AGREEMENT AND PLAN OF MERGER Between PENNSYLVANIA COMMERCE BANCORP, INC. and REPUBLIC FIRST BANCORP, INC. Dated as of November 7, 2008
Exhibit
2.1
AGREEMENT
AND PLAN OF MERGER
Between
PENNSYLVANIA
COMMERCE BANCORP, INC.
and
REPUBLIC
FIRST BANCORP, INC.
Dated as
of November 7, 2008
TABLE
OF CONTENTS
| Page | ||
|
DEFINITIONS
|
1
|
|
|
ARTICLE
I THE MERGER
|
6
|
|
|
1.1.
|
The
Merger
|
6
|
|
1.2.
|
Effective
Time
|
6
|
|
1.3.
|
Effects
of the Merger
|
7
|
|
1.4.
|
Conversion
of Company Common Stock.
|
7
|
|
1.5.
|
Option
Plans; Stock Options; Other Convertible Securities.
|
8
|
|
1.6.
|
Parent
Common Stock
|
9
|
|
1.7.
|
Articles
of Incorporation
|
9
|
|
1.8.
|
Bylaws
|
9
|
|
1.9.
|
Directors
and Officers.
|
9
|
|
1.10.
|
Tax
Consequences
|
10
|
|
ARTICLE
II EXCHANGE OF SHARES
|
10
|
|
|
2.1.
|
Parent
to Make Shares and Cash Available
|
10
|
|
2.2.
|
Exchange
of Shares.
|
10
|
|
ARTICLE
III DISCLOSURE SCHEDULES
|
12
|
|
|
ARTICLE
IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
|
12
|
|
|
4.1.
|
Corporate
Organization.
|
12
|
|
4.2.
|
Capitalization.
|
14
|
|
4.3.
|
Authority;
No Violation.
|
15
|
|
4.4.
|
Consents
and Approvals
|
15
|
|
4.5.
|
SEC
Reports
|
16
|
|
4.6.
|
Regulatory
Reports
|
16
|
|
4.7.
|
Financial
Statements
|
16
|
|
4.8.
|
Broker’s
Fees
|
17
|
|
4.9.
|
Absence
of Certain Changes or Events.
|
17
|
|
4.10.
|
Legal
Proceedings.
|
18
|
|
4.11.
|
Taxes.
|
18
|
|
4.12.
|
Employees.
|
19
|
|
4.13.
|
Company
Information
|
21
|
|
4.14.
|
Compliance
with Applicable Law
|
21
|
|
4.15.
|
Certain
Contracts.
|
21
|
|
4.16.
|
Agreements
with Regulatory Agencies
|
22
|
|
4.17.
|
Environmental
Matters
|
22
|
|
4.18.
|
Opinion
|
23
|
|
4.19.
|
Approvals
|
23
|
|
4.20.
|
Loan
Portfolio.
|
23
|
|
4.21.
|
Property
|
24
|
|
4.22.
|
Reorganization
|
24
|
| Page | ||
|
4.23.
|
State
Takeover Laws and Charter Provisions
|
24
|
|
4.24.
|
Insurance
|
25
|
|
ARTICLE
V REPRESENTATIONS AND WARRANTIES OF PARENT
|
25
|
|
|
5.1.
|
Corporate
Organization.
|
25
|
|
5.2.
|
Capitalization.
|
26
|
|
5.3.
|
Authority;
No Violation.
|
27
|
|
5.4.
|
Consents
and Approvals
|
27
|
|
5.5.
|
SEC
Reports
|
28
|
|
5.6.
|
Regulatory
Reports
|
28
|
|
5.7.
|
Financial
Statements
|
28
|
|
5.8.
|
Broker’s
Fees
|
29
|
|
5.9.
|
Absence
of Certain Changes or Events.
|
29
|
|
5.10.
|
Legal
Proceedings.
|
30
|
|
5.11.
|
Taxes.
|
30
|
|
5.12.
|
Employees.
|
31
|
|
5.13.
|
Parent
Information
|
33
|
|
5.14.
|
Compliance
with Applicable Law
|
33
|
|
5.15.
|
Certain
Contracts.
|
33
|
|
5.16.
|
Agreements
with Regulatory Agencies
|
34
|
|
5.17.
|
Environmental
Matters
|
34
|
|
5.18.
|
Ownership
of Company Common Stock; Affiliates and Associations.
|
35
|
|
5.19.
|
Opinion
|
35
|
|
5.20.
|
Approvals
|
35
|
|
5.21.
|
Loan
Portfolio.
|
35
|
|
5.22.
|
Property
|
36
|
|
5.23.
|
Reorganization
|
36
|
|
5.24.
|
State
Takeover Laws and Charter Provisions
|
36
|
|
5.25.
|
Insurance
|
36
|
|
ARTICLE
VI COVENANTS RELATING TO CONDUCT OF BUSINESS
|
37
|
|
|
6.1.
|
Covenants
of the Company
|
37
|
|
6.2.
|
Covenants
of Parent
|
39
|
|
ARTICLE
VII ADDITIONAL AGREEMENTS
|
40
|
|
|
7.1.
|
Proxy
Statement-Prospectus.
|
40
|
|
7.2.
|
Regulatory
Approvals.
|
41
|
|
7.3.
|
Access
to Information.
|
41
|
|
7.4.
|
Certain
Actions.
|
42
|
|
7.5.
|
Shareholder
Meetings
|
44
|
|
7.6.
|
Legal
Conditions to Merger
|
44
|
|
7.7.
|
Stock
Reserve
|
45
|
|
7.8.
|
Stock
Exchange Listing
|
45
|
|
7.9.
|
Employee
Benefit Plans; Existing Agreements.
|
45
|
|
7.10.
|
Indemnification.
|
46
|
|
7.11.
|
Additional
Agreements
|
47
|
|
7.12.
|
Intentionally
Omitted.
|
48
|
-ii-
| Page | ||
|
7.13.
|
Appointment
of Directors
|
48
|
|
ARTICLE
VIII CONDITIONS PRECEDENT
|
48
|
|
|
8.1.
|
Conditions
to Each Party’s Obligation to Effect the Merger
|
48
|
|
8.2.
|
Conditions
to Obligations of Parent
|
49
|
|
8.3.
|
Conditions
to Obligations of the Company
|
50
|
|
ARTICLE
IX TERMINATION AND AMENDMENT
|
51
|
|
|
9.1.
|
Termination
|
51
|
|
9.2.
|
Effect
of Termination
|
54
|
|
9.3.
|
Amendment
|
54
|
|
9.4.
|
Extensions;
Waiver
|
54
|
|
ARTICLE
X GENERAL PROVISIONS
|
55
|
|
|
10.1.
|
Closing
|
55
|
|
10.2.
|
Nonsurvival
of Representations, Warranties and Agreements
|
55
|
|
10.3.
|
Expenses
|
55
|
|
10.4.
|
Notices
|
55
|
|
10.5.
|
Interpretation
|
56
|
|
10.6.
|
Counterparts
|
56
|
|
10.7.
|
Entire
Agreement
|
56
|
|
10.8.
|
Governing
Law
|
56
|
|
10.9.
|
Enforcement
of Agreement
|
56
|
|
10.10.
|
Severability
|
57
|
|
10.11.
|
Publicity
|
57
|
|
10.12.
|
Assignment;
No Third Party Beneficiaries
|
57
|
Exhibit A - Form of Voting Agreement
Exhibit
B - Form
of Employment Agreement
-iii-
AGREEMENT
AND PLAN OF MERGER
This
AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of November 7, 2008,
is entered into between Pennsylvania Commerce Bancorp, Inc., a Pennsylvania
corporation (“Parent”), and Republic First Bancorp, Inc., a Pennsylvania
corporation (the “Company”).
WHEREAS,
the Boards of Directors of Parent and the Company have determined that it is in
the best interests of their respective companies and their shareholders to
consummate the business combination transaction provided for herein in which the
Company will, subject to the terms and conditions set forth herein, merge with
and into Parent (the “Merger”);
WHEREAS,
the parties desire that immediately following the Merger that Commerce
Bank/Harrisburg, a bank organized under the Pennsylvania Banking Code of 1965
and a wholly-owned subsidiary of Parent (the “Parent Bank”), and Republic First
Bank, a bank organized under the Pennsylvania Banking Code of 1965 and a
wholly-owned subsidiary of the Company (the “Company Bank”), shall continue to
operate as two stand-alone bank subsidiaries of Parent; and
WHEREAS,
as a condition to the willingness of the parties to enter into this Agreement,
each director of Parent has entered into a voting agreement with the Company,
and each director of the Company has entered into a voting agreement with
Parent, in each case dated as of the date hereof and in the form attached hereto
as Exhibit A,
pursuant to which each such director has agreed, among other things, to vote all
shares of the capital stock of Parent or the Company, as applicable, which he or
she owns in favor of the approval of this Agreement and the transactions
contemplated hereby, upon the terms and subject to the conditions set forth in
such voting agreement; and
WHEREAS,
the parties desire to make certain representations, warranties and agreements in
connection with the Merger and also to prescribe certain conditions to the
Merger.
NOW,
THEREFORE, in consideration of the mutual covenants, representations, warranties
and agreements contained herein, and intending to be legally bound hereby, the
parties agree as follows:
DEFINITIONS
In
addition to terms defined elsewhere in this Agreement, the following terms shall
have the meanings set forth below, unless the context requires
otherwise:
“2007
Audited Financial Statements” has the meaning given to that term in Section 4.7
of this Agreement.
“2007
Parent Audited Financial Statements” has the meaning given to that term in
Section 5.7 of this Agreement.
“Agreement”
means this Agreement and Plan of Merger.
“Articles
of Merger” has the meaning given to that term in Section 1.2 of this
Agreement.
“Authorized
Shares Amendment” means an amendment to the Parent’s Articles of Incorporation,
pursuant to which the number of shares of common stock which Parent is
authorized to issue is increased from 10,000,000 to 25,000,000.
“Average
Closing Price” means the average of the last reported sale prices per share of
Parent Common Stock as reported on the NASDAQ Stock Market (as reported in The
Wall Street Journal or, if not reported therein, in another mutually agreed upon
authoritative source) for the twenty consecutive trading days immediately
preceding the Determination Date.
“BHC Act”
means the Bank Holding Company Act of 1956, as amended.
“Break-up
Fee” has the meaning given to that term in Section 7.4(e) of this
Agreement.
“Certificate”
has the meaning given to that term in Section 1.4(b) of this
Agreement.
“Closing”
has the meaning given to that term in Section 10.1 of this
Agreement.
“Closing
Date” has the meaning given to that term in Section 10.1 of this
Agreement.
“Closing
Deadline” has the meaning given to that term in Section 9.1(c) of this
Agreement.
“Code”
means the Internal Revenue Code of 1986, as amended.
“Company”
means Republic First Bancorp, Inc., a Pennsylvania corporation.
“Company
Bank” has the meaning given to that term in the foregoing recitals.
“Company
Common Stock” has the meaning given to that term in Section 1.4(a) of this
Agreement.
“Company
Convertible Securities” has the meaning given to that term in Section 1.5(b) of
this Agreement.
“Company
Disclosure Schedule” has the meaning given to that term in Article III of
this Agreement.
“Company
Employees” has the meaning given to that term in Section 7.10(a) of this
Agreement.
“Company
Option” has the meaning given to that term in Section 1.5(a) of this
Agreement.
2
“Company
Option Plan” has the meaning given to that term in Section 1.5(a) of this
Agreement.
“Company
Reports” has the meaning given to that term in Section 4.5 of this
Agreement.
“Company
Trust” or collectively “Company Trusts” means each of the following Delaware
statutory business trusts, the common securities of which are held by the
Company: Republic Capital Trust II, Republic Capital Trust III and Republic
First Bancorp Capital Trust IV.
“Company
Trust Preferred Securities” means the capital securities issued by the Company
Trusts.
“Company’s
Counsel” has the meaning given to that term in Section 8.3(d) of this
Agreement.
“Company
Loans” has the meaning given to that term in Section 4.20(a) of this
Agreement.
“Confidentiality
Agreement” has the meaning given to that term in Section 7.3(b) of this
Agreement.
“Determination
Date” means the third calendar day immediately prior to the Effective
Time, or if such calendar day is not a trading day on the NASDAQ Stock Market,
then the trading day immediately preceding such calendar day.
“DPC
Shares” has the meaning given to that term in Section 1.4(d) of this
Agreement.
“ERISA”
means Employee Retirement Income Security Act of 1974, as amended.
“ERISA
Affiliate” means, with respect to any entity, any other entity that together
with the first entity would be deemed a “single employer” within the meaning of
Section 4001(b) of ERISA.
“Effective
Time” has the meaning given to that term in Section 1.2 of this
Agreement.
“Environmental
Laws” has the meaning given to that term in Section 4.17(a) of this
Agreement.
“Exchange
Act” has the meaning given to that term in Section 1.5(b) of this
Agreement.
“Exchange
Agent” has the meaning given to that term in Section 2.1 of this
Agreement.
3
“Exchange
Fund” has the meaning given to that term in Section 2.1 of this
Agreement.
“Exchange
Ratio” has the meaning given to that term in Section 1.4(a) of this
Agreement.
“FDIC”
means Federal Deposit Insurance Corporation.
“Federal
Reserve Board” means Board of Governors of the Federal Reserve
System.
“Financial
Statements” has the meaning given to that term in Section 4.9(a) of this
Agreement.
“GAAP”
means United States generally accepted accounting principles.
“Governmental
Entity” has the meaning given to that term in Section 4.4 of this
Agreement.
“IRS”
means Internal Revenue Service.
“Indemnified
Parties” has the meaning given to that term in Section 7.10(a) of this
Agreement.
“Injunction”
has the meaning given to that term in Section 8.1(f) of this
Agreement.
“June 30
Parent Unaudited Financial Statements” has the meaning given to that term in
Section 5.7 of this Agreement.
“June 30
Unaudited Financial Statements” has the meaning given to that term in Section
4.7 of this Agreement.
“KBW”
means ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
“Material
Adverse Effect” has the meaning given to that term in Section 4.1(a) of this
Agreement.
“Merger”
has the meaning given to that term in the foregoing recitals.
“Merger
Consideration” has the meaning given to that term in Section 1.4(a) of this
Agreement.
“Option
Plan Amendment” means an amendment to the Company’s Amended and Restated Stock
Option Plan and Restricted Stock Plan to waive the requirement that participants
in such plan exercise or lose their option awards within ten days of receiving
notice from the Company of the effective date of the Merger.
4
“Parent”
means Pennsylvania Commerce Bancorp, Inc., a Pennsylvania
corporation.
“Parent
Bank” has the meaning given to that term in the foregoing recitals.
“Parent
Loans” has the meaning given to that term in Section 5.20(a) of this
Agreement.
“Parent
Plans” has the meaning given to that term in Section 5.12(a) of this
Agreement.
“Parent
Disclosure Schedule” has the meaning given to that term in Article III of this
Agreement.
“Parent
Financial Statements” has the meaning given to that term in Section 5.7 of
this Agreement.
“Parent
Reports” has the meaning given to that term in Section 5.5 of this
Agreement.
“Parent’s
Counsel” has the meaning given to that term in Section 8.2(e) of this
Agreement.
“PBCL”
has the meaning given to that term in Section 1.1 of this
Agreement.
“PBGC”
means Pension Benefit Guaranty Corporation.
“Plans”
has the meaning given to that term in Section 4.12(a) of this
Agreement.
“Proxy
Statement-Prospectus” has the meaning given to that term in Section 7.1(a) of
this Agreement.
“Representatives”
has the meaning given to that term in Section 7.5(a) of this
Agreement.
“Regulatory
Agency” has the meaning given to that term in Section 4.6 of this
Agreement.
“Requisite
Regulatory Approvals” has the meaning given to that term in Section 8.1(d) of
this Agreement.
“Retention
Plan” has the meaning given to that term in Section 7.10(c) of this
Agreement.
“S-4” has
the meaning given to that term in Section 4.13 of this Agreement.
“Sandler”
means Sandler ▇’▇▇▇▇▇ Partners, L.P.
5
“Severance
Plan” has the meaning given to that term in Section 7.10(c) of this
Agreement.
“Specified
Awards” means those Company Options listed in Section 1.5(a) of the Company
Disclosure Schedule.
“State
Regulator” has the meaning given to that term in Section 4.6 of this
Agreement.
“Subsidiary”
has the meaning given to that term in Section 4.1(b) of this
Agreement.
“Surviving
Corporation” has the meaning given to that term in Section 1.1 of this
Agreement.
“Tax
Return” means any return, report, information return or other document
(including any related or supporting information) with respect to
Taxes.
“Taxes”
means all taxes, charges, fees, levies, penalties or other assessments imposed
by any United States federal, state, local or foreign taxing authority,
including income, gross profits, excise, property, sales, transfer, franchise,
payroll, withholding, unclaimed property, social security or other taxes,
including any interest, penalties or additions attributable
thereto.
“Trust IV
Documents” means the Amended and Restated Declaration of Trust of Republic First
Bancorp Capital Trust IV dated June 10, 2008, the Indenture, dated as of June
10, 2008, between the Company and Wilmington Trust Company, a Delaware banking
corporation, and the related documents described in each of them.
ARTICLE
I
THE
MERGER
1.1. The
Merger. Subject
to the terms and conditions of this Agreement, in accordance with the
Pennsylvania Business Corporation Law (the “PBCL”), at the Effective Time (as
defined in Section 1.2 hereof), the Company shall merge with and into
Parent. Parent shall be the surviving corporation (hereinafter
sometimes called the “Surviving Corporation”) in the Merger, and shall continue
its corporate existence under the laws of the Commonwealth of
Pennsylvania. Upon consummation of the Merger, the separate corporate
existence of the Company shall cease.
1.2. Effective
Time. Subject
to the provisions of this Agreement, articles of merger complying with the PBCL
(the “Articles of Merger”) shall be duly prepared, executed and delivered for
filing with the Department of State of the Commonwealth of Pennsylvania (the
“Department”) on the Closing Date (as defined in Section 10.1
hereof). The Merger shall become effective at such time as the
Articles of Merger are filed by the Department or at such later time as may be
specified in the Articles of Merger (such time being the “Effective
Time”).
6
1.3. Effects of the
Merger. At
and after the Effective Time, the Merger shall have the effects set forth in
Section 1929 of the PBCL.
1.4. Conversion of Company Common
Stock.
(a) At the
Effective Time, subject to the other provisions of this Article I and Sections
2.2(f) and 9.1(g) hereof, each share of the common stock, $0.01 par value per
share, of the Company (the “Company Common Stock”) issued and outstanding
immediately prior to the Effective Time (other than shares of Company Common
Stock held directly or indirectly by Parent or the Company or any of their
respective Subsidiaries (as defined below) (except for DPC Shares, as such term
is defined in Section 1.4(d) hereof)) shall, by virtue of this Agreement and
without any action on the part of the holder thereof, cease to be outstanding
and be converted into the right to receive a fraction (subject to adjustment as
provided for herein, the “Exchange Ratio”) of a share of Parent Common Stock,
calculated as of the Determination Date, whose numerator is $10.00 and whose
denominator is the Average Closing Price, provided, however, that in no
event shall the Exchange Ratio be greater than 0.38 or less than 0.34 (the
“Merger Consideration”).
(b) All of
the shares of Company Common Stock converted into the Merger Consideration
pursuant to this Article I shall no longer be outstanding and shall
automatically be cancelled and shall cease to exist, and each holder of a
certificate or direct registration statement previously representing any such
shares of Company Common Stock (each a “Certificate”) shall thereafter cease to
have any rights with respect to such securities, except the right to receive (i)
the Merger Consideration, (ii) any dividends and other distributions in
accordance with Section 2.2(c) hereof, and (iii) any cash to be paid in lieu of
any fractional share of Parent Common Stock in accordance with Section 2.2(f)
hereof.
(c) If,
between the date of this Agreement and the Effective Time, the shares of Parent
Common Stock shall be changed into a different number or class of shares by
reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment, or a stock dividend thereon shall be
declared with a record date within such period, proportionate adjustments shall
be made to the Exchange Ratio and any references in this Agreement to “Exchange
Ratio” shall thereafter be deemed to refer to the Exchange Ratio after giving
effect to any adjustment made pursuant to this Section 1.4(c).
(d) At the
Effective Time, all shares of Company Common Stock that are owned directly or
indirectly by Parent or the Company or any of their respective Subsidiaries
(other than shares of Company Common Stock held by Parent or the Company or any
of their respective Subsidiaries in respect of a debt previously contracted (any
such shares of Company Common Stock, and shares of Parent Common Stock which are
similarly held, whether held directly or indirectly by Parent or the Company,
being referred to herein as “DPC Shares”)) shall be cancelled and shall cease to
exist, and no stock of Parent, cash or other consideration shall be delivered in
exchange therefor. All shares of Parent Common Stock that are owned
by the Company or any of its Subsidiaries shall become treasury stock of
Parent.
7
1.5. Option Plans; Stock Options;
Other Convertible Securities.
(a) Each
stock option to purchase Company Common Stock (a “Company Option”) and the
Company’s Amendment and Restatement No. 3 to the Stock Option Plan and
Restricted Stock Plan of Republic First Bancorp, Inc. (the “Company Option
Plan”), shall be assumed by Parent in a transaction described in Section 409A or
Section 424(a), as applicable, of the Code, subject, in the event the Option
Plan Amendment is submitted to a vote of the Company’s shareholders, to the
approval of the Option Plan Amendment by the Company’s
shareholders. Each Company Option so assumed by Parent under this
Agreement will continue to have, and be subject to, the same terms and
conditions of such Company Option immediately prior to the Effective Time,
except that (i) each Company Option (other than the Specified Awards) will be
fully vested and immediately exercisable (regardless of the vested status of
such Company Option immediately prior to the Effective Time) for that number of
shares of Parent Common Stock equal to the product of the number of shares of
Company Common Stock that were issuable upon exercise of such Company Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Parent Common Stock, and
(ii) the per share exercise price for the shares of Parent Common Stock issuable
upon the exercise of such assumed Company Option will be equal to the quotient
determined by dividing the exercise price per share of Company Common Stock at
which such Company Option was exercisable immediately prior to the Effective
Time by the Exchange Ratio, rounded up to the nearest whole cent. If
deemed necessary or appropriate by the Company and Parent, the Company shall
submit the Option Plan Amendment to a vote of the Company’s shareholders at the
Company Shareholder Meeting and shall use its best efforts to obtain approval of
the Option Plan Amendment by the Company’s shareholders. If the
Option Plan Amendment is submitted to a vote of the Company’s shareholders and
the Company’s shareholders do not approve the Option Plan Amendment, the holder
of each Company Option shall have only those rights with respect to such Company
Option as are provided under the applicable award, the Company Option Plan and
applicable law. If it is not deemed necessary or appropriate to
submit the Option Plan Amendment to a vote of the Company's shareholders, or if
the Option Plan Amendment is submitted to a vote of the Company's shareholders
and is approved by the Company's shareholders, then, in either case, promptly
after the Effective Time, Parent shall deliver or shall cause the Surviving
Corporation to deliver to the holders of Company Options, notices describing the
conversion of such Company Options into Parent Options. The
agreements evidencing the Company Options shall continue in effect on the same
terms and conditions (modified as described in this Section 1.5(a)) and Parent
shall comply with such terms. Prior to the Effective Time, Parent
shall reserve for issuance the number of shares of Parent Common Stock necessary
to satisfy Parent’s obligations under this Section 1.5(a). As soon as
practicable after the Effective Time, Parent shall file a registration statement
or statements on Form S-8 (or any successor form) with respect to the shares of
Parent Common Stock subject to Company Options assumed by Parent pursuant to
this Agreement.
(b) At and
after the Effective Time, the outstanding convertible Company Trust Preferred
Securities and the Company’s outstanding Fixed Rate Junior Subordinated
Convertible Debt Securities due 2038 (collectively, the “Company Convertible
Securities”) shall be convertible (in accordance with the provisions of the
Trust IV Documents) into that number of shares of Parent Common Stock equal to
the product of the number of shares
8
of
Company Common Stock into which such Company Convertible Securities could have
been converted immediately prior to the Effective Time, multiplied by the
Exchange Ratio, rounded down to the nearest whole number of shares of Parent
Common Stock, subject to adjustment for events subsequent to the Effective
Time. Parent shall make or shall cause the Surviving Corporation to
deliver to the holders of Company Convertible Securities notices describing the
effects of the Merger on such Company Convertible Securities. The
Trust IV Documents shall continue in effect on the same terms and conditions
(modified as described in this Section 1.5(b) and supplemented by any
supplemental indenture with the trustee of the applicable Company Trust) and
Parent shall comply or shall cause the Surviving Corporation to comply with such
terms. Prior to the Effective Time, Parent shall reserve for issuance
the number of shares of Parent Common Stock necessary to satisfy Parent’s
obligations under this Section 1.5(b).
(c) Prior to
the Effective Time, Parent and the Company shall take all such steps as may be
required to cause any acquisitions of Parent equity securities (including
derivative securities with respect to any Parent equity securities) and
dispositions of Company equity securities (including derivative securities with
respect to any Company equity securities) resulting from the transactions
contemplated by this Agreement by each individual who is anticipated to be
subject to the reporting requirements of Section 16(a) of the Securities and
Exchange Act of 1934, as amended (the “Exchange Act”), with respect to Parent or
who is subject to the reporting requirements of Section 16(a) of the Exchange
Act with respect to the Company, to be exempt under Rule 16b-3 promulgated under
the Exchange Act.
1.6. Parent Common
Stock. Except
for shares of Parent Common Stock owned by the Company or any of its
Subsidiaries (other than DPC Shares), which shall be converted into treasury
stock of Parent as contemplated by Section 1.4 hereof, the shares of Parent
Common Stock issued and outstanding immediately prior to the Effective Time
shall be unaffected by the Merger and such shares shall remain issued and
outstanding.
1.7. Articles of
Incorporation. At
the Effective Time, the Articles of Incorporation of Parent, as in effect
immediately prior to the Effective Time, as amended by the Authorized Share
Amendment, shall be the Articles of Incorporation of the Surviving
Corporation.
1.8. Bylaws. At
the Effective Time, the Bylaws of Parent, as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until thereafter
amended in accordance with applicable law.
1.9. Directors and
Officers.
(a) At and
after the Effective Time, the directors of Parent shall consist of the Parent
Directors and Company Directors who shall continue as or become directors of
Parent in accordance with Section 7.13 hereof, each to hold office in accordance
with the Articles of Incorporation and Bylaws of the Surviving Corporation until
their respective successors are duly elected or appointed and
qualified.
(b) The
officers of Parent immediately prior to the Effective Time shall be the officers
of the Surviving Corporation, each to hold office in accordance with the
9
Articles
of Incorporation and Bylaws of the Surviving Corporation until their respective
successors are duly elected or appointed and qualified.
1.10. Tax
Consequences. It
is intended that the Merger shall constitute a reorganization within the meaning
of Section 368(a) of the Code and that this Agreement shall constitute a plan of
reorganization for the purposes of Section 368 of the Code and the Treasury
Regulations thereunder.
ARTICLE
II
EXCHANGE
OF SHARES
2.1. Parent to Make Shares and
Cash Available. At
or prior to the Effective Time, Parent shall deposit, or shall cause to be
deposited, with a bank or trust company (which may be a Subsidiary of Parent)
(the “Exchange Agent”) selected by Parent and reasonably satisfactory to the
Company, for the benefit of the holders of Certificates, for exchange in
accordance with this Article II (i) certificates representing the shares of
Parent Common Stock to be issued pursuant to Section 1.4 and Section 2.2(a) in
exchange for outstanding shares of Company Common Stock and (ii) the cash in
lieu of fractional shares to be paid in accordance with Section 2.2(f) hereof.
Such cash and certificates for shares of Parent Common Stock, together with any
dividends or distributions with respect thereto, are hereinafter referred to as
the “Exchange Fund.”
2.2. Exchange of
Shares.
(a) As soon
as practicable after the Effective Time, and in no event more than three
business days thereafter, the Exchange Agent shall mail to each holder of record
of a Certificate or Certificates a form letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent) and instructions for use in effecting the surrender of the Certificates
in exchange for the Merger Consideration. The Exchange Agent shall
request street name or nominee record holders to forward the letter of
transmittal and instructions to the appropriate beneficial owner(s) of the
shares of Company Common Stock represented by such Certificate or
Certificates. The Company shall have the right to review both the
letter of transmittal and the instructions prior to the Effective Time and
provide reasonable comments thereon.
(b) Upon
surrender of a Certificate or Certificates for exchange and cancellation to the
Exchange Agent, together with a properly executed letter of transmittal, the
holder of such Certificate or Certificates shall be entitled to receive in
exchange therefor (i) a certificate representing that number of whole shares of
Parent Common Stock which such holder of Company Common Stock became entitled to
receive pursuant to the provisions of Article I hereof and/or (ii) the amount of
cash in lieu of fractional shares, if any, which such holder has the right to
receive in respect of the Certificate or Certificates surrendered pursuant to
Section 2.2(f). The Certificate or Certificates so surrendered shall
forthwith be cancelled. At Parent’s option, the shares of Parent
Common Stock which such holder of Company Common Stock became entitled to
receive shall be uncertificated and registered on the stock books of Parent
10
without
the issuance of a certificate; however, a certificate shall be issued upon such
holder’s request. No interest will be paid or accrued on the cash in lieu of
fractional shares or the unpaid dividends and distributions, if any, payable to
holders of Certificates.
(c) No
dividends or other distributions declared after the Effective Time with respect
to Parent Common Stock and payable to the holders of record thereof shall be
paid to the holder of any unsurrendered Certificate until the holder thereof
shall surrender such Certificate in accordance with this Article
II. After the surrender of a Certificate in accordance with this
Article II, the record holder thereof shall be entitled to receive any such
dividends or other distributions, without any interest thereon, which
theretofore had become payable with respect to shares of Parent Common Stock
issuable in exchange for such Certificate.
(d) If any
certificate representing shares of Parent Common Stock is to be issued in a name
other than that in which the Certificate surrendered in exchange therefor is
registered, it shall be a condition of the issuance thereof that the Certificate
so surrendered shall be properly endorsed (or accompanied by an appropriate
instrument of transfer) and otherwise in proper form for transfer, and that the
person requesting such exchange shall (i) pay to the Exchange Agent in advance
any transfer or other Taxes required by reason of the issuance of a certificate
representing shares of Parent Common Stock in any name other than that of the
registered holder of the Certificate surrendered (ii) establish to the
satisfaction of the Exchange Agent that any applicable tax has been paid or that
no tax is payable with respect thereto.
(e) After the
Effective Time, there shall be no transfers on the stock transfer books of the
Company of the shares of Company Common Stock which were issued and outstanding
immediately prior to the Effective Time. If, after the Effective
Time, Certificates representing such shares are presented for transfer to the
Exchange Agent, they shall be cancelled and exchanged for shares of Parent
Common Stock and/or cash in lieu of fractional shares as provided in this
Article II.
(f) Notwithstanding
anything to the contrary contained herein, no certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution with respect to Parent
Common Stock shall be payable on or with respect to any fractional share, and
such fractional share interests shall not entitle the owner thereof to vote or
to any other rights of a shareholder of Parent. In lieu of the
issuance of any such fractional share, Parent shall pay to each former
shareholder of the Company who otherwise would be entitled to receive a
fractional share of Parent Common Stock an amount in cash determined by
multiplying (i) the Average Closing Price by
(ii) the fraction of a share of Parent Common Stock which such holder would
otherwise be entitled to receive pursuant to Section 1.4 hereof.
(g) Any
portion of the Exchange Fund that remains unclaimed by the shareholders of the
Company for 12 months after the Effective Time shall be paid to
Parent. Any shareholders of the Company who have not theretofore
complied with this Article II shall thereafter look only to Parent for payment
of the Merger Consideration, the cash in lieu of fractional shares and/or the
unpaid dividends and distributions on the Parent Common Stock deliverable in
respect of each share of Company Common Stock such shareholder holds as
determined pursuant to this Agreement, in each case, without any interest
thereon.
11
Notwithstanding
the foregoing, none of Parent, the Company, the Exchange Agent or any other
person shall be liable to any former holder of shares of Company Common Stock
for any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(h) In the
event any Certificate shall have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by Parent, the posting by such person of a
bond in such amount as Parent may reasonably direct as indemnity against any
claim that may be made against it with respect to such Certificate, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration deliverable in respect thereof pursuant to this
Agreement.
ARTICLE
III
DISCLOSURE
SCHEDULES
Prior to
the execution and delivery of this Agreement, the Company has delivered to
Parent, and Parent has delivered to the Company, a schedule (in the case of the
Company, the “Company Disclosure Schedule,” and in the case of Parent, the
“Parent Disclosure Schedule”) setting forth, among other things, items the
disclosure of which is necessary or appropriate either in response to an express
disclosure requirement contained in a provision hereof or as an exception to one
or more of such party’s representations or warranties contained in Article IV,
in the case of the Company, or Article V, in the case of Parent, or to one or
more of such party’s covenants contained in Articles VI or VII.
The
Company Disclosure Schedule and Parent Disclosure Schedule are qualified in
their entirety by reference to specific provisions of this Agreement and are not
intended to constitute, and shall not be construed as constituting,
representations and warranties of the Company or Parent, as applicable, except
as and to the extent provided in this Agreement. If and to the extent
any information required to be furnished in any Schedule is contained in this
Agreement or disclosed on any of these Schedules, such information shall be
deemed to be included in all Schedules in which the information is required to
be included and all other Schedules.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Subject
to Article III and the Company Disclosure Schedule, the Company hereby
represents and warrants to Parent as follows:
4.1. Corporate
Organization.
(a) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Pennsylvania. The Company has
the corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted, and is duly
licensed or qualified to do business in each
12
jurisdiction
in which the nature of the business conducted by it or the character or location
of the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be licensed or qualified
would not have a Material Adverse Effect (as defined below) on the
Company. The Company is duly registered as a bank holding company
under the BHC Act. The Articles of Incorporation and Bylaws of the
Company, copies of which have previously been made available to Parent, are true
and correct copies of such documents as in effect as of the date of this
Agreement. As used in this Agreement, the term “Material Adverse
Effect” means, with respect to Parent or the Company, as the case may be, a
material adverse effect on (i) the business, results of operations or financial
condition of such party and its Subsidiaries taken as a whole, other than any
such effect attributable to or resulting from (1) any change following the date
of this Agreement in banking or similar laws, rules or regulations of general
applicability or interpretations thereof by courts or governmental authorities,
(2) any change or the effectiveness of any change following the date of this
Agreement in GAAP or regulatory accounting principles applicable to banks,
thrifts or their holding companies generally, (3) changes following the date of
this Agreement attributable to or resulting from changes in general economic
conditions, including changes in the prevailing level of interest rates, (4) any
action or omission of the Company or Parent, or any of the respective
Subsidiaries of either of them, taken in accordance with the terms of this
Agreement or with the prior written consent of the other party hereto, (5) any
expenses incurred by such party in connection with this Agreement or the
transactions contemplated hereby, (6) the engagement by the United States in
hostilities, whether or not pursuant to the declaration of a national emergency
or war, or the occurrence, after the date hereof, of any military or terrorist
attack upon or within the United States, or any of its territories, possessions
or diplomatic or consular offices or upon any military installation, equipment
or personnel of the United States, except to the extent that such engagement or
occurrence has a disproportionate adverse effect on such party, or (7) the
announcement of this Agreement and of the transactions contemplated by this
Agreement, or (ii) the ability of such party and its Subsidiaries to consummate
the transactions contemplated hereby.
(b) The
Company Bank is a commercial bank duly organized, validly existing and in good
standing under the laws of Commonwealth of Pennsylvania. The deposit
accounts of the Company Bank are insured by the FDIC through the Deposit
Insurance Fund to the fullest extent permitted by law, and all premiums and
assessments required to be paid in connection therewith have been
paid. The Company’s other Subsidiaries are duly organized, validly
existing and in good standing under the laws of their respective jurisdictions
of incorporation or organization. Each of the Company’s Subsidiaries
has the corporate (or equivalent) power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted
and is duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or the location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be licensed or qualified
would not have a Material Adverse Effect on such Subsidiary. The
articles of incorporation, bylaws and similar governing documents of each
Subsidiary of the Company, copies of which have previously been made available
to Parent, are true and correct copies of such documents as in effect as of the
date of this Agreement. As used in this Agreement, the word
“Subsidiary” when used with respect to any party means any corporation, limited
liability company, partnership or other organization, whether incorporated or
13
unincorporated,
which is consolidated with such party for financial reporting purposes and also
includes any statutory trust, if such trust is not consolidated for financial
reporting.
(c) The
minute books of the Company and each of its Subsidiaries contain true and
correct records of all meetings and other corporate (or equivalent) actions held
or taken since January 1, 2005 through September 30, 2008 of their respective
shareholders, members or partners, as the case may be, and Boards of Directors
or similar governing authority (including committees thereof).
4.2. Capitalization.
(a) As of the
date of this Agreement, the authorized capital stock of the Company consists of
20,000,000 shares of Company Common Stock, $0.01 par value per share and
10,000,000 shares of preferred stock, $0.01 par value per share. As
of October 31, 2008, there were 10,614,950 shares of Company Common Stock issued
and outstanding, no shares of preferred stock of the Company issued or
outstanding and 416,303 shares of Company Common Stock held in the Company’s
treasury. As of the date of this Agreement, there were no shares of
Company Common Stock reserved for issuance upon exercise of outstanding stock
options or otherwise except for 1,540,000 shares of Company Common Stock
reserved pursuant to the Company Option Plan and 1,661,538 shares of Company
Common Stock reserved for issuance upon the conversion of the outstanding
convertible Company Trust Preferred Securities. All of the issued and
outstanding shares of Company Common Stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. Except as
referred to above or reflected in Section 4.2(a) of the Company Disclosure
Schedule, the Company does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of Company Common
Stock or any other equity security of the Company or any securities representing
the right to purchase or otherwise receive any shares of Company Common Stock or
any other equity security of the Company. As of the date of this
Agreement, the names of the optionees or grantees of restricted stock, the grant
date of each option to purchase Company Common Stock or restricted stock grant,
the number of shares subject to each such option or grant, the restriction
period of each restricted stock grant and the price at which each such option
may be exercised under the Company Option Plans are set forth in Section 4.2(a)
of the Company Disclosure Schedule. Each Company Option was granted with an
exercise price of not less than fair market value of a share of Company Common
Stock as of the date such Company Option was granted and there has been no
backdating of any Company Option.
(b) Section
4.2(b) of the Company Disclosure Schedule sets forth a true and correct list of
all of the Subsidiaries of the Company. Except for the Company Trust
Preferred Securities and as set forth in Section 4.2(b) of the Company
Disclosure Schedule, the Company owns, directly or indirectly, all of the issued
and outstanding shares of the capital stock or other equity interests of each of
such Subsidiaries, free and clear of all liens, charges, encumbrances and
security interests whatsoever, and all of such shares or equity interests are
duly authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. No Subsidiary of the Company, other than the Company Trusts,
is bound by any outstanding subscriptions, options,
14
warrants,
calls, commitments or agreements of any character calling for the purchase or
issuance of any shares of capital stock or any other equity interest of such
Subsidiary or any securities representing the right to purchase or otherwise
receive any shares of capital stock or any other equity interest of such
Subsidiary.
4.3. Authority; No
Violation.
(a) The
Company has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of the Company. The Board of Directors of the
Company has directed that this Agreement and the transactions contemplated
hereby be submitted to the Company’s shareholders for approval and adoption at a
meeting of such shareholders and, except for the approval and adoption of this
Agreement by the requisite vote of the Company’s shareholders, no other
corporate proceedings on the part of the Company are necessary to approve and
adopt this Agreement and to consummate the Merger. This Agreement has
been duly and validly executed and delivered by the Company and (assuming due
authorization, execution and delivery by Parent) this Agreement constitutes a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency, receivership and similar laws affecting creditors’
rights and remedies generally.
(b) Except as
may be set forth in Section 4.3(b) of the Company Disclosure Schedule, neither
the execution and delivery of this Agreement by the Company, nor the
consummation by the Company of the transactions contemplated hereby, nor
compliance by the Company with any of the terms or provisions hereof, will (i)
violate any provision of the Articles of Incorporation or Bylaws of the Company
or the articles of incorporation, bylaws or similar governing documents of any
of its Subsidiaries, or (ii) assuming that the consents and approvals referred
to in Section 4.4 hereof are duly obtained, (x) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to the Company or any of its Subsidiaries, or any of their respective
properties or assets, or (y) violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation of any lien,
pledge, security interest, charge or other encumbrance upon any of the
respective material properties or assets of the Company or any of its
Subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Company or any of its Subsidiaries is a
party, or by which they or any of their respective material properties or assets
may be bound or affected, except for such as would not have a Material Adverse
Effect.
4.4. Consents and
Approvals. Except
for (a) the filing with the SEC of the Proxy Statement-Prospectus, the filing of
such reports under Section 13(a) of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby, (b) the
approval of this Agreement by the requisite vote of the shareholders of the
Company, (c)
15
the
filing of the Articles of Merger with the Department, (d) supplemental
indentures with trustees of the Company Trusts, and (e) such filings,
authorizations or approvals as may be set forth in Section 4.4 of the Company
Disclosure Schedule, no consents or approvals of or filings or registrations
with any court, administrative agency or commission or other governmental
authority or instrumentality (each a “Governmental Entity”) or with any third
party are required to be made by the Company in connection with (1) the
execution and delivery by the Company of this Agreement and (2) the consummation
by the Company of the Merger.
4.5. SEC
Reports. The
Company has previously made available to Parent a true and correct copy of each
(a) final registration statement, prospectus, report, schedule and definitive
proxy statement filed since December 31, 2004 by the Company with the SEC
pursuant to the Securities Act or the Exchange Act (the “Company Reports”) and
(b) communication mailed by the Company to its shareholders since December 31,
2004, and no such Company Report (either when filed or at its effective time, if
applicable) or communication (when mailed) contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading, except that information
as of a later date shall be deemed to modify information as of an earlier
date. The Company has filed all Company Reports and other documents
required to be filed by it under the Securities Act and the Exchange Act since
December 31, 2004, and, as of their respective dates, all Company Reports
complied in all material respects with the published rules and regulations of
the SEC with respect thereto.
4.6. Regulatory
Reports. Except
as may be set forth in Section 4.6 of the Company’s Disclosure Schedule, the
Company and each of its Subsidiaries have timely filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they were required to file since December 31, 2004
with any agency regulating its business (each a “Regulatory Agency”), including
(i) the Federal Reserve Board, (ii) the FDIC, (iii) the Pennsylvania Department
of Banking or the New Jersey Department of Banking and Insurance (each a “State
Regulator”) and (iv) the NASDAQ Stock Market, and have paid all fees and
assessments due and payable in connection therewith. Except for
normal examinations conducted by a Regulatory Agency in the regular course of
the business of the Company and its Subsidiaries, and except as may be set forth
in Section 4.6 of the Company Disclosure Schedule, no Regulatory Agency has
initiated any proceeding or, to the knowledge of the Company, investigation into
the business or operations of the Company or any of its Subsidiaries since
December 31, 2004, and there is no unresolved violation, criticism, or exception
by any Regulatory Agency with respect to any report or statement relating to any
examinations of the Company or any of its Subsidiaries, where the relevant
Regulatory Agency has communicated that such violation, criticism, or exception,
if left unresolved, shall result in an enforcement action, or where such
constitutes a violation of an existing enforcement action.
4.7. Financial
Statements. The
Company has previously made available to Parent copies of (a) the consolidated
balance sheet of the Company and its Subsidiaries (other than the Company
Trusts) as of December 31 for the fiscal year 2007, and the related consolidated
statements of income, shareholders’ equity and cash flows for the fiscal years
2006 and 2007, accompanied by the audit report of its independent public
accountants with respect to the Company (the “2007 Audited Financial
Statements”) and (b) the consolidated balance sheet
16
of the
Company and its Subsidiaries (other than the Company Trusts) as of June 30,
2008, and the related consolidated statements of income, shareholders’ equity
and cash flows for the six-month period then ended (the “June 30 Unaudited
Financial Statements”). Except as described in Section 4.7 of the
Company Disclosure Schedule, each of the December 31, 2007 and June 30, 2008
consolidated balance sheets of the Company (including the related notes, where
applicable) fairly present the consolidated financial position of the Company
and its Subsidiaries (other than the Company Trusts) as of the date of such
balance sheet, and the other financial statements referred to in this Section
4.7 (including the related notes, where applicable) fairly present, and the
financial statements to be filed with the SEC after the date hereof will fairly
present (subject, in the case of each of the unaudited statements, to recurring
audit adjustments normal in nature and amount), the results of the consolidated
operations and consolidated financial position of the Company and its
Subsidiaries (other than the Company Trusts) for the respective fiscal periods
or as of the respective dates therein set forth; each of such statements
(including the related notes, where applicable) complies, and the financial
statements to be filed with the SEC after the date hereof will comply, in all
material respects, with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto; and each of
such statements (including the related notes, where applicable) has been, and
the financial statements to be filed with the SEC after the date hereof will be,
prepared in accordance with GAAP consistently applied during the periods
involved, except as indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC. The books and
records of the Company and its Subsidiaries are being maintained in accordance
with GAAP and any other applicable legal and accounting
requirements.
4.8. Broker’s
Fees. Neither
the Company nor any Subsidiary of the Company nor any of their respective
officers or directors has employed any broker or finder or incurred any
liability for any broker’s fees, commissions or finder’s fees in connection with
any of the transactions contemplated by this Agreement, except that the Company
has engaged, and will pay a fee or commission to, Sandler in accordance with the
terms of a letter agreement dated August 21, 2008, between Sandler and the
Company, a true and correct copy of which has been previously made available by
the Company to Parent.
4.9. Absence of Certain Changes
or Events.
(a) Except as
may be set forth in Section 4.9(a) of the Company Disclosure Schedule, or as
disclosed in the 2007 Audited Financial Statements or the June 30 Unaudited
Financial Statements (together the “Financial Statements”) or any Company Report
(as defined in Section 4.5) filed with the SEC prior to the date of this
Agreement, since December 31, 2007, neither the Company nor any Subsidiary of
the Company, as applicable, had any liabilities, obligations or loss
contingencies of any nature (whether absolute, accrued, contingent or otherwise)
of a type required to be reflected in such Financial Statements or the footnotes
thereto or any Company Report which are not fully reflected or reserved against
therein or fully disclosed in a footnote thereto, except for liabilities,
obligations and loss contingencies which are not material individually or in the
aggregate or which are incurred in the ordinary course of business, consistent
with past practice and subject, in the case of any unaudited statements, to
normal, recurring audit adjustments and the absence of footnotes.
17
(b) Except as
may be set forth in Section 4.9(b) of the Company Disclosure Schedule or as
disclosed in the Financial Statements or any Company Report filed with the SEC
prior to the date of this Agreement, since December 31, 2007 the Company and its
Subsidiaries have carried on their respective businesses in the ordinary course
consistent with their past practices.
(c) Except as
may be set forth in Section 4.9(c) of the Company Disclosure Schedule, since
December 31, 2007 neither the Company nor any of its Subsidiaries has (i) with
respect to any executive officer or director, increased the wages, salaries,
compensation, pension, or other fringe benefits or perquisites payable from the
amount thereof in effect as of December 31, 2007 (other than increases in wages
or salaries with respect to any such individual equaling less than 10%), granted
any severance or termination pay, entered into any contract to make or grant any
severance or termination pay, or paid any bonus (except for bonus payments and
severance or termination payments made in the ordinary course of business
consistent with past practices), (ii) suffered any strike, work stoppage,
slowdown, or other labor disturbance, (iii) been a party to a collective
bargaining agreement, contract or other agreement or understanding with a labor
union or organization, or (iv) had any union organizing activities.
4.10. Legal
Proceedings.
(a) Except as
may be set forth in Section 4.10(a) of the Company Disclosure Schedule, neither
the Company nor any of its Subsidiaries is a party to any, and there are no
pending or, to the Company’s knowledge, threatened, legal, administrative,
arbitral or other proceedings, claims, actions or governmental or regulatory
investigations of any nature, against the Company or any of its Subsidiaries,
including any such proceeding requesting equitable relief or challenging the
validity or propriety of the transactions contemplated by this
Agreement.
(b) Except as
may be set forth in Section 4.10(b) of the Company Disclosure Schedule, there is
no injunction, order, judgment or decree imposed upon the Company, any of its
Subsidiaries or the assets of the Company or any of its
Subsidiaries.
4.11. Taxes.
(a) Except as
may be set forth in Section 4.11(a) of the Company Disclosure Schedule, each of
the Company and its Subsidiaries has (i) duly and timely filed (including
applicable extensions granted without penalty) all material Tax Returns (as
hereinafter defined) required to be filed at or prior to the Effective Time, and
all such Tax Returns are true and correct in all material respects, and (ii)
paid in full or made adequate provision in the financial statements of the
Company (in accordance with GAAP) for all Taxes required to be paid by them,
whether or not shown to be due on such Tax Returns.
(b) Except as
set forth in Section 4.11(b) of the Company Disclosure Schedule, as of the date
hereof (i) neither the Company nor any of its Subsidiaries has requested any
extension of time within which to file any Tax Returns in respect of any taxable
year which have not since been filed and no request for waivers or agreements
for extension of the time to assess any Taxes are pending, outstanding or in
effect; (ii) with respect to each taxable period of
18
the
Company and its Subsidiaries, the federal and state income Tax Returns of the
Company and its Subsidiaries have been audited by the IRS or appropriate state
tax authorities through December 31, 2004 or the time for
assessing and collecting income Tax with respect to such taxable period has
closed and such taxable period is not subject to review; (iii) there are no
claims, audits or assessments pending against the Company or any of its
Subsidiaries for any alleged deficiency in Taxes, and the Company has not been
notified in writing of any proposed Tax claims, audits or assessments against
the Company or any of its Subsidiaries (other than, in each case, claims, audits
or assessments for which adequate reserves in the financial statements of the
Company have been established); (iv) there are no material liens for Taxes upon
the assets of the Company or any of its Subsidiaries, other than liens for
current Taxes not yet due and payable or contested in good faith by appropriate
proceedings; (v) all Taxes required to be withheld, collected or deposited by or
with respect to the Company and its Subsidiaries have been timely withheld,
collected or deposited, as the case may be, and, to the extent required, have
been paid to the relevant taxing authority; (vi) neither the Company nor any of
its Subsidiaries is required to include in income any adjustment pursuant to
Section 481(a) of the Code (or any similar provision of law or regulations) by
reason of a change in accounting method; (vii) except with respect to the
affiliated group of corporations of which the Company is the common parent (as
defined by Section 1504(a) of the Code), neither the Company nor any of its
Subsidiaries is a party to any Tax allocation or Tax sharing agreement or
otherwise has any liability for the Taxes of any person (A) as a transferee or
successor, (B) by contract, (C) under Section 1.1502-6 of the Treasury
regulations (or any similar provision of state, local or foreign Law), or (D)
otherwise; (viii) neither the Company nor any of its Subsidiaries has entered
into any transaction that is either a “listed transaction” or that the Company
believes in good faith is a “reportable transaction” (both as defined in Treas.
Reg. Section 1.6011-4, as modified by periodically updated Revenue Procedures
and other applicable published Internal Revenue Service guidance); (ix) neither
the Company nor any of its Subsidiaries has been a “United States real property
holding corporation” within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code; and (x)
neither the Company nor and of its Subsidiaries has been a distributing
corporation or controlled corporation in a transaction within the past three
years intended or purported to be governed by Code Section 355 or
361.
4.12. Employees.
(a) Section
4.12(a) of the Company Disclosure Schedule sets forth a true and correct list of
each deferred compensation plan, incentive compensation plan, equity
compensation plan, “welfare” plan, fund or program (within the meaning of
Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”)); “pension” plan, fund or program (within the meaning of Section 3(2)
of ERISA); each employment, termination or severance agreement; and each other
employee benefit plan, fund, program, agreement or arrangement, in each case,
that is sponsored, maintained or contributed to or required to be contributed to
by the Company or any of its ERISA Affiliates, for the benefit of any employee
or former employee, director or consultant of the Company or any Subsidiary or
with respect to which the Company or any Subsidiary has any liability or
obligation, contingent or otherwise (the “Plans”).
19
(b) The
Company has heretofore made available to Parent with respect to each of the
Plans true and correct copies of each of the following documents, if applicable:
(i) the Plan document and any amendment thereto (or if there is no Plan
document, a summary of the material terms of the Plan); (ii) any related trust
or other funding vehicle; (iii) the actuarial report and annual report for such
Plan for the most recent two years for which such reports are available; (iv)
the most recent determination letter from the IRS for such Plan, and (v) the
most recent summary plan description and related summaries of material
modifications.
(c) Except as
may be set forth in Section 4.12(c) of the Company Disclosure Schedule: each of
the Plans has been established and has at all times been operated and
administered in material compliance with the applicable law, including the Code
and ERISA; there is no material liability relating to the Plans (with
materiality determined with respect to the Plans in the aggregate) that has not
been disclosed on the Company’s financial statements in accordance with GAAP and
any other applicable legal and accounting requirements and such liability with
respect to any Plan will not materially increase as a result of the Merger; with
respect to each of the Plans intended to be “qualified” within the meaning of
Section 401(a) of the Code, the Company has received a favorable determination
notification or opinion letter from the IRS, and, to the Company’s knowledge, no
event has occurred that would reasonably be expected to affect such
determination; each of the Plans has been timely amended to comply with current
law and regulations (or time remains to make such amendments under Section
401(b) of the Code or other similar statutory, regulatory or administrative
relief); no Plan has an accumulated or waived funding deficiency within the
meaning of Section 412 of the Code; neither the Company nor any of its ERISA
Affiliates has incurred, directly or indirectly, any current or contingent
liability to or on account of a Plan pursuant to Title IV of ERISA (other than
liability for premiums due the PBGC (which premiums have been paid when due));
to the knowledge of the Company, no proceedings have been instituted to
terminate any Plan that is subject to Title IV of ERISA; no “reportable event,”
as such term is defined in Section 4043(c) of ERISA, has occurred with respect
to any Plan that is subject to Title IV of ERISA (other than a reportable event
with respect to which the thirty day notice period has been waived); to the
Company’s knowledge, no non-exempt “prohibited transaction” (within the meaning
of Section 4975 of the Code or Section 406 of ERISA) or breach of any fiduciary
duty described in Section 404 of ERISA has occurred that could result in any
material liability, direct or indirect, for the Company or any of its ERISA
Affiliates or any shareholder, officer, director or employee of the Company or
an ERISA Affiliate; except as required by COBRA or any similar State law,
neither the Company nor any of its Subsidiaries has any liability with respect
to post-termination health, medical or life insurance benefits for retired,
former or current employees of the Company or any of its Subsidiaries; each Plan
that is a group health plan (within the meaning of section 5000(b)(1) of the
Code) complies, and in each and every case has complied, with all material
requirements of ERISA and section 4980B of the Code; no condition exists that
presents a material risk to the Company of incurring a liability to or on
account of a Plan pursuant to Title IV of ERISA (other than liability for
premiums due the PBGC); all amounts that the Company and its ERISA Affiliates
are required to pay as contributions to the Plans as of the last day of the most
recent fiscal year of each of the Plans have been paid or properly accrued; all
benefits accrued under any funded or unfunded Plan have been paid, accrued or
otherwise adequately reserved in accordance with GAAP; and all monies withheld
from employee paychecks with respect to Plans have been transferred to the
appropriate Plan or otherwise applied to pay premiums or benefits in a timely
manner as required by applicable law; no contract, Plan or
20
arrangement
(written or otherwise) (including provisions that become operative by virtue of
this Agreement) covering any disqualified individual (within the meaning of
Section 280G(c) of the Code) of the Company or any of its Subsidiaries provides
for payments (including but not limited to liability associated with any
gross-up payment under any such contract, Plan or arrangement) that may result
in any nondeductible compensation under Section 280G(a) of the Code or may
result in an excise tax payable by such disqualified individuals under Section
4999 of the Code solely as a result of the transactions contemplated by this
Agreement; neither the Company nor any of its ERISA Affiliates have ever
participated in or contributed to (or been required to contribute to) a
multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA); there
are no pending or, to the knowledge of the Company, threatened or anticipated
(i) claims (other than routine claims for benefits) by, on behalf of or
against any of the Plans or any trusts related thereto, or (ii) any audit
or investigation by any Governmental Entity with respect to a Plan; each Plan
that is subject to Section 409A of the Code has been maintained and operated in
good faith based on the regulations promulgated by the IRS and related IRS
guidance issued with respect to Section 409A of the Code; all persons classified
by the Company or its ERISA Affiliates as independent contractors satisfy and
have at all times satisfied the requirements of applicable law to be so
classified; and the Company and its ERISA Affiliates have fully and accurately
reported their compensation on IRS Forms 1099 when required to do so; and no
individuals are currently providing services to the Company or its ERISA
Affiliates pursuant to an employee leasing agreement or similar type of
arrangement, nor is the Company or its ERISA Affiliates party to any such
arrangement.
4.13. Company
Information. The
information relating to the Company and its Subsidiaries which is provided to
Parent by the Company for inclusion in the Proxy Statement-Prospectus and the
registration statement on Form S-4 (the “S-4”) in which the Proxy
Statement-Prospectus will be included or in any other document filed with any
Regulatory Agency in connection herewith, will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances in which they are made, not
misleading. The Proxy Statement-Prospectus (except for such portions
thereof that relate to Parent or any of its Subsidiaries) will comply with the
provisions of the Exchange Act and the rules and regulations
thereunder.
4.14. Compliance with Applicable
Law. The
Company and each of its Subsidiaries holds all material licenses, franchises,
permits and authorizations necessary for the lawful conduct of their respective
businesses under and pursuant to all, and have complied, in all material
respects, with and are not in default in any material respect under any, law,
statute, order, rule, regulation, policy and/or guideline of any Governmental
Entity applicable to the Company or any of its Subsidiaries, and neither the
Company nor any of its Subsidiaries has received notice of any violations of any
of the above.
4.15. Certain
Contracts.
(a) Except as
set forth in Section 4.15(a) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries is a party to or bound by any contract
(whether written or oral) (i) with respect to the employment of any directors,
(ii) which, upon the consummation of the transactions contemplated by this
Agreement, will result in any payment or benefits (whether of severance pay or
otherwise) becoming due that would not otherwise be
21
payable
in the absence of the transactions contemplated by this Agreement, or the
acceleration, increase or vesting of any rights to any payment or benefits, from
Parent, the Company, the Surviving Corporation or any of their respective
Subsidiaries to any officer, director or consultant of the Company or any of its
Subsidiaries, (iii) as of the date of this Agreement which is a material
contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC) to be
performed after the date of this Agreement that has not been filed or
incorporated by reference in the Company Reports, (iv) which is a consulting
agreement (including data processing, software programming and licensing
contracts) not terminable on 90 days or less notice involving the payment of
more than $100,000 per annum in the case of any one such agreement or $200,000
in total payments in the case of any one such agreement, or (v) which materially
restricts the conduct of any line of business by the Company or any of its
Subsidiaries. Each contract of the type described in clause (iii) of
this Section 4.15(a), whether or not set forth in Section 4.15(a) of the Company
Disclosure Schedule, is referred to herein as a “Company
Contract.” The Company has previously delivered or made available to
Parent true and correct copies of each contract of the type described in Section
4.15(a) of the Company Disclosure Schedule.
(b) Except as
set forth in Section 4.15(b) of the Company Disclosure Schedule, (i) each
Company Contract is valid and binding and in full force and effect, (ii) the
Company and each of its Subsidiaries has performed all obligations required to
be performed by it to date under each Company Contract, (iii) no event or
condition exists which, to the knowledge of the Company, constitutes or, after
notice or lapse of time or both, would constitute, a default on the part of the
Company or any of its Subsidiaries under any Company Contract, and (iv) no other
party to any Company Contract is, to the knowledge of the Company, in default in
any material respect thereunder.
4.16. Agreements with Regulatory
Agencies. Except
as may be set forth in Section 4.16 of the Company Disclosure Schedule, neither
the Company nor any of its Subsidiaries is or since December 31, 2004 has been
subject to any cease-and-desist or other order issued by, or is a party to any
written agreement, consent agreement or memorandum of understanding with, or is
a party to any commitment letter or similar undertaking to, or is subject to any
order or directive by, or is a recipient of any extraordinary supervisory letter
from, or has adopted any board resolution at the request of any Regulatory
Agency (each, whether or not set forth on Section 4.16 of the Company Disclosure
Schedule, a “Regulatory Agreement”), that restricts the conduct of its business
or that in any manner relates to its capital adequacy, its credit policies, its
management or its business, nor has the Company or any of its Subsidiaries been
advised by any Regulatory Agency that it is considering issuing or requesting
any Regulatory Agreement.
4.17. Environmental
Matters. Except
as may be set forth in Section 4.17 of the Company Disclosure
Schedule:
(a) To the
knowledge of the Company, each of the Company and its Subsidiaries, and each of
the Participation Facilities and the Loan Properties (each as hereinafter
defined), is in compliance, in all material respects, with applicable federal,
state and local laws, regulations and ordinances, and with all applicable
decrees, orders and contractual obligations relating to pollution or the
discharge of, or exposure to, Hazardous Materials (as hereinafter defined) in
the environment or workplace (“Environmental Laws”);
22
(b) There is
no suit, claim, action or proceeding pending or, to the knowledge of the
Company, threatened, before any Governmental Entity or other forum in which the
Company or any of its Subsidiaries has been named as a defendant, or, to the
knowledge of the Company, the subject of which is any Participation Facility or
any Loan Property, (x) for alleged noncompliance (including by any predecessor)
with any Environmental Laws, or (y) relating to the release, threatened release
or exposure to any Hazardous Material whether or not occurring at or on a site
owned, leased or operated by the Company or any of its Subsidiaries;
and
(c) To the
knowledge of the Company, during the period of (x) the Company’s or any of its
Subsidiaries’ ownership or operation of any of their respective current or
former properties, (y) the Company’s or any of its Subsidiaries’ participation
in the management of any Participation Facility, or (z) the Company’s or any of
its Subsidiaries’ interest in a Loan Property, there has been no release of
Hazardous Materials in, on, under or affecting any such property, Participation
Facility or Loan Property in a manner that requires any material remediation
under any applicable Environmental Law. To the knowledge of the
Company, prior to the period of (x) the Company’s or any of its Subsidiaries’
ownership or operation of any of their respective current or former properties,
(y) the Company’s or any of its Subsidiaries’ participation in the management of
any Participation Facility, or (z) the Company’s or any of its Subsidiaries’
interest in a Loan Property, there was no release of Hazardous Materials in, on,
under or affecting any such property, Participation Facility or Loan Property in
a manner than requires any material remediation under any Environmental
Law.
The
following definitions apply for purposes of this Section 4.17: (x) “Hazardous
Materials” means any chemicals, pollutants, contaminants, wastes, toxic
substances, petroleum or other regulated substances or materials, (y) “Loan
Property” means any property in which the Company or any of its Subsidiaries
holds a security interest; and (z) “Participation Facility” means any facility
in which the Company or any of its Subsidiaries operates or participates in the
management.
4.18. Opinion. Prior
to the execution of this Agreement, the Company has received an opinion from
Sandler to the effect that as of the date thereof and based upon and subject to
the matters set forth therein, the Merger Consideration to be received by the
shareholders of the Company is fair to such shareholders from a financial point
of view.
4.19. Approvals. As
of the date of this Agreement, the Company knows of no reason why all regulatory
approvals required for the consummation of the transactions contemplated hereby
(including, without limitation, the Merger) should not be obtained.
4.20. Loan
Portfolio.
(a) The
Company has made available to Parent (including by making available to Parent
copies of all material documentation) (i) all of the following loan agreements,
notes and borrowing arrangements of the Company or any Subsidiary (including
leases, credit enhancements, commitments, guarantees and interest-bearing
assets) (collectively, “Company Loans”): (x) Company Loans the unpaid principal
balance of which exceeds $250,000, under the terms of which the obligor was, as
of September 30, 2008, over 90 days delinquent in payment of
23
principal
or interest, (y) Company Loans the unpaid principal balance of which exceeds
$250,000, and that were as of September 30, 2008 classified by any bank examiner
(whether regulatory or internal) as “Special Mention,” “Substandard,”
“Doubtful,” “Loss” or words of similar import and (z) Company Loans the
unpaid principal balance of which exceeds $250,000, and that were on non-accrual
status as of September 30, 2008; (ii) any Company Loan with any director,
executive officer or five percent or greater shareholder of the Company or any
of its Subsidiaries, or to the knowledge of the Company, any person, corporation
or enterprise controlling, controlled by or under common control with any of the
foregoing; and (iii) each asset of the Company that as of September 30, 2008,
was classified as “Other Real Estate Owned,” and the book value
thereof.
(b) To the
knowledge of the Company, each Company Loan in original principal amount in
excess of $250,000 (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and what they purport to be, (ii) to the
extent secured, has been secured by valid liens and security interests and (iii)
is the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditors’ rights and to general equity principles.
4.21. Property. Except
as set forth in Section 4.21 of the Company Disclosure Schedule, each of the
Company and its Subsidiaries has good and marketable title free and clear of all
liens, encumbrances, mortgages, pledges, charges, defaults or equitable
interests to all of the properties and assets, real and personal, tangible or
intangible, which are reflected on the consolidated balance sheet of the Company
as of December 31, 2007 or, if acquired after such date, would be required to be
reflected on a consolidated balance sheet of the Company prepared after the date
of such acquisition except (i) liens for Taxes not yet due and payable or
contested in good faith by appropriate proceedings, (ii) pledges to secure
deposits and other liens incurred in the ordinary course of business, (iii) such
imperfections of title, easements and encumbrances, if any, as do not interfere
with the use of the respective property as such property is used on the date of
this Agreement, (iv) for dispositions of or encumbrances on such properties or
assets in the ordinary course of business, (v) mechanics’, materialmen’s,
workmen’s, repairmen’s, warehousemen’s, carrier’s and other similar liens and
encumbrances arising in the ordinary course of business, (vi) liens securing
obligations that are reflected in such consolidated balance sheet or (vii) the
lessor’s interest in any such property that is leased. All leases
pursuant to which the Company or any of its Subsidiaries, as lessee, leases real
or personal property are valid and enforceable in accordance with their
respective terms, subject to bankruptcy, insolvency, fraudulent conveyance and
other laws of general applicability relating to or affecting creditors’ rights
and to general equity principles, and neither the Company nor any of its
Subsidiaries nor, to the knowledge of the Company, any other party thereto, is
in default thereunder.
4.22. Reorganization. As
of the date of this Agreement, the Company has no reason to believe that the
Merger will fail to qualify as a reorganization under Section 368(a) of the
Code.
4.23. State Takeover Laws and
Charter Provisions. Assuming
the accuracy of the representations and warranties of Parent set forth in
Section 5.18 hereof, the Company has taken all necessary action to exempt the
transactions contemplated by this Agreement from all
24
applicable
state takeover laws and any comparable provisions in the Articles of
Incorporation or Bylaws of the Company.
4.24. Insurance. The
Company and its Subsidiaries have policies of insurance to which the Company or
its Subsidiaries are parties or that provide coverage to the Company and its
Subsidiaries and all such policies: are valid and enforceable; are issued by
insurers that are financially sound and reputable; taken together, provide
reasonably adequate insurance coverage for the assets and the operations of the
Company and its Subsidiaries for all risks normally insured against by a person
carrying on the same business or businesses as the Company and its Subsidiaries;
and are sufficient for compliance with all legal
requirements. Neither the Company nor any Subsidiary has received (a)
any refusal of coverage or any notice that a defense will be afforded with
reservation of rights or (b) any notice of cancellation or any other indication
that any policy of insurance is no longer in full force or effect or that the
issuer of any policy of insurance is not willing or able to perform its
obligations thereunder.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF PARENT
Subject
to Article III and the Parent Disclosure Schedule, Parent hereby represents and
warrants to the Company as follows:
5.1. Corporate
Organization.
(a) Parent is
a corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania. Parent has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted, and is duly licensed or
qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be licensed or qualify would not have a Material
Adverse Effect on the Parent. Parent is duly registered as a bank
holding company under the BHC Act. The Articles of Incorporation and
Bylaws of Parent, copies of which have previously been made available to the
Company, are true and correct copies of such documents as in effect as of the
date of this Agreement.
(b) Each
Subsidiary of Parent is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or
organization. Each Subsidiary of Parent has the corporate (or
equivalent) power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be licensed or qualify would not have a Material
Adverse Effect on the Subsidiary of Parent. The deposit accounts of
the Parent Bank are insured by the FDIC through the Deposit Insurance Fund to
the fullest extent permitted by law, and all premiums and assessments required
in connection therewith have been paid when due. The charter and
bylaws of the Parent Bank, copies of which
25
have
previously been made available to the Company, are true and correct copies of
such documents as in effect as of the date of this Agreement.
(c) The
minute books of Parent and each of its Subsidiaries contain true and correct
records of all meetings and other corporate (or equivalent) actions held or
taken since January 1, 2005 through September 30, 2008 of their respective
shareholders, members or partners, as the case may be, and Boards of Directors
or similar governing authority (including committees thereof).
5.2. Capitalization.
(a) As of the
date of this Agreement, the authorized capital stock of Parent consists of
10,000,000 shares of Parent Common Stock, $1.00 par value per share, and
1,000,000 shares of Parent preferred stock, $10.00 par value per
share. As of October 31, 2008, there were 6,374,356 shares of Parent
Common Stock issued and outstanding, 40,000 shares of Parent preferred stock
issued and outstanding and no shares of Parent Common Stock held in Parent’s
treasury. As of October 31, 2008, an aggregate of 1,073,394 shares of
Parent Common Stock were (i) reserved for issuance upon the exercise of stock
options pursuant to Parent’s 1990 Directors Stock Option Plan, 1996 Employee
Stock Option Plan, 2001 Directors Stock Option Plan and 2006 Employee Stock
Option Plan or (ii) issuable pursuant to Parent’s Dividend Reinvestment and
Stock Purchase Plan, SmartBuy Stock Purchase Plan and Warrant Agreement dated
October 7, 1988 with Commerce Bancorp, Inc.
All of
the issued and outstanding shares of Parent Common Stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. As of the date of this Agreement, except as referred to
above or reflected in Section 5.2(a) of the Parent Disclosure Schedule, Parent
does not have and is not bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of Parent Common Stock or any other equity
securities of Parent or any securities representing the right to purchase or
otherwise receive any shares of Parent Common Stock or any other equity
securities of Parent. The shares of Parent Common Stock to be issued
pursuant to the Merger will be duly authorized and validly issued and, at the
Effective Time, all such shares will be fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof.
(b) Section
5.2(b) of the Parent Disclosure Schedule sets forth a true and correct list of
all of the Subsidiaries of Parent. Except as may be set forth in
Section 5.2(b) of the Parent Disclosure Schedule, Parent owns, directly or
indirectly, all of the issued and outstanding shares of capital stock or other
equity interests of each of the Subsidiaries of Parent, free and clear of all
liens, charges, encumbrances and security interests whatsoever, and all of such
shares or equity interests are duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. No Subsidiary of Parent is bound
by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of capital stock or any other equity interest of such Subsidiary or any
securities
26
representing
the right to purchase or otherwise receive any shares of capital stock or any
other equity interest of such Subsidiary.
5.3. Authority; No
Violation.
(a) Parent
has full corporate power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly approved by the Board of Directors of
Parent. The Board of Directors of Parent has directed that this
Agreement and the transactions contemplated hereby be submitted to Parent’s
shareholders for approval and adoption at a meeting of such shareholders and,
except for the approval and adoption of this Agreement and the Authorized Share
Amendment by the requisite vote of Parent’s shareholders, no other corporate
proceedings on the part of Parent are necessary to approve and adopt this
Agreement and to consummate the Merger. This Agreement has been duly
and validly executed and delivered by Parent and (assuming due authorization,
execution and delivery by the Company) this Agreement constitutes a valid and
binding obligation of Parent, enforceable against Parent in accordance with its
terms, except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy,
insolvency, receivership and similar laws affecting creditors’ rights and
remedies generally.
(b) Except as
may be set forth in Section 5.3(b) of the Parent Disclosure Schedule, neither
the execution and delivery of this Agreement by Parent, nor the consummation by
Parent of the transactions contemplated hereby, nor compliance by Parent with
any of the terms or provisions hereof, will (i) violate any provision of the
Articles of Incorporation or Bylaws of Parent, or the articles of incorporation,
bylaws or similar governing documents of any of its Subsidiaries or (ii)
assuming that the consents and approvals referred to in Section 5.4 are duly
obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to Parent or any of its
Subsidiaries or any of their respective properties or assets, or (y) violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right
of termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective material properties or assets of Parent
or any of its Subsidiaries under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party, or by which they or any of their respective properties or assets may be
bound or affected, except for such as would not have a Material Adverse
Effect.
5.4. Consents and
Approvals. Except
for (a) the filing of applications and notices, as applicable, with the Federal
Reserve Board under the BHC Act, and approval of such applications and notices,
(b) the filing with the SEC of the Proxy Statement-Prospectus and the filing and
declaration of effectiveness of the S-4, (c) the approval and adoption of this
Agreement, the Authorized Share Amendment and the issuance of shares of Parent
Common Stock pursuant to this Agreement by the requisite vote of the
shareholders of Parent, (d) the filing of the Articles of Merger with the
Department, (e) such filings and approvals as are
27
required
to be made or obtained under the securities or “Blue Sky” laws of various states
in connection with the issuance of the shares of Parent Common Stock pursuant to
this Agreement, (f) approval of the listing of the Parent Common Stock to be
issued in the Merger on the NASDAQ Stock Market, (g) approval and/or filings in
connection therewith pursuant to the Pennsylvania Banking Code, as amended, and
(h) such filings, authorizations or approvals as may be set forth in Section 5.4
of the Parent Disclosure Schedule, no consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are required
to be made by Parent in connection with (1) the execution and delivery by Parent
of this Agreement and (2) the consummation by Parent of the Merger.
5.5. SEC
Reports. Parent
has previously made available to the Company a true and correct copy of each (a)
final registration statement, prospectus, report, schedule and definitive proxy
statement filed since December 31, 2004 by Parent with the SEC pursuant to the
Securities Act or the Exchange Act (the “Parent Reports”) and (b) communication
mailed by Parent to its shareholders since December 31, 2004, and no such Parent
Report (when filed and at its respective effective time, if applicable) or
communication (when mailed) contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances in which
they were made, not misleading, except that information as of a later date shall
be deemed to modify information as of an earlier date. Parent has
filed all Parent Reports and other documents required to be filed by it under
the Securities Act and the Exchange Act since December 31, 2004, and, as of
their respective dates, all Parent Reports complied in all material respects
with the published rules and regulations of the SEC with respect
thereto.
5.6. Regulatory
Reports. The
Parent and each of its Subsidiaries have filed all reports, registrations and
statements, together with any amendments required to be made with respect
thereto, that they were required to file since December 31, 2004 with each
Regulatory Agency, including (i) the Federal Reserve Board, (ii) the Office of
the Comptroller of the Currency, (iii) FDIC, (iv) any State Regulator and (v)
the NASDAQ Stock Market, and have paid all fees and assessments due and payable
in connection therewith. Except as described in Section 5.6 of the
Parent Disclosure Schedule and normal examinations conducted by a Regulatory
Agency in the regular course of the business of the Parent and its Subsidiaries,
(x) no Regulatory Agency has initiated any proceeding or, to the knowledge of
the Parent, investigation into the business or operations of the Parent or any
of its Subsidiaries since December 31, 2004; and (y) there is no unresolved
violation, criticism, or exception by any Regulatory Agency with respect to any
report or statement relating to any examinations of the Parent or any of its
Subsidiaries, where the relevant Regulatory Agency has communicated that such
violation, criticism, or exception, if left unresolved, shall result in an
enforcement action, or where such constitutes a violation of an existing
enforcement action.
5.7. Financial
Statements. Parent
has previously made available to the Company copies of (a) the consolidated
balance sheet of the Parent and its Subsidiaries as of December 31 for the
fiscal year 2007, and the related consolidated statements of income,
shareholders’ equity and cash flows for the fiscal years 2006 and 2007,
accompanied by the audit report of ▇▇▇▇▇ ▇▇▇▇▇▇ Company LLP, independent public
accountants with respect to the Parent (the “2007 Parent Audited Financial
Statements”) and (b) the consolidated balance sheet of the Parent and its
Subsidiaries as of June 30, 2007, and the related consolidated statements of
28
income,
shareholders’ equity and cash flows for the six-month period then ended (the
“June 30 Parent Unaudited Financial Statements”). Each of the
December 31, 2007 and June 30, 2008 consolidated balance sheets of the Parent
(including the related notes, where applicable) fairly present the consolidated
financial position of the Parent and its Subsidiaries as of the date of such
balance sheet, and the other financial statements referred to in this Section
5.7 (including the related notes, where applicable) fairly present, and the
financial statements to be filed with the SEC after the date hereof will fairly
present (subject, in the case of each of the unaudited statements, to recurring
audit adjustments normal in nature and amount), the results of the consolidated
operations and consolidated financial position of the Parent and its
Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth; each of such statements (including the related notes, where
applicable) complies, and the financial statements to be filed with the SEC
after the date hereof will comply, in all material respects, with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto; and each of such statements (including the related notes,
where applicable) has been, and the financial statements to be filed with the
SEC after the date hereof will be, prepared in accordance with GAAP consistently
applied during the periods involved, except as indicated in the notes thereto
or, in the case of unaudited statements, as permitted by Form 10-Q of the
SEC. The books and records of the Parent and its Subsidiaries have
been, and are being, maintained in accordance with GAAP and any other applicable
legal and accounting requirements.
5.8. Broker’s
Fees. Neither
Parent nor any Subsidiary of Parent, nor any of their respective officers or
directors, has employed any broker or finder or incurred any liability for any
broker’s fees, commissions or finder’s fees in connection with any of the
transactions contemplated by this Agreement, except that Parent has engaged, and
will pay a fee or commission to, KBW.
5.9. Absence of Certain Changes
or Events.
(a) Except as
may be set forth in Section 5.9(a) of the Parent Disclosure Schedule, or as
disclosed in the 2007 Parent Audited Financial Statements or the June 30 Parent
Unaudited Financial Statements (together the “Parent Financial Statements”) or
any Parent Report (as defined in Section 5.5) filed with the SEC prior to the
date of this Agreement, since December 31, 2007, neither Parent nor any
Subsidiary of Parent, as applicable, had any liabilities, obligations or loss
contingencies of any nature (whether absolute, accrued, contingent or otherwise)
of a type required to be reflected in such Parent Financial Statements or the
footnotes thereto or any Parent Report which are not fully reflected or reserved
against therein or fully disclosed in a footnote thereto, except for
liabilities, obligations and loss contingencies which are not material
individually or in the aggregate or which are incurred in the ordinary course of
business, consistent with past practice and subject, in the case of any
unaudited statements, to normal, recurring audit adjustments and the absence of
footnotes.
(b) Except as
may be set forth in Section 5.9(b) of the Parent Disclosure Schedule or as
disclosed in the Financial Statements or any Parent Report filed with the SEC
prior to the date of this Agreement, since December 31, 2007 Parent and its
Subsidiaries have carried on their respective businesses in the ordinary course
consistent with their past practices.
29
(c) Except as
may be set forth in Section 5.9(c) of the Parent Disclosure Schedule, since
December 31, 2007 neither Parent nor any of its Subsidiaries has
(i) suffered any strike, work stoppage, slowdown, or other labor
disturbance, (ii) been a party to a collective bargaining agreement, contract or
other agreement or understanding with a labor union or organization, or (iii)
had any union organizing activities.
5.10. Legal
Proceedings.
(a) Except as
may be set forth in Section 5.10(a) of the Parent Disclosure Schedule, neither
the Parent nor any of its Subsidiaries is a party to any, and there are no
pending or, to the Parent’s knowledge, threatened, legal, administrative,
arbitral or other material proceedings, claims, actions or governmental or
regulatory investigations of any nature, against the Parent or any of its
Subsidiaries involving a claim in excess of $250,000 or requesting equitable
relief, including any such proceeding challenging the validity or propriety of
the transactions contemplated by this Agreement.
(b) Except as
may be set forth in Section 5.10(b) of the Parent Disclosure Schedule, there is
no injunction, order, judgment or decree imposed upon the Parent, any of its
Subsidiaries or the assets of the Parent or any of its
Subsidiaries.
5.11. Taxes.
(a) Except as
may be set forth in Section 5.11(a) of the Parent Disclosure Schedule, each of
the Parent and its Subsidiaries has (i) duly and timely filed (including
applicable extensions granted without penalty) all material Tax Returns required
to be filed at or prior to the Effective Time, and all such Tax Returns are true
and correct in all material respects, and (ii) paid in full or made adequate
provision in the financial statements of the Parent (in accordance with GAAP)
for all Taxes required to be paid by them, whether or not shown to be due on
such Tax Returns.
(b) Except as
set forth in Section 5.11(b) of the Parent Disclosure Schedule, as of the date
hereof (i) neither the Parent nor any of its Subsidiaries has requested any
extension of time within which to file any Tax Returns in respect of any fiscal
year which have not since been filed and no request for waivers or agreement for
extension of the time to assess any Taxes are pending, outstanding or in effect;
(ii) with respect to each taxable period of the Parent and its Subsidiaries, the
federal and state income Tax Returns of the Parent and its Subsidiaries have
been audited by the IRS or appropriate state tax authorities through December
31, 2004 or the time for assessing and collecting income Tax with respect to
such taxable period has closed and such taxable period is not subject to review;
(iii) there are no claims, audits or assessments pending against the Parent or
any of its Subsidiaries for any alleged deficiency in Taxes, and the Parent has
not been notified in writing of any proposed Tax claims, audits or assessments
against the Parent or any of its Subsidiaries (other than, in each case, claims,
audits or assessments for which adequate reserves in the financial statements of
the Parent have been established); (iv) there are no material liens for Taxes
upon the assets of the Parent or any of its Subsidiaries, other than liens for
current Taxes not yet due and payable or contested in good faith by appropriate
proceedings; (v) all Taxes required to be withheld, collected or deposited by or
with respect to the Parent and its Subsidiaries have been timely withheld,
collected or deposited,
30
as the
case may be, and, to the extent required, have been paid to the relevant taxing
authority; (vi) neither the Parent nor any of its Subsidiaries is required to
include in income any adjustment pursuant to Section 481(a) of the Code (or any
similar provision of law or regulations) by reason of a change in accounting
method; (vii) except with respect to the affiliated group of corporations of
which the Parent is the common parent (as defined by Section 1504(a) of the
Code), neither the Parent nor any of its Subsidiaries is a party to any Tax
allocation or Tax sharing agreement or otherwise has any liability for the Taxes
of any person (A) as a transferee or successor, (B) by contract, (C) under
Section 1.1502-6 of the Treasury regulations (or any similar provision of state,
local or foreign Law), or (D) otherwise; (viii) neither the Parent nor any of
its Subsidiaries has entered into any transaction that is either a “listed
transaction” or that the Parent believes in good faith is a “reportable
transaction” (both as defined in Treas. Reg. Section 1.6011-4, as modified by
periodically updated Revenue Procedures and other applicable published Internal
Revenue Service guidance); (ix) neither the Parent nor any of its Subsidiaries
has been a “United States real property holding corporation” within the meaning
of Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code; and (x) neither the Parent nor and of its
Subsidiaries has been a distributing corporation or controlled corporation in a
transaction within the past three years intended or purported to be governed by
Code Section 355 or 361.
5.12. Employees.
(a) Section
5.12(a) of the Parent Disclosure Schedule sets forth a true and correct list of
each deferred compensation plan, incentive compensation plan, equity
compensation plan, “welfare” plan, fund or program (within the meaning of
Section 3(1) of ERISA); “pension” plan, fund or program (within the meaning of
Section 3(2) of ERISA); each employment, termination or severance agreement; and
each other employee benefit plan, fund, program, agreement or arrangement, in
each case, that is sponsored, maintained or contributed to or required to be
contributed to by the Parent or any of its ERISA Affiliates, for the benefit of
any employee or former employee, director or consultant of the Parent or any
Subsidiary or with respect to which the Parent or any of its Subsidiaries has
any liability or obligation, contingent or otherwise (the “Parent
Plans”).
(b) The
Parent has heretofore made available to Company with respect to each of the
Parent Plans true and correct copies of each of the following documents, if
applicable: (i) the Parent Plan document and any amendment thereto (or if there
is no Parent Plan document, a summary of the material terms of the Parent Plan);
(ii) any related trust or other funding vehicle; (iii) the actuarial report and
annual report for such Parent Plan for the most recent two years for which such
reports are available; (iv) the most recent determination letter from the IRS
for such Parent Plan, and (v) the most recent summary plan description and
related summaries of material modifications.
(c) Except as
may be set forth in Section 5.12(c) of the Parent Disclosure Schedule: each of
the Parent Plans has been established and has at all times been operated and
administered in material compliance with the applicable law, including the Code
and ERISA; there is no material liability relating to the Parent Plans (with
materiality determined with respect to the Parent Plans in the aggregate) that
has not been disclosed on the Parent’s financial statements in accordance with
GAAP and any other applicable legal and accounting
31
requirements
and such liability with respect to any Parent Plan will not materially increase
as a result of the Merger; with respect to each of the Parent Plans intended to
be “qualified” within the meaning of Section 401(a) of the Code, Parent has
received a favorable determination notification or opinion letter from the IRS,
and, to the Parent’s knowledge, no event has occurred that would reasonably be
expected to affect such determination; each of the Parent Plans has been timely
amended to comply with current law and regulations (or time remains to make such
amendments under Section 401(b) of the Code or other similar statutory,
regulatory or administrative relief); no Parent Plan has an accumulated or
waived funding deficiency within the meaning of Section 412 of the Code; neither
the Parent nor any of its ERISA Affiliates has incurred, directly or indirectly,
any current or contingent liability to or on account of a Parent Plan pursuant
to Title IV of ERISA (other than liability for premiums due the PBGC (which
premiums have been paid when due)); to the knowledge of the Parent, no
proceedings have been instituted to terminate any Parent Plan that is subject to
Title IV of ERISA; no “reportable event,” as such term is defined in Section
4043(c) of ERISA, has occurred with respect to any Parent Plan that is subject
to Title IV of ERISA (other than a reportable event with respect to which the
thirty day notice period has been waived); to Parent’s knowledge, no non-exempt
“prohibited transaction” (within the meaning of Section 4975 of the Code or
Section 406 of ERISA) or breach of any fiduciary duty described in Section 404
of ERISA has occurred that could result in any material liability, direct or
indirect, for the Parent or any or its ERISA Affiliates or any shareholder,
officer, director or employee of the Parent or an ERISA Affiliate; except as
required by COBRA or any similar State law, neither Parent nor any of its
Subsidiaries has any liability with respect to post-termination health, medical
or life insurance benefits for retired, former or current employees of the
Parent or any of its Subsidiaries; each Parent Plan that is a group health plan
(within the meaning of section 5000(b)(1) of the Code) complies, and in each and
every case has complied, with all material requirements of ERISA and section
4980B of the Code; no condition exists that presents a material risk to the
Parent of incurring a liability to or on account of a Parent Plan pursuant to
Title IV of ERISA (other than liability for premiums due the PBGC); all amounts
that the Parent and its ERISA Affiliates are required to pay as contributions to
the Parent Plans as of the last day of the most recent fiscal year of each of
the Parent Plans have been paid or properly accrued; all benefits accrued under
any funded or unfunded Parent Plan have been paid, accrued or otherwise
adequately reserved in accordance with GAAP; and all monies withheld from
employee paychecks with respect to Parent Plans have been transferred to the
appropriate Parent Plan or otherwise applied to pay premiums or benefits in a
timely manner as required by applicable law; no contract, Parent Plan or
arrangement (written or otherwise) (including provisions that become operative
by virtue of this Agreement) covering any disqualified individual (within the
meaning of Section 280G(c) of the Code) of Parent or any of its Subsidiaries
provides for payments (including but not limited to liability associated with
any gross-up payment under any such contract, Parent Plan or arrangement) that
may result in any nondeductible compensation under Section 280G(a) of the Code
or may result in an excise tax payable by such disqualified individuals under
Section 4999 of the Code solely as a result of the transactions contemplated by
this Agreement; neither Parent nor any of its ERISA Affiliates have ever
participated in or contributed to (or been required to contribute to) a
multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA); there
are no pending or, to the knowledge of the Parent, threatened or anticipated
(i) claims (other than routine claims for benefits) by, on behalf of or
against any of the Parent Plans or any trusts related thereto, or (ii) any
audit or investigation by any Governmental Entity with respect to a
32
Parent
Plan; each Parent Plan that is subject to Section 409A of the Code has been
maintained and operated in good faith based on the regulations promulgated by
the IRS and related IRS guidance issued with respect to Section 409A of the
Code; each Parent Plan subject to Section 409A of the Code has been or prior to
December 31, 2008, will be amended to comply with Section 409A of the Code and
regulations issued by the IRS; all persons classified by Parent or its ERISA
Affiliates as independent contractors satisfy and have at all times satisfied
the requirements of applicable law to be so classified; and Parent and its ERISA
Affiliates have fully and accurately reported their compensation on IRS Forms
1099 when required to do so; and no individuals are currently providing services
to Parent or its ERISA Affiliates pursuant to an employee leasing agreement or
similar type of arrangement, nor is Parent or its ERISA Affiliates party to any
such arrangement.
5.13. Parent
Information. The
information relating to Parent and its Subsidiaries to be contained in the Proxy
Statement-Prospectus and the S-4, or in any other document filed with any
Regulatory Agency in connection herewith, will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances in which they are made, not
misleading. The Proxy Statement-Prospectus (except for such portions
thereof that relate to the Company or any of its Subsidiaries) will comply with
the provisions of the Exchange Act and the rules and regulations
thereunder. The S-4 will comply with the provisions of the Securities
Act and the rules and regulations thereunder.
5.14. Compliance with Applicable
Law. The
Parent and each of its Subsidiaries holds all material licenses, franchises,
permits and authorizations necessary for the lawful conduct of their respective
businesses under and pursuant to all, and have complied, in all material
respects, with and are not in default in any material respect under any, law,
statute, order, rule, regulation, policy and/or guideline of any Governmental
Entity applicable to the Parent or any of its Subsidiaries, and neither the
Parent nor any of its Subsidiaries has received notice of any violations of any
of the above.
5.15. Certain
Contracts.
(a) Except as
set forth in Section 5.15(a) of the Parent Disclosure Schedule, neither Parent
nor any of its Subsidiaries is a party to or bound by any contract (whether
written or oral) (i) with respect to the employment of any directors, (ii)
which, upon the consummation of the transactions contemplated by this Agreement,
will result in any payment or benefits (whether of severance pay or otherwise)
becoming due that would not otherwise be payable in the absence of the
transactions contemplated by this Agreement, or the acceleration, increase or
vesting of any rights to any payment or benefits, from Parent, the Surviving
Corporation or any of their respective Subsidiaries to any officer, director or
consultant of Parent or any of its Subsidiaries, (iii) as of the date of this
Agreement which is a material contract (as defined in Item 601(b)(10) of
Regulation S-K of the SEC) to be performed after the date of this Agreement that
has not been filed or incorporated by reference in the Parent Reports, or (iv)
which materially restricts the conduct of any line of business by Parent or any
of its Subsidiaries. Each contract of the type described in clause
(iii) of this Section 5.15(a), whether or not set forth in Section 5.15(a) of
the Parent Disclosure Schedule, is referred to herein as a “Parent
Contract.”
33
Parent
has previously delivered or made available to the Company true and correct
copies of each contract of the type described in Section 5.15(a) of the Parent
Disclosure Schedule.
(b) Except as
set forth in Section 5.15(b) of the Parent Disclosure Schedule, (i) each Parent
Contract is valid and binding and in full force and effect, (ii) Parent and
each of its Subsidiaries has performed all obligations required to be performed
by it to date under each Parent Contract, (iii) no event or condition exists
which, to the knowledge of Parent, constitutes or, after notice or lapse of time
or both, would constitute, a default on the part of Parent or any of its
Subsidiaries under any Parent Contract, and (iv) no other party to any Parent
Contract is, to the knowledge of the Parent, in default in any material respect
thereunder.
5.16. Agreements with Regulatory
Agencies. Except
as set forth in Section 5.15 of the Parent Disclosure Schedule, neither the
Parent nor any of its Subsidiaries is or since December 31, 2004 has been
subject to any cease-and-desist or other order issued by, or is a party to any
Regulatory Agreement that restricts the conduct of its business or that in any
manner relates to its capital adequacy, its credit policies, its management or
its business, nor has the Parent or any of its Subsidiaries been advised by any
Regulatory Agency that it is considering issuing or requesting any Regulatory
Agreement.
5.17. Environmental
Matters. Except
as may be set forth in Section 5.17 of the Parent Disclosure
Schedule:
(a) To the
knowledge of Parent, each of Parent and its Subsidiaries, and each of the
Participation Facilities and the Loan Properties (each as hereinafter defined),
is in compliance, in all material respects, with applicable Environmental
Laws;
(b) There is
no suit, claim, action or proceeding pending or, to the knowledge of Parent,
threatened, before any Governmental Entity or other forum in which Parent or any
of its Subsidiaries has been named as a defendant, or, to the knowledge of
Parent, the subject of which is any Participation Facility or any Loan Property,
(x) for alleged noncompliance (including by any predecessor) with any
Environmental Laws, or (y) relating to the release, threatened release or
exposure to any Hazardous Material whether or not occurring at or on a site
owned, leased or operated by Parent or any of its Subsidiaries; and
(c) To the
knowledge of Parent, during the period of (x) Parent’s or any of its
Subsidiaries’ ownership or operation of any of their respective current or
former properties, (y) Parent’s or any of its Subsidiaries’ participation in the
management of any Participation Facility, or (z) Parent’s or any of its
Subsidiaries’ interest in a Loan Property, there has been no release of
Hazardous Materials in, on, under or affecting any such property, Participation
Facility or Loan Property in a manner that requires any material remediation
under any applicable Environmental Law. To the knowledge of Parent,
prior to the period of (x) the Parent’s or any of its Subsidiaries’ ownership or
operation of any of their respective current or former properties, (y) Parent or
any of its Subsidiaries’ participation in the management of any Participation
Facility, or (z) Parent or any of its Subsidiaries’ interest in a Loan Property,
there was no release of Hazardous Materials in, on, under or affecting any such
property, Participation Facility or Loan Property in a manner than requires any
material remediation under any Environmental Law
34
The
following definitions apply for purposes of this Section 5.17:
(x) “Hazardous Materials” means any chemicals, pollutants, contaminants,
wastes, toxic substances, petroleum or other regulated substances or materials,
(y) “Loan Property” means any property in which Parent or any of its
Subsidiaries holds a security interest; and (z) “Participation Facility” means
any facility in which Parent or any of its Subsidiaries operates or participates
in the management.
5.18. Ownership of Company Common
Stock; Affiliates and Associations.
(a) Neither
Parent nor any of its affiliates or associates (as such terms are defined under
the Exchange Act) (i) beneficially owns, directly or indirectly, or (ii) is a
party to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares of capital stock of the
Company (other than DPC shares); and
(b) Neither
Parent nor any of its Subsidiaries is an “interested shareholder” of the Company
(as such term is defined in Section 2553 of the PBCL).
5.19. Opinion. Prior
to the execution of this Agreement, Parent has received an opinion from KBW to
the effect that as of the date thereof and based upon and subject to the matters
set forth therein, the Merger Consideration to be paid by Parent is fair to
Parent from a financial point of view.
5.20. Approvals. As
of the date of this Agreement, Parent knows of no reason why all regulatory
approvals required for the consummation of the transactions contemplated hereby
(including, without limitation, the Merger) should not be obtained.
5.21. Loan
Portfolio.
(a) Parent
has made available to the Company (including by making available to the Company
copies of all material documentation) (i) all of the following loan agreements,
notes and borrowing arrangements of Parent or any Subsidiary (including leases,
credit enhancements, commitments, guarantees and interest-bearing assets)
(collectively, “Parent Loans”): (x) Parent Loans the unpaid principal balance of
which exceeds $250,000, under the terms of which the obligor was, as of
September 30, 2008, over 90 days delinquent in payment of principal or interest,
(y) Parent Loans the unpaid principal balance of which exceeds $250,000, and
that were as of September 30, 2008 classified by any bank examiner (whether
regulatory or internal) as “Special Mention,” “Substandard,” “Doubtful,” “Loss”
or words of similar import and (z) Parent Loans the unpaid principal
balance of which exceeds $250,000, and that were on non-accrual status as of
September 30, 2008; (ii) any Parent Loan with any director, executive officer or
five percent or greater shareholder of Parent or any of its Subsidiaries, or to
the knowledge of Parent, any person, corporation or enterprise controlling,
controlled by or under common control with any of the foregoing; and
(iii) each asset of Parent that as of September 30, 2008, was classified as
“Other Real Estate Owned,” and the book value thereof.
(b) To the
knowledge of Parent, each Parent Loan in original principal amount in excess of
$250,000 (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and what they purport to be, (ii) to the
extent secured, has been secured by valid liens and security interests and (iii)
is the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, subject to
35
bankruptcy,
insolvency, fraudulent conveyance and other laws of general applicability
relating to or affecting creditors’ rights and to general equity
principles.
5.22. Property. Each
of Parent and its Subsidiaries has good and marketable title free and clear of
all liens, encumbrances, mortgages, pledges, charges, defaults or equitable
interests to all of the properties and assets, real and personal, tangible or
intangible, which are reflected on the consolidated balance sheet of Parent and
its Subsidiaries as of December 31, 2007 or, if acquired after such date, would
be required to be reflected on a consolidated balance sheet of Parent prepared
after the date of such acquisition except (i) liens for Taxes not yet due and
payable or contested in good faith by appropriate proceedings, (ii) pledges to
secure deposits and other liens incurred in the ordinary course of business,
(iii) such imperfections of title, easements and encumbrances, if any, as do not
interfere with the use of the respective property as such property is used on
the date of this Agreement, (iv) for dispositions of or encumbrances on
such properties or assets in the ordinary course of business, (v) mechanics’,
materialmen’s, workmen’s, repairmen’s, warehousemen’s, carrier’s and other
similar liens and encumbrances arising in the ordinary course of business, (vi)
liens securing obligations that are reflected in such consolidated balance sheet
or (vii) the lessor’s interest in any such property that is
leased. All leases pursuant to which Parent or any of its
Subsidiaries, as lessee, leases real or personal property are valid and
enforceable in accordance with their respective terms, subject to bankruptcy,
insolvency, fraudulent conveyance and other laws of general applicability
relating to or affecting creditors’ rights and to general equity principles, and
neither Parent nor any of its Subsidiaries nor, to the knowledge of Parent, any
other party thereto, is in default thereunder.
5.23. Reorganization. As
of the date of this Agreement, Parent has no reason to believe that the Merger
will fail to qualify as a reorganization under Section 368(a) of the
Code.
5.24. State Takeover Laws and
Charter Provisions. To
the extent applicable, Parent has taken or will take all necessary action to
exempt the transactions contemplated by this Agreement from all applicable state
takeover laws and any comparable provisions in the Articles of Incorporation or
Bylaws of Parent.
5.25. Insurance. Parent
and its Subsidiaries have policies of insurance to which Parent or its
Subsidiaries are parties or that provide coverage to Parent and its Subsidiaries
and all such policies: are valid and enforceable; are issued by insurers that
are financially sound and reputable; taken together, provide reasonably adequate
insurance coverage for the assets and the operations of Parent and its
Subsidiaries for all risks normally insured against by a person carrying on the
same business or businesses as Parent and its Subsidiaries; and are sufficient
for compliance with all legal requirements. Neither Parent nor any
Subsidiary has received (a) any refusal of coverage or any notice that a defense
will be afforded with reservation of rights or (b) any notice of cancellation or
any other indication that any policy of insurance is no longer in full force or
effect or that the issuer of any policy of insurance is not willing or able to
perform its obligations thereunder.
36
ARTICLE
VI
COVENANTS
RELATING TO CONDUCT OF BUSINESS
6.1. Covenants of the
Company
. During
the period from the date of this Agreement and continuing until the Effective
Time, except as expressly contemplated or permitted by this Agreement or with
the prior written consent of Parent, the Company and its Subsidiaries shall
carry on their respective businesses in the ordinary course consistent with past
practice. Without limiting the generality of the foregoing, and
except as set forth in Section 6.1 of the Company Disclosure Schedule or as
otherwise contemplated by this Agreement or consented to in writing by Parent,
the Company shall not, and shall not permit any of its Subsidiaries
to:
(a) solely in
the case of the Company or a Subsidiary which is not a wholly-owned Subsidiary,
declare or pay any dividends on, or make other distributions in respect of, any
of its capital stock other than periodic distributions on the Company Trust
Preferred Securities;
(b) (i) repurchase,
redeem or otherwise acquire (except for the acquisition of DPC Shares, as such
term is defined in Section 1.4(d) hereof) any shares of the capital stock of the
Company or any Subsidiary of the Company, or any securities convertible into or
exercisable for any shares of the capital stock of the Company or any of its
Subsidiaries other than in connection with the termination of any employee of
the Company or any Subsidiary in accordance with the terms of any applicable
plan, grant or award agreement, (ii) split, combine or reclassify any shares of
its capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, or
(iii) issue, deliver or sell, or authorize the issuance, delivery or sale of,
any shares of its capital stock or any securities convertible into or
exercisable for, or any rights, warrants or options to acquire, any such shares,
or enter into any agreement with respect to any of the foregoing other than for
the issuance Company Common Stock upon the exercise or fulfillment of rights,
options or other convertible securities issued or existing as of the date
hereof;
(c) amend its
Articles of Incorporation, Bylaws or other similar governing
documents;
(d) make any
capital expenditures other than those which are (i) made in the
ordinary course of business or are necessary to maintain existing assets in good
repair and (ii) not in excess of $500,000 in the aggregate;
(e) enter
into any new line of business;
(f) acquire
or agree to acquire, by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets of, or by
any other manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire any assets,
which would be material, individually or in the aggregate, to the Company, other
than in connection with foreclosures,
37
settlements
in lieu of foreclosure or troubled loan or debt restructurings in the ordinary
course of business consistent with past practices;
(g) take any
action or enter into any agreement that would reasonably be expected to
jeopardize or materially delay the receipt of any Requisite Regulatory Approval
(as defined in Section 8.1(d));
(h) take any
action that is intended or may reasonably be expected to result in any of its
representations and warranties set forth in this Agreement being or becoming
untrue in any material respect, or in any of the conditions to the Merger set
forth in Article VIII not being satisfied;
(i) change
its methods of accounting in effect at December 31, 2007, except as required by
changes in GAAP or regulatory accounting principles or interpretation as
concurred to by the Company’s independent auditors, or make any Tax election or
enter into any agreement or arrangement with respect to Taxes;
(j) except as
otherwise contemplated by this Agreement, as required by applicable law or as
required to maintain qualification pursuant to the Code, adopt, amend, or
terminate any employee benefit plan or any agreement, arrangement, plan or
policy between the Company or any Subsidiary of the Company and one or more of
its current or former directors, officers or employees (including without
limitation any retention, stay bonus, severance or change-of-control agreement,
arrangement, plan or policy);
(k) except in
the ordinary course of business consistent with past practice or except as
required by applicable law, make any bonus payment or increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay any
benefit not required by any Plan or agreement as in effect as of the date hereof
(including the granting of stock options, stock appreciation rights, restricted
stock, restricted stock units or performance units or shares);
(l) other
than activities in the ordinary course of business consistent with past
practice, sell, lease, encumber, assign or otherwise dispose of, or agree to
sell, lease, encumber, assign or otherwise dispose of, any of its material
assets, properties or other rights or agreements;
(m) other
than in the ordinary course of business consistent with past practice, incur any
indebtedness for borrowed money, engage in any repurchase transactions or
assume, guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of any other individual, corporation or other
entity;
(n) incur
deposit liabilities, other than deposit liabilities incurred in the ordinary
course of business consistent with past practice, or accept any brokered deposit
having a maturity longer than 365 days;
(o) sell,
purchase, enter into a lease, relocate, open or close any banking or other
office, or file any application pertaining to such action with any Regulatory
Agency;
38
(p) purchase
any mortgage loan servicing rights;
(q) with
respect to any agreement that should be filed with the SEC pursuant to Item
601(b)(10) of Regulation S-K, create, renew, amend or terminate or give notice
of a proposed renewal, amendment or termination of, any material contract,
agreement or lease for property or services to which the Company or its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
their respective properties is bound, other than the renewal in the ordinary
course of business of any lease the term of which expires prior to the Closing
Date;
(r) take,
cause to be taken or omit to take any action which would reasonably be expected
to prevent the Merger from qualifying as a reorganization under Section 368(a)
of the Code; or
(s) agree to
do any of the foregoing.
6.2. Covenants of
Parent. During
the period from the date of this Agreement and continuing until the Effective
Time, except as expressly contemplated or permitted by this Agreement or with
the prior written consent of the Company, Parent and its Subsidiaries shall
carry on their respective businesses in the ordinary course consistent with past
practice. Without limiting the generality of the foregoing, and
except as set forth in Section 6.2 of the Parent Disclosure Schedule or as
otherwise contemplated by this Agreement or consented to in writing by the
Company, Parent shall not, and shall not permit any of its Subsidiaries
to:
(a) solely in
the case of Parent, declare or pay any dividends on or make any other
distributions in respect of any of its capital stock other than its current
quarterly dividends on its preferred stock;
(b) take any
action or enter into any agreement that would reasonably be expected to
jeopardize or materially delay the receipt of any Requisite Regulatory Approval
(as defined in Section 8.1(d)) or
(c) take any
action that is intended or may reasonably be expected to result in any of its
representations and warranties set forth in this Agreement being or becoming
untrue in any material respect, or in any of the conditions to the Merger set
forth in Article VIII not being satisfied;
(d) change
its methods of accounting in effect at December 31, 2007, except as required by
changes in GAAP or regulatory accounting principles or interpretation as
concurred to by the Company’s independent auditors, or make any Tax election or
enter into any agreement or arrangement with respect to Taxes;
(e) take,
cause to be taken or omit to take any action which would reasonably be expected
to prevent the Merger from qualifying as a reorganization under Section 368(a)
of the Code; or
(f) agree to
do any of the foregoing.
39
ARTICLE
VII
ADDITIONAL
AGREEMENTS
7.1. Proxy
Statement-Prospectus.
(a) For the
purposes (x) of registering with the SEC, under the Securities Act, Parent
Common Stock to be offered to holders of Company Common Stock in connection with
the Merger and (y) of holding the Shareholder Meetings, Parent and the Company
shall prepare and file with the SEC a joint proxy statement. As
promptly as practicable after the date hereof, Parent shall prepare and file the
S-4, in which the proxy statement will be included as a
prospectus. Such documents shall satisfy all applicable requirements
of applicable state securities and banking laws, and of the Securities Act and
the Exchange Act, and the rules and regulations thereunder (such proxy
statement/prospectus in the form mailed to the Company shareholders, together
with any and all amendments or supplements thereto, being herein referred to as
the “Proxy Statement-Prospectus”). Each of Parent and the Company
shall use their reasonable best efforts to have the S-4 declared effective under
the Securities Act as promptly as practicable after such filing, and each of the
Company and Parent shall thereafter promptly mail the Proxy Statement-Prospectus
to its respective shareholders. Parent shall also use its reasonable
best efforts to obtain all necessary state securities law or “Blue Sky” permits
and approvals required to carry out the transactions contemplated by this
Agreement, and the Company shall furnish all information concerning the Company
and the holders of the Company Common Stock as may be reasonably requested in
connection with any such action.
(b) Each
party shall provide the other with any information concerning itself that the
other may reasonably request in connection with the drafting and preparation of
the Proxy Statement-Prospectus, and each party shall notify the other promptly
of the receipt of any comments of the SEC with respect to the Proxy
Statement-Prospectus and of any requests by the SEC for any amendment or
supplement thereto or for additional information and shall provide to the other
promptly copies of all correspondence between such party or any of their
representatives and the SEC. Parent shall not file the S-4, including
any amendment thereto without giving the Company the opportunity to review,
comment on and revise the S-4. Each of Parent and the Company agrees
to use all reasonable best efforts, after consultation with the other party
hereto, to respond promptly to all such comments of and requests by the SEC and
to cause the Proxy Statement-Prospectus and all required amendments and
supplements thereto to be mailed to the shareholders of the Company and Parent
entitled to vote at the Shareholders Meetings at the earliest practicable
time.
(c) The
Company and Parent shall promptly notify the other party if at any time it
becomes aware that the Proxy Statement-Prospectus or the S-4 contains any untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading. In
such event, the Company shall cooperate with Parent in the preparation of a
supplement or amendment to such Proxy Statement-Prospectus that corrects such
misstatement or omission, and Parent shall file an amended S-4 with the SEC, and
the Company shall mail an amended Proxy Statement-Prospectus to the Company
shareholders.
40
7.2. Regulatory
Approvals.
(a) The
parties hereto shall use their reasonable best efforts, and cooperate with each
other, to promptly prepare and file all necessary documentation, to effect all
applications, notices, petitions, amendments, filings and refilings, and to
obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the Merger. The Company and
Parent shall have the right to review in advance, and to the extent practicable
each will consult the other on, in each case subject to applicable laws relating
to the exchange of information, all the information relating to the Company or
Parent, as the case may be, and any of their respective Subsidiaries, which
appears in any filing made with, or written materials submitted to, any third
party, including any Governmental Entity, in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto shall act reasonably and as promptly as
practicable. The parties hereto agree that they will consult with
each other with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein.
(b) Parent
and the Company shall, upon request, furnish each other with all information
concerning themselves, their Subsidiaries, directors, officers and shareholders
and such other matters as may be reasonably necessary or advisable in connection
with the Proxy Statement-Prospectus, the S-4 or any other statement, filing,
notice or application made by or on behalf of Parent, the Company or any of
their respective Subsidiaries to any Governmental Entity in connection with the
Merger and the other transactions contemplated by this Agreement.
(c) Parent
and the Company shall promptly furnish each other with copies of written
communications received by Parent or the Company, as the case may be, or any of
their respective Subsidiaries, Affiliates or Associates (as such terms are
defined in Rule 12b-2 under the Exchange Act as in effect on the date of this
Agreement) from, or delivered by any of the foregoing to, any Governmental
Entity in respect of the transactions contemplated hereby.
7.3. Access to
Information.
(a) Upon
reasonable notice and subject to applicable laws relating to the exchange of
information, each party shall, and shall cause each of its Subsidiaries to,
afford to the officers, employees, accountants, counsel and other
representatives of the other party, reasonable access, during normal business
hours during the period prior to the Effective Time, to all its properties,
books, contracts, commitments, records, officers, employees, accountants,
counsel and other representatives and, during such period, it shall, and shall
cause its Subsidiaries to, make available to the other party all information
concerning its business, properties and personnel as the other party may
reasonably request. Neither party nor any of its Subsidiaries shall
be required to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of its customers, jeopardize
any attorney-client privilege or contravene any law, rule, regulation, order,
judgment, decree, fiduciary duty or binding agreement entered into prior to the
date of this Agreement. The parties hereto will make
41
appropriate
substitute disclosure arrangements under circumstances in which the restrictions
of the preceding sentence apply.
(b) All
nonpublic information furnished by either party to the other pursuant to
Sections 7.1, 7.2 and 7.3(a) shall be subject to, and the receiving party shall
hold all such information in confidence in accordance with, the provisions of
the confidentiality agreements dated August 11 and 12, 2008 and countersigned
August 13, 2008 (collectively, the “Confidentiality Agreement”), between Parent
and the Company.
(c) No
investigation by either of the parties or their respective representatives shall
affect the representations, warranties, covenants or agreements of the other set
forth herein.
7.4. Certain
Actions.
(a) Except
with respect to this Agreement and the transactions contemplated hereby and
except as otherwise permitted in this Section 7.4, the Company will not, and
will not authorize or permit any of its directors, officers, agents, employees,
investment bankers, attorneys, accountants, advisors, agents, affiliates (as
such term is used in Rule 12b-2 under the Exchange Act) or representatives
(collectively, “Representatives”) to, directly or indirectly, (i) initiate,
solicit, encourage or take any action to facilitate (including by way of
furnishing non-public information) any Acquisition Proposal (as defined below)
or any inquiries with respect to or the making of any Acquisition Proposal, (ii)
enter into or participate in any discussions or negotiations with, furnish any
non-public information relating to the Company or any of its Subsidiaries or
afford access to the business, properties, assets, books or records of the
Company or any of its Subsidiaries to, otherwise cooperate in any way with, or
knowingly assist, participate in, facilitate or encourage any effort by any
third party that is seeking to make, or has made, an Acquisition Proposal, (iii)
approve, endorse or recommend any Acquisition Proposal, (iv) enter into any
letter of intent or similar document or any contract, agreement or commitment
contemplating or otherwise relating to an Acquisition Proposal, (v) fail to
make, withdraw or modify in a manner adverse to Parent its recommendation to its
shareholders referred to in Section 7.5 hereof, or (vi) grant any waiver or
release under any standstill or similar agreement with respect to any class of
equity securities of the Company.
(b) Notwithstanding
anything herein to the contrary, the Company and its Board of Directors shall be
permitted (i) to comply with requirements under Rule 14d-9 and Rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition Proposal
(provided that the Board of Directors of the Company shall not withdraw or
modify in an adverse manner its approval recommendation referred to in Section
7.5 hereof except as set forth below), (ii) to engage in discussions or
negotiations with, or provide information to, any person in response to a
Superior Proposal (as defined below) by any such person, if and only to the
extent that (x) the Company’s Board of Directors concludes in good faith, after
consultation with outside counsel, that failure to do so would be inconsistent
with its fiduciary duties to the Company’s shareholders under applicable law,
(y) prior to providing any information or data to any person in connection with
a Superior Proposal by any such person, the Company’s Board of Directors
receives from such person an executed confidentiality agreement on terms no less
favorable to the Company than those contained in the Confidentiality Agreement
(a copy of
42
which
executed confidentiality agreement shall have been provided to the Parent for
informational purposes), and (z) at least 48 hours prior to providing any
information or data to any person or entering into discussions or negotiations
with any person, the Company notifies Parent in writing promptly of such
inquiries, proposals or offers received by, any such information requested from,
or any such discussions or negotiations sought to be initiated or continued
with, any of its Representatives indicating, in connection with such notice, the
name of such person and the material terms and conditions of any inquiries,
proposals or offers, and (iii) to withdraw or modify in a manner adverse to
Parent its recommendation to its shareholders referred to in Section 7.5 hereof
in order to accept a Superior Proposal. The Company will promptly
(and in any event within 24 hours) notify Parent in writing of the receipt of
any Acquisition Proposal or any information related thereto, which notification
shall describe the Acquisition Proposal and identify the third party making the
same.
(c) The
Company agrees that it will, and will cause its Representatives to, immediately
cease and cause to be terminated any activities, discussions, or negotiations
existing as of the date of this Agreement with any parties conducted heretofore
with respect to any Acquisition Proposal.
(d) For
purposes of this Section 7.4:
(i) The term
“Acquisition Proposal” means any tender offer or exchange offer or any proposal
for a merger, acquisition of all of the stock or assets of, or other business
combination involving the Company or any of its Subsidiaries or the acquisition
of fifty percent (50%) or more of the total voting power or of any class of
equity securities of the Company or the acquisition or purchase of assets that
constitute fifty percent (50%) or more of the consolidated assets of the Company
and its Subsidiaries taken as a whole.
(ii) The term
“Superior Proposal” means, with respect to the Company, any bona-fide,
unsolicited written Acquisition Proposal made by a person other than Parent
which is on terms which the Board of Directors of the Company in good faith
concludes (after consultation with its financial advisors and outside counsel),
taking into account, among other things, all break-up fees, expense
reimbursement provisions and conditions to consummation and all legal,
financial, regulatory and other aspects of the proposal and the person making
the proposal, (A) is more favorable to its shareholders (in their capacities as
shareholders) than the Merger and for which financing, to the extent required,
is then fully committed or reasonably determined to be available by the Board of
Directors of the Company, and (B) is reasonably capable of being
completed.
(e) If a
Payment Event (as hereinafter defined) occurs, the Company shall pay to Parent
(by wire transfer of immediately available funds), within two (2) business days
following such Payment Event, a fee of Five Million Dollars ($5,000,000) (the
“Break-up Fee”).
“Payment
Event” means (x) the termination of this Agreement by Parent pursuant to Section
9.1(f) as a result of a breach by the Company of any of its covenants under any
of Sections 7.4(a), 7.4(c), 7.5 or 7.6, or pursuant to Section 9.1(h), or by the
Company pursuant to Section 9.1(i), and (y) the occurrence of any of the
following events within twelve (12) months
43
of any
such termination of this Agreement, provided that an Acquisition Proposal shall
have been made after the date hereof and prior to such termination (which shall
not have been withdrawn in good faith prior to such termination): (i) the
Company merges with or into, or is acquired, directly or indirectly, by merger
or otherwise by, a Third Party; (ii) a Third Party, directly or indirectly
acquires more than 50% of the total assets of the Company and its Subsidiaries,
taken as a whole; or (iii) a Third Party, directly or indirectly, acquires more
than 50% of the outstanding Company Common Stock. As used herein,
“Third Party” means any person as defined in Section 13(d) of the Exchange Act
(other than Parent or its affiliates).
(f) The
Company acknowledges that the agreements contained in Section 7.4(e) are an
integral part of the transactions contemplated in this Agreement and that
without these agreements Parent would not enter into this
Agreement. Accordingly, in the event the Company fails to pay to
Parent the Break-up Fee, promptly when due, the Company shall, in addition
thereto, pay to Parent all costs and expenses (including attorney’s fees and
disbursements) incurred in collecting such Break-up Fee together with interest
on the amount of the Break-up Fee (or any unpaid portion thereof), from the date
such payment was due until the date such payment is received by Parent, accrued
at the fluctuating prime rate (as quoted in The Wall Street Journal) as in
effect from time to time during the period.
7.5. Shareholder
Meetings. The
Company and Parent each shall take all steps necessary to duly call, give notice
of, convene and hold a meeting of its respective shareholders to be held as soon
as reasonably practicable after the date on which the S-4 becomes effective for
the purpose of voting upon the approval and adoption of this Agreement and the
consummation of the Merger and, in the case of the Company, if deemed necessary
or appropriate by the Company and Parent, the approval of the Option Plan
Amendment, and, in the case of Parent, to adopt the Authorized Share Amendment
(the “Shareholder Meetings”). Subject, in the case of the Company, to
the right of the Company and its Board of Directors to take action permitted by
Section 7.4(b) with respect to a Superior Proposal, the Company and Parent each
will, through its respective Board of Directors, recommend to its respective
shareholders approval and adoption of this Agreement and the Merger and such
other matters as may be submitted by the respective Board of Directors to its
respective shareholders in connection with this Agreement. The
Company and Parent shall coordinate and cooperate with respect to the foregoing
matters, with a view towards, among other things, holding the respective
meetings of each party’s shareholders on the same day.
7.6. Legal Conditions to
Merger. Each
of Parent and the Company shall, and shall cause its Subsidiaries to, use their
reasonable best efforts (a) to take, or cause to be taken, all actions which it
deems necessary, proper or advisable to comply promptly with all legal
requirements which may be imposed on such party or its Subsidiaries with respect
to the Merger and, subject to the satisfaction of the conditions set forth in
Article VIII hereof, to consummate the transactions contemplated by this
Agreement and (b) to obtain (and to cooperate with the other party to obtain)
any consent, authorization, order or approval of, or any exemption by, any
Governmental Entity and any other third party which is required to be obtained
by the Company or Parent or any of their respective Subsidiaries in connection
with the Merger and the other transactions contemplated by this Agreement, and
to comply with the terms and conditions of such consent, authorization, order or
approval.
44
7.7. Stock
Reserve. Parent
agrees from the date of this Agreement to set aside shares of Parent Common
Stock for its obligations under this Agreement and following approval of the
Authorized Share Amendment, until the Merger Consideration has been paid in
full, Parent shall reserve a sufficient number of shares of Parent Common Stock
to fulfill its obligations under this Agreement.
7.8. Stock Exchange
Listing. Parent
shall use its reasonable best efforts to cause the shares of Parent Common Stock
to be issued in the Merger to be approved for listing on the NASDAQ Stock
Market, subject to official notice of issuance, as of the Effective
Time.
7.9. Employee Benefit Plans;
Existing Agreements.
(a) The
employees of the Company and its Subsidiaries (the “Company Employees”) shall be
eligible to participate in those Parent Plans in which similarly situated
employees of Parent or its Subsidiaries participate, to the same extent that
similarly situated employees of Parent or its Subsidiaries
participate. From and after the Effective Time, Parent may elect not
to provide to the Company Employees any benefits which are not then provided by
Parent and its Subsidiaries to their employees notwithstanding that such
benefits were provided by the Company and its Subsidiaries to their employees
immediately prior to the Effective Time. In the case of benefits
which are provided at the Effective Time by Parent to employees of Parent and
its Subsidiaries but are not then provided by the Company and its Subsidiaries
to their employees, Parent will as soon as possible after the Effective Time
include the Company Employees in the Parent Plans under which such benefits are
made available.
(b) With
respect to each Parent Plan for which length of service is taken into account
for any purpose, service with the Company or any of its Subsidiaries (or
predecessor employers to the extent the Company provides past service credit)
shall be treated as service with Parent for purposes of determining eligibility
to participate, vesting, and entitlement to benefits, including for vacation
entitlement; provided, however, that such
service shall not be recognized to the extent that such recognition would result
in a duplication of benefits. Such service also shall apply for
purposes of satisfying any waiting periods, evidence of insurability
requirements, or the application of any preexisting condition limitations. Each Parent Plan shall waive
pre-existing condition limitations to the same extent waived under the
applicable Company Plan, and Company Employees shall be given credit for amounts
paid under a corresponding benefit plan during the same period for purposes of
applying deductibles, copayments and out-of-pocket maximums as though such
amounts had been paid in accordance with the terms and conditions of the Parent
Plan.
(c) Parent
and the Company agree that, prior to the Effective Time, subject to the
reasonable approval of Parent, the Company may adopt a severance plan (the
“Severance Plan”) for those employees not otherwise entitled to a severance
benefit and who will not be retained by Parent following consummation of the
transactions contemplated hereunder and a change in control retention plan (the
“Retention Plan”). Notwithstanding any other provision of this
Agreement, any Plan or otherwise, Parent agrees from and after the Closing Date
to maintain in full force and effect, without amendment or modification (i) for
a period of no less than one year following the Closing Date, the Severance Plan
and (ii) the Retention Plan until such time as all Parent or Company obligations
are fulfilled thereunder. All payments of a
45
severance
amount, whether pursuant to the Severance Plan or otherwise, will be subject to
the subject employee’s execution of a release that is satisfactory in form and
substance to Parent. Subject to the following minimum benefits, the
Company will grant an eligible full-time employee, who was exempt from the
requirements of the Fair Labor Standards Act (“FLSA”) as of the date of this
Agreement, two weeks of severance pay (at his or her then current pay rate) for
each year of service with the Company or any of its Subsidiaries prior to the
employment termination date. The minimum benefit for exempt employees
shall be two weeks’ salary, and the maximum severance benefit will be ten weeks’
salary for Company exempt employees. The Company will grant an
eligible full-time employee, who was not exempt from the requirements of the
FLSA as of the date of this Agreement, one week of severance pay (at his then
current pay rate) for each year of service with the Company or any of its
Subsidiaries prior to the employment termination date. The minimum
benefit for non-exempt employees shall be one week’s salary, and the maximum
severance benefit will be five weeks’ salary for Company non-exempt
employees.
(d) Prior to
the Effective Time and no later than December 31, 2008, the Company shall amend
all Plans that are subject to Section 409A of the Code to comply with the final
regulations under Section 409A, subject to the prior review and approval of
Parent; provided, however, that in any
case where the consent of a service provider is required for such amendment, the
Company will have fulfilled its obligations under this Section 7.9(d) if it has
exercised reasonable efforts to secure the consent of the service provider
(whether or not such consent is actually given).
7.10. Indemnification.
(a) In the
event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, in which any person
who is now, or has been at any time prior to the date of this Agreement, or who
becomes prior to the Effective Time, a director, officer or employee of the
Company or any of its Subsidiaries (the “Indemnified Parties”) is, or is
threatened to be, made a party based in whole or in part on, or arising in whole
or in part out of, or pertaining to (i) the fact that he is or was a director,
officer or employee of the Company, any of the Subsidiaries of the Company or
any of their respective predecessors or affiliates or (ii) this Agreement
or any of the transactions contemplated hereby, whether in any case asserted or
arising before or after the Effective Time, the parties hereto agree to
cooperate and use their best efforts to defend against and respond
thereto. It is expressly understood and agreed that indemnification
provided herein does not extend to any threatened or actual claim, action, suit,
proceeding or investigation based on any action or inaction of any Indemnified
Party in such party’s capacity as director, officer or employee of any former
subsidiary of the Company on and after January 31, 2005. It is
further understood and agreed that after the Effective Time, Parent shall
indemnify and hold harmless, as and to the fullest extent permitted by law, each
such Indemnified Party against any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorney’s fees and expenses in advance of the
final disposition of any claim, suit, proceeding or investigation incurred by
each Indemnified Party to the fullest extent permitted by law upon receipt of
any undertaking required by applicable law), judgments, fines and amounts paid
in settlement in connection with any such threatened or actual claim, action,
suit, proceeding or investigation, and in the event of any such threatened or
actual claim, action, suit, proceeding or investigation (whether asserted or
arising
46
before or
after the Effective Time), the Indemnified Parties may retain counsel reasonably
satisfactory to them after consultation with Parent; provided, however, that (1)
Parent shall have the right to assume the defense thereof and upon such
assumption Parent shall not be liable to any Indemnified Party for any legal
expenses of other counsel or any other expenses subsequently incurred by any
Indemnified Party in connection with the defense thereof, except that if Parent
elects not to assume such defense or counsel for the Indemnified Parties
reasonably advises that there are issues which raise conflicts of interest
between Parent and the Indemnified Parties, the Indemnified Parties may retain
counsel reasonably satisfactory to them after consultation with Parent, and
Parent shall pay the reasonable fees and expenses of such counsel for the
Indemnified Parties; (2) Parent shall in all cases be obligated pursuant to
this Section 7.10(a) to pay for only one firm or counsel for all Indemnified
Parties; (3) Parent shall not be liable for any settlement effected without its
written consent (which consent shall not be unreasonably withheld); (4) Parent
shall have no obligation hereunder to any Indemnified Party when and if a court
of competent jurisdiction shall ultimately determine, and such determination
shall have become final and nonappealable, that indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law; and (5) Parent shall have no obligation hereunder to any Indemnified Party
in respect of any such loss, claim, damage, liability, cost, expense, judgment
or amount paid in settlements which arose out of or resulted from the gross
negligence, criminal activity, willful misconduct or recklessness of the
Indemnified Party. Any Indemnified Party wishing to claim
Indemnification under this Section 7.10, upon learning of any such claim,
action, suit, proceeding or investigation, shall promptly notify Parent thereof,
provided that the failure to so notify shall not affect the obligations of
Parent under this Section 7.10 except to the extent such failure to notify
materially prejudices Parent. Parent’s obligations under this Section
7.10 shall continue in full force and effect without time limit from and after
the Effective Time.
(b) Parent
shall cause the persons serving as officers and directors of the Company and its
Subsidiaries immediately prior to the Effective Time to be covered for a period
of six years from the Effective Time by the directors’ and officers’ liability
insurance policy maintained by the Company (provided that Parent may substitute
therefor policies of at least the same coverage and amounts containing terms and
conditions which are not less advantageous than such policy) with respect to
acts or omissions occurring prior to the Effective Time which were committed by
such officers and directors in their capacity as such.
(c) In the
event Parent or any of its successors or assigns (i) consolidates with or
merges into any other person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, or (ii) transfers or
conveys all or substantially all of its properties and assets to any person,
then, and in each such case, to the extent necessary, proper provision shall be
made so that the successors and assigns of Parent assume the obligations set
forth in this Section 7.10.
(d) The
provisions of this Section 7.10 are intended to be for the benefit of, and shall
be enforceable by, each Indemnified Party and his or her heirs and
representatives.
7.11. Additional
Agreements. In
case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement or to vest the
47
Surviving
Corporation with full title to all properties, assets, rights, approvals,
immunities and franchises of any of the parties to the Merger, the proper
officers and directors of each party to this Agreement and their respective
Subsidiaries shall take all such necessary action as may be reasonably requested
by Parent.
7.12. Intentionally
Omitted.
7.13. Appointment of
Directors
. Effective
as of the Effective Time, Parent shall cause the number of directors
constituting its Board of Directors to be fixed at twelve (12) members, and
shall take all actions necessary to cause eight (8) of such members to be Parent
Directors (as defined below) and four (4) of such members to be Company
Directors (as defined below), each to hold office until his/her successor is
elected and qualified or otherwise in accordance with applicable law, the
Articles of Incorporation and Bylaws of Parent. If any of the Company
Directors does not become, or does not continue in the office of, a director of
Parent because of death, disability or otherwise, Parent agrees, after
consultation with the remaining Company Directors, to cause a member of the
Board of Directors of the Company as of the date hereof who is mutually
agreeable to Parent and the Company to be elected or appointed to the Board of
Directors of Parent as the new Company Director.
The term
“Parent Directors” shall mean individuals who shall be mutually selected by the
Company and Parent from the members of Parent’s Board of Directors immediately
prior to the Effective Time to continue as members of the Board of Directors of
Parent after the Effective Time pursuant to this Section 7.13. The
term “Company Directors” shall mean individuals who shall be mutually selected
by the Company and Parent from the members of the Company’s Board of Directors
to become members of the Board of Directors of Parent as of the Effective Time
pursuant to this Section 7.13. Nothing in this Section 7.13 shall
require the election or appointment of any individual whose election or
appointment is prohibited or advised against by any Regulatory
Agency. Provided that a Company Director continues to satisfy the
nomination criteria of the Nominating and Corporate Governance Committee of the
Parent Board of Directors at the time such Company Director’s initial term is
set to expire, the Parent Board of Directors shall re-nominate and recommend the
election of such Company Director for election by the Parent shareholders to at
least one additional term following the expiration of such Company Director’s
initial term of office.
ARTICLE
VIII
CONDITIONS
PRECEDENT
8.1. Conditions to Each Party’s
Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following
conditions:
(a) Shareholder Approval of
Merger. This Agreement shall have been approved and adopted by
the requisite votes of the holders of the outstanding shares of Company Common
Stock and Parent Common Stock under applicable law and the rules of the NASDAQ
Stock Market.
48
(b) Shareholder Approval of
Authorized Shares. The Authorized Share Amendment shall have
been approved and adopted by the requisite votes of the holders of the
outstanding shares of Parent Common Stock under applicable law and the rules of
the NASDAQ Stock Market.
(c) Listing of
Shares. The shares of Parent Common Stock which shall be
issued to the shareholders of the Company upon consummation of the Merger shall
have been authorized for listing on the NASDAQ Stock Market, subject to official
notice of issuance.
(d) Other
Approvals. All regulatory approvals required to consummate the
transactions contemplated hereby (including the Merger) shall have been obtained
and shall remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired (all such approvals and the expiration of all
such waiting periods being referred to herein as the “Requisite Regulatory
Approvals”).
(e) S-4. The
S-4 shall have become effective under the Securities Act and no stop order
suspending the effectiveness of the S-4 shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC.
(f) No Injunctions or
Restraints; Illegality. No order, injunction or decree issued
by any court or agency of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger (an “Injunction”) shall be
in effect. No statute, rule, regulation, order, injunction or decree
shall have been enacted, entered, promulgated or enforced by any Governmental
Entity which prohibits, restricts or makes illegal consummation of the
Merger.
(g) Employment
Agreement. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Parent shall have executed an
employment agreement in the form attached hereto as Exhibit
B.
(h) No Pending Governmental
Actions. No proceeding initiated by any Governmental Entity
seeking an Injunction shall be pending.
8.2. Conditions to Obligations of
Parent. The
obligation of Parent to effect the Merger is also subject to the satisfaction or
waiver by Parent at or prior to the Effective Time of the following
conditions:
(a) Representations and
Warranties. The representations and warranties of the Company
set forth in this Agreement (i) that are not qualified by materiality shall be
true and correct in all material respects and (ii) that are qualified by
materiality shall be true and correct in all respects, in each of the foregoing
cases as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date; provided, however, that for
purposes of this Section 8.2(a), no representation or warranty of the Company
set forth in this Agreement shall be deemed untrue or incorrect as a consequence
of the existence of any fact, circumstance or event unless such fact,
circumstance or event, individually or taken together with all other facts,
circumstances or events which would otherwise cause any representation or
warranty of the Company contained in this Agreement to be untrue or incorrect,
has had a Material Adverse Effect on the Company and its Subsidiaries taken as a
whole. Parent shall
49
have
received a certificate signed on behalf of the Company by the Chief Executive
Officer or the Chief Financial Officer of the Company to the foregoing
effect.
(b) Performance of Obligations
of the Company. The Company shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Parent shall have received a
certificate signed on behalf of the Company by the Chief Executive Officer or
the Chief Financial Officer of the Company to such effect.
(c) Absence of Material Adverse
Effect on the Company. Since the date of this Agreement, there
shall not have been any event or events which, individually or in the aggregate,
have had a Material Adverse Effect on the Company.
(d) Regulatory Capital; Absence
of Cease and Desist Order. The Company Bank shall have
sufficient regulatory capital to qualify as “well capitalized” under applicable
regulations and neither the Company Bank nor the Company shall have received any
cease and desist order from any Regulatory Agency.
(e) Federal Tax
Opinion. Parent shall have received an opinion from Mette,
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to Parent (“Parent’s Counsel”), in form and
substance reasonably satisfactory to Parent, dated the Effective Time,
substantially to the effect that on the basis of facts, representations and
assumptions set forth in such opinion which are consistent with the state of
facts existing at the Effective Time, the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code. In
rendering such opinion, Parent’s Counsel may require and rely upon
representations and covenants, including those contained in certificates of
officers of Parent, the Company and others, reasonably satisfactory in form and
substance to such counsel.
8.3. Conditions to Obligations of
the Company. The
obligation of the Company to effect the Merger is also subject to the
satisfaction or waiver by the Company at or prior to the Effective Time of the
following conditions:
(a) Representations and
Warranties. The representations and warranties of Parent set
forth in this Agreement (i) that are not qualified by materiality shall be true
and correct in all material respects and (ii) that are qualified by materiality
shall be true and correct in all respects, in each of the foregoing cases as of
the date of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though made on
and as of the Closing Date; provided, however, that for
purposes of this Section 8.3(a), no representation or warranty of the Company
set forth in this Agreement shall be deemed untrue or incorrect as a consequence
of the existence of any fact, circumstance or event unless such fact,
circumstance or event, individually or taken together with all other facts,
circumstances or events which would otherwise cause any representation or
warranty of the Company contained in this Agreement to be untrue or incorrect,
has had a Material Adverse Effect on the Company and its Subsidiaries taken as a
whole. The Company shall have received a certificate signed on behalf
of Parent by the Chief Executive Officer or the Chief Financial Officer of
Parent to the foregoing effect.
50
(b) Performance of Obligations
of Parent. Parent shall have performed in all material
respects all obligations required to be performed by it under this Agreement at
or prior to the Closing Date, and the Company shall have received a certificate
signed on behalf of Parent by the Chief Executive Officer or the Chief Financial
Officer of Parent to such effect.
(c) Absence of Material Adverse
Effect on Parent. Since the date of this Agreement, there has
not been any event or events, which individually or in the aggregate, have had a
Material Adverse Effect on Parent.
(d) Federal Tax
Opinion. The Company shall have received an opinion from
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP (the “Company’s Counsel”), in form and substance reasonably
satisfactory to the Company, dated the Effective Time, substantially to the
effect that on the basis of facts, representations and assumptions set forth in
such opinion which are consistent with the state of facts existing at the
Effective Time, the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code. In rendering such opinion, the
Company’s Counsel may require and rely upon representations and covenants,
including those contained in certificates of officers of Parent, the Company and
others, reasonably satisfactory in form and substance to such
counsel.
ARTICLE
IX
TERMINATION
AND AMENDMENT
9.1. Termination. This
Agreement may be terminated at any time prior to the Effective Time, whether
before or after approval of the Merger by the shareholders of both the Company
and Parent:
(a) by mutual
consent of the Company and Parent in a written instrument, if the Board of
Directors of each so determines by a vote of a majority of the members of its
entire Board;
(b) by either
Parent or the Company upon written notice to the other party (i) 30 days after
the date on which any request or application for a Requisite Regulatory Approval
shall have been denied or withdrawn at the request or recommendation of the
Governmental Entity having the authority to grant such Requisite Regulatory
Approval, unless within the 30-day period following such denial or withdrawal a
petition for rehearing or an amended application has been filed with the
applicable Governmental Entity (provided, however, that no
party shall have the right to terminate this Agreement pursuant to this Section
9.1(b)(i) if such denial or request or recommendation for withdrawal shall be
due to the failure of the party seeking to terminate this Agreement to perform
or observe the covenants and agreements of such party set forth herein) or (ii)
if any Governmental Entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the Merger;
(c) by either
Parent or the Company if the Merger shall not have been consummated on or before
April 30, 2009 (“Closing Deadline”), unless the failure of the Closing to occur
by such date shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe the covenants and agreements of such party set
forth herein; provided,
51
however, that either
Parent or the Company may extend the Closing Deadline to July 31, 2009 by notice
to the other party on or before April 30, 2009, in the event that either of the
conditions set forth in Sections 8.1(d) and 8.1(e) have not been met by March
15, 2009, and the failure of such condition(s) to have been met is not due to
the failure of the party seeking to extend the Closing Deadline;
(d) by either
Parent or the Company if the respective shareholders of the Company or the
Parent shall have voted at the respective shareholders meeting on this Agreement
and such vote shall not have been sufficient to approve this Agreement by such
respective shareholders, provided, however, that the
right to terminate this Agreement under this Section 9.1(d) shall not be
available to a party whose shareholders failed to approve this Agreement if such
party did not comply with its obligations under Section 7.5;
(e) by either
Parent or the Company (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other agreement
contained herein) if there shall have been a material breach of any of the
representations or warranties set forth in this Agreement on the part of the
other party, which breach is not cured within thirty days following written
notice to the party committing such breach, or which breach, by its nature,
cannot be cured prior to the Closing; provided, however, that neither
party shall have the right to terminate this Agreement pursuant to this Section
9.1(e) unless the breach of representation or warranty, together with all other
such breaches, would entitle the party receiving such representation or warranty
not to consummate the transactions contemplated hereby under Section 8.2(a) (in
the case of a breach of representation or warranty by the Company) or Section
8.3(a) (in the case of a breach of representation or warranty by
Parent);
(f) by either
Parent or the Company (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other agreement
contained herein) if there shall have been a material breach of any of the
covenants or agreements set forth in this Agreement on the part of the other
party, which breach shall not have been cured within thirty days following
receipt by the breaching party of written notice of such breach from the other
party hereto, or which breach, by its nature, cannot be cured prior to the
Closing; or
(g) by the
Company, in its sole discretion, if (either before or after the approval of this
Agreement by the Company shareholders) during the three business day period
commencing with (and including) the Determination Date both conditions (1) and
(2) below are satisfied. For purposes of this Section 9.1(g), the
following terms shall have the meanings indicated:
“Adjusted
Parent Ratio” means the number obtained by multiplying (x) the Parent
Ratio, by (y) the quotient obtained by dividing (A) the Exchange
Ratio, after giving effect to any adjustment made pursuant to this Section
9.1(g), by (B) the Exchange Ratio, before giving effect to any adjustment
made pursuant to this Section 9.1(g).
“Index
Price” on a given date means the closing price of the NASDAQ Bank
Index.
52
“Per
Share Consideration” means the product of the Exchange Ratio times the Average
Closing Price.
“Starting
Date” means the NASDAQ Stock Market trading day preceding the day on which the
parties publicly announce the signing of this Agreement.
“Starting
Price” means $28.86.
The
Company may terminate this Agreement at any time during the two-day period
following the Determination Date if the following two conditions are
satisfied:
(1) the
Average Closing Price shall be less than the product of .80 and the Starting
Price; and
(2) (i)
the number obtained by dividing the Average Closing Price by the Starting Price
(such number being referred to herein as the “Parent Ratio”) shall be less than
(ii) the number obtained by dividing the Index Price on the Determination Date
by the Index Price on the Starting Date (as defined below) and subtracting .20
from such quotient (such number being referred to herein as the “Index
Ratio”).
It is
provided, however, that if the
Company elects to exercise its termination right pursuant to this Section
9.1(g), it shall give prompt written notice to Parent and that such notice of
election to terminate may be withdrawn at any time within the aforementioned
two-day period. During the period commencing with its receipt of such
notice and ending at the Effective Time, Parent shall have the option of
increasing the Exchange Ratio in a manner such, and to the extent required, so
that the condition set forth in either clause (1) or (2) above shall be deemed
not to exist.
For
purposes hereof, the condition set forth in clause (1) above shall be deemed not
to exist if:
the
Exchange Ratio is increased so that the Per Share Consideration (calculated by
using the Average Closing Price) after such increase is not less than 80% of the
Per Share Consideration calculated by using the Starting Price in lieu of the
Average Closing Price.
For
purposes hereof, the condition set forth in clause (2) above shall be deemed not
to exist if:
the
Exchange Ratio is increased so that the Adjusted Parent Ratio is not less than
the Index Ratio.
If Parent
makes this election, within such period, it shall give prompt written notice to
Company of such election and the revised Exchange Ratio, whereupon no
termination shall have occurred pursuant to this Section 9.1(g) and this
Agreement shall remain in effect in
53
accordance
with its terms (except as the Exchange Ratio shall have been so modified), and
any references in this Agreement to “Exchange Ratio” shall thereafter be deemed
to refer to the Exchange Ratio after giving effect to any adjustment made
pursuant to this Section 9.1(g).
If Parent
declares or effects a stock dividend, reclassification, recapitalization,
split-up, combination, exchange of shares or similar transaction between the
Starting Date and the Determination Date, the prices for the common stock of
Parent shall be appropriately adjusted for the purposes of applying this Section
9.1(g);
(h) by
Parent, if the Board of Directors of the Company shall have withdrawn or
modified in a manner adverse to Parent its recommendation to its shareholders
referred to in Section 7.5 hereof in order to accept a Superior Proposal;
or
(i) by the
Company, in order to enter into a definitive agreement with respect to a
Superior Proposal, provided that the Company complies with the provisions of
Section 7.4 in connection with such Superior Proposal.
9.2. Effect of
Termination. In
the event of termination of this Agreement by either Parent or the Company as
provided in Section 9.1, this Agreement shall forthwith become void and have no
effect except (i) Sections 7.3(b), 7.4(e), 9.2 and 10.3 shall survive any
termination of this Agreement and (ii) that, notwithstanding anything to the
contrary contained in this Agreement, no party shall be relieved or released
from any liabilities or damages arising out of its willful breach of any
provision of this Agreement.
9.3. Amendment. Subject
to compliance with applicable law, this Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval and adoption of this Agreement and the
Merger by the shareholders of either the Company or Parent; provided, however, that after
any approval and adoption of the transactions contemplated by this Agreement by
the Company’s shareholders, there may not be, without further approval and
adoption of such shareholders, any amendment of this Agreement which reduces the
amount or changes the form of the consideration to be delivered to the Company
shareholders hereunder other than as contemplated by this
Agreement. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
9.4. Extensions;
Waiver. At
any time prior to the Effective Time, each of the parties hereto, by action
taken or authorized by its Board of Directors, may, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions of the other party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party,
but such extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
54
ARTICLE
X
GENERAL
PROVISIONS
10.1. Closing. Subject
to the terms and conditions of this Agreement, the closing of the Merger (the
“Closing”) will take place at the offices of Parent at 10:00 a.m., or such other
place and time as may be agreed to by the parties hereto, and on such date as
the parties hereto shall mutually agree, provided that such date may not be
later than 15 business days after the satisfaction or waiver (subject to
applicable law) of the latest to occur of the conditions set forth in Article
VIII hereof (other than those conditions which relate to actions to be taken at
the Closing) (the “Closing Date”).
10.2. Nonsurvival of
Representations, Warranties and Agreements. None
of the representations, warranties, covenants and agreements in this Agreement
or in any instrument delivered pursuant to this Agreement shall survive the
Effective Time, except for those covenants and agreements contained herein and
therein which by their terms apply in whole or in part after the Effective
Time.
10.3. Expenses. Except
as otherwise specified in this Agreement, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses.
10.4. Notices. All
notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally, telecopied (with confirmation), mailed by
registered or certified mail (return receipt requested) or delivered by an
express courier (with confirmation) 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
Parent, to:
Pennsylvania
Commerce Bancorp, Inc.
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇ , Chief Executive Officer
with a
copy to:
▇▇▇▇▇ ▇.
▇▇▇▇
Attorney
at Law
Mette,
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
and
55
(b) if to the
Company, to:
Republic
First Bancorp, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, Chief Executive Officer
with a
copy to:
|
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
|
|
|
Attorney
at Law
|
|
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP
|
|
|
3000
Two ▇▇▇▇▇ Square
|
|
|
Eighteenth
and ▇▇▇▇ ▇▇▇▇▇▇▇
|
|
|
▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
10.5. Interpretation. When
a reference is made in this Agreement to Sections, Exhibits or Schedules, such
reference shall be to a Section of or Exhibit or Schedule to this Agreement
unless otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words
“include,” “includes” or “including” are used in this Agreement, they shall be
deemed to be followed by the words “without limitation.” The phrases
“the date of this Agreement,” “the date hereof” and terms of similar import,
unless the context otherwise requires, shall be deemed to refer to November 7,
2008. No provision of this Agreement shall be construed to require
the Company, Parent or any of their respective Subsidiaries or affiliates to
take any action that would violate any applicable law, rule or
regulation.
10.6. Counterparts. This
Agreement may be executed in counterparts, all of which shall be considered one
and the same agreement and shall become effective when counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
10.7. Entire
Agreement. This
Agreement (including the documents and the instruments referred to herein)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, other than the Confidentiality Agreements.
10.8. Governing
Law. This
Agreement shall be governed and construed in accordance with the laws of the
Commonwealth of Pennsylvania, without regard to any applicable conflicts of
law.
10.9. Enforcement of
Agreement. The
parties hereto agree that money damages or any other remedy at law would not be
a sufficient or adequate remedy for any actual or threatened breach or violation
of, or default under, this Agreement by any of them and that, in addition to all
other available remedies, each aggrieved party shall be entitled, to the fullest
extent permitted by law, to an injunction restraining such actual or threatened
breach, violation
56
or
default and to any other equitable relief, including specific performance,
without bond or other security being required.
10.10. Severability. Any
term or provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as
to be unenforceable, the provision shall be interpreted to be only so broad as
is enforceable.
10.11. Publicity. Except
as expressly permitted by this Agreement or otherwise required by law or the
rules of the NASDAQ Stock Market, so long as this Agreement is in effect,
neither Parent nor the Company shall, or shall permit any of its Subsidiaries
to, issue or cause the publication of any press release or other public
announcement with respect to, or otherwise make any public statement concerning,
the transactions contemplated by this Agreement without the consent of the other
party, which consent shall not be unreasonably withheld.
10.12. Assignment; No Third Party
Beneficiaries. Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns. Except as otherwise
expressly provided herein, this Agreement (including the documents and
instruments referred to herein) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
[SIGNATURE
PAGE FOLLOWS]
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IN
WITNESS WHEREOF, Parent and the Company have caused this Agreement and Plan of
Merger to be executed by their respective officers thereunto duly authorized as
of the date first above written.
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PENNSYLVANIA
COMMERCE BANCORP, INC.
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By:
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▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇
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Name:
▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇
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||
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Title:
Chairman/President/CEO
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||
|
REPUBLIC
FIRST BANCORP, INC.
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||
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By:
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▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇
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Name:
▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇
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||
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Title:
Chief
Executive Officer
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||
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