AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BRADFORD BANK
AND
▇▇▇▇▇ ▇▇▇▇ BANCORPORATION, INC.
AND
▇▇▇▇▇ ▇▇▇▇ FEDERAL SAVINGS & LOAN ASSOCIATION
DATED AS OF JULY 9, 2002
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
RECITALS ...........................................................1
ARTICLE I CERTAIN DEFINITIONS.............................................2
Section 1.01 Definitions................................................2
ARTICLE II THE MERGER AND EXCHANGE OF SHARES............................7
Section 2.01 Effects of Merger; Surviving Corporation...................7
Section 2.02 Conversion of Shares.......................................8
Section 2.03 Exchange Procedures........................................8
Section 2.04 Stock Options.............................................10
Section 2.05 RRP Awards................................................10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND ▇▇▇▇▇ ▇▇▇▇.....10
Section 3.01 Organization..............................................11
Section 3.02 Capitalization............................................11
Section 3.03 Registered Stock..........................................12
Section 3.04 Dividends.................................................12
Section 3.05 Authority; No Violation...................................12
Section 3.06 Consents..................................................13
Section 3.07 Financial Statements......................................14
Section 3.08 Taxes.....................................................15
Section 3.09 No Material Adverse Effect................................15
Section 3.10 Contracts.................................................15
Section 3.11 Ownership of Property; Insurance Coverage.................17
Section 3.12 Legal Proceedings.........................................18
Section 3.13 Compliance With Applicable Law............................18
Section 3.14 ERISA/Employee Compensation...............................19
Section 3.15 Brokers, Finders and Financial Advisors...................22
Section 3.16 Other Transaction-Related Agreements and Expenses.........22
Section 3.17 Environmental Matters.....................................23
Section 3.18 Loan Portfolio............................................24
Section 3.19 Information to be Supplied................................25
Section 3.20 Related Party Transactions................................26
Section 3.21 Schedule of Termination Benefits..........................26
Section 3.22 Deposits..................................................26
Section 3.23 Business Combination......................................26
Section 3.24 Fairness Opinion..........................................27
Section 3.25 Risk Management Instruments...............................27
Section 3.26 Disclosure................................................27
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BRADFORD..................27
Section 4.01 Organization..............................................28
Section 4.02 Authority; No Violation...................................28
Section 4.03 Consents..................................................29
Section 4.04 Financing.................................................29
Section 4.05 Bradford Financials.......................................30
Section 4.06 Information to be Supplied................................30
Section 4.07 Disclosure................................................30
ARTICLE V COVENANTS OF THE PARTIES....................................31
Section 5.01 Conduct of ▇▇▇▇▇ ▇▇▇▇'▇ Business..........................31
Section 5.02 Access; Confidentiality...................................34
Section 5.03 Regulatory Matters and Consents...........................35
Section 5.04 Taking of Necessary Action................................36
Section 5.05 Certain Agreements........................................37
Section 5.06 No Other Bids and Related Matters.........................38
Section 5.07 Duty to Advise; Duty to Update Disclosure Schedules.......39
Section 5.08 Conduct of Bradford's Business............................40
Section 5.09 Board and Committee Minutes...............................40
Section 5.10 Undertakings by the Parties...............................40
Section 5.11 Employee and Termination Benefits.........................42
Section 5.12 Directors.................................................46
Section 5.13 Duty to Advise............................................46
Section 5.14 Reduction of Merger Consideration.........................46
ARTICLE VI CONDITIONS..................................................47
Section 6.01 Conditions to Parent's and ▇▇▇▇▇ ▇▇▇▇'▇ Obligations
under this Agreement......................................47
Section 6.02 Conditions to Bradford's Obligations under this Agreement.48
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT...........................49
Section 7.01 Termination...............................................49
Section 7.02. Effect of Termination.....................................50
ARTICLE VIII MISCELLANEOUS.............................................51
Section 8.01 Expenses..................................................51
Section 8.02 Survival of Representations and Warranties;
Indemnification...........................................52
Section 8.03 Amendment, Extension and Waiver...........................52
Section 8.04 Entire Agreement..........................................52
Section 8.05 No Assignment.............................................53
Section 8.06 Notices...................................................53
Section 8.07 Captions..................................................54
Section 8.08 Counterparts..............................................54
Section 8.09 Severability..............................................54
Section 8.10 Governing Law.............................................54
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of July 9,
2002, is by and among Bradford Bank, a federally-chartered savings bank
("Bradford"), and ▇▇▇▇▇ ▇▇▇▇ Bancorporation, Inc. ("Parent"), a Delaware
corporation, and ▇▇▇▇▇ ▇▇▇▇ Federal Savings & Loan Association, a
federally-chartered savings association ("▇▇▇▇▇ ▇▇▇▇"). Each of Bradford, Parent
and ▇▇▇▇▇ ▇▇▇▇, is sometimes individually referred to herein as a "party," and
Bradford, Parent and ▇▇▇▇▇ ▇▇▇▇ are sometimes collectively referred to herein as
the "parties."
RECITALS
WHEREAS, Bradford is a federally-chartered savings bank organized under the
laws of the United States, with principal offices in Baltimore, Maryland.
WHEREAS, Parent, a registered savings and loan holding company organized
under the laws of the State of Delaware, with principal offices in Lutherville,
Maryland, owns all of the issued and outstanding capital stock of ▇▇▇▇▇ ▇▇▇▇, a
federally-chartered savings association organized under the laws of the United
States, with principal offices in Lutherville, Maryland.
WHEREAS, the Boards of Directors of the respective parties hereto deem it
advisable and in the best interests of the respective companies and, with
respect to Parent and ▇▇▇▇▇ ▇▇▇▇, their stockholders, and, with respect to
Bradford, its members, to consummate the business combination transaction
contemplated herein in which Bradford shall incorporate a to-be-formed company
("Interim"), which shall be merged with and into Parent, with Parent surviving
the merger, and in connection therewith, each share of Parent Common Stock
outstanding immediately prior to the Closing Date shall be
canceled in exchange for the right to receive the cash payments specified
herein, (the "Merger");
WHEREAS, as Bradford's purpose in effecting the Merger is the acquisition
of ▇▇▇▇▇ ▇▇▇▇, the Merger shall be followed immediately by (i) the liquidation
of a to-be-formed Delaware-chartered interim service subsidiary of Bradford
("Service Subsidiary"), of which Parent will be a wholly-owned subsidiary
following the Merger, into Bradford, (ii) the liquidation of Parent into
Bradford, and (iii) the merger of ▇▇▇▇▇ ▇▇▇▇ with and into Bradford, with
Bradford surviving the merger (the "Bank Merger"), with the result that Bradford
will acquire all the assets and liabilities of ▇▇▇▇▇ ▇▇▇▇, and ▇▇▇▇▇ ▇▇▇▇ shall
cease to exist (the Merger and the Bank Merger are sometimes collectively
referred to as the "Mergers"); and
WHEREAS, the parties hereto desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
Mergers, and the other transactions contemplated by this Agreement
(collectively, the "Merger Documents").
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained and intending to be
legally bound hereby, the parties hereto do hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.01 DEFINITIONS.
Except as otherwise provided herein, as used in this Agreement, the
following terms shall have the indicated meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
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"Affiliate" means any Person who directly, or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under common control
with, such Person and, without limiting the generality of the foregoing,
includes any executive officer or director of such Person and any Affiliate of
such executive officer or director.
"Agreement" means this agreement, and any amendment or supplement hereto,
which constitutes a "plan of merger" between Bradford, Service Subsidiary,
Interim, Parent and ▇▇▇▇▇ ▇▇▇▇.
"Applications" means the applications for regulatory approval that are
required by the transactions contemplated hereby.
"Bank Merger" means the merger of ▇▇▇▇▇ ▇▇▇▇ with and into Bradford, with
Bradford as the surviving institution, and shall include (i) the liquidation of
Service Subsidiary into Bradford and (ii) the liquidation of Parent, as the
surviving corporation of the Merger, into Bradford.
"BIF" means the Bank Insurance Fund, as administered by the FDIC.
"Bradford Employee Plan" means all pension, retirement, group insurance,
and other tax-qualified employee benefit plan and arrangements, including, but
not limited to, "employee benefit plans," as defined in Section 3(3) of ERISA,
incentive and welfare policies, plans and arrangements with respect to employees
of Bradford.
"Bradford Financials" means (i) the audited financial statements of
Bradford as of December 31, 1999, 2000 and 2001 and for the three years ended
December 31, 1999, 2000 and 2001, including the notes thereto, and (ii) the
unaudited interim financial statements of Bradford as of each calendar quarter
thereafter.
"Bradford Regulatory Reports" means the Thrift Financial Reports of
Bradford and accompanying schedules, as filed with the OTS, for each calendar
quarter beginning with the quarter ended March 31, 2001, through the Closing
Date.
"Bradford Subsidiary" means any corporation, 50% or more of the capital
stock of which is owned, either directly or indirectly, by Bradford, except any
corporation the stock of which is held as security by Bradford in the ordinary
course of its lending activities.
"Closing Date" means the date determined by Bradford and Parent not later
than fifteen (15) days after all the conditions precedent pursuant to this
Agreement have been fulfilled or waived (including the expiration of any
applicable waiting period), or such other date as to which Bradford and Parent
shall mutually agree.
"Code" means the Internal Revenue Code of 1986, as amended.
"Compensation and Benefit Plans" has the meaning given to such term in
Section 3.14(a).
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"Disclosure Schedules" means the Disclosure Schedules delivered by Parent
and ▇▇▇▇▇ ▇▇▇▇ to ▇▇▇▇▇▇▇▇ pursuant to Article III of this Agreement.
"DOL" means the U.S. Department of Labor.
"Embezzlement" shall mean the embezzlement as disclosed in Disclosure
Schedule 3.11(c).
"Environmental Law" means any Federal or state law, statute, rule,
regulation, code, order, judgment, decree, injunction, common law or agreement
with any Federal or state governmental authority relating to (i) the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, groundwater, drinking water supply, surface land, subsurface
land, plant and animal life or any other natural resource), (ii) human health or
safety, or (iii) exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of, Hazardous Material, in each case as amended and now in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESOP" means the Parent Employee Stock Ownership Plan.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated from time to time thereunder.
"Exchange Agent" means the entity selected by Bradford to perform the
functions described in Section 2.03 of this Agreement.
"FDIA" means the Federal Deposit Insurance Act, as amended.
"FDIC" means the Federal Deposit Insurance Corporation.
"FHLB of Atlanta" means the Federal Home Loan Bank of Atlanta.
"FRB" means the Board of Governors of the Federal Reserve System.
"GAAP" means generally accepted accounting principles as in effect at the
relevant date and consistently applied.
"GUST" means the Uruguay Round Agreements Act, the Uniformed Services
Employment and Reemployment Rights Act of 1994, the Small Business Job
Protection Act of 1996, the Taxpayer Relief Act of 1997, the Internal Revenue
Service Restructuring and Reform Act of 1998 and the Community Renewal Tax
Relief Act of 2000, pertaining to employee benefit plans that are intended to
qualify under Section 401(a) of the Code.
"Hazardous Material" means any substance (whether solid, liquid or gas)
which is or could be detrimental to human health or safety or to the
environment, currently or
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hereafter listed, defined, designated or classified as hazardous, toxic,
radioactive or dangerous, or otherwise regulated, under any Environmental Law,
whether by type or by quantity, including any substance containing any such
substance as a component. Hazardous Material includes, without limitation, any
toxic waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance, oil or petroleum, or any
derivative or by-product thereof, radon, radioactive material, asbestos,
asbestos-containing material, urea formaldehyde foam insulation, lead and
polychlorinated biphenyl.
"HOLA" means the Home Owners' Loan Act, as amended, 12 U.S.C.ss.ss.1464 et
al.
"Interim" means the to-be-formed subsidiary of Bradford that will be merged
with and into Parent.
"IRS" means the Internal Revenue Service.
"Knowledge" as used with respect to a Person (including references to such
Person being aware of a particular matter) means those facts that are known by
the executive officers and directors of such Person, and includes, without
limitation, any facts, matters or circumstances set forth in any written notice
from a Regulatory Authority or any other material written notice received by
that Person. References to the "Knowledge" of Parent includes the "Knowledge" of
▇▇▇▇▇ ▇▇▇▇.
"Loan" includes loan participations.
"Loan Property" shall have the meaning given to such term in Section
3.17(b) of this Agreement.
"Material Adverse Effect" shall mean, with respect to Bradford, Parent or
▇▇▇▇▇ ▇▇▇▇, any adverse effect on its assets, financial condition or results of
operations which is material to its assets, financial condition or results of
operations, except for any material adverse effect caused by (i) any change in
the market value of the assets of Bradford, Parent or ▇▇▇▇▇ ▇▇▇▇ resulting from
a change in interest rates generally, (ii) any individual or combination of
changes occurring after the date hereof in any Federal or state law, rule or
regulation or in GAAP, which change(s) or affect(s) financial institutions
generally, (iii) any action taken by Parent, ▇▇▇▇▇ ▇▇▇▇ or any other Parent
Subsidiary at the request of Bradford, (iv) expenses incurred to complete the
transaction contemplated by this Agreement; or (v) an increase by the FDIC,
pursuant to Section 327.9 of the FDIC Regulations (12 CFR ss.327.9), in the BIF
or SAIF Assessment Schedule.
"Merger" means the merger of Interim with and into Parent, with Parent as
the surviving entity.
"OTS" means the Office of Thrift Supervision.
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"Parent Common Stock" has the meaning given to that term in Section 3.02(a)
of this Agreement.
"Parent Financials" means (i) the audited consolidated financial statements
of Parent as of June 30, 1999, 2000 and 2001 and for the three years ended June
30, 1999, 2000, 2001, including the notes thereto, and (ii) the unaudited
interim consolidated financial statements of Parent as of each calendar quarter
thereafter included in Securities Documents filed by Parent.
"Parent Regulatory Reports" means the Thrift Financial Reports of ▇▇▇▇▇
▇▇▇▇ and accompanying schedules, as filed with the OTS, for each calendar
quarter beginning with the quarter ended March 31, 2001, through the Closing
Date, and all Annual, Quarterly and Current Reports filed on Form H(b)-11 with
the OTS by Parent from March 31, 2001 through the Closing Date.
"Parent Subsidiary" means any corporation, 50% or more of the capital stock
of which is owned, either directly or indirectly, by Parent, including ▇▇▇▇▇
▇▇▇▇, except any corporation the stock of which is held as security by Parent or
▇▇▇▇▇ ▇▇▇▇ in the ordinary course of its lending activities.
"Participation Facility" shall have the meaning given to such term in
Section 3.17(b) of this Agreement.
"Person" means any individual, corporation, partnership, joint venture,
association, trust or "group" (as that term is defined under the Exchange Act).
"Proxy Statement" means the proxy statement, together with any supplements
thereto, to be transmitted to holders of Parent Common Stock in connection with
the transactions contemplated by this Agreement.
"Regulatory Agreement" has the meaning given to that term in Section 3.13
of this Agreement.
"Regulatory Authority" means any agency or department of any federal or
state government, including without limitation the OTS, the FDIC, the FRB, the
SEC or the respective staffs thereof.
"Rights" means warrants, options, rights, convertible securities and other
capital stock equivalents that obligate an entity to issue its securities.
"SAIF" means the Savings Association Insurance Fund, as administered by the
FDIC.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated from time to time thereunder.
6
"Securities Documents" means all registration statements, schedules,
statements, forms, reports, proxy material, and other documents required to be
filed under the Securities Laws.
"Securities Laws" means the Securities Act and the Exchange Act and the
rules and regulations promulgated from time to time thereunder.
"Subsidiary" means any corporation, 50% or more of the capital stock of
which is owned, either directly or indirectly, by another entity, except any
corporation the stock of which is held as security by either Bradford, Parent or
▇▇▇▇▇ ▇▇▇▇, as the case may be, in the ordinary course of its lending
activities.
"Superior Proposal" has the meaning given to such term in Section 5.06 of
this Agreement.
"▇▇▇▇▇ ▇▇▇▇ 401(k) Plan" means the ▇▇▇▇▇ ▇▇▇▇ Federal Savings & Loan
Employees Savings & Profit Sharing Plan and Trust.
ARTICLE II
THE MERGER AND EXCHANGE OF SHARES
SECTION 2.01 EFFECTS OF MERGER; SURVIVING CORPORATION.
(a) (i) On the Closing Date, Interim shall merge with and into Parent; the
separate existence of Interim shall cease; Parent shall be the surviving
corporation in the Merger (the "Surviving Corporation") and a wholly-owned
subsidiary of Service Subsidiary; and all of the property (real, personal and
mixed), rights, powers and duties and obligations of Interim shall be taken and
deemed to be transferred to and vested in Parent, as the Surviving Corporation
in the Merger, without further act or deed; all in accordance with Delaware law.
(ii) On the Closing Date, the Charter of the Surviving Corporation shall
continue as in effect immediately prior to the Closing Date, and the Bylaws of
the Surviving Corporation shall continue as in effect immediately prior to the
Closing Date, until thereafter altered, amended or repealed in accordance with
applicable law.
(iii) On the Closing Date, the directors of Interim duly elected and
holding office immediately prior to the Closing Date shall be the directors of
the Surviving Corporation in the Merger, each to hold office until his or her
successor is elected and qualified or otherwise in accordance with the Charter
and Bylaws of the Surviving Corporation.
(iv) On the Closing Date, the officers of Interim duly elected and holding
office immediately prior to the Closing Date shall be the officers of the
Surviving Corporation in the Merger, each to hold office until his or her
successor is elected and
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qualified or otherwise in accordance with the Charter and the Bylaws of the
Surviving Corporation.
(b) Notwithstanding any provision of this Agreement to the contrary,
▇▇▇▇▇▇▇▇ ▇▇▇ elect, subject to the filing of all necessary applications and the
receipt of all required regulatory approvals, to modify the structure of the
transactions contemplated hereby, and the parties shall enter into such
alternative transactions, so long as (i) there are no adverse financial or tax
consequences to Parent or the stockholders, directors or officers of Parent as a
result of such modification, (ii) the Merger Consideration is not thereby
changed in kind or reduced in amount because of such modification, (iii) such
modification will not be likely to materially delay or jeopardize receipt of any
required regulatory approvals, and (iv) such modification will not be likely to
materially delay the Closing Date that would otherwise apply.
SECTION 2.02 CONVERSION OF SHARES.
(i) Each outstanding share of Parent Common Stock issued and outstanding at
the Closing Date, except as provided in clauses (ii) of this Section, shall
cease to be outstanding, shall cease to exist and shall be converted into the
right to receive $14.55 in cash (subject to appropriate adjustment pursuant to
Section 5.14 hereof) (the "Merger Consideration").
(ii) Any shares of Parent Common Stock which are owned or held by either
party hereto or any of their respective Subsidiaries (other than in a fiduciary
capacity or in connection with legally binding commitments or debts contracted
prior to the Closing Date, including obligations under the Parent Stock Option
Plan, which obligations under the Parent Stock Option Plan will be treated as
provided in Section 2.04 below) at the Closing Date shall cease to exist, the
certificates for such shares shall as promptly as practicable be canceled, such
shares shall not be converted into the Merger Consideration, and no cash shall
be issued or exchanged therefor.
(iii) The holders of certificates representing shares of Parent Common
Stock as of the Closing Date (any such certificate being hereinafter referred to
as a "Certificate") shall cease to have any rights as stockholders of Parent,
except such rights, if any, as they may have pursuant to applicable law.
SECTION 2.03 EXCHANGE PROCEDURES.
(a) As promptly as practicable after the Closing Date (but in no event
later than five (5) business days after the Closing Date), the Exchange Agent
shall mail to each holder of record of an outstanding share Certificate or
Certificates a Letter of Transmittal containing instructions for the surrender
of the Certificate or Certificates held by such holder for payment therefor.
Upon surrender of the Certificate or Certificates to the Exchange Agent in
accordance with the instructions set forth in the Letter of Transmittal, such
holder shall promptly receive (but in no event later than five (5) business days
after such surrender) in exchange therefor the Merger Consideration, without
interest thereon.
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Approval of this Agreement by the stockholders of Parent shall constitute
authorization for Bradford to designate and appoint such Exchange Agent who
shall be reasonably acceptable to Parent. Neither Bradford nor the Exchange
Agent shall be obligated to deliver the Merger Consideration to a former
stockholder of Parent until such former stockholder surrenders his Certificate
or Certificates or, in lieu thereof, any such appropriate affidavit of loss and
indemnity agreement and bond as may be reasonably required by Bradford.
(b) If payment of the Merger Consideration is to be made to a person other
than the person in whose name a Certificate surrendered in exchange therefor is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed (or accompanied by an appropriate
instrument of transfer) and otherwise in proper form for transfer, and that the
person requesting such payment shall pay any transfer or other taxes required by
reason for the payment to a person other than the registered holder of the
Certificate surrendered, or required for any other reason, or shall establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(c) On or prior to the Closing Date, Bradford shall deposit or cause to be
deposited, in trust with the Exchange Agent, an amount of cash equal to the
aggregate Merger Consideration that Parent's stockholders shall be entitled to
receive on the Closing Date pursuant to Section 2.02 hereof and such amounts
payable by Bradford under Sections 2.04 and 2.05 herein.
(d) The payment of the Merger Consideration upon the conversion of Parent
Common Stock in accordance with the above terms and conditions shall be deemed
to have been issued and paid in full satisfaction of all rights pertaining to
such Parent Common Stock.
(e) Promptly following the date which is twelve (12) months after the
Closing Date, the Exchange Agent shall deliver to Bradford all cash,
certificates and other documents in its possession relating to the transactions
described in this Agreement, and the Exchange Agent's duties shall terminate.
Thereafter, each holder of a Certificate formerly representing shares of Parent
Common Stock may surrender such Certificate to Bradford and (subject to
applicable abandoned property, escheat and similar laws) receive in
consideration therefor the Merger Consideration multiplied by the number of
shares of Parent Common Stock formerly represented by such Certificate, without
any interest thereon.
(f) After the close of business on the Closing Date, there shall be no
transfers on the stock transfer books of Parent of the shares of Parent Common
Stock that are outstanding immediately prior to the Closing Date, and the stock
transfer books of Parent shall be closed with respect to such shares. If, after
the Closing Date, Certificates representing such shares are presented to the
Exchange Agent for transfer, they shall be canceled and exchanged for the Merger
Consideration as provided in this Article II.
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(g) In the event any Certificate for Parent Common Stock shall have been
lost, stolen or destroyed, the Exchange Agent shall deliver in exchange for such
lost, stolen or destroyed Certificate, upon the making of an affidavit of the
fact by the holder thereof, the cash to be paid in the Merger as provided for
herein; provided, however, that ▇▇▇▇▇▇▇▇ ▇▇▇, in its sole discretion and as a
condition precedent to the delivery thereof, require the owner of such lost,
stolen or destroyed certificate to deliver a bond in such reasonable sum as
▇▇▇▇▇▇▇▇ ▇▇▇ require as indemnity against any claim that may be made against
Parent, Bradford or any other party with respect to the Certificate alleged to
have been lost, stolen or destroyed.
SECTION 2.04 STOCK OPTIONS.
At the Closing Date, each option granted by Parent (a "Parent Option") to
purchase shares of Parent Common Stock issued and outstanding pursuant to the
Parent 1999 Stock Option and Incentive Plan (the "Parent Stock Option Plan"),
whether or not such option is otherwise exercisable on the Closing Date, shall,
by reason of the Merger, cease to be outstanding and each holder of a Parent
Option shall receive from Parent (or if requested by Bradford, from Bradford),
at the Closing Date, cash in an amount equal to (i) the difference (if a
positive number) between (A) $14.55 (subject to appropriate adjustment pursuant
to Section 5.14 hereof) and (B) the exercise price of each such Parent Option
multiplied by (ii) the number of shares of Parent Common Stock subject to the
Parent Option, less applicable tax withholding, provided that such recipient
shall deliver a cancellation agreement in form and substance reasonably
satisfactory to Bradford and Parent prior to receipt of such payment.
SECTION 2.05 RRP AWARDS.
As set forth in DISCLOSURE SCHEDULE 2.05, all stock awards under the Parent
Recognition and Retention Plan ("RRP"), whether or not otherwise vested prior to
the Closing Date, shall become immediately vested on the Closing Date pursuant
to the terms of the RRP and shall be exchanged as provided in Section 2.02
hereof; provided, however, that the recipients of such awards shall deliver a
cancellation agreement in form and substance reasonably satisfactory to Bradford
and Parent prior to receipt of such payment; and provided, further, that such
recipients shall also be entitled to any cash amounts due under the terms of the
RRP at the time the Merger Consideration is paid to such recipients; and
provided, further, that the Merger Consideration and cash amounts associated
with the stock awards shall be reduced by applicable tax withholding.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND ▇▇▇▇▇ ▇▇▇▇
Parent and ▇▇▇▇▇ ▇▇▇▇ represent and warrant to Bradford that the statements
contained in this Article III are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article
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III), except as set forth in the Disclosure Schedules delivered by Parent and
▇▇▇▇▇ ▇▇▇▇ to ▇▇▇▇▇▇▇▇ on or prior to the date hereof. Parent and ▇▇▇▇▇ ▇▇▇▇
have made a good faith effort to ensure that the disclosure on each schedule of
the Disclosure Schedules corresponds to the section reference herein. However,
for purposes of the Disclosure Schedules, any item disclosed on any schedule is
deemed to be fully disclosed with respect to all schedules under which such item
may be relevant.
SECTION 3.01 ORGANIZATION.
(a) Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and is duly registered as a
savings and loan holding company under the HOLA. ▇▇▇▇▇ ▇▇▇▇ is the only
subsidiary of Parent.
(b) ▇▇▇▇▇ ▇▇▇▇ is a savings association duly organized, validly existing
and in good standing under federal law. The deposits of ▇▇▇▇▇ ▇▇▇▇ are insured
by the FDIC through the SAIF to the fullest extent permitted by law, and all
premiums and assessments required to be paid in connection therewith have been
paid by ▇▇▇▇▇ ▇▇▇▇ when due. W.P. Financial Corporation ("WP Financial") is the
only subsidiary of ▇▇▇▇▇ ▇▇▇▇.
(c) ▇▇▇▇▇ ▇▇▇▇ is a member of the FHLB of Atlanta and owns the requisite
amount of stock therein.
(d) WP Financial is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maryland. WP Financial has full
corporate power and authority to carry on its business as now conducted and is
duly licensed or qualified to do business in the states of the United States and
foreign jurisdictions where its ownership or leasing of property or the conduct
of its business requires such qualification, except where the failure to be so
licensed or qualified would not have a Material Adverse Effect on Parent. WP
Financial has no subsidiaries.
(e) ▇▇▇▇▇ ▇▇▇▇ and WP Financial are the only Parent Subsidiaries.
(f) The respective minute books of Parent and each Parent Subsidiary
accurately records, in all material respects, all material corporate actions of
their respective stockholders and boards of directors (including committees)
through the date of this Agreement.
(g) Prior to the date of this Agreement, Parent has made available to
Bradford true and correct copies of the Charter and Bylaws of Parent, ▇▇▇▇▇ ▇▇▇▇
and WP Financial.
SECTION 3.02 CAPITALIZATION.
(a) The authorized capital stock of Parent consists of 2,000,000 shares of
common stock, $0.01 par value ("Parent Common Stock"), of which 822,490 shares
are outstanding, validly issued, fully paid and non-assessable and free of
preemptive rights,
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and 500,000 shares of preferred stock, $0.01 par value, none of which are issued
and outstanding. Parent holds 189,223 shares of Parent Common Stock as treasury
stock. Neither Parent nor any Parent Subsidiary has or is bound by any Rights of
any character relating to the purchase, sale or issuance or voting of, or right
to receive dividends or other distributions on any shares of Parent Common
Stock, or any other security of Parent or any securities representing the right
to vote, purchase or otherwise receive any shares of Parent Common Stock or any
other security of Parent, other than 168,909 shares of Parent Common Stock
issuable under the Parent Stock Option Plan. The shares issuable under the
Parent Stock Option Plan and the Parent RRP were validly authorized and issued
by Parent. DISCLOSURE SCHEDULE 3.02(A) sets forth, as of the date hereof, the
name of each holder of an option to purchase Parent Common Stock, the number of
shares each such individual may acquire pursuant to the exercise of such
options, the vesting dates, and the exercise price relating to the options held,
and the name of each grantee of an award under the RRP, the number of shares
subject to each award, the amount of cash awards under the RRP, and the vesting
schedule of each award.
(b) Parent owns all of the capital stock of ▇▇▇▇▇ ▇▇▇▇, free and clear of
any lien or encumbrance.
(c) ▇▇▇▇▇ ▇▇▇▇ owns all of the capital stock of WP Financial, free and
clear of any lien or encumbrance.
SECTION 3.03 REGISTERED STOCK.
The Parent Common Stock is registered under Section 12(g) of the Exchange
Act. Parent has timely filed all reports required to be filed pursuant to the
Exchange Act for the last twelve (12) months and all such reports contain no
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made, in light of the circumstances under which
they were made, not misleading.
SECTION 3.04 DIVIDENDS.
At the date of this Agreement, there are no declared and not yet payable
dividends or distributions on, or with respect to, the Parent Common Stock.
SECTION 3.05 AUTHORITY; NO VIOLATION.
(a) Parent and ▇▇▇▇▇ ▇▇▇▇ each has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent and
▇▇▇▇▇ ▇▇▇▇ and the completion by Parent and ▇▇▇▇▇ ▇▇▇▇ of the transactions
contemplated hereby (other than the Bank Merger, which shall be approved by the
Board of Directors of ▇▇▇▇▇ ▇▇▇▇ and by Bradford, in its capacity as sole
stockholder of ▇▇▇▇▇ ▇▇▇▇ following the Merger and the liquidation of each of
Service Subsidiary and Parent into Bradford, after the Merger) have been duly
and validly approved by the Board of Directors of Parent and ▇▇▇▇▇ ▇▇▇▇,
respectively, and, except for approval of the stockholders of Parent and the
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Regulatory Authorities and as contemplated in the parenthetical in the preceding
clause, no other corporate proceedings on the part of Parent or ▇▇▇▇▇ ▇▇▇▇ are
necessary to complete the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by Parent and ▇▇▇▇▇ ▇▇▇▇ and
subject to approval by the stockholders of Parent, receipt of the required
approvals of the Regulatory Authorities described in Section 5.03 hereof and
approval of the Bank Merger by the Board of Directors of ▇▇▇▇▇ ▇▇▇▇ and by
Bradford, in its capacity as sole stockholder of ▇▇▇▇▇ ▇▇▇▇ following the Merger
and the liquidation of each of Service Subsidiary and Parent into Bradford,
after the Merger, constitutes the valid and binding obligations of Parent and
▇▇▇▇▇ ▇▇▇▇, enforceable against Parent and ▇▇▇▇▇ ▇▇▇▇ in accordance with its
terms, subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally, and as to ▇▇▇▇▇ ▇▇▇▇, the conservatorship or
receivership provisions of the FDIA, and subject, as to enforceability, to
general principles of equity.
(b) (A) The execution and delivery of this Agreement by Parent and ▇▇▇▇▇
▇▇▇▇, (B) subject to receipt of approvals from the Regulatory Authorities
referred to in Section 5.03 hereof, and Parent's and Bradford's compliance with
any conditions contained therein, and subject to the receipt of the approval of
Parent's stockholders, the consummation of the transactions contemplated hereby,
and (C) compliance by Parent and ▇▇▇▇▇ ▇▇▇▇ with any of the terms or provisions
hereof, will not: (i) conflict with or result in a breach of any provision of
the Charter or Bylaws of Parent or any Parent Subsidiary; (ii) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Parent or any Parent Subsidiary or any of their
respective properties or assets; or (iii) violate, conflict with, result in a
breach of any provisions of, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default), under, result in
the termination of, accelerate the performance required by, or result in a right
of termination or acceleration or the creation of any lien, security interest,
charge or other encumbrance upon any of the properties or assets of Parent or
any Parent Subsidiary under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other investment or obligation to which Parent or any Parent Subsidiary is a
party, or by which they or any of their respective properties or assets may be
bound or affected, except for such violations, conflicts, breaches or defaults
under clause (ii) or (iii) hereof which, either individually or in the
aggregate, will not have a Material Adverse Effect on Parent and the Parent
Subsidiaries taken as a whole.
SECTION 3.06 CONSENTS.
Except for the consents, waivers, approvals, filings and registrations from
or with the Regulatory Authorities referred to in Section 5.03 hereof and
compliance with any conditions contained therein, the approval of this Agreement
by the requisite vote of the stockholders of Parent and the approval of the Bank
Merger by the Board of Directors of ▇▇▇▇▇ ▇▇▇▇ and by Bradford, in its capacity
as sole stockholder of ▇▇▇▇▇ ▇▇▇▇ following the Merger and the liquidation of
each of Service Subsidiary and Parent into Bradford, after the Merger, no
consents, waivers or approvals of, or filings or registrations with, any
Regulatory Authority are necessary, and, to Parent's Knowledge,
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no consents, waivers or approvals of, or filings or registrations with, any
other third parties are necessary, in connection with (a) the execution and
delivery of this Agreement by Parent and ▇▇▇▇▇ ▇▇▇▇, and (b) the completion by
Parent and ▇▇▇▇▇ ▇▇▇▇ of the Merger and the Bank Merger. Parent and ▇▇▇▇▇ ▇▇▇▇
have no reason to believe that (i) any required Regulatory Approvals or other
required consents or approvals will not be received, or that (ii) any public
body or authority, the consent or approval of which is not required or to which
a filing is not required, will object to the completion of the transactions
contemplated by this Agreement.
SECTION 3.07 FINANCIAL STATEMENTS.
(a) Parent has previously made available to Bradford the Parent Regulatory
Reports. The Parent Regulatory Reports have been prepared in all material
respects in accordance with applicable regulatory accounting principles and
practices throughout the periods covered by such statements, and fairly present
in all material respects, the consolidated financial position, results of
operations and changes in shareholders' equity of Parent as of and for the
periods ended on the dates thereof, in accordance with applicable regulatory
accounting principles applied on a consistent basis.
(b) Parent has previously made available to Bradford the Parent Financials.
The Parent Financials have been prepared in accordance with GAAP, and (including
the related notes where applicable) fairly present in each case in all material
respects (subject in the case of the unaudited interim statements to normal
year-end adjustments), the consolidated financial position, results of
operations and cash flows of Parent and the Parent Subsidiaries on a
consolidated basis as of and for the respective periods ending on the dates
thereof, in accordance with GAAP applied on a consistent basis during the
periods involved, except as indicated in the notes thereto, or in the case of
unaudited statements, as permitted by Form 10-QSB.
(c) At the date of each balance sheet included in the Parent Financials or
the Parent Regulatory Reports, Parent did not have any liabilities, obligations
or loss contingencies of any nature (whether absolute, accrued, contingent or
otherwise) of a type required to be reflected in such Parent Financials or
Parent Regulatory Reports or in the footnotes thereto which are not fully
reflected or reserved against therein or fully disclosed in a footnote thereto,
except for liabilities, obligations and loss contingencies which are not
material individually or in the aggregate or which are incurred in the ordinary
course of business, consistent with past practice, and except for liabilities,
obligations and loss contingencies which are within the subject matter of a
specific representation and warranty herein and subject, in the case of any
unaudited statements, to normal, recurring audit adjustments and the absence of
footnotes.
(d) Parent has previously made available to Bradford all management letters
either it or ▇▇▇▇▇ ▇▇▇▇ has received from their auditors since 1995.
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SECTION 3.08 TAXES.
Parent and the Parent Subsidiaries are members of the same affiliated group
within the meaning of Code Section 1504(a). Parent has duly filed all federal,
state and local tax returns required to be filed by or with respect to Parent
and all Parent Subsidiaries on or prior to the Closing Date (all such amounts
shown to be due have been paid) and has duly paid or made provisions for the
payment of all material federal, state and local taxes which have been incurred
by or are due or claimed to be due from Parent and any Parent Subsidiary by any
taxing authority or pursuant to any written tax sharing agreement on or prior to
the Closing Date other than taxes or other charges which (i) are not delinquent,
(ii) are being contested in good faith, or (iii) have not yet been fully
determined. As of the date of this Agreement, there is no audit examination,
deficiency assessment, tax investigation or refund litigation with respect to
any taxes of Parent or any of its Subsidiaries, and no claim has been made by
any authority in a jurisdiction where Parent or any of its Subsidiaries do not
file tax returns that Parent or any such Subsidiary is subject to taxation in
that jurisdiction. Parent and its Subsidiaries have not executed an extension or
waiver of any statute of limitations on the assessment or collection of any
material tax due that is currently in effect. Parent and each of its
Subsidiaries has withheld and paid all taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party, and Parent and each of
its Subsidiaries has timely complied with all applicable information reporting
requirements under Part III, Subchapter A of Chapter 61 of the Code and similar
applicable state and local information reporting requirements.
SECTION 3.09 NO MATERIAL ADVERSE EFFECT.
Except as set forth in DISCLOSURE SCHEDULE 3.09, Parent and the Parent
Subsidiaries, taken as a whole, have not suffered any Material Adverse Effect
since June 30, 2001, and no event has occurred or circumstance arisen since that
date which, in the aggregate, has had or is reasonably likely to have a Material
Adverse Effect on Parent and the Parent Subsidiaries.
SECTION 3.10 CONTRACTS.
(a) Except as set forth in DISCLOSURE SCHEDULE 3.10(A), neither Parent nor
any Parent Subsidiary is a party to or subject to: (i) any employment,
consulting or severance contract or material arrangement with any past or
present officer, director or employee of Parent nor any Parent Subsidiary,
except for "at will" arrangements; (ii) any plan, material arrangement or
contract providing for bonuses, pensions, options, deferred compensation,
retirement payments, profit sharing or similar material arrangements for or with
any past or present officers, directors or employees of Parent or any Parent
Subsidiary; (iii) any collective bargaining agreement with any labor union
relating to employees of Parent or any Parent Subsidiary; (iv) any agreement
which by its terms limits the payment of dividends by Parent or ▇▇▇▇▇ ▇▇▇▇; (v)
any instrument evidencing or related to material indebtedness for borrowed money
whether directly or indirectly, by
15
way of purchase money obligation, conditional sale, lease purchase, guaranty or
otherwise, in respect of which Parent or any Parent Subsidiary is an obligor to
any person, which instrument evidences or relates to indebtedness other than
deposits, borrowings from the FHLB of Atlanta, repurchase agreements, bankers'
acceptances, and "treasury tax and loan" accounts established in the ordinary
course of business and transactions in "federal funds" or which contains
financial covenants or other restrictions (other than those relating to the
payment of principal and interest when due) which would be applicable on or
after the Closing Date to Bradford or any Bradford Subsidiary; (vi) any
agreement, written or oral, that obligates Parent or any Parent Subsidiary for
the payment of more than $15,000 annually; or (vii) any contract (other than
this Agreement) limiting the freedom, in any material respect, of Parent to
engage in any type of banking or bank-related business which it or ▇▇▇▇▇ ▇▇▇▇ is
permitted to engage in under applicable law as of the date of this Agreement.
(b) True and correct copies of agreements, plans, contracts, arrangements
and instruments referred to in Section 3.10(a), have been provided to Bradford
on or before the date hereof, are listed on DISCLOSURE SCHEDULE 3.10(A) and are
in full force and effect on the date hereof, and neither Parent nor any Parent
Subsidiary (nor, to the Knowledge of Parent, any other party to any such
contract, plan, arrangement or instrument) has materially breached any provision
of, or is in material default under any term of, any such contract, plan,
arrangement or instrument. Except as set forth in the DISCLOSURE SCHEDULE
3.10(B), no party to any material contract, plan, arrangement or instrument will
have the right to terminate any or all of the provisions of any such contract,
plan, arrangement or instrument as a result of the execution of, and the
transactions contemplated by, this Agreement. Except as set forth in DISCLOSURE
SCHEDULE 3.10(B), none of the employees (including officers) of Parent or any
Parent Subsidiary, possess the right to terminate their employment and receive
or be paid (or cause Parent or any Parent Subsidiary to accrue on their behalf)
benefits solely as a result of the execution of this Agreement or the
consummation of the transactions contemplated hereby. Except as set forth in
DISCLOSURE SCHEDULE 3.10(B), no plan, contract, employment agreement,
termination agreement, or similar agreement or arrangement to which Parent or
any Parent Subsidiary is a party or under which Parent or any Parent Subsidiary
may be liable contains provisions which permit an employee or independent
contractor to terminate it without cause and continue to accrue future benefits
thereunder. Except as set forth in DISCLOSURE SCHEDULE 3.10(B), no such
agreement, plan, contract, or arrangement (x) provides for acceleration in the
vesting of benefits or payments due thereunder upon the occurrence of a change
in ownership or control of Parent or any Parent Subsidiary or upon the
occurrence of a subsequent event; or (y) requires Parent or any Parent
Subsidiary to provide a benefit in the form of Parent Common Stock or determined
by reference to the value of Parent Common Stock.
(c) Each real estate lease that may require the consent of the lessor or
its agent resulting from the Merger by virtue of a prohibition or restriction
relating to assignment, by operation of law or otherwise, or change in control,
is listed in DISCLOSURE SCHEDULE 3.10(C) identifying the section of the lease
that contains such prohibition or restriction.
16
Neither Parent nor any Parent Subsidiary is in default in any material respect
under any material contract, agreement, commitment, arrangement, lease,
insurance policy or other instrument to which it is a party, by which its
assets, business, or operations may be bound or affected, or under which it or
its assets, business, or operations receive benefits, and there has not occurred
any event that, with the lapse of time or the giving of notice or both, would
constitute such a default.
(d) A true and correct copy of the agreement (the "NCR Agreement") between
▇▇▇▇▇ ▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ("NCR") has been provided to Bradford on or
before the date hereof. No amendment or other modification to the NCR Agreement
has been made as of the date hereof, including, without limitation, any change
that would affect ▇▇▇▇▇ ▇▇▇▇'▇ or ▇▇▇▇▇▇▇▇'▇, as the case may be, ability to
terminate the NCR Agreement upon one hundred eighty (180) days notice to NCR and
the payment of a termination fee in the approximate amount of $86,000, assuming,
with respect to the termination fee, that such termination were to occur on
December 31, 2002.
(e) A true and correct copy of the Standard Invest Correspondent Agreement
(the "Invest Agreement") by and between WP Financial and Carrollton Financial
Services, Inc. ("Carrollton") has been provided to Bradford on or before the
date hereof. No amendments or other modifications have been made to the Invest
Agreement as of the date hereof, including, without limitation, any change that
would affect WP Financial's or Bradford's, as the case may be, ability to
terminate the Invest Agreement upon sixty (60) days notice to INVEST Financial
Corporation and Carrollton without penalty, financial or otherwise.
SECTION 3.11 OWNERSHIP OF PROPERTY; INSURANCE COVERAGE.
(a) Parent and the Parent Subsidiaries have good and, as to real property,
marketable title to all material assets and properties owned by Parent or any
Parent Subsidiary in the conduct of their businesses, whether such assets and
properties are real or personal, tangible or intangible, including assets and
property reflected in the balance sheets contained in the Parent Regulatory
Reports and in the Parent Financials or acquired subsequent thereto (except to
the extent that such assets and properties have been disposed of in the ordinary
course of business, since the date of such balance sheets), subject to no
material encumbrances, liens, mortgages, security interests or pledges, except
(i) those items which secure liabilities for public or statutory obligations or
any discount with, borrowing from or other obligations to the FHLB of Atlanta,
inter-bank credit facilities, or any transaction by a Parent Subsidiary acting
in a fiduciary capacity, (ii) statutory liens for amounts not yet delinquent or
which are being contested in good faith, and (iii) items permitted under Article
V. Parent and the Parent Subsidiaries, as lessee, have the right under valid and
subsisting leases of real and personal properties used by Parent and its
Subsidiaries in the conduct of their businesses to occupy or use all such
properties as presently occupied and used by each of them. Except as disclosed
in DISCLOSURE SCHEDULE 3.11(A), such existing leases and commitments to lease
constitute or will constitute operating leases for both tax and financial
accounting purposes and the
17
lease expense and minimum rental commitments with respect to such leases and
lease commitments are as disclosed in the notes to the Parent Financials.
(b) With respect to all material agreements pursuant to which Parent or any
Parent Subsidiary has purchased securities subject to an agreement to resell, if
any, Parent or such Parent Subsidiary, as the case may be, has a lien or
security interest (which to Parent's knowledge is a valid, perfected first lien)
in the securities or other collateral securing the repurchase agreement, and the
value of such collateral equals or exceeds the amount of the debt secured
thereby.
(c) Parent and each Parent Subsidiary currently maintains insurance
considered by Parent to be reasonable for their respective operations, in
accordance with good business practice. Parent has not received notice from any
insurance carrier that (i) such insurance will be canceled or that coverage
thereunder will be reduced or eliminated, or (ii) premium costs with respect to
such policies of insurance will be substantially increased. There are presently
no material claims pending under such policies of insurance and no notices have
been given by Parent or any Parent Subsidiary under such policies. All such
insurance is valid and enforceable and in full force and effect, and within the
last three years Parent and each Parent Subsidiary has received each type of
insurance coverage for which it has applied and during such periods has not been
denied indemnification for any material claims submitted under any of its
insurance policies. DISCLOSURE SCHEDULE 3.11(C) sets forth a complete and
accurate description of the Embezzlement.
SECTION 3.12 LEGAL PROCEEDINGS.
Except as disclosed in DISCLOSURE SCHEDULE 3.12, neither Parent nor any
Parent Subsidiary is a party to any, and there are no pending or, to Parent's
Knowledge, threatened legal, administrative, arbitration or other proceedings,
claims, actions or governmental investigations or inquiries of any nature (i)
against Parent or any Parent Subsidiary, (ii) to which Parent or any Parent
Subsidiary's assets are or may be subject, (iii) challenging the validity or
propriety of any of the transactions contemplated by or relating to this
Agreement, or (iv) which could adversely affect the ability of Parent or ▇▇▇▇▇
▇▇▇▇ to perform under this Agreement, except for any proceedings, claims,
actions, investigations or inquiries referred to in clauses (i) or (ii) which,
if adversely determined, individually or in the aggregate, could not be
reasonably expected to have a Material Adverse Effect on Parent and the Parent
Subsidiaries, taken as a whole.
SECTION 3.13 COMPLIANCE WITH APPLICABLE LAW.
(a) Parent and the Parent Subsidiaries hold all licenses, franchises,
permits and authorizations necessary for the lawful conduct of their respective
businesses under, and have complied in all material respects with, applicable
laws, statutes, orders, rules or regulations of any Federal, state or local
governmental authority relating to them, other than where such failure to hold
or such noncompliance will neither result in a limitation in any material
respect on the conduct of their respective businesses.
18
(b) Except as disclosed in DISCLOSURE SCHEDULE 3.13, neither Parent nor any
Parent Subsidiary has received any notification or communication from any
Regulatory Authority (i) asserting that Parent or any Parent Subsidiary is not
in material compliance with any of the statutes, regulations or ordinances which
such Regulatory Authority enforces; (ii) threatening to revoke any license,
franchise, permit or governmental authorization which is material to Parent or
any Parent Subsidiary; (iii) requiring or threatening to require Parent or any
Parent Subsidiary, or indicating that Parent or any Parent Subsidiary may be
required, to enter into a cease and desist order, agreement or memorandum of
understanding or any other agreement with any Federal or state governmental
agency or authority which is charged with the supervision or regulation of banks
or engages in the insurance of bank deposits restricting or limiting, or
purporting to restrict or limit, in any material respect the operations of
Parent or any Parent Subsidiary, including without limitation any restriction on
the payment of dividends; or (iv) directing, restricting or limiting, or
purporting to direct, restrict or limit, in any manner the operations of Parent
or any Parent Subsidiary, including without limitation any restriction on the
payment of dividends (any such notice, communication, memorandum, agreement or
order described in this sentence is hereinafter referred to as a "Regulatory
Agreement"). Neither Parent nor any Parent Subsidiary has consented to or
entered into any currently effective Regulatory Agreement, except as set forth
in DISCLOSURE SCHEDULE 3.13.
SECTION 3.14 ERISA/EMPLOYEE COMPENSATION.
(a) DISCLOSURE SCHEDULE 3.14(A) includes a descriptive list of all existing
bonus, incentive, deferred compensation, pension, retirement, profit-sharing,
thrift, savings, phantom stock, severance, welfare and fringe benefit plans,
employment, severance and change in control agreements and all other benefit
practices, policies and arrangements maintained by Parent, any Parent Subsidiary
or any other entity (including but not limited to a Parent Subsidiary) which is
considered one employer with Parent under Section 4001(b)(1) of ERISA or Section
414 of the Code (an "ERISA Affiliate"),in which any employee or former employee,
consultant or former consultant or director or former director of Parent, any
Parent Subsidiary or any ERISA Affiliate participates or to which any such
employee, consultant or director, or former employee, former consultant or
former director, is a party or is otherwise entitled to receive benefits (the
"Compensation and Benefit Plans"). A true and correct copy of each Compensation
and Benefit Plan has previously been delivered to Bradford. Neither Parent, any
Parent Subsidiary nor any ERISA Affiliate has any commitment to create any
additional Compensation and Benefit Plan or to modify, change or renew any
existing Compensation and Benefit Plan, except as contemplated by Section 5.11
hereof.
(b) Each Compensation and Benefit Plan has been operated and administered
in accordance with its terms and with applicable law, including, but not limited
to, ERISA, the Code, the Age Discrimination in Employment Act, and any
regulations or rules promulgated thereunder, and all filings, disclosures and
notices required by ERISA, the Code, the Age Discrimination in Employment Act
and any other applicable law have been timely made. Each Compensation and
Benefit Plan which is an "employee pension
19
benefit plan" within the meaning of Section 3(2) of ERISA (a "Pension Plan") and
which is intended to be qualified under Section 401 (a) of the Code is so
qualified, has been fully amended for GUST, has been submitted to the IRS for a
determination letter covering GUST, and has received a favorable determination
letter from the IRS. Parent is not aware of any circumstances which could result
in revocation of such currently effective favorable determination letter. There
is no pending or threatened action, suit or claim relating to any of the
Compensation and Benefit Plans (other than routine claims for benefits). Neither
Parent, any Parent Subsidiary nor any ERISA Affiliate has engaged in a
transaction, or omitted to take any action, with respect to any Compensation and
Benefit Plan that could constitute a "prohibited transaction" within the meaning
of Section 406 of ERISA, or subject Parent, any Parent Subsidiary or any ERISA
Affiliate to a tax or penalty imposed by either Section 502 of ERISA or Section
4975 of the Code.
(c) No liability under Title IV of ERISA has been incurred by Parent, any
Parent Subsidiary or any ERISA Affiliate with respect to any Compensation and
Benefit Plan which is subject to Title IV of ERISA, or with respect to any
"single-employer plan" (as defined in Section 4001 (a) of ERISA) currently or
formerly maintained or contributed to by Parent, any Parent Subsidiary or any
ERISA Affiliate (any such plan is herein referred to as a "Parent Pension Plan")
since the effective date of ERISA that has not been satisfied in full, and, to
their Knowledge, no condition exists that presents a risk to Parent, any Parent
Subsidiary or any ERISA Affiliate of incurring a liability under such Title
(including, but not limited to, the cessation of participation in the Financial
Institutions Retirement Fund, as provided in Section 5.11(a) hereof). Except as
set forth in DISCLOSURE SCHEDULE 3.14(C), the fair market value of the assets of
each Parent Pension Plan exceeds the present value of the "benefit liabilities"
(as defined in Section 4001(a)(16) of ERISA) under such Parent Pension Plan as
of the end of the most recent plan year with respect to the Parent Pension Plan
ending prior to the date hereof, calculated on the basis of the actuarial
assumptions used in the most recent actuarial valuation for such Parent Pension
Plan as of the date hereof, and the assets of each Parent Pension Plan are
sufficient to provide all plan benefits on a termination basis (within the
meaning of Section 4041(b)(2)(A) of ERISA); except as disclosed at DISCLOSURE
SCHEDULE 3.14(C), there is not currently pending with the Pension Benefit
Guaranty Corporation any filing with respect to any reportable event under
Section 4043 of ERISA nor has any reportable event occurred as to which a filing
is required and has not been made (other than as might be required with respect
to this Agreement and the transactions contemplated hereby). Neither Parent, any
Parent Subsidiary nor any ERISA Affiliate has contributed to any "multi-employer
plan," as defined in Section 3(37) of ERISA, on or after September 26, 1980.
Except as set forth in DISCLOSURE SCHEDULE 3.14(C), neither Parent, any Parent
Subsidiary, nor any ERISA Affiliate, nor any Compensation and Benefit Plan,
including any Parent Pension Plan, nor any trust created thereunder, nor any
trustee or administrator thereof has engaged in a transaction in connection with
which Parent, a Parent Subsidiary, an ERISA Affiliate, or any Compensation and
Benefit Plan, including any Parent Pension Plan or any such trust or any trustee
or administrator thereof, could reasonably be expected to be subject to either a
civil liability or penalty
20
pursuant to Section 409, 502(i) or 502(l) of ERISA or a tax imposed pursuant to
Chapter 43 of the Code.
(d) All contributions required to be made under the terms of any
Compensation and Benefit Plan or ERISA Affiliate Plan or any employee benefit
arrangements to which Parent, any Parent Subsidiary or any ERISA Affiliate is a
party or a sponsor have been timely made, and all anticipated contributions and
funding obligations are accrued monthly on Parent's consolidated financial
statements. Parent, each Parent Subsidiary and each ERISA Affiliate have
expensed and accrued as a liability the present value of future benefits under
each applicable Compensation and Benefit Plan for financial reporting purposes
as required by GAAP. Neither any Pension Plan nor any ERISA Affiliate Plan has
an "accumulated funding deficiency" (whether or not waived) within the meaning
of Section 412 of the Code or Section 302 of ERISA. None of Parent, any Parent
Subsidiary or any ERISA Affiliate (x) has provided, or is required to provide,
security to any Pension Plan or to any ERISA Affiliate Plan pursuant to Section
401(a)(29) of the Code, or (y) has taken any action, or omitted to take any
action, that has resulted, or could reasonably be expected to result, in the
imposition of a Lien under Section 412(n) of the Code or pursuant to ERISA.
(e) Except as set forth in DISCLOSURE SCHEDULE 3.14(E), neither Parent, any
Parent Subsidiary nor any ERISA Affiliate has any obligations to provide retiree
medical coverage, life insurance, disability insurance, or other retiree death
benefits under any Compensation and Benefit Plan, other than benefits mandated
by Section 4980B of the Code. There has been no communication to employees by
Parent, any Parent Subsidiary or any ERISA Affiliate that could be construed as
a promise or guarantee to such employees of retiree medical coverage, life
insurance, disability insurance, or other retiree death benefits.
(f) Neither Parent, any Parent Subsidiary nor any ERISA Affiliate maintains
any Compensation and Benefit Plans covering employees who are non-resident
aliens.
(g) With respect to each Compensation and Benefit Plan, if applicable,
Parent has provided or made available to Bradford copies of the: (A) plan
documents, (B) trust instruments and insurance contracts; (C) two (2) most
recent Forms 5500 filed with the Pension and Welfare Benefits Administration;
(D) most recent actuarial report and financial statement; (E) most recent
summary plan description; (F) most recent determination letter issued by the
IRS; (G) any Form 5310 or Form 5330 filed with the IRS; (H) most recent
participant benefits statements; and (J) all agreements granting awards of
options or restricted stock under each applicable Compensation and Benefit Plan.
With respect to the ESOP, in addition to the foregoing, Parent has provided or
made available to Bradford copies of the documentation of the loan or loans
obtained by the ESOP to finance the purchase of Parent Common Stock, a current
statement of the amounts due on such loan or loans (which amounts are also set
forth on DISCLOSURE SCHEDULE 3.14(G)), and copies of all documents used in
connection with obtaining the ESOP participants' approval of the transaction
contemplated hereby.
21
(h) Except as set forth in DISCLOSURE SCHEDULE 3.10(B) or DISCLOSURE
SCHEDULE 3.14(H), the consummation of the Mergers will not, directly or
indirectly (including, without limitation, as a result of any termination of
employment or service at any time prior to or following the Closing Date) (A)
entitle any employee, consultant or director to any payment or benefit
(including severance pay, change in control benefit, or similar compensation) or
any increase in compensation (other than payments or benefits distributed
pursuant to Section 5.11 hereof), (B) result in the vesting or acceleration of
any benefits under any Compensation and Benefit Plan, (C) result in any material
increase in benefits payable under any Compensation and Benefit Plan, or (D)
entitle any employee, consultant or director to any payment or benefit which
constitutes an "excess parachute payment" within the meaning of Section
280(b)(1) of the Code.
(i) DISCLOSURE SCHEDULE 3.14(I) sets forth a list of all employees of
Parent and/or ▇▇▇▇▇ ▇▇▇▇, including the current rate of compensation and the
date of hire for each employee. In addition, DISCLOSURE SCHEDULE 3.14(I) sets
forth all salary adjustments, employee and officer promotions, and changes to
any Compensation and Benefit Plan since June 30, 2001.
(j) DISCLOSURE SCHEDULE 3.14(J) sets forth a list of the assets (including
fair market values) owned by any rabbi trust established by Parent and/or ▇▇▇▇▇
▇▇▇▇, or a statement that there are no such assets.
(k) DISCLOSURE SCHEDULE 3.14(K) sets forth the value of the vacation
accruals of employees of Parent and/or ▇▇▇▇▇ ▇▇▇▇, and separately identifies the
amounts, if any, that are payable to such employees with respect to such
accruals on account of the transactions contemplated hereby.
SECTION 3.15 BROKERS, FINDERS AND FINANCIAL ADVISORS.
Except for Parent's engagement of Trident Securities, a division of
McDonald Investments, Inc. ("Trident") in connection with the transactions
contemplated by this Agreement, a copy of which engagement agreement (the
"Trident Agreement") has been provided to Bradford on or before the date hereof,
neither Parent nor any Parent Subsidiary, nor any of their respective officers,
directors, employees or agents, has employed any broker, finder or financial
advisor in connection with the transactions contemplated by this Agreement, or
incurred any liability or commitment for any fees or commissions to any such
person in connection with the transactions contemplated by this Agreement, which
has not been reflected in the Parent Financials. DISCLOSURE SCHEDULE 3.15 sets
forth the fees Parent has paid to Trident as of the date hereof pursuant to the
Trident Agreement and the aggregate amount Parent expects to pay to Trident in
connection with this Agreement and the transactions contemplated hereby.
SECTION 3.16 OTHER TRANSACTION-RELATED AGREEMENTS AND EXPENSES.
Except for the Trident Agreement and Parent's engagement of each of ▇▇▇▇▇
▇▇▇▇ LLP and Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP for the provision of legal
services
22
in connection with this Agreement, neither ▇▇▇▇▇ ▇▇▇▇ nor Parent is a party to
or subject to any agreements for services to be rendered to ▇▇▇▇▇ ▇▇▇▇ or Parent
in connection with this Agreement or the transactions contemplated hereby.
Parent expects that its expenses in connection with this Agreement and the
transactions contemplated hereby (excluding those set forth on DISCLOSURE
SCHEDULE 3.15) shall not exceed $100,000.
SECTION 3.17 ENVIRONMENTAL MATTERS.
(a) With respect to Parent and each of the Parent Subsidiaries, and except
as set forth in DISCLOSURE SCHEDULE 3.17:
(i) To its Knowledge, each of Parent and its Subsidiaries
are, and have been, in substantial compliance with, and are not liable under,
any Environmental Laws;
(ii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or, to
Parent's Knowledge, threatened, before any court, governmental agency or board
or other forum against it or any of the Parent Subsidiaries or any Participation
Facility (x) for alleged noncompliance (including by any predecessor) with, or
liability under, any Environmental Law or (y) relating to the presence of or
release into the environment of any Hazardous Material, whether or not occurring
at or on a site owned, leased or operated by it or any of the Parent
Subsidiaries or any Participation Facility;
(iii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or, to
Parent's Knowledge threatened, before any court, governmental agency or board or
other forum relating to or against any Loan Property (or ▇▇▇▇▇ ▇▇▇▇ in respect
of such Loan Property) (x) relating to alleged noncompliance (including by any
predecessor) with, or liability under, any Environmental Law or (y) relating to
the presence of or release into the environment of any Hazardous Material,
whether or not occurring at or on a site owned, leased or operated by a Loan
Property;
(iv) To Parent's Knowledge, the properties currently owned
or operated by Parent or any of the Parent Subsidiaries (including, without
limitation, soil, groundwater or surface water on, under or adjacent to the
properties, and buildings thereon) are not contaminated with and do not
otherwise contain any Hazardous Material other than as permitted under
applicable Environmental Law;
(v) Neither Parent nor any of the Parent Subsidiaries has
received any notice, demand letter, executive or administrative order, directive
or request for information from any Federal, state, local or foreign
governmental entity or any third party indicating that it may be in violation
of, or liable under, any Environmental Law;
(vi) To Parent's Knowledge, (A) there are no underground
storage tanks on, in or under any properties owned or operated by Parent or any
of the Parent Subsidiaries, and (B) no underground storage tanks have been
closed or removed from
23
any properties owned or operated by Parent or any of the Parent Subsidiaries or
any Participation Facility; and
(vii) To Parent's Knowledge, during the period of (s)
Parent's or any of the Parent Subsidiaries' ownership or operation of any of
their respective current properties or (t) Parent's or any of the Parent
Subsidiaries' participation in the management of any Participation Facility,
there has been no contamination by or release of Hazardous Materials in, on,
under or affecting such properties. To Parent's Knowledge, prior to the period
of (x) Parent's or any of the Parent Subsidiaries' ownership or operation of any
of their respective current properties or (y) Parent's or any of the Parent
Subsidiaries' participation in the management of any Participation Facility,
there was no contamination by or release of Hazardous Material in, on, under or
affecting such properties.
(viii) Parent has not conducted any environmental studies
during the past ten (10) years with respect to any properties owned or leased by
it or any of its Subsidiaries.
(b) "Loan Property" means any property in which the applicable party (or a
Subsidiary of it) holds a security interest and includes the owner or operator
of such property, but only with respect to such property. "Participation
Facility" means any facility in which the applicable party (or a Subsidiary of
it) participates in the management (including all property held as trustee or in
any other fiduciary capacity) and, where required by the context, includes the
owner or operator of such property, but only with respect to such property.
SECTION 3.18 LOAN PORTFOLIO.
(a) The allowance for possible losses reflected in Parent's statement of
condition at June 30, 2001 was, and the allowance for possible losses shown on
the balance sheets in Parent's Regulatory Reports for periods ending after June
30, 2001 will be, adequate, as of the dates thereof, under GAAP.
(b) DISCLOSURE SCHEDULE 3.18 sets forth a listing, as of May 31, 2002, by
account, of: (A) all loans (including loan participations) of ▇▇▇▇▇ ▇▇▇▇ or any
of the Parent Subsidiaries that have been accelerated during the past twelve
(12) months; (B) all loan commitments or lines of credit of ▇▇▇▇▇ ▇▇▇▇ or any of
the Parent Subsidiaries which have been terminated by ▇▇▇▇▇ ▇▇▇▇ or any of the
Parent Subsidiaries during the past twelve (12) months by reason of a default or
adverse developments in the condition of the borrower or other events or
circumstances affecting the credit of the borrower; (C) all loans, lines of
credit and loan commitments as to which ▇▇▇▇▇ ▇▇▇▇ or any of the Parent
Subsidiaries has given written notice of its intent to terminate during the past
twelve (12) months; (D) with respect to all commercial loans (including
commercial real estate loans), all notification letters and other written
communications from ▇▇▇▇▇ ▇▇▇▇ or any of the Parent Subsidiaries to any of their
respective borrowers, customers or other parties during the past twelve (12)
months wherein ▇▇▇▇▇ ▇▇▇▇ or any of the Parent
24
Subsidiaries has requested or demanded that actions be taken to correct existing
defaults or facts or circumstances which may become defaults; (E) each borrower,
customer or other party which has notified ▇▇▇▇▇ ▇▇▇▇ or any of the Parent
Subsidiaries during the past twelve months of, or has asserted against ▇▇▇▇▇
▇▇▇▇ or any of the Parent Subsidiaries, in each case in writing, any "lender
liability" or similar claim, and, to the Knowledge of ▇▇▇▇▇ ▇▇▇▇, each borrower,
customer or other party which has given ▇▇▇▇▇ ▇▇▇▇ or any of the Parent
Subsidiaries any oral notification of, or orally asserted to or against ▇▇▇▇▇
▇▇▇▇ or any of the Parent Subsidiaries, any such claim; (F) all loans, (1) that
are contractually past due 90 days or more in the payment of principal and/or
interest, (2) that are on non-accrual status, (3) that as of the date of this
Agreement are classified as "Other Loans Specially Mentioned", "Special
Mention", "Substandard", "Doubtful", "Loss", "Classified", "Criticized", "Watch
list" or words of similar import, together with the principal amount of and
accrued and unpaid interest on each such Loan and the identity of the obligor
thereunder, (4) where the interest rate terms have been reduced and/or the
maturity dates have been extended subsequent to the agreement under which the
loan was originally created due to concerns regarding the borrower's ability to
pay in accordance with such initial terms, or (5) where a specific reserve
allocation exists in connection therewith, and (G) all assets classified by
Parent or any Parent Subsidiary as real estate acquired through foreclosure or
in lieu of foreclosure, including in-substance foreclosures, and all other
assets currently held that were acquired through foreclosure or in lieu of
foreclosure.
(c) All loans receivable (including discounts) and accrued interest entered
on the books of ▇▇▇▇▇ ▇▇▇▇ arose out of bona fide arm's-length transactions,
were made for good and valuable consideration in the ordinary course of ▇▇▇▇▇
▇▇▇▇'▇ or the appropriate Subsidiary's respective business, and the notes or
other evidences of indebtedness with respect to such loans (including discounts)
are true and genuine and are what they purport to be. To the knowledge of ▇▇▇▇▇
▇▇▇▇, the loans, discounts and the accrued interest reflected on the books of
▇▇▇▇▇ ▇▇▇▇ and the Parent Subsidiaries are subject to no defenses, set-offs or
counterclaims (including, without limitation, those afforded by usury or
truth-in-lending laws), except as may be provided by bankruptcy, insolvency or
similar laws affecting creditors' rights generally or by general principles of
equity. All such loans are owned by ▇▇▇▇▇ ▇▇▇▇ or the appropriate Subsidiary
free and clear of any Liens.
(d) The notes and other evidences of indebtedness evidencing the loans
described in clause (c) above, and all pledges, mortgages, deeds of trust and
other collateral documents or security instruments relating thereto are, in all
material respects, valid, true and genuine, and what they purport to be.
SECTION 3.19 INFORMATION TO BE SUPPLIED.
The information to be provided by Parent for inclusion in the Proxy
Statement will not, at the time the Proxy Statement is mailed to Parent
stockholders, contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein not
misleading. The information supplied, or to be supplied,
25
by Parent and ▇▇▇▇▇ ▇▇▇▇ for inclusion in the Applications will, at the time
such documents are filed with any Regulatory Authority, be accurate in all
material aspects.
SECTION 3.20 RELATED PARTY TRANSACTIONS.
Except as disclosed in DISCLOSURE SCHEDULE 3.20, neither Parent nor any
Parent Subsidiary is a party to any transaction (including any loan or other
credit accommodation) with any Affiliate of Parent. Except as disclosed in
DISCLOSURE SCHEDULE 3.20, all such transactions (a) were made in the ordinary
course of business, (b) were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other Persons, and (c) did not involve more than the normal
risk of collectibility or present other unfavorable features. Except as set
forth on DISCLOSURE SCHEDULE 3.20, no loan or credit accommodation to any
Affiliate of Parent or any Parent Subsidiary is presently in default or, during
the three year period prior to the date of this Agreement, has been in default
or has been restructured, modified or extended. Neither Parent nor any Parent
Subsidiary has been notified that principal and interest with respect to any
such loan or other credit accommodation will not be paid when due or that the
loan grade classification accorded such loan or credit accommodation by ▇▇▇▇▇
▇▇▇▇ or Parent is inappropriate.
SECTION 3.21 SCHEDULE OF TERMINATION BENEFITS.
DISCLOSURE SCHEDULE 3.21 includes a schedule of all termination benefits
and related payments that would be payable to the individuals identified
thereon, under any and all employment agreements, special termination
agreements, supplemental executive retirement plans, deferred bonus plans,
deferred compensation plans, salary continuation plans, change in control
agreements, or any compensation arrangement, or other pension benefit or welfare
benefit plan maintained by Parent, any Parent Subsidiary or any ERISA Affiliate
for the benefit of officers or directors of Parent, any Parent Subsidiary or any
ERISA Affiliate (the "Benefits Schedule"), assuming their employment or service
is terminated in connection with, or following, the transactions contemplated
hereby. No other individuals (other than beneficiaries of the individuals
identified on DISCLOSURE SCHEDULE 3.21) are entitled to benefits under any such
plans.
SECTION 3.22 DEPOSITS.
None of the deposits of ▇▇▇▇▇ ▇▇▇▇ is a "brokered" deposit as defined in 12
U.S. Code Section 1831f(g).
SECTION 3.23 BUSINESS COMBINATION.
The Board of Directors of Parent has taken, or will take, the necessary
action by board resolution and otherwise to exempt Bradford from the definition
of "Interested Stockholder" and to exempt the Merger under Section 203 of the
Delaware General Corporation Law and Article EIGHTH of the Parent Certificate of
Incorporation, to the extent applicable. The Board of Directors of ▇▇▇▇▇ ▇▇▇▇
has taken, or will take, the
26
necessary action by stockholder resolution and otherwise to exempt Bradford and
the Bank Merger under Section 8 of ▇▇▇▇▇ ▇▇▇▇'▇ Charter, to the extent
applicable.
SECTION 3.24 FAIRNESS OPINION.
Parent has received an opinion from Trident to the effect that, subject to
the terms, conditions and qualifications set forth therein, as of the date
thereof, the Merger Consideration to be received by the stockholders of Parent
pursuant to this Agreement is fair to such stockholders from a financial point
of view. Such opinion has not been amended or rescinded as of the date of this
Agreement.
SECTION 3.25 RISK MANAGEMENT INSTRUMENTS.
All material interest rate swaps, caps, floors, option agreements, futures
and forward contracts and other similar risk management arrangements, whether
entered into for ▇▇▇▇▇ ▇▇▇▇'▇ own account, or for the account of one or more of
its Subsidiaries or their customers (all of which are set forth in DISCLOSURE
SCHEDULE 3.25), were entered into in accordance with prudent business practices
and in all material respects in compliance with all applicable laws, rules,
regulations and regulatory policies and with counterparties believed to be
financially responsible at the time; and each of them constitutes the valid and
legally binding obligation of Parent or one of its Subsidiaries, enforceable in
accordance with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors' rights
or by general equity principles), and is in full force and effect. Neither
Parent nor any of its Subsidiaries, nor to the Knowledge of Parent any other
party thereto, is in breach of any of its obligations under any such agreement
or arrangement in any material respect.
SECTION 3.26 DISCLOSURE.
The representations and warranties contained in this Article III and in the
Disclosure Schedules hereto are true, complete and correct, and no such
representation or warranty contains any untrue statement of material fact or
omits to state any material fact necessary to make the statements made not
misleading. To Parent's Knowledge, there is no fact which Parent has not
disclosed in writing to Bradford which will or could have a Material Adverse
Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ represents and warrants to Parent and ▇▇▇▇▇ ▇▇▇▇ that the
statements contained in this Article IV are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though
27
the Closing Date were substituted for the date of this Agreement throughout this
Article IV).
SECTION 4.01 ORGANIZATION.
(a) Bradford is a mutual savings association duly organized and validly
existing under the laws of the United States. The deposits of Bradford are
insured by the FDIC through the SAIF to the fullest extent permitted by law, and
all premiums and assessments required to be paid in connection therewith have
been paid when due by Bradford.
(b) Bradford is a member in good standing of the FHLB of Atlanta and owns
the requisite amount of stock therein.
(c) Prior to the date of this Agreement, Bradford has delivered to ▇▇▇▇▇
▇▇▇▇ true and correct copies of the Charter and Bylaws of Bradford.
SECTION 4.02 AUTHORITY; NO VIOLATION.
(a) Bradford has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Bradford and the completion by
Bradford of the transactions contemplated hereby have been duly and validly
approved by the Board of Directors of Bradford and, no other corporate
proceedings on the part of Bradford other than (i) the incorporation of Service
Subsidiary, (ii) the incorporation of Interim and (iii) the approval of the Bank
Merger by the Board of Directors of ▇▇▇▇▇ ▇▇▇▇ and by Bradford, in its capacity
as the sole stockholder of ▇▇▇▇▇ ▇▇▇▇ following the Merger and the liquidation
of each of Service Subsidiary and Parent into Bradford, after the Merger, are
necessary to complete the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by Bradford and, subject to receipt
of the required approvals of Regulatory Authorities described in Section 5.03
hereof and the approval of the Bank Merger by the Board of Directors of ▇▇▇▇▇
▇▇▇▇ and by Bradford, in its capacity as the sole stockholder of ▇▇▇▇▇ ▇▇▇▇
following the Merger and the liquidation of each of Service Subsidiary and
Parent into Bradford, after the Merger, constitutes the valid and binding
obligation of Bradford enforceable against Bradford in accordance with its
terms, subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally.
(b) (A) The execution and delivery of this Agreement by Bradford, (B)
subject to receipt of approvals from the Regulatory Authorities referred to in
Section 5.03 hereof, Parent's and ▇▇▇▇▇ ▇▇▇▇'▇ compliance with any conditions
contained herein and the approval of the Bank Merger by the Board of Directors
of ▇▇▇▇▇ ▇▇▇▇ and by Bradford, in its capacity as the sole stockholder of ▇▇▇▇▇
▇▇▇▇ following the Merger and the liquidation of each of Service Subsidiary and
Parent into Bradford, after the Merger, the consummation of the transactions
contemplated hereby, and (C) compliance by Bradford with any of the terms or
provisions hereof will not (i) conflict with or result in a breach of
28
any provision of the Charter or Bylaws of Bradford; (ii) violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to Bradford or any of its properties or assets; or (iii) violate,
conflict with, result in a breach of any provisions of, constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default), under, result in the termination of, accelerate the performance
required by, or result in a right of termination or acceleration or the creation
of any lien, security interest, charge or other encumbrance upon any of the
properties or assets of Bradford under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other investment or obligation to which Bradford is a party,
or by which it or any of its properties or assets may be bound or affected,
except for such violations, conflicts, breaches or defaults under clause (ii) or
(iii) hereof which will not, either individually or in the aggregate, have a
Material Adverse Effect on Bradford.
SECTION 4.03 CONSENTS.
Except for consents, approvals, filings and registrations from or with the
OTS and compliance with any conditions contained herein, and the approval of
this Agreement by the stockholders of Parent, the filing of a such certificates
and other documents with the OTS as necessary, no consents, waivers or approvals
of, or filings or registrations with, any public body or authority are
necessary, and no consents, waivers or approvals of or filings or registrations
with any third parties are necessary, or will be, in connection with (a) the
execution and delivery of this Agreement by Bradford, and (b) the completion by
Bradford of the transactions contemplated hereby. Bradford has no reason to
believe that (i) any required consents or approvals will not be received or will
be received with conditions, limitations or restrictions unacceptable to it or
which would adversely impact Bradford's ability to complete the transactions
contemplated by this Agreement or that (ii) any public body or authority, the
consent or approval of which is not required or any filing with which is not
required, will object to the completion of the transactions contemplated by this
Agreement.
SECTION 4.04 FINANCING.
As of the date hereof Bradford has, and at the Closing Date, Bradford will
have, funds that are sufficient, under all applicable legal and regulatory
standards, and available to meet its obligations under this Agreement and to
consummate in a timely manner the transactions contemplated hereby and thereby.
Based on the Parent Regulatory Reports and the Parent Financials previously made
available to Bradford pursuant to Section 3.07 hereof, immediately following the
Closing Date, Bradford will comply with all regulatory capital requirements
under applicable federal banking law. Bradford shall not enter into any plan of
reorganization or plan of merger with any party to form a new parent corporation
of either entity without such party assuming all obligations of Bradford under
this Agreement, and further provided, that such plan of reorganization or plan
of merger will not cause any material delay, cause the termination of or
increase the expense to Parent or ▇▇▇▇▇ ▇▇▇▇ of this transaction.
29
SECTION 4.05 BRADFORD FINANCIALS.
(a) Bradford has previously made available to Parent the Bradford
Regulatory Reports. The Bradford Regulatory Reports have been prepared in all
material respects in accordance with applicable regulatory accounting principles
and practices throughout the periods covered by such statements, and fairly
present in all material respects, the consolidated financial position, results
of operations and changes in regulatory capital of Bradford as of and for the
periods ended on the dates thereof, in accordance with applicable regulatory
accounting principles applied on a consistent basis.
(b) Bradford has previously made available to Parent the Bradford
Financials. The Bradford Financials have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered by such statements,
and (including the related notes where applicable) fairly present the
consolidated financial position, results of operations and cash flows of
Bradford and the Bradford Subsidiaries as of and for the respective periods
ending on the dates thereof, except as indicated in the notes thereto.
(c) At the date of each balance sheet included in the Bradford Financials
or the Bradford Regulatory Reports, Bradford did not have any liabilities,
obligations or loss contingencies of any nature (whether absolute, accrued,
contingent or otherwise) of a type required to be reflected in such Bradford
Financials or Bradford Regulatory Reports or in the footnotes thereto which are
not fully reflected or reserved against therein or fully disclosed in a footnote
thereto, except for liabilities, obligations and loss contingencies which are
not material individually or in the aggregate or which are incurred in the
ordinary course of business, consistent with past practice, and except for
liabilities, obligations and loss contingencies which are within the subject
matter of a specific representation and warranty herein and subject, in the case
of any unaudited statements, to normal, recurring audit adjustments and the
absence of footnotes.
SECTION 4.06 INFORMATION TO BE SUPPLIED.
The information to be provided by Bradford for inclusion in the Proxy
Statement will not, at the time the Proxy Statement is mailed to the Parent
stockholders, contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein not
misleading. The information supplied, or to be supplied, by Bradford for
inclusion in the Applications will, at the time such documents are filed with
any Regulatory Authority, be accurate in all material aspects.
SECTION 4.07 DISCLOSURE.
The representations and warranties contained in this Article IV are true,
complete and correct, and no such representation or warranty contains any untrue
statement of material fact or omits to state any material fact necessary to make
the statements made not misleading. To Bradford's Knowledge, there is no fact
which Bradford has not disclosed in writing to Parent which will or could have a
Material Adverse Effect.
30
ARTICLE V
COVENANTS OF THE PARTIES
SECTION 5.01 CONDUCT OF ▇▇▇▇▇ ▇▇▇▇'▇ BUSINESS.
(a) From the date of this Agreement to the Closing Date, Parent and each
Parent Subsidiary will use their best efforts to conduct their business and
engage in transactions, including extensions of credit, only in the ordinary
course and consistent with past practice and policies, except as otherwise
required or contemplated by this Agreement or with the written consent of
Bradford (which consent will not be unreasonably withheld or delayed), Parent
and each of the Parent Subsidiaries will use its reasonable good faith efforts,
to (i) preserve their business organizations intact, (ii) maintain good
relationships with employees, and (iii) preserve for themselves the good will of
their customers and others with whom business relationships exist. From the date
hereof to the Closing Date, except as otherwise consented to or approved by
Bradford in writing (which approval will not be unreasonably withheld or
delayed), as contemplated or required by this Agreement or required by
regulatory authorities or applicable law, Parent and ▇▇▇▇▇ ▇▇▇▇ will not, and
Parent will not permit any Parent Subsidiary to:
(i) except as contemplated by Section 3.23 hereof, amend
or change any provision of its Charter or Bylaws;
(ii) except as required by the Parent Stock Option Plans
and RRP, and as may be required by legally binding commitments existing on the
date hereof as set forth in DISCLOSURE SCHEDULE 5.01(A)(II), change the number
of authorized or issued shares of its capital stock or issue or grant any right
or agreement of any character relating to its authorized or issued capital stock
or any securities convertible into shares of such stock, or split, combine or
reclassify any shares of capital stock, or declare, set aside or pay any
dividend or other distribution in respect of capital stock;
(iii) materially increase staffing levels or effect changes
in personnel employed as of the date of this Agreement other than in the
ordinary course of business consistent with past practice:
(iv) grant or agree to pay any bonus, severance or
termination to, or enter into or amend any employment agreement, severance
agreement, supplemental executive agreement, or similar agreement or arrangement
with any of its directors, officers or employees, or increase in any manner the
compensation or fringe benefits of any employee, officer or director, except for
normal increases (or practices as to renewal, provided that in no event shall
such renewals increase the amount payable under any severance agreement) in the
ordinary course of business consistent with past practice and except as
contemplated by Sections 5.11(g) and 5.11(h) hereof, and except as may be
31
required pursuant to legally binding commitments existing on the date hereof and
set forth on DISCLOSURE SCHEDULES 3.10 AND 3.14;
(v) enter into or, except as may be required by law,
modify any pension, retirement, stock option, stock purchase, stock appreciation
right, stock grant, savings, profit sharing, deferred compensation, supplemental
retirement, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or employees; or
make any contributions to any defined contribution or defined benefit plan not
in the ordinary course of business consistent with past practice or not
consistent with Section 5.11 herein; or materially amend any Compensation and
Benefit Plan except to the extent such modifications or amendments do not result
in an increase in cost;
(vi) except as permitted by Section 5.06 in connection
with a Superior Proposal, merge or consolidate Parent or any Parent Subsidiary
with any other corporation; except as permitted by Section 5.06 in connection
with a Superior Proposal, sell or lease all or any substantial portion of the
assets or business of Parent or any Parent Subsidiary; make any acquisition of
all or any substantial portion of the business or assets of any other person,
firm, association, corporation or business organization other than in connection
with foreclosures, settlements in lieu of foreclosure, troubled loan or debt
restructuring, or the collection of any loan or credit arrangement between
Parent, or any Parent Subsidiary, and any other person; except as permitted by
Section 5.06 in connection with a Superior Proposal, enter into a purchase and
assumption transaction with respect to deposits and liabilities; permit the
revocation or surrender by any Parent Subsidiary of its certificate of authority
to maintain, or file an application for the relocation of, any existing branch
office, or file an application for a certificate of authority to establish a new
branch office;
(vii) sell or otherwise dispose of the capital stock of
Parent or any Parent Subsidiary or sell or otherwise dispose of any asset of
Parent or of any Parent Subsidiary other than in the ordinary course of business
consistent with past practice; subject any asset of Parent or of any Parent
Subsidiary to a lien, pledge, security interest or other encumbrance (other than
in connection with deposits, repurchase agreements, bankers acceptances,
"treasury tax and loan" accounts established in the ordinary course of business
and transactions in "federal funds" and the satisfaction of legal requirements
in the exercise of trust powers) other than in the ordinary course of business
consistent with past practice; incur any indebtedness for borrowed money (or
guarantee any indebtedness for borrowed money), except in the ordinary course of
business consistent with past practice; provided, however, that the foregoing
restriction shall not prevent ▇▇▇▇▇ ▇▇▇▇ from obtaining advances from the FHLB
of Atlanta;
(viii) change any method, practice or principle of
accounting, except as may be required from time to time by GAAP (without regard
to any optional early adoption date) or any Regulatory Authority responsible for
regulating Parent or ▇▇▇▇▇ ▇▇▇▇;
32
(ix) waive, release, grant or transfer any material rights
of value or modify or change in any material respect any existing material
agreement or indebtedness to which Parent or any Parent Subsidiary is a party,
other than in the ordinary course of business, consistent with past practice;
(x) purchase any security for its investment portfolio
not rated "A" or higher by either Standard & Poor's Corporation or ▇▇▇▇▇'▇
Investor Services, Inc. or otherwise alter, in any material respect, the mix,
maturity, credit or interest rate risk profile of its portfolio of investment
securities or its portfolio of mortgage-backed securities;
(xi) purchase any security with a remaining term to
maturity greater than three (3) years;
(xii) make any new loan or other credit facility commitment
(including without limitation, lines of credit and letters of credit) to any
borrower or group of affiliated borrowers other than in the ordinary course of
business consistent with past practice, or increase, compromise, extend, renew
or modify any existing loan or commitment outstanding other than in the ordinary
course of business consistent with past practice;
(xiii) enter into, renew, extend or modify any other
transaction with any Affiliate; provided, however, that the foregoing
restriction shall not prevent Parent or any Parent Subsidiary from engaging in
any transaction with one another in the ordinary course of business consistent
with past practice;
(xiv) enter into any futures contract, option, interest
rate caps, interest rate floors, interest rate exchange agreement or other
agreement or take any other action for purposes of hedging the exposure of its
interest-earning assets and interest-bearing liabilities to changes in market
rates of interest;
(xv) except for the execution of this Agreement and the
documents related to this Agreement and except as permitted by Section 5.06 in
connection with a Superior Proposal, take any action that would give rise to a
right of payment to any individual under any employment agreement, or take any
action that would give rise to a right of payment to any individual under any
Compensation and Benefit Plan;
(xvi) make any change in policies with regard to the
extension of credit, the establishment of reserves with respect to the possible
loss thereon or the charge off of losses incurred thereon, investment,
asset/liability management or other material banking policies in any material
respect except as may be required by changes in applicable law or regulations or
in GAAP and except as may be necessitated in the reasonable opinion of Parent or
▇▇▇▇▇ ▇▇▇▇ due to changes in interest rates, and in accordance with safe and
sound banking practices;
33
(xvii) make any capital expenditures in excess of $20,000,
other than pursuant to binding commitments existing on the date hereof and other
than expenditures necessary to maintain existing assets in good repair;
(xviii) purchase or otherwise acquire, or sell or otherwise
dispose of, any assets or incur any liabilities other than in the ordinary
course of business consistent with past practices and policies;
(xix) undertake or enter into any lease, contract or other
commitment for its account, other than in the normal course of providing credit
to customers as part of its banking business, involving a payment by Parent or
any Parent Subsidiary of more than $25,000 annually, or containing a material
financial commitment and extending beyond twelve (12) months from the date
hereof;
(xx) sell any REO or loan, or capitalize any further
expenses relating to REO, except in the ordinary course of business consistent
with past practice;
(xxi) make any changes to the pricing of its deposit
liabilities, except (A) in the ordinary course of business consistent with past
practice, (B) as may be required by changes in applicable law or regulations and
(C) as may be necessitated in the reasonable opinion of Parent or ▇▇▇▇▇ ▇▇▇▇ due
to changes in interest rates and in accordance with safe and sound banking
practices;
(xxii) renew, amend or otherwise modify the real estate
leases to which Parent and ▇▇▇▇▇ ▇▇▇▇ are currently parties; or
(xxiii) except as permitted by Section 5.06 in connection
with a Superior Proposal, agree to do any of the foregoing.
SECTION 5.02 ACCESS; CONFIDENTIALITY.
(a) Upon reasonable notice and subject to applicable laws relating to the
exchange of information, Parent shall, and shall cause each of its Subsidiaries
to, afford to the officers, employees, accountants, counsel and other
Representatives of Bradford access, during normal business hours during the
period prior to the Closing Date, to all its properties and to all books,
accounts, records, filings with any Regulatory Authority (subject to permission
from such Regulatory Authority as may be required), tax returns, leases,
contracts and documents of Parent, ▇▇▇▇▇ ▇▇▇▇ and any Parent Subsidiary with
respect to Parent's, ▇▇▇▇▇ ▇▇▇▇'▇ or any Parent Subsidiary's assets, liabilities
and business, and to its officers, employees, accountants, counsel and other
representatives, in each case in a manner not unreasonably disruptive to the
operation of the business of Parent and its Subsidiaries. and, during such
period, Parent shall, and shall cause its Subsidiaries to, make available to
Bradford (i) a copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to the requirements
of Federal securities laws or Federal or state banking, mortgage lending, real
estate or consumer finance or protection laws (other than reports
34
or documents which Parent is not permitted to disclose under applicable law) and
(ii) all other information concerning its business, properties and personnel as
such other party may reasonably request. Neither Parent nor any of its
Subsidiaries shall be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the rights of its
customers, jeopardize the attorney-client privilege of the institution in
possession or control of such information or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement in the ordinary course of business
consistent with past practice. The parties hereto will make appropriate and
reasonable substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply. ▇▇▇▇▇ ▇▇▇▇ shall permit Bradford,
at Bradford's sole expense, to cause a "phase I environmental audit" and a
"phase II environmental audit" to be performed at any physical location owned or
occupied by ▇▇▇▇▇ ▇▇▇▇, provided that any phase I environmental audit is
contracted for within thirty (30) days of the date of this Agreement and
commenced as soon as practicable thereafter. Bradford shall provide a copy of
each phase I and phase II audit so conducted to Parent within two (2) business
days after receipt thereof.
(b) Bradford shall hold all information furnished by Parent or any of its
Subsidiaries or representatives pursuant to Section 5.02(a) in confidence to the
extent required by, and in accordance with, the provisions of the
Confidentiality Agreement, dated March 27, 2002, between Bradford and Parent
(the "Confidentiality Agreement").
(c) No investigation by either of the parties or their respective
Representatives shall affect the representations, warranties, covenants or
agreements of the other set forth herein.
SECTION 5.03 REGULATORY MATTERS AND CONSENTS.
(a) Except for the Parent Proxy Statement, Bradford will prepare all
Applications, which Applications shall conform to all applicable legal
requirements, and, subject to review and consent of Parent as to matters
relating to Parent and ▇▇▇▇▇ ▇▇▇▇, make all filings as promptly as practicable
following the preparation thereof, and shall use its best efforts to obtain as
promptly as practicable after the date hereof, all necessary permits, consents,
approvals, waivers and authorizations of all Regulatory Authorities necessary or
advisable to consummate the transactions contemplated by this Agreement.
(b) ▇▇▇▇▇ ▇▇▇▇ will furnish Bradford with all information concerning ▇▇▇▇▇
▇▇▇▇ and the Parent Subsidiaries as may be necessary or advisable in connection
with any Application or filing made by or on behalf of Bradford to any
Regulatory Authority in connection with the transactions contemplated by this
Agreement.
(c) Bradford, Parent, and ▇▇▇▇▇ ▇▇▇▇ will promptly furnish each other with
copies of all material written communications to, or received by them from, any
Regulatory Authority in respect of the transactions contemplated hereby, and
advise each
35
other of all material oral communications received by them from any such
Regulatory Authority in respect of the transactions contemplated hereby,
including any requests for additional information, except information that is
filed by either party, which is designated, as confidential.
(d) The parties hereto agree that they will consult with each other with
respect to the obtaining of all permits, consents, approvals and authorizations
of all third parties and Regulatory Authorities. In addition to the foregoing,
Bradford will furnish Parent and ▇▇▇▇▇ ▇▇▇▇ with (i) copies of all Applications
prior to filing with any Regulatory Authority and provide Parent a reasonable
opportunity to provide changes to such Applications and (ii) copies of all
Applications filed.
(e) ▇▇▇▇▇ ▇▇▇▇ and Bradford will cooperate with each other in the foregoing
matters and will furnish the responsible party with all information concerning
it and its Subsidiaries as may be necessary or advisable in connection with any
Application or filing (including the Proxy Statement) made by or on behalf of
Bradford, Parent or ▇▇▇▇▇ ▇▇▇▇ to any Regulatory Authority in connection with
the transactions contemplated by this Agreement, and such information will be
accurate and complete in all material respects. In connection therewith, each
party will provide certificates and other documents reasonably requested by the
other.
SECTION 5.04 TAKING OF NECESSARY ACTION.
(a) Bradford, Parent and ▇▇▇▇▇ ▇▇▇▇ shall each use its best efforts in good
faith, and each of them shall cause its Subsidiaries to use their best efforts
in good faith, to (i) furnish such information as may be required in connection
with the preparation of the documents referred to in Section 5.03 of this
Agreement, and (ii) take or cause to be taken all action necessary or desirable
on its part using its best efforts so as to permit completion of the Mergers and
the transactions contemplated by this Agreement, including, without limitation,
(A) obtaining the consent or approval of each individual, partnership,
corporation, association or other business or professional entity whose consent
or approval is required or desirable for consummation of the transactions
contemplated hereby (including assignment of leases without any change in
terms), provided that neither Parent nor any Parent Subsidiary shall agree to
make any payments or modifications to agreements in connection therewith without
the prior written consent of Bradford, and (B) requesting the delivery of
appropriate opinions, consents and letters from its counsel and independent
auditors. No party hereto shall take, or cause, or to the best of its ability
permit to be taken, any action that would substantially impair the prospects of
completing the Mergers pursuant to this Agreement, except for the exercise of
its rights under this Agreement.
(b) Parent shall prepare, subject to the review, and consent of Bradford
with respect to matters relating to Bradford, a Proxy Statement to be mailed to
the stockholders of Parent in connection with the meetings of its stockholders
and transactions contemplated hereby, which Proxy Statement shall conform to all
applicable legal requirements. The parties shall cooperate with each other with
respect to the preparation
36
of the Proxy Statement. Parent shall, as promptly as practicable following the
preparation thereof, file the Proxy Statement with the SEC, and Parent shall use
all reasonable efforts to have the Proxy Statement mailed to stockholders as
promptly as practicable after such filing, subject to receipt by Parent of any
comments from the SEC with respect to the Proxy Statement and satisfaction
thereof and subject to completion the audit of the financial statements of
Parent for the year ended June 30, 2002 as set forth in Section 5.10(a)(iv).
Parent will promptly advise Bradford of the time when the Proxy Statement has
been filed and mailed, or of any comments from the SEC or any request by the SEC
for additional information.
SECTION 5.05 CERTAIN AGREEMENTS.
(a) For a period of six (6) years from and after the Closing Date, Bradford
shall, to the fullest extent permitted to it under applicable law, indemnify,
defend and hold harmless each present and former director and officer of Parent
(the "Indemnified Parties") against all losses, claims, damages, costs, expenses
(including reasonable attorneys' fees and expenses), liabilities, judgments or
amounts paid in settlement (with the prior written approval of Bradford, which
approval shall not be unreasonably withheld) or in connection with any claim,
action, suit, proceeding or investigation arising out of matters existing or
occurring at or prior to the Closing Date (a "Claim") in which an Indemnified
Party is, or is threatened to be made, a party or a witness based in whole or in
part on, or arising in whole or in part out of, the fact that such person is or
was a director or officer of Parent or any Parent Subsidiary, regardless of
whether such Claim is asserted or claimed prior to, at or after the Closing
Date, to the fullest extent to which directors and officers of Parent would have
been entitled under Parent's Charter and applicable law and regulations. All
rights to indemnification in respect of a Claim asserted or made within the
period described in the preceding sentence shall continue until the final
disposition of such Claim.
(b) Any Indemnified Party wishing to claim indemnification under this
Section 5.05, upon learning of any Claim, shall promptly notify Bradford, but
the failure to so notify shall not relieve Bradford of any liability it may have
to such Indemnified Party except to the extent that such failure prejudices
Bradford. In the event of any Claim, (i) Bradford shall have the right to assume
the defense thereof (with counsel reasonably satisfactory to the Indemnified
Party) and shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that, if
Bradford elects not to assume such defense or counsel for the Indemnified
Parties advises that there are issues which raise conflicts of interest between
Bradford and the Indemnified Parties, the Indemnified Parties may retain counsel
satisfactory to them, and Bradford shall pay all reasonable fees and expenses of
such counsel for the Indemnified Parties promptly as statements therefor are
received, provided further that Bradford shall in all cases be obligated
pursuant to this paragraph to pay for only one firm of counsel for all
Indemnified Parties, (ii) the Indemnified Parties will cooperate in the defense
of any such Claim and (iii) Bradford shall not be liable for any settlement
37
effected without its prior written consent (which consent shall not unreasonably
be withheld).
(c) In the event Bradford or any of is successors or assigns (i)
consolidates with or merges into any other Person and shall not continue or
survive such consolidation or merger, or (ii) transfers or conveys all or
substantially all of its properties and assets to any Person, then, and in each
such case, to the extent necessary, proper provision shall be made so that the
successors and assigns of Bradford assume the obligations set forth in this
Section 5.05.
(d) Bradford shall maintain in effect for six (6) years from the Closing
Date, the current directors' and officers' liability insurance policy maintained
by Parent (provided that ▇▇▇▇▇▇▇▇ ▇▇▇ substitute therefor policies of at least
the same coverage containing terms and conditions which are not materially less
favorable) with respect to matters occurring at or prior to the Closing Date. In
connection with the foregoing, Parent agrees to provide such insurer or
substitute insurer with such representations as such insurer may reasonably
request with respect to the reporting of any prior claims. DISCLOSURE SCHEDULE
5.05 sets forth all claims made or notices provided to Parent's present insurers
and the extent to which any present insurance coverage has been impaired due to
either defense expense or settlements.
(e) As soon as practicable following the execution of this Agreement,
Bradford shall afford Parent the opportunity to review the proposed insurance
policy to be obtained by Bradford pursuant to Section 5.05(d).
(f) The provisions of this Section 5.05 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.
SECTION 5.06 NO OTHER BIDS AND RELATED MATTERS.
From and after the date hereof until the termination of this Agreement,
neither Parent, nor any Parent Subsidiary, nor any of their respective officers,
directors, employees, representatives, agents or affiliates (including, without
limitation, any investment banker, attorney or accountant retained by Parent or
any of its Subsidiaries), will, directly or indirectly, (a) initiate, solicit or
knowingly encourage (including by way of furnishing non-public information or
assistance), or (b) facilitate knowingly, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal (as defined below), or (c) enter into or maintain or
continue discussions or negotiate with any person or entity in furtherance of
such inquiries or to obtain an Acquisition Proposal or agree to or endorse any
Acquisition Proposal, (d) or authorize or permit any of its officers, directors,
or employees or any of its subsidiaries or any investment banker, financial
advisor, attorney, accountant or other representative retained by any of its
subsidiaries to take any such action, and Parent shall notify Bradford orally
(within one (1) business day) and in writing (as promptly as practicable) of all
of the relevant details relating to all inquiries and proposals which it or
38
any of its Subsidiaries or any such officer, director, employee, investment
banker, financial advisor, attorney, accountant or other representative may
receive relating to any of such matters; provided, however, that nothing
contained in this Section 5.06 shall prohibit the Board of Directors of Parent
from (i) furnishing information to, or entering into discussions or negotiations
with any person or entity that makes an unsolicited written, bona fide proposal
to acquire Parent pursuant to a merger, consolidation, share exchange, business
combination, tender or exchange offer or other similar transaction, if, and only
to the extent that, (A) the Board of Directors of Parent receives an opinion
from its independent financial advisor that such proposal may be superior to the
Merger from a financial point-of-view to Parent's stockholders, (B) the Board of
Directors of Parent, after consultation with and after considering the advice of
independent legal counsel, determines in good faith that failure to take such
action may cause the Board of Directors of Parent to breach its fiduciary duties
to stockholders under applicable law (such proposal that satisfies (A) and (B)
being referred to herein as a "Superior Proposal"); and (C) Parent promptly
notifies Bradford of such inquiries, proposals or offers received by, any such
information requested from, or any such discussions or negotiations sought to be
initiated or continued with Parent or any of its representatives indicating, in
connection with such notice, the name of such person and the material terms and
conditions of any inquiries, proposals or offers. For purposes of this
Agreement, "Acquisition Proposal" shall mean any proposal or offer as to any of
the following (other than the transactions contemplated hereunder) involving
Parent or any of its Subsidiaries: (i) any merger, consolidation, share
exchange, business combination, or other similar transactions; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of 25% or more
of the assets of Parent, taken as a whole, in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for 25% or more of the
outstanding shares of capital stock of Parent or the filing of a registration
statement under the Securities Act in connection therewith; or (iv) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
SECTION 5.07 DUTY TO ADVISE; DUTY TO UPDATE THE DISCLOSURE SCHEDULES.
Parent shall promptly advise Bradford of any change or event having a
Material Adverse Effect on it or on any Parent Subsidiary or which it believes
would or would be reasonably likely to cause or constitute a material breach of
any of its representations, warranties or covenants set forth herein or
materially delay the consummation of the transactions contemplated hereby.
Parent and ▇▇▇▇▇ ▇▇▇▇ shall update the Parent Disclosure Schedules as promptly
as practicable after the occurrence of an event or fact that, if such event or
fact had occurred prior to the date of this Agreement, would have been disclosed
in the Disclosure Schedules. The delivery of such updated Disclosure Schedule
shall not relieve Parent or ▇▇▇▇▇ ▇▇▇▇ from any breach or violation of this
Agreement and shall not have any effect for the purposes of determining the
satisfaction of the condition set forth in Section 6.02 (c) hereof.
39
SECTION 5.08 CONDUCT OF BRADFORD'S BUSINESS.
From the date of this Agreement to the Closing Date, Bradford will use its
best efforts to (x) preserve its business organizations intact, (y) maintain
good relationships with employees, and (z) preserve for itself the goodwill of
its customers and others with whom it maintains business relationships. From the
date of this Agreement to the Closing Date, Bradford will not (i) amend its
Charter or Bylaws in any manner inconsistent with the prompt and timely
consummation of the transactions contemplated by this Agreement, (ii) take any
action which would or is reasonably likely to adversely affect or materially
delay the receipt of the necessary approvals from the Regulatory Authorities;
(iii) take action which would or is reasonably likely to materially and
adversely affect Bradford's ability to perform its covenants and agreements
under this Agreement; (iv) reorganize into a mutual holding company; (v) convert
from a mutual for savings bank to a stock form savings bank or a commercial
bank; or (vi) agree to do any of the foregoing.
SECTION 5.09 BOARD AND COMMITTEE MINUTES.
Parent and ▇▇▇▇▇ ▇▇▇▇ shall provide to Bradford, within thirty (30) days
after any meeting of their respective Board of Directors, or any executive
committee thereof, a copy of the minutes of such meeting, excluding any matters
related to this Agreement or the transactions contemplated hereby, except that
with respect to any meeting held within fifteen (15) days of the Closing Date,
such minutes shall be provided to each party prior to the Closing Date.
SECTION 5.10 UNDERTAKINGS BY THE PARTIES.
(a) From and after the date of this Agreement:
(i) Voting by Directors and Executive Officers.
Concurrent with the execution of this Agreement, the directors and executive
officers of Parent shall have entered into and delivered to Bradford the Support
Agreement set forth as EXHIBIT A to this Agreement;
(ii) Systems Conversions. ▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇▇ shall
meet on a regular basis to discuss and plan for the conversion of ▇▇▇▇▇ ▇▇▇▇'▇
data processing and related electronic informational systems to those used by
Bradford, which planning shall include, but not be limited to, discussion of the
possible termination by ▇▇▇▇▇ ▇▇▇▇ of third-party service provider arrangements
effective at the Closing Date or at a date thereafter, non-renewal of personal
property leases and software licenses used by ▇▇▇▇▇ ▇▇▇▇ in connection with its
systems operations, retention of outside consultants and additional employees to
assist with the conversion, and outsourcing, as appropriate, of proprietary or
self-provided system services, it being understood that ▇▇▇▇▇ ▇▇▇▇ shall not be
obligated to take any such action prior to the Closing Date and, unless ▇▇▇▇▇
▇▇▇▇ otherwise agrees, no conversion shall take place prior to the Closing Date.
In the event that ▇▇▇▇▇ ▇▇▇▇ takes, at the request of Bradford, any action
relative to third parties to facilitate the conversion that results in the
imposition of any termination fees or
40
charges, Bradford shall indemnify ▇▇▇▇▇ ▇▇▇▇ for any such fee and charges, and
the costs of reversing the conversion process, if for any reason the Bank Merger
is not consummated for any reason other than a breach of this Agreement by ▇▇▇▇▇
▇▇▇▇, or a termination of this Agreement under Section 7.01(c)(iv) or (d)(iv).
(iii) List of Nonperforming Assets and Lending Activities.
▇▇▇▇▇ ▇▇▇▇ shall provide Bradford, within ten (10) days of the end of each
calendar month, a written list (which shall include the outstanding principal
amount of the loan, where applicable) of the following: (i) loans on nonaccrual,
(ii) real estate owned, (iii) all loans delinquent sixty (60) days or more as to
principal or interest as of the end of such month and (iv) and impaired loans,
subject to ▇▇▇▇▇ ▇▇▇▇'▇ obligations under relevant privacy laws. Also within
twenty (20) days of the end of each calendar month, ▇▇▇▇▇ ▇▇▇▇ shall also
provide Bradford with a status report on each loan with an unpaid principal
balance of $500,000 or more, subject to ▇▇▇▇▇ ▇▇▇▇'▇ obligations under relevant
privacy laws. On a monthly basis, ▇▇▇▇▇ ▇▇▇▇ shall provide Bradford with a
listing of all loan approvals, which listing shall indicate the loan amount,
loan type and other material features of the loan; and
(iv) Stockholders' Meeting. Subject to delays, if any,
which may be occasioned by the review of proxy materials by a Regulatory
Authority, Parent shall mail proxy materials relating to this Agreement and the
transactions contemplated hereby to the stockholders of Parent within thirty
(30) days after the completion of the audit of Parent's financial statements for
the year ended June 30, 2002, or as soon as is practicable, and, if consistent
with its fiduciary obligation at the time and subject to Section 5.06, its Board
of Directors shall recommend approval of this Agreement to the Parent
stockholders.
(b) From and after the date of this Agreement, Bradford, Parent and ▇▇▇▇▇
▇▇▇▇ shall each:
(i) Filings and Approvals. Cooperate with the other in
the preparation and filing, as soon as practicable, of (A) the Applications, (B)
the Proxy Statement, (C) all other documents necessary to obtain any other
approvals and consents required to effect the completion of the Merger, and the
transactions contemplated by this Agreement, (D) all other documents
contemplated by this Agreement;
(ii) Public Announcements. Cooperate and cause their
respective officers, directors, employees and agents to cooperate in good faith,
consistent with their respective legal obligations, in the preparation and
distribution of, and agree upon the form and substance of, any press release
related to this Agreement and the transactions contemplated hereby, and any
other public disclosures related thereto, including without limitation
communications to stockholders, internal announcements and customer disclosures,
and neither Bradford nor Parent shall issue, or cause to be issued, any such
press release or make any such public statement without the prior consent of the
other party, which consent shall not be unreasonably withheld; provided,
however, that nothing contained herein shall prohibit either party from making
any disclosure which its counsel
41
deems necessary, provided that the disclosing party notifies the other party
reasonably in advance of the timing and contents of such disclosure;
(iii) Maintenance of Insurance. Maintain, and cause their
respective Subsidiaries to maintain, insurance in such amounts as are reasonable
to cover such risks as are customary in relation to the character and location
of its properties and the nature of its business;
(iv) Maintenance of Books and Records. Maintain, and cause
their respective Subsidiaries to maintain, books of account and records in
accordance with GAAP applied on a basis consistent with those principles used in
preparing the financial statements heretofore delivered; or
(v) Taxes. File all federal, state, and local tax returns
required to be filed by them or their respective Subsidiaries on or before the
date such returns are due (including any extensions) and pay all taxes shown to
be due on such returns on or before the date such payment is due.
SECTION 5.11 EMPLOYEE AND TERMINATION BENEFITS.
(a) Except as provided in the next sentence and in Sections 5.11(c),
5.11(d) and 5.11(e) hereof, as of or after the Closing Date, and at Bradford's
election and subject to the requirements of the Code and ERISA, the Compensation
and Benefit Plans may be continued and maintained separately, consolidated, or
terminated. Notwithstanding the foregoing, the ESOP and the ▇▇▇▇▇ ▇▇▇▇ 401(k)
Plan will be terminated by Parent and/or ▇▇▇▇▇ ▇▇▇▇ prior to the Closing Date,
and Parent and/or ▇▇▇▇▇ ▇▇▇▇ will withdraw from the Financial Institutions
Retirement Fund as adopted by ▇▇▇▇▇ ▇▇▇▇ before the Closing Date (or as soon
thereafter as is practicable, if it is not practicable due to the requirements
of applicable law to withdraw prior to the Closing Date). ▇▇▇▇▇ ▇▇▇▇ employees
who continue employment with Bradford following the Closing Date ("Continuing
Employees") shall, to the extent determined by Bradford, participate in
Bradford's employee benefit plans as of the first entry date coincident with or
following the Closing Date (or such later date determined by Bradford), with
recognition of prior service with ▇▇▇▇▇ ▇▇▇▇ for purposes of eligibility to
participate and vesting, but not benefit accrual.
Continuing Employees shall be enrolled in the Bradford medical, dental,
life insurance and disability insurance programs available to other Bradford
Federal employees immediately upon the termination of the ▇▇▇▇▇ ▇▇▇▇ plans (or
as soon thereafter as is practicable, if it is not practicable to enroll such
Continuing Employees immediately) without such Continuing Employees incurring
any uninsured waiting periods or pre-existing conditions exclusions for such
Continuing Employees and dependents participating in such similar ▇▇▇▇▇ ▇▇▇▇
plans at such time. Further, any plan year deductibles under such plans incurred
as of the date of termination of the respective ▇▇▇▇▇ ▇▇▇▇ plans shall be
credited to the first plan year deductibles under the comparable Bradford plans
upon enrollment in such Bradford plans. The terms of this
42
paragraph shall be operative only to the extent that the insurance carrier of
each plan agrees, under reasonable conditions, to such terms.
(b) At and for a period of six months following the Closing Date, any
person who is an employee of Parent or ▇▇▇▇▇ ▇▇▇▇ five (5) business days prior
to the Closing Date (other than an employee who is a party to an employment or
change in control agreement) and whose employment is terminated by Bradford
(other than by voluntary termination or termination for cause) during the period
ending six (6) months after the Closing Date, shall be provided with severance
benefits equal to two (2) weeks pay for every year of service with Parent or
▇▇▇▇▇ ▇▇▇▇, up to a maximum of twenty-six (26) weeks. The benefits shall be paid
within ten (10) days of the date of termination of employment.
(c) The employment-related agreements identified in DISCLOSURE SCHEDULE
3.21 will be honored by Bradford, and Bradford will provide written notice to
each individual who is a party to any such employment-related agreement of
Bradford's assumption of the employment-related agreement, in accordance with
the terms of such employment-related agreement. The payments that would be
required to be made under those agreements as a result of the transactions
contemplated by this agreement and/or the termination of the employment of the
individuals covered by such employment-related agreements are set forth in
DISCLOSURE SCHEDULE 3.21 (which payments, if applicable, shall be made by ▇▇▇▇▇
▇▇▇▇, or if requested by Bradford, by Bradford), shall be in complete
satisfaction of all of the individual's rights under the employment-related
agreement, neither Bradford, Parent nor ▇▇▇▇▇ ▇▇▇▇ shall have further obligation
under the employment-related agreements, and each individual shall execute a
cancellation agreement and release, in form and substance reasonably
satisfactory to Bradford and Parent in connection with such payments. To the
extent that Bradford has notified Parent prior to the Closing Date that
employees with employment agreements or change in control severance agreements
will not be retained by Bradford after the Closing Date, or to the extent that
Parent has notified Bradford prior to the Closing Date that employees with
employment agreements or change in control severance agreements shall resign on
the Closing Date, then Parent shall make such termination payments in accordance
with such agreements as of the Closing Date (which payments, at the request of
Bradford, may be made by Bradford).
(d) The following shall apply to the ESOP:
(i) Parent and/or ▇▇▇▇▇ ▇▇▇▇ shall take all steps
necessary to provide the trustees of the ESOP with the appropriate amount of
proxy materials to be used by Parent in connection with the transactions
contemplated hereby pursuant to Section 5.10(a)(iv), as such trustees deem
appropriate to comply with the requirements of ERISA and the terms of the ESOP,
and Parent shall cause its transfer agent to cooperate with the ESOP trustees in
connection with the distribution to the ESOP participants of such proxy
materials and, as requested by the trustees, any additional communications
required under ERISA and the terms of the ESOP; provided, however, that prior to
the mailing of any
43
such additional communications to the participants of the ESOP, Bradford shall
have a reasonable opportunity to review such additional communications.
(ii) The outstanding ESOP indebtedness shall be repaid
from the Merger Consideration received by the ESOP in exchange for its
unallocated shares of Parent Common Stock. If the Merger Consideration received
by the ESOP with respect to its unallocated shares of Parent Common Stock
exceeds the balance of the outstanding ESOP indebtedness, the balance of such
Merger Consideration (after repayment of the outstanding ESOP indebtedness)
shall be allocated and distributed to the ESOP participants in accordance with
the terms of the ESOP (as amended pursuant to (iii) below). However, if the
Merger Consideration received by the ESOP with respect to its unallocated shares
of Parent Common Stock is less than the balance of the outstanding ESOP
indebtedness, Bradford will repay any such outstanding ESOP indebtedness.
(iii) The ESOP shall be amended by Parent and/or ▇▇▇▇▇ ▇▇▇▇
prior to the Closing Date in a manner reasonably satisfactory to Bradford to
address issues required to be addressed by amendment prior to the termination of
the ESOP. The amendment shall include the following:
(A) The amendment shall clarify that, as set
forth in (ii) above, the outstanding ESOP indebtedness shall be repaid from the
Merger Consideration received by the ESOP in exchange for its unallocated shares
of Parent Common Stock.
(B) The amendment shall provide that the
provisions of Section 13.2 of the ESOP (as amended by amendment dated November
17, 1999) relating to payments to ESOP participants in respect of amounts which
could not be allocated due to the limitations of IRC Section 415, shall become
operative only if the IRS approves a reversion from the ESOP to Bradford of such
excess amounts.
(C) The amendment shall provide that an IRS
determination letter will be sought in connection with the ESOP termination, and
that final distributions will not be made until such a letter is obtained.
(D) The amendment shall provide that the ESOP
will be converted to a profit sharing plan, and thus, any distributions from the
ESOP on or after the Closing Date will be made in cash, and not employer
securities.
(E) The amendment shall provide that the ESOP is
terminated effective prior to the Closing Date.
(iv) Parent and/or ▇▇▇▇▇ ▇▇▇▇ may, to the extent permitted
under the Code, and in accordance with their past practices, make contributions
to the ESOP in an amount equal to the normal contribution amount for the plan
year ending June 30, 2002, and make pro-rata contributions to the ESOP with
respect to the period beginning July 1, 2002 to the Closing Date proportionately
with the normal contribution amount for the plan year.
44
(v) Parent and/or ▇▇▇▇▇ ▇▇▇▇ shall provide to Bradford a
favorable IRS determination letter with respect to the ESOP that takes into
account all of the requirements of GUST.
(e) The following shall apply to the ▇▇▇▇▇ ▇▇▇▇ 401(k) Plan:
(i) Parent or ▇▇▇▇▇ ▇▇▇▇ shall provide to Bradford prior
to the Closing Date a signed copy of the adoption agreement for the ▇▇▇▇▇ ▇▇▇▇
401(k) Plan, and the most recent IRS determination letter issued directly to the
▇▇▇▇▇ ▇▇▇▇ 401(k) Plan (not to the prototype sponsor), if any.
(ii) The ▇▇▇▇▇ ▇▇▇▇ 401(k) Plan shall be terminated by
Parent and/or ▇▇▇▇▇ ▇▇▇▇ prior to the Closing Date.
(iii) Parent and/or ▇▇▇▇▇ ▇▇▇▇ may make contributions to
the ▇▇▇▇▇ ▇▇▇▇ 401(k) Plan with respect to the period ending on the Closing Date
in accordance with the terms of the ▇▇▇▇▇ ▇▇▇▇ 401(k) Plan as currently in
effect and consistent with its past practice, subject to Parent's and/or ▇▇▇▇▇
▇▇▇▇'▇ right to make contributions accrued through the Closing Date as if the
Closing Date were the last day of the plan year.
(iv) Parent and/or ▇▇▇▇▇ ▇▇▇▇ shall take all steps
necessary to provide the plan sponsor of the ▇▇▇▇▇ ▇▇▇▇ 401(k) Plan with the
appropriate amount of proxy materials to be used by Parent in connection with
the transactions contemplated hereby pursuant to Section 5.10(a)(iv), as such
plan sponsor deems appropriate to comply with applicable law and the terms of
the ▇▇▇▇▇ ▇▇▇▇ 401(k) Plan, and Parent shall cause its transfer agent to
cooperate with the plan sponsor in connection with the distribution to the ▇▇▇▇▇
▇▇▇▇ 401(k) participants whose accounts are invested in employer securities of
such proxy materials and, as requested by the plan sponsor, any additional
communications required under applicable law and the terms of the ▇▇▇▇▇ ▇▇▇▇
401(k) Plan; provided, however, that prior to the mailing of any such additional
communications to such participants, Bradford shall have a reasonable
opportunity to review such additional communications.
(v) Prior to the Closing Date, the ▇▇▇▇▇ ▇▇▇▇ 401(k) Plan
shall be amended to provide that, effective as of the Closing Date, employer
securities will not be available as an investment option under the ▇▇▇▇▇ ▇▇▇▇
401(k) Plan.
45
(f) Prior to the Closing Date, Parent and/or ▇▇▇▇▇ ▇▇▇▇ shall obtain and
provide to Bradford a written statement from the administrator of the Financial
Institutions Retirement Fund (the "Fund") setting forth the amount that will be
required to be paid to the Fund in connection with the termination of Parent
and/or ▇▇▇▇▇ ▇▇▇▇'▇ participation in the Fund. Such amount shall not exceed
$100,000. The statement shall provide information as of an estimated Closing
Date to be determined by mutual agreement of Bradford and Parent and/or ▇▇▇▇▇
▇▇▇▇ and shall set forth the basis for the determination of the liability set
forth therein, including any actuarial or other assumptions.
(g) Prior to the Closing Date, ▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall
execute an amendment to the Executive Supplemental Retirement Plan and
Compensation Continuation Agreement (the "SERP") in form and substance
reasonably satisfactory to Bradford and Parent such that as of the Closing Date
all future benefit accruals under the SERP shall cease and the total benefit
payable to ▇▇. ▇▇▇▇▇▇▇ thereunder shall be fixed at $707,216, which amount shall
be payable in a lump sum, or in non-annuity installments, at the time otherwise
provided under the terms of the SERP.
(h) Prior to the Closing Date, ▇▇▇▇▇ ▇▇▇▇ and each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (each, an "Executive") shall execute
an amendment to such Executive's Change in Control Protective Agreement, dated
November 17, 1999 (each, a "Change in Control Agreement"), in form and substance
reasonably satisfactory to Bradford and Parent, limiting the required funding of
the rabbi trust provided for thereunder to the maximum benefits payable to the
Executive thereunder and immediately renewing such Change in Control Agreement
for a term expiring June 30, 2003.
SECTION 5.12 DIRECTORS.
At the Closing Date, two (2) of the existing directors of Parent shall be
appointed to the Board of Directors of Bradford.
SECTION 5.13 DUTY TO ADVISE.
Bradford shall promptly advise Parent of any change or event having a
Material Adverse Effect on it or which it believes would or would be reasonably
likely to cause or constitute a material breach of any of its representations,
warranties or covenants set forth herein or materially delay the consummation of
the transactions contemplated hereby.
SECTION 5.14 REDUCTION OF MERGER CONSIDERATION.
(a) If the amount set forth on Schedule 3.14(c) with respect to the
required payments by ▇▇▇▇▇ ▇▇▇▇ as a result of the termination of its
participation in the Financial Institutions Retirement Fund shall exceed
$100,000, the aggregate amount of the Merger Consideration to be paid to the
stockholders of Parent pursuant to Section 2.02 and the holders of Parent
Options pursuant to Section 2.04 shall be reduced by the
46
amount of such excess (net of any tax deduction to which Parent and/or ▇▇▇▇▇
▇▇▇▇ is entitled with respect to the payment of such excess), and the reduction
of the per share Merger Consideration shall be determined by dividing such
excess amount by (i) the number of shares of Parent Common Stock to be converted
pursuant to Sections 2.02 plus (ii) the number of shares of Parent Common Stock
represented by Parent Options to be exchanged for cash pursuant to 2.04 hereof.
(b) If a reduction of the Merger Consideration is required pursuant to this
Section 5.14, Bradford will not have any other rights or claims against Parent
or ▇▇▇▇▇ ▇▇▇▇, their Subsidiaries, and their respective officers and directors,
under this Agreement with respect to any breach of the representation set forth
in Section 3.14(c) (as modified by DISCLOSURE SCHEDULE 3.14(C)) with respect to
the required payments by ▇▇▇▇▇ ▇▇▇▇ as a result of the termination of its
participation in the Financial Institutions Retirement Fund or the covenant set
forth in Section 5.11(f), it being agreed that the reduction in the Merger
Consideration pursuant to this Section 5.14 will constitute the sole and
exclusive remedy of Bradford against Parent and ▇▇▇▇▇ ▇▇▇▇, their Subsidiaries
and their respective officers and directors with respect to the aforementioned
breaches.
ARTICLE VI
CONDITIONS
SECTION 6.01 CONDITIONS TO PARENT'S AND ▇▇▇▇▇ ▇▇▇▇'▇ OBLIGATIONS UNDER THIS
AGREEMENT.
The obligations of Parent and ▇▇▇▇▇ ▇▇▇▇ hereunder shall be subject to
satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by Parent and ▇▇▇▇▇ ▇▇▇▇ pursuant to Section 8.03
hereof:
(a) Corporate Proceedings. All action required to be taken by, or on the
part of, Bradford to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated by this
Agreement, shall have been duly and validly taken by Bradford; and ▇▇▇▇▇ ▇▇▇▇
and Parent shall have received certified copies of the resolutions evidencing
such authorizations;
(b) Covenants. The obligations and covenants of Bradford required by this
Agreement to be performed by Bradford at or prior to the Closing Date shall have
been duly performed and complied with in all material respects;
(c) Insurance Coverage. Bradford shall have obtained the insurance coverage
as provided in Section 5.05(d) and shall provide Parent with written proof
thereof.
(d) Representations and Warranties. Each of the representations and
warranties of Bradford set forth in this Agreement which is qualified as to
materiality shall be true and correct and each such representational warranty
that is not so qualified shall be true and correct in all material respects, in
each case as of the date of this
47
Agreement, and as of the Closing Date as though made on and as of the Closing
Date (except as to any representation or warranty which specifically relates to
an earlier date);
(e) Approvals of Regulatory Authorities. The parties to this Agreement
shall have received all required approvals from the Regulatory Authorities with
respect to the Mergers; and all notice and waiting periods required thereunder
shall have expired or been terminated;
(f) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction that enjoins or
prohibits consummation of the transactions contemplated hereby;
(g) Approval of Parent's Stockholders. This Agreement shall have been
approved by the stockholders of Parent by such vote as is required under
applicable law, and Parent's Charter and Bylaws;
(h) Officer's Certificate. Bradford shall have delivered to ▇▇▇▇▇ ▇▇▇▇ a
certificate, dated the Closing Date and signed, without personal liability, by
its president, to the effect that the conditions set forth in subsections (a)
through (f) of this Section 6.01 have been satisfied; and
(h) Funds Deposited with the Exchange Agent. Bradford shall have deposited
or caused to be deposited, in trust with the Exchange Agent, an amount of cash
equal to the aggregate Merger Consideration that the holders of Parent Common
Stock shall be entitled to receive on the Closing Date pursuant to Section 2.02,
Section 2.04 and Section 2.05 of this Agreement and shall provide Parent with
sufficient evidence of the same.
SECTION 6.02 CONDITIONS TO BRADFORD'S OBLIGATIONS UNDER THIS AGREEMENT.
The obligations of Bradford hereunder shall be subject to satisfaction at
or prior to the Closing Date of each of the following conditions, unless waived
by Bradford pursuant to Section 8.03 hereof:
(a) Corporate Proceedings. All action required to be taken by, or on the
part of, Parent and ▇▇▇▇▇ ▇▇▇▇ to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated by this Agreement, shall have been duly and validly taken by Parent
and ▇▇▇▇▇ ▇▇▇▇; and Bradford shall have received certified copies of the
resolutions evidencing such authorizations;
(b) Covenants. The obligations and covenants of Parent and each Parent
Subsidiary required by this Agreement to be performed at or prior to the Closing
Date shall have been duly performed and complied with in all material respects;
(c) Representations and Warranties. Each of the representations and
warranties of Parent, ▇▇▇▇▇ ▇▇▇▇ and each Parent Subsidiary set forth in this
48
Agreement which is qualified as to materiality shall be true and correct and
each such representation and warranty that is not so qualified shall be true and
correct in all material respects, in each case as of the date of this Agreement,
and as of the Closing Date as though made on and as of the Closing Date (except
as to any representation or warranty which specifically relates to an earlier
date);
(d) Approvals of Regulatory Authorities. All required approvals from the
Regulatory Authorities with respect to the Mergers shall have been received; and
all notice and waiting periods required thereunder shall have expired or been
terminated; provided, however, that no approval or consent referred to herein
shall be deemed to have been received if it shall include any condition or
requirement that, in the aggregate, would so materially reduce the economic or
business benefits of the Mergers to Bradford that had such condition or
requirement been known, Bradford, in its reasonable judgment, would not have
entered into this Agreement.
(e) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction that enjoins or
prohibits consummation of the transactions contemplated hereby;
(f) No Material Adverse Effect. Since June 20, 2001, there shall not have
occurred any Material Adverse Effect with respect to Parent or ▇▇▇▇▇ ▇▇▇▇; and
(g) Officer's Certificate. Parent and ▇▇▇▇▇ ▇▇▇▇ shall have delivered to
Bradford, certificates, dated the Closing Date and signed, without personal
liability, by their respective chairman of the board or president, to the effect
that the conditions set forth in subsections (a) through (f) of this Section
6.02 have been satisfied.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
SECTION 7.01 TERMINATION.
This Agreement may be terminated at any time prior to the Closing Date:
(a) by mutual written consent of the parties authorized by their respective
boards of directors;
(b) by Bradford, or Parent or ▇▇▇▇▇ ▇▇▇▇ (i) if the Closing Date shall not
have occurred on or prior to February 28, 2003, (ii) if a vote of the
stockholders of Parent is taken and such stockholders fail to approve this
Agreement at the meeting of stockholders (or any adjournment thereof) of Parent
contemplated by Section 5.04(b) hereof, or (iii) any applicable regulatory
authority formally disapproves the issuance of any required regulatory approval,
unless in the case of clauses (i) and (ii) of this Section 7.01(b) such failure
is due to the failure of the party seeking to terminate this Agreement to
perform or observe its agreements set forth herein to be performed or observed
by such party on or before February 28, 2003.
49
(c) by Bradford if (i) at the time of such termination any of the
representations and warranties of Parent or ▇▇▇▇▇ ▇▇▇▇ contained in this
Agreement shall not be true and correct to the extent that the condition set
forth in Section 6.02(b) or (c) hereof cannot be satisfied, (ii) there shall
have been any material breach of any covenant, agreement or obligation of Parent
or ▇▇▇▇▇ ▇▇▇▇ hereunder and such breach shall have not been remedied by Parent
or ▇▇▇▇▇ ▇▇▇▇ within fifteen (15) business days after receipt by them of notice
in writing from Bradford specifying the nature of such breach and requesting
that it be remedied, (iii) any applicable Regulatory Authority approves the
transactions contemplated but with conditions attached such that the
requirements of Section 6.02(d) are not satisfied, (iv) Parent has received a
Superior Proposal, and in accordance with Section 5.06 of this Agreement, the
Board of Directors of Parent has entered into an acquisition agreement with
respect to the Superior Proposal, terminated this Agreement or withdrawn its
recommendation of this Agreement, failed to make such recommendation or modified
or qualified its recommendation in a manner adverse to Bradford, or (v) any
event occurs such that a condition set forth in Section 6.02 hereof which must
be fulfilled before Bradford is obligated to consummate the Mergers cannot be
fulfilled and non-fulfillment is not waived by Bradford.
(d) by Parent or ▇▇▇▇▇ ▇▇▇▇ if (i) at the time of such termination any of
the representations and warranties of Bradford contained in this Agreement shall
not be true and correct to the extent that the condition set forth in Section
6.01(b) or (c) hereof cannot be satisfied, (ii) there shall have been any
material breach of any covenant, agreement or obligation of Bradford hereunder
and such breach shall not have been remedied within fifteen (15) business days
after receipt by Bradford of notice in writing from Parent specifying the nature
of such breach and requesting that it be remedied, (iii) any event occurs such
that a condition set forth in Section 6.01 hereof which must be fulfilled before
Parent is obligated to consummate the Merger cannot be fulfilled and
non-fulfillment is not waived by Parent, or (iv) Parent has received a Superior
Proposal, and in accordance with Section 5.06 of this Agreement, the Board of
Directors of Parent has made a determination to accept such Superior Proposal;
provided that Parent shall not terminate this Agreement pursuant to this Section
7.01(d)(iv) and enter in a definitive agreement with respect to the Superior
Proposal until the expiration of three (3) business days following Bradford's
receipt of written notice advising Bradford that Parent has received a Superior
Proposal, specifying the material terms and conditions of such Superior Proposal
(and including a copy thereof with all accompanying documentation, if in
writing) identifying the person making the Superior Proposal and stating whether
Parent intends to enter into a definitive agreement with respect to the Superior
Proposal. After providing such notice, Parent shall provide a reasonable
opportunity to Bradford during the three-day period to make such adjustments in
the terms and conditions of this Agreement as would enable Parent to proceed
with the Mergers on such adjusted terms.
SECTION 7.02 EFFECT OF TERMINATION.
Except as otherwise provided in this Agreement, if this Agreement is
terminated pursuant to Section 7.01 hereof, this Agreement shall forthwith
become void (other than Section 8.01 (Expenses), Sections 5.02 (Access;
Confidentiality) and the last sentences
50
of 5.10(a)(ii) (Systems Conversion), which shall remain in full force and
effect), and there shall be no further liability on the part of Bradford, Parent
or ▇▇▇▇▇ ▇▇▇▇ to the other, except that no party shall be relieved or released
from any liabilities or damages arising out of its willful or fraudulent breach
of any provision of this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 EXPENSES.
(a) Except as provided herein, each party hereto shall bear and pay all
costs and expenses incurred by it in connection with the transactions
contemplated hereby, including fees and expenses of its own financial
consultants, accountants and counsel. Section 8.01(a) shall not be construed to
relieve or release a breaching party from any liability or damages arising out
of its willful breach of any provision of this Agreement.
(b) As a condition of Bradford's willingness, and in order to induce
Bradford to enter into this Agreement and to reimburse Bradford for incurring
the costs and expenses related to entering into this Agreement and consummating
the transactions contemplated by this Agreement, Parent and ▇▇▇▇▇ ▇▇▇▇ hereby
agree to pay Bradford, and Bradford shall be entitled to payment of a fee of,
five hundred fifty thousand dollars ($550,000) (the " Bradford Termination
Fee"), within five (5) business days after written demand for payment is made by
Bradford, following the occurrence of any of the events set forth below:
(i) Parent terminates this Agreement pursuant to Section
7.01(d)(iv) or Bradford terminates this Agreement pursuant to Section 7.01
(c)(iv); or
(ii) the entering into a definitive agreement by Parent
relating to an Acquisition Proposal or the consummation of an Acquisition
Proposal involving Parent within seven (7) months after the occurrence of any of
the following: (i) the termination of the Agreement by Bradford pursuant to
Section 7.01(c)(ii); or (ii) the failure of the stockholders of Parent to
approve this Agreement after the occurrence of an Acquisition Proposal.
If demand for payment of the Bradford Termination Fee is made pursuant to
this Section 8.01(b) and payment is timely made, then Bradford will not have any
other rights or claims against Parent or ▇▇▇▇▇ ▇▇▇▇, their Subsidiaries, and
their respective officers and directors, under this Agreement, it being agreed
that the acceptance of the Bradford Termination Fee under this Section 8.01(b)
will constitute the sole and exclusive remedy of Bradford against Parent and
▇▇▇▇▇ ▇▇▇▇, their Subsidiaries and their respective officers and directors.
(c) As a condition of Parent's willingness, and in order to induce Parent
to enter into this Agreement and to reimburse Parent for incurring the costs and
expenses related to entering into this Agreement and consummating the
transactions
51
contemplated by this Agreement, Bradford hereby agrees to pay Parent, and Parent
shall be entitled to payment of a fee of, two hundred thousand dollars
($200,000) (the "▇▇▇▇▇ Termination Fee"), within five (5) business days after
written demand for payment is made by Parent, following the termination of this
Agreement by Bradford pursuant to Section 7.01(c)(iii).
If demand for payment of the ▇▇▇▇▇ Termination Fee is made pursuant to this
Section 8.01(c) and payment is timely made, then Parent and ▇▇▇▇▇ will not have
any other rights or claims against Bradford, its Subsidiaries, and its officers
and directors, under this Agreement, it being agreed that the acceptance of the
▇▇▇▇▇ Termination Fee under this Section 8.01(c) will constitute the sole and
exclusive remedy of Parent and ▇▇▇▇▇ against Bradford, its Subsidiaries and its
officers and directors.
SECTION 8.02 SURVIVAL OF REPRESENTATIONS AND WARRANTIES .
All representations and warranties shall terminate on the Closing Date.
SECTION 8.03 AMENDMENT, EXTENSION AND WAIVER.
Subject to applicable law, at any time prior to the consummation of the
transactions contemplated by this Agreement, the parties may (a) amend this
Agreement, (b) extend the time for the performance of any of the obligations or
other acts of either party hereto, (c) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, or (d) waive compliance with any of the agreements or
conditions contained in Articles V and VI hereof or otherwise. This Agreement
may not be amended except by an instrument in writing authorized by the
respective Boards of Directors and signed, by duly authorized officers, on
behalf of the parties hereto. Any agreement on the part of a party hereto to any
extension or waiver shall be valid only if set forth in an instrument in writing
signed by a duly authorized officer on behalf of such party, but such waiver or
failure to insist on strict compliance with such obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
SECTION 8.04 ENTIRE AGREEMENT.
This Agreement, including the documents and other writings referred to
herein or delivered pursuant hereto, contains the entire agreement and
understanding of the parties with respect to its subject matter. This Agreement
supersedes all prior arrangements and understandings between the parties, both
written and oral with respect to its subject matter, except as expressly
referenced herein, including, without limitation, the Confidentiality Agreement
referenced in Section 5.02. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors; provided,
however, that nothing in this Agreement, expressed or implied, is intended to
confer upon any party, other than the parties hereto and their respective
successors, any rights, remedies, obligations or liabilities other than pursuant
to Sections 2.02, 2.03, 5.05 and 5.11(c), (d) and (e).
52
SECTION 8.05 NO ASSIGNMENT.
Notwithstanding anything to the contrary in this Agreement, neither party
hereto may assign any of its rights or obligations hereunder to any other
person, without the prior written consent of the other party hereto.
SECTION 8.06 NOTICES.
All notices or other communications hereunder shall be in writing and shall
be deemed given if delivered personally, mailed by prepaid registered or
certified mail (return receipt requested), or sent by telecopy, addressed as
follows:
(a) If to Bradford to:
Bradford Bank
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
President
with a copy to:
Venable, Baetjer and ▇▇▇▇▇▇, LLP
1800 Mercantile Bank & Trust Building
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
(b) If to Parent or ▇▇▇▇▇ ▇▇▇▇, to:
▇▇▇▇▇ ▇▇▇▇ Federal Savings & Loan Association
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
with a copy to:
▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇.▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
53
SECTION 8.07 CAPTIONS; INTERPRETATION.
(a) The captions contained in this Agreement are for reference purposes
only and are not part of this Agreement.
(b) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section references are to
this Agreement unless otherwise specified. Whenever the words "include" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. No provision of this Agreement
shall be construed to require Bradford, Parent, ▇▇▇▇▇ ▇▇▇▇, or any of their
respective officers, directors, Subsidiaries or affiliates to take any action
which would violate or conflict with any applicable law (whether statutory or
common), rule or regulation.
SECTION 8.08 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute one and the same agreement and shall
become effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
SECTION 8.09 SEVERABILITY.
If any provision of this Agreement or the application thereof to any person
or circumstance shall be invalid or unenforceable to any extent, the remainder
of this Agreement and the application of such provisions to other persons or
circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law.
SECTION 8.10 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Maryland, without regard to conflict of law principles.
54
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
ATTEST: BRADFORD BANK
By: _________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇
President
-------------------------
▇▇▇▇ ▇▇▇▇▇
Secretary
▇▇▇▇▇ ▇▇▇▇ BANCORPORATION, INC.
By: _________________________
_________________________ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ President
Secretary
▇▇▇▇▇ ▇▇▇▇ FEDERAL SAVINGS & LOAN
ASSOCIATION
By: _________________________
_________________________ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ President
Secretary
[Signature Page of Agreement and Plan of Merger]