EXHIBIT 2
AGREEMENT OF MERGER
BY AND AMONG
CNB BANCORP, INC., CNB ACQUISITION CORP.
AND
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
DATED AS OF JANUARY 23, 1999
TABLE OF CONTENTS
ARTICLE I
THE MERGER.................................................................................................2
1.1 The Merger.............................................................................2
1.2 Exchange Agent.........................................................................3
1.3 Funding of Exchange Agent..............................................................4
1.4 Closing; Effective Time................................................................4
1.5 Stock Options..........................................................................4
ARTICLE II
REPRESENTATIONS AND WARRANTIES CONCERNING ADIRONDACK.......................................................5
2.1 Organization, Good Standing and Authority..............................................5
2.2 Organizational Documents; Minutes and Stock Records....................................5
2.3 Capitalization of Adirondack...........................................................5
2.4 Financial Statements and Other Reports.................................................6
2.5 SEC Documents..........................................................................6
2.6 Undisclosed Liabilities................................................................7
2.7 Loan Portfolio and Delinquent Loans....................................................7
2.8 No Adverse Changes.....................................................................8
2.9 Conduct of Business in Normal Course...................................................8
2.10 Properties and Assets..................................................................8
2.11 Insurance..............................................................................9
2.12 Litigation and Compliance with Laws....................................................9
2.13 Conflict of Interest Transactions.....................................................10
2.14 Significant Contracts.................................................................10
2.15 No Defaults...........................................................................11
2.16 Additional Schedules..................................................................11
2.17 Taxes.................................................................................11
2.18 Employee Compensation and Benefit Plans...............................................11
2.19 Authorization of Transactions.........................................................12
2.20 Contaminated Properties...............................................................12
2.21 Change in Business Relationships......................................................13
2.22 Broker's and Finder's Fees............................................................13
2.23 Year 2000 Compliance..................................................................13
ARTICLE III
REPRESENTATIONS AND WARRANTIES CONCERNING CNB AND ACQUISITION CORP........................................13
3.1 Corporate Existence...................................................................13
3.2 Financial Statements..................................................................14
3.3 SEC Documents.........................................................................14
3.4 Undisclosed Liabilities...............................................................14
3.5 No Adverse Change.....................................................................15
3.6 Authorization of Transactions.........................................................15
3.7 Financial Resources...................................................................15
3.8 Year 2000 Compliance..................................................................15
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3.9 Regulatory Matters....................................................................16
ARTICLE IV
ADDITIONAL AGREEMENTS.....................................................................................16
4.1 Conduct of Business of Adirondack.....................................................16
4.2 Conduct of Business of CNB............................................................18
4.3 Access to Information and Attendance at Board Meetings ...............................18
4.4 Adirondack Stockholders' Meeting......................................................19
4.5 Adirondack Proxy Materials............................................................19
4.6 Reasonable Efforts....................................................................19
4.7 Regulatory Approvals..................................................................19
4.8 Business Relations and Publicity......................................................20
4.9 No Conduct Inconsistent with this Agreement...........................................20
4.10 Confidential Information..............................................................21
4.11 Maintenance of Capital Levels.........................................................22
4.12 Indemnification and Directors' and Officers' Liability Insurance......................22
4.13 Board of Directors of CNB.............................................................22
4.14 Employee Benefit Plans................................................................22
4.15 Adirondack Employment, Severance and Supplemental Agreements..........................25
4.16 Subsidiary Bank Merger................................................................25
4.17 Stockholder Voting Agreements.........................................................25
4.18 Environmental Audits/Remediation......................................................26
ARTICLE V
CONDITIONS PRECEDENT......................................................................................27
5.1. Conditions Precedent to Obligations of CNB and Acquisition............................27
5.2 Conditions Precedent to Obligations of Adirondack.....................................29
ARTICLE VI
GENERAL PROVISIONS........................................................................................31
6.1 Non-Survival of Representations and Warranties and Covenants..........................31
6.2 Further Assurances....................................................................31
6.3 Expenses..............................................................................31
6.4 Successors and Assigns................................................................32
6.5 Termination...........................................................................32
6.6 Notices...............................................................................33
6.7 Governing Law.........................................................................34
6.8 Counterparts..........................................................................34
6.9 Headings..............................................................................34
6.10 Entire Agreement; Amendment...........................................................34
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EXHIBITS (excluded)
Exhibit A Form of Stockholder Voting Agreement
Exhibit B Form of Non Competition Agreement
Exhibit C Form of Non Competition Agreement - ▇▇▇▇▇
Exhibit D Form of Silver, ▇▇▇▇▇▇▇▇ & Taff, L.L.P. Opinion
Exhibit E Form of ▇▇▇▇▇▇ & Blank Co., LPA Opinion
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ADIRONDACK DISCLOSURE SCHEDULES
Schedule 2.1 Organization, Good Standing and Authority.
Schedule 2.3 Capitalization of Adirondack
Schedule 2.6 Undisclosed Liabilities
Schedule 2.7 Loan Portfolio and Delinquent Loans
Schedule 2.9 Conduct of Business in Normal Course
Schedule 2.10 Properties and Assets
Schedule 2.11 Insurance
Schedule 2.12 Litigation and Compliance with Laws
Schedule 2.13 Conflict of Interest Transactions
Schedule 2.14 Significant Contracts
Schedule 2.16 Additional Schedules
Schedule 2.17 Taxes
Schedule 2.18 Employee Compensation and Benefit Plans
Schedule 2.20 Contaminated Properties
Schedule 2.23 Year 2000 Compliance
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AGREEMENT OF MERGER
This Agreement of Merger (this "Agreement") is made and entered into as of
the __ day of January, 1999, by and among CNB BANCORP, INC., a New York
corporation ("CNB"), CNB ACQUISITION CORP., a Delaware corporation and
wholly-owned subsidiary of CNB ("ACQUISITION"), and ADIRONDACK FINANCIAL
SERVICES BANCORP, INC., a Delaware corporation ("Adirondack").
WHEREAS, the respective Boards of Directors of the parties hereto deem it
advisable and in the best interests of the parties hereto and their respective
stockholders to consummate the Merger (as defined in Section 1.1) between
Acquisition and Adirondack, upon the terms and subject to the conditions of this
Agreement;
WHEREAS, concurrently with or as soon as practicable after the Merger, CNB
and Adirondack shall cause Adirondack's wholly-owned depository institution
subsidiary, Gloversville Federal Savings (the "Bank"), to be merged with CNB's
wholly-owned depository institution subsidiary, City National Bank and Trust
Company ("City") (the "Bank Merger"), such that City is the resulting
wholly-owned depository institution subsidiary of CNB (hereinafter sometimes
called the ("Surviving Bank") in the Bank Merger;
WHEREAS, subsequent to the Merger and the Bank Merger, CNB intends to merge
Adirondack with and into CNB with CNB surviving such merger and after such
merger and the Bank Merger, City shall continue to be a wholly-owned subsidiary
of CNB; and
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with this Agreement and the
Merger;
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions herein
contained, the parties hereto covenant and agree as follows:
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ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement and
in accordance with the Delaware General Corporation Law ("DGCL"), at the
Effective Time (as defined in Section 1.4 hereof), Acquisition shall be merged
with and into Adirondack (the "Merger"). The separate corporate existence of
Acquisition shall cease, and Adirondack shall be the surviving corporation (the
"Surviving Corporation") in the Merger, shall be considered the same business
and corporate entity as each merging corporation, and shall have the other
properties, liabilities and attributes as provided by the DGCL. Pursuant to the
Merger:
(a) the Certificate of Incorporation of Adirondack, as in effect
immediately prior to the Effective Time, shall be, from and after the Effective
Time, the Certificate of Incorporation of the Surviving Corporation;
(b) the Bylaws of Acquisition, as in effect immediately prior to the
Effective Time, shall be, from and after the Effective Time, the Bylaws of the
Surviving Corporation;
(c) the directors of Acquisition immediately prior to the Effective
Time shall be, from and after the Effective Time, the directors of the Surviving
Corporation to serve until his or her death, resignation or removal or until his
or her successor is duly elected and qualified;
(d) the officers of Acquisition immediately prior to the Effective
Time shall be, from and after the Effective Time, the officers of the Surviving
Corporation to serve until his or her death, resignation or removal or until his
or her successor is duly elected and qualified;
(e) the 100 shares of common stock, $.01 par value per share, of
Acquisition, issued and outstanding immediately prior to the Effective Time,
shall be converted, without any action by the holder thereof, into 100 shares of
common stock, $0.01 par value per share, of the Surviving Corporation; and
(f) all shares of common stock, $.01 par value per share, of
Adirondack ("Adirondack Shares"), issued and outstanding immediately prior to
the Effective Time, other than Adirondack Shares (i) the holders of which have
validly demanded appraisal of such shares pursuant to Section 262 of the DGCL
("Section 262") and have not voted such shares in favor of the Merger
("Dissenting Shares"), (ii) owned by Adirondack as treasury shares, or (iii)
owned by CNB, Acquisition or by any direct or indirect subsidiary of any of them
(the "CNB Shares") if any, shall be converted by virtue of the Merger,
automatically and without action by the holder thereof, into the right to
receive $15 million in the aggregate, less the amount, if any, by which the
Closing Equity (as defined below) is less than $9,114,959
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(the "Merger Price"). The per share consideration ("Per Share Price") shall be
determined by dividing the Merger Price by the total number of Adirondack Shares
outstanding as of the Effective Time (other than the CNB Shares). Closing Equity
is defined as the stockholders' equity of Adirondack as of the month end prior
to the Closing Date determined in accordance with generally accepted accounting
principles, consistently applied, but (i) shall exclude any unrealized gain and
losses pursuant to SFAS 115, and (ii) shall be reduced by any nonrecurring or
extraordinary net gains (including all cumulative securities gains) in excess of
$5,000 since September 30, 1998 through the Closing Date, provided however that
up to $50,000 in aggregate pre tax gains (net of any losses) realized upon the
disposition of real property held as "other real estate owned" by the Bank shall
be included within the definition of Closing Equity for purposes hereof, and
(iii) shall be increased by the amount of transaction costs, provided however,
that the increase relating to financial advisory fees, investment banking fees,
legal and accounting costs associated with the transactions contemplated by this
Agreement shall be limited to $350,000.
The Merger Price shall be payable by CNB, in cash, without any
interest thereon from the Effective Time until the time of payment, at the
Effective Time or such date thereafter as certificates shall be surrendered in
accordance with Section 1.2 of this Agreement.
(g) The Dissenting Shares shall not be converted into the right to
receive the Merger Price at or after the Effective Time unless and until the
holder of such shares withdraws the demand for appraisal of their shares or
otherwise becomes ineligible to pursue appraisal rights under the DGCL. If
converted into the right to receive the Merger Price or other amount of
consideration in settlement of an appraisal demand or by order of a court of
competent jurisdiction, the Dissenting Shares shall be canceled and shall cease
to exist.
(h) At the Effective Time, all Adirondack Shares referred to in
Section 1.1(f)(i), (ii) and (iii) shall be canceled and shall cease to exist,
and no consideration shall be delivered in exchange therefor.
1.2 Exchange Agent. Prior to the Closing (as defined in Section 1.4), CNB
shall designate an exchange agent reasonably satisfactory to Adirondack (the
"Exchange Agent") to deliver to the stockholders of Adirondack the cash to which
they are entitled pursuant to the Merger. With the approval of Adirondack, not
to be unreasonably withheld, CNB and the Exchange Agent shall prepare and
communicate to the stockholders of Adirondack instructions and procedures for
the stockholders to tender certificates evidencing Adirondack Shares to the
exchange agent in exchange for the Merger Price.
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1.3 Funding of Exchange Agent. CNB shall irrevocably deposit with the
Exchange Agent at the Effective Time, by wire, or other acceptable means
approved by Adirondack, the total amount of funds required to be paid at the
Effective Time pursuant to Section 1.1 hereof for exchanges in accordance with
this Agreement.
1.4 Closing; Effective Time. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place on such date and at such time
and place as the parties may mutually agree, which shall be no later than the
last business day of the calendar month following the month in which all of the
conditions precedent to the Merger set forth in Article V have occurred if such
conditions shall have occurred, unless such date is extended by mutual agreement
of the parties (hereinafter referred to sometimes as the "Closing Date"). The
parties hereto agree to file on the Closing Date a Certificate of Merger, as
contemplated by Section 251(c) of the DGCL. The Merger shall be effective upon
the close of business on the day when the Certificate of Merger has been
accepted for filing by the Delaware Secretary of State (the "Effective Time")
unless the parties otherwise subsequently agree.
1.5 Stock Options. At the Effective Time, options to acquire Adirondack
Shares ("Option") awarded under the Adirondack Financial Services Bancorp, Inc.
1998 Stock Option and Incentive Plan (the "Adirondack Option Plan") will be
converted into options to purchase shares of CNB, $2.50 par value per share,
common stock ("CNB Shares") as hereinafter provided, and the Adirondack Option
Plan shall be assumed. Each holder of an Option awarded under the Adirondack
Option Plan which is outstanding at the Effective Time shall receive from CNB,
as of the Effective Time, whether or not the Option is then exercisable under
the terms of the Adirondack Option Plan an option to purchase that number of CNB
Shares at the ratio of .575 CNB Shares for each option to purchase an Adirondack
Share. The CNB options shall otherwise be subject to the terms of the Adirondack
Option Plan and the grants thereunder (including the requirements for Continuous
Service and vesting as defined by the Adirondack Option Plan and the grants made
thereunder), as applicable. The per share exercise price of such CNB option
shall similarly be adjusted.
ARTICLE II
ADIRONDACK REPRESENTATIONS AND WARRANTIES
This Agreement is entered into by CNB upon the understanding, and
Adirondack represents and warrants that the following Representations and
Warranties, being the only representations or warranties made to CNB by or on
behalf of Adirondack in connection with the transactions contemplated by this
Agreement, are true and correct on the date of this Agreement:
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2.1 Organization, Good Standing and Authority. Adirondack is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to own its property
and assets and to carry on its business as it is now being conducted. Adirondack
is registered as a savings and loan holding company under the Home Owners' Loan
Act ("HOLA"). The Bank is a federal savings association chartered under the laws
of the United States of America and all of its issued and outstanding shares of
common stock are owned of record and beneficially by Adirondack. The Bank is
duly organized, validly existing and in good standing under the laws of the
United States of America and has the corporate power and authority to own its
property and assets and to carry on its business as it is now being conducted.
The Bank is a member in good standing of the Federal Home Loan Bank System. The
deposits of the Bank are insured up to applicable limits by the Federal Deposit
Insurance Corporation ("FDIC") through the Savings Association Insurance Fund.
The Bank does not own or control any voting stock or equity securities of any
other entity, except as set forth in Schedule 2.1.
2.2 Organizational Documents; Minutes and Stock Records. Adirondack has
furnished CNB a copy of its Certificate of Incorporation and bylaws and the
charter and bylaws of the Bank, in each case as amended to the date hereof, and
such other documents relating to the authority of Adirondack and the Bank to
conduct their business as CNB has requested. All such documents are complete and
correct copies of the original documents. The stock register of Adirondack and
minute books of Adirondack and the Bank are complete and correct in all material
respects and accurately reflect all meetings, consents and other actions of the
organizers, incorporators, shareholders and stockholders (as the case may be),
Board of Directors and committees of the Board of Directors of Adirondack and
the Bank and all transactions in the capital stock of Adirondack and the Bank,
occurring since Adirondack's initial organization.
2.3 Capitalization of Adirondack. As of the date of this Agreement, the
authorized capital stock of Adirondack consists of 1,200,000 shares of common
stock, $.01 par value per share, of which 689,055 shares are issued and
outstanding and 100,000 shares of preferred stock, $.01 par value per share, of
which no shares are issued and outstanding. As of the date of this Agreement
there are options for 62,820 Adirondack Shares to be issued under the Adirondack
Option Plan. Set forth on Schedule 2.3 is a list of the option holders and the
exercise price for each Option. The issued and outstanding shares of Adirondack
have been duly and validly authorized and issued and are fully paid and
nonassessable. Except for the aforesaid options to purchase shares of Adirondack
Common Stock (which shall be converted into options to purchase CNB Shares
pursuant to Section 1.5 hereof), and except for the rights of CNB under this
Agreement there are or will be at the Closing no options, agreements, contracts
or other
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rights granted by Adirondack to purchase or acquire from Adirondack any shares
of capital stock of Adirondack, whether now or hereafter authorized or issued.
There are 25,123 Adirondack Shares issued under the Recognition and Retention
Plan (as defined in Section 4.14(d)).
2.4 Financial Statements and Other Reports. Adirondack has furnished CNB
true and complete copies of the following financial statements and reports of
Adirondack and the Bank:
(a) Consolidated Statements of Financial Condition as of September 30,
1998 and 1997, and Consolidated Statements of Income, Consolidated Statements of
Cash Flows and Consolidated Statements of Stockholders' Equity of Adirondack as
of September 30, 1998 and for each of the three years then ended (collectively,
the "Adirondack Financial Statements"); and
(b) Thrift Financial Reports filed by the Bank with the Office of
Thrift Supervision (the "OTS") for the fiscal years ended September 30, 1998 and
1997.
The Adirondack Statements described in clause (a) above are audited
and have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis, and, together with the notes thereto,
present fairly in all material respects the financial position of Adirondack at
the dates shown and the results of operations for the years then ended.
The information contained in the reports described in clauses (b)
above does not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements made therein not misleading.
2.5 SEC Documents. Adirondack has made available to CNB a true and complete
copy of each report, schedule, registration statement and definitive proxy
statement filed by Adirondack with the Securities and Exchange Commission (the
"SEC") (as such documents have since the time of their filing been amended, the
"Adirondack SEC Documents"), which are all the documents that Adirondack was
required to file with the SEC. As of their respective dates of filing with the
SEC, the Adirondack SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
or the Exchange Act, as the case may be, and the rules and regulations of the
SEC thereunder applicable to such Adirondack SEC Documents, and did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading (provided
that certain statements regarding the number of authorized shares of Adirondack
capital stock were incorrect). The financial statements of Adirondack included
in the Adirondack SEC Documents complied as to form, as of their respective
dates of filing with the SEC, in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect
6
thereto, have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the notes) and fairly present in all material respects the
consolidated financial position of Adirondack as of the dates thereof and the
consolidated results of operations, changes in stockholders' equity and cash
flows for the years then ended. All material agreements, contracts and other
documents required to be filed as exhibits to any of the Adirondack SEC
Documents have been so filed.
2.6 Undisclosed Liabilities. As of the date hereof, except for those
liabilities that are fully reflected or reserved against in the Adirondack
Financial Statements, liabilities disclosed in Schedule 2.6 and liabilities
incurred in the ordinary course of business since September 30, 1998, neither
Adirondack nor any of its Subsidiaries has incurred any liability of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and whether due
or to become due) that, either alone or when combined with similar liabilities,
has had, or could reasonably be expected to have, a Material Adverse Effect on
Adirondack. As used in this Agreement, the term "Material Adverse Effect" means,
with respect to Adirondack or CNB, as the case may be, a material effect (i) on
the business, assets, properties, results of operations or financial condition
of such party and its Subsidiaries, taken as a whole, or (ii) on the
consummation of the Merger; provided, however, that Material Adverse Effect
shall not be deemed to include the impact of (a) changes in laws and regulations
or interpretations thereof that are generally applicable to the banking or
savings industries, (b) changes in generally accepted accounting principles or
regulatory accounting requirements that are generally applicable to the banking
or savings industries, (c) expenses incurred in connection with the transactions
contemplated hereby, (d) changes attributable to or resulting from changes in
general economic conditions, including changes in the prevailing level of
interest rates, and (e) any modifications or changes to valuation policies and
practices in connection with the Merger or restructuring charges taken in
connection with the Merger, in each case in accordance with generally accepted
accounting principles. The word "Subsidiary" or "Subsidiaries" when used in this
Agreement with respect to any party means any bank, corporation, partnership,
limited liability company, or other organization, whether incorporated or
unincorporated, which is consolidated with such party for financial reporting
purposes.
2.7 Loan Portfolio and Delinquent Loans.
(a) The loans contained in the loan portfolio of the Bank are
evidenced by promissory notes or other evidences of indebtedness, which, with
all ancillary security documents, except as set forth in Schedule 2.7(a), and
except for matters arising in the ordinary course of business, constitute valid
and binding obligations of the Bank and, to the best of Adirondack's knowledge,
each of the other parties
7
thereto, enforceable in accordance with their terms except as limited by
applicable bankruptcy, insolvency, moratorium or other similar laws affecting
the enforcement of creditors' rights and remedies generally and by applicable
laws or principles of equity that may affect the availability of equitable
remedies. No party liable to the Bank with respect to such loans has notified
the Bank regarding any defense, set-off or counterclaim and to the best of
Adirondack's knowledge none of such loans is currently subject to any defense,
set-off or counterclaim, and all such loans which are secured, as evidenced by
the ancillary security documents, are so secured by valid and enforceable liens.
(b) Except as set forth in Schedule 2.7(b), neither Adirondack nor any
Adirondack Subsidiary is a party to any written or oral loan agreement, note or
borrowing arrangement the unpaid principal balance of which exceeds $25,000 and
as to which the obligator is more than 90 days delinquent in payment of
principal and interest or on which Adirondack or any Adirondack Subsidiary has
stopped accruing interest.
(c) The Bank's allowance for loan losses as of the date hereof has
been calculated in accordance with prudent and customary banking practices and
is adequate to reflect the risk inherent in the Bank's loan portfolio.
2.8 No Adverse Changes. Other than as specifically disclosed in this
Agreement, the Adirondack Financial Statements, the schedules or exhibits
provided for herein, or any other writing delivered to CNB, since September 30,
1998, there has not occurred any event which has made a Material Adverse Effect
or any condition, event, circumstance, fact or occurrence (other than changes
resulting from or attributable to changes in laws, regulations and generally
accepted accounting principles or interpretations) that may reasonably be
expected to result in a Material Adverse Effect on Adirondack.
2.9 Conduct of Business in Normal Course. Except as set forth in Schedule
2.9, the business of Adirondack has, since September 30, 1998, been conducted
only in the ordinary and usual course consistent with past practice.
2.10 Properties and Assets. The assets reflected in the most recent of the
Adirondack Financial Statements or identified in this Agreement or the schedules
or exhibits provided for herein include substantially all of the assets owned by
Adirondack, except for those subsequently disposed of for fair value or
otherwise abandoned or disposed of as worthless in the ordinary course of
business. Adirondack has a valid right to use or a valid leasehold interest in,
all real property used by it in the conduct of its business as it is now being
conducted, subject to no mortgage, pledge, lien, option, conditional sale
agreement, encumbrance, security interest, title exceptions or restrictions or
claim or charge of any kind except for (i) liens for taxes not yet due and
payable, (ii) rights of other parties under leases or other
8
arrangements by which Adirondack uses such real property, and (iii) minor
imperfections of title none of which is substantial in amount, materially
detracts from the value or impairs Adirondack's present use of the property. To
the best of Adirondack's knowledge, all material certificates, licenses, and
permits required for the lawful use and occupancy of such real property by
Adirondack, have been obtained and are in full force and effect. All material
tangible personal property owned by Adirondack, or used by it in its business
and necessary for the operation of its business, is in good working condition,
normal wear and tear excepted.
2.11 Insurance. Adirondack has furnished CNB with a Schedule of Insurance
(Schedule 2.11) that sets forth a complete and correct list of all policies of
insurance in which Adirondack is named as an insured party, which otherwise
relate to or cover any assets, properties, premises, operations and personnel of
Adirondack or which is owned or carried by Adirondack. Adirondack has in full
force and effect the policies of insurance set forth in such Schedule. There has
been no notice given by any party of interest in or to any such policies
claiming any breach or violation of any provisions thereof, disclaiming or
denying any coverage thereof, or canceling or threatening cancellation of any
such insurance contracts. Adirondack's policies of insurance comply with the
requirements of any contracts binding on Adirondack or its Subsidiaries relating
to its assets or properties.
2.12 Litigation and Compliance with Laws. Adirondack and the Bank are each
in substantial compliance with all material applicable federal, state, county
and municipal laws and regulations (a) that regulate or are concerned in any way
with the business of banking or acting as a fiduciary, including those laws and
regulations relating to the investment of funds, the taking of deposits, the
extension of credit, the collection of interest, and the location and operation
of banking facilities or (b) that otherwise relate to or affect the business or
assets of the Bank or the assets owned, used or occupied by it, except for
violations which would not, individually or in the aggregate, have a Material
Adverse Effect on Adirondack. Except as disclosed in Schedule 2.12, (i) there
are no claims, actions, suits, orders or proceedings pending, or, to the
knowledge of Adirondack, threatened against Adirondack or the Bank, or, to the
knowledge of Adirondack, the Bank's institution-affiliated parties (in their
capacities as such), at law or in equity, or before any federal, state,
municipal or other governmental authority, or before any arbitrator or
arbitration panel, whether by contract or otherwise, as to which an adverse
determination is likely and which, if adversely determined, would have a
Material Adverse Effect on Adirondack, and (ii) there is no decree, judgment,
order or supervisory agreement in existence against or restraining Adirondack or
the Bank, or any of the Bank's institution-affiliated parties from taking any
actions of any kind in connection with the business of Adirondack or the Bank,
as the case may be, which has had or is likely to have a Material
9
Adverse Effect on Adirondack. Adirondack has not received from any regulatory
authority any notice of, nor to the knowledge of Adirondack does there exist any
threat of, enforcement actions.
2.13 Conflict of Interest Transactions. Except as reflected in Schedule
2.13, no executive officer or director of Adirondack, or holder of 10% or more
of the common stock of Adirondack, or any member of the immediate family of any
such person has, since September 30, 1998, been involved in any transaction with
Adirondack (excluding transactions in deposit accounts) that involves an amount
in excess of $15,000 or has been involved in any other material transaction with
Adirondack or has had loans or any commitment to loan outstanding from the Bank
involving in excess of $15,000.
2.14 Significant Contracts. Schedule 2.14 sets forth a Schedule of
Significant Contracts, and completely and accurately lists the following
contracts, commitments or arrangements (whether written or oral) under which
Adirondack is obligated on the date hereof:
(a) All consulting arrangements, and contracts for professional and
other services, including those under which Adirondack performs services for
others, that are not terminable by Adirondack without damages or penalty with 30
days notice;
(b) All leases of real estate or personal property, exclusive of
leases of personal property whereunder total annual rentals are, in each
instance, less than $5,000;
(c) All contracts, commitments and agreements for the purchase,
acquisition, development, sale or disposition of real or personal property,
exclusive of conditional sales contracts and security agreements for the
acquisition of personal property whereunder total future payments are, in each
instance, less than $5,000;
(d) All employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA")) under which
Adirondack or the Bank has or may have any obligation ("Adirondack ERISA
Plans"), and all employment contracts, supplemental executive agreements,
severance agreements and all other employee compensation arrangements and all
other bonus, deferred compensation, pension, retirement, salary continuation
agreements, profit sharing, stock option, stock purchase, stock appreciation and
other employee benefit plans, formal or informal, under which Adirondack or the
Bank has or may have any obligation ("Adirondack non-ERISA Plans") and, together
with the Adirondack ERISA Plans, (the "Adirondack Benefit Plans");
(e) All union and other labor contracts;
(f) All agreements, contracts, mortgages, loans, deeds of trust,
leases, commitments, indentures, notes, instruments and other arrangements,
which are with officers or directors of Adirondack, any affiliates of Adirondack
within the meaning of Section 23A of the Federal Reserve Act, or any record
10
or beneficial owner of 10% or more of the common stock of Adirondack, excepting
any ordinary and customary banking relationships that comply with applicable
banking regulations; and
(g) Each other material contract to which Adirondack is a party or
under which it is obligated made other than in the usual or ordinary course of
business and which is not terminable by Adirondack without damages or penalty
with 30 days notice.
2.15 No Defaults. To the best of its knowledge, Adirondack has fulfilled
and taken all action reasonably necessary to date to enable it to fulfill when
due, all material obligations under all contracts, commitments and arrangements
to which it is a party, and there are no material defaults and no events have
occurred that, with the lapse of time or election of any other party, will
become material defaults by it under any such contracts, commitments or
arrangements, except for defaults which either individually or in the aggregate
would not have a Material Adverse Effect on Adirondack.
2.16 Additional Schedules. The following additional schedules are attached
hereto: (a) Schedule 2.16(a), which is a Real Estate Schedule describing all
real estate owned by or in which Adirondack has any interest as of the date of
this Agreement, or which is the subject of pending foreclosure proceedings by
Adirondack, indicating in each case whether such real estate is improved and the
nature of any material encumbrances or defects of title of which Adirondack has
actual knowledge; and (b) Schedule 2.16(b), which is a Securities Schedule of
all investment securities owned by Adirondack as of September 30, 1998. Such
schedules are materially complete and correct.
2.17 Taxes. Except as set forth in Schedule 2.17, no application for
extension of time for filing any tax return or consent to any extension of time
for filing any tax return or consent to any extension of the period of
limitations applicable to the assessment or collection of any tax is in effect
with respect to Adirondack, and all tax returns and information returns required
to be filed by Adirondack with the United States or any state or local
government unit have been, and until the Closing will have been, timely filed,
other than those tax returns the failure of which to file would not have a
Material Adverse Effect on Adirondack. Adirondack is not delinquent in the
payment of any taxes claimed to be due by any taxing authority and adequate
provisions for taxes have been made on its books. None of Adirondack's federal
or state income tax returns is being examined by the appropriate federal or
state agency. Adirondack has not received any notice of any proposed deficiency
for any duty, tax, assessment or governmental charge, and there are no pending
claims with respect thereto. Adirondack is a member of a consolidated group for
purposes of the Internal Revenue Code of 1986, as amended (the "Code").
2.18 Employee Compensation and Benefit Plans. To the best of Adirondack's
knowledge, each of the Adirondack Benefit Plans has been administered, in all
material respects, in compliance with
11
its terms and the requirements of applicable law. Neither Adirondack nor any of
its affiliates, its employees, directors or agents, or any fiduciary, has
engaged in any "Prohibited Transaction" (as defined in Section 406 of ERISA or
4975(c)(1) of the Code) that is not exempt under Section 4975(c)(l) or (d) of
the Code or Section 407 or 408 of ERISA with respect to any Adirondack ERISA
Plan. Except as disclosed on Schedule 2.18, each Adirondack ERISA Plan that is
intended to be qualified under Section 401(a) and related provisions of the Code
is the subject of a favorable determination letter from the Internal Revenue
Service to the effect that it is so qualified under the Code. No matter is
pending relating to any Adirondack Benefit Plan before any court or governmental
agency. Except as set forth in Schedule 2.18, neither Adirondack, nor any of its
affiliates is, or has ever been, obligated to contribute to a multiemployer plan
(as defined in Section 3(37) of ERISA). Except as required pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985, Section 4980B of the
Code and Section 601 of ERISA or as reflected on Schedule 2.18 delivered
pursuant hereto, neither Adirondack, nor any other party on behalf of
Adirondack, has any obligation or commitment to provide health, disability, or
life insurance or similar welfare benefits to former employees or members of
their families.
2.19 Authorization of Transactions. The execution, delivery and performance
of this Agreement by Adirondack have been duly authorized by the Board of
Directors of Adirondack. Subject to approval by the stockholders of Adirondack
as contemplated by Section 5.1(d) hereof, Adirondack has full corporate power to
execute, deliver and perform this Agreement and to consummate the transactions
herein contemplated, and such execution, delivery and performance does not
violate any provisions of the Certificate of Incorporation or bylaws of
Adirondack or the charter or bylaws of the Bank or any orders, agreements or
directives to which Adirondack or the Bank is a party or is otherwise bound.
Except for the regulatory approvals referred to in Section 5.1(c) or approval of
stockholders referred to in Section 5.1(d) hereof, no consent of any regulatory
authority or other person is required to be obtained by Adirondack in order to
permit Adirondack to perform its obligations hereunder or to permit consummation
of the Merger.
2.20 Contaminated Properties. As of the date hereof:
(a) Except as disclosed in Schedule 2.20, none of the properties owned
or leased by Adirondack or, to the knowledge of Adirondack, held by Adirondack
as a fiduciary for the account of others, or which collateralize any outstanding
material loan or line of credit, whether or not such loan or line of credit is
or has been in default, is contaminated with any wastes or hazardous substances,
as defined below, except in compliance with Environmental Laws, as defined in
Section 4.18.
(b) Adirondack neither is nor may it be deemed to be an "owner or
operator" of a "facility" or "vessel" which owns, possesses, transports,
generates, or disposes of a "hazardous
12
substance," as those terms are defined in Section 9601 of the Comprehensive
Environmental Response Compensation and Liability Act of 1980 and which would
subject it to any liability under such Act.
2.21 Change in Business Relationships. Except as described in writing to
CNB, Adirondack has no actual notice, whether on account of this Agreement or
otherwise, that any customer, agent, representative or supplier intends to
discontinue, diminish, or change its relationships with Adirondack, the effect
of which would have a Material Adverse Effect on Adirondack.
2.22 Broker's and Finder's Fees. Adirondack has not incurred any obligation
or liability, contingent or otherwise, for any brokerage commission or finder's
fee or like compensation in respect of the transactions contemplated hereunder
except for fees and expenses that may be owed Capital Resources Group, Inc. for
investment banking services, which fees (including any expenses and fees
previous accrued or paid in connection with the transactions contemplated by
this Agreement) shall not exceed $200,000.
2.23 Year 2000 Compliance. The Bank is in compliance in all material
respects with the Year 2000 guidelines of the Federal Financial Institutions
Examination Counsel as set forth in its Interagency Statement dated May 5, 1997.
Schedule 2.23 lists the documents the Bank has provided to CNB that relate to
the Bank's compliance with the Interagency Statement, and all such documents are
true, correct and complete in all material respects as of the date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
CONCERNING CNB AND ACQUISITION
This Agreement is entered into by Adirondack upon the understanding, and
CNB and Acquisition represent and warrant, that the following Representations
and Warranties, being the only representations or warranties made to Adirondack
by or on behalf of CNB and Acquisition in connection with the transactions
contemplated by this Agreement, are true and correct on the date of this
Agreement:
3.1 Corporate Existence. CNB is a corporation duly organized, validly
existing, and in good standing under the laws of the State of New York and has
the corporate power and authority to own its property and assets and to carry on
its business as now being conducted. CNB is a bank holding company registered
under the Federal Bank Holding Company Act of 1956, as amended and City is a
national banking association organized under the laws of the United States.
Acquisition is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and CNB owns all of the issued
and outstanding voting stock of Acquisition.
13
3.2 Financial Statements. CNB has furnished Adirondack true and complete
copies of its Consolidated Balance Sheet, Consolidated Statements of Income,
Consolidated Statements of Cash Flows and Consolidated Statements of
Stockholders' Equity as of and for the years ended December 31, 1997, 1996 and
1995 together with the interim financial statements as of and for the nine
months ended September 30, 1998 (collectively, "CNB Financial Statements"). The
CNB Financial Statements as of and for the three years ended December 31, 1997
are audited, and together with the unaudited financial statements as of and for
the nine months ended September 30, 1998, have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis, and,
together with the notes thereto, present fairly the financial position of CNB at
the dates shown and the results of operations for the periods then ended.
3.3 SEC Documents. CNB has made available to Adirondack a true and complete
copy of each report, schedule, registration statement and definitive proxy
statement filed by CNB with the Securities and Exchange Commission (the "SEC")
within the two year period prior the date hereof (as such documents have since
the time of their filing been amended, the "CNB SEC Documents"), which are all
the documents that CNB was required to file with the SEC within such period. As
of their respective dates of filing with the SEC, the CNB SEC Documents complied
in all material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC thereunder applicable to such CNB SEC
Documents, and did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of CNB included in the CNB SEC
Documents complied as to form, as of their respective dates of filing with the
SEC, in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated in
the notes) and fairly present in all material respects the consolidated
financial position of CNB as of the dates thereof and the consolidated results
of operations, changes in stockholders' equity and cash flows for the years then
ended. All material agreements, contracts and other documents required to be
filed as exhibits to any of the CNB SEC Documents have been so filed.
3.4 Undisclosed Liabilities. As of the date hereof, except for those
liabilities that are fully reflected or reserved against in the CNB Financial
Statements and liabilities incurred in the ordinary course of business since
September 30, 1998, neither CNB nor any of its Subsidiaries has incurred any
14
liability of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether due or to become due) that, either alone or when combined
with similar liabilities, has had, or could reasonably be expected to have, a
Material Adverse Effect on CNB.
3.5 No Adverse Changes. Other than as specifically disclosed in this
Agreement or the CNB Financial Statements there has not occurred any event which
has made a Material Adverse Effect or any condition, event, circumstance, fact
or occurrence (other than changes resulting from or attributable to changes in
laws, regulations and generally accepted accounting principles or
interpretations) that may reasonably be expected to result in a Material Adverse
Effect on CNB.
3.6 Authorization of Transactions. The execution, delivery and performance
of this Agreement by CNB have been duly authorized by the Board of Directors of
CNB, this being the only authorization required under CNB's Certificate of
Incorporation, its bylaws, or governing statutes. CNB has full corporate power
to execute, deliver and perform this Agreement and to consummate the
transactions herein contemplated, and such execution, delivery and performance
does not violate any provisions of the Certificate of Incorporation of CNB, its
bylaws, or any orders, agreements or directives to which CNB is a party or is
otherwise bound. The execution, delivery and performance of this Agreement by
Acquisition have been duly authorized by the Board of Directors of Acquisition,
this being the only corporate authorization required under Acquisition's
Certificate of Incorporation, its bylaws, or governing statutes. CNB, in its
capacity as the sole stockholder of Acquisition, has approved this Agreement as
required by the DGCL. Except for the regulatory approvals referred to in Section
5.1(c) hereof, no consent of any regulatory authority or other person is
required to be obtained by CNB in order to permit CNB to perform its obligations
hereunder or to permit consummation of the Merger.
3.7 Financial Resources. CNB has the financial wherewithal, whether by
using its internal funds, external financing, or both, to perform its
obligations under this Agreement. CNB and its Subsidiaries are, and will be
following the Merger, in compliance with all applicable capital, debt and
financial and non-financial criteria of state and federal banking agencies
having jurisdiction over them. CNB has no knowledge of any facts or conditions
applicable to it or its Subsidiaries that would reasonably lead CNB to believe
the Merger will not be approved by the Board of Governors of the Federal Reserve
System (the "Federal Reserve") and any other state or federal banking agencies
having jurisdiction over the transactions contemplated hereby or that such
approvals would be delayed.
3.8 Year 2000 Compliance. CNB and City are in compliance in all material
respects with the Year 2000 guidelines of the Federal Financial Institutions
Examination Counsel as set forth in its Interagency Statement dated May 5, 1997.
15
3.9 Regulatory Matters. Neither CNB nor City is the subject of, nor a party
to, any regulatory action or agreement such as letter agreements, memorandum of
understanding, cease and desist orders or like agreements. City has received a
Satisfactory or better CRA rating by the Office of the Comptroller of the
Currency.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Conduct of Business of Adirondack. Between the date hereof and the
Closing Date, except as contemplated or permitted by this Agreement, Adirondack
shall conduct its business and shall cause the Bank to conduct its business in
the usual and ordinary course consistent in all material respects with prudent
banking practices. Without limiting the foregoing, without the prior written
consent of CNB, which consent shall not be unreasonably withheld (provided that
CNB shall respond to a request for a consent within five business days):
(a) Adirondack shall, and shall cause the Bank to, make no changes in
their respective charter or bylaws, the number of issued and outstanding shares
(other than the issuance of up to 1,000 shares that may be issued under
Adirondack's 401(k) Plan and the issuance of shares under the Adirondack Option
Plan), or the number of options except for changes resulting from the exercise
of existing Options in accordance with their terms;
(b) Adirondack shall, and shall cause the Bank to, not increase the
compensation of their directors, officers or employees.
(c) Adirondack shall, and shall cause the Bank to, make no loan for
$150,000 or more (including aggregation of loans to any one customer or related
entities) except for loans currently committed to be made pursuant to written
commitment letters, and Adirondack shall, and shall cause the Bank to, make no
other loans, or renewals or restructuring of loans except in the ordinary course
of business and consistent in all material respects with prudent banking
practices and policies and applicable rules and regulations of federal or state
banking agencies ("Regulatory Authorities") with respect to amount, terms,
security and quality of the borrower's credit;
(d) Adirondack shall not declare or pay any stock dividend, cash
dividend or other distribution without the prior written consent of CNB;
(e) Adirondack shall, and shall cause the Bank to, use their best
efforts to maintain their present insurance coverage in respect of their
respective properties and businesses;
16
(f) Adirondack shall, and shall cause the Bank to, make no significant
changes, outside the ordinary course of business, in the general nature of the
business conducted by Adirondack and the Bank, including but not limited to the
investment or use of their assets, the liabilities they incur, or the facilities
they operate;
(g) Adirondack shall, and shall cause the Bank to, not enter into any
employment, consulting or other similar agreements (other than consulting or
employment agreements pursuant to Section 4.1(n)) that isnot terminable on 30
days' notice or less without penalty;
(h) Adirondack shall, and shall cause the Bank to, not take any action
that would result in a termination, partial termination, curtailment,
discontinuance or merger into another plan or trust of any Adirondack Benefit
Plan, except as provided in this Agreement;
(i) Adirondack shall, and shall cause the Bank to, timely file or
extend all required tax returns with all applicable taxing authorities and will
not make any application for or consent to any extension of time for filing any
tax return or any extension of the period of limitations applicable thereto;
(j) Except as already reflected in the Financial Statements,
Adirondack shall, and shall cause the Bank to, not make any expenditure for
fixed assets in excess of $10,000 for any single item, or $25,000 in the
aggregate, or enter into any lease of fixed assets;
(k) Adirondack shall, and shall cause the Bank to, not incur any
liabilities or obligations, make any commitments or disbursements, acquire or
dispose of any property or asset, make any contract or agreement, or engage in
any transaction, except in the ordinary course consistent in all material
respects with prudent banking practices;
(l) Adirondack shall, and shall cause the Bank to, only purchase or
invest in instruments permitted by the Bank's investment policy, including, but
not limited to, obligations of the government of the United States, agencies of
the United States or mortgage-backed securities, and to not execute individual
investment transactions of greater than $2,000,000 in principal amount;
(m) Adirondack shall, and shall cause the Bank to, make no changes of
a material nature in their accounting procedures, methods, policies or practices
or the manner in which they conduct their businesses and maintain their records,
except as may be required by applicable law or regulation;
(n) Subject to the approval of the selection of and the terms of the
engagement thereof by CNB, Adirondack and the Bank shall, as soon as reasonably
possible following execution of this Agreement, engage consultants or employees
to assist in the management of Adirondack and the Bank pending the Closing Date,
provided that the terms of the engagements shall provide that agreement to
17
provide such services are cancelable upon the expiration of one year and shall
provide for compensation not to exceed $60,000 per annum plus usual and
customary business expense reimbursement; and
(o) Subject to and only upon the receipt of the prior written approval
of CNB, Adirondack may propose to its stockholders, in connection with the
approval of the Agreement as required by Section 4.4 hereof, that the Adirondack
Option Plan and Recognition and Retention Plan be amended to provide for the
acceleration of the vesting of all outstanding options granted under the
Adirondack Option Plan and awards of Adirondack Shares made under Recognition
and Retention Plan upon the Closing.
4.2 Conduct of Business of CNB. Between the date hereof and the Closing
Date, the business of CNB shall be conducted (and CNB shall cause the business
of its Subsidiaries to be conducted) in all material respects consistent with
prudent banking.
4.3 Access to Information and Attendance at Board Meetings. Pending the
Closing, Adirondack shall (a) give CNB and its representatives full access to
further information (including, but not limited to the Bank's loan portfolio,
records, files, correspondence, tax work papers and audit work papers) with
respect to Adirondack (other than records, files, correspondence and findings of
the Board of Directors related to the possible sale of Adirondack), (b) supply
to CNB and its representatives, as soon as they become available, all reports on
loans and investments of Adirondack, month-end prepared balance sheets and
profit and loss statements, internal and external audit reports and such other
reports of Adirondack that CNB may reasonably request, and (c) to the extent
permissible under law, transmit to CNB copies of all notices, minutes, consents,
Board packages and other materials that Adirondack and the Bank provide to their
respective directors, other than materials relating to any possible sale of
Adirondack or the Bank. CNB shall use such information solely for the purpose of
conducting business, legal and financial reviews of Adirondack and for such
other purposes as may be related to this Agreement. Pending the Closing,
representatives of CNB shall, during normal business hours and on reasonable
advance notice to Adirondack, be given full access to Adirondack's records and
business activities and afforded the opportunity to observe its business
activities and consult with its directors and officers regarding the same on an
ongoing basis (without limiting the foregoing, to verify compliance by
Adirondack with all terms of this Agreement), provided that the foregoing do not
interfere with the business operations of Adirondack. Furthermore, pending the
Closing, a director or senior officer of CNB may attend meetings of the Boards
of Directors of Adirondack and the Bank, and Adirondack and the Bank shall give
CNB reasonable advance notice of the date, place and time of such meetings;
provided, however, that Adirondack and the Bank shall have the right to exclude
the CNB representative from any
18
meeting or any portion of a meeting during which the sale of Adirondack or the
Bank is expected to be discussed. Notwithstanding this Section 4.3 and other
than as set forth in this Agreement, the management of Adirondack and the
authority to establish and implement its business policies shall reside solely
in Adirondack's officers and Board of Directors.
4.4 Adirondack Stockholders' Meeting. As soon as practicable following the
execution and delivery of this Agreement by the parties hereto, Adirondack shall
call and hold a meeting of its stockholders (the "Stockholders Meeting") to act
upon and consider this Agreement and the transactions contemplated herein in
accordance with its Certificate of Incorporation, its bylaws, and the applicable
statutes of the State of Delaware. Adirondack, acting through its Board of
Directors, shall recommend to its stockholders, consistent with its fiduciary
duties, approval of this Agreement and the Merger.
4.5 Adirondack Proxy Materials. As soon as practicable following the
execution and delivery of this Agreement by the parties hereto, Adirondack shall
prepare and mail to the holders of the Adirondack Shares appropriate proxy
materials (the "Proxy Materials"), including a notice of the meeting, proxy
statement and form of proxy that comply with applicable laws and regulations.
CNB shall furnish to Adirondack all information concerning CNB required for
inclusion in the Proxy Materials, and all such information shall be true and
correct in all material respects without omission of any material fact required
to be stated to make the information stated therein not misleading. In the Proxy
Materials, Adirondack shall present this Agreement for adoption by the holders
of the Adirondack Shares at the Stockholders Meeting. Before the Proxy Materials
are filed with the SEC and again before the materials are mailed to the holders
of the Adirondack Shares, Adirondack's legal counsel shall deliver a copy of
such materials to CNB's legal counsel, and CNB's legal counsel shall have a
reasonable amount of time to review such materials before filing or mailing, as
the case may be.
4.6 Reasonable Efforts. The parties to this Agreement agree to use their
reasonable efforts in good faith to satisfy the various conditions to Closing
and to consummate the Merger as soon as practicable. None of the parties hereto
shall intentionally take or intentionally permit to be taken any action that
would be in breach of the terms or provisions of this Agreement or that would
cause any of the representations contained herein to be or become untrue.
4.7 Regulatory Approvals. Within 45 calendar days after the date of this
Agreement, CNB shall make all appropriate initial filings necessary to obtain
the regulatory approvals referred to in Section 5.1(c) hereof, and Adirondack
shall cooperate fully in the process of obtaining all such approvals. CNB shall
provide Adirondack and its legal counsel with copies of all applications when
filed and all correspondence, notices and approvals when received.
19
4.8 Business Relations and Publicity. Adirondack shall use reasonable
efforts to preserve its reputation and relationships with suppliers, clients,
depositors, customers, employees and others having business relations with
Adirondack. No press release or other communication in connection with or
relating to this Agreement or the transactions contemplated hereby (other than
communications with appropriate regulatory authorities) shall be issued or made
without the prior mutual consent of the parties hereto; provided, however, that
either party may release information in connection with or relating to this
Agreement or the transactions contemplated hereby if the party releasing the
information believes such release is required by law.
4.9 No Conduct Inconsistent with this Agreement.
(a) Adirondack agrees that it will not, during the term of this
Agreement, solicit, encourage or authorize or take any other action to
facilitate any inquiries or proposals that constitute, or may be reasonably
expected to lead to, any Transaction Proposal, as defined below, or discuss or
negotiate with any Person, as defined below, in furtherance of such inquiries or
to obtain a Transaction Proposal, or agree to or endorse any Transaction
Proposal, or authorize or permit any of its officers, directors, or employees or
any investment banker, financial advisor, attorney, accountant, or other
representative retained by it or any of its Subsidiaries to take any such
action; provided, however, that the Board of Directors of Adirondack may, in
response to an unsolicited written proposal from a third party regarding a
Superior Proposal, as defined below, furnish or cause to be furnished
information to and engage in discussions with such third party, but only if the
Board of Directors of Adirondack shall determine in good faith and based upon an
opinion of its outside counsel that failure to take such action could be
reasonably expected to result in a breach of the fiduciary duties of such Board
under applicable law. In the event that the Board furnishes information to or
engages in such discussions with any Person, Adirondack shall promptly notify
CNB orally and in writing of all of the relevant details relating to all
inquiries and proposals that it may receive relating to any of such matters and
provide CNB with copies of all materials delivered to such Person.
(b) As used herein, "Superior Proposal" means a bona fide, written and
unsolicited proposal or offer made by any Person with respect to a Transaction
Proposal, as defined below, on terms that the Board of Directors of Adirondack
determines in good faith, and in the exercise of its reasonable judgment, based
on the advice of independent financial advisors and legal counsel, to be more
favorable to Adirondack and its stockholders than the transactions contemplated
by this Agreement.
(c) "Transaction Proposal" as used in this Agreement means (in each
case other than transactions contemplated hereby) (A) a bona fide tender offer
or exchange offer for 25% or more of the
20
then outstanding Adirondack Shares that shall have been publicly proposed to be
made or shall have been commenced or made by any Person; (B) a merger,
consolidation, or other business combination with Adirondack, or with any of the
Subsidiaries of Adirondack, which shall have been effected by any Person, or an
agreement relating to any such transaction which shall have been entered into;
(C) any sale, lease, exchange, mortgage, pledge, transfer, or other disposition
(whether in one transaction or a series of related transactions) involving a
substantial part of Adirondack's consolidated assets (including any stock of the
Bank), or all or a substantial part of the assets of any of the Subsidiaries of
Adirondack, to any Person which shall have been effected, or any agreement
relating to such transaction which shall have been entered into; (D) the
acquisition after the date hereof by any Person (other than CNB or any of the
Subsidiaries of Adirondack in a fiduciary capacity for third parties, none of
whom beneficially owns 10% or more of the outstanding Adirondack Shares) of
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act,
which will be deemed for purposes hereof to provide that a Person beneficially
owns any Adirondack Shares that may be acquired by such person pursuant to any
right, option, warrant, or other agreement, regardless of when such acquisition
would be permitted by the terms thereof) of 25% or more of the outstanding
Adirondack Shares (including Adirondack Shares currently beneficially owned by
such Person); (E) any reclassification of securities or recapitalization of
Adirondack or other transaction that has the effect, directly or indirectly, of
increasing the proportionate share of any class of equity security (including
securities convertible into equity securities) of Adirondack that is owned by
any Person which shall have been effected, or any agreement relating to such
transaction which shall have been entered into or plan with respect thereto
adopted; (F) any transaction having an effect similar to those described in (A)
through (E) above; or (G) a public announcement with respect to a proposal,
plan, or intention by Adirondack or another Person to effect any of the
foregoing transactions (which may include publication of notice of filing or any
similar notice under applicable law).
(d) The term "Person" for purposes of this Section 4.9 shall mean any
corporation (excluding CNB or any of its Subsidiaries), partnership, person or
other entity or group (as defined in Section 13(d)(3) of the Exchange Act).
4.10 Confidential Information. Adirondack, CNB and Acquisition shall, and
shall direct all of their agents, employees and advisors to keep in strict
confidence any information concerning the Merger and the properties, business
and assets of the other party that may have been obtained in the course of
negotiations or examination of the affairs of the other party either prior or
subsequent to the execution of this Agreement (other than such information as
shall be in the public domain or otherwise ascertainable
21
from public or sources) and shall, in the event the transactions contemplated in
this Agreement are not consummated, return all documents to the other party
containing such information.
4.11 Maintenance of Capital Levels. CNB and its financial institution
Subsidiary or Subsidiaries shall maintain at least the minimum capital levels as
required by Regulatory Authorities.
4.12 Indemnification and Directors' and Officers' Liability Insurance. CNB
agrees that from and after the Effective Time it shall indemnify and hold
harmless each present and former director and officer of Adirondack and the Bank
(the "Indemnified Parties") against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any threatened or actual
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the full extent permitted under applicable law. CNB
shall cause to be maintained in effect for three years from the Effective Time
for the benefit of Adirondack's current directors' and officers' either CNB's
current directors' and officers' liability insurance policy or a "tail" policy
on Adirondack's current directors' and officers' liability insurance policy, in
both instances if such insurance is obtainable (provided that CNB may substitute
therefor, in either case, policies of equivalent coverage so long as no lapse in
coverage occurs as a result of substitution with respect to matters occurring
prior to the Effective Time); and provided further that CNB shall not be
obligated to expend for such insurance an amount greater than 150 percent of the
cost of the most recent policy of one year, and in the event it shall cost more
than such amount for such policy, CNB shall be obligated to purchase only such
insurance as may be purchased with such cost.
4.13 Board of Directors of CNB. At the Effective Time, CNB shall cause two
persons to be added to the Board of Directors of CNB, who shall also be added to
the Board of Directors of City. In addition, any person serving as a director of
Adirondack or the Bank as of the Effective Time shall be entitled to serve as
either a director of: (i) CNB or City or (ii) as an advisory director of CNB or
City until October 9, 2003. The duties and compensation of any such advisory
director shall be determined from time to time at the sole discretion of CNB or
City as the case may be.
4.14 Employee Benefit Plans.
(a) At and after the Effective Time employees of Adirondack and the
Bank who are employed by CNB or its Subsidiaries and affiliates, shall be
eligible to participate in the employee welfare and other similar fringe
benefits of CNB or its subsidiaries, on the same terms and conditions to those
that CNB and its Subsidiaries may make available to similarly situated officers
and employees, including,
22
without limitation, any health, life, long-term disability, severance, vacation
or paid time off programs (the "CNB Welfare Plans") without any pre existing
condition, and with credit for co-payments and deductibles during the comparable
plan year. The period of employment and compensation of each employee of
Adirondack and its Subsidiaries with Adirondack and its Subsidiaries shall be
counted for all purposes (except for purposes of benefit accrual) under the CNB
Welfare Plans, including, without limitation, for purposes of service credit and
eligibility.
(b) As of the Effective Time or as soon as practicable thereafter, the
loan between Adirondack and The Gloversville Federal Savings Employee Stock
Ownership Plan (the "ESOP") shall be repaid in full with the cash consideration
received from CNB for the unallocated Adirondack Shares held in the ESOP in the
amount equal to the Merger Price multiplied by the number of unallocated
Adirondack Shares held by the ESOP, and any unallocated portion of the
consideration remaining after such repayment shall be allocated to the ESOP
accounts of the employees of Adirondack and its Subsidiaries who are
participants and beneficiaries (such individuals hereinafter referred to as the
"ESOP Participants") as earnings and not as "annual additions," in accordance
with the terms of the ESOP as amended. As of the day before the Effective Time
the ESOP shall be terminated. Following the receipt of a favorable determination
letter from the Internal Revenue Service ("IRS") as to the tax qualified status
of the ESOP upon its termination under Section 401(a) and 4975(e)(7) of the Code
(the "Final Determination Letter"), distributions of the account balances under
the ESOP shall be made to the ESOP Participants. From and after the date of this
Agreement, in anticipation of such termination and distribution, CNB, Adirondack
and their respective representatives prior to the Effective Time, and CNB and
its representatives after the Effective Time, shall use their best efforts to
apply for and obtain a favorable Final Determination Letter from the IRS. In the
event that CNB, Adirondack and their respective representatives, prior to the
Effective Time, and CNB and its representatives after the Effective Time,
reasonably determine that the ESOP cannot obtain a favorable Final Determination
Letter, or that the amounts held therein cannot be so applied, allocated or
distributed without causing the ESOP to lose its qualified status, Adirondack
prior to the Effective Time and CNB after the Effective Time shall take such
action as they may reasonably determine with respect to the distribution of
account balances to the ESOP Participants, provided that the assets of the ESOP
shall be held or paid for the benefit of the ESOP Participants and provided
further that in no event shall any portion of the amounts held in the ESOP
revert, directly or indirectly, to Adirondack or any affiliate thereof, or to
CNB or any affiliate thereof. All ESOP Participants shall fully vest and have a
nonforfeitable interest in their accounts under the ESOP determined as of the
termination date.
23
(c) At the Effective Time, the Gloversville Federal Savings Profit
Sharing Plan (the "Bank PSP") shall be adopted by CNB and continued in effect.
Thereafter, CNB may elect to terminate the Bank PSP or merge it with a
tax-qualified plan maintained by CNB. Employees of Adirondack and its
Subsidiaries shall receive credit for eligibility and vesting purposes for
periods of employment with Adirondack or its Subsidiaries. At the Effective
Time, all participants in the Bank PSP shall fully vest and have a
nonforfeitable interest in their accounts under the Bank PSP determined as of
the Effective Time. If the Bank PSP is terminated, all participants shall be
offered the option of a lump-sum cash payment or, with CNB's consent, the option
of rolling or transferring such amount to the CNB plan, subject in all cases to
applicable provisions of the Code.
(d) CNB acknowledges and agrees that the Adirondack Option Plan and
all awards granted under the Adirondack Financial Services Bancorp, Inc.
Recognition and Retention Plan (the "Recognition and Retention Plan") shall be
continued after the Effective Time until at least October 9, 2003, provided
however that Adirondack and CNB acknowledge and agree that any person holding an
unvested option or award under the terms of the Adirondack Option Plan or the
Recognition and Retention Plan and who is not an employee, director or advisory
director of CNB or City after the Closing, shall have terminated Continuous
Service as defined by such plans. Shares of Adirondack held in the Recognition
and Retention Plan shall be converted to cash in accordance with the terms of
paragraph 1.1 hereof, and thereafter the cash balance shall accrue interest
until distributed in accordance with the terms of such plans and the grants
thereunder at the published federal funds rate. The Adirondack Option Plan and
the Recognition and Retention Plan shall be frozen and no new options, or in the
case of the Recognition and Retention Plan, shares, shall be awarded pursuant to
such plans. After the Effective Time, participants holding options under the
Adirondack Option Plan and participants having an interest in the cash held by
the Recognition and Retention Plan shall, subject to all of the terms and
conditions of such plans and the grants and agreements thereunder, including the
requirement of continued service, continue to vest in the respective options and
the cash balances. No person shall have any right of continued employment at or
after the Effective Time with CNB or any of its then affiliated companies, by
reason of this subparagraph.
(e) At or prior to the Effective Time, CNB shall take all corporate
action necessary to reserve for issuance a sufficient number of shares of CNB
Common Stock for delivery upon exercise of options to purchase Adirondack Common
Stock assumed by it in accordance with Section 1.5 hereof. Within 60 days
following the Effective Time, CNB shall file a registration statement on Form
S-3 or Form S-8, as the case may be (or any successor or other appropriate
forms), or another appropriate form with
24
respect to the shares of CNB Common Stock subject to such options and shall use
its best efforts to maintain the effectiveness of such registration statement
(and maintain the current status of the prospectus or prospectuses contained
therein) for so long as such options remain outstanding.
4.15 Adirondack Employment, Severance and Supplemental Agreements. CNB
agrees to perform and satisfy the terms of (a) the Change of Control Agreement
by and among Adirondack, the Bank and ▇▇▇▇▇ ▇. ▇▇▇▇▇ (the "▇▇▇▇▇ Agreement")
(CNB acknowledges hereby that the Merger will constitute an Involuntary
Termination in connection with a Change in Control for purposes of the ▇▇▇▇▇
Agreement), and (b) the Gloversville Federal Employee Severance Compensation
Plan (the "Severance Plan"), and (c) to pay such additional severance pay to
terminated employees of Adirondack or the Bank as may be determined by the
parties, but in no event shall the additional severance amount exceed one year
of compensation for any individual so terminated.
4.16 Subsidiary Bank Merger. Adirondack and CNB agree to cooperate and to
take such steps as may be necessary to obtain all requisite regulatory,
corporate and other approvals for the Bank Merger, subject to consummation of
the Merger, to be effective concurrently with the Merger or as soon as
practicable thereafter. The Surviving Bank shall be City, and shall continue to
be known as "City National Bank and Trust Company." In furtherance of such
agreement, each of Adirondack and CNB agrees, as applicable:
(a) to cause the board of directors of the Bank and City,
respectively, to approve the Bank Merger and to submit it to the sole
stockholder of each bank for its approval;
(b) to vote the shares of stock of the Bank and City owned by them in
favor of the Bank Merger; and
(c) to take, or cause to be taken, all steps necessary to consummate
the Bank Merger concurrently with or as soon as is practicable after
consummation of the Merger.
The Bank Merger shall be accomplished pursuant to a merger agreement
containing such terms and conditions as are ordinary and customary for
affiliated bank merger transactions of such type. Immediately after the
Effective Time, the officers of the Surviving Corporation shall take, or cause
to be taken, whatever additional steps may be necessary to effectuate the Bank
Merger.
4.17 Stockholder Voting Agreements. Contemporaneously with the execution of
this Agreement, Adirondack shall obtain and deliver to CNB a Stockholder Voting
Agreement, in the form attached hereto as Exhibit A, executed by each
stockholder of Adirondack who is a director of Adirondack or the Bank.
25
4.18 Environmental Audits/Remediation
(a) CNB shall have the right to engage an environmental consulting
engineering firm reasonably acceptable to Adirondack, to perform environmental
site assessments of the owned or leased real properties of Adirondack or its
Subsidiaries (but excluding property held in trust or in a fiduciary capacity
and space in retail or similar establishments leased by Adirondack or any of its
Subsidiaries for automatic teller machines or bank branch facilities where the
space leased comprises less than 30% of the total space leased to all tenants of
such property) (collectively, the "Audited Properties"), which shall satisfy the
American Society of Testing and Materials "Standard Practice for Environmental
Site Assessments: Phase I Environmental Site Assessment Process," except that
such assessment shall also include a review of compliance with Environmental
Laws, as defined below (the "Environmental Audits"), and render reports of the
Environmental Audits (the "Environmental Reports) to determine whether there are
any indications or evidence that (i) any toxic substance has been stored,
deposited, treated, recycled, used or accidentally or intentionally disposed of,
discharged, spilled, released, dumped, emitted or otherwise placed on, under or
at, or used in any construction on, any such Audited Property, (ii) any such
Audited Property is contaminated by or contains any toxic substance or (iii) any
violations of Environmental Laws have occurred or are likely to occur on any
Audited Property. The scope of the Environmental Audits may also include any
testing or sampling of materials to determine, to CNB's reasonable satisfaction,
whether any clean up, removal, remedial action or other response ("Remediation
Action") is required to bring the Audited Properties into material compliance
with Environmental Laws or to eliminate any condition that could result in a
material liability as a result of the ownership, lease, operation or use of any
Audited Property, and the estimated cost of such Remediation Action (the
"Remediation Costs"). All Environmental Audits shall initially be provided to
CNB and Adirondack in draft form. CNB shall require that the environmental
consulting firm not disclose (except as required by law) any information in the
Environmental Audits to anyone other than CNB and Adirondack. CNB will cause the
Phase I Environmental Audits to be completed within 45 days of the date hereof.
Within 15 days of the receipt of the Phase I Environmental Audit by CNB, CNB
shall determine whether, in its reasonable judgment, a Phase II Environmental
Audit is necessary and shall notify Adirondack of its determination in this
regard. If CNB desires to cause a Phase II Environmental Audit to be conducted,
CNB shall use its reasonable efforts to cause an environmental consulting
engineering firm to commence such Phase II Environmental Audit within such 15
day period; provided, that prior to commencing such Phase II Environmental
Audit, CNB's environmental consultant shall consult with an environmental
consultant selected by Adirondack (at its sole expense) on the monitoring and
testing methodologies,
26
including conducting joint testing or taking separate samples for processing at
different labs. Such Phase II Environmental Audit shall be completed not later
than 45 days after the date of such firm's engagement. Adirondack agrees to
cooperate with CNB's environmental consultant. Except for the expense of its own
environmental consultant if it shall select one as provided for herein, CNB
shall be solely responsible for all costs associated with the Environmental
Audits and Environmental Reports. As used in this Agreement, the term
"Environmental Laws" shall mean all applicable federal, state, and local
environmental laws relating to pollution or protection of the environment
including, without limitation, the Solid Waste Disposal Act, the Hazardous
Materials Transportation Act, the Clean Water Act, the Clean Air Act, the
Resource Conservation and Recovery Act, the Toxic Substances Control Act, the
Occupational Safety and Health Act and the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, their state and local laws,
their state and local law counterparts and all rules and regulations promulgated
thereunder.
(b) In the event that the Environmental Audits disclose that any
remediation at any of the Audited Properties is required under Environmental
Laws, the after-tax costs (based on the highest federal marginal tax rate) of
such remediation up to $ 50,000 shall be paid by CNB. Such after-tax costs so
required which exceed $50,000 shall be the responsibility of Adirondack and
shall be deducted from the Merger Price; provided that in the event such
after-tax costs exceed $300,000 Adirondack shall have the right pursuant to
Section 6.5(f) to terminate this Agreement.
ARTICLE V
CONDITIONS PRECEDENT
5.1. Conditions Precedent to Obligations of CNB and Acquisition Corp.
Unless the conditions are waived by CNB or Acquisition, all obligations of CNB
and Acquisition under this Agreement are subject to the fulfillment, prior to or
at the Closing, of each of the following conditions:
(a) Representations and Warranties; Performance of Agreements. The
Representations and Warranties of Adirondack contained in Article II of this
Agreement, as amended or supplemented by the Adirondack Updated Statements (as
defined in Section 5.1(h) hereof) shall have been true and correct in all
material respects as of this date (except to the extent such representations and
warranties speak as of an earlier date) and shall be true and correct in all
material respects at the Closing as though made on and as of the Closing Date,
and Adirondack shall have performed all agreements herein required to be
performed by it on or prior to the Closing.
27
(b) Closing Certificate. CNB shall have received a certificate signed
by the chief executive officer of Adirondack, dated as of the Closing Date,
certifying as to the fulfillment of the conditions to the obligations of CNB as
set forth in this Agreement.
(c) Regulatory and Other Approvals. CNB shall have obtained the
approval of all appropriate federal and state regulatory agencies (including,
without limitation, the approval of the Federal Reserve) necessary to complete
the transactions contemplated by this Agreement, all required waiting periods
shall have expired, and there shall have been no motion for rehearing or appeal
from any such approval or commencement of any suit or action by any governmental
authority seeking to enjoin the transactions provided for herein or to obtain
other relief with respect thereto.
(d) Approval of Merger and Execution of Certificate of Merger. This
Agreement and the transactions contemplated hereby shall have been approved by
the Board of Directors and the stockholders of Adirondack shall have adopted the
Merger Agreement at the Stockholder Meeting in accordance with applicable law
and the Certificate of Incorporation and bylaws of Adirondack. The proper
officers of Adirondack shall have executed and delivered to CNB such
certificates, statements or other instruments as may be necessary or appropriate
to effect the filing of the Certificate of Merger.
(e) No Litigation with Respect to Transactions. No suit or other
action shall have been instituted seeking to enjoin the consummation of the
transactions contemplated hereby or to obtain other relief in connection with
this Agreement or the transactions contemplated hereby, that reasonably could be
expected to result in the issuance of an order enjoining such transactions.
(f) Opinion of Counsel. CNB shall have received the opinion of Silver
▇▇▇▇▇▇▇▇ and ▇▇▇▇, LLP special counsel for Adirondack, dated as of the Closing
Date, and in substantially the form attached hereto as Exhibit D. In rendering
the foregoing opinion, such counsel may rely on certificates of corporate
officers or governmental officials as to factual matters.
(g) Other Documents. CNB shall receive at the Closing all such other
documents, certificates or instruments as it may have reasonably requested
evidencing compliance by Adirondack with the terms of this Agreement.
(h) Updated Statements. Adirondack shall have provided CNB any
information necessary to make the Representations and Warranties of Adirondack
set forth in Article II true and correct as of the Closing Date (the "Adirondack
Updated Statements"), and none of such Adirondack Updated Statements shall
reflect a change from the Representations and Warranties of Adirondack made as
of the date of this Agreement that reflect a Material Adverse Effect of
Adirondack.
28
(i) Other Employee Matters. At or prior to the Effective Time of the
Merger, ▇▇▇▇▇ ▇. Case shall have ceased to be an employee of Adirondack and the
Bank and any and all Adirondack Shares held for his benefit in the Recognition
and Retention Plan and any and all option shares held by him under the
Adirondack Option Plan shall have been forfeited without expense or liability to
Adirondack or the Bank.
(j) Limitation on Recognition Shares and Options. At the Effective
Time of the Merger there shall be not more than 20,749 Adirondack shares issued
under the Recognition and Retention Plan and not more than 49,595 outstanding
options under the Adirondack Option Plan.
(k) Non Competition Agreement. At the Effective Time CNB shall have
received executed Non Competition Agreements in the form of Exhibit B from each
director of Adirondack and the Bank other than ▇▇▇▇▇ ▇. ▇▇▇▇▇, and shall have
received the Non Competition Agreement in the form of Exhibit C from ▇▇▇▇▇ ▇.
▇▇▇▇▇.
5.2 Conditions Precedent to Obligations of Adirondack. Unless the
conditions are waived by Adirondack, all obligations of Adirondack under this
Agreement are subject to the fulfillment, prior to or at Closing, of each of the
following conditions:
(a) Representations and Warranties; Performance of Agreements. The
Representations and Warranties of CNB and Acquisition contained in Article III
of this Agreement, as amended or supplemented by the CNB and Acquisition Updated
Statements (as defined in Section 5.2(j)) shall have been true and correct in
all material respects as of this date (except to the extent such representations
and warranties speak as of an earlier date) and shall be true and correct in all
material respects at the Closing as though made on and as of the Closing Date,
and CNB shall have performed all agreements herein required to be performed by
it on or prior to the Closing.
(b) Closing Certificate. Adirondack shall have received a certificate
signed by the chief executive officers of CNB and Acquisition and dated as of
the Closing Date, certifying as to the fulfillment of the conditions to the
obligations of Adirondack as set forth in this Agreement.
(c) Regulatory and Other Approvals. CNB shall have obtained the
approval of all appropriate federal and state banking regulatory agencies
(including, without limitation, the approval of the Federal Reserve Board)
necessary to complete the transactions contemplated by this Agreement, all
required waiting periods shall have expired, and there shall have been no motion
for rehearing or appeal from such approval or commencement of any suit or action
by any governmental authority seeking to enjoin the transactions provided for
herein or to obtain other relief with respect thereto.
29
(d) Fairness Opinion. Capital Resources Group, Inc. shall have
delivered to the Board of Directors of Adirondack, as of the date of this
Agreement, its opinion to the effect that the consideration to be received in
the Merger is fair, from a financial point of view, to the stockholders of
Adirondack, and such opinion shall not have been withdrawn, amended or modified
in any material respect at or prior to the Closing.
(e) No Litigation. No suit or other action shall have been instituted
or threatened seeking to enjoin the consummation of the transactions
contemplated hereby or to obtain other relief in connection with this Agreement
or the transactions contemplated hereby (including, but not limited to,
substantial damages) that reasonably could be expected to result in the issuance
of an order enjoining such transactions or result in a determination that CNB
has failed to comply with applicable legal requirements of a material nature in
connection with the transactions contemplated hereby or actions preparatory
thereto.
(f) Opinion of Counsel. Adirondack shall have received the opinion of
▇▇▇▇▇▇ & Blank Co., LPA, special counsel for CNB and Acquisition, dated as of
the Closing Date, in substantially the form of Exhibit E hereto.
(g) Approval of Merger and Delivery of the Certificate of Merger. This
Agreement and the transactions contemplated hereby shall have been approved by
the Board of Directors of CNB and Acquisition and by CNB as the sole stockholder
of Acquisition in accordance with governing statutes and the Certificate of
Incorporation and bylaws of CNB and the Certificate of Incorporation and bylaws
of Acquisition, and the stockholders of Adirondack shall have adopted the Merger
Agreement at the Stockholders Meeting. The proper officers of each of CNB,
Acquisition and Adirondack, as applicable, shall have executed the Certificate
of Merger in form suitable for filing with the Delaware Secretary of State and
shall have executed and delivered all such other certificates, statements or
other instruments as may be necessary or appropriate to effect such filings.
(h) Merger Consideration. CNB shall have deposited funds with the
exchange agent or made other arrangements to provide funds to the exchange
agent, sufficient to enable the exchange agent to pay in full the total amount
of funds required to be paid at the Effective Time pursuant to Section 1.1
hereof for exchanges in accordance with this Agreement.
(i) Other Documents. Adirondack shall receive at the Closing all such
other documents, certificates or instruments as it may have reasonably requested
evidencing compliance by CNB and Acquisition with the terms of this Agreement.
30
(j) Updated Statements. CNB and Acquisition shall have provided
Adirondack any information necessary to make the Representations and Warranties
of CNB and Acquisition set forth in Article III true and correct as of the
Closing Date (the "CNB and Acquisition Updated Statements"), and none of such
CNB and Acquisition Updated Statements shall reflect a change from the
Representations and Warranties of CNB and Acquisition made as of the date of
this Agreement that reflect a Material Adverse Effect of CNB.
ARTICLE VI
GENERAL PROVISIONS
6.1 Non-Survival of Representations and Warranties and Covenants. None of
the Representations and Warranties and covenants in this Agreement shall survive
the Effective Time, except for such other covenants and agreements contained in
this Agreement that by their terms apply in whole or in part after the Effective
Time. In the event of the termination of this Agreement pursuant to Section 6.5
hereof, none of the representations and warranties and covenants in this
Agreement shall survive except that the covenants in this Agreement with respect
to confidentiality contained in Section 4.10, payment of expenses contained in
Section 6.3 and this Section 6.1 shall survive.
6.2 Further Assurances. Each of the parties hereto agrees that at any time
and from time to time after the Effective Time it shall cause to be executed and
delivered to any party such further instruments or documents as such other party
may reasonably require to give effect to the transactions contemplated hereby.
6.3 Expenses and Termination Rights. Each of the parties to this Agreement
shall bear their respective costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby; provided, however, that:
(a) in the event this Agreement is validly terminated by CNB pursuant
to Section 6.5(d) hereof or by Adirondack pursuant to Section 6.5(e) hereof,
Adirondack shall pay to CNB a termination fee of $500,000 in cash on demand;
(b) in the event this Agreement is validly terminated by Adirondack
pursuant to Section 6.5(d), CNB shall pay to Adirondack a termination fee of
$500,000 in cash on demand;
(c) in the event this Agreement is terminated either (i) by Adirondack
pursuant to Section 6.5(e), or (ii) by CNB as provided in Section 6.5(d) as a
result of Adirondack's breach of Section 4.4 or by CNB as provided in Section
6.5(d) following a failure of Adirondack's stockholders to grant the necessary
approval in Section 5.1(d) and contemporaneously with the termination provided
in this
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paragraph (ii) there is a Transaction Proposal and, prior to or within 12 months
of such termination, Adirondack shall have entered into a definitive agreement
relating to such Transaction Proposal, then, with respect to a termination under
either paragraph (i) or (ii) of this Section 6.3(d), Adirondack shall pay to
CNB, in immediately available funds, an amount equal to $750,000 within ten
business days after demand for payment by CNB following such termination, which
amount, however, shall be reduced by any amount Adirondack shall have previously
paid or shall be obligated to pay to CNB pursuant to Section 6.3(a) hereof.
(d) In the event of termination of this Agreement as provided in
Sections 6.5(a), 6.5(b), 6.5(c), 6.5(f) or 6.5(g) this Agreement shall forthwith
become void and there shall be no liability under this Agreement on the part of
CNB or Adirondack or their respective officers or directors expect as set forth
in Section 6.1.
(e) Notwithstanding anything in this Agreement to the contrary, the
parties hereto agree that irreparable damage would occur in the event that the
provisions of this Agreement were not performed in accordance with its specific
terms or was otherwise breached. It is accordingly agreed that the parties shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, and to be awarded
reasonable attorneys' fees, this being in addition to any other remedy to which
they are entitled hereunder.
6.4 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the respective heirs, successors, assigns of the parties
hereto; provided, however, that no party may assign this Agreement without the
written consent of the other parties, and except that CNB may assign this
Agreement to any entity, a majority of the stock of which is owned directly or
indirectly by CNB. Any assignment shall only be done upon prior notice to
Adirondack and will not relieve CNB from any of its responsibilities, duties,
liabilities and obligations set forth herein.
6.5 Termination. This Agreement may be terminated (a) at any time by
agreement of CNB and Adirondack, (b) by either CNB or Adirondack if the
regulatory approvals referred to in Section 5.1(c) hereof have not been obtained
on or before September 30, 1999, provided that both parties have used reasonable
efforts to secure such approvals (for purposes hereof " reasonable efforts"
shall not require CNB to assent to any condition or affirmative requirement of a
regulatory agency which would, in the reasonable opinion of CNB, cost CNB in
excess of $100,000), (c) by either CNB or Adirondack if the Closing has not
occurred by December 31, 1999 (provided that the terminating party is not then
in material breach of any representation, warranty, covenant or other agreement
contained herein), (d) by
32
either CNB or Adirondack if a material default shall be made by the other party
in the observance or in the due and timely performance of any of its covenants
and agreements contained in this Agreement and such default by its nature cannot
be cured prior to the Closing and which breach has had, individually or in the
aggregate, a Material Adverse Effect on the non-breaching party, (e) by
Adirondack if its Board of Directors shall determine that a Transaction Proposal
constitutes a Superior Proposal and the Board shall have received a written
opinion of its outside counsel that the failure to accept such Superior Proposal
could reasonably be expected to result in a breach of the fiduciary duties of
the Board under applicable law, or (f) by Adirondack pursuant to Section
4.18(b).
6.6 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given (a) when delivered personally; (b) the second
business day after being deposited in the United States mail registered or
certified (return receipt requested); (c) the first business day after being
deposited with Federal Express or any other recognized national overnight
courier service; or (d) on the business day on which it is sent and received by
facsimile, in each case to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) If to CNB addressed to:
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chairman, President & CEO
CNB Bancorp (City National Bank & Trust Company)
▇▇-▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ & Blank Co. L.P.A.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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(b) If to Adirondack, addressed to:
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇
President
Adirondack Financial Services Bancorp, Inc.
▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Phone:
Fax:
with a copy to:
▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Silver, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
6.7 Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the internal laws of the State of Delaware, without
giving effect to the conflict of laws principles thereof.
6.8 Counterparts. This Agreement may be executed in any number of
counterparts, and each such executed counterpart will be an original instrument.
6.9 Headings. Descriptive headings appearing in this Agreement are for
convenience only and will not be deemed to explain, limit or amplify any of the
provisions hereof.
6.10 Entire Agreement; Amendment. This Agreement, with its exhibits and the
schedules delivered pursuant to it, sets forth the entire understanding of the
parties and supersedes all prior agreements, arrangements and communications,
whether oral or written. This Agreement may only be modified or amended by an
agreement in writing signed by CNB and Adirondack.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year hereinabove first written.
CNB BANCORP, INC. CNB ACQUISITION CORP.
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
________________________________ ________________________________
Title: Chairman & President Title: President
_____________________________ ____________________________
34
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
__________________________________
Title: President
______________________________
35