Indemnified Party,
his or her heirs and his or her representatives, and shall survive the Effective
Time and any merger, consolidation or reorganization of Bancorp.
3.6 Letter(s) of Accountants. FMS shall use its best efforts to cause to be
delivered to Bancorp a letter of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, FMS's independent auditors,
and/or a letter of PricewaterhouseCoopers LLP, FMS's former independent
auditors, each dated a date within three (3) business days before the date on
which the Registration Statement is declared effective, and each addressed to
Bancorp, in form and substance reasonably satisfactory to Bancorp and each
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement and proxy statements similar to the Proxy Statement.
3.7 Legal Conditions to Merger. Each party to this Agreement will: (a) take
all reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on it with respect to the Merger (including making all
filings and requests in connection with the Regulatory Approvals and furnishing
all information required in connection therewith); (b) promptly cooperate with
and furnish information to the other party in connection with any such
requirements imposed upon any of them in connection with the Merger; and (c)
take all reasonable actions necessary to obtain (and will cooperate with the
other party in obtaining) any consent, authorization, order or approval of, or
any exemption by, any governmental entity or other public or private Person,
required to be obtained by the parties to this Agreement in connection with the
Merger or the taking of any action contemplated thereby or by this Agreement.
3.8 Stock Listings. FMS shall use its reasonable best efforts to maintain
the listing of FMS Common Stock on the Nasdaq Global Market through the
Effective Time.
3.9 Announcements. Subject to each party's disclosure obligations imposed
by Law, FMS and Bancorp will cooperate with each other in the development and
distribution of all news releases and other public information disclosures with
respect to this Agreement or any of the transactions contemplated hereby and
shall not issue any public announcement or statement with respect thereto prior
to consultation with the other party.
3.10 Best Efforts. Subject to the terms and conditions of this
Agreement and subject to the fiduciary duties of the Board of Directors of each
party, each of the parties agrees to use its
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best efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary or advisable to consummate the transactions
contemplated by this Agreement including, but not limited to, the Merger.
3.11 Employee and Managerial Matters.
(a) Employees. FMB will continue to employ substantially all present
employees who are employed without employment contracts as employees at will,
subject to the determinations of FMB management and the FMB's and Bancorp's
boards of directors.
(b) Bancorp Executive Officers. Following the Effective Time, the
Executive Officers of Bancorp shall be as set forth in Exhibit F.
(c) Bonus and Retention Program. Officers and employees of FMB and/or
FMS will be paid bonus and retention awards as disclosed on FMS Disclosure
Schedule 3.11(c).
(d) Employee Severance. Employees of FMS and FMB who continue as
employees after the Effective Time will be eligible to receive severance
benefits on the terms set forth on FMS Disclosure Schedule 3.11(d).
3.12 Employee Benefit Matters.
(a) FMS Defined Benefit Plan. The FMS Defined Benefit Plan shall
continue, except to the extent inconsistent with Law, after the Merger for
employees of FMB until such time as Bancorp's Board of Directors elects to take
alternative action.
(b) Health and Welfare Benefits. After the Merger, Bancorp shall
continue, except to the extent not consistent with Law, FMB's health and welfare
benefit plans, programs, insurance and policies until such time as Bancorp's
Board of Directors elects to take alternative action.
(c) Replacement. With respect to each employee and health and welfare
benefit plan or program that replaces a FMS or FMB Existing Plan, for purposes
of determining eligibility to participate and vesting, service with FMS or an
Affiliate of FMS shall be treated as service with Bancorp; provided, however,
that such service shall not be recognized to the extent that such recognition
would result in a duplication of benefits. Such service shall also apply for
purposes of satisfying any waiting periods, actively-at-work requirements, and
evidence of insurability requirements. No pre-existing condition limitations
will apply to any of FMB's employees or their dependents who were participants
in the FMS or FMB Existing Plans comparable to the plan in question at the
Closing Date. Each of the FMB's continuing employees and their dependents shall
be given credit for amounts paid under a corresponding benefit plan during the
same period for purposes of applying deductibles, co-payments and out-of-pocket
maximums as though such amounts had been in accordance with the terms and
conditions of the corresponding FMS Existing Plan.
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(d) COBRA. Until the Effective Time, FMS shall be liable for all
obligations for continued health coverage pursuant to Section 4980B of the Code
and Sections 601 through 609 of ERISA ("COBRA") with respect to each FMS
qualifying beneficiary (as defined in COBRA) who incurs a qualifying event (as
defined in COBRA) before the Effective Time. Bancorp shall be liable for (i) all
obligations for continued health coverage under COBRA with respect to each FMS
qualified beneficiary (as defined in COBRA) who incurs a qualifying event (as
defined in COBRA) from and after the Effective Time, and (ii) for continued
health coverage under COBRA from and after the Effective Time for each FMS
qualified beneficiary who incurs a qualifying event before the Effective Time.
(e) As of the Effective Time, FMB employees that shall continue as
Bancorp or BMSB employees immediately thereafter shall be eligible to
participate in any employee stock ownership plan ("ESOP") that is purchasing
Bancorp Common Stock in the Minority Stock Offering or immediately thereafter,
on the same basis as all other Bancorp or BMSB employees as of the Effective
Time, and such FMB employees shall receive credit for employment service with
FMB prior to the Effective Time in the same manner as other Bancorp or BMSB
employees shall receive credit for employment service with Bancorp and BMSB
prior to the Effective Time for purposes of eligibility to participate in such
ESOP and the vesting of benefits under such ESOP.
(f) As of the Effective Time, FMB employees that shall continue as
Bancorp or BMSB employees immediately thereafter shall be eligible to
participate in any tax-qualified defined contribution plan, including any 401k
plan then maintained or thereafter established by Bancorp or BMSB on the same
basis as all other Bancorp or BMSB employees employed as of the Effective Time,
and such FMB employees shall receive credit for employment service with FMB
prior to the Effective Time for purposes of eligibility to participate in such
plan and vesting of benefits under such plan.
3.13 Listing of Bancorp Common Stock. Bancorp shall use its best efforts to
cause the shares of Bancorp Common Stock to be issued pursuant to this Agreement
to be approved for listing on the Nasdaq Global Market subject to official
notice of issuance, prior to the Effective Time.
3.14 Affiliates. FMS shall use its best efforts to obtain and deliver to
Bancorp on the date hereof a signed representation letter as to certain
restrictions on resale substantially in the form of Exhibit E hereto from each
executive officer and director of FMS and each stockholder of FMS who may be
deemed an "affiliate" of FMS within the meaning of such term as used in Rule 145
under the Securities Act, and shall use best efforts to obtain and deliver to
Bancorp a signed representation letter substantially in the form of Exhibit E
from any person who becomes an executive officer or director of FMS or any
stockholder who becomes such an "affiliate" after the date hereof as promptly as
practicable after (and shall use its reasonable best efforts to obtain and
deliver within five (5) business days after) such person achieves such status.
3.15 Disclosure Controls. (a) Between the date of this Agreement and the
Effective Time, FMS shall maintain disclosure controls and procedures that are
effective to ensure that material information relating to FMS and FMS
Subsidiaries is made known to the President and
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Chief Executive Officer and Chief Financial Officer of FMS to permit FMS to
record, process, summarize and report financial data in a timely and accurate
manner; (ii) such officers shall promptly disclose to FMS' auditors and audit
committee any significant deficiencies in the design or operation of internal
controls which could adversely affect FMS' ability to record process, summarize
and report financial data, any material weaknesses identified in internal
controls, and any fraud, whether or not material, that involves management or
other employees who have a significant role in FMS' internal controls; and (iii)
FMS shall take appropriate corrective actions to address any such significant
deficiencies or material weaknesses identified in the internal controls.
(b) Between the date of this Agreement and the Effective Time, FMS
shall, upon reasonable notice during normal business hours, permit Bancorp (a)
to meet with the officers of FMS and any FMS Subsidiary responsible for the
financial statements of FMS and each FMS Subsidiary and the internal control
over financial reporting of FMS and each FMS Subsidiary to discuss such matters
as Bancorp may deem reasonably necessary or appropriate concerning Bancorp's
obligations under Sections 302 and 906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act; and (b) to
meet with officers of FMS and FMS Subsidiaries to discuss the integration of
appropriate disclosure controls and procedures and internal control over
financial reporting relating to FMS and each FMS Subsidiary's operations with
the controls and procedures and internal control over financial reporting of
Bancorp for purposes of assisting Bancorp in compliance with the applicable
provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act following the Effective Time. FMS shall,
and shall cause its and each FMS Subsidiary's respective employees and
accountants to, fully cooperate with Bancorp in the preparation, documentation,
review, testing and all other actions Bancorp deems reasonably necessary to
satisfy the internal control certification requirements of Section 404 of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
(c) Between the date of this Agreement and the Effective Time, Bancorp
shall maintain an adequate internal control structure and procedures for
financial reporting as required by the rules and regulations of the FDIC (12
C.F.R. Part 363).
3.16 Appointment to Bancorp Board of Directors. Bancorp shall, as of the
Effective Time, cause ▇▇▇▇▇ ▇. ▇▇▇▇▇ and one other director to be designated by
FMS and approved by Bancorp to be appointed to the Board of Directors of each of
Bancorp, Beneficial MHC and BMSB.
3.17 Advisory Board. Bancorp shall cause BMSB to create an advisory board
(the "Advisory Board") to (a) assist in and advise with respect to integration
of the operations of FMB with and into those of BMSB, and (b) advise with
respect to the operations of BMSB. Other than the directors identified in
Section 3.16 above, BMSB will invite all current members of the Board of
Directors of FMS who are members of such Board of Directors as of the Effective
Time to serve on the Advisory Board. The Advisory Board will have a term of one
year and during the one-year term each Advisory director will earn an amount
equal to the aggregate regular Board fees paid to a FMS Board member for service
on both the FMS and FMB boards for the twelve month period immediately prior to
the Effective Time.
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3.18 Meeting of FMS Shareholders.
(a) FMS will promptly take all steps necessary to cause the FMS
Meeting to be duly called, noticed, and held as soon as practicable after the
Registration Statement is declared effective for the purpose of voting to
approve this Agreement, the Merger and all matters related thereto. FMS will use
its best efforts to secure the required approval of its Shareholders.
(b) FMS will prepare and file with the SEC a Proxy Statement as soon
as reasonably practicable after the date of this Agreement. FMS shall use
reasonable best efforts to cause the Proxy Statement to be cleared for mailing
as promptly as practicable after such filing. FMS will cause to be mailed to its
Shareholders a notice of the Meeting and the Proxy Statement as soon as
practicable thereafter. Each party to this Agreement will furnish to the other
parties all information concerning itself as each such other party or its
counsel may reasonably request and which is required or customary for inclusion
in the Proxy Statement.
(c) The Proxy Statement shall include the recommendation of the Board
of Directors of FMS in favor of the Merger; provided, however, that if the Board
of Directors of FMS shall, in good faith and after consulting with its legal
counsel, determine that to make such a recommendation would be a violation of
its fiduciary obligations under applicable Law, then the Board of Directors of
FMS shall not be obligated to make any such recommendation.
3.19 Voting Agreement. FMS shall use its best efforts to have ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ enter into a Voting Agreement in the form attached hereto as Exhibit D as
soon as practicable following the execution of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FMS
FMS hereby represents and warrants to Bancorp that:
4.1 Organization and Qualification; Subsidiaries.
(a) FMS is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey, and is a registered savings
and loan holding company under HOLA. FMB is a federally chartered capital stock
savings bank duly organized and validly existing under the HOLA. The deposits of
FMB are insured by the Deposit Insurance Fund of the FDIC to the extent provided
by the FDIA, and FMB has paid all premiums and assessments required thereunder.
FMB is a member in good standing of the FHLB of New York. Each of the other FMS
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the state of its incorporation. Each of FMS and the FMS Subsidiaries has
the requisite corporate power and authority and is in possession of all
franchises, grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and orders ("FMS Approvals") necessary to own, lease and
operate its properties and to carry on its business as it is now being
conducted, including appropriate authorizations from the OTS and the FDIC,
except where a failure to be so organized, existing and in good standing or to
have such power,
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authority and FMS Approvals would not, individually or in the aggregate, have a
Material Adverse Effect on FMS, and neither FMS nor any FMS Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any FMS Approvals.
(b) Each of FMS and FMB is duly qualified or licensed as a foreign
corporation to conduct business, and is in good standing (or the equivalent
thereof) in each jurisdiction where the character of the properties it owns,
leases or operates or the nature of the activities it conducts make such
qualification or licensing necessary, except for such failures to be so duly
qualified and licensed and in good standing that would not, either individually
or in the aggregate, have a Material Adverse Effect on FMS.
(c) A true and complete list of all Subsidiaries of FMS (the "FMS
Subsidiaries"), together with (i) FMS's direct or indirect percentage ownership
of each FMS Subsidiary; (ii) the jurisdiction in which the FMS Subsidiaries are
incorporated; and (iii) a description of the principal business activities
conducted by each FMS Subsidiary, is set forth in the FMS Disclosure Schedule.
FMS and/or one or more of the FMS Subsidiaries owns beneficially and of record
all of the outstanding shares of capital stock of each of the FMS Subsidiaries.
Except for the Subsidiaries identified in the FMS Disclosure Schedule, FMS does
not directly or indirectly own any equity or similar interests in, or any
interests convertible into or exchangeable or exercisable for any equity or
similar interest in, any corporation, partnership, limited liability company,
joint venture or other business association or entity other than in the ordinary
course of business, and in no event in excess of 10% of the outstanding equity
or voting securities of such entity.
4.2 Certificate of Incorporation and Bylaws. FMS heretofore has furnished
to Bancorp a complete and correct copy of the Certificate of Incorporation or
other chartering documents and Bylaws, as amended or restated, of FMS and of
FMB. Each such Certificate of Incorporation or other chartering document and
Bylaws are in full force and effect. Neither FMS nor FMB is in violation of any
of the provisions of its Certificate of Incorporation or other chartering
document or Bylaws.
4.3 Capitalization. The authorized capital stock of FMS consists of
10,000,000 shares of FMS Common Stock and 5,000,000 shares of serial preferred
stock. As of the date of this Agreement, (a) 6,515,813 shares of FMS Common
Stock are issued and outstanding, all of which are duly authorized, validly
issued, fully paid and non-assessable, and not issued in violation of any
preemptive right of any FMS Shareholder, (b) 1,493,579 shares of FMS Common
Stock are held in the treasury of FMS, (c) 31,000 shares of FMS Common Stock are
subject to issuance pursuant to outstanding Stock Options, and (d) no shares of
FMS Common Stock are reserved for future issuance pursuant to the FMS Stock
Option Plan. As of the date of this Agreement, no shares of FMS's preferred
stock are issued and outstanding. Except as set forth in clauses (c) and (d)
above, as of the date of this Agreement FMS has not granted any options,
warrants or other rights, agreements, arrangements or commitments of any
character, including without limitation voting agreements or arrangements,
relating to the issued or unissued capital stock of FMS or FMB or obligating FMS
or FMB to issue or sell any shares of capital stock of, or other equity
interests in, FMS or FMB. All shares of FMS Common Stock subject to issuance as
described in the foregoing, upon issue on the terms and conditions specified in
the instruments
27
pursuant to which they are issuable, will be duly authorized, validly issued,
fully paid and nonassessable and will not be issued in violation of any
preemptive right of any FMS Shareholder. Except as described in the FMS
Disclosure Schedule, there are no obligations, contingent or otherwise, of FMS
or FMB to repurchase, redeem or otherwise acquire any shares of FMS Common Stock
or the capital stock of FMB or to provide funds to or make any investment (in
the form of a loan, capital contribution or otherwise) in FMB or any other
entity. Each of the outstanding shares of capital stock of FMB is duly
authorized, validly issued, fully paid and nonassessable, and such shares owned
by FMS are owned free and clear of all security interests, liens, claims,
pledges, agreements, limitations of FMS' voting rights, charges or other
encumbrances of any nature whatsoever.
4.4 Authorization; Enforceability. The execution, delivery and performance
of this Agreement and all of the documents and instruments required by this
Agreement to be executed and delivered by FMS are within the corporate power of
FMS, and: (a) have been duly and validly authorized by the requisite vote of the
Board of Directors of FMS; and (b) upon the approval of the FMS Shareholders and
receipt of all Regulatory Approvals, shall be duly and validly authorized by all
necessary corporate action. This Agreement is, and the other documents and
instruments required by this Agreement to be executed and delivered by FMS or
FMB will be, when executed and delivered by FMS and FMB, the valid and binding
obligations of FMS and FMB, enforceable against each of them in accordance with
their respective terms, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws
generally affecting the rights of creditors and subject to general equity
principles.
4.5 No Violation or Conflict. Except as set forth in the FMS Disclosure
Schedule, subject to the receipt of the Regulatory Approvals and the receipt of
the approval of the FMS Shareholders, the execution, delivery and performance of
this Agreement and all of the documents and instruments required by this
Agreement to be executed and delivered by FMS do not and will not conflict with
or result in a breach of any Law, the Certificate of Incorporation or Bylaws of
FMS, or the Charter or Bylaws of FMB, constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any FMS Existing Contract or any FMS Permit, or the creation of any Lien upon
any of the properties or assets of FMS or FMB, in each case which would have a
Material Adverse Effect on FMS.
4.6 Title to Assets; Leases. Except for the FMS Existing Liens, which are
listed in the FMS Disclosure Schedule, Liens for current taxes not yet due and
payable, pledges to secure deposits and such imperfections of title, easements
and other encumbrances, if any, as do not materially detract from the value of
or substantially interfere with the present use of the property affected
thereby, FMS owns good and, with respect to real property, marketable title to
the assets and properties which it owns or purports to own, free and clear of
any and all Liens. There is not, under any leases pursuant to which FMS or FMB
leases from others real or personal property, any default by FMS, FMB or, to the
best of FMS's Knowledge, any other party thereto, or any event which with notice
or lapse of time or both would constitute such a default in each case which
would have a Material Adverse Effect on FMS.
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4.7 Litigation. Except as disclosed on the FMS Disclosure Schedule, (a)
neither FMS nor FMB is subject to any material continuing order of, or written
agreement or memorandum of understanding with, or, to the Knowledge of FMS, any
continuing material investigation by the OTS or insurance authority or other
governmental entity, or any judgment, order, writ, injunction, decree or award
of any governmental entity or arbitrator, including, without limitation, cease
and desist or other orders of any savings and loan regulatory authority; (b)
there is no claim, litigation, arbitration, proceeding, governmental
investigation, citation or action of any kind pending or, to the Knowledge of
FMS, proposed or threatened, against or relating to FMS or FMB, nor to the
Knowledge of FMS is there any basis known for any such material action which
could result in a Material Adverse Effect; (c) there are no actions, suits or
proceedings pending or, to the knowledge of FMS, proposed or threatened, against
FMS by any Person which question the legality, validity or propriety of the
transactions contemplated by this Agreement; and (d) there are no uncured
material violations or violations with respect to which material refunds or
restitutions may be required, cited in any compliance report to FMS or FMB as a
result of an examination by any regulatory authority which could result in a
Material Adverse Effect.
4.8 Securities and Banking Reports; Books and Records.
(a) Since December 31, 2003, FMS and FMB have filed all reports,
registration statements, definitive proxy statements and prospectuses, together
with any amendments required to be made with respect thereto, that were and are
required to be filed under the Securities Act, Exchange Act or any other Law
with: (i) the SEC; (ii) the OTS; (iii) the FHLB of New York; (iv) the FDIC; and
(v) any other applicable state securities or savings and loan authorities (all
such reports, statements and prospectuses are collectively referred to herein as
the "FMS Reports"). When filed, each of the FMS Reports complied as to form and
substance in all material respects with the requirements of applicable Laws.
(b) Each of the consolidated audited financial statements and
consolidated unaudited interim financial statements (including, in each case,
any related notes thereto) of FMS included in the FMS Reports filed with the SEC
have been or will be, as the case may be, prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as may be
indicated therein or in the notes thereto and except with respect to
consolidated unaudited interim statements as permitted by SEC Form 10-Q) and
each fairly presents the consolidated financial condition of FMS as of the
respective dates thereof and the consolidated income, equity and cash flows for
the periods then ended, subject, in the case of the consolidated unaudited
interim financial statements, to normal year-end and audit adjustments and any
other adjustments described therein.
(c) The minute books of FMS and FMB contain accurate and complete
records of all meetings and actions taken by written consent by their respective
shareholders and Boards of Directors (including all committees of such Boards),
and all signatures contained therein are the true signatures of the Persons
whose signatures they purport to be. To the Knowledge of FMS, the share transfer
books of FMS are correct, complete and current in all respects. Except as set
forth in the FMS Disclosure Schedule, the accounting books and records of FMS:
(i) are in all material respects correct and complete; (ii) are current in a
manner
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consistent with past practice; and (iii) have recorded therein all the
properties and assets and liabilities of FMS.
4.9 Absence of Certain Changes. Except as set forth in the FMS Disclosure
Schedule or otherwise provided in this Agreement, since June 30, 2006 there has
not been any:
(a) change in the financial condition, properties, business or results
of operations of FMS or FMB having a Material Adverse Effect on FMS;
(b) damage, destruction or loss (whether or not covered by insurance)
with respect to any assets of FMS or FMB having a Material Adverse Effect on
FMS;
(c) transactions by FMS or FMB outside the ordinary course of their
respective businesses or inconsistent with past practices, except for the
transactions contemplated by this Agreement;
(d) except for regular quarterly cash dividends of $0.03 per share on
FMS Common Stock with usual record and payment dates, declaration or payment or
setting aside the payment of any dividend or any distribution in respect of the
capital stock of FMS or, except as set forth on the FMS Disclosure Schedule, any
direct or indirect redemption, purchase or other acquisition of any such stock
by FMS;
(e) allocations to the accounts of any directors, officers or
employees of FMS or FMB pursuant to any of the FMS Existing Plans other than in
the normal course and in accordance with the terms of the FMS Existing Plans
(none of which have been amended or established subsequent to June 30, 2006);
(f) contribution to, increase in, or establishment of any Employee
Benefit Plan (including, without limitation, the granting of stock options,
stock appreciation rights, performance awards or restricted stock awards), or
any other increase in the compensation payable or to become payable to any
officers, directors or key employees of FMS or FMB other than in the normal
course and in accordance with the terms of the FMS Existing Plans (none of which
have been amended or established subsequent to June 30, 2006); or
(g) change in the method of accounting or accounting practices of FMS
or any FMS Subsidiary.
4.10 Buildings and Equipment. Except as set forth in the FMS Disclosure
Schedule: (a) the Buildings and the Equipment of FMS and FMB are in good
operating condition and repair, reasonable wear and tear excepted; (b) are
adequately insured for the nature of FMS' business with the self-insured
retentions specified on the FMS Disclosure Schedule; (c) to the Knowledge of
FMS, such assets and their use conform in all material respects to applicable
Laws; and (d) no notice of any violation of any building, zoning or other Law
relating to such assets or their use has been received by FMS or FMB.
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4.11 FMS Existing Contracts. The FMS Disclosure Schedule lists and briefly
describes each Material Contract (the "FMS Existing Contracts") to which FMS or
FMB is a party or by which its assets are bound. Each of FMS and FMB has fully
performed each term, covenant and condition of each FMS Existing Contract which
is to be performed by it at or before the date hereof, except where such
non-performance would not have a Material Adverse Effect on FMS.
4.12 Investment Securities. Except as set forth on the FMS Disclosure
Schedule, FMS and FMB do not own, and do not have any right or obligation to
acquire, any Investment Securities.
4.13 Contingent and Undisclosed Liabilities. FMS and FMB have no material
liabilities of any nature (contingent or otherwise) except for those which: (a)
are disclosed in the FMS Reports or in the FMS Disclosure Schedule or in this
Agreement; or (b) arise in the ordinary course of business since June 30, 2006
and are not required to be disclosed in the FMS Reports or arise pursuant to
this Agreement or the FMS Disclosure Schedule.
4.14 Insurance Policies. All real and personal property owned or leased by
FMS or FMB has been and is being insured against, and FMS or FMB maintains
liability insurance against, such insurable risks and in such amounts as set
forth in the FMS Disclosure Schedule. Such Insurance Policies constitute all
insurance coverage owned by FMS or FMB and are in full force and effect and
neither FMS nor FMB has received notice of or is otherwise aware of any
cancellation or threat of cancellation of such insurance. Except as described in
the FMS Disclosure Schedule, no property damage, personal injury or liability
claims have been made, or are pending, against FMS or FMB that are not covered
by insurance. Within the past two (2) years, no insurance company has canceled
any insurance (of any type) maintained by FMS or FMB. Neither FMS nor FMB has
any liability for unpaid premiums or premium adjustments for any insurance
policy. To the Knowledge of FMS, the cost of any insurance currently maintained
by FMS or FMB will not increase significantly upon renewal other than increases
consistent with the general upward trend in the cost of obtaining insurance.
4.15 Employee Benefit Plans.
(a) Except for the FMS Existing Plans, which are listed in the FMS
Disclosure Schedule, FMS does not maintain, nor is it bound by, any Employee
Benefit Plan. FMS has furnished Bancorp with a complete and accurate copy of
each FMS Existing Plan and a complete and accurate copy of each material
document prepared in connection with each such FMS Existing Plan, including,
without limitation and where applicable, a copy of (i) each trust or other
funding arrangement, (ii) the most recent summary plan description and all
summaries of material modifications applicable thereto, (iii) the most recently
filed IRS Form 5500, (iv) the most recently received IRS determination letter,
and (v) the most recently prepared actuarial report and financial statement.
(b) Neither FMS nor FMB maintains or contributes to, or within the two
years preceding the Effective Time has maintained or contributed to, an employee
pension benefit plan subject to Title IV of ERISA other than its defined benefit
plan. Except as indicated on the FMS
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Disclosure Schedule, none of the FMS Existing Plans or FMS Existing Contracts
obligates FMS or FMB to pay material separation, severance, termination or
similar-type benefits solely as a result of any transaction contemplated by this
Agreement or as a result of a "change in control," within the meaning of such
term under Section 280G of the Code. Except as indicated on the FMS Disclosure
Schedule, none of the FMS Existing Plans or the FMS Existing Contracts provides
for or promises retiree medical, disability or life insurance benefits to any
current or former employee, officer or director of FMS or FMB.
(c) To the Knowledge of FMS, each FMS Existing Plan has always been
operated in material compliance with the requirements of all applicable Law. FMS
and FMB have performed in all material respects all obligations required to be
performed by either of them under, are not in any material respect in default
under or in violation of, and have no Knowledge of any material default or
violation by any party to, any FMS Existing Plan. No legal action, suit or claim
is pending or, to the Knowledge of FMS, threatened with respect to any FMS
Existing Plan (other than claims for benefits in the ordinary course) and no
fact or event exists to the knowledge of FMS that could give rise to any such
action, suit or claim.
(d) Except as set forth on the FMS Disclosure Schedule, each FMS
Existing Plan that is intended to be qualified under Section 401(a) of the Code
or Section 401(k) of the Code has received a favorable determination letter from
the IRS that it is so qualified, and to the Knowledge of FMS no fact or event
has occurred since the date of such determination letter from the IRS to
adversely affect the qualified status of any such FMS Existing Plan. No trust
maintained or contributed to by FMS or FMB is intended to be qualified as a
voluntary employees' beneficiary association or is intended to be exempt from
federal income taxation under Section 501(c)(9) of the Code.
(e) To the Knowledge of FMS, there has been no non-exempt prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code) with respect to any FMS Existing Plan. Neither FMS nor FMB has incurred
any liability for any excise tax arising under Section 4972 or 4980B of the Code
and no fact or event exists that could give rise to any such liability.
(f) All contributions, premiums or payments required to be made with
respect to any FMS Existing Plan have been made on or before their due dates. To
the Knowledge of FMS, there is no accumulated funding deficiency, within the
meaning of ERISA or the Code, in connection with the FMS Existing Plans and no
reportable event, as defined in ERISA, has occurred in connection with the FMS
Existing Plans.
4.16 No Violation of Law. Except as set forth in the FMS Disclosure
Schedule, neither FMS, FMB nor any of the assets of FMS or FMB materially
violate or conflict with (i) any Law, including, without limitation, the federal
Bank Secrecy Act, as amended, and its implementing regulations (31 C.F.R. Part
103), the USA PATRIOT Act of 2001, Public Law 107-56 (the "USA PATRIOT Act"),
and the regulations promulgated thereunder, any order issued with respect to
anti-money laundering by the U.S. Department of the Treasury's Office of Foreign
Assets Control, or any other applicable anti-money laundering statute, rule or
regulation;, any FMS Permits, or any decree, judgment or order, or, to the
Knowledge of FMS, any zoning, building
32
line restriction, planning, use or other similar restriction, in each case which
would have a Material Adverse Effect on FMS.
4.17 Brokers. Except for fees to ▇▇▇▇ ▇▇▇▇ & Co., FMS' financial advisor,
neither FMS nor FMB has incurred any brokers', finders', financial advisor or
any similar fee in connection with the transactions contemplated by this
Agreement. The FMS Disclosure Schedule contains a list of all fees to be paid to
such advisor in connection with the transactions contemplated by this Agreement.
4.18 Taxes.
(a) Except as disclosed in the FMS Disclosure Schedule and except as
may arise as a result of the transactions contemplated by this Agreement: FMS
and FMB have timely and properly filed all federal, state, local and foreign tax
returns required to be filed prior to the date hereof (including but not limited
to income, franchise, sales, payroll, employee withholding and social security
and unemployment) which were required to be filed except where the failure to
have filed timely or properly would not have a Material Adverse Effect on FMS;
FMS and FMB have paid or made adequate provision, in reserves reflected in its
financial statements included in the FMS Reports in accordance with generally
accepted accounting principles, for the payment of all taxes (including interest
and penalties) and withholding amounts owed by them or assessable against them;
no tax deficiencies have been assessed or proposed against FMS or FMB and to the
Knowledge of FMS there is no basis in fact for the assessment of any tax or
penalty tax against FMS or FMB.
(b) As of the date of this Agreement, except as disclosed in the FMS
Disclosure Schedule, there are no fiscal years of FMS currently under
examination by the IRS or the New Jersey Department of Revenue, and none of the
open years has been examined by the IRS or the New Jersey Department of Revenue.
FMS and FMB have not consented to any extension of the statute of limitation
with respect to any open tax returns.
(c) There are no tax Liens upon any property or assets of FMS or FMB
except for Liens for current taxes not yet due and payable.
(d) As soon as practicable after the date of this Agreement, FMS and
FMB will deliver to Bancorp correct and complete copies of all tax returns of
FMS filed for all periods not barred by the applicable statute of limitations.
No examination or audit of any tax return for any period not closed by audit or
not barred by the applicable statute of limitations has occurred, no such
examination is in progress and, to the Knowledge of FMS, no such examination or
audit is planned.
(e) Except where the failure to withhold, pay or file would not have a
Material Adverse Effect on FMS, FMS and FMB have properly withheld and timely
paid all withholding and employment taxes which they were required to withhold
and pay relating to salaries, compensation and other amounts heretofore paid to
their employees or other Persons. All Forms W-2 and 1099 required to be filed
prior to the date hereof with respect thereto have been timely and properly
filed.
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4.19 Real Estate. The FMS Real Estate: (a) constitutes all real property
and improvements (or interest therein, including without limitation easements,
licenses or similar arrangements authorizing FMS or FMB to place, maintain,
operate and/or use an automated teller machine or similar device on real
property of a third-party) leased or owned by FMS or FMB; (b) other than with
respect to FMS or FMB as lessee, is not subject to any leases or tenancies of
any kind; (c) is not in the possession of any adverse possessors; (d) has direct
access to and from a public road or street; (e) except for violations that would
not have a Material Adverse Effect on FMS, is used in a manner which is
consistent with applicable Law; (f) is, and has been since the date of
possession thereof by FMS or FMB, in the peaceful possession of FMS or FMB; (g)
is served by all water, sewer, electrical, telephone, drainage and other
utilities required for the normal operations of the Buildings of FMS and FMB and
the FMS Real Estate; (h) except as disclosed in the FMS Disclosure Schedule, to
the Knowledge of FMS, is not located in an area designated as a flood plain or
wetland; (i) is not subject to any outstanding special assessment; (j) is not
subject to any zoning, ordinance, decrees or other Laws which would materially
restrict or prohibit Bancorp from continuing the operations presently conducted
thereon by FMS or FMB; (k) is not subject to any interest of any Person under an
easement, contract, option or mineral rights or other agreements which would
have a Material Adverse Effect on FMS; (l) is not subject to any presently
pending condemnation proceedings, nor to FMS' Knowledge, are such proceedings
threatened against the FMS Real Estate.
4.20 Governmental Approvals. No permission, approval, determination,
consent or waiver by, or any declaration, filing or registration with, any
governmental or regulatory authority is required in connection with the
execution, delivery and performance of this Agreement by FMS or FMB, except for
the Regulatory Approvals and except for any consent the failure of which to
obtain would not, individually or in the aggregate, have a Material Adverse
Effect on FMS.
4.21 No Pending Acquisitions. Except for this Agreement, FMS is not a party
to or bound by any agreement, undertaking or commitment with respect to an
Acquisition on the date of this Agreement.
4.22 Labor Matters.
(a) Except as disclosed on the FMS Disclosure Schedule (or in an
updated FMS Disclosure Schedule with respect to vacations in (iii) below), there
is no present or former employee of FMS or FMB who has any claim against any of
such entities (whether under Law, under any employee agreement or otherwise) on
account of or for: (i) overtime pay, other than overtime pay for the current
payroll period; (ii) wages or salaries, other than wages or salaries for the
current payroll period; or (iii) vacations, sick leave, time off or pay in lieu
of vacation, sick leave or time off, other than vacation, sick leave or time off
(or pay in lieu thereof) earned in the twelve-month period immediately preceding
the date of this Agreement or incurred in the ordinary course of business and
appearing as a liability on the most recent financial statements included in the
FMS Reports.
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(b) There are no pending and unresolved claims by any Person against
FMS or FMB arising out of any Law relating to discrimination against employees
or employee practices or occupational or safety and health standards. There is
no pending or, to the knowledge of FMS, threatened, nor has FMS or FMB, since
December 31, 2000, experienced any, labor dispute, strike or work stoppage which
affected, affects or may affect the business of FMS or FMB or which did, may or
would interfere with the continued operation of FMS or FMB.
(c) Neither FMS nor FMB is a party to any collective bargaining
agreement. There is not now pending or, to the Knowledge of FMS, threatened, any
charge or complaint against FMS or FMB by or before the National Labor Relations
Board or any representative thereof, or any comparable state agency or
authority. No union organizing activities are in process, or to FMS's Knowledge
contemplated, and no petitions have been filed for union organization or
representation of employees of FMS or FMB, and FMS and FMB have not committed
any unfair labor practices which have not heretofore been corrected and fully
remedied.
4.23 Indebtedness. Except for the FMS Existing Indebtedness, FMS has no
Indebtedness.
4.24 Permits. The Permits described on the FMS Disclosure Schedule
constitute all Permits which FMS and FMB currently have and need for the conduct
of their respective businesses as currently conducted, except for such Permits
the failure of which to have would not have a Material Adverse Effect on FMS.
4.25 Disclosure. No statement of fact by FMS contained in this Agreement,
the FMS Disclosure Schedule, or any other document furnished or to be furnished
by FMS contains or will contain any untrue statement of a material fact or omits
or will omit to state a material fact necessary in order to make the statements
herein or therein contained, in the light of the circumstances under which they
were made, not misleading as of the date to which it speaks.
4.26 Information Supplied. None of the information supplied or to be
supplied by FMS for inclusion or incorporation by reference in the Registration
Statement or the Proxy Statement will, at the date the Registration Statement
becomes effective, the date(s) the Proxy Statement is mailed to the FMS
Shareholders and at the time(s) of the FMS Meeting, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations of the SEC thereunder.
4.27 Vote Required. The affirmative vote of the holders of a majority of
the outstanding shares of FMS Common Stock is the only vote of the holders of
any class or series of capital stock or other securities of FMS necessary to
approve the Merger, this Agreement and the transactions contemplated by this
Agreement.
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4.28 Opinion of Financial Advisor. FMS has received the opinion of ▇▇▇▇
▇▇▇▇ & Co. as of the date of this Agreement, to the effect that the
consideration to be received in the Merger by the FMS Shareholders is fair to
the FMS Shareholders from a financial point of view.
4.29 Environmental Protection.
(a) Except as set forth in the FMS Disclosure Schedule, FMS and the
FMS Subsidiaries: (i) are in material compliance with all applicable
Environmental Laws; and (ii) have not received any communication (written or
oral), from a governmental authority or other Person, that alleges that FMS is
not in compliance with applicable Environmental Laws.
(b) Except as set forth in the FMS Disclosure Schedule, FMS and FMB
have obtained all Environmental Permits, and all such Environmental Permits are
in good standing and FMS and FMB are in material compliance with all terms and
conditions of their Environmental Permits.
(c) Except as set forth in the FMS Disclosure Schedule, there is no
Environmental Claim pending or, to the Knowledge of FMS, threatened against FMS,
FMB or against any Person whose liability for any Environmental Claim FMS or FMB
has or may have retained or assumed either contractually or by operation of Law,
or against any real or personal property or operations which FMS or FMB owns,
leases or manages.
(d) Except as set forth in the FMS Disclosure Schedule, to the
Knowledge of FMS there have been no Releases of any Hazardous Material by FMS or
by any Person on real property owned (including REO properties of FMB), used,
leased or operated by FMS or FMB.
(e) No real property at any time owned (including REO properties of
FMB), operated, used or controlled by FMS or FMB is currently listed on the
National Priorities List or the Comprehensive Environmental Response,
Compensation and Liability Information System, both promulgated under the
CERCLA, or on any comparable state list, and, except as described in the FMS
Disclosure Schedule, FMS has not received any written notice from any Person
under or relating to CERCLA or any comparable state or local Law relating to
potential listing on such lists.
(f) Except as set forth in the FMS Disclosure Schedule, to the
Knowledge of FMS, no off-site location at which FMS or FMB has disposed or
arranged for the disposal of any waste is listed on the National Priorities List
or on any comparable state list and neither FMS nor FMB has received any written
notice from any Person with respect to any off-site location, of potential or
actual liability or a written request for information from any Person under or
relating to CERCLA or any comparable state or local Law.
4.30 Controls and Procedures. (a) Each of the principal executive officer
and the principal financial officer of FMS has made all certifications required
under Sections 302 and 906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act with respect to FMS
Reports, and FMS has delivered to Bancorp a summary of any disclosure made by
management to FMS' auditors and audit committee since January 1, 2003 referred
to in such certifications. For purposes of the preceding sentence,
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"principal executive officer" and "principal financial officer" shall have the
meanings given to such terms in the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
(b) FMS has (i) designed and maintains disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Exchange Act) to ensure that
material information required to be disclosed by FMS in the reports it files or
submits under the Exchange Act is communicated to its management by others
within those entities as appropriate to allow timely decisions regarding
required disclosure, and (ii) disclosed, based on its most recent evaluation, to
its auditors and the audit committee of its Board of Directors (A) any
significant deficiencies or material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect FMS' ability to record, process, summarize and report financial
information, and (B) any fraud, whether or not material, that involves
management or other employees who have a significant role in FMS' internal
control over financial reporting. FMS has provided to Bancorp true and correct
copies of any of the foregoing disclosures to the auditors or audit committee
that have been made in writing from January 1, 2003 through the date hereof, and
will promptly provide to Bancorp true and correct copies of any such disclosure
that is made after the date hereof.
(c) FMS has designed and maintains a system of internal control over
financial reporting (as defined in Rule 13a-15(f) under the Exchange Act)
sufficient to provide reasonable assurance concerning the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP, including reasonable assurance (i) that
transactions are executed in accordance with management's general or specific
authorizations and recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (ii)
access to assets is permitted only in accordance with management's general or
specific authorizations, and (iii) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any difference.
(d) No personal loan or other extension of credit by FMS or any FMS
Subsidiary to any of its or their executive officers or directors has been made
or modified (other than as permitted by Section 13 of the Exchange Act and
Section 402 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act).
(e) Since January 1, 2003, (i) neither FMS nor any of FMS Subsidiaries
nor, to the Knowledge of FMS, any director, officer, employee, auditor,
accountant or representative of FMS or any of FMS Subsidiaries has received any
written complaint, allegation, assertion, or claim that FMS or any FMS
Subsidiary has engaged in improper or illegal accounting or auditing practices
or maintains improper or inadequate internal accounting controls and (ii) no
attorney representing FMS or any FMS Subsidiary, whether or not employed by FMS
or any FMS Subsidiary, has reported evidence of a material violation of U.S.
federal or state securities laws, a material breach of fiduciary duty or similar
material violation by FMS, any of FMS Subsidiaries or any of their respective
officers, directors, employees or agents to any officer of FMS, the Board of
Directors of FMS or any member or committee thereof.
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4.31 Community Reinvestment Act. FMB received a rating of
"satisfactory" or better on its most recent Community Reinvestment Act
examination.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BANCORP
Bancorp hereby represents and warrants to FMS that:
5.1 Organization and Capitalization; Business.
(a) Bancorp is a federally chartered mid-tier savings and loan holding
company duly organized, validly existing and in good standing under the HOLA.
Beneficial MHC is a federally chartered mutual holding company duly organized
and validly existing and in good standing under HOLA. BMSB is a
Pennsylvania-chartered stock savings bank duly organized and validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania. The
deposits of BMSB are insured by the Deposit Insurance Fund of the FDIC to the
extent provided by the FDIA and BMSB has paid all premiums and assessments
required thereunder. BMSB is a member in good standing of the FHLB of
Pittsburgh. Each of the other Bancorp Subsidiaries is duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Bancorp and the Bancorp Subsidiaries has the requisite corporate power
and authority and is in possession of all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates, approvals and orders
("Bancorp Approvals") necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted, including appropriate
authorizations from the OTS and the FDIC, except where a failure to be so
organized, existing and in good standing or to have such power, authority and
Bancorp Approvals would not, individually or in the aggregate, have a Material
Adverse Effect on Bancorp, and neither Bancorp nor any Bancorp Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any Bancorp Approvals.
(b) Each of Bancorp and BMSB is duly qualified or licensed as a
foreign corporation to conduct business, and is in good standing (or the
equivalent thereof) in each jurisdiction where the character of the properties
it owns, leases or operates or the nature of the activities it conducts make
such qualification or licensing necessary, except for such failures to be so
duly qualified and licensed and in good standing that would not, either
individually or in the aggregate, have a Material Adverse Effect on Bancorp.
(c) Bancorp and/or one or more of the Bancorp Subsidiaries owns
beneficially and of record all of the outstanding shares of capital stock of
each of the Bancorp Subsidiaries. Bancorp does not directly or indirectly own
any equity or similar interests in, or any interests convertible into or
exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, limited liability company, joint venture or other
business association or entity other than in the ordinary course of business,
and in no event in excess of 10% of the outstanding equity or voting securities
of such entity.
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(d) Bancorp, Beneficial MHC and BMSB each have full corporate power
and authority and those Permits necessary to carry on their respective business
as it is now conducted and to own, lease and operate their respective assets and
properties.
(e) Copies of the Charter and Bylaws of Bancorp, Beneficial MHC and
BMSB have been delivered to FMS. Such copies are complete and correct copies of
such documents, and are in full force and effect. None of Bancorp, Beneficial
MHC, or BMSB is in violation of any of the provisions of its Charter or Bylaws.
5.2 Authorization; Enforceability. The entering into, execution, delivery
and performance of this Agreement and all of the documents and instruments
required by this Agreement to be executed and delivered by each of Beneficial
MHC, Bancorp and BMSB is within their respective corporate powers, and: (a) has
been duly and validly authorized by the requisite vote of their respective Board
of Directors; and (b) upon receipt of all Regulatory Approvals, shall be duly
and validly authorized by all necessary corporate action on their part. This
Agreement is, and the other documents and instruments required by this Agreement
to be executed and delivered by Beneficial MHC, Bancorp and BMSB will be, when
executed and delivered by Beneficial MHC, Bancorp and BMSB, the valid and
binding obligations of Beneficial MHC, Bancorp and BMSB, enforceable against
them in accordance with their respective terms, except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar Laws generally affecting the rights of creditors and
subject to general equity principles.
5.3 No Violation or Conflict. Subject to the receipt of the Regulatory
Approvals, the execution, delivery and performance of this Agreement and all of
the documents and instruments required by this Agreement to be executed and
delivered by Beneficial MHC, Bancorp or BMSB do not and will not conflict with
or result in a breach of any Law or their respective Charter or Bylaws or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any Contract of Beneficial MHC,
Bancorp or BMSB or any Permit held by any of them or the creation of any Lien
upon any of their respective properties or assets which would have a Material
Adverse Effect on Bancorp.
5.4 Litigation. (a) Neither Bancorp nor any Bancorp Subsidiary is subject
to any continuing order of, or written agreement or memorandum of understanding
with, or, to the Knowledge of Bancorp, any continuing material investigation by,
any federal or state savings and loan, banking or insurance authority or other
governmental entity, or any judgment, order, writ, injunction, decree or award
of any governmental entity or arbitrator, including, without limitation, cease
and desist or other orders of any savings and loan regulatory authority; (b)
there is no claim, litigation, arbitration, proceeding, governmental
investigation, citation or action of any kind pending or, to the Knowledge of
Bancorp, proposed or threatened, against or relating to Bancorp or any Bancorp
Subsidiary, nor is to the Knowledge of Bancorp is there any basis for any such
material action; (c) there are no actions, suits or proceedings pending or, to
the Knowledge of Bancorp, proposed or threatened, against Bancorp by any Person
which question the legality, validity or propriety of the transactions
contemplated by this Agreement; and (d) there are no uncured material violations
or violations with respect to which material refunds or
39
restitutions may be required, cited in any compliance report to Bancorp or any
Bancorp Subsidiary as a result of an examination by any regulatory authority.
5.5 Governmental Approvals. No permission, approval, determination, consent
or waiver by, or any declaration, filing or registration with, any governmental
or regulatory authority is required in connection with the execution, delivery
and performance of this Agreement by Bancorp except for the Regulatory Approvals
and except for any consent the failure of which to obtain would not,
individually or in the aggregate, have a Material Adverse Effect on Bancorp.
5.6 Cash Payment. Bancorp has sufficient funds or has financing arranged as
part of the Minority Stock Offering to pay the cash payment required under
Section 2.5 of this Agreement and such payment will not cause BMSB to fail to
meet any regulatory capital requirements to which it is subject.
5.7 Compliance with Laws. Bancorp is in compliance in all material respects
with all applicable Laws including, without limitation, the federal Bank Secrecy
Act, as amended, and its implementing regulations (31 C.F.R. Part 103), the USA
PATRIOT Act of 2001, Public Law 107-56 (the "USA PATRIOT Act"), and the
regulations promulgated thereunder, any order issued with respect to anti-money
laundering by the U.S. Department of the Treasury's Office of Foreign Assets
Control, or any other applicable anti-money laundering statute, rule or
regulation.
5.8 Consummation. Bancorp has no reason to believe that it will be unable
to obtain the Regulatory Approvals on a timely basis.
5.9 Banking Reports; Books and Records.
(a) Since January 1, 2005, Beneficial MHC, Bancorp and BMSB have filed
all reports, together with any amendments required to be made with respect
thereto, that were and are required to be filed under any Law with: (i) the OTS;
(ii) the FHLB of Pittsburgh; (iii) the FDIC; and (iv) any other applicable state
securities or savings bank authorities (all such reports and other documents are
collectively referred to herein as the "Bancorp Reports"). When filed, each of
the Bancorp Reports complied as to form and substance in all material respects
with the requirements of applicable Laws.
(b) Each of the consolidated audited financial statements and
consolidated unaudited interim financial statements (including, in each case,
any related notes thereto) of Bancorp included in the Bancorp Reports have been
or will be, as the case may be, prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto and except with respect to consolidated
unaudited interim statements) and each fairly presents the consolidated
financial condition of Bancorp as of the respective dates thereof and the
consolidated income, equity and cash flows for the periods then ended, subject,
in the case of the consolidated unaudited interim financial statements, to
normal year-end and audit adjustments and any other adjustments described
therein.
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(c) The minute books of Beneficial MHC, Bancorp and the Bancorp
Subsidiaries contain accurate and complete records of all meetings and actions
taken by written consent by their respective shareholders and Boards of
Directors (including all committees of such Boards), and all signatures
contained therein are the true signatures of the Persons whose signatures they
purport to be. The accounting books and records of Bancorp: (i) are in all
material respects correct and complete; (ii) are current in a manner consistent
with past practice; and (iii) have recorded therein all the properties and
assets and liabilities of Bancorp.
5.10 Absence of Certain Changes. Since June 30, 2006 there has not been
any:
(a) change in the financial condition, properties, business or results
of operations of Bancorp or any Bancorp Subsidiary having a Material Adverse
Effect on Bancorp;
(b) damage, destruction or loss (whether or not covered by insurance)
with respect to any assets of Bancorp or any Bancorp Subsidiary having a
Material Adverse Effect on Bancorp;
(c) transactions by Bancorp or any Bancorp Subsidiary outside the
ordinary course of their respective businesses or inconsistent with past
practices, except for the transactions contemplated by this Agreement; or
(d) change in the method of accounting or accounting practices of
Bancorp or any Bancorp Subsidiary.
5.11 Taxes.
(a) Except as may arise as a result of the transactions contemplated
by this Agreement: Beneficial MHC, Bancorp and the Bancorp Subsidiaries have
timely and properly filed all federal, state, local and foreign tax returns
(including but not limited to income, franchise, sales, payroll, employee
withholding and social security and unemployment) which were required to be
filed except where the failure to have filed timely or properly would not have a
Material Adverse Effect on Bancorp; Beneficial MHC, Bancorp and the Bancorp
Subsidiaries have paid or made adequate provision, in reserves reflected in its
financial statements included in the Bancorp Reports in accordance with
generally accepted accounting principles, for the payment of all taxes
(including interest and penalties) and withholding amounts owed by them or
assessable against them; no tax deficiencies have been assessed or proposed
against Bancorp or any Bancorp Subsidiary and to the Knowledge of Bancorp there
is no basis in fact for the assessment of any tax or penalty tax against
Beneficial MHC, Bancorp or any Bancorp Subsidiary.
(b) As of the date of this Agreement, there are no fiscal years of
Bancorp currently under examination by the IRS or the New Jersey or Pennsylvania
Departments of Revenue, and none of the open years has been examined by the IRS
or the New Jersey or Pennsylvania Departments of Revenue. Bancorp and the
Bancorp Subsidiaries have not consented to any extension of the statute of
limitation with respect to any open tax returns.
41
(c) There are no tax Liens upon any property or assets of Bancorp or
any Bancorp Subsidiary except for Liens for current taxes not yet due and
payable.
(d) As soon as practicable after the date of this Agreement, Bancorp
and the Bancorp Subsidiaries will deliver to FMS correct and complete copies of
all tax returns and reports of Bancorp filed for all periods not barred by the
applicable statute of limitations. No examination or audit of any tax return or
report for any period not closed by audit or not barred by the applicable
statute of limitations has occurred, no such examination is in progress and, to
the Knowledge of Bancorp, no such examination or audit is planned.
(e) Except where the failure to withhold, pay or file would not have a
Material Adverse Effect on Bancorp, Bancorp and the Bancorp Subsidiaries have
properly withheld and timely paid all withholding and employment taxes which
they were required to withhold and pay relating to salaries, compensation and
other amounts heretofore paid to their employees or other Persons. All Forms W-2
and 1099 required to be filed with respect thereto have been timely and properly
filed.
5.12 Title to Assets; Leases. Except for Liens for current taxes not yet
due and payable, pledges to secure deposits and such imperfections of title,
easements and other encumbrances, if any, as do not materially detract from the
value of or substantially interfere with the present use of the property
affected thereby, Bancorp owns good and, with respect to real property,
marketable title to the assets and properties which it owns or purports to own,
free and clear of any and all Liens. There is not, under any leases pursuant to
which Bancorp or BMSB leases from others real or personal property, any default
by Bancorp, BMSB or, to the best of Bancorp's Knowledge, any other party
thereto, or any event which with notice or lapse of time or both would
constitute such a default in each case which would have a Material Adverse
Effect on Bancorp.
5.13 Contingent and Undisclosed Liabilities. Bancorp and BMSB have no
material liabilities of any nature (contingent or otherwise) except for those
which: (a) are disclosed in the Bancorp Reports; or (b) arise in the ordinary
course of business since June 30, 2006 and are not required to be disclosed in
the Bancorp Reports or arise pursuant to this Agreement.
5.14 Insurance Policies. All real and personal property owned or leased by
Bancorp or BMSB has been and is being insured against, and Bancorp or BMSB
maintains liability insurance against, such insurable risks. Such Insurance
Policies constitute all insurance coverage owned by Bancorp or BMSB and are in
full force and effect and neither Bancorp nor BMSB has received notice of or is
otherwise aware of any cancellation or threat of cancellation of such insurance.
No property damage, personal injury or liability claims have been made, or are
pending, against Bancorp or BMSB that are not covered by insurance. Within the
past two (2) years, no insurance company has canceled any insurance (of any
type) maintained by Bancorp or BMSB. Neither Bancorp nor BMSB has any liability
for unpaid premiums or premium adjustments for any insurance policy. To the
Knowledge of Bancorp, the cost of any insurance currently maintained by Bancorp
or BMSB will not increase significantly upon renewal other than increases
consistent with the general upward trend in the cost of obtaining insurance.
42
5.15 Employee Benefit Plans.
(a) Bancorp has furnished FMS with a complete and accurate copy of
each Bancorp Existing Plan and a complete and accurate copy of each material
document prepared in connection with each such Bancorp Existing Plan, including,
without limitation and where applicable, a copy of (i) each trust or other
funding arrangement, (ii) the most recent summary plan description and all
summaries of material modifications applicable thereto, (iii) the most recently
filed IRS Form 5500, (iv) the most recently received IRS determination letter,
and (v) the most recently prepared actuarial report and financial statement.
(b) Neither Bancorp nor BMSB maintains or contributes to, or within
the two years preceding the Effective Time has maintained or contributed to, an
employee pension benefit plan subject to Title IV of ERISA other than its
defined benefit plan. None of the Bancorp Existing Plans or Bancorp Existing
Contracts obligates Bancorp or BMSB to pay material separation, severance,
termination or similar-type benefits solely as a result of any transaction
contemplated by this Agreement or as a result of a "change in control," within
the meaning of such term under Section 280G of the Code. None of the Bancorp
Existing Plans or the Bancorp Existing Contracts provides for or promises
retiree medical, disability or life insurance benefits to any current or former
employee, officer or director of Bancorp or BMSB.
(c) To the Knowledge of Bancorp, each Bancorp Existing Plan has always
been operated in material compliance with the requirements of all applicable
Law. Bancorp and BMSB have performed in all material respects all obligations
required to be performed by either of them under, are not in any material
respect in default under or in violation of, and have no Knowledge of any
material default or violation by any party to, any Bancorp Existing Plan. No
legal action, suit or claim is pending or, to the Knowledge of Bancorp,
threatened with respect to any Bancorp Existing Plan (other than claims for
benefits in the ordinary course) and no fact or event exists to the knowledge of
Bancorp that could give rise to any such action, suit or claim other than as a
result of the transactions contemplated by this Agreement.
(d) Each Bancorp Existing Plan that is intended to be qualified under
Section 401(a) of the Code or Section 401(k) of the Code has received a
favorable determination letter from the IRS that it is so qualified, and to the
Knowledge of Bancorp no fact or event has occurred since the date of such
determination letter from the IRS to adversely affect the qualified status of
any such Bancorp Existing Plan. No trust maintained or contributed to by Bancorp
or BMSB is intended to be qualified as a voluntary employees' beneficiary
association or is intended to be exempt from federal income taxation under
Section 501(c)(9) of the Code.
(e) To the Knowledge of Bancorp, there has been no non-exempt
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) with respect to any Bancorp Existing Plan. Neither Bancorp nor
BMSB has incurred any liability for any excise tax arising under Section 4972 or
4980B of the Code and no fact or event exists that could give rise to any such
liability.
(f) All contributions, premiums or payments required to be made with
respect to any Bancorp Existing Plan have been made on or before their due
dates. To the Knowledge of
43
Bancorp, there is no accumulated funding deficiency, within the meaning of ERISA
or the Code, in connection with the Bancorp Existing Plans and no reportable
event, as defined in ERISA, has occurred in connection with the Bancorp Existing
Plans.
5.16 Labor Matters.
(a) There is no present or former employee of Bancorp or BMSB who has
any claim against any of such entities (whether under Law, under any employee
agreement or otherwise) on account of or for: (i) overtime pay, other than
overtime pay for the current payroll period; (ii) wages or salaries, other than
wages or salaries for the current payroll period; or (iii) vacations, sick
leave, time off or pay in lieu of vacation, sick leave or time off, other than
vacation, sick leave or time off (or pay in lieu thereof) earned in the
twelve-month period immediately preceding the date of this Agreement or incurred
in the ordinary course of business and appearing as a liability on the most
recent financial statements included in the Bancorp Reports.
(b) There are no pending and unresolved claims by any Person against
Bancorp or BMSB arising out of any Law relating to discrimination against
employees or employee practices or occupational or safety and health standards.
There is no pending or, to the knowledge of Bancorp, threatened, nor has Bancorp
or BMSB, since December 31, 2000, experienced any, labor dispute, strike or work
stoppage which affected, affects or may affect the business of Bancorp or BMSB
or which did, may or would interfere with the continued operation of Bancorp or
BMSB.
(c) Neither Bancorp nor BMSB is a party to any collective bargaining
agreement. There is not now pending or, to the Knowledge of Bancorp, threatened,
any charge or complaint against Bancorp or BMSB by or before the National Labor
Relations Board or any representative thereof, or any comparable state agency or
authority. No union organizing activities are in process, or to Bancorp's
Knowledge contemplated, and no petitions have been filed for union organization
or representation of employees of Bancorp or BMSB, and Bancorp and BMSB have not
committed any unfair labor practices which have not heretofore been corrected
and fully remedied.
5.17 Disclosure. No statement of fact by Bancorp contained in this
Agreement or any other document furnished or to be furnished by Bancorp contains
or will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements herein or
therein contained, in the light of the circumstances under which they were made,
not misleading as of the date to which it speaks.
5.18 Information Supplied. None of the information supplied or to be
supplied by Bancorp for inclusion or incorporation by reference in the
Registration Statement or the Proxy Statement will, at the date the Registration
Statement becomes effective, the date(s) the Proxy Statement is mailed to the
FMS Shareholders and at the time(s) of the FMS Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material
44
respects with the provisions of the Exchange Act and the rules and regulations
of the SEC thereunder. The Registration Statement will comply as to form in all
material respects with the provisions of the Securities Act and the rules and
regulations of the SEC thereunder.
5.19 Environmental Protection.
(a) Bancorp and the Bancorp Subsidiaries: (i) are in material
compliance with all applicable Environmental Laws; and (ii) have not received
any communication (written or oral), from a governmental authority or other
Person, that alleges that Bancorp is not in compliance with applicable
Environmental Laws.
(b) Bancorp and BMSB have obtained all Environmental Permits, and all
such Environmental Permits are in good standing and Bancorp and BMSB are in
material compliance with all terms and conditions of their Environmental
Permits.
(c) There is no Environmental Claim pending or, to the Knowledge of
Bancorp, threatened against Bancorp, BMSB or against any Person whose liability
for any Environmental Claim Bancorp or BMSB has or may have retained or assumed
either contractually or by operation of Law, or against any real or personal
property or operations which Bancorp or BMSB owns, leases or manages.
(d) To the Knowledge of Bancorp there have been no Releases of any
Hazardous Material by Bancorp or by any Person on real property owned (including
REO properties of BMSB), used, leased or operated by Bancorp or BMSB.
(e) No real property at any time owned (including REO properties of
BMSB), operated, used or controlled by Bancorp or BMSB is currently listed on
the National Priorities List or the Comprehensive Environmental Response,
Compensation and Liability Information System, both promulgated under the
CERCLA, or on any comparable state list, and Bancorp has not received any
written notice from any Person under or relating to CERCLA or any comparable
state or local Law relating to potential listing on such lists.
(f) To the Knowledge of Bancorp, no off-site location at which Bancorp
or BMSB has disposed or arranged for the disposal of any waste is listed on the
National Priorities List or on any comparable state list and neither Bancorp nor
BMSB has received any written notice from any Person with respect to any
off-site location, of potential or actual liability or a written request for
information from any Person under or relating to CERCLA or any comparable state
or local Law.
5.20 Community Reinvestment Act. BMSB received a rating of "satisfactory"
or better on its most recent Community Reinvestment Act examination.
45
ARTICLE VI
CONDUCT OF BUSINESS OF THE PARTIES PENDING THE MERGER
6.1 Conduct of Business by FMS Until the Effective Time. During the period
commencing on the date hereof and continuing until the Effective Time, FMS
agrees (except as expressly contemplated by this Agreement or to the extent that
Bancorp shall otherwise consent in writing which consent shall not be
unreasonably withheld) that:
(a) Except as contemplated by this Agreement, FMS and each FMS
Subsidiary will carry on their respective businesses in, the usual, regular and
ordinary course in substantially the same manner as heretofore conducted
(including ongoing review, testing, maintenance and assessment of disclosure
controls and procedures and internal control over financial reporting), maintain
their respective books in accordance with GAAP, conduct their respective
business and operations only in accordance with safe and sound banking and
business practices, and, except as set forth on Schedule 6.1(a) of the FMS
Disclosure Schedule, use all reasonable efforts to (i) preserve intact their
present business organizations, (ii) generally keep available the services of
their present officers and employees, and (iii) preserve their relationships
with customers, suppliers, agents, brokers and others having business dealing
with them to the end that their respective goodwill and going businesses shall
be unimpaired at the Effective Time.
(b) FMS will, and will cause each FMS Subsidiary to, use their best
efforts to comply promptly with all requirements which Federal or state law may
impose on any of them with respect to the Merger and will promptly cooperate
with and furnish information to Bancorp in connection with any such requirements
imposed upon any of them in connection with the Merger.
(c) FMS will, and will cause each FMS Subsidiary to, use their best
efforts to obtain (and to cooperate with Bancorp in obtaining) any consent,
authorization or approval of, or any exemption by, any governmental authority or
agency, or other third party, required to be obtained or made by any of them in
connection with the Merger or the taking of any action contemplated hereby. FMS
will not, nor will it permit any of FMS Subsidiaries to, knowingly or willfully
take any action that would adversely affect the ability of such party to perform
its obligations under this Agreement.
(d) FMS will not declare or pay any cash dividends on or make other
distributions with respect to capital stock, except that until the Effective
Date occurs, FMS will be permitted to declare and pay a regular quarterly cash
dividend not exceeding $0.03 per share, so long as no dividend would be payable
for that quarter on any Bancorp Common Stock to be issued as a result of the
Merger. FMS shall not make any changes in its normal practice of declaring
dividends or establishing dividend record or dividend payment dates.
(e) FMS will not, and will not permit any FMS Subsidiary to, sell,
lease or otherwise dispose of any assets, except in the ordinary course of
business, which are material, individually or in the aggregate, to the business
or financial condition of FMS on a consolidated basis.
46
(f) FMS will not, and will not permit any FMS Subsidiary to, acquire
by merging or consolidating with, purchasing substantially all of the assets of
or otherwise, any business or any corporation, partnership, association or other
business organization or division thereof.
(g) Except as otherwise contemplated by this Agreement or pursuant to
the exercise of outstanding options, FMS will not, and will not permit any FMS
Subsidiary to, or enter into any agreement to, issue, sell, grant, authorize or
propose the issuance or sale of, or purchase or propose the purchase of, permit
the conversion of or otherwise acquire or transfer for any consideration any
shares of their respective capital stocks or any class or securities convertible
into, or rights, warrants or options to acquire, any such shares or other
convertible securities, or to increase or decrease the number of shares of
capital stock by split-up, reclassification, reverse split, stock dividend,
stock split or change in par or stated value. No additional shares of FMS Common
Stock shall become subject to new grants of employee stock options, stock
appreciation rights, limited rights, stock grants or similar stock-based
employee compensation rights.
(h) FMS will not, and will not permit any FMS Subsidiary to, create or
incur any liabilities, in a single transaction or a series of related
transactions, in excess of $50,000 other than the taking of deposits and other
liabilities incurred in the ordinary course of business or consistent with past
practices, or permit or suffer the imposition on any shares of stock held by it
or by any FMS Subsidiary of any material lien, charge or encumbrance.
Notwithstanding the foregoing, in no event will FMS or any FMS Subsidiary incur
any liabilities or indebtedness relating to: (i) brokered deposits or internet
deposits; (ii) borrowed money other than fixed-rate Federal Home Loan Bank
advances in the ordinary course of business with a term not in excess of two and
one-half (2.5) years. In addition, such advances shall not have embedded options
in their terms that are exercisable by the Federal Home Loan Bank.
(i) FMS will not, and will not permit any FMS Subsidiary to, (i) grant
to any director, officer or employee any increase in compensation (except in
accordance with past practices for those employees who are not executive or
senior management), (ii) make contributions to any FMS Existing Plans (except in
accordance with past practices or the terms of such plans or agreements as
currently in effect as of the date of this Agreement provided that no
contributions shall be made to any FMS plan that is a defined benefit plan), or
(iii) pay any bonus (except in accordance with past practices or plans or
agreements with respect to employees other than executive or senior management)
or increase any severance or termination pay, or enter into or amend any
employment, special termination, change in control, retention, covenant not to
compete, severance, SERP or other compensation related agreement with any such
person except as contemplated in this Agreement; provided, however, that nothing
shall prevent FMS from paying out accrued but unused vacation time in excess of
five (5) days for the 2006 calendar year consistent with past practice.
(j) Neither FMS, nor any FMS Subsidiary, will enter into, renew,
extend, amend or modify any lease or license with respect to any property,
whether real or personal with a term of more than one (1) year or payments
greater than $50,000.
47
(k) Except as set forth on Schedule 6.1(k) to the FMS Disclosure
Schedule, neither FMS, nor any FMS Subsidiary, will enter into or amend any
continuing contract or series of related contracts involving in excess of
$50,000 for the purchase of materials, supplies, equipment or services which
cannot be terminated without cause with less than ninety (90) days' notice and
without payment of any amount as a penalty, bonus, premium or other compensation
for such termination except as contemplated or permitted by this Agreement.
(l) FMS will not, and will not permit any FMS Subsidiary to, adopt or
amend in any material respect any collective bargaining, employee pension,
profit-sharing, retirement, employee stock ownership, insurance, incentive
compensation, severance, vacation, stock option, or other plan, agreement,
trust, fund or arrangement for the benefit of employees, except as contemplated
herein.
(m) FMS will, and will cause each FMS Subsidiary to, use their best
efforts to maintain their respective properties and assets in their present
states of repair, order and condition, reasonable wear and tear excepted, and to
maintain and keep in full force and effect all policies of insurance presently
in effect, including the insurance of accounts with the FDIC. FMS will, and will
cause each FMS Subsidiary to, take all requisite action (including without
limitation the making of claims and the giving of notices) pursuant to their
directors' and officers' liability insurance policies in order to preserve all
rights thereunder with respect to all matters known by FMS which could
reasonably give rise to a claim prior to the Effective Time.
(n) FMS will not, and will not permit any FMS Subsidiary to, amend
their respective Certificate of Incorporation, Charters, or Bylaws, except as
contemplated by this Agreement.
(o) Except as contemplated on Schedule 6.1(o) to the FMS Disclosure
Schedule, FMS will not, and will not permit any FMS Subsidiary to, enter into,
renew, modify or increase: (i) any loan secured by lease receivables, (ii) any
loan secured by commercial real estate involving an amount in excess of
$1,250,000, or any amount which, when aggregated with any and all loans to the
same or related borrowers, would be in excess of $2,500,000 (and in any event
only if such loan has an existing debt service coverage ratio of not less than
1.20 and a loan value ratio in accordance with regulatory guidelines), (iii) any
business loan involving an amount in excess of $250,000, or in any amount which,
when aggregated with any and all loans to the same or related borrowers, would
be in excess of $500,000 (and in any event only if such loan has an existing
debt service coverage ratio of not less than 1.20), (iv) any loan or credit
commitment (including letters of credit) which is secured by property located
outside of New Jersey and Pennsylvania; and (v) any loan or credit commitment
(including letters of credit) to, or make any investment or agree to make an
investment in, any person or entity or modify any of the material provisions or
renew or otherwise extend the maturity date of any existing loan, credit
commitment or investment: (A) to any person or entity involving an amount in
excess of $1,250,000 or in any amount which, when aggregated with any and all
loans or credit commitments of FMS and FMB to such person or entity or related
entities, would be in excess of $2,500,000 (and in any event only if such loan
has a loan to value ratio of not greater than 80% unless private mortgage
insurance is purchased); (B) to any person other than in accordance with
48
its lending policies as in effect on the date hereof; or (C) to any person or
entity any of the loans or other extensions of credit to which, or investments
in which, are delinquent, non-performing or on a "watch list" or similar
internal report of FMS or FMB; provided, however, that nothing in this
subsection shall prohibit FMS or FMB from honoring any contractual obligation in
existence on the date of this Agreement.
(p) FMS will not, and will not permit any FMS Subsidiary to (i) make
any fixed rate loan, loan commitment or renewal or extension with a term longer
than ten (10) years, except on such terms and in such amounts as are consistent
with past practice and in any event no more than $2.0 million in aggregate
principal amount on average in any month of fixed rate loans with terms 30 years
or longer unless such loans confirm to the FNMA/FHLMC standards, or (ii)
purchase any loan or loan participation except FMS may purchase up to $5.0
million per month of adjustable rate loans or loan participations with initial
fixed rate periods of five (5) years or less that are secured by 1-4 family
residences and have loan to value ratios of not greater than 80% unless private
mortgage insurance is purchased.
(q) FMS will not, and will not permit any FMS Subsidiary to, take any
action which would, or fail to take any action contemplated by this Agreement if
such failure would, disqualify the Merger as a tax-free reorganization under
Section 368(a) of the Code.
(r) FMS will not, and will not permit any FMS Subsidiary to,
materially restructure or materially change its investment securities portfolio,
through purchases, sales or otherwise, or change the manner in which the
portfolio is classified or reported (in accordance with FAS 115 or otherwise),
or execute individual investment transactions in excess of $50,000, except that
individual investment and mortgage-backed securities purchases will be limited
to $3.0 million per issue, will be of the two highest investment grade
categories, and no fixed-rate non-mortgage related security should have a final
maturity of more than two (2) years and no fixed-rate mortgage-related security
should have an average life of greater than three (3) years at Bloomberg
consensus prepayment speeds.
(s) Except as required by applicable law or regulation, FMS (i) will
not, and will not permit any FMS Subsidiary to, implement or adopt any material
change in its interest rate and other risk management policies, procedures or
practices, and (ii) will, and will cause each FMS Subsidiary to, follow its
existing policies and practices with respect to managing its exposure to
interest rate and other risk and to use commercially reasonable means to avoid
any material increase in its aggregate exposure to interest risk.
(t) FMS will not, and will not permit any FMS Subsidiary to, enter
into any new, or modify, amend or extend the terms of any existing, contracts
relating to the purchase or sale of financial or other futures, derivative or
synthetic mortgage product or any put or call option relating to cash,
securities or commodities or any interest rate swap agreements or other
agreements relating to the hedging of interest rate risks.
(u) FMS will not, and will not permit any FMS Subsidiary to, enter
into, increase or renew any loan or credit commitment (including letters of
credit) to any executive officer or director of FMS or any FMS Subsidiary, any
five percent stockholder of FMS, or any
49
entity controlled, directly or indirectly, by any of the foregoing or engage in
any transaction with any of the foregoing which is of the type or nature sought
to be regulated in 12 U.S.C. 371c and 12 U.S.C. 371c-1. For purposes of this
Subsection, "control" shall have the meaning associated with that term under 12
U.S.C. 371c.
(v) FMS will promptly advise Bancorp orally and in writing of any
event or series of events which has a FMS Material Adverse Effect.
(w) Notwithstanding any of the foregoing, at or immediately prior to
the Effective Time, if and as so required by Bancorp, FMS and FMB (i) shall
cause any outstanding inter-company debt to be repaid to the extent permitted by
the instrument or indenture governing such debt, and (ii) cause dividends to be
paid to FMS in such amounts as specified by Bancorp, subject to any regulatory
notice or approval requirement.
(x) Except as set forth in the FMS Disclosure Schedule, neither FMS,
nor any FMS Subsidiary, will enter into any contract or agreement to buy, sell,
exchange or otherwise deal in any tangible assets in a single transaction or a
series of related transactions in excess of $75,000 in aggregate value.
(y) Neither FMS, nor any FMS Subsidiary, will make any one capital
expenditure or any series of related capital expenditures (other than emergency
repairs and replacements), the amount or aggregate amount of which (as the case
may be) is in excess of $75,000; provided, further, any computer or network
equipment acquired by FMS or FMB shall satisfy certain standards and
specifications acceptable to Bancorp.
(z) Neither FMS, nor any FMS Subsidiary, will file any application to
relocate operations from existing locations.
(aa) Neither FMS, nor any FMS Subsidiary, will create or incur any
mortgage, lien, pledge, or security interest, against or in respect of any
property or right of FMS or any FMS Subsidiary securing any obligation in excess
of $75,000, except for any pledge or security interests given in connection with
the acceptance of repurchase agreements or government deposits or if in the
ordinary course of business consistent with past practice.
(bb) Neither FMS, nor any FMS Subsidiary, will discharge or satisfy
any mortgage, lien, charge or encumbrance other than as a result of the payment
of liabilities in accordance with the terms thereof, or except in the ordinary
course of business, if the cost to FMS or any FMS Subsidiary to discharge or
satisfy any such mortgage, lien, charge or encumbrance is in excess of $75,000,
unless such discharge or satisfaction is covered by general or specific
reserves.
(cc) Neither FMS, nor any FMS Subsidiary, will settle or agree to
settle any claim, action or proceeding, whether or not initiated in a court of
law, involving an expenditure in excess of $75,000.
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(dd) Neither FMS, nor any FMS Subsidiary, will change in any material
respect any basic policies and practices with respect to liquidity management
and cash flow planning, marketing, deposit origination, lending, budgeting,
profit and tax planning, personnel practices, accounting or any other material
aspects of its business or operations, except for such changes as may be
required by the rules of the AICPA or the FASB or by Governmental Authorities or
by law.
(ee) Neither FMS, nor any FMS Subsidiary, will knowingly or
intentionally default under the terms of any material agreement to which FMS or
any FMS Subsidiary is party.
6.2 Acquisition Transactions. (a) Promptly following the execution of this
Agreement, FMS shall take affirmative steps necessary to discontinue, and
thereafter not initiate, solicit or knowingly encourage (including by way of
furnishing any information or assistance), or take any other action to
facilitate, any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal, or negotiate with
any person in furtherance of such inquires or to obtain an Acquisition Proposal,
or agree to endorse, or endorse, any Acquisition Proposal, or authorize or
permit any of its officers, directors or employees or any investment banker,
financial advisor, attorney, accountant or other representative retained by FMS
or any of the FMS Subsidiaries to take any such action, and FMS shall promptly
notify Bancorp orally, and confirm in writing, subject to disclosure being
consistent with the fiduciary duties of the Board of Directors of FMS, all of
the relevant details relating to all inquiries and proposals which FMS or a FMS
Subsidiary may receive relating to any of such matters; provided, however, that
nothing contained in this Section 6.14 shall prohibit the Board of Directors of
FMS from: (A) complying with its disclosure obligations under federal or state
law; (B) providing information in response to a request therefore by a Person
who has made an unsolicited bona fide written Acquisition Proposal if the FMS
Board of Directors receives from the Person so requesting such information an
executed confidentiality agreement substantially similar to that entered into
with Bancorp; (C) engaging in any negotiations or discussions with any Person
who has made an unsolicited bona fide written Acquisition Proposal or (D)
recommending such an Acquisition Proposal to the shareholders of FMS, if and
only to the extent that, in each such case referred to in clause (B), (C) or (D)
above, (i) the FMS Board of Directors determines in good faith (after
consultation with outside legal counsel) that such action would be required in
order for its directors to comply with their respective fiduciary duties under
applicable law, and (ii) the FMS Board of Directors determines in good faith
(after consultation with its financial advisor) that such Acquisition Proposal,
if accepted, is at least as reasonably likely to be consummated, taking into
account all legal, financial and regulatory aspects of the proposal and the
Person making the proposal and, if consummated, would result in a transaction
more favorable to the FMS shareholders from a financial point of view than the
Merger. An Acquisition Proposal which is received and considered by FMS in
compliance with this section 6.14 and which meets the requirements set forth in
clause (D) of the preceding sentence is herein referred to as a "Superior
Proposal." FMS agrees that it will immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any Acquisition Proposal. FMS agrees that it will
notify Bancorp immediately if any such inquiries, proposals or offers are
received by, any such information is requested from, or any such discussions or
negotiations are sought to be initiated or continued with FMS or any of its
representatives after the date hereof, and the identity of the
51
person making such inquiry, proposal or offer and the substance thereof and will
keep Bancorp informed of any material developments with respect thereto
immediately upon the occurrence thereof.
(b) In the event that the Board of Directors of FMS determines in good
faith, after consultation with its financial advisor and upon advice from
outside counsel, that it desires to accept a Superior Proposal, it shall notify
Bancorp in writing of its intent to terminate this Agreement in order to enter
into an acquisition agreement with respect to, or recommend acceptance of, the
Superior Proposal. Such notice shall specify all of the material terms and
conditions of such Superior Proposal and identify the Person making such
Superior Proposal. Bancorp shall have three calendar days to evaluate and
respond to FMS' notice. If Bancorp notifies FMS in writing prior to the
expiration of the three calendar day period provided above that it shall
increase the Merger Consideration to an amount at least equal to that of such
Superior Proposal (the "Bancorp Proposal"), then FMS shall not be permitted to
enter into an acquisition agreement with respect to, or permit its Board to
recommend acceptance to its shareholders of, such Superior Proposal. Such notice
by Bancorp shall specify the new Merger Consideration. FMS shall have three
calendar days to evaluate the Bancorp Proposal.
(c) In the event that the Board of Directors FMS determines in good
faith, upon the advice of its financial advisor and outside counsel, that the
Bancorp Proposal is not at least equal to the Superior Proposal, FMS can
terminate this Agreement in order to execute an acquisition agreement with
respect to, or to allow its Board to adopt a resolution recommending acceptance
to FMS' shareholders of, the Superior Proposal as provided in Section 8.1(k).
6.3 Minority Stock Offering. Within 60 days of the date hereof, Bancorp
shall adopt a Plan of Minority Stock Issuance in connection with the Minority
Stock Offering. Such Plan shall conform in all respects with HOLA and the
requirements and regulations of the OTS. Subject to the terms and conditions of
this Agreement, including without limitation Section 2.5(b), such Plan shall
provide for a percentage of shares of Bancorp Common Stock to be issued in the
Minority Stock Offering to persons other than Beneficial MHC so as to permit the
maximum number of shares of Bancorp Common Stock to be issued in the Merger to
FMS Shareholders. Bancorp shall promptly prepare and file with the OTS a Form
MHC-2 and shall prepare and file with the SEC a registration statement on Form
S-1 (the "S-1") in connection with the Minority Stock Offering. The initial
filings of the MHC-2 and the S-1 shall contain financial information for both
Bancorp and FMS at and for the year ended December 31, 2006. Bancorp shall
promptly respond to any and all comments it receives on such filings from the
respective staffs of the OTS and SEC and shall use its best efforts to obtain
approval of the MHC-2 and have the S-1 declared effective. Bancorp will commence
the Minority Stock Offering promptly after receipt of all requisite regulatory
clearances and approvals.
6.4 Formation of Merger Corp. Bancorp shall take all actions necessary to
incorporate and organize Merger Corp.
6.5 Change in Bank Control Act Filings. In the event that an FMS
shareholder who is requested to execute a Voting Agreement is required to or may
elect to make any filings pursuant
52
to 12 C.F.R. Part 574, Bancorp shall cooperate with any such filings and use its
best efforts to assist in obtaining the requisite approval or non-objection from
the OTS.
6.6 FMS Options. FMS shall use its best efforts to cause each holder of an
option outstanding under the FMS Stock Option Plan to agree in writing to cancel
any of their outstanding options to acquire shares of FMS Common Stock in
exchange for the consideration set forth in Section 2.5 herein.
ARTICLE VII
CONDITIONS PRECEDENT TO THE MERGER
7.1 Conditions to Each Parties Obligations to Effect the Merger. The
respective obligations of Bancorp and FMS to effect the transactions
contemplated by this Agreement shall be subject to the fulfillment at or prior
to the Closing and as of the Effective Time of the following conditions
precedent:
(a) No Litigation. No suit, action or other proceeding shall be
pending or overtly threatened before any court in which the consummation of the
transactions contemplated by this Agreement is restrained or enjoined or in
which the relief requested is to restrain, enjoin or prohibit the consummation
of the transactions contemplated by this Agreement and, in either case, where in
the reasonable judgment of either Bancorp or FMS, such suit, action or other
proceeding, is likely to have a Material Adverse Effect with respect to such
party's interest.
(b) Approval of FMS Shareholders. This Agreement and the Merger shall
have received the requisite approval and authorization of the FMS Shareholders.
(c) Regulatory Approvals.
(i) The Merger, this Agreement, the transactions contemplated
hereby, shall have been approved by the OTS and any other governmental entities
whose approval is necessary, all conditions required to be satisfied prior to
the Effective Time imposed by the terms of such approvals shall have been
satisfied, and all waiting periods relating to such approvals shall have
expired. The Minority Stock Offering also shall have been approved by the OTS
and any other governmental entity whose approval is necessary in order for
Bancorp to proceed with the Minority Stock Offering.
(ii) No permission, approval, determination, consent or waiver
received pursuant to Section 7.1(c)(i) of this Agreement shall contain any
condition applicable to Bancorp which is, in the reasonable judgment of Bancorp,
materially burdensome upon the conduct of Bancorp's business or which would so
adversely impact the economic and business benefits of the Merger to Bancorp so
as to render it inadvisable to proceed with the Merger.
(d) Minority Stock Offering. The Minority Stock Offering shall have
occurred. All such events which shall occur simultaneously with the Closing
shall occur simultaneously with Closing.
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(e) Registration Statement. The Registration Statement shall have been
declared effective and no stop order shall have been instituted or threatened.
7.2 Conditions to Obligation of Bancorp. The obligation of Bancorp to
effect the transactions contemplated by this Agreement shall be subject to the
fulfillment at or prior to the Closing and as of the Effective Time of the
following additional conditions precedent:
(a) Compliance with Agreement. FMS shall have performed and complied
in all material respects with all of its covenants, agreements and other
obligations under this Agreement which are to be performed or complied with by
it prior to or on the Closing Date and as of the Effective Time.
(b) Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken in connection with the transactions contemplated
by this Agreement, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to Bancorp, and FMS shall have made available
to Bancorp for examination the originals or true and correct copies of all
documents Bancorp may reasonably request in connection with the transactions
contemplated by this Agreement.
(c) Representations and Warranties of FMS. Each of the representations
and warranties of FMS contained in Article IV of this Agreement, after giving
effect to any update to the FMS Disclosure Schedule Change, shall be true and
correct, as of the Effective Time with the same force and effect as though made
on and as of the Effective Time, except for those representations and warranties
which address matters only as of a particular date (which shall remain true and
correct as of such date), and except for those breaches which individually or in
the aggregate do not or would not be reasonably likely to have a Material
Adverse Effect on FMS.
(d) No Material Adverse Change. During the period from the date of
this Agreement to the Closing Date and as of the Effective Time there shall not
have occurred, and there shall not exist on the Closing Date and as of the
Effective Time, any condition(s) or fact(s) having individually or in the
aggregate a Material Adverse Effect on FMS.
(e) Deliveries at Closing. FMS shall have delivered to Bancorp such
certificates and documents of officers of FMS and public officials as shall be
reasonably requested by Bancorp to establish the existence of FMS and the due
authorization of this Agreement and the transactions contemplated by this
Agreement by FMS.
(f) Accountant(s) Letters. Bancorp shall have received a copy of the
following letter(s) from PricewaterhouseCoopers LLP and/or ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP,
which shall be in form and substance reasonably satisfactory to Bancorp and
shall contain information concerning the financial condition of FMS: (i) the
letter(s) described in Section 3.6 of this Agreement; (ii) similar letter(s)
dated the Closing Date.
(g) Stock Listing. FMS Common Stock shall continue to have been listed
on the Nasdaq Global Market.
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(h) Stock Options. FMS shall have used its best efforts to cause all
of the FMS Stock Options outstanding immediately prior to the Effective Time to
have been terminated or canceled as contemplated in Section 2.4 herein.
(i) Cash in Lieu of Options. The cash payment contemplated in Section
6.15 herein shall have been made, and the written agreement contemplated in
Section 6.15 herein shall have been entered into.
(j) Required Consents. In addition to Regulatory Approvals, FMS and
Bank shall have obtained all necessary third party consents or approvals in
connection with the Merger, the absence of which would materially and adversely
affect FMS and FMS Subsidiaries, taken as a whole.
7.3 Conditions to Obligation of FMS. The obligation of FMS to effect the
transactions contemplated by this Agreement shall be subject to the fulfillment
at or prior to the Closing and as of the Effective Time of the following
additional conditions precedent:
(a) Compliance with Agreement. Bancorp shall have performed and
complied in all material respects with all of its covenants, agreements and
other obligations under this Agreement which are to be performed or complied
with by it prior to or on the Closing Date and as of the Effective Time.
(b) Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken in connection with the transactions contemplated
by this Agreement, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to FMS, and Bancorp shall have made available
to FMS for examination the originals or true and correct copies of all documents
which FMS may reasonably request in connection with the transactions
contemplated by this Agreement.
(c) Representations and Warranties of Bancorp. Each of the
representations and warranties of Bancorp contained in Article V of this
Agreement, after giving effect to any Bancorp Disclosure Schedule Change, shall
be true and correct as of the Effective Time with the same force and effect as
though made on and as of the Effective Time, except for those representations
and warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), and except for those breaches which
individually or in the aggregate do not or would not be reasonably likely to
have a Material Adverse Effect on Bancorp.
(d) No Material Adverse Change. During the period from the date of
this Agreement to the Closing Date and as of the Effective Time there shall not
have occurred, and there shall not exist on the Closing Date and as of the
Effective Time, any condition(s) or fact(s) having individually or in the
aggregate a Material Adverse Effect (irrespective of whether any such condition
or fact was disclosed in a Bancorp Disclosure Schedule Change) on Bancorp.
55
(e) Deliveries at Closing. Bancorp shall have delivered to FMS such
certificates and documents of officers of Bancorp and of public officials as
shall be reasonably requested by FMS to establish the existence of Bancorp and
the due authorization of this Agreement and the transactions contemplated by
this Agreement by Bancorp.
(f) Opinion of Financial Advisor. FMS shall have received the opinion
of ▇▇▇▇ ▇▇▇▇ & Co. dated the date on which the FMS Proxy Statement is first
mailed to FMS Shareholders, to the effect that the consideration to be received
in the Merger by the FMS Shareholders is fair to the FMS Shareholders from a
financial point of view and such opinion shall not have been withdrawn as of the
Closing Date.
(g) Stock Listing. Shares of Bancorp Common Stock shall have been
approved for quotation on the Nasdaq Global Market.
(h) Receipt of Merger Consideration. The Exchange Agent in its
fiduciary capacity shall have certified receipt of the aggregate Merger
Consideration for all shares of FMS Common Stock to be acquired hereunder.
(i) Required Consents. In addition to Regulatory Approvals, Bancorp
shall have obtained all necessary third party consents or approvals in
connection with the Merger, the absence of which would materially and adversely
affect Bancorp and Bancorp Subsidiaries, taken as a whole.
(j) Tax Opinion. FMS and Bancorp shall have received an opinion of
Bancorp's counsel, in form and substance reasonably acceptable to FMS and
Bancorp, to the effect that the Merger will constitute a reorganization under
Section 368 of the Code and the shareholders of FMS will not recognize any gain
or loss to the extent that such shareholders exchange their FMS Shares for
Bancorp Shares. Each of FMS and Bancorp shall upon request execute and deliver
to such counsel a certificate or certificates setting forth certain factual
matters necessary to for the basis for such opinions.
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date, whether before or after approval of the Merger by the stockholders
of FMS:
(a) By the mutual written agreement of Bancorp and FMS;
(b) By either Bancorp or FMS (provided that the terminating party is
not then in material breach of any representation, warranty, covenant or other
agreement contained herein) if there shall have been a breach of any of the
representations or warranties set forth in this Agreement on the part of the
other party such that the conditions set forth in Sections 7.2(c) or 7.3(c), as
the case may be, would not be satisfied and such breach by its nature cannot be
cured prior to the Closing Date or shall not have been cured within thirty (30)
days after written notice by Bancorp to FMS (or by FMS to Bancorp) of such
breach;
56
(c) By either Bancorp or FMS (provided that the terminating party is
not then in material breach of any representation, warranty, covenant or other
agreement contained herein) if there shall have been a failure to perform or
comply with any of the covenants or agreements set forth in this Agreement on
the part of the other party such that the conditions set forth in Sections
7.2(a) or 7.3(a), as the case may be, would not be satisfied and such failure by
its nature cannot be cured prior to the Closing Date or shall not have been
cured within thirty (30) days after written notice by Bancorp to FMS (or by FMS
to Bancorp) of such failure;
(d) By either Bancorp or FMS, if the Closing shall not have occurred
by December 31, 2007 or such later date as shall have been agreed to in writing
by Bancorp and FMS; provided, that no party may terminate this Agreement
pursuant to this Section 8.1(d) if the failure of the Closing to have occurred
on or before said date was due to such party's breach of any of its obligations
under this Agreement;
(e) By either Bancorp or FMS if the shareholders of FMS shall have
voted at the FMS Meeting and such vote shall not have been sufficient to approve
the Agreement;
(f) By either Bancorp or FMS (i) if final action has been taken by a
Government Entity whose approval or non-objection is required in connection with
this Agreement and the transactions contemplated hereby or thereby (other than
the Minority Offering), which final action (x) has become unappealable, and (y)
does not approve or state a non-objection to this Agreement or the transactions
contemplated hereby or thereby, (ii) if any regulatory authority whose approval
or non-objection is required in connection with this Agreement and the
transactions contemplated hereby or thereby (other than the Minority Offering)
has stated in writing that it will not issue the required approval or
non-objection, or (iii) if any court of competent jurisdiction or other
governmental authority shall have issued an order, decree, ruling or taken any
other action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action shall have become final and nonappealable;
(g) By either Bancorp or FMS (i) if final action has been taken by a
Government Entity whose approval or non-objection is required in connection with
the Minority Offering, which final action (x) has become unappealable, and (y)
does not approve or state a non-objection to the Minority Offering, or (ii) if
any regulatory authority whose approval or non-objection is required in
connection with the Minority Offering has stated in writing that it will not
issue the required approval or non-objection, (iii) if any court of competent
jurisdiction or other governmental authority shall have issued an order, decree,
ruling or taken any other action restraining, enjoining or otherwise prohibiting
the Minority Offering an such order, decree, ruling or other action shall have
become final and nonappealable;
(h) By either Bancorp or FMS (provided that the terminating party is
not then in material breach of any representation, warranty, covenant or other
agreement contained herein) in the event that any of the conditions precedent to
the obligations of such party to consummate the Merger, as set forth in Article
VII, cannot be satisfied or fulfilled by December 31, 2007.
57
(i) By Bancorp if (a) at any time prior to the FMS Meeting, the FMS
Board of Directors shall have failed for any reason to make its recommendation
referred to in Section 3.18, withdrawn such recommendation or modified or
changed such recommendation in a manner adverse in any respect to the interests
of Bancorp, or (ii) the FMS Board of Directors shall have failed for any reason
to call, give notice of, convene and hold the FMS Meeting;
(j) By Bancorp if a tender offer or exchange offer for 25% or more of
the outstanding shares of FMS Common Stock is commenced (other than by Bancorp),
and the FMS Board of Directors recommends that the shareholders of FMS tender
their shares in such tender or exchange offer or otherwise fails to recommend
that such shareholders reject such tender offer or exchange offer within the
ten-Business Day period specified in Rule 14e-2(a) under the Exchange Act;
(k) At any time prior to the FMS Meeting, by FMS in order to
concurrently enter into an acquisition agreement or similar agreement (each, an
"Acquisition Agreement") with respect to a Superior Proposal which has been
received and considered by FMS and the FMS Board of Directors in compliance with
Section 6.2 hereof, provided, however, that this Agreement may be terminated by
FMS pursuant to this Section 8.1(k) only after the third calendar day following
Bancorp's receipt of written notice from FMS advising Bancorp that FMS is
prepared to enter into an Acquisition Agreement with respect to a Superior
Proposal, and only if, during such three-calendar day period, Bancorp does not,
in its sole discretion, make an offer to FMS that Bancorp's Board of Directors
determines in good faith, after consultation with its financial and legal
advisors, is at least as favorable as the Superior Proposal; or
(l) By FMS if any requisite approval or non-objection of the OTS
contemplated in Section 6.5 shall have not been obtained.
8.2 Effect of Termination.
(a) In the event of termination of this Agreement pursuant to any
provision of Section 8.1, this Agreement shall forthwith become void and have no
further force, except that (i) the provisions of Section 3.1 and Article VIII,
and (ii) any other Section which, by its terms, relates to post-termination
rights or obligations, shall survive such termination of this Agreement and
remain in full force and effect.
(b) In recognition of the efforts, expenses and other opportunities
foregone by Bancorp while structuring and pursuing the Merger, the parties
hereto agree that FMS shall pay to Bancorp a termination fee of seven million
three hundred thousand dollars ($7,300,000) (the "FMS Termination Fee") in the
manner and subject to the conditions set forth below if:
(i) this Agreement is terminated by Bancorp pursuant to Section
8.1(i) or 8.1 (j);
(ii) this Agreement is terminated by Bancorp pursuant to Sections
8.1(b) or 8.1(c) and, in each case, within 18 months after such
termination FMS or
58
a FMS Subsidiary enters into any agreement with respect to, or
consummates, any Acquisition;
(iii) this Agreement is terminated by Bancorp pursuant to
Sections 8.1(b) or 8.1(c) resulting from the intentional or willful
conduct or gross negligence of FMS;
(iv) this Agreement is terminated by either Bancorp or FMS
pursuant to Section 8.1(e), and an Acquisition Proposal shall have
been publicly announced or otherwise communicated or made known to the
senior management of FMS or the FMS Board of Directors (or any Person
shall have publicly announced, communicated or made known an
intention, whether or not conditional, to make an Acquisition
Proposal) at any time after the date of this Agreement and prior to
the taking of the vote of the shareholders of FMS contemplated by this
Agreement at the FMS Meeting; or
(v) this Agreement is terminated by FMS pursuant to Section
8.1(k).
In the event the FMS Termination Fee shall become payable pursuant to
Section 8.2(b)(i), (iii) or (iv), (x) FMS shall pay to Bancorp an amount equal
to three million seven hundred thousand dollars ($3,700,000) on or before the
third Business Day following termination of this Agreement, and (y) if within 18
months after such termination FMS or a FMS Subsidiary enters into any agreement
with respect to, or consummates, any Acquisition, FMS shall pay to Bancorp the
FMS Termination Fee (net of any payment made pursuant to clause (x) above) on
the earliest of the date of execution of such agreement or consummation of the
Acquisition. In the event the FMS Termination Fee shall become payable pursuant
to Section 8.2(b)(ii), FMS shall pay to Bancorp the entire FMS Termination Fee
on the earliest of the date of execution of such agreement or consummation of
the Acquisition. In the event the FMS Termination Fee shall become payable
pursuant to Section 8.2(v), FMS shall pay to Bancorp the entire FMS Termination
Fee within three Business Days following the date of termination of this
Agreement. Any amount that becomes payable pursuant to this Section 8.2(b) shall
be paid by wire transfer of immediately available funds to an account designated
by Bancorp.
(c) In recognition of the efforts, expenses and other opportunities
foregone by Bancorp while structuring and pursuing the Merger, the parties
hereto agree that FMS shall pay to Bancorp a termination fee of one million
eight hundred thousand dollars ($1,800,000) if FMS terminates this Agreement
pursuant to Section 8.1(l) and within 18 months after such termination FMS or a
FMS Subsidiary enters into any agreement with respect to, or consummates, any
Acquisition (the "FMS Section 8.1(l) Termination Fee"). In the event the FMS
Section 8.1(l) Termination Fee shall become payable pursuant to this Section
8.2(c), FMS shall pay to Bancorp the entire FMS Section 8.1(l) Termination Fee
on the earliest of the date of execution of such agreement or consummation of
the Acquisition. Any amount that becomes payable pursuant to this Section 8.2(c)
shall be paid by wire transfer of immediately available funds to an account
designated by Bancorp.
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(d) Except as provided in Sections 8.2(b) and 8.3, whether or not the
Merger is consummated, all out of pocket expenses, including, without
limitation, reasonable legal accounting and investment banking expenses incurred
by such other party in connection with the entering into this Agreement and the
carrying out of all acts contemplated hereunder (collectively referred to
hereunder as the "Costs") incurred in connection with this Agreement and the
transactions contemplated hereby shall be borne by the party incurring such
Costs.
(e) In no event shall any officer, agent, or director of FMS, any FMS
Subsidiary, Bancorp or any Bancorp Subsidiary, be personally liable thereunder
for any default by any party in any of its obligations hereunder unless any such
default was intentionally caused by such officer, agent or director.
(f) In no event shall Bancorp be entitled to receive both the FMS
Termination Fee and the FMS Section 8.1(1) Termination Fee.
8.3 Bancorp Termination Payment.
(a) Bancorp Special Payment. As a condition of FMS' willingness to,
and in order to induce FMS to, enter into this Agreement, and to reimburse FMS
for incurring the damages, costs and expenses related to entering into this
Agreement and consummating the transactions contemplated by this Agreement,
Bancorp hereby agrees to pay to FMS, as liquidated damages and in lieu of any
other rights or remedies under this Agreement, a cash payment (the "Special
Payment") only if (i) the Agreement is terminated pursuant to Section 8.1(f) or
Section 8.1(g), or (ii) Bancorp does not consummate the Minority Offering and is
otherwise unable to consummate the Merger by December 31, 2007 or such later
date agreed to as contemplated in Section 8.1(d) other than as a result of the
failure to obtain any requisite approval or non-objection of the OTS
contemplated in Section 6.5; provided, however, that Bancorp shall not have
breached its obligation set forth in Section 6.5, or (iii) FMS has terminated
this Agreement in accordance with Section 8.1(b) or 8.1(c) because Bancorp has
intentionally and willfully breached any of its representations or warranties
herein or intentionally and willfully failed to perform or comply with any of
its covenants or agreements herein, to such extent as to permit such termination
(each of such reasons for termination being hereinafter referred to as the
"Special Payment Event"). If the Special Payment Event is pursuant to subsection
(i) or (ii) of this Section 8.3(a), then the Special Payment shall amount to
five million five hundred thousand dollars ($5,500,000). If the Special Payment
Event is pursuant to subsection (iii) of this Section 8.3(a), then the Special
Payment shall amount to three million seven hundred thousand dollars
($3,700,000). Notwithstanding the foregoing, Bancorp shall have no obligation to
make the Special Payment to FMS if the Special Payment Event is primarily due to
a breach of a representation or warranty of FMS (subject to the standard set
forth in Section 7.2(c) of this Agreement) or a breach by FMS of one or more
covenants in this Agreement, which breach of representation, warranty or
covenant is the principal cause of the occurrence of the Special Payment Event.
(b) Payment Required. Any payment required to be made under this
Section 8.3 shall be paid by Bancorp to FMS by wire transfer of immediately
available funds to an account designated by FMS within three (3) Business Days
after demand by FMS.
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(c) Exclusivity of Remedy. Notwithstanding anything to the contrary
set forth in this Agreement, if Bancorp pays or causes to be paid to FMS the
Special Payment, Bancorp will not have any further obligations or liabilities to
FMS with respect to this Agreement or the transactions contemplated by this
Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 Entire Agreement; Amendment. This Agreement, the Confidentiality
Agreement and the other documents referred to in this Agreement and required to
be delivered pursuant to this Agreement constitute the entire agreement among
the parties pertaining to the subject matter of this Agreement, and supersede
all prior and contemporaneous agreements, understandings, negotiations and
discussions of the parties, whether oral or written, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter of this Agreement, except as specifically set
forth in this Agreement. This Agreement may be amended by the parties at any
time before or after approval of this Agreement by the FMS Shareholders, except
that after such approval no amendment shall be made without the further approval
of the FMS Shareholders if such amendment: (a) alters or changes the amount or
kind of shares, securities, cash, property and/or rights to be received in
exchange for or on conversion of all or any of the shares of FMS Common Stock,
(b) alters or changes any term of Bancorp's Charter other than as provided
herein, or (c) alters or changes any of the terms and conditions of this
Agreement if such alteration or change would adversely affect the FMS
Shareholders. No amendment, supplement, modification, waiver or termination of
this Agreement shall be binding unless executed in writing by the party to be
bound thereby. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision of this Agreement,
whether or not similar, nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
9.2 Governing Law. This Agreement shall be construed and interpreted
according to the Laws of the Commonwealth of Pennsylvania except to the extent
federal law may apply.
9.3 Assignment. This Agreement shall not be assigned by operation of law or
otherwise.
9.4 Notices. All communications or notices required or permitted by this
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date when actually delivered to an officer of a party by personal
delivery or telephonic facsimile transmission (receipt electronically confirmed)
or two days after deposited in the United States mail, certified or registered
mail, postage prepaid, return receipt requested, and addressed as follows,
unless and until any of such parties notifies the others in accordance with this
Section of a change of address:
IF TO BANCORP: Beneficial Mutual Bancorp, Inc.
▇▇▇▇▇▇ ▇. Nise
President and Chief Executive Officer
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▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO FMS: FMS Financial Corporation
▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive Officer
▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇. Spidi, Esq.
▇▇▇▇▇▇▇ Spidi & ▇▇▇▇▇, PC
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
9.5 Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Table of Contents
and Article and Section headings in this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
9.6 Interpretation. Unless the context requires otherwise, all words used
in this Agreement in the singular number shall extend to and include the plural,
all words in the plural number shall extend to and include the singular, and all
words in any gender shall extend to and include all genders.
9.7 Severability. If any provision, clause, or part of this Agreement, or
the application thereof under certain circumstances, is held invalid, the
remainder of this Agreement, or the application of such provision, clause or
part under other circumstances, shall not be affected thereby unless such
invalidity materially impairs the ability of the parties to consummate the
transactions contemplated by this Agreement. If, however, any provision of this
Agreement is held invalid by a court of competent jurisdiction, then the parties
hereto shall in good faith amend this Agreement to include an alternative
provision that accomplishes a result which is not materially different.
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9.8 Specific Performance. The parties agree that the assets and business of
FMS as a going concern constitute unique property. There is no adequate remedy
at Law for the damage which any party might sustain for failure of the other
parties to consummate the Merger and the transactions contemplated by this
Agreement, and accordingly, each party shall be entitled, at its option, to the
remedy of specific performance to enforce the Merger pursuant to this Agreement.
9.9 No Reliance. Except for the parties to this Agreement and any
Indemnified Parties under Section 3.5 of this Agreement: (a) no Person is
entitled to rely on any of the representations, warranties and agreements of the
parties contained in this Agreement; and (b) the parties assume no liability to
any Person because of any reliance on the representations, warranties and
agreements of the parties contained in this Agreement.
9.10 Further Assurances. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest Bancorp with full right, title and possession to all
assets, properties, rights, privileges, powers and franchises of FMS, the
officers of Bancorp are fully authorized to take any such action in the name of
FMS.
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IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of
Merger to be duly executed as of the day and year first above written.
BENEFICIAL SAVINGS BANK MHC
By: /s/ ▇▇▇▇▇▇ ▇. Nise
-----------------------------------
▇▇▇▇▇▇ ▇. Nise
President and Chief Executive Officer
BENEFICIAL MUTUAL BANCORP, INC.
By: /s/ ▇▇▇▇▇▇ ▇. Nise
-----------------------------------
▇▇▇▇▇▇ ▇. Nise
President and Chief Executive Officer
BENEFICIAL MUTUAL SAVINGS BANK
By: /s/ ▇▇▇▇▇▇ ▇. Nise
-----------------------------------
▇▇▇▇▇▇ ▇. Nise
President and Chief Executive Officer
FMS FINANCIAL CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive Officer
FARMERS AND MECHANICS BANK
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive Officer
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